Jason DeBono – VP of NuView Trust Company – https://www.nuviewtrust.com/
Jason graduated from the University of Central Florida and has since acquired 15-years of experience in the self-directed IRA industry. He has served as both Director of Business Development and Director of Operations for NuView Trust Company – a self-directed custodian with over $1.4 billion of assets under custody.
Now, in his role as Corporate Vice President, Jason oversees the day to day activities of the company. He is heavily recruited to speak on podcasts and at national events as a subject matter expert in tax-advantaged investing through retirement accounts. Additionally, Jason has provided continuing education to CPAs, Attorneys, and Real Estate professionals and has been a guest speaker at hundreds of investment events and conferences throughout the United States.
Outside of his role at NuView, Jason serves as Co-founder and Chairman of Chair the Love, a 501(c)(3) organization, which provides wheelchairs and other mobility-related services to those in need. He currently resides in Central Florida with his wife, Christina, son, Tyler, and daughter, Delaney.
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Listen to our Podcast:
https://thealternativeinvestor.libsyn.com/92-jason-debono-on-passive-income-active-growth
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Bill Fairman (00:06):
Hello, we’re back.
Wendy Sweet (00:08):
We’re missing somebody.
Bill Fairman (00:11):
We’re just saving this chair for Jonathan.
Wendy Sweet (00:13):
Jonathan’s really here.
Bill Fairman (00:15):
This is in memory of Jonathan.
Wendy Sweet (00:17):
He’s wearing his invisible suit.
Bill Fairman (00:19):
He stepped away for a moment.
Wendy Sweet (00:20):
He’ll be back, put your name on the other line.
Bill Fairman (00:22):
So I’m Bill Fairman, this is Wendy Sweet. Jonathan is really in that chair but you just don’t see him.
Wendy Sweet (00:28):
We should just have a cutout of him. Here he comes.
Bill Fairman (00:29):
We’re with Carolina Capital Management.
Jonathan Davis (00:33):
Oh, we’re on?
Wendy Sweet (00:33):
We’re on!
Bill Fairman (00:33):
Our website is, I’m surprised to Jonathan that we had to show.
Jonathan Davis (00:40):
No, we’re doing this.
Bill Fairman (00:40):
CarolinaHardMoney.com. If you’re a lender and you’re, sorry, if you’re a borrower interested in borrowing some money, just click on the borrower tab. If you’re an investor looking for passive returns, click on the investor tab. Don’t forget the what? Share.
Wendy Sweet (00:56):
Like, subscribe, tell all your friends, refer.
Bill Fairman (00:56):
Subscribe, all that good stuff. We have a question or a chat box over on the side. If you have any questions, don’t hesitate to ask them. We’ll have a guest coming up here. Jason Debono of IRA.
Wendy Sweet (01:17):
Is it Debano?
Bill Fairman (01:17):
Debano?
Jonathan Davis (01:19):
I think it’s Debono.
Bill Fairman (01:19):
Debono. Sorry. He’ll be on in a few minutes and we’re going to discuss IRAs. Why they’re important. Unfortunately, why only 5% of the population even know they exists. Wendy, you’ve been doing your Wednesday with Wendy.
Bill Fairman (01:41):
It’s hard to say.
Bill Fairman (01:41):
For what, how many months?
Wendy Sweet (01:44):
Oh, it’s been, I think it’s been a full year.
Jonathan Davis (01:47):
I was thinking, yeah close to a year.
Wendy Sweet (01:48):
Yeah, it’s close to a year. Over a year.
Bill Fairman (01:50):
So what trends are you beginning to see? Let’s say since COVID, are there any trends coming up?
Wendy Sweet (01:58):
Well, there’s always, you know, I think things are always a little different. I think when I first started doing these Wednesday with Wendy things that most of the people that were signing up are people who are already in business and really just wanted direction or wanted to expand or, you know, really figure out what their goals, were making sure they’re going down the right path. Now I’m getting more and more newbies not only from people signing up for the Wednesday with Wendy thing, but also borrowers that are filling out applications and that kind of thing. It’s more new people and I always think that that’s kind of strange that more new people want to get in at a time when to me, it seems scarier, I guess but I think what’s going on is they’re seeing real estate, you know, sales going on houses under contract. They’re seeing things in the real estate market really shaken move so they’re assuming that now is a good time to, you know, fix and flip or wholesale and that kind of thing.
Jonathan Davis (03:09):
And it can be.
Wendy Sweet (03:09):
If you’re the right area.
Jonathan Davis (03:10):
Yeah.
Wendy Sweet (03:10):
If you’re in the right area. I was talking to somebody this morning that lives in the Charlotte area. They are buying houses in Mocksville, which is outside of Winston Salem. It’s about an hour from where they live.
Bill Fairman (03:26):
Yeah. I think it’s a little closer to state school [Inaudible]
Wendy Sweet (03:30):
Yeah. So I think they’re smart because they’re looking in more outskirt kind of towns to do their deals then that then looking right underneath their noses because the competition is just so fierce.
Jonathan Davis (03:47):
It is.
Wendy Sweet (03:48):
Your biggest problem though is when you’re trying to invest a little outside of your community is you really need to have good boots on the ground. You need to have contractors that you trust, a real estate agent that you trust, you know, people that know that area better than you.
Jonathan Davis (04:04):
Yeah. If it’s a place you can’t go to once or twice a day, you better have a contractor that you can trust.
Wendy Sweet (04:10):
Yeah. I talked to another guy this morning that is a fairly new investor. I say fairly new, he’s really new he’s done one deal already. He is actually in the Greenville Spartanburg market and he actually filled out an application to do a loan in Anderson, which is maybe an hour from there, for them, it’s two hours for us, but it’s about an hour for them there and he was telling me how, you know, he’s going to the smaller towns and saying, well, it’s really difficult to find deals in Greenville. Greenville is a great market and I can see where it can be a little tougher because Greenville’s a great market. You know, there’s a lot of sales going on there. And he said, you know, I think I’m going to expand more toward the Charlotte area and invest in Charlotte. I said, stop right there.
