Tracy Z:
Hello and welcome. This is Tracy Z
Fred Rewey:
I’m Fred Rewey
Tracy Z:
I like how they've got their names We did that actually, but we're on the opposite sides today. You want to be Tracy and I'll be Fred.
Fred Rewey (00:23):
The picture of the cows hidden behind my head too. So if you were there it would be like this. No. It's going to mess everything up.
Tracy Z (00:35):
Welcome. We are here today to talk about notes in retirement accounts. How to put real estate notes in self-directed retirement accounts and we love self-directed retirement accounts. We'll talk a little bit about the benefits, and then we're going to give you an example of a deal. Then we're going to go through our 10 tips for buying notes and retirement accounts. Before we get started, we'll do the quick little disclaimer, just to let you know that we are not financial advisors, attorneys or tax advisors, and that all investment carries risks. We definitely recommend that you review any transactions with those professionals because they provide a great service.
Fred Rewey (01:12):
Past performance is no guarantee of future results. We don't play financial advisors on TV. We don't play financial advisors on YouTube consult your real professional people.
Tracy Z (01:23):
That's right. Because we'd have to add professional then.
Fred Rewey (01:26):
That's clearly why we have to do that. It's disclaimer, is that clearly these people do. I don't want to wear a tie.
Tracy Z (01:33):
That's a good point. We want to ask you to like share and subscribe, hit the bell, which will give you reminders when we go live. We're having a lot of fun with these note investing 101 sessions.
Fred Rewey (01:45):
This is the seventh one, I think we've done or something like that.
Tracy Z (01:49):
Let's start off with the benefits of putting a real estate note in self-directed IRA. Now, just a quick little refresher. If you missed any of the prior ones, we're talking about notes, promissory notes that are secured by real estate. We're talking about a retirement account that allows for self-direction. Meaning that you can pick different investments besides stocks, bonds, mutual funds, anything that is allowed by the IRS code, basically on for IRS. You want to kick us off with benefit.
Fred Rewey (02:19):
Just let me picked up on what you're saying a little bit though. I mean this is live and there are people joining here that are from. Just to back up a little bit on the notes for a quick second, a lot of people buy a property and you can certainly have property and things like that. But a note is basically where you own the loan on the property instead you're essentially the bank. Maybe you had a property and you sold it to someone and they agreed to pay you. Or you bought a note or something like that. And you're going to put that in your IRA. So we're not talking about physical real estate. We're actually talking about the cashflow, but you can put those. And a lot of people don't even know this. A lot of people with even self-directed IRAs don't know that they can put those in their retirement.
Tracy Z (02:58):
Just keep in mind that it be an asset you already own that you transfer into your IRA. You can't borrow money from your IRA would have to be something that you buy from someone else, a third independent party or property that your IRA buys and then creates a note. There are a few little rules in there, but we'll talk about that today. All right. Benefit number one, notes in IRAs. You get to Generate Interest income. Interest income is different than buying real estate because interest income is basically what all the banks charged, right? For people to borrow money. And with real estate, you're looking for appreciation or cashflow off of tenants. But with notes, you get to generate interest income with having owners in the property that take care of the management, the taxes and the insurance, instead of rental income, you get interest income. That's one of the benefits of having notes in IRAs is that interest income. Benefit number two.
Fred Rewey (03:59):
You can purchase notes at a discount. This is a great way. Somebody may have a note and they're getting $500 a month for that note and they're earning an 8% return on it. But if you buy that note at a discount, which is very common it's how most notes are transacted, you actually receive an even greater amount on your money. You have a greater return on your money, I should say. And you get to decide, we'll talk about it later. We've talked about another one's you decide how much you want to pay. So you decide what your risks are. You decide how much you want to pay. But the big thing is, is you're actually purchasing notes. You're purchasing an asset at a discount and putting it in your IRA.
Tracy Z(04:35):
The beauty of that is when you purchase something at a discount, in addition to getting the extra yield, like Fred was mentioning, if they pay off early, then your yield goes up and that's all going to be what we're going to cover today. Number three, you've got an asset that's backed by real estate as security. So this is very important because there's notes out there that are unsecured there's notes that are based on businesses or autos or cars, planes, trains, automobiles. But we talk specifically about notes that are backed by real estate because real estate is a hard asset. And for some reason, someone doesn't make payments on the notes. Then you have options. Number four.
