Self-Directed IRAs & Retirement Investing with Kaaren Hall

Christian (00:05.371)
Hey everybody, welcome back to the show. I am here with Kaaren and today we are going to talk about Roth IRAs, mortgage lending, property management, and even we have so much to talk about. And Kaaren, I’m really excited to speak with you today. So why don’t you just introduce yourself, tell the audience who you are, how you got here, and just a little bit about your background.

[email protected] (00:26.656)
Yeah, thanks Christian. really appreciate the opportunity to chat about my very favorite thing, which is self-directed IRAs. And you’re right, yeah, my background was a lot of things, including property management. And I was a realtor for a year and mortgage origination and mortgage loan servicing as well. And they got into the self-directed IRA space in 2007. So yeah, but since 2009, I’ve been the CEO founder of UDirect IRA Services. And most recently, whoo, right about

So it’s a bigger pockets guide to self-directed IRA. So just keep it busy over here and helping people save for retirement.

Christian (01:05.445)
Very, very nice, very nice. So, Kaaren, I’m really interested to know, I mean, there’s obviously a lot of people that are unfamiliar with self-directed IRAs. Could you break down a little bit about, you know, what exactly is a self-directed IRA and how they differ from traditional retirement accounts today?

[email protected] (01:22.894)
Sure, well I think a lot of us know what an IRA is. It’s an individual retirement arrangement. So it’s for the individual, it’s not the kind of account you’d have with an employer. It’s an individual account. So if you’re married, for example, and two spouses, and you each have an IRA, you don’t have a joint IRA, it’s an individual account. So it’s for the individual. But what it lets you do is save for later. So the IRA itself, are different kinds. There’s a traditional, a Roth, a SEP, a simple, spousal,

inherited IRA all different kinds of IRAs But IRAs in general came about in 1975 when the ERISA laws were enacted So what that means is it’s the IRA’s 50th birthday. Happy birthday to the IRA

Christian (02:07.161)
Wow, wow, that’s incredible. That’s awesome. I appreciate you sharing. I mean, let’s talk about, you know, some common mistakes maybe just investors make or just regular people in general when using a self-directed IRA and how can they avoid mistakes by using that?

[email protected] (02:23.054)
With a sub-directed IRA, yeah, there are pitfalls for sure and there are rules called prohibited transactions. So you want to avoid prohibited transactions. And just the rule of thumb is keep it arm’s length, know, keep it away from you. So no personal benefit, present benefit, know, indirect benefit. You don’t benefit today from your retirement account. The money is all for later, okay? So you keep that in mind.

Christian (02:45.883)
Okay, so it’s a long-term picture there, right?

[email protected] (02:48.768)
It is, and it’s also, for example, if your IRA invests in a house, you can’t live there. It has to be a non-owner occupied property. You’re not even supposed to stay there one night. And also your ascendance and descendance aren’t supposed to benefit from it either. That’s also prohibited. So you just want to keep away from disallowed people and prohibited transactions. And that in itself is a whole conversation.

Christian (03:13.295)
Wow, yeah, definitely sounds like a conversation. It sounds like there’s a lot to that. Well, awesome. So let’s talk about, you know, maybe some alternative investments, right? Can people hold in their self-directed IRAs with that? I mean, what are some of the more unique assets you’ve seen in your experience?

[email protected] (03:28.428)
Right, yeah, yeah, you’re so right. Self-directed IRAs are all about the alternative. So you can have a typical IRA that’s invested in the stock market, but a self-directed IRA lets you invest in like all these different asset classes like syndications and maybe, you know, performing and non-performing debt. Your IRA could be the bank and lend money to people. You could invest in cryptocurrency, precious metals.

know, lots of different things, just a single family home. Syndications, normally that’s like a multi-family or self-storage or some sort of commercial building that your IRA can invest in. So just lots of different asset classes.

Christian (04:10.661)
Wow, wow, awesome, that’s amazing. So I know you did a book, right? So I mean, what motivated you to write the self-directed IRA to investing, right? What motivated you and what can readers expect to learn from that book?

[email protected] (04:23.022)
Yeah, yeah, it was a long time ago that attorney Gene Trowbridge and I were talking and he was writing his book and he says, why don’t you write a chapter for my book? So said, yes, and that was probably 10 years ago. So I started writing this book and it’s had many iterations. so the people, people with bigger pockets came to me and said, hey, we want you to write our book. And I said, I’d love to. And so I gave him a manuscript. And at the time they said, you know what, we you’ve done all this, you know, you gave us a manuscript, but we changed our mind. We’re going to hold off. OK, so there then they

came back in September and they said, we want that book by November go. So it was a lot of typing and I rewrote the book pretty much because in the interim we’d had the secure act 1.0 pass that changed some rules and secure 2.0 that also changed some rules. So I just rewrote the thing and so bigger pockets we collaborated. They took out some of the stories the actual stories about

Christian (04:58.395)
Wow.

[email protected] (05:22.896)
like case studies, you know, and this is a real how to kind of book, real, you know, just bare bones kind of like a, it’s a good, it’s a guidebook, a rule kind of guidebook and a good resource.

Christian (05:24.965)
Yep.

Christian (05:36.069)
I love that, I love that. I appreciate you breaking that down. Guys, be sure to check out Karen’s book. I definitely feel like there’s nothing but gems inside of that book. awesome. So I know you’re a founder of O-C-R-E-I-A, which you can explain what that is, but why don’t you explain what that is and also what trends are you seeing in real estate investing today?

[email protected] (05:57.272)
Sure, well, OCI, every major metropolitan statistical area, NSA, has a REIA, a Real Estate Investors Association. So I run the one in Orange County, and I founded it in 2012.