Jonathan Davis (04:58):
If you think Greenville is hard.
Wendy Sweet (05:00):
I said, that might be the biggest mistake you’ll ever make because there are no deals, you know, you’re not going to be falling over deals in Charlotte there’s action going on in Charlotte but it’s not the kind of action that, that an investor really likes. It’s hard to find good deals.
Jonathan Davis (05:16):
It’s tough, I mean, I felt that, you know, a deal that closed on a couple of months ago that was in Concord, which is just outside of Charlotte and I mean, it had a lot of hair on it, It had 27 errors we had to get off of it.
Wendy Sweet (05:26):
That’s not fun.
Jonathan Davis (05:27):
Yeah.
Wendy Sweet (05:27):
That’s D seven.
Jonathan Davis (05:28):
And that 27 errors, 27 errors!
Jonathan Davis (05:31):
Yeah. So it is like, the competition is high and you know, it’s tough to find properties, especially most people aren’t willing to do a lot of work on the title side so it’s tough to find properties that you can just come in and buy in Charlotte or around Charlotte.
Wendy Sweet (05:48):
We probably have what? Three or four deals that are sitting on our pipeline and our pipeline goes out what? Three weeks maybe? Of what’s going to close. We have three or four deals in there whether there’s title issues on them and they’ve been sitting there trying to get these title issues fixed. They’re fixable but it’s not something that happens overnight. So, you know, we’re getting more and more deals that have hair on them like that
Jonathan Davis (06:13):
And we don’t mind helping to fix title issues. It’s you just have to know what’s going to, once you find it, it’s going to delay the process.
New Speaker (06:19):
Yeah, significantly.
Speaker 1 (06:20):
Well, I mean, that’s why you’re, I mean the low hanging fruit isn’t there any longer, obviously, but you’re still getting off market deals. And if you’re getting stuff that has, you’re getting more and more with issues is because people are having to work harder and harder to get the off market deal.
Jonathan Davis (06:41):
Yep.
Wendy Sweet (06:41):
That’s right.
Jonathan Davis (06:41):
Exactly.
Bill Fairman (06:43):
Prices are going to continue to go up and the best way to do that is look for the harder ones at the same time, go into your bedroom communities. You don’t have to be right in the heart of everything
Bill Fairman (06:58):
And don’t be desperate. Don’t close on the first thing you see,
Wendy Sweet (07:03):
That’s right.
Bill Fairman (07:03):
Listen, prices are harder to, good prices are harder to come back for investors. It’s exactly the same thing for the retail buyer. So, you know, if the prices are too high, let’s say in Charlotte, then they can easily commute from rock Hill or Concord or Kannapolis
Wendy Sweet (07:20):
And people are moving out. They don’t want to be in the bigger cities anymore.
Bill Fairman (07:25):
I’ve always liked Solsbury but it was too hard to get there and back. And the main reason it’s taken them 35 years to finish the highway between here and there and they finally did.
Wendy Sweet (07:38):
Welcome to the DMT.
Bill Fairman (07:38):
And now it’s an easy commute,
Jonathan Davis (07:41):
Well, Bill, as you said in the previous one, I mean the money is made on the purchase so don’t get desperate, don’t make a move with thin margins just because you think you just want to do it and you just, you know, just want to get something done.
Wendy Sweet (07:56):
There’s no gray, it’s all black and white.
Jonathan Davis (07:58):
You gotta wait. You know, and it’s, I know it’s tough to wait, especially for, you know, what you don’t want to do is become one of, you don’t want to be one of our, or your own loss story. We don’t want you to know a loss story so we’re going to tell you if the margins are too thin.
Wendy Sweet (08:15):
That’s exactly right. You know one of the things, I’m sorry.
Bill Fairman (08:19):
Let me finish. The easiest lessons learned, or I’m sorry, the lessons that are learned the most are the ones where you’ve lost money. The easiest lessons learned is what someone else has lost money and you just learned from that
Jonathan Davis (08:33):
It does seem that retention of the lesson is correlated to the amount of money lost.
Wendy Sweet (08:40):
That’s for sure.
Bill Fairman (08:41):
So go ahead.
Wendy Sweet (08:41):
You know, the thing that I thought was really interesting about, you know, this guy who he’s already done, one deal he’s heavily involved in Facebook marketing, Craigslist, that’s how he’s finding and selling his properties.
Jonathan Davis (08:55):
Craigslist is still a thing?
Wendy Sweet (08:57):
Yeah, believe it or not.
Bill Fairman (08:57):
Well thanks for the broadcast.
Wendy Sweet (09:00):
And I said to him, you’re in Greenville, right? He says, yeah. And I said, well, you know, the best real estate investor association that I’ve ever been to is the Greenville,
Bill Fairman (09:13):
CREIA.
Wendy Sweet (09:13):
CREIA. which stands for Carolina Real Estate Investor Association.
Jonathan Davis (09:20):
They’re very active.
Wendy Sweet (09:21):
Their education is phenomenal. Carla Coon I think is over that and they just do a fabulous job of bringing in not only good speakers, both locally and nationally, but they do a really good job of keeping everybody in the group involved. They have, you know, really good subgroups, they do a lot of, you know, Saturday learnings and that kinda thing.
Bill Fairman (09:46):
They have national speakers that are based in Greenville.
Wendy Sweet (09:53):
Yeah. So anyway, I’ll hook them up and my point is networking is so very important in what you do and you’re so much better if you surround yourself with other people that know way more than you do.
Jonathan Davis (10:06):
Like me with you all.
Wendy Sweet (10:06):
And you’ve got to, you’ve got to learn from each other, you,
Bill Fairman (10:12):
Again, he’s learning from his mistakes, hanging out with us.
Wendy Sweet (10:17):
You do sales back and forth, that’s how you buy and sell property, it’s how you learn from other people’s mistakes. If you don’t know other people, then you can’t learn from their mistakes, can you?
Jonathan Davis (10:24):
That’s very true.