Fred Rewey (05:16):
It's less hands-on than owning property. So if you've ever owned property and own a rental, then you know exactly what I'm talking about. You know, at 2 am you get a call because the toilet's not working or the roof has a leak or, you know, somebody is not happy with the hose fitting outside of the house, whatever it may be. When you own the note, you're just like the bank. So, you know, as someone that you may be paying out a mortgage or something like that, you know, if you have a problem with your house, you don't get to call the bank and say, Hey, you know, I have these problems. You have to deal with it yourself. Well, when you own a note, you're not getting those phone calls. So it's a lot less hands on. And the only time you're actually talking is when Hey, object doesn't come in or someone wants to pay off. But you know, in theory, you're not getting any of those phone calls because it's not even applicable to you. You don't own the property. You only own the cashflow.
Tracy Z (06:00):
Yes. And there's some benefits to having things that are less hands-on in your IRA account as well, because then you're not providing any kind of service to your IRA, which is one of the things you have to watch out for, with self-directed retirement accounts. So as Fred mentioned, you're not having to take those calls. There's another benefit you can hire licensed third-party servicers to manage the payments and handle any collections and think of a third party servicer like a property manager for real estate. The benefit is though that they don't charge near as much. An average servicing fee is usually somewhere between 20 and $30 a month. It goes up a little bit. If it goes into a non-paying note and they have to do more work on the collection side, but that's another beauty is that you can do a lot more notes than you could do properties per se, because they are less hands-on and you can hire these third parties.
Fred Rewey (06:51):
The next one thing would be is really, I mean, it says a lot of things here, but it's really a flexibility in dealing with it. So you have the ability to rework a note. So maybe the person making payments wants to increase their payments. You can certainly facilitate that. Maybe they want to rewrite the note and do something different with it in the event that they don't pay you and they have to leave. You can take a deed and loop, which means they just sign back over the property and then you know what to sell it. And you do it again. Or you can, you have all the rights that like a bank does where you can take back the property foreclosure in the event of a non-payment as well. But there's a lot of flexibility. And to the point we made earlier about, you know, minimizing your risk by buying at a discount and things like that, you know, you could literally have creative things where you go, Hey, you know, call somebody say, Hey, if you double your payment, I'll lower your interest rate. And then they could pay it off sooner. But guess what? You've accelerated the money coming into your IRA and your return has gone up even higher. So you have a lot of flexibility when it comes to the paperwork.
Tracy Z (07:45):
There are a lot of great strategies of how to do that. And the last benefit we want to touch on today is probably one of our favorites. And that is profits are tax deferred or even tax free with a Roth IRA. When we talk about IRAs, but remember we've got traditional IRAs, Roth IRAs, solo 401k's, Simples, SEPs, HSHS, Coverdell, educational savings accounts. There's all kinds of these tax benefited accounts, where they seem, depending on the account, it's either tax deferred. You don't have to pay any taxes until you take it out or it's tax free in the case of the Roth type. So those are the main benefits of notes in retirement accounts. And we've seen a lot of notes in retirements. We've definitely seen it improve. I think the first time I bought a note in a retirement account was about 1997. It was fairly new then, and didn't have a lot of choices of custodians, but now you have lots of choices of custodians.
Fred Rewey (08:43):
I was going to say one more thing. I was gonna add to the tax deferred. So one of the reasons why this is really important when you start talking to retirement accounts and anybody that has had a good hit, and this is when you sell a property and you get this big hit of income or something happens is maybe you have a note outside of your IRA and somebody pays off and you get it. And then you have the tax consequence. And those, this is important. So even if, even if you eventually have a, you know, maybe it's not a Roth, maybe it's not something that you ever have to pay tax on, but let's talk about traditional for just a second. You know, if those, hits your tax based on when you take the money out, you're not taxed on that, Hey, this, this year was a big hit. And then this year didn't make much, and this year was another big hit in some things like that. So you spread that out to where your tax consequence is, not these windfall moments, but basically when you're, when the schedule says, you have to start taking it out, or you start choosing to take it off. And that's very, very important, protecting your money longer term.
