Bill Neville: Hi, everybody.
Bill Neville: My name is Bill Neville, and I am business development manager with the interest group.
Bill Neville: Thank you for joining our webinar today. I want to welcome Jock Mcneil from pure property management
Bill Neville: services. Who is going to be doing the lion's share of the presentation.
Bill Neville: and at the end we will take.
Bill Neville: We will answer all your questions.
Bill Neville: feel free to enter them into the Q. And a box at any time you want
Bill Neville: throughout the presentation, and then we will.
Bill Neville: We'll answer them at the very end.
Bill Neville: Alright! Let's get started. Go ahead, Jacque, put us on the next page.
Jock McNeill, PURE PM: Of course it's giving me a problem here. Hang on a second.
Jock McNeill, PURE PM: How in the world do I change it? Hang on!
Jock McNeill, PURE PM: I had it a minute ago. Apologize.
Jock McNeill, PURE PM: There you go!
Bill Neville: So this is something we always put up at the beginning of our presentation.
Bill Neville: So please read this essentially. What it says is that the entrust group Norjok
Bill Neville: in this particular instance provide any advice.
Bill Neville: so we are not as a custodian of self-directed retirement accounts. We are purely the custodian record keeper of your account. We are not a fiduciary, therefore we do not give investment, advice, tax advice, legal advice.
Bill Neville: So before making any investment, we encourage everybody to seek the advice of lawyers, Cpas, etc. Etc. Financial advisors.
Bill Neville: anybody that can assist you with that, but it won't be. Entrust that provides any of that advice.
Bill Neville: So what we're going to do today first, st I'm going to tell you a little bit about interest. Then Jock's going to take over and do an introduction of property management? What are the benefits of having a property manager best practices in terms of finding one? The costs, and comparing to? If you want to self manage?
Bill Neville: Then going over compliance and due diligence specifically related to self-directed Iras, and then how to get started. And then, like, I said, explain how to get started with a self-directed Ira, that is, and then we'll take the Q. And A at the end. Again, I'll emphasize. You can type in your questions at any time, and we'll we'll answer every single question, so we'll stay as long as it needs to answer all the questions
Bill Neville: that's me. I've been with entrust for
Bill Neville: over 14 years at this point.
Bill Neville: So the Mtrust group we've been in business since 1981. We are custodian and record keeper, otherwise known as administrator of self-directed retirement accounts. The majority of our staff have certified Ira service professional certifications, including myself. And
Bill Neville: we do these monthly educational webinars, where oftentimes we bring in subject matter experts. Sometimes we just do them ourselves. This one, obviously, we brought in a expert on property management.
Bill Neville: We currently have over 5 billion dollars in assets under custody.
Bill Neville: We actually have over 25,000 active investors. I think we need to update this, add another. Add another number to that. K.
Bill Neville: We've been in business since 1981 since, as I mentioned. So we're one of the oldest companies in the self-directed space, and we provide a single point of contact for anybody who opens an account with us. So with a lot of our competitors, once you have an account with them. If you have any questions or need assistance, you call an 800 number and get whoever happens to answer the phone or send an email to a general email address with entrust. I'm 1 of 4 business development managers. I have a region of the country
Bill Neville: so we all split up the country regionally. And so you get assigned a business development manager and then their associates. So we each have an associate report. So if you have any questions. If you have an account with us, you need help, have questions. You have your business development manager and their associates. Direct point of contact information, their email and phone number rather than just calling an 800 number and get whoever happens to pick up the phone.
Bill Neville: All right. With that, I'm going to go. I'm going to go off screen, and I'm going to let Jock take over from here, and then I'll be back to actually, there's 1 point in the middle of Jock's, where I might get a little little bit involved in providing some feedback, but otherwise I'll be here to take any questions you have about self-directed Iras at the end
Bill Neville: enjoy.
Jock McNeill, PURE PM: Thanks, Bill. Appreciate your your time here.
Jock McNeill, PURE PM: All right. My name is Jock Mcneil. I'm a vice president at pure property management. I'm in Northern California, been in property management for close to 26 years as a property management company owner, property manager, also a real estate investor, and only recently became very well versed on what entrust does. And I think it's an incredible opportunity
Jock McNeill, PURE PM: for real estate investors to take advantage of equity that they might not otherwise think about investing in real estate. So I'm excited to talk about this
Jock McNeill, PURE PM: pure property management manages about 25,000 rental units across 22 States and 50 markets. We've got exposure to a lot of different types of markets, and I'm excited to share what we do with you today
Jock McNeill, PURE PM: as an investor. One of my favorite quotes is, if you want to go fast, go alone, and if you want to go far, go together, and that resonates with me, because I think that as real estate investors, you can really go a lot farther by leveraging relationships and leveraging capabilities of other people, and what I mean by that is.
Jock McNeill, PURE PM: you need to put together a team. So if you want to intentionally invest in real estate and expand your portfolio, you can't do it by yourself. I mean, you can. But it's incredibly complicated
Jock McNeill, PURE PM: by putting together a dream team of professionals. You can actually achieve your goals faster without a lot of the stress that comes with it because you're leveraging other people's expertise.
Jock McNeill, PURE PM: So
Jock McNeill, PURE PM: really important, you partner with professionals. And that team for real estate specifically, should include a real estate professional.
Jock McNeill, PURE PM: a property manager, an Ira custodian.
Jock McNeill, PURE PM: If you're going to be leveraging your property a lender, and if you're going to be utilizing an Llc. You're going to want legal professions, and I would always advise working with an accounting professional and or your tax advisor to determine how investing in real estate affects your overall
Jock McNeill, PURE PM: position from a tax perspective.
Jock McNeill, PURE PM: One of the things that I think
Jock McNeill, PURE PM: should be done very early on in the investing journey is getting clear on what your goals are. There are a lot of different types of
Jock McNeill, PURE PM: asset classes in real estate, and some of them are suitable for certain goal sets. So 1st thing you've got to understand is what you're in it for. So are you looking for income, or are you looking for appreciation? Is it a long term hold? Or is it something you're going to buy, create value and then turn around and sell it? That would be the appreciation piece.
Jock McNeill, PURE PM: and when you're looking at these, you'll identify at least in residential 3 different classes, long term, medium term and short term
Jock McNeill, PURE PM: at pure. We only do long term
Jock McNeill, PURE PM: within those sections. There's also single family, multifamily and also commercial, you know, small commercial could be an asset class.
Jock McNeill, PURE PM: Once you're clear on your goals, then you want to start thinking about how you can engage with a property manager. So let's talk a little bit about what a property manager actually does. There's a fiduciary relationship there that's really important to recognize. Just like the untrust group being your custodian. They've got a fiduciary relationship with you, your tax person, your financial advisor. All have some level of fiduciary relationship with you.
Jock McNeill, PURE PM: The property manager really is there to look out for your interest and to manage the relationship with the Resident and to manage the property. So there's a very common misconception that all property managers do is collect rent, and that's just one thing that a property manager will do.
Jock McNeill, PURE PM: There's also monthly and annual financial reporting. Most of the platforms that are in use to run property management companies and portfolios have very versatile reporting structures where you can. You can get all types of different reports instead of just a standard profit and loss statement each month.
