NP: Thank you Quincy for taking time out of your busy schedule to discuss the nuts and bolts of a self directed IRS.

Quincy: Thanks for asking me.

NP: Explain what a self directed IRA is, why it is advantageous for an investor to have one?

Quincy: A self-directed IRA is no different legally than any other IRA. The difference is simply that with a truly self-directed IRA your account agreement with the administrator or custodian allows you to invest your IRA's funds in any asset not prohibited by the Internal Revenue Code. Since there are so few restrictions contained in the law, this allows investors to purchase many "non-traditional" assets such as real estate and secured and unsecured notes. In other words, you can invest your IRA in what you know best, which for many people means something other than the stock market.

NP: What is the procedure for buying an asset in a self-directed IRA?

Quincy: Once you know the procedures followed by your IRA administrator or custodian, buying real estate, notes, or any other kind of asset is extremely easy. Just as you can direct your IRA to buy a stock or mutual fund, with a self-directed IRA you can direct the IRA to buy non-traditional assets. An analogy can be made to a corporation buying real estate or a note. A corporation cannot act on its own - it must have an officer or the board of directors make a decision to do a transaction and pass the necessary resolutions authorizing a person to sign on behalf of the corporation. With a self-directed IRA, you are in complete control. Once you find an asset you want your IRA to own, you send a buy direction letter directing and authorizing your IRA administrator or custodian to purchase that asset. Normally you must also sign as having been "read and approved" any document you want your administrator or custodian to sign. The administrator or custodian then sends the funds to the seller or title company, and the asset is now owned by your IRA.

NP: What are some examples on how you can purchase and sell real estate using a self-directed IRA?

Quincy: An investor's IRA purchased a property for $23,000 cash. The property was rehabbed using contractors who were not disqualified from doing business with the investor's IRA. All rehab expenses, utilities, property taxes and homeowner's dues were paid from the IRA's funds. The total rehab expenses were $24,197.80. The property was sold in approximately 10 months
with the net proceeds to the IRA being $85,661.78. The IRA's profit after all expenses was $36,982.58, or about 78.36% return in only 10 months!

NP: Are you telling me that this is also tax free?

Quincy: Yes!!! Nice, huh?

NP: What is another example? I'm liking this.

Quincy: An investor purchased a pre-foreclosure property in his Roth IRA for $11,213.22 cash, including closing costs. Approximately 7 weeks later the IRA sold the property to a neighbor for $24,734.00 cash and a $5,000.00 seller-financed note. This amounts to a 265.17% profit in only 7 weeks! Because this was done in a Roth IRA, this enormous profit is TAX-FREE FOREVER!

NP: Do you have other examples:

Quincy: Yes. Another example was an investor noticed what appeared to be a large abandoned house in downtown Houston. After doing her due diligence, she found out that the owner lived in California and was being sued for owing almost $100,000 in delinquent taxes. She purchased the property subject to the delinquent taxes in her Roth IRA with only $3,036.50 paid in closing costs and the $75.00 purchase price. The property is on the tax rolls for $302,000, but needed substantial repairs. Three and one-half months later the IRA sold the property to another investor and netted $46,707.71 from the sale after paying all delinquent taxes and selling costs. Because this property was debt-financed (the delinquent taxes are considered the same as a mortgage), her Roth IRA had to pay a special tax called unrelated business income tax (UBIT). However, even after paying the tax of $15,539.00, her Roth IRA went from $3,040.00 to $32,882.66 in only 3 1/2 months!

NP: WOW!!! And this is legal?

Quincy: Absolutely!!!

NP: How can options on notes or real estate be used in self directed IRA?

Like many non-traditional assets, options are perfectly acceptable investments in a self-directed IRA. You can buy an option on anything, including notes and real estate. An option is the right, but not the obligation, to purchase the asset you have an option on. If your option (or contract) is assignable, you can build your retirement wealth very quickly. For example, one of our clients put a burned out house under contract in his daughter's Coverdell Education Savings Account (formerly known as an Education IRA) with only $100 earnest money. He then located an investor willing to pay $8,500 more than the sales price the ESA was paying. At closing 3 weeks after the contract was signed, the ESA received a check for $8,500 on its $100 investment. This is a profit of 8,400% in less than 4 months! When was the last time you did that in the stock market?

