"Building Wealth and Investing in Real Estate with Self-Directed IRAs"
Tax Attorney and Wealth Strategist
Episode 42: "Bad Beats"
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On today’s episode of The Real Estate Nerds Podcast, fellow attorney-investor Rebecca Walser sits down with our host and attorney Scott Smith. If you’ve ever wondered what happens when a couple of lawyers sit down to talk real estate shop, Rebecca and Scott are here to help you find out. Tune in for some free insider knowledge as well as a good-old-fashioned Bat Beats episode.
Rebecca Walser on Building Wealth
Scott Smith welcomes Rebecca Walser, who shares about her background, business philosophy and wealth building strategies.
[0:45] Scott is particularly enthusiastic about talking about a bad deal with a fellow attorney, and asks Rebecca to share some more about her background and practice. Rebecca is a Certified Financial Planner who worked in finance for over a decade before attending law school at the University of Florida, then proceeding with her LLM in Federal Taxation at NYU.
[4:00] Rebecca’s law practice centered around tax minimization for high net worth individuals. She describes a revelation she had during a meeting with a client where she decided to strike out on her own, “marrying” her love of both law and finance.
[6:00] In Rebecca’s practice, Walser Wealth Management, she regards market volatility as the first of two major threats to wealth building and maintenance. Tax issues present the other major issue to keeping wealth.
[8:00] Rebecca shares how her background informs the way she serves her clients: “Our practice is unique not only because we help build wealth financially, but because we also make sure the wealth is built in the right tax bucket.” She believes approaching tax and traditional wealth building holistically is essential. Using a self-directed IRA to hold real estate investments is a common and effective strategy among Rebecca’s clients.
Self-Directed IRAs and Real Estate: Managing Expectations
Rebecca shares how self-directed IRA deals can sometimes go sideways, and the best management solutions for when they do.
[10:00] Rebecca describes pairing with a group to establish manage self-directed IRA accounts, including finding deals. She experienced some difficulties in terms of on-the-ground property management. Poor property management can get expensive fairly quickly. Many of Rebecca’s clients like real estate’s “hands off” investment approach when property management is active and professional.
[12:20] Scott discusses Rebecca’s vetting process for the nationally-recognized company that managed her clients’ properties. He wonders if contractual solutions could have improved her situation, or whether to simply take a different approach moving forward.
[14:26] Rebecca points to the nature of expectations in this type of asset (real estate in a self-directed IRA) and its unique problems as learning moments in her own story. Scott suggests real estate investors may have, or at least desire, a heightened sense of control over their asset than a typical investor would feel over a stock or a bond.
[18:00] The two investors agree one one critical point: “Real estate should be looked at like any other investment: whether it’s working or whether it’s not.”
[19:30] Scott brings up client management. He finds “high transparency and frequent touchpoints” useful for problem-solving with clients. Rebecca agrees both are important in professions where you’re managing other people’s money, as she and Scott are. Rebecca shares some communication strategies for clarifying her company’s role and boundaries regarding clients and their investments.
The Takeaway: Understand Your Asset and Have Reasonable Expectations
Rebecca and Scott conclude the show with their “lessons learned” from Rebecca’s story.
[23:57] For Scott, clarifying expectations upfront is a huge lesson to be learned from Rebecca’s experience, particularly surrounding responsibilities to other people.
[25:05] For Rebecca, cautioning clients about the distinctions between real estate and stocks/bonds has proven essential. She points out failure to do this creates a situation the company has to manage later anyway. Rebecca succinctly sums up: “Real estate, as great as it is, we do ourselves a disservice to describe it as turn-key easy.”
Connect with Rebecca Walser
Connect with Rebecca Walser via her website, Walserwealth.com. You can also check out her book Wealth Unbroken at Amazon.com.
Thank you for joining us on today’s episode of the Real Estate Nerds Podcast.
For even more free educational resources on real estate investing and the law, check out the Royal Legal Solutions blog. You can also reach our host Scott Smith directly, connect with him on LinkedIn, subscribe to the Royal Legal Solutions YouTube channel, or join our investor community on Facebook.