Jock McNeill, PURE PM: Leasing and resident screening is a big part of what we do. So if you buy a property and it's vacant, we're going to help you select a resident and get the best lease terms possible, based on the market conditions and the property itself.
Jock McNeill, PURE PM: Maintenance coordination is a is a big thing.
Jock McNeill, PURE PM: Properties are not completely hands off. There's always something that needs to get done, whether it be preventative or reactive maintenance. And a good property manager is going to be able to handle all that stuff for you.
Jock McNeill, PURE PM: Lease enforcement, you know. Unfortunately, we're dealing with with people, and a lot of times. Things go wrong, and residents don't always abide by the lease agreement. Sometimes they don't read it, they don't understand it. When those things do go wrong, something as simple as a nonpayment. That's a lease enforcement issue, and that's what a property manager will help you deal with. They'll be your representative with that resident.
Jock McNeill, PURE PM: and then the biggest piece communication with residents and investors. A good property manager really acts as a liaison in the relationship, and communicates with you as needed. When something's going on at the property.
Jock McNeill, PURE PM: There are some significant benefits of hiring a property manager to manage your real estate investments.
Jock McNeill, PURE PM: I think one of the biggest ones that isn't talked about. Enough is the time savings. There is a perception that it's, you know. It's easy to do it yourself, and yes, for some people with certain skill sets it might be, but I think you need to talk about the time savings. One of my favorite examples is a client of mine who was a dentist and very lucrative profession. But the dentist realized quickly that
Jock McNeill, PURE PM: the time that he spent in his dental practice was much more lucrative than the time that he could spend coordinating a plumber on a Saturday afternoon. And so the time savings. And you know quite frankly it's how you create a passive investment is getting yourself out of the day to day. So the Time savings is a big piece.
Jock McNeill, PURE PM: A property manager is going to have
Jock McNeill, PURE PM: hyper local market expertise. They're going to understand the local rental rates, the regulations, and they're your boots on the ground.
Jock McNeill, PURE PM: What this allows for you as an investor. So I'm in California.
Jock McNeill, PURE PM: I can invest in my community no problem, because I can drive by my property and check it out. I can go visit if needed, and manage the process. But I can't buy a property out of state easily without having some boots on the ground in that market. So
Jock McNeill, PURE PM: take a little sidebar here and tell you my story. I sold a property here in California about 3 years ago. I was satisfying a 1031 exchange, and I knew that I was going to want to invest outside of California. Well, Pure has offices in 50 different markets. I was able to make a connection in one of our markets, and I chose my wife and I chose Charleston, South Carolina.
Jock McNeill, PURE PM: because we had a property management connection there they were the who that was going to get me into that market, so that I was able to have a conversation about what the market conditions were, what something would rent for. They put me in touch with a realtor, a lender got the deal done, got it leased up.
Jock McNeill, PURE PM: I would have never been able to do all that without a local market expert, and to this date I've never been to South Carolina. So that's how well it can work.
Jock McNeill, PURE PM: The other benefit of hiring a property manager is resident screening now resident screening is is one of the major
Jock McNeill, PURE PM: kind of potholes in the investing journey, because it can go really well, or it can go very poorly, and how you screen your resident is actually a critical step there. And most property managers have a very well refined process around screening tenants.
Jock McNeill, PURE PM: and they've got access to credit checks, reference checks. They can verify income, and they have very consistent screening criteria. What a lot of people don't realize is that an individual
Jock McNeill, PURE PM: property investor cannot typically just sign up with a credit agency to get access to credit reports. You normally have to use a service to do that. So
Jock McNeill, PURE PM: resident screening is a big part, and when it's done well.
Jock McNeill, PURE PM: it reduces problem residents and keeps your vacancy time low.
Jock McNeill, PURE PM: The other piece, where a property manager can add, a lot of value is legal compliance.
Jock McNeill, PURE PM: I've seen a number of self-managing real estate investors get themselves in trouble by just simply not understanding landlord resident laws. It's a big piece of the equation here. You need to understand what are the requirements for returning a security deposit. How do you? You know what are your requirements for responding to maintenance? What are habitability standards? And then, most importantly.
Jock McNeill, PURE PM: what's fair housing? A lot of investors don't understand fair housing and and how simply making a misstep during the resident screening process can subject you to a fair housing complaint. So a good property manager is going to be up to date on all this stuff. They've got fair housing, compliant policies and procedures. And then, lastly, they've got compliant lease forms.
Jock McNeill, PURE PM: addendums, notices, and letters. Now you can go online, and you can find your own forms, you can find a lease agreement. But I guarantee you the one you find online compared to the one that your local property manager uses is going to have some gaps.
Jock McNeill, PURE PM: So
Jock McNeill, PURE PM: the other piece is maintenance management. Now, obviously, you know, coordinating repairs is one of the areas where a self-managing investor can save themselves some money.
Jock McNeill, PURE PM: But at the same time, if you're investing out of the area, you need to leverage, a local contact that has some relationships. And so a good property manager is going to have relationships with multiple vendors in each trade. And they're going to be able to help get that work done quickly at a reasonable cost, with someone who actually knows how to communicate with
Jock McNeill, PURE PM: residents.
Jock McNeill, PURE PM: And a lot of times. What I've found is that a property manager can troubleshoot stuff over the phone and sometimes resolve issues before having to call a vendor out. In the 1st place, because they're experienced in home maintenance construction.
Jock McNeill, PURE PM: They've it's not their 1st rodeo with a plumbing issue. They know what questions to ask.
Jock McNeill, PURE PM: So, and lastly, you know, reducing stress. When I 1st got started in the business I got stressed out when my emergency calls came in. So I was on the emergency pager. This is how long ago it was and the emergency pager would go off. It would beep, and I'd have to call and listen to the message
Jock McNeill, PURE PM: middle of the night. Usually, you know, weekend plumbing backup, whatever it was, and you can eliminate all of that stress by employing a property manager. They're only going to call you when something really, really serious happens. And honestly, if it's in the middle of the night, they're not going to call you until the next business day to let you know what happened.
Jock McNeill, PURE PM: So it allows you to treat real estate investing as a business and take the emotion out of it.
Jock McNeill, PURE PM: Property managers are relationship managers as well, and they're going to take that piece of it away for you.
Jock McNeill, PURE PM: So a question that I often get is, how do I find a property manager? Well.
Jock McNeill, PURE PM: referrals are probably the best way to do it. So if you have a referral from a trusted source like a realtor, a friend, or maybe someone else. You know, that owns investment real estate. That's where I'd start first.st That's the 1st phone call.
Jock McNeill, PURE PM: If you don't have connections in a market. Then you want to go do some online searching. Google reviews are an excellent way to find a good
Jock McNeill, PURE PM: property manager, Zillow real Estate investment groups on social media, like Facebook oftentimes will be a good source of referrals.
Jock McNeill, PURE PM: But my favorite is the National Association of Residential Property managers or Narpm
Jock McNeill, PURE PM: Narpm is about 5,000 members strong across the Us. And what this is is, it's a trade association that includes property managers that are really interested in improving themselves, improving their business and improving the industry. So if you go to narpm.org, you're going to find a search function where you can actually look in specific markets and find people that you can work with.
Jock McNeill, PURE PM: So I've been a Narpa member for a long time. It's been a great way for me to refer clients to other property managers.