NP: As I told you, the stock market made a millionaire out of me…of course I was a billionaire when I started. I like sticking to things I have control over.

NP: Is the purchase of high yield notes a good technique for self-directed IRAs?

The beauty of a self-directed IRA is that you can invest in what you know best. If you know how to buy notes or you can find a note broker you can trust to buy notes in your IRA, this can be a great way to build your retirement wealth. With a self-directed IRA, your success or failure is completely within your control.

NP: For many of us the key word there is CONTROL. In my NOTE PROFESSOR NOTEBOOK, I show a technique of how you can actually put notes in your IRA for free. It is called "HAPPY TAILS TO YOU". Click here

Quincy: Great technique!!

NP: I know there is a myriad of rules and regulations governing self directed IRAs. I cannot keep up with them. Will you be able to guide the investor on how to structure a deal to comply will all the IRS guidelines?

The functions of a self-directed administrator or custodian are generally limited to the following: 1) Hold your IRA's assets, including cash and investments; 2) When directed by you with proper paperwork, to send your funds to the seller or closer; 3) To verify that your assets are vested correctly in the IRA's name; 4) To file the appropriate IRS tax reporting forms for distributions and contributions; and 5) To answer your questions about the rules for IRA transactions, including prohibited investments, prohibited transactions and disqualified persons.

Although as your administrator Entrust cannot generally give tax, legal or investment advice, we can and routinely do answer basic questions about the rules and can guide you and your CPA or attorney if necessary on where to look for answers beyond the basics. Normally Entrust will not suggest a particular structure for an investment but in many cases we can help you determine if your proposed structure will work within the rules.

NP: Sounds like this is why they call it self directed. You will just help us make sure we are playing within the rules.

NP: Explain the procedure of setting up a self directed IRA, and what the fees are. How would investors contact you to discuss their IRAs and set up their self directed IRA?

The procedure for opening a self-directed IRA is as easy as 1,2,3. First go to our website at and select the type of IRA you want to open. Second fill out a brief application, fee disclosure and, if necessary, an IRA Transfer or Direct Rollover form. Finally, mail the original forms in along with a copy of your driver's license, a check for the account opening fee and a separate check if you are making a contribution.

You may email Quincy Long, President of Entrust Retirement Services, Inc. at, or call us toll-free at 800.320.5950. If you are unsure about the application, you may fax a copy for us to review before you send it in at 281-646-9701. We look forward to serving your retirement account needs!

NP: Thanks again Quincy for your taking time to give us a "in a nutshell" view of self directed IRAs. For those who do not have a self directed IRA, you are leaving money on the table. You will find no one in the industry who is more knowledgeable than Quincy. He is co authoring a book with Hugh Bromma on IRAs…be sure to look for it. When you contact Quincy, tell him Tom sent you.

Here is my usual disclaimer. This information is for general information only. It should not be used without consulting competent legal and tax advisors. If you try any of these techniques without competent advice, you need to be taken out of the gene pool.

ANNOUNCEMENT: My last April seminar was a sell out, and a few were even turned away because there were no more seats. Some have requested of Cathy Crowe that I repeat my seminar. I will be giving a repeat seminar on THE ABCs of NOTES and REAL ESTATE on Saturday, June 25th, from 8:30 a.m. to 5:00 p.m.

Because this is a "hands on seminar" where we cover everything from from how to use a financial calculator with ease, to structuring note deals to create wealth. We will also cover getting notes for free to put in your IRA. THE CLASS WILL BE LIMITED TO 20. You will need to bring a HP 10BII financial calculator to class, unless you are familiar with another financial calculator. I will be teaching with the HP 10BII. I will be teaching from THE NOTE PROFESSOR NOTEBOOK, which you can purchase at the discounted price and have it sent to you prior to the seminar, if you contact me directly.

For details on the seminar, contact Of course, you can always contact me.

I look forward to seeing you there.

Tom Henderson a.k.a THE NOTE PROFESSOR

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