Wendy Sweet (10:26):
So anyway, you know, get, get with your local real estate investor group. If you’re a new investor, get with that group, there’s, it’s called the National Real Estate Investor Association. You click on their website and they have all the different cities that these associations are located in pick your city that you’re interested in and join. It’s the cheapest education you’ll ever get.
Bill Fairman (10:49):
I will say that the least expensive. You don’t want it to be cheap, you just want it to be not as expensive.
Wendy Sweet (10:57):
That’s exactly right.
Bill Fairman (10:58):
Did you say Jason was on?
Jonathan Davis (10:59):
I did.
Wendy Sweet (11:00):
How do you know?
Bill Fairman (11:01):
Where is he?
Jonathan Davis (11:01):
Because Scott told us he put it on the screen,
Wendy Sweet (11:03):
Oh that’s totally cool.
Bill Fairman (11:05):
Then he took it away from me. I hate that.
Wendy Sweet (11:07):
So here’s something that’s really cool. We talk about Jason joining us from NuView Trust and one thing that I’ve preached and will continue to preach till the day I die is that if you understand self-directed IRAs, you can raise an unlimited amount of money to do your business with. Unlimited. Because when you know how to do it, you’re going to train other people how to do it and you can’t help but be successful.
Bill Fairman (11:39):
Well, not only that, you want to mitigate your taxes as much as possible and you can only do that through, well, not only because,
Wendy Sweet (11:50):
You could best do that,
Bill Fairman (11:50):
You could buy a life insurance policy, that’s not taxable the earnings, but the best way to mitigate your tax liability is by having tax deferred or tax exempt type account. So are we bringing Jason on or are we just going to hide him in the background? There he is.
Wendy Sweet (12:15):
Hey!
Jason Debono (12:15):
Hey! Good afternoon everybody,
Bill Fairman (12:17):
Thank you so much for joining us. You know, we’ve been working for so long to get you on the show.
Jason Debono (12:26):
Well, I’m glad to be here and I got to listen. I was in the background but I got to hear the last five or seven minutes and I couldn’t agree more with just about every single thing that you guys shared. So I’m in good company.
Wendy Sweet (12:41):
Awesome. I love your farm wood background, that’s so pretty.
Jason Debono (12:45):
Thank you. I would love to take more credit for it, but I’d be lying if I said I had anything to do with it but I do enjoy it.
Wendy Sweet (12:52):
It’s very pretty.
Bill Fairman (12:54):
So Jason, where is NuView based?
Jason Debono (12:58):
We’re in Florida. We’ve got a trust office in South Dakota and then our operational administrative office just outside of Orlando, Florida.
Bill Fairman (13:06):
Nice. I know Orlando has been hit kind of hard with the COVID because, you know, the lack of tourism and stuff, how’s the city in general doing you think?
Jason Debono (13:20):
Good, you know, I think as good as it could be. You’re absolutely right, I mean, being a service community, you know, we’re starting to feel the fallout and about 20 miles outside of downtown Orlando and about 40 miles from Disney so we’re a little bit removed from it, you know, from a day to day, but yeah. I think what happens in a lot of market shifts and cycles is there’s, you know, obviously large scale stuff that everybody sees and then there’s a lot of macro and micro stuff and Orlando would be an example of a market that is feeling it much harder, you know, certainly probably then than maybe the Carolinas where they’re not as reliant, um, you know, on that sort of income. So yeah, we’re feeling it here, we’re feeling it both at the service sector and then a lot of real estate investments that are short-term rentals and other properties that rely on that as well or are feeling it. So yeah, we’ll have to see now that unemployment, at least for Florida is, you know, the extra payments and other things have kind of gone away. I think it’s starting to rear its head more so than it was a month or two ago.
Bill Fairman (14:26):
Yeah. We were given some stance on our earlier show today about serious delinquencies with mortgages and Miami Fort Lauderdale area was really at the top of the list, of course they depend a lot on tourism as well. Don’t worry, New York and Las Vegas were in there, but yeah, it tough on new service sector areas right now and I feel awful for them. Most of them, you know, obviously Disney and SeaWorld knows that they’re giant corporations, but it really affects a lot of the small business owners that depend on that extra business that they’re not getting now and that that’s who I worry about the most. People that have put their life savings into their businesses and through no fault of their own or having a difficult time. So I’ll get to less depressing things.
Wendy Sweet (15:25):
Yeah. I want to ask you some stats that I would imagine you know better than us for sure but do you know offhand what the percentage of money that’s sitting in custodial accounts that’s not being used that’s just sitting there, not being invested?
Jason Debono (15:46):
You know, there’s so many different ways to get to that number. I don’t know, I don’t have a clue where to begin. If I had to just throw some lawn darts at it, I’d say probably about 10% of the overall retirement market, which is, you know, about 4 trillion of IRAs and over seven or 8 trillion when you factor in all the other plans. About 10% of that is probably sitting in some sort of cash or cash like instrument. Now obviously, that changes, right? I mean, interest rates have dropped significantly so a cash instrument that somebody may be getting a couple of percent in, they may be getting a quarter percent at best today or, you know, a 10th of a percent so it’s part of, what’s fueled a lot of the market growth in both real estate in and stocks is. Nobody wants to be in cash right now so there’s not a lot of alternatives to it that’s risk adjusted but there’s no doubt, there’s a lot of money just sitting on the sidelines, looking for something to do
Wendy Sweet (16:48):
Right. A whole lot.
Jonathan Davis (16:49):
10% of four trillion.
Wendy Sweet (16:51):
Yeah, 10% of four trillion is a lot of money.
Jason Debono (16:54):
Yeah. I’d have to take my shoes off for that one.
Bill Fairman (16:59):
And that’s the biggest concern about people that do have self-directed accounts. They have to direct the money and you’ll have a lot of people out there that what are we, what did Larry call it? Shelf help. A lot of people take real estate investing courses and that kind of stuff and they want to use that money but they’re afraid to pull the trigger and then they end up sitting there with their money in the account doing nothing and then you have active investors who really know what to do but they’re just having a hard time finding deals too so, you know, that’s a concern to me but you guys provide a bunch of education to teach people about the different investments that is possible with a self-directed IRA, don’t you?