Jock McNeill, PURE PM: One of the things you really have to look at is licensing requirements. Almost every State has a licensing requirement, and in order to manage property, you've got to have a real estate license and work under a broker. There's, you know, 6 exceptions which I've listed here.
Jock McNeill, PURE PM: You also want to go online and check those credentials. So just like, if you were hiring a contractor for a major remodel, you're going to check with the State Licensing Board and make sure that there aren't any disciplinary issues.
Jock McNeill, PURE PM: If the State requires a specific property management license, you want to make sure that they have that as well.
Jock McNeill, PURE PM: And you know, read the online reviews. And let's be honest about this. The resident investor relationship can be a little adversarial sometimes, so I would expect some bad reviews. Don't expect it to be perfect, but look for those that have consistently good reviews, and those that are, you know, getting reviews from actual investors?
Jock McNeill, PURE PM: I do give a lot of weight to property managers who have gone and gotten professional designations. I got my master property manager or my Mpm. In 2015. It's like taking a college course in property management, and there's only a couple of 100 of them across the Us. So if you find someone with a master property manager designation, that's a great place to start
Jock McNeill, PURE PM: the Rmp. Or residential management, professional certified property manager and accredited residential manager are all professional designations offered by trade associations.
Jock McNeill, PURE PM: That kind of separate the the best from the good.
Jock McNeill, PURE PM: One of the things that I really encourage people to do when they're considering investing in real estate is make contact with a property manager. 1st
Jock McNeill, PURE PM: property managers are really really a great source of information for investors. If you're considering buying real estate, even if it's in your home market, and you know it well, and or you think you know it. Well, that property manager is going to offer information that's really valuable.
Jock McNeill, PURE PM: The 1st thing is rental comps. Now, there's a lot of publicly available rental comp information on some free sites.
Jock McNeill, PURE PM: But
Jock McNeill, PURE PM: a property manager that manages a portfolio of hundreds of units is going to give you some real accurate information about potential rent value on properties.
Jock McNeill, PURE PM: A lot of times our business development team will get contacted by a client or a potential client or a realtor who's working with an investor and says, Hey, I've got these 4 properties that I'm looking at. Can you please give me rent comps on these, and we're always happy to do that for them, because it gives them good information.
Jock McNeill, PURE PM: They're also able to give market Intel. Now, every city's got areas that are more desirable than others, and some areas are really strong rental markets and some are not. And so a property manager is going to help you identify that they're going to tell you what's going on in terms of leasing. So you want to watch your vacancy trends.
Jock McNeill, PURE PM: Most property managers will know their average days on market. So you can. You know that's a kpi that you can. You can watch as it goes along, and then also the best types of properties to purchase. I love these kind of calls because I have someone call me, and they say, Hey, I've got X amount to spend. And I'm looking at this 5 bedroom house on 3 acres, with a swimming pool and a horse barn.
Jock McNeill, PURE PM: That's a great property for someone to to live in.
Jock McNeill, PURE PM: but it's not going to be the perfect rental. The perfect rental might be something without all those moving parts, maybe with a smaller lot, without the swimming pool, without the horse barn, and maybe just a standard 3 or 4 bedroom. So those are the kind of conversations that you should just pick up the phone or set up a Zoom Meeting with your local property manager.
Jock McNeill, PURE PM: Real estate is super hyperlocal, and those those conditions are not always evident in the free information that's available online.
Jock McNeill, PURE PM: One of the other things that a property manager can really do for you when you contact them in advance is connect you with a real estate professional. So if you're going into a market where you have 0 connections.
Jock McNeill, PURE PM: That property manager knows the best realtors and those who work with with real estate investors on a regular basis, and all you have to do is ask, they're more than happy to make a connection.
Jock McNeill, PURE PM: So
Jock McNeill, PURE PM: how much does a property manager charge? Well, I will say that the fee structure varies quite a bit by region.
Jock McNeill, PURE PM: mostly because rent values vary by region, and most of the property management compensation is based on
Jock McNeill, PURE PM: the actual rent value and a percentage of that. So there's going to be a few different types of fees that you see here.
Jock McNeill, PURE PM: The 1st is going to be just a base management fee that'll range anywhere from 7 to 10%, maybe sometimes a little higher or a little lower. But that's what we see, on average.
Jock McNeill, PURE PM: 7 to 10% of the rent. So each month, when that property manager collects rent.
Jock McNeill, PURE PM: they're going to take a piece of that and and pay themselves that covers their base costs. You've also got a fee for leasing, so if your property becomes vacant, that's a lot of work finding a new resident for you, and so that leasing fee will get charged at the time that they procure a new tenant. I've seen those fees vary widely from 25 to 100% of one month's rent. You just have to ask
Jock McNeill, PURE PM: renewal fee. So after that 1st lease term is up and we're going to sign that resident on a new lease.
Jock McNeill, PURE PM: There's some paperwork involved, and there's some work, so there will be a renewal fee there and then a maintenance markup. It's very common that if a property manager is coordinating maintenance, whether minor or major maintenance for you, there's a markup. Sometimes it's a percentage, sometimes it's a flat fee, but it's it's a very common thing. So make sure that you understand whether that happens or not, and at what level it begins to happen. It depends on how much you spend. Sometimes
Jock McNeill, PURE PM: there are also several things that are not part of standard property management, and that would be something like representing you in front of an hoa or negotiating a good neighbor fence
Jock McNeill, PURE PM: repair, or, you know, providing
Jock McNeill, PURE PM: advice, or, you know, outside of normal property management, and you'll find that most management companies have an hourly fee
Jock McNeill, PURE PM: built in to what they're doing.
Jock McNeill, PURE PM: and then on top of that, sometimes you'll see an admin or an accounting fee. At the end of the year it varies by company, and occasionally we'll see onboarding fees. So you sign up, and then you pay a setup fee, and then sometimes, if you're having to sell, or if you leave during the term of the contract, there might be a termination fee.
Jock McNeill, PURE PM: So these are the common types of fees that you'll see at the very least, you're going to see a management fee, a leasing fee, a renewal fee, and then most likely maintenance hourly admin, and the other fees.
Jock McNeill, PURE PM: All right. So this is. This is where Bill's going to step in and help me out here. So the question always comes up, should I self-manage my property? So
Jock McNeill, PURE PM: you know. Obviously it's your property. You do what you want with it under the rules, with a self-directed Ira. You can actively manage your investment. But there are some potential issues here. The things you can do is managing vacancies, hiring contractors, managing paperwork. You can do the tax filings, you can manage the managers if you have multiple markets. The one thing I will say is, don't underestimate the amount of skills and education and technical expertise
Jock McNeill, PURE PM: required to manage your property, because just one misstep
Jock McNeill, PURE PM: can cancel out all of the gains that you've made in that Property
Jock McNeill, PURE PM: Bill, do you have anything that you would want to add on what can or can't be done? While self managing.
Bill Neville: Yeah, I mean to add on to that. They there's no rule that says that you have to hire a property manager when it's owned by a self-directed Ira. Right? Like, we're specifically from a standpoint of if you're investing, using your personal funds.
Bill Neville: So as it says here, it's not required but a couple of things that you can't do.