Tracy Z (09:33):
All right, well, since we're touching on the tax stuff, we'll add one more to that, but not giving tax or financial advice. And that is some people like notes in IRAs instead of owning the real estate itself. Because when you own real estate, you do get appreciation in something called depreciation. So you get some really great tax write off for a real estate owns right in your normal outside of your IRA. So a lot of people like to put the notes in the IRAs because they don't have the appreciation and depreciation. It's just the interest income. And so that's why they really liked to put them in there. So those are all the benefits related to being a tax benefited account. All right. So now we'll do the example. That was good. I'm glad you added to that. So the example on this one is a first performing note in Dallas, Texas, and this was purchased in my IRA. And do you want to start?
Fred Rewey (10:23):
So I'll just lay down and Tracy can tell you what, what we did here, but basically the sale price of the property was $91,900. The down payment was 5,000, which isn't a particularly very big down payment. The original balance of the note that they created was $86,900. And the terms they wrote the note at 9.5%, which meant that it was basically 249 months long, and the payments were 829 cents a month. When Tracy saw the note, when we saw for the IRA, there had been 72 payments already made on the note. So there's some seasoning here. So about six years and there were 176 payments remaining in the note, remember it was started at 249, they've made 72, that leaves 176 to go. So that made the current balance. At that time, the unpaid balance is $75,834, or what we would say would be LTV, which is a loan to value of the property, which have you assumed the value of the property is the $91,900 . And it could be more, but at that moment, let's just say $91,900 that would be 83%. In other words, they have basically 17% equity in the property.
Tracy Z (11:33):
And if you're falling along home, you're saying, Hey, 72 and 176 is adds up to one month less that's because this buyer made a little bit extra that kind of rounded up every month. So they did pay down a little bit, which didn't affect the amortization that much. But I only mentioned it because when you buy those that already exist, you're buying on the unpaid principal balance at that moment in time, the amount that the buyer would have to come in and pay off if they wanted to pay it up because they can pay off if they want. So what's cool about this note was, is that because it had been six years in the Dallas, Texas market. Oh, we do need that stucked up on the screen. Thank you. What was really cool about this note is, that thank you.
Tracy Z (12:13):
We have people behind the scenes. So what's really cool about this. One was that the values had gone up as many areas have. So when we look at these notes, as part of due diligence, we get a valuation with the properties currently worked, and while we're not buying the property, we're buying the note. It is secured by that property. So the value of that property helps our position. So in this case, it actually had gone up to over a hundred thousand dollars at the property is worth. So that means that long devalue that Fred mentioned it actually in, in today's dollars, been more like 75%. So here's what we did with that note. We bought it in an IRA for $68,430. So now that's the amount we've invested to buy the note. Now we look at investment to value. What are we investing compared to the property's value?
Tracy Z (13:03):
And that's a 74 ITV just based on that old sale price. Of course, it's more like a 68% ITD when you look at the current value of the property. So in paying that amount in discounting it, as we talked about earlier, when you look at the unpaid balance and you minus out what we've invested now, we have a discount is $7,404. So they came in and paid off tomorrow. They have to pay out the whole $75,834, and we get all that money back, including our discount. But normally if they pay according to term, they're going to pay over time. They're going to make that $800.29 cents a month for the less of the term, which was 176 months. If they do that, if they pay as expected, the anticipated yield to the IRA is a 11.36%, a nice respectable return.
Fred Rewey (13:48):
And just to back up just a second, for those of you that may be joining, and hadn't seen some of the other episodes to kind of understand where the discount comes from here or why some would even do it. You know, the sellers had a 70, you know, we're owed at the time, $75,000. So some people, one of the first questions you get is, well, why would they take a discount? Well, I mean, I think most of us, especially if we have a need or want, if someone owes me, $75,000, but it's over the course of 176 months, and someone said, Hey, tell you what, I'll give you $68,000 in change right now. And then you can walk away and, you know, yeah, it's a little bit of a discount. You'd probably take it, especially if you had an important need or want. The other thing is, that nothing changes for the payer.