Jason Debono (17:43):
Yeah. I mean, you, you hit on something that is, the thing I always tell people is the biggest benefit of self-direction is the biggest drawback to self-direction and that is you got to make your own investments and for, you know, a large portion of our clients, that’s what attracts them to self-direction, right? They love the idea of making their own investments and they’re good at it and they do that every day but unfortunately there is a percentage of potential clientele that they like the idea of self-direction, it sounds great in theory and they may even set up their account but as a practical matter. They’re either ill-equipped or unable to go out and make an investment. So, you know, our firms specifically really tries to spend a lot of time and energy on education. It doesn’t really benefit us as a company to bring on a client and six months later, they don’t make an investment and go back to, you know, where the account that they came from. It’s generally costs us money as an organization. So, you know, we’re pretty deliberate in bringing clients on really, you know, encouraging clients to come on with an investment in mind and more importantly, we don’t tell clients what to buy, but we certainly wanna educate them to be as informed as possible about what the investment options that are out there and available to them are.
Bill Fairman (18:58):
Yeah. And to be clear, you do not endorse any investments. You’re just showing them the investment vehicles that they could get into with a self-directed retirement account.
Jason Debono (19:10):
You got it. Yeah. We don’t recommend endorse or approve any investment made. We’re a passive custodian.
Bill Fairman (19:15):
Yeah. Yeah. Excellent. So how’d you get into this business anyway?
Jason Debono (19:20):
It’s funny, I love the question because it’s kind of an ironic story, but I’ve been doing this 15 years. I was in my last semester of college. I was working at a retail department store and I kind of got to the point where I said, I probably need a real job, a real field if I’m going to go out and graduate and do something decent with my life and, you know, I went to an internship expo and I met a bunch of companies and I will never forget coming across NuView when I got the opportunity to interview and I just had no idea what the company did. So I picked up the phone and called my dad and was like, dad, IRAs, real estate, you know. I know you know, about investing in real estate because I’ve ripped, you know, dirty carpet out of a rental property many times. I don’t know how this IRA stuff works and my dad, I’ll never forget, he said, you can’t do that. He said, you can’t buy real estate in an IRA, my broker told me that it wasn’t allowed and I thought, you know, here I am, a college kid, dad says, no, obviously I’m now more intrigued and so I went to the interview and, you know, long story short, after that interview, I walked out of there and I called my dad and it was really, the conversation I had that man, this was a kind of a startup company was small at the time, you know, we didn’t have a lot of accounts, you know, business had only been around for two years. The idea of self-direction was very, very, very new to most people but my dad said, man, I wish I knew about this 10 years ago. I turned down some other opportunities at larger firms, SeaWorld, you mentioned, you know, I could have joined them as an intern and some other financial firms but none of them were attractive to me because it didn’t give me the sense of excitement around this kind of startup company that’s offering a service and my dad’s no different than, you know the majority of baby boomers out there. He’s just looking for opportunity and the door had been closed on him. So it’s kind of an interesting ride and I’ve loved every second of the last 15 years but yeah, it was really, I got into this more so by accident than by design.
Bill Fairman (21:22):
Excellent. So did you have any thing you wanted to ask?
Wendy Sweet (21:26):
I Thought you were in the middle of a question, but go ahead.
Bill Fairman (21:30):
No.
Wendy Sweet (21:30):
He talks a lot.
Bill Fairman (21:30):
You guys are just too slow.
Wendy Sweet (21:30):
He doesn’t take a breath so nobody knows if they can say anything.
Jason Debono (21:38):
That’s why they put me by myself on this side. I can’t talk amongst too many people cause I talk too much myself.
Wendy Sweet (21:44):
That was really smart. So one of the things that, that we talk about when we’re talking to people about self-directed IRAs cause we, the three of us love self-directed money. If you have access to somebody that has self-directed money, there are so many different things that you can do with i and as long as you can help guide them to do it, do it correctly. So one of the things that we talk about all the time is the difference of buying real estate in your self-directed IRA versus lending it, you know, what are the consequences of that? Buying it in your self-directed IRA? What are the things that you can do if your IRA owns it? You know, getting a loan, using your IRA as the owner of the property. I mean, there’s a couple different ways that you can twist that up, right?
Jason Debono (22:39):
Yeah. And I think I’ll maybe go up about 10,000 feet and just kind of paint a picture of how I think, you know, we look at the marketplace and I’m an investor myself so I can kind of speak a little bit from kind of the personal side. In my opinion, there are three types of investors out there for self-directed IRAs. There’s what I call the active investor so this is someone that’s already making these types of investments, knows them, understands them, right? They already buy and sell real estate and they just want to mirror duplicate what they’re doing in their IRA or in their personal or business in their IRA and there’s tax benefits which was mentioned earlier and there’s some rules and nuances that need to be adhered too but basically that’s someone that that’s doing exactly what they’re doing outside their IRA just doing it inside, that’s what I would consider kind of an active self-directed account holder. The other end, other extreme of that would be the truly passive account holder. This would be that that person you want lending you money, this would be someone that has no idea for the most part about real estate investments has no desire to go out and, you know, knock on doors and pound the pavement looking for real estate but they like and understand real estate enough to know that it makes it good, a bit of collateral and they like the attractiveness of the higher interest rates, that’s something like a private loan could offer. Those would be your passive investors. They’re not going to find self-direction on their own, they’re going to find it by somewhat, generally the active investor, right? Going out and talking to the passive investor. The group that’s right in the middle of those, which would be a hybrid, right? For lack of better term. Those are the people that I would actually probably consider closer to myself and that is, I’m an active investor, I own investments but I don’t mirror what I do outside my IRA inside my IRA for a couple of reasons. One time and energy, right? I’m a full-time employee here at NuView and so I don’t have enough dedicated time and two, I like the more passive nature for some of my investments and they fit nicely in an IRA. So I’m a hybrid because I know and understand how the real estate investment work, I know how to proform it, right? I’ve learned from plenty of mistakes as we were talking about earlier. You know, so I don’t, it makes me a great lender because I can look at a deal and yes, this is a great investment you’re going to really do well with this If all the things, you know, forecast out the way you want and you know, your construction projections are all good. The market, you know, projections are accurate so I still may be a lender but I can toggle back between being truly passive and maybe finding some more active investments. So I share that because depending on who’s listening today, where you are, if you’re an active investor then hybrid and passive investors can be great resources for you. If you’re a passive investor, then you need to go out in the marketplace, you mentioned the RIAs and networking, and if you like the idea of real estate, but you don’t want to go roll your sleeves up and get deep into it, then be passive but you got to go out and network with some hybrids or some active people that are willing to do the leg work for you and at the end of the day, I had someone say, well, if you could do the deal, why did you write a loan at 10% when you could have done the deal and made 20%? Well, because I made 10% doing none of the work or I got to put it the work and take more risks for 20. It doesn’t make sense. So kind of a little bit of a long answer but I like to share that because I think it really helps underscore how passive inactive investors outside IRAs work with investors inside IRAs and vice-versa
Wendy Sweet (26:15):
That’s exactly right and I love the way you talked about. You did nothing and made 10% rather than work your rear end off and make 20, when you calculate the hours that a lender puts in a deal versus an investor putting into that deal or the contract you’re putting in that deal. The lender always makes more money per hour. Always, always. We have a question up here from Lisa Hoover and it’s a great question. So she’s saying when you’re self-employed in real estate as an investor, how can I start and fund a Roth IRA?