Bill Neville: You can't hold the money right like. So if you're property managing it like one of the things that Jock mentioned in earlier slide is that one of the things property managers do is receive the rent right?
Bill Neville: You can't receive the rent like into a separate account that you've created
Bill Neville: like in your personal name, or even you can't create account in the name of your Ira, like you can have them send you the rent that's made out to your Ira, but then you have to forward it to your custodian. Now, the only sort of exception to this is, if you structure it through an Llc. And I don't want to get too into the weeds associated with that. But
Bill Neville: and you can't do. And I think Jacque goes over this in the slide. You can't do any physical labor on the property right? So you can if you're self managing the property, and it's owned by your self, directed Ira. You can hire the contractors. You can go there to the property. You can show them what needs to be done. You can show tenants or prospective tenants. You can interview them, but you can't. You can't receive the rent and post deposit into account that you keep separately.
Bill Neville: And you can't
Bill Neville: I lost my train of thought already mentioned. You can't do the physical labor
Bill Neville: I'm gonna let Chuck take over from here, cause he's got some more slides associated with this.
Jock McNeill, PURE PM: I mean, basically, you can't do any self dealing right? So you can't do work that builds sweat equity. You can't pay yourself for work that's being done. Are there any.
Bill Neville: Brother.
Jock McNeill, PURE PM: Any other parties that you.
Bill Neville: Can't.
Jock McNeill, PURE PM: Okay.
Bill Neville: Can't pay yourself to be the manager right? Like. So property managers take 10% or whatever. You can't take that from your Ira, right. So you your spouse, your ancestors. So the account holder, the account holder, spouse, the account holders, ancestors, so parents, grandparents, etc.
Bill Neville: account holders, lineal descendants, so children, grandchildren, and then spouse of lineal descendants are all considered disqualified persons, so can't, you know? Do physical labor can't use the property for personal use? Can't get paid to manage the property can't hold the funds for the for the rental income. Things like that.
Jock McNeill, PURE PM: Got it. So I mean, that's
Jock McNeill, PURE PM: for for someone who's self managing. They think they're going to save themselves a lot of money by doing those types of things, and and some of them are prohibited. Some of them are totally okay.
Jock McNeill, PURE PM: working with a property manager. You need to. If you're going to be investing through your self-directed Ira, and you're talking to a property manager. You need to actually ask them if they have worked with a self-directed Ira before, because it's a little bit technical, and I know that the entrust group has a lot of resources to help managers and clients make sure that they're compliant. But you know, 1st of all the contracts. So the agreements are made in the name of your Ira.
Jock McNeill, PURE PM: and they're signed by entrust, and then you acknowledge it after you know, with the signature. So the contract is with the Ira
Jock McNeill, PURE PM: itself, right to Bill's point. Monthly payments are sent
Jock McNeill, PURE PM: through the property manager. If you use one directly to the Ira. Okay, you can't have the money come through you unless the specific circumstances existed where it's made out, and you're just passing it through.
Jock McNeill, PURE PM: Bills are paid by the property manager in this case, if you're using one. And so one of the big benefits here is that we aren't ever going to let you touch that money. We're going to make it really easy for you to avoid that mistake. The payments come into the Property Management Company. We take our management fee.
Jock McNeill, PURE PM: and then we pay bills on that property on your behalf. If there's a repair bill or a gardener, and then the remaining amount are sent through to the custodian to your Ira via the custodian. Each month financial reports are sent to you, and the custodian as directed.
Jock McNeill, PURE PM: and we can even send them to your Cpa. We can send them to any email that you direct us to.
Jock McNeill, PURE PM: So the finance part is actually one of the things that we do that really keep you from getting in trouble. Because that's a that's a big big issue. If you violate this rule you create a whole potential tax situation
Jock McNeill, PURE PM: and then repairs and maintenance. We talked about this a minute ago.
Jock McNeill, PURE PM: You can't work on your property yourself.
Jock McNeill, PURE PM: There's no sweat equity. There's no painting the units in between, and there's no, there's no cleaning. There's no doing the landscaping each month. All labor repairs, maintenance and improvements have to be performed by a paid.
Jock McNeill, PURE PM: non-disqualified 3rd party contractor and a property manager is going to have all those relationships for you. So we make this part again really easy for you to avoid getting in trouble, you know, at at Pure. We've had owners request that they work on their own property. Non-ira owned properties, and it's very difficult, because not every owner has the skill set to do it well. And so there's a very narrow set of circumstances where we allow that.
Jock McNeill, PURE PM: So when you're working on finding a property manager, there's going to be some questions that you want to ask and some some conversations you want to have.
Jock McNeill, PURE PM: and I would I would approach this from a level of trying to understand how that Property Management Management Company does business.
Jock McNeill, PURE PM: One of the things we didn't talk about is the sheer size of this industry. There are over 40,000 property management companies in the United States, and that's
Jock McNeill, PURE PM: that means there's over 40,000 different ways of doing business, different approaches to tenant screening, different approaches to handling maintenance and all that kind of stuff. So the more questions you ask going into the relationship, the better off you'll be in having your expectations met during the relationship.
Jock McNeill, PURE PM: So the 1st thing I think you should ask about is, how do they
Jock McNeill, PURE PM: handle leasing? So ask about the application process. What are the rental criteria? How do they verify income?
Jock McNeill, PURE PM: Then you want to agree on a rental rate. How do you do that? Well, they're going to present you with some market intelligence, through rental comps and other similar properties that they've leased recently, and you're going to agree on what it is. Some property managers actually will have a set way of reducing rents if something doesn't lease it after a certain period of time. So you need to agree on that as well.
Jock McNeill, PURE PM: I do recommend looking over a sample lease and addendums
Jock McNeill, PURE PM: at that point, so that you can understand. You know what the what the lease terms are. Most property management companies use a standardized lease that is, a State produced form or State association produced form. But you know, just understand what it is. It's very, very rare that a property manager will modify a lease to suit an owner's request, so don't get your hopes up there. If you want to add something or take something away.
Jock McNeill, PURE PM: I think it's important to also talk about how property managers handle maintenance. Now.
Jock McNeill, PURE PM: when you're engaging with a property manager.
Jock McNeill, PURE PM: your resident is never going to call you to report maintenance, or they shouldn't. And when they call the property manager, you need to understand what their process is.
Jock McNeill, PURE PM: you know. Do they call you for everything, or do they call you for only things over a certain dollar amount
Jock McNeill, PURE PM: pretty normal standard to have a preset expense authorization limit. Let's say $500. If your resident calls me with a plumbing backup.
Jock McNeill, PURE PM: and I can get a plumber out there for
Jock McNeill, PURE PM: less than a couple $100. I'm going to take care of it. You're going to see it on your statement. And that's it. That's just how it goes.
Jock McNeill, PURE PM: Emergency maintenance is another thing. If it comes in after hours, most management agreements will have language that allows the property manager to take action to preserve the property, protect the health and safety of the residents and the public. So
Jock McNeill, PURE PM: don't be surprised when you read language in there that says if there's, you know, something that happens in the middle of the night, there's no cap on the expense limit, we will do what needs to be done to protect your property and your interests.
Jock McNeill, PURE PM: I also recommend working with a property manager that has high standards for their vendors and their contractors. Now this
Jock McNeill, PURE PM: this concept is.