Fred Rewey (14:28):
So the way they wrote the note was 9.5. So if we had paid $75,834 for this note, which we wouldn't, but if we had, we would be earning 9.5% on our money. But since we bought it at a discount, now we're paying, we're paying less money for the same cashflow. We're still getting 176 payments, and we're still getting the $800.29 a month. So that means the only thing that can change is the yield goes up for us, not for the payer, nothing changes for them, but we bought the same cashflow for less money. So that's how we're able to do it. And that's one of the amazing things about this industry is the ability to get increased yield. A lot of people aren't willing, you know, why would anybody do that? Well, that's why they would want to sell. And why would anybody buy it? Well, clearly 11.36%, right now, when you have something that is better than 74% ITV, cause right now we know the value is higher and now it's backed by real estate. That's, pretty powerful
Tracy Z(15:23):
Its very powerful. Now Texas happens to be one of the largest producers of seller finance notes. In fact, for all the years you've been tracking it, they have. And one of the reasons is that they have a non-judicial foreclosure process. And so it's, it's not really hard to foreclose, if people don't pay. Now we buy notes. We like performing notes. We like notes where people are paying. We like the cashflow. We're not looking to get the property back, but if somebody gets into a hard life situation, we'll work with them to get them back on track, definitely during COVID and those sorts of things. You know, there's been special circumstances where people have these life events and we get them back on tracks. Cause we want to have them stay in the home. But if they don't, then you do have the ability to rework it or get a deed in lieu as Fred mentioned. But what normally happens with these notes, they usually pay off early because people pay at nine and a half percent. We see higher interest rates on seller finance notes, and they get a nice payment history. And guess what? They now are able to go out and refinance a lower interest rate, or maybe they sell the property or something like that. So the beauty of buying at a discount is if that pays off early, your yield goes up.
Fred Rewey (16:33):
And just so everybody understands the mechanics of it, basically, you know, it's not like you're writing a check. So you have the money in an IRA. The IRA is writing a check in this case for $68,430. And purchasing that note, the monthly payments are also going to go into the IRA. They don't go to you. You don't cash them. You don't, you definitely don't want to do that. So, so basically your IRA, which is yours, is purchasing using the money to purchase it. And then the payments are going to go in there. But you know what? There's no limit to what an IRA can earn. So in this case, it's a learning, you know, earning 11.36. Now, if you bought it at a lower discount, you'd be earning even more. If they pay off early, guess what? You're going to get a higher return.
Tracy Z (17:12):
Excellent. Well, that's a good lead into our 10 tips. So let's talk about our 10 tips for buying notes in a self-directed IRA. So tip number one is to know your type. So some people like performing, some people like non-performing, some people like notes secured by mobile homes. Some people don't like notes secured by mobile homes.
Fred Rewey (17:33):
I don't like things that move just for the record. The name is mobile.
Tracy Z (17:44):
Some people like notes secured by land. Some people like notes secured by commercial property. There are some people like notes in judicial foreclosure States. Some like them in non-judicial foreclosure state. Some people like to buy notes where investors are paying. Some people like to buy notes where individuals that live in the home are paying. So know what your note type is. Don't just go into like, I'm going to buy a note, like really think through what your risk tolerance is and what kind of a note you'd like to.
Fred Rewey (18:11):
And this is usually in line with what you know, forgetting about the note for a second. This is usually in line with the type of property that you would feel comfortable, really owning as a property, even though we're talking about notes. So you would feel comfortable. Hey, I'd be okay if I owned a property that had a renter in it, or, you know, an owner in it, I'd be okay with owning a commercial property, but not this big or something like that. So it's usually in line with what you'd feel comfortably owning is also what you'd feel comfortable in. So tip number two. So basically just kind of dovetails off that is have a playbook for your investing guidelines. One of the coolest things I loved about this industry, when I learned about it is the amount of flexibility or the amount of power that we have to decide what our parameters are.