Jason Debono (26:52):
So it really, it’s a hard question to answer specifically. So I’m going to, I’ll move it to some generalities and we can come back to specifics if needed. When it comes to saving inside a retirement account from a starting standpoint, meaning you want to add money to it, you have to have earned income. Earned income, it depends on how you pay taxes on the money that you earn. If you’re a real estate investor and all you do is take profits from real estate that is not considered active income, it’s not earned income and I hate that term because Lisa, I’m sure you work really hard in every dollar you make in real estate but for tax purposes, it’s not earned income. That said, if you had an LLC that collected that income and then you took payroll of some kind or some form of earned income out of the LLC, so say money but called it something slightly different and paid a little tax on it, now you’re eligible to contribute to an IRA. So it’s a little bit of Symantec’s unfortunately, but it has to do with whether or not you have earned income. Once you check that box off, then it becomes, you know, what’s the best type of self-directed account? Is it the self-directed Roth IRA? Should I look at a 401k, you know, Roth 401k and obviously our team can help you with that but that’s really the starting point is making sure that the money that you’re earning is considered self-employed or I’m sorry, is considered earned income. Whether it be self-employed income or just earned income, it’s the first step in contributing to a retirement account.
Wendy Sweet (28:22):
If you have a traditional already, you can always convert a portion of that into a rock, right?
Jason Debono (28:28):
And that’s where I was going to go with the next part, which is most of our clients don’t start their retirement accounts with us. I’m not suggesting that it doesn’t happen but understand most being 80% or so. They’re bringing money from another account. An old 401k, an old retirement plan, an old IRA. They’re moving those over into, you know, taking it out of stock investments and moving it into, you know, real estate investments and once they do that, you know, you’re absolutely right. If they want to move it to a Roth, pay the tax, those are all options. They’re not required to self-direct but certainly options.
Bill Fairman (29:07):
Well, at least I’ll also add it to that about a solo 401k, which I think, if you want to get, if you’re self-employed and you and your spouse are the only ones that are in this business, that is an awesome way to do it.
Wendy Sweet (29:26):
You can put some funds away from that.
Bill Fairman (29:26):
You can have a raw part of it, you can have a traditional part of it, you can borrow against it. If you accidentally make a investment choice that is not allowed that will only blow up that investment choice, not your entire IRA. So there’s a lot of great things about a solo 401k. However, you have to do a lot of research and education on it, cause it can get kind of complicated on your own, correct?
Jason Debono (29:55):
Yeah. The solo 401k. So actually the reason I was a few minutes late to hopping on here today was I just did a one hour course on the solo 401k for a few hundred investors.
Bill Fairman (30:04):
Excellent.
Wendy Sweet (30:04):
Was it recorded?
Jason Debono (30:07):
Is recorded and it will be on the blog section of our website, but you’re absolutely right. It is the best possible plan to get into if you qualify, number one and if you want to take on some of the responsibilities that gives you all the benefit and I say that because if you’re just going to be passive investor and you really don’t have an active role, you just want to write a couple of private loans, collect the interest and move on, you probably don’t need all the benefits that a solo 401k offers because a self-directed IRA is going to be the easier approach, less hands-on and it’s going to give you the same opportunity but if you want to add more money to your account, if you want to have full investment control from a checkbook standpoint, if you want to be able to sign the checks and documents as the trustee, you can only do that in a 401k, not an IRA without jumping through a bunch of hoops so lots of nuances but I couldn’t agree more. If you have any form of self-employed income, you need to take the time to understand how that plan works and then decide you don’t want it. Don’t assume you don’t need it, it’s gotta be an informed decision. It’s the best plan that exists if it’s right for you.
Bill Fairman (31:18):
Perfect.
Wendy Sweet (31:18):
That’s great.
Jonathan Davis (31:19):
We actually have another question. James here, I’m interested in becoming more active as an investor however, most of my portfolio is in a self-directed IRA or 401k, any general advice? So to become,
Wendy Sweet (31:30):
A 401k, can you borrow against that?
Jason Debono (31:36):
Well, you know, so, there’s, again, a lot of different ways we can approach this, I think for starters, you know, when you say you want to be more active as an investor, does that mean you want to generate more day-to-day living money from your investments? Because I can be the most active investor and not make a dollar into my personal bank account by doing everything through my 401k or my solo 401k or my IRA. So you have to first ask yourself, what’s the desire of the money? If your desire is to use the money today or in very short order, then yeah, pose us a different question because the IRA is not going to be as advantageous because you’re earmarking the money for the term. What you’re getting for earmarking, it is tax-free growth or tax deferred growth. So it’s great if you can wait. If you can’t wait, then it takes, unfortunately, there’s not a lot you can do with IRA money to make money today that makes good financial sense. You can take out a loan against your 401k, the problem with that is whatever investments you make are made in your personal name and they’re taxable. That said, if your sole intention is to get more money in your pocket today, that’s certainly a strategy we’ve seen people deploy and the cares act is actually made it easier to pull some money for the short-term out of your IRA and your 401k and make those investments, and then put back what you took out. So again, short term, the penalty that you pay as you give up the tax deferral on that money, the benefit you gain is that you have access to it today and that’s really what it boils down to.