Jock McNeill, PURE PM: you know, kind of there's a there's a there's a wide spectrum of how people deal with vendors in our industry. Some are happy to take the uninsured handyman unlicensed handyman, and some go the other direction and say, everybody that we work with must be licensed and insured.
Jock McNeill, PURE PM: However, you feel about those types of regulations. I encourage you to please stick with the licensed and insured vendors. They look out for you. There's there's recourse. If something goes wrong, and your property manager quite frankly gets paid to be paranoid and handle all of the what if situations, and that's why they use licensed and insured vendors.
Jock McNeill, PURE PM: It's also very important to know what to expect when it comes to financial reporting and payments.
Jock McNeill, PURE PM: For example, you know, rent gets paid on the first.st When do you get your money?
Jock McNeill, PURE PM: Most property managers will pay it in the same month between the 10th and the 15, th but I've also seen it where they pay you at the end of the month for the previous month. So just get clear on when that money is coming, because if you have a mortgage to pay, it's very important to know that there's revenue coming.
Jock McNeill, PURE PM: Ask about what sample reports look like. So like, I said a while ago, there are all types of reports you can have sent to you each month on your property the basic stuff which is kind of a profit and loss or a checkbook type of a statement should be the bare minimum, and you should know what that looks like and how to read it. If you get your 1st statement, and it doesn't make sense. Call your property manager and ask them.
Jock McNeill, PURE PM: And please please explain this to me. So I don't have to bother you again.
Jock McNeill, PURE PM: And then most relationships, not just property management, but relationships in general fail on communication. And so it's very important early on to have clear expectations on the communication method and the frequency of communication. And when you have that conversation with your property manager, you're going to say, hey? Oh, that works for me. I don't want you to call me. I want you to email me, or I don't want you to email me. I want you to call me, and they will generally respect that preference.
Jock McNeill, PURE PM: and then also know when they're going to call you
Jock McNeill, PURE PM: like I said, about the plumbing repair under $200 when those come in. Usually it's not typical that we'll call an owner and say, Hey, we're spending your money within our contractual limit. It's going to show up on the next statement.
Jock McNeill, PURE PM: and then also. And this comes down to like how a property management company is structured. But understand, if you're going to be working with just a single point of contact, like a portfolio manager or an asset manager, or if you know, when you have an accounting question. Are you going to call the accounting department? We have a maintenance question. Are you going to call a maintenance coordinator? So all of these things are questions that you should be asking as you go through
Jock McNeill, PURE PM: some other great questions, for a property manager is, how long have you been in business. Now
Jock McNeill, PURE PM: understand that, you know. It only takes a couple of years to really get good at property management, but someone who's been in the business for
Jock McNeill, PURE PM: maybe more than 10 years. They've seen a lot more than someone who's been in it for 2 years, and someone who's been in it for 25 years like myself.
Jock McNeill, PURE PM: I feel like I've seen it all. So the longer that someone's been in business the better equipped they're going to be for those situations that come up for the 1st time and the more established they'll be in their community.
Jock McNeill, PURE PM: I also like to find out how many properties someone manages, because the number of properties that that one manages also will help dictate the type of organization. It is a 50 unit property manager is probably one person doing everything, whereas a 500 Unit Property Management Company probably has an accountant
Jock McNeill, PURE PM: has a maintenance coordinator has a couple of property managers and a broker, and so I like to go for the mid-sized large to large property management companies.
Jock McNeill, PURE PM: If you're buying a residential property, you definitely want to find a property manager that specializes in residential same thing with commercial or medium term or short term. So ask them what types of properties they manage and where they manage them, because the markets that they manage in need to overlap with what you're looking at.
Jock McNeill, PURE PM: And then, you know, another good good metric is whether or not they own their own investment properties.
Jock McNeill, PURE PM: A property manager who sees the business through the lens of a real estate investor themselves
Jock McNeill, PURE PM: looks at things a little differently, and if they've got experience being in your shoes that can be really valuable when it comes to making decisions along the way, especially if you've been really clear about your goals and objectives with this investment. They'll make decisions like you would
Jock McNeill, PURE PM: a lot of times. It's good just to ask about their team, you know. How are they set up? What's their organization like? Who will you be working with?
Jock McNeill, PURE PM: It's kind of important
Jock McNeill, PURE PM: also like to ask them what their outlook is for the rental market. Now, these are
Jock McNeill, PURE PM: these are people in real estate who don't always have
Jock McNeill, PURE PM: the rosiest outlook on real estate, you know a real estate salesperson has a different perspective than a property manager, and who has a different perspective than a Cpa or a lender. So gather the information don't just go from one source when you're making your decision about a market. But it's good to get their perspective on what their outlook is for the local market that you're investigating.
Jock McNeill, PURE PM: And then, lastly, this is kind of a loaded one. If you have a property in mind, a specific home or a specific apartment complex.
Jock McNeill, PURE PM: ask them what they think of it, you know, obviously without giving away any confidential information.
Jock McNeill, PURE PM: When you do that, it can be very telling. They might point something out that you haven't thought of that could impact your success as an investor.
Jock McNeill, PURE PM: Alright. So let's just say that you've decided. This is something you want to do. Let's talk about how to get started.
Jock McNeill, PURE PM: 1st of all, like I said earlier, get really clear on your investment goals. You're going to explore what's important to you. You're going to decide on an asset class.
Jock McNeill, PURE PM: maybe narrow down some market locations and then figure out how you're going to do the deal. Are you pulling all of the cash out and buying a property? Or are you pulling some cash out and doing something with a lender that you've been connected with, are you doing it through an Llc. So get these things out front and figure out what's going to happen there in terms of where, when, and how you're going to invest.
Jock McNeill, PURE PM: Then you start putting together your team. Obviously the entrust group is a great partner for a self-directed Ira custodian. They have a number of partners in in lending, and they can connect you with someone like me who's a property manager as well.
Jock McNeill, PURE PM: So you get your team together before you take the leap, it's always best to have those relationships in place before you need them. There's nothing worse than trying to find an attorney in a hurry, or an accounting person who you don't have a relationship. But you have a critical time, sensitive accounting question. So
Jock McNeill, PURE PM: get those people set up in advance. Let them know what you're doing. They may have other connections that can help you.
Jock McNeill, PURE PM: Then it gets down to actually doing the deal. So this is the fun. Part, in my opinion, is finding the property. You know, I as a real estate professional. I can't stop looking at the real estate market, even if I'm not actively buying. I'm always on on the Mls. Or on Zillow. So this is the fun part. So find your property that suits your needs and the asset class that you want. You make an offer on it through your realtor.
Jock McNeill, PURE PM: You handle your buyer inspections, and you've engaged with your self-directed Ira custodian early on in the process, so they'll tell you everything that you have to do through this. You're not signing that purchase agreement by yourself. You're signing it with them
Jock McNeill, PURE PM: and then get it funded and close the deal. Right? Sounds simple. This could take months. It could take weeks. It just depends on the opportunities that you're presented with.
Jock McNeill, PURE PM: So once you've closed the deal, then you need to engage with a property manager. If you're going to use a property manager, get the property leased up and get the process going where the money is flowing through your self-directed Ira. Not to you, remember.