Fred Rewey (18:55):
So, you know, when we start talking about what's the discount going to be, or what am I going to pay for this note? Well, I decide on the return I want on the note, I decided if I want to earn 9%, 10%, 11%, 12%, 14%. Now if I choose too high, I may not be able to get the deal, but at least no one's making me, you know, only earn 4%. I get to choose the same as true. When you start talking about how much money do I want into something, as far as what the risk is. So let's say it's a hundred thousand dollar note and maybe I don't want to be in any more than 75% of whatever the value of the property is. Well, if it's a hundred thousand dollar home, then that means the most I'm going to want in it is $75,000.
Fred Rewey (19:32):
Now for you, it may be 80. It may be 85, maybe 70. Yeah, it might be 50, but you know, imagine if it, if it's 70 now, if I have a $70,000 investment on a hundred thousand dollar property, how good do I feel that if things go bad, if they can't pay and I can't work with them and I have to take the property back, what's the likelihood of my getting my money back out of it. It's pretty good. There's a lot of equity in that property. So you get to decide what that is. You can decide how long of note you want to buy. You get to decide on all the things we talk about it on the different types, but you kind of can set those guidelines and you can stick to those guidelines and you go, you know what? I'm not going to go for a higher yield if it puts me outside my comfort zone.
Tracy Z (20:11):
That's a really good point. And the reason we talk about this is to understand your investment, to value your buyers loan, to value or equity position, because it's not just what you invest. Your buyer is more motivated when they have skin in the game, as well. Think about your discounts, think about your yields because you want to go into it, looking for the type of notes that fit that. Now, if you say I want a performing note, grade A 50% investment to value my buyer has a 60% equity or, or we'll see that wouldn't be those numbers wouldn't work 40% equity. And I want to be in a 50% investment to value. And I want this 14 yield and look, you're not going to get that kind of great yield most normally on those grade A notes. So you kind of have to think about what your parameters are.
Tracy Z (20:55):
If you want a grade A note, you're going to have to drop down your yield expectations a little bit. If you're willing to buy something a little riskier than you could get a higher yield, but you're going to want to temper that with some investment to value issues like Fred said. So we only talk about that because there's a whole playbook there. The next piece, number three is master the time value of money. Because if you heard us talking about yield and discount and amortization calculations for understanding yield over a long period of time are different than a cash on cash basis of ROI. That most real estate investors are familiar with. Remember that with a note, people are paying it down until it pays to zero. So that's why we say understand the time value of money and understanding that will also give you some abilities to do some other things we're going to talk about in the next few tips.
Fred Rewey (21:46):
Well, you did an entire course on the time value. She did a course called how to calculate cash flows, which by the way I said she shouldn't do. She said, she came with me the idea, and she's like, you know, I want to do this course. And I said, and by the way, it is probably if I was to pick three things that everybody needs to know, that would be one of them. My only issue was, one. It's going to be a lot of work and two, nobody's going to want to watch it because people don't know what they don't know. And so this is, I mean, hundreds of people have seen this and love this course. And it really is. Because when you have a handle of that, it's not just about notes. It's about buying cars and buying houses and financing. Anything. You never look at money. It's a very empowering powering item is to be able to handle the financial calculator and understand that, you know, if you're involved in a financial transaction and you're not the one with the financial calculator, guess what the other side is. So that's what you want to be able to kind of, you know, play the T the, the, the equal the playing field, if you will. Mastering the time value money. I mean you did an entire course.
Tracy Z (22:46):
And I really have enjoyed the feedback from people that have taken that course.
Fred Rewey (22:51):
So number four is to basically embrace the boring. And I think this is funny that I'm the one that has to talk about this one, because you know, this is the closing of the due diligence. More specifically, the due diligence though. I mean, the closing is basically, you know, the paperwork and how it goes, but due diligence matters. It's easy to get excited about the yield. It's easy to get excited about the note and maybe the property, which by the way, isn't your property, you own the loan on the property, but you don't actually own the property, but it's the details that matter. And you know, when you, when you've got a deal, you have to take your time to make sure, are they employed? Are their taxes, you know current is there insurance on the property in case it burns down.