Bill Fairman (33:15):
Yeah. And with being active, you have to be careful because there’s a lot of things that you can’t do with your IRA money that you can do with cash. For example, if you bought a rental property, you can’t go over there and change a light bulb or cut the grass because it’s not for your personal benefit, it’s for the benefit of the IRA. Everything has to be managed by a third party, you can’t accept payments and then turn around and pay the IRA. Now, the check could be written to the IRA and all you’re doing is sending it in but the point is, if it’s not like you’re running the business and you can’t mingle any of the funds. It all has to be either for the IRA, or you have to have cash that’s just for you. Is that, am I on the right track?
Jason Debono (34:05):
Yeah, absolutely. I mean, being an active investor in an IRA, as we talked about earlier, how some limitations, it’s a great strategy and it’s very opportunistic but there’s some boundaries, you know, getting money out of IRAs, and again, it’s the hardest part about an IRA is people want money today and they want that instant gratification and there is a difference, I recognize there are people that do want to earn a living in real estate and I do get that but unfortunately, the penalty that you pay by trying to use your IRA for the money that you want to live on today is you’re foregoing all the tax benefits that you get in an IRA and for me, that’s not a trade off I’d make. I’d rather go find the money somewhere else, borrow it, you know, beg, borrow, steal outside my IRA to earn a living personally, because that money in my IRA is sacred, there’s just no better type of money for it and I’ll kind of share if I’ve got a minute to kind of illustrate what it looks like. You know, we talk a lot about investments and I get it. It’s what’s attractive. People want to know make money, make money but what people step over is how much more impactful wealth building is than the investment itself and one of the things that I do to illustrate this, you know, in real numbers is the true value of tax benefits. So if I take a dollar and I double it every year for 20 years at the end of 20 years, if I do it in my personal account where I pay 25% tax rate, right? When, that dollar will become 72 grand. Now, most people would go, that’s awesome, you turn a buck into 72,000 bucks over 20 years, you’re an amazing investor. I can take the same dollar, make the same investment over the same time period so there’s no difference between me and the other person from an investment standpoint but if I put that dollar into a Roth IRA first and I make the same investment and forego the 25% tax every year, instead of having 72 grand, I have 1,048,000. So we’re talking about the same dollar, same investment, same timeframe but the taxed advantaged account is going to yield me nearly a million dollars more over 20 years. So going back to my comment earlier, if you want to withdraw it from your IRA, use whatever cares act loophole or loan provisions exist, put it into your personal name, every dollar you make is getting you closer to 72 grand and further away from a million dollars and if you think about it that way, you’ll probably understand why, you know, I’m so emphatic about that not being a very good decision. Short-term results a problem but long-term, it’s not wealth building and really, we got to combine the idea of good investments with good wealth building strategies, which IRAs offer and that’s how we get to building wealth in the long term.
Bill Fairman (36:58):
And that’s part of why people like to invest in real estate anyway, is because you can take appreciation over the long haul and you’re not being taxed, you know, each year on the new value of the house so you’re only being taxed at the end when you’re, when you sell it, right? So you’re able to build up that wealth over time, just like you would on a tax exempt vehicle. Tax deferred vehicle, you’re doing basically the same thing and you’re only paying in taxes as you take it out. God, I love the way that works. And that’s one of the things that I always and correct me if I’m wrong, I know there’s other ways of doing it but I always tell people that if you’re going to use your IRA for anything, use it in the lending space because there is no tax advantage to be a receiving interest income and if you’re gonna do that, do it with a tax deferred or tax exempt account. If you’re buying property in your IRA, you can’t take advantage of any of the depreciation that the tax laws currently allow you to do. Now you can always offset that a little bit with borrowing against it and then of course your subject, I know we’re getting into the weeds so I’m going to leave that alone but you pay cash for your actual real estate and then you use your IRA money for stuff that isn’t already,
Jonathan Davis (38:32):
For lending.
Bill Fairman (38:32):
Tax benefit.
Wendy Sweet (38:33):
Yeah, we have lots of lenders in our company that that will lend their IRA money to us so we can loan it out for them or buy notes from us that we’re doing and then they also borrow money from us to buy and rehab houses so they’re using it, they’re doing both. So it doesn’t have to be an either, or, right?
Bill Fairman (39:00):
Yeah. And we have two ways they can invest too. We have a 506D regulation fund that they can invest in, which is purely passive and I love it because it compound over so many years, It’s the perfect thing for an IRA and then if you’re not an accredited investor, you could buy fractional notes with it and I just love that part of it. Was that a question for you? I don’t think so. I was just spouting off, and Jason?
Jason Debono (39:30):
I’m predominantly a lender in my own retirement accounts for the reasons you just mentioned. I’ll share kind of just some perspective from an organization so we custody about a billion and a half dollars of assets and it’s not exactly a third, a third and a third but it’s close enough with some rounding about a third of our customers do private loans of all different types, a third of our customers own real estate of all different types and a third of our customers own private entities, which would include passive investment funds like a 5,060 lending fund could be a real estate fund, could be an operational business, it really doesn’t matter but our clients are pretty split about a third, a third and a third. And they all, have what I appreciate about what we do, and I’ll go back to something and I don’t remember who mentioned it earlier when I was kind of sitting on the sidelines but there was a discussion around, you know, the best lesson to learn is that the least expensive and least painful as the lesson that someone else learned and you just got the experience from and, you know, all of our clients have make those investment decisions generally based on past experience and things that have happened so it’s fun because I get to live vicariously through thousands of clients experience and I’ve run into some sticky situations that I’ve been able to navigate moderately. Well, because I’ve either seen it play out and seen some really smart clients navigate that murky water so I didn’t have to figure it out on my own. So when it comes to, you know, our client’s investments, you know, I’ve learned a couple of things. They’re very smart and generally they do what they know that they’re good at and I think for a lot of our real estate clients, they know they’re good at real estate and they know that they have strategies and structures and ways to buy investments and markets and really make good money in a very low risk way and so I think for a lot of our deliberate real clients, they’re not throwing hail Marys in the real estate market and speculating. I mean, they’re really pretty active in what they do so it’s fun to see our clients get to participate in all different investment types and really in all different strategies, whether they’re they’re active kind of hybrid or fully passive.