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About Rebecca Walser
Rebecca is an attorney, Certified Financial Planner, and author who describes herself as “completely disgusted with conventional financial wisdom.” She advocates for tax strategies that come with matches. Learn more about Rebecca’s philosophies from Walserwealth.com or from her books.
Leveraging her background as a tax attorney, a Certified Financial Planner® and wealth strategist, Rebecca is uniquely qualified to assess, structure and implement the best income maximization, wealth maximization, tax mitigation/ minimization and optimal legacy strategies for her clients. Rebecca earned her bachelor s degree, summa cum laude, in finance, her Juris Doctor degree, cum laude, from the University of Florida, and her advanced law degree in taxation from New York University. Prior to law, she worked for years in finance with Pricewaterhousecoopers LLP and the global networking division of IBM, acquired by AT&T. She continues to practice law in the areas of federal taxation, wealth preservation, trusts and legacy planning, business succession and estate planning, and asset management and protection. Rebecca spearheads a national practice with clients across the country and enjoys working with high income professionals, business owners, retirees and pre-retirees and high net worth families to implement advanced financial planning and wealth management strategies that maximize income and legacy distribution while minimizing taxes and managing risk. With over 15 years of financial experience, Rebecca maximizes her distinctive skillset and years of knowledge to the best advantage of her clients. Rebecca can be heard nationwide on iHeart radio weekly and she has also been featured in US News & World Report, New York Post, New York Daily News, Yahoo Finance, Bloomberg Business, ABC News, NBC News, CBS News, FOX News, CW, Chicago Tribune, Miami Herald, Boston Globe, LA Daily News, International Business Times, Investing Daily, Street Insider, and numerous other media outlets.
When making business decisions that affect your long-term goals, like what types of investments to make with your retirement dollars and which vehicles to use, it really is best to be aware of all of your options. We frequently talk about the Solo 401(k) and Self-Directed IRA as tools for funding your retirement. But what about life insurance? And what about the stock market? What if we told you there is a tool that allows to to reap some benefits of both? It’s called Indexed Universal Life Insurance–and some investors have found it a useful addition to their retirement plans.
What Is Indexed Universal Life Insurance?
Indexed Universal Life Insurance (IUL) plans are a variety of permanent life insurance plan that features a cash-building element. One primary benefit of these plans is that the policy holder gets some of the gains of being associated with the stock market without all of the risk Wall Street is famous for. This is in no small part because of how these policies are designed. IULs earn in part because they are directly linked to a market index, such as the Dow or the S&P 500. Any gains remain within the policy, albeit a cap rate will limit how much you can make. However, you are protected during a particularly bad year for your index with an IUL. The worst case scenario with these plans is that you make nothing, but you never actually lose money no matter how poorly your index performs. The protection of your principal is actually derived in part from the same cap rate that limits your gains.
How much money do policyholders stand to make? Historically, returns run between 5-9%. The S&P Index has actually returned at 9-11%, but the upside limit on UILs stems from the account’s cap rate. For this reason, many advisors argue that the UIL can make a wise addition to a retirement or estate plan once more traditional and self-directed accounts are maxed out.
Tax Benefits of Indexed Universal Life Insurance (IUL) Plans
There are three key tax benefits of IULs. First, you may pay into the policy with pre-tax or after-tax funds. Withdrawals from the policy may be made tax-free if you are under 59 1/2. Such withdrawals are regarded as loans, with your death benefit serving as collateral. Any funds paid out to the beneficiary are also tax-free, including normal benefits upon your passing. This is true regardless of their value.
Ask the Experts at Royal Legal Solutions About Your Retirement Planning Options
Regardless of where you are in the retirement planning process, Royal Legal Solutions an assist you. We have extensive experience educating investors about self-directed investment options. Many of our investor-clients love our Solo 401k information, product, and compliance services. Our Self-Directed IRA services can also be helpful for retirement planning, as the SDIRA is yet another vehicle that allows you to diversify and take total control of your investments. To determine which of the available retirement planning strategies are best for you, consult with one of our experts at Royal Legal Solutions. You may also contact us with any questions you may have about your options.