Monday, July 30, 2012

Outsourcing for Passive Income in a Roth SDIRA

The last post on this blog discussed ways to invest in real estate with a SDIRA. And as many people have sizeable accounts in their company-sponsored 401K accounts, which may be transferred to a tax-deferred SDIRA, real estate investments can be easily afforded.

However, real estate is often out of reach for people with a tax-free Roth IRA; because a person is limited to a maximum contribution of $5,000.00 per year, it takes a while for that Roth to build in value to the amount needed to acquire a piece of real estate. 

While the Roth SDIRA may not be able to buy an individual piece of real estate, it may be able to partake in a real estate investment trust (REIT) or real estate syndicate, along with other investors. One of the key advantages to these options is that the IRA holder can enjoy the benefits of the real estate investment in a passive fashion; he is effectively outsourcing the daily management duties to someone else. The drawback is that because the IRA is participating with others, its investment is not individually secured by a unique piece of real estate. As everyone knows, the value of real estate can go up or down, so it is important to be very sure of how the investment is secured – or not.

Another option for a Roth SDIRA to make money is by buying a business; some low-cost business startups involve multi-level marketing opportunities, or MLMs. In fact, none other than Robert Kiyosaki of “Rich Dad, Poor Dad” fame is a fan of MLM opportunities for business people. Some popular MLM companies include longstanding brands like Avon and Amway; newer entries in the field include the popular Beach Body brand, which includes fitness products advertised heavily on television such as P90X, Insanity and TurboFire workout programs.

And while these are all solid companies, they involve one primary problem for the SDIRA – the income from them must be passive (see prior post on “passive income” for definitions). And it can be difficult, if not impossible, to be passive and succeed in a MLM environment

One thing to consider is the prospect of teaming in a MLM business, in which the Roth SDIRA puts up the start-up money and another individual performs the day-to-day activities in the business. Once the Roth makes its initial money back, the business would share the profits.
If you would like to discuss this possibility, please send me a direct message at Please note that this article is for information purposes only, and is not an offer of a security or investment in any way, shape or form.

Sunday, July 22, 2012

Passive Income for the Self-Directed IRA (SDIRA)

Anyone who knows me already knows that I am a big fan of the truly self-directed IRA, also known as a “checkbook IRA.” In addition, I am a fan of using the SDIRA for real estate investment. This involves a few challenges that need to be considered, as explained in the article below:

Earlier this year I began RI Group, LLC, a South Carolina company that uses its own money and resources to help others buy, hold and sell real estate to generate passive income. I formed the group with the novice real estate investor in mind, although anyone is welcome to participate. When forming the group, I asked myself the following questions:

  • What if a person wants to invest in real estate, but has all of his money tied up in his IRA sitting in a brokerage account?
  • What if someone is intrigued by real estate investment, but has not bought or sold anything beyond his primary residence?
  • How can a SDIRA make passive investments in real estate that are secured, without paying a fortune in fees?
  • What is a good niche market for the SDIRA holder to make a solid and steady return?
  • How can someone know who to trust?

Most of these questions involve FEAR – the fear of loss, fear of being taken advantage of, fear of market gyrations, and self-doubt due to inexperience. RI Group aims to overcome these fears in two key ways: we partner with the investor and put real money into the deal; and we work with a solid experienced team of real estate professionals, attorneys and CPAs to be sure that things are done right. 

Please note that RI Group, LLC does not offer or sell securities or investments, and is not a licensed real estate broker. Instead, it seeks to partner with people that want to make money in real estate. It is important to consider that real estate values can and do fluctuate, and there is no guarantee of a return. Maybe that’s common knowledge, but it still needs to be said.

If you need some background on the SDIRA, please read these short articles that explain the concept succinctly:

If you would like to learn more about this process, please send me a direct message at

Thanks for reading.

Wednesday, July 18, 2012

Why "Passive" Income?

We constantly read and hear that passive income is best. But what exactly is passive income, and why is it so important?

Investopedia defines passive income as "earnings an individual derives from an enterprise in which he or she is not actively involved." Wikipedia calls it "income received on a regular basis, with little effort required to maintain it." Author and speaker Robert Kiyosaki speaks of the need for people to be able to support themselves through passive income generated through systems such as real estate and business ownership. Simply put, passive income is when your money works for you.

Most people work for money. We go to a job, and we get paid after Uncle Sam takes his share. Then we get to pay our bills. And finally we get to keep whatever is left. Now think of a big corporation, the ultimate passive income machine. The corporation invests its money, and sits back while lots of good people work all day to generate income for the corporation. At the end of the day, the corporation pays its workers and pays its bills. Then Uncle Sam steps in and takes his share. The corporation gets to keep what's left - and it's passive income.

Passive income is great for many reasons, and I will be highlighting them throughout this blog. For a taste of what's to come, here are some initial reasons why every individual should be figuring out how to make generating passive income a way of life:

  • It provides a way for you to save on taxes in complete compliance with the IRS.
  • It allows a person to not need to depend on a fickle employer for his livelihood.
  • It is the only way in which a person can use his self-directed IRA (SDIRA) for investment income.
I will be spending a good bit of time explaining how a person can generate passive income for his SDIRA - traditional and/or Roth. What's a SDIRA? I have written several articles on what I believe is the best-kept secret that Wall Street has over most hard-working Americans. For homework tonight, read up:

Thanks for spending time with me. I welcome your comments.