Wendy Sweet (41:49):
Jason, what are some of the most common mistakes that you see people making with their IRA? Like, like loans, they shouldn’t be doing, people they shouldn’t be lending to or investments they really shouldn’t be doing.
Jason Debono (42:05):
Oh man, how long do we have?
Wendy Sweet (42:06):
I know.
Jason Debono (42:06):
We have thousands of clients and I think even the best investors make mistakes. Nobody, if, you know, if you ever invest with someone that says they’ve never lost money on a deal, it’s probably not someone you should invest with, I mean, there’s some issues there. You know, I think what it boils down to, I will share some common things that I’ve seen. Number one is it’s investing without understanding the asset. Whether you’re going to be active or passive, you still have to understand what you’re investing into. You don’t have to be an expert, you don’t have to figure out every nuance of the deal but you got to know what it actually means so I think that’s the first thing. It’s no different than closing your eyes and picking a stock, right? You might as well go to Vegas and put it on the blackjack table if we’re just going to go for the luck of the next card out, then that’s probably better suited for Vegas and at least you’ll get free drinks while you’re doing it Investing without knowledges is in my opinion, the first way to lose all your money really fast. The second thing, and I see a lot of this in real estate, especially in IRAs is they only factor in best case scenario and they never factor in worst case scenario. So, you know, if the deal doesn’t make sense, if things aren’t great, it doesn’t matter if it makes sense when things are great and I can, you know, easily point to the pandemic we’re in, you know, the people that are really going, Oh, how are my real estate holdings going to perform? Generally, probably were in that position that day they bought it. They just realized it today that are going, you know, yeah, I could go four or five months without rent, it’s not ideal but, you know, I bought this in a manner where I can survive that so there’s some strategy of understanding kind of what happens if the market does go sour and what’s my exit strategy and then I think from a private lending standpoint, you mentioned two things that I think are so critical. One is investing with someone they shouldn’t be and I hear this one all the time and I’m embarrassed to say this as much as my dad was a catalyst for me taking this job and I owe him a debt of gratitude for that. I’ll also share somewhat of a story he’d probably be a bit embarrassed by but my dad called me honest to God’s truth, he called me and said, Hey son, I’ve got this investment opportunity, you know, to invest in a movie that’s coming out and I thought, well, gosh, that’s a pretty interesting opportunity and given that you live in a pretty small town in Florida, I’m not sure that there’s a lot of movie production, like how did you come across this? Oh, man, this guy called me and this deal is the group that was in Shrek and him going on and on and on and I just thought to myself, dad, you know nothing about this group and you’re ready to put 50,000 bucks into it? You don’t know the first thing about a movie but forget about that. If these guys were so good and these guys were the producers of Shrek and all these other things, you think that they’re randomly, robocalling you for 50 grand? You know, there’s an element of just understanding who these people are. You know, what is their track record? I tell people that I borrow money from, I don’t want you to tell me you don’t make much money, I want you to tell me you’re going to make 200% on this deal, I’m happy at 10%. I want to know you got extra opportunity that even if things go bad, I’m going to get paid. Don’t be embarrassed to be successful, it makes you a better borrower, not a worse borrower so that would be one. And then the second one is trusting the borrower too much. He who has the gold makes the rules so the deal doesn’t fit your box, don’t let the borrower talk you into something like, for example, I don’t need title insurance because this is a deal that I know really well. Okay, well, you guys, you know, the three of you just talked about a pipeline of deals, full of title issues, right? Why in the world for the sake of a thousand bucks that my borrower pays, what I’ve run the risk of my title being clouded and losing the property? So there’s some just general due diligence stuff that I think people start looking at returns and they forget about common sense logic and I think it boils down to don’t be a victim of the idea of big returns, the word guaranteed should be a reason to run for the Hills. Lack of track record doesn’t mean you won’t invest with someone, it means they just have to prove more so that they’re worthy of your money, you know, it’s all of those things and I’ll kind of end this, you know, due diligence rant with one of my favorite Warren Buffett quotes and Warren Buffett says return of principle is always more important than return on principle.
Wendy Sweet (46:50):
Amen.
Jason Debono (46:52):
And so many people get caught up and, you know, I can make 12%, well, 12% of nothing is zero. I’d rather comprehend the brand back. So, you know, do your due diligence, do your research if it sounds too good to be true, it probably is. If it sounds too good to be true, ask more questions and if at any point in the process, you feel uncomfortable, walk away. There’s so many deals that exist out there, find stuff that’s good and when you find it, stick with it and do your due diligence and I won’t say it will be just fine, there’s always going to be some landmines you’ll step on occasionally but let it not be self-inflicted wounds by just being too aggressive for return and overlooking the real value of due diligence.
Jonathan Davis (47:31):
Well said.
Wendy Sweet (47:32):
You are just singing music to our ears. We say this to people all the time. we’re involved in several mastermind groups that we are, you know, just so excited to even be a part of but even within those groups, there are investors that know better, that are getting more and more educated as they go along and just about a year ago when I went to one of these groups, one of these investors was talking about investing and where was it? Beliefs, you know, something crazy like that. I’m hearing feedback over here but they were talking about investing in beliefs and in a new project and then started talking about, you know, I’m going to make, you know, 17 to 27% and my head’s about to explode. I’m wanting to go, what, are you thinking? You know, better. But he had been educated enough to where he thought he knew better than he really knew and it was just so off the mark and we hear that all the time, people chasing the double digits on returns and singles? We’ll pay the bills all day long. Singles and doubles, way to go. You know, you don’t have to hit a home run every time you get up, right?