Fred Rewey (23:32):
And by the way, we'll share a burndown story with you at some point. But you know, these are things that you, you know, that it's easy to skip over or assume, and you don't want to do that. So we do, you know, we have checklists and we have our members and our trainings and things like that. We have very specific checklists and you know what? You need to go through them every time. I don't think I got a fair, how familiar you think you are with the deal or how much you love the deal. You just don't skip those steps. And they're not hard steps, but you do need to go through them.
Tracy Z (23:59):
Definitely. And there's things like making sure you have the original note and it's properly endorsed. And we talk about how to underwrite. Basically you're acting as an underwriter, right? Nobody's giving you financial advice. So you've got to understand this process and there's people that can help you and trainings like ours, but you're looking at the three PS as we call them. And that's the people, people making the payments or the person selling you the note, the property, what kind of security you have there. And then the people property and the paperwork. So that that's the paper like the original note and the deed of trust and the title report. So all of those things are really important. And you did a really good job on talking about due diligence. I like that. So number five, seek professional help.
Tracy Z (24:45):
And no, we're not talking about, go get a therapist. Although I've had a couple of deals, maybe they needed one, but seek professional help. Get a team around, have a title company, have an attorney, have a service, or have a financial advisor, have all, all of these people that understand this process, have a good IRA custodian. So have a good team of professionals around you because then you're not just relying on yourself. And you're also relying on the same checks and balances that a bank does when they do notes.
Fred Rewey (25:15):
The next one would be to spread the risk. And so what this is, just to say, you know, if you have a, say of $200,000 to invest you could buy one note and put all your money. In one note, I would rather have four separate notes than one note. I'd rather have four $50,000 notes. I may vary it in location. So I'm not going to put all four notes in one location. I may vary the location a bit, maybe on different sides of town, maybe in a completely different state, depending on what, you know, what my comfort zones are. But basically spread the risk around, you know, maybe some of it is a higher risk note, but not, they're not all higher risks notes. And then maybe once just a really nice, you know, a low risk note that, you know, going, you know what, I'm only earning 6% on it, but boy, I'm sitting in here at a 50 ITV on a great credit score payer. It's like, well, you know what? I'm not worried about this one. I can sleep at night.
Tracy Z (26:06):
Definitely. So tip number seven is to find creative solutions. And what are we talking about like that? Well, one of my most favorite creative solutions is a partial purchase and we've did a whole episode note investing 101 about partial purchases. And one of the great things is that you can lower your investment to value. You can lower the disk, which means you're lowering your risk. You can lower the discount to the seller of the note, meaning give them more money. So they, aren't taking such a large discount and you are buying the payments immediately in that time value of money that we talked about that are most valuable. And you can build in residual cashflow because in the future they might want to sell you. So that would be just one idea of how to find a creative solution. Other creative solutions can work like you were talking about earlier about reworking a note.
Fred Rewey (26:55):
I mean, you could go back and rework notes, you can go back to somebody and go, you know, you can, you could talk to them. I had a deal literally that I was trying to, you know, I was buying some very small notes and I was trying to get them to pay off early because they were very, very small notes. And I literally, , it was around football. It was, coming up on super bowl and I knew their hot button was a big screen TV. And I had said, you know, I'll tell you what, if you pay the note off in full well, I'll buy a big screen TV. Well, the discount was something like 4,000, $5,000 or whatever it was. And so by them paying it off early and I went and bought a $1,500 TV. It didn't matter. I still got this great return. So there's a lot of creative things you can really do.
Tracy Z (27:37):
I love that story. That's my favorite ones. And tip number eight is to tap into deal flow. And so how do you do that? So you've either need to network with people, right? That have deal flow, or you need to understand how to create notes, which is why we did the creating notes master class, or you need to know how to market, which is why we have the finding cash flow notes. So all of these things work in. Some people like to tap into deal flow off of the note listing platforms that we've talked about. We bought notes there as well. That actually that Texas note came up with some platforms. So I've used them as well when I've got some money to get deployed, because one thing is you don't want money sitting idle, and you want to keep it working because you got to keep it reinvested or your yield goes down.