Jock McNeill, PURE PM: and obviously the earlier, that you're engaging with a property manager the better they're going to be when the time comes when you close on it, we're going to be able to onboard something fast. Usually, if someone calls pure and says, Hey, I'm buying a property, I close on it next week. Within a week's time we can be ready to take that property over and hit the ground running
Jock McNeill, PURE PM: all right. So there are a lot of free resources out there a lot. And the one thing I would, I would encourage you not to do well, 2 things. One. Don't get all your information from Youtube. It's a great source. But anybody can post something on Youtube.
Jock McNeill, PURE PM: Second, don't get all your information and make a decision based on one source. When you do that, I think it becomes really really risky. So a couple of sites that I like. If you're looking at commercial real estate, Loopnet Loopnet is a great free site. They have free and paid versions all these do. And then realtor.com and zillow are obviously the big elephants in the marketplace that have a lot of data.
Jock McNeill, PURE PM: They're collecting your data, too. So, you know, be careful about what you provide. But they have a lot of data around price trends, neighborhood information. They do risk scores on investments that kind of thing.
Jock McNeill, PURE PM: and then, when it comes down to actually figuring out what your return is going to be, I encourage you to look at
Jock McNeill, PURE PM: 2 sites rentometer which offers free rent comps, and also
Jock McNeill, PURE PM: calculator.net. I like calculator.net because they actually have a number of calculators to help you determine the return that you're going to put that you're going to have on a property. Okay? And then, lastly, if you are really going into this, and you want to start spending some money. You can do something like Costar or bright investor, and
Jock McNeill, PURE PM: those are great sites to to help you do a little research.
Jock McNeill, PURE PM: Oh, my screen froze, guys.
Jock McNeill, PURE PM: there we go. Okay, I'm back all right. Now, if you really want to go deep on digging into a market and figuring out. You know the economic situation in a market. Demographics, population growth start with the Census Bureau
Jock McNeill, PURE PM: and then also the Bls Bureau of Labor Statistics will tell you unemployment rates, economic trends. This is all great free government information. But let me tell you, it's usually old by the time it gets published. So try and do your own research. There's a lot of great
Jock McNeill, PURE PM: economic development boards out there. So if you're in a community that that has, like a good Chamber of commerce and a good Economic Development Board. That is a fantastic source of information when picking a market
Jock McNeill, PURE PM: to invest in
Jock McNeill, PURE PM: all right. That is the end of my prepared presentation. I'd love to be able to answer any questions if there are any.
Bill Neville: Go ahead and go to the next slide, chuck.
Bill Neville: We'll get through it quite.
Bill Neville: It's you. It's all. You go ahead one more.
Bill Neville: So if you do one. If you don't already have a an Ira with entrust, and you want to move forward, you can just
Bill Neville: open an account. We have an online portal. It takes maybe 10 min to get an account established. Then you fund your account. You transfer or roll over from your current Ira, or 401 k. Or pension, or 403 B plan, or you can make an annual contribution.
Bill Neville: But you have to get the account funded.
Bill Neville: and then you instruct us to make whatever investment is that you want to make, and so, depending upon whether you're investing in real estate or private equity or notes, or whatever it is.
Bill Neville: we'll need the paperwork in the name of the Iras, the investor, and then we process your investment for you.
Bill Neville: So we'll have we do
Bill Neville: monthly webinars, as you know. So the next one coming up in August is investing in retirement properties so kind of consistent with this one with the self-directed Ira, and we'll send everybody who registered for this. We'll send you a follow up email which includes the link to
Bill Neville: to see this again. If so, you'll have a copy of it. We also put it on our Youtube page and on our website
Bill Neville: and feel free to visit our website, the entrustgroup.com. If you want to do any more research, we have a learning center on there that has all kinds of information. Again, this.
Bill Neville: This Webinar will end up on there
Bill Neville: shortly after this and follow us on social media.
Bill Neville: and then go to the next slide.
Bill Neville: One more after this. I think it has our good. So there's our contact info. We'll keep this up
Bill Neville: so you have it while we go ask questions. So let's jump into that. So 1st question, does pure
Bill Neville: offer property management in Sarasota County, Florida? Specifically Venice and Northport?
Bill Neville: And then same question for Paulding, County, Slash, Cobb County, Georgia, and Loudoun County, Virginia.
Jock McNeill, PURE PM: Okay. I don't know all my counties really well, but I can tell you. In Florida we have Ocala and Bonita Springs, and we're expanding into Orlando right now. So if that's close by within half an hour, we can help you there. In Georgia. We've got North Atlanta and Atlanta. So like the Marietta area. And what was the other one.
Bill Neville: Loudoun County, Virginia.
Jock McNeill, PURE PM: Virginia we do not cover, we do not cover. However, I'm a connector, and I like putting people in touch with each other. So if you are looking for a property manager in one of those markets and we aren't there. If you send me an email, I will see if I have a personal connection. I can put you in touch with.
Bill Neville: Does pure also do Pm. Forms.
Bill Neville: and then it says, S. Dash, T. Rentals. I'm guessing that means short term does pure also do Pm. Forms S. Short term rentals and pad split properties.
Jock McNeill, PURE PM: Good question. So we use our proprietary forms, so we don't share our forms. We don't sell them or license them outside of our client base, good question. If you need forms, I would recommend joining your local apartment association if they offer them, or if you can find a licensed real estate professional
Jock McNeill, PURE PM: who can provide them to you. That's a great way to do it. But property managers are really the best source of forms, so you've got to engage them and pay them to do that. We don't do short term rentals except for one Market Lexington, Kentucky. It's a very different business. It's much more hospitality than property management. And so we haven't focused on that. And then pad split is a fantastic concept. We don't
Jock McNeill, PURE PM: do any of it that I know of, but it is really big in the Atlanta market, and I actually have done a bit of research on it myself. It seems like a fantastic concept. And you can. You can do well.
Bill Neville: What is that?
Jock McNeill, PURE PM: Pad split. So Pad split's the name of the company. It's a. It's basically like individual leases within a property roommate type things, and sometimes short, term sometimes longer, term.
Bill Neville: Yeah.
Bill Neville: Okay. Do you have any contacts in the Akron Ohio area? Jack, this is for you. I have gone through 3 lousy ones so far that had decent reviews, online.
Jock McNeill, PURE PM: Not that I can think of, but send me a message, and I'll I'll look and see if I can find somebody.
Bill Neville: Does a property manager need access to self-directed Ira bank account to be able to pay utility or repair bills? Or does the Property Management Company fund it.
Bill Neville: and they can seek reimbursement from the self-direct Ira checking account. So I'll answer this question from the self-direct Ira custodian standpoint, and also from a personal standpoint, because I have a I have a property in my Ira, and I have a property manager.
Bill Neville: What I have done is I simply have the rent get paid to the property manager, who then keeps the money in a bank account
Bill Neville: for my Ira, so I can do it this way, because the property manager is a non disqualified 3rd party to my Ira. It's not me that's doing it. So there's no rule that says that a 3rd party can't hold the money
Bill Neville: like the rental income that's coming in. And so the rental income gets paid to my property manager. They keep an account, a separate bank account for my rental income. When they get a bill they pay it from that account, and then once a year or so, and they send me statements, and once a year, so I haven't send some of the money back to my Ira while keeping a balance. That's 1 of the ways you can do it.