Jonathan Davis (49:00):
What we want people to start saying is when they start hearing people throw around 15, 20, 25%, it’s like, that sounds dangerous. Like, you know, what is that? You know, and it’s not necessarily a bad investment but you know that sounds dangerous, tell me more.
Bill Fairman (49:16):
Yeah.
Wendy Sweet (49:20):
And it’s not all out there. There are deals that out there that are double digits that are good solid deals but there’s a risk that goes along with that will match that return and most people can’t sleep at night if they really knew what the risk was.
Bill Fairman (49:37):
Yeah. And it’s okay if you’re young, you can take risks but as you get a little bit older,
Wendy Sweet (49:42):
Like Bill.
Bill Fairman (49:42):
You need to take fewer. Thank you.
Jonathan Davis (49:47):
You have the old eyes, right?
Bill Fairman (49:49):
Your job is to minimize the risk, the best you can and the first place is like you said, knowing and understanding the person you’re investing with or the company investing with and getting references with the companies that you’re investing with. And, you know, don’t just send me the people that have had good experiences, I want to talk to some of them who have lost money with you.
Wendy Sweet (50:16):
And how did they behave.
Bill Fairman (50:17):
How did they treat you when you lost money?
Wendy Sweet (50:20):
Yeah. Did they hide in the shadows or were they reaching out to you to see what you can do to things out? And, you know, it’s really good too. You were in a position Jason, that you were able to tell your dad, you know, don’t do this, this doesn’t make sense. Why are you even considering this? But are you allowed to do that with your clients? Are you allowed to throw up red flags for them?
Jason Debono (50:47):
Yeah. I mean, that’s a really good question and the answer to that is, no, we’re not, we don’t provide any form of due diligence. That said, you know, we have resources on our website. If someone sounds confused, we ask them questions, not because we want them to convince us. We want them to maybe ask themselves some questions that they didn’t think to ask to begin with. So yeah, I mean, unfortunately that is the drawback. It’s kind of like the car salesman, right? Their jobs to put you in a car that you like and can afford, it’s not the determined if you’re a good driver and it’s unfortunate because, you know, in some cases but I also understand the other side of that, which is, you know, my job isn’t to direct people, I’m not equipped to. I’m not a great investor, you know, I’ve been fortunate to kind of understand how it works, you know, over my years of experience and doing what I do, but, you know, I’m not equipped to tell people it’s a good or bad investment, it’s their own money. You know, I like to use the drop the kids off for a sleepover type litmus test, you know, which is, you know, think of your money like your kids and you’re going to drop them off at somebody else’s house. Would you do that with your kids without asking a few questions? You know, what would be the things you’d want to know, what would be the safety nets? The backup things, you know, what are those safeguards that you put in place? And you should have the same or similar set of those for your money. I’m not suggesting money and kids are equally as important but I have no, having two kids, you know, I have no problem saying, yeah, I mean, you can’t have kids without money, I think everyone understands that. And you know, we work hard for our money and it’s amazing how many people are so quick to just let it walk away without any real understanding of where it’s going.
Wendy Sweet (52:33):
Which is why it’s so important to be able to get on your website and watch the videos that you’ve, and the webinars that you’ve put together that other people can learn from. So what’s the best way for people to reach you and to find those videos but to reach you, to ask you about your fees and all the things that you do as a custodian company.
Jason Debono (52:57):
Yeah. So the website is where I generally, you know, direct people to start because it’s just so chock-full of information and that’s NuView with a U trust.com. NuViewtrust.com and that, again is going to be the easiest way to at least start. There’s so many videos and written contact and things you can download, educate yourself. I think we live in an information age. There really is no longer an excuse to not know something. You know, we carry around a phone that gives us every, you know, every sort of trivia question we’d ever come up with but we don’t actually take the 10 minutes to go and look up that real financial information that’s going to have a far more profound impact on our life. So start with the website, you can reach our team at (877) 259-3256 and that’ll get you right into our organization. You can reach out, we’ve got an entire sales team. I’m generally available myself so you’re always welcome to ask for me if I’m in the office, I’m happy to help. If not, we’ve got an amazing team here. You know, they can walk you through and talk you through kind of the process and, you know, as we alluded to earlier, we’re not here to tell you what to do or to advise you, that’s not our job or our role as a passive custodian but we certainly want to make sure that you’re as educated and informed as possible so you hopefully can make the best decisions for you and your money.
Wendy Sweet (54:17):
That’s awesome.
Bill Fairman (54:18):
Excellent. Jason, thank you so much for your time today, you’ve been an awesome guest.
Jason Debono (54:24):
Well, thanks for having me really enjoyed it.
Wendy Sweet (54:26):
I can’t wait to, your email address, actually websites in the chat box, too. If you want to save that folks, you just, you can go ahead and do that plus we have it across the screen as well but I can’t wait to get online and watch your 401k that you just finished. Cause that’s exceptionally interesting for me. I love it.
Bill Fairman (54:49):
Absolutely. So folks that does it for today. Don’t forget if you’re a borrower and you’re interested in getting a loan, go to CarolinaHardMoney.com, click on the borrower tab. If you’re interested in passive returns, then click on the investor tab. Don’t forget to share, like, and subscribe to our channel. Again, next week, we’re going to be broadcasting live from the Opal sands hotel, overlooking the pool and the ocean.
Jonathan Davis (55:16):
Well, they will, I won’t be.
Wendy Sweet (55:17):
Yeah, I won’t be. I’m actually gonna be on a plane, he gets to do it by himself.
Bill Fairman (55:20):
I’m doing it solo. Darn, I’m taking one for the team.
Wendy Sweet (55:24):
Poor guy.
Bill Fairman (55:24):
So doing this next week. Thanks again Jason.
Wendy Sweet (55:27):
Thanks again Jason, that was awesome.
Bill Fairman (55:27):
You guys have a great week.
Jason Debono (55:31):
Take care, everybody.
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