Fred Rewey (28:21):
Number nine is learn from others. It sounds obvious, but here's the weird thing about this industry. So we have over 50 years combined experience in this industry. We've done this for a very long time. The essence of the industry has always been the same. Yes, there's, there's different things that we watch for. And we've learned some new techniques over the years and things like that. And you've certainly refined the marketing and certainly refine the fact that the sellers are much more aware they can sell now than it used to be. But you know, this isn't reinventing the wheel. You don't have to go out and create your own thing. I mean, everybody has done it. We've all been doing it the same way. We, find a note, we've been on a note, we purchased the note. We put the note in our IRA, or we put the note wherever we're going to put it. But basically the processes have been changed and you can learn from others. We created noteinvestor.com years ago, and there are hundreds of free articles on there. You can read whether you want to read about marketing, closing retirement accounts. There are a lot of great you know, like quest IRA and other places do these videos and conferences you can go to online. You don't even have to leave your house anymore. You know, there's some great information out.
Tracy Z (29:26):
And so that brings us to tip number 10, which is if you're going to do notes and IRAs, you need to use a self-directed IRA and you need to find a good self-directed IRA custodian. As I mentioned, there's a lot more options out there, quite a few good ones. And so equity trust, Quest trust, new view. I mean main street, we've got all our directory, our 2021 directory of note buyers and resources lists all the main ones that were nominated for best of notes, 2020. And you can even go to noteinvestor.com the homepage you'll see best to notes, 2020. They'll tell you some of those. So they have some great learning opportunities. Like you mentioned. I know Quest will be speaking on Friday where a sponsor at the Quest con, which is quest [inaudible] online conference for private lenders and seller financing is a type of private lending. So those are reasons you use a self-directed IRA. Custodian is one regular IRA. Custodians will say, Oh, you can't do that. You only can invest in stocks and bonds and mutual funds. But what they're saying is that you can't do that with us because we don't have, we're not set up to handle those kinds of investments. It's not the IRS that says that.
Fred Rewey (30:35):
Or they don't profit as much off of it.
Tracy Z (30:38):
That's probably the main reason why I was trying to be generous.
Fred Rewey (30:41):
I'm not losing any friends over at my stocks.
Tracy Z (30:43):
That's true. So you have to work with a self-directed IRA to get that account set up, and then they also help educate you on things like what's a prohibited transaction. So what are some things you can't do? What's a disqualified person. What, who are the people you can't do business with? It's normally your relatives, your above you and below you, your ascendance and descendants that you can't do deals within your IRA, but that leaves a whole open world of everybody else. And so they'll kind of guide you through that process and make sure you're well-educated in that area. And then if you get a little bit more advanced, some people like to set up an LLC or a trust that's owned by their self-directed IRA. So there's all kinds of cool strategies, but start with that custodian because they will help keep you on the right path.
Fred Rewey (31:27):
What I like about the custodians now versus say years ago is that to your point, they are much more helpful. You know, I mean, they are, they, you know, like I said, they, they have events that, you know, obviously our marketing events for them to have like a convention and things like that, but they are passing on information when they invite someone like us to speak at their, you know, they're trying to pass on information to their members, clients, they work for you, and they understand that. And they help you they're there, they help you along the way. So I really liked that they have an educational component as much as they can legally. But they have an environment that creates that information.
Tracy Z (32:01):
And many of them have IRA specialists that have actually taken all the IRS examinations did earn that designation. So they have that ability to provide that advice as well. Not the advice on what investment you make, because that's up to you, but just on the basics of how the IRAs operate. So I hope that you've enjoyed this session. Just as a reminder, you can go to noteinvestor.com. And that is our website where we share hundreds of articles. Like Fred mentioned, you'll also see resources there in the bookstore tab as well. And we do a lot of work with members. And so we welcome members. We welcome doing business with people. We've worked a lot lately with people who are real estate investors, who are wanting to understand note investing. I call it landlord versus lean Lord, which is what I'll be talking about on Friday at Quest. So we invite you to like share, subscribe, share it with somebody, hit the bell. We should have a bell when we do that bell noise. Okay. Well, thank you so much for joining us, everybody. Thank you until next time. Happy note investing!
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