Bill Neville: The property manager could also simply forward the bill.
Bill Neville: 2. If they're not, if the if the if the rent is either getting paid directly to the Ira or the property manager is receiving it and then forwarding it to the Ira. Then they can just forward the bill to the Ira to have it be paid.
Bill Neville: I don't, I mean, I guess theoretically, I don't know many property managers that would want to do this, and John could answer that, but sure a property manager could pay a bill.
Bill Neville: and then like, but the account holder would have to send us the bill like the account holder would have to have to tell us to reimburse the property manager right? So they could send us the bill and say, Pay the property manager back like. Ultimately they send us the bill. We can send that to anybody other than a disqualified person. So they send us the bill and say, Pay directly to my property manager. It could be done that way.
Jock McNeill, PURE PM: It could be. Yeah, I think the standard procedure in property management is, you know, we collect rent revenue each month. We pay our management fee, and we pay any bills on the property that are needed. Right? So
Jock McNeill, PURE PM: there's no need to send it to your custodian unless you want to do it that way, and it actually probably creates a layer of complexity. That's kind of unnecessary. One of the big benefits of having a property manager is a centralized source of financial information.
Jock McNeill, PURE PM: One statement, right? And when you do that, if you're sending it to the custodian for payment, you're having to keep some manual records there. Probably.
Jock McNeill, PURE PM: Yeah, he sent a follow up question said, or is there an operating amount that needs to be deposited with prop, with property manager to ensure smooth operation
Jock McNeill, PURE PM: question. Yeah, so we most property managers that I know of keep a maintenance reserve so it could be $500 per unit. And then most will hold the security deposit as well, although we don't like spending the security deposit on expenses for the property, because technically, that's
Jock McNeill, PURE PM: the tenants money until they move out right? So I would expect a minimum. $500 reserve. And I like Bill's strategy, since it's in an Ira and you're not using it to, you know, to pay a mortgage each month each month. Just do a quarterly or an annual distribution
Jock McNeill, PURE PM: to yourself. So to your Ira.
Bill Neville: I also will point out that we do. And we're, I think, the only company in the self-directed space. We provide a debit card or the ability to apply for a debit card where you can transfer money from your Ira. Put it on that debit card. It's a visa, and then pay any expenses that accept visa right? So from I mean.
Bill Neville: theoretically, the property manager could have the visa and use it. I mean, typically it's for the account holders themselves whenever they're self-management to pay their expenses. But just a plug that we do. We do offer that, and I don't think we have any competitors that that offer, that.
Jock McNeill, PURE PM: Yeah, that's amazing. So like an example, if someone's got a property manager, but they need to to fund that property manager for a major repair. They could use that, or, if they needed to, you know, pay for a major repair, that. They don't have the funds at the manager
Jock McNeill, PURE PM: in in the manager's account. They could do it that way as well.
Bill Neville: Yeah, if they need to pay, or they send us the bill, and we pay from the account.
Jock McNeill, PURE PM: Got it.
Bill Neville: Okay, so follow up question from one of the earlier ones. Can someone please cover the negatives of investing in property within your self-directed Ira versus an Llc. Outside of a self-directed Ira.
Bill Neville: and then they fought up, said, the ones I can think of are no depreciation deduction. That's true. No self use of property for you or certain family members also. True, no sweat, equity repairs by owner or some other related folks. I'm hoping to learn what I can.
Bill Neville: So I will.
Bill Neville: I want to answer this by saying, I don't know that you're looking at it in the right way. The question isn't investing in a property inside your Ira versus outside your Ira.
Bill Neville: Because you can do both. You can invest in a property both inside and outside your Ira. The question is
Bill Neville: within your Ira
Bill Neville: like you're going to make an investment inside your retirement account right? Like you have a retirement account. You have cash inside the retirement account. You want to invest that in something.
Bill Neville: The question is, do you want to invest your retirement account in real estate, or do you want to put it in the stocks, bonds, and mutual funds right like. It's not a comparison of inside versus outside, and you don't get. It's true when you get when you have a
Bill Neville: Ira that owns the property. You don't get to depreciate it because you don't own the property right? You're not receiving the rent. The Ira is receiving the rent, so you're not reporting it on your taxes, which means you can't deduct depreciation because you're not reporting the income. It's just growing your retirement account. So the question you want to look at, or I guess the thought process I would encourage you to look at is
Bill Neville: you want to grow your retirement account. What is the best way to grow your retirement account is investing in real estate. The best way to grow your retirement account, or is investing in something else, whether it's stocks, bonds, mutual funds, or private equity, or notes, or precious metals, or the myriad of opportunities of things that you can invest in inside your retirement account. So the fact that you're investing in real estate outside of your retirement account does not preclude you from also investing in real estate inside your inside. Your retirement account.
Jock McNeill, PURE PM: You know, Bill, I'd add something else. That's kind of an unrecognized advantage in owning real estate in your self-directed Ira. If you own investment real estate, and you sell it, and you want to defer taxes. And it's not in your Ira. You have to do a 1031 exchange right to defer those taxes and protect your equity, but if you own it in your self-directed Ira, you can
Jock McNeill, PURE PM: buy a property, make $100,000, sell it, put the money back in your Ira, and then, months and months later, invest back in the market without any restriction on a 1031 exchange, which is a timed, very restrictive process. And I like that
Jock McNeill, PURE PM: piece of this because, you know, it could be good for like a fix, a rehab and flip person it could be, you know, if someone wants to, if they seize an opportunity, and they want to buy something and then maybe not hold it long term, and then get back into something a year down the road. They don't have to comply with with the Irs. 1031 rules. And so that's a big advantage.
Bill Neville: Yeah. And not everybody has the cash in their personal savings. Note that you can partner your Ira with your personal income on a new investment right like. So if you want to take some money from your Ira and also some, maybe your personal savings, partner them together where your Ira owns a percentage. And you personally own a percentage.
Bill Neville: That's another way to buy real estate where, if there's 1 property you want to buy, and you don't have all the money in either
Bill Neville: scenario, either in your personal savings, and you don't want to take a mortgage or within your retirement account. You can't partner them together.
Bill Neville: I will just put to bed this you asked. You know, sort of what are the downsides to the self-directed Ira the other, or holding real estate. The other general Downside, potentially of self-directed Iras has to do with
Bill Neville: most investments that we hold are not easily liquidated. Right like, if you have stocks or mutual funds, and you need access to that cash right? Like you're in a scenario, either, whether you're subject to requirement distributions. Or you know, you just like some expense, comes up, and you need to access that money that's inside your retirement account. If you're holding stocks or mutual funds, you can just go and sell it on the market right? Whatever the whatever the market price is. Just put it out there. It's probably going to sell within minutes. Right?
Bill Neville: Things like real estate. Private equity preced. Well, precious metals usually can sell pretty quickly, although you'd have to find a deal or sell to the dealership. The metals, right. So it's not like you'd have the money the next day.
Bill Neville: but things like real estate. It could take you a long time to sell that piece of real estate. If you're holding, you know private equity, you might not be able to sell it at all. Right. If you've got notes like, are you going to get that note paid off. So we hold nontraditional investments. Those aren't typically as easily liquidated as your stocks bonds, mutual funds. So I just want to sort of
Bill Neville: throw that out there that you want to kind of. Be aware of that.
Bill Neville: do you offer checkbook? Llc, so
Bill Neville: what this means? Just Fyi is for those who aren't aware that are on this. Instead of having your Ira invest directly in real estate, you can have your Ira
Bill Neville: own.
Bill Neville: like an Llc. So have your Ira be the single member of the Llc. And then the Llc. Owns the real estate, and through that Llc. As a pass through you in effect, have checkbook control over your retirement account. Right? So to answer your question. Yes, you can hold a checkbook, Llc. Within an interest, Ira.
Bill Neville: However, we don't set up the Llc. For you, so some of our competitors not only will do that for you, but some of our competitors. That's the only way you can hold real estate through them is by structuring it through an Llc. That they set up for you and charge you
Bill Neville: a thousand dollars, or whatever it is to set up the Llc. For you. So from an interest standpoint, we'll hold the real estate directly. You don't have to have the Llc. Or we will hold the Llc. If you would rather do it, using the Llc. As a pass through to get that checkbook control.
Bill Neville: But we don't offer the service to set the Llc. Up for you. Now we do have a list of about 15 to 20 different vendors and contacts that other entrust clients have used to help them set up their Llc. So if you do want to do the the checkbook Llc. Thing, you want to do it with entrust
Bill Neville: we can. You can use people from this list. You can do it yourself. You can use somebody else, but it's not a service that we provide. But bear in mind again if you don't want to do the checkbook. Llc. If you're talking to a custodian, and you're saying you want to invest in real estate, and they say, Great! You can do that first.st You have to set up an Llc. And here's how much we charge you to do that note that that's that custodian that's telling you that that's not the rule.
Bill Neville: You can have your Ira hold direct title on the property without an Llc. Being involved. So if you have a custodian who's telling you, you have to do it through an Llc. That's that custodian that's forcing you to do that. Not the Irs
Bill Neville: are there any useful stats available on rental value, associated rents, expenses, etc.
Bill Neville: Jock, that would be for you.
Jock McNeill, PURE PM: That is a very market specific piece of data. So some of those items that I shared on that slide that had places where you can go look for rent values, that kind of thing. They also have that amount of that kind of data, too. And that's honestly, that's when you call a property manager and you ask them those questions. They're going to give you real time
Jock McNeill, PURE PM: experienced data.
Jock McNeill, PURE PM: I don't have any.
Bill Neville: Hey!
Jock McNeill, PURE PM: Prepared, though.
Bill Neville: Okay, next one just complimented the presentation.
Bill Neville: then, here's how about Dallas County, Hayes County and Williamson County, Texas.
Jock McNeill, PURE PM: Again. I don't know my counties in Texas, but I can tell you we have an office in Dallas, Fort Worth, Round Rock, Austin and Corpus Christi. They're fantastic teams down there, and I'm happy to make a connection for you.
Bill Neville: Okay, do
Bill Neville: After all the fees and expense, what is a realistic return on investment? We can expect? That's a very general.
Jock McNeill, PURE PM: Yeah, again, that's very market specific and depends on the fee structure of the property manager.
Bill Neville: Do you like duplexes slash multifamily, or single family homes better, I mean, like, is a.
Jock McNeill, PURE PM: Yeah, it depends on your.
Jock McNeill, PURE PM: That's why, yeah, you have to get.
Bill Neville: Using them versus owning them. I think.
Jock McNeill, PURE PM: I personally have done well in single family, and I like managing single family, but we manage hundreds and hundreds of units of thousands of units of multifamily everywhere, from 2 to 10 to 100 plus units. It really depends on what your goal is with the investment, because each of those have a very specific goal set that's suitable for them.
Bill Neville: Okay, last question, does leverage property create ubit tax, unrelated business income tax is what that's called. Should the property be purchased without that? Because of this. So yes, leverage, it's actually technically unrelated, that financed income tax, Udfi. But ubit udfi, it's the opposite side of the same coin. It ultimately
Bill Neville: is applied, and just to give like a quick explanation for anybody who doesn't know what that means.
Bill Neville: If your Ira buys a property, let's say, and it
Bill Neville: puts up 50% and borrows the other 50%. And then at the end of the year, the property makes $10,000. Just to use a figure. The Irs is going to look at that and say, well, 50% of that $10,000 came from Non Ira money. It came from outside the Ira because it borrowed the money, which means $5,000 or 50% of that income is going to be subject to unrelated debt, financed income tax, Udfi, which is calculated at trust rates. So that
Bill Neville: tax on $5,000. It's going to be based on these trust tax tables that's graduated just like your regular income tax, but a much lower dollar amount, right? So like, you get like up to $1,200 into like
Bill Neville: 10%, then above that, etc. Etc. So if you use leverage, and at the end of the year you generate income, then what your leverage is at at the end of the year, and the example I use 50%. Then a portion of that is going to be subject, unrelated debt, finance, income tax. So yes, if you use leverage unless it's through a 401 k. If you hold it within a 401 k. 401 ks. Are not subject to Udfi. If you do it in an Ira you're going to have to pay. But
Bill Neville: I want to point out that that's just an expense, right. So when you're calculating the return on your investment, you want to take into account your income minus expenses. Expenses are going to include property taxes potentially a property management fee insurance maintenance.
Bill Neville: Udfi just becomes another expense, right like, along with all those other expenses. Now, it's not going to be 50. When I say 50%. The actual tax is going to probably be around 12% of the 50%. Right? So like, for example, that example, I gave
Bill Neville: the property earned $10,000, and then you take out, let's say, $1,200 in Udfi. It's still earned $8,800. Right? So let's say you paid $100,000 for the property. Now, you got an 8.8% return instead of a 10% return. So when calculating. When thinking about Udfi, you want to think about it in terms of how does it affect your overall rate of return?
Bill Neville: You said, should the property be purchased without debt because of this. That's a very sort of personal individual scenario that can't be generalized. Right? If you're using leverage, maybe you buy 4 properties or 2 properties instead of one property. Right? So if you buy all cash, you can only afford to buy the one property because you used up all the cash. But if you use 50% on this property and 50% of that property, now, you potentially are buying 2 properties. And so your ultimate
Bill Neville: return on investment might be greater, even though you have to pay
Bill Neville: unrelated debt, finance, income tax on both of them, because you use leverage on both of them.
Bill Neville: Right? So I can't generalize and say, should it be purchased without that, because of this, if you purchase it without that, it's not going to be subject to that tech to that
Bill Neville: unrelated business income tax or Udfi, right? But you're still gonna have to pay property tax. You're still going to have to pay maintenance. You might have to, you know. If you have a property manager, you'll have to pay them insurance like. So you want to be cognizant of all the different expenses that your property potentially is going, because ultimately, what you're trying to do is is get a rate of return right? You want to drive rate of return because you want to grow your retirement account. So that just becomes an expense that that you want to take into account.
Bill Neville: Okay, very good. Jock, appreciate the appreciate you doing the presentation today.
Bill Neville: Everybody. Thank you for coming and join us next month again. We'll be talking about investment properties inside your retirement account. There's our contact information feel free to reach out to either one of us. If you have any further questions, thanks. Everybody.
Jock McNeill, PURE PM: Thank you.