Christian (06:04.282)
Okay.

[email protected] (06:11.084)
And ever since then, every second Thursday of the month, we bring in somebody to teach about real estate investing. And there are so many aspects, so many asset classes and things that touch real estate. Self-directed IRAs, obviously, touch the real estate industry. All the things like non-recourse lending, maybe 1031 exchanges, maybe taxation. How do you keep more of what you earn? So let’s talk about taxation and how to save taxes as a real estate investor. So we talk about all these different things

And so our website is ocrea.com and this coming month we’re having Matt Faircloth. You might know him if you’re in the Bigger Pockets arena. He’s a well-known real estate investor so he’s speaking in March. But every month we have a different topic and a different speaker.

Christian (07:05.691)
That’s awesome, awesome, that’s awesome. So I mean, what trends are you seeing in real estate investing today? Obviously you’ve been in the industry for so long. I’m really interested to see your take on that.

[email protected] (07:17.548)
Right, well, I mean, there was, when we first opened U-Direct, was a great recession. And so you could buy real estate. People were literally buying it on tape, a sight unseen, 50 houses at a time, you know. Well, those days are over, obviously. We’re in a different era entirely. We’ve got high rates and high prices and issues. So you can still buy the single-family home. And surprisingly, people are, you it’s not uncommon to still do that. That’s not uncommon. Sometimes, instead

Christian (07:31.215)
Definitely.

[email protected] (07:47.424)
of the IRA buying the whole property just from the account itself people may be partnered and go in on that property together like a couple of people with IRAs you know go on going on that property together or people will invest in a single-family house using leverage and you there’s a non recourse loan that’s a whole thing to talk about but so that’s one asset class another asset class is the number one real you know really biggest asset class for our industry is

syndications. So that’s like reg A, B, C, D offering where you go to the SEC say hey I want to raise capital and you get the approval of the SEC to raise capital. So that is a syndication. It’s an LLC on steroids. So when you are doing this and when you’re a general partner you can raise capital from other people’s money including retirement accounts and that’s the number one asset class for our whole industry. But yeah so also Chris

Christian (08:43.803)
Wow. Wow.

[email protected] (08:47.258)
cryptocurrency is just skyrocketing in popularity. Super wild west, know, super risky. We don’t know what’s it based on. It’s not like Fort Knox, right? And we don’t have gold backing it. But people are certainly taking a dive into cryptocurrency. And you can do that with a self-directed account.

Christian (08:58.651)
Yeah.

Christian (09:05.689)
Wow, so I did not know that you could do crypto with a self-directed account. is that? Makes sense, makes sense, wow. These are things I didn’t even know, so I know the audience is definitely gonna take this. So valuable information. So I have some questions too. What has been the most rewarding part of building Udirect IRA services over the past 15 years since you’ve been in the industry?

[email protected] (09:09.794)
Yeah, with us you can do it directly through our platform.

[email protected] (09:32.34)
the most rewarding I think I think just seeing people say for retirement because

Christian (09:35.994)
Mm-hmm.

[email protected] (09:37.794)
If you just Google it and look at the statistics, people are super unprepared to retire. It’s hard enough to afford today, let alone save for tomorrow, but we absolutely have to. Because what are you going to do when you can’t work anymore or when you’re older? You definitely want to have that nest egg, so you have to. So the ways that we save for retirement, a lot of times it’s an employer plan. So you’re working and you’re putting money away because if it comes out of your paycheck, you get a tax deduction typically, and then you can

Christian (09:43.28)
Yes.

[email protected] (10:07.618)
stick it away into a 401k or a TSP or a 403b, different kinds of retirement plans with your employers. But with an IRA, you can also, in addition to your employer plan, contribute and save for your retirement because you just need to take care of your future self. And so it’s very rewarding to see people, a lot of times they’ll take their IRA from where it used to be, or I should say 401k with their old employer and roll it over into a self-directed

Christian (10:26.297)
Right.

[email protected] (10:37.668)
IRA and then build that instead of just taking that old 401k and putting it back in the market they’ll put it into asset classes that they understand like you know real estate syndications like you know brick-and-mortar properties you know what have you notes notes are huge so so that’s what happens a lot of times people like assets that they have more control over and self-directed IRAs give you that that ability to do that.

Christian (10:38.331)
Mm-hmm.

Christian (11:00.336)
Hmm.

Christian (11:04.558)
That’s amazing. I mean, what are some practical steps, right? You know, let’s say you’re working with somebody, you’re just bringing them on. You what are some practical steps people can take today to secure their financial future? Because as you know, Kaaren, I mean, there’s so much information out there right now. I mean, you can go on YouTube and spend millions of hours, honestly, watching, you know, all types of information when it comes to these things on like how to build wealth, how to secure your, you know, your financial future. So how about you just list out some practical steps people can take to really secure their future?

[email protected] (11:35.054)
think the number one thing you can do today is to write yourself a check to your IRA. Put my, I mean you know now we don’t write checks right now we just like you know go online to your trading account you know whatever it is but but or you know or your self-directed IRA contribute contribute contribute because if it’s a traditional IRA you can contribute $7,000 cap if you’re under $50 $8,000 if you’re 50 plus so

Christian (11:37.349)
Mm-hmm.

[email protected] (12:04.834)
The most practical thing you can do is to actually put money aside so that you can invest for the future.

Christian (12:10.299)
Gotcha. How about we talk about maybe sharing a success story of somebody that you’ve worked with that has used a self-directed IRA to create significant or maybe just, you any type of wealth, just in general. Obviously you don’t have to disclose this person, but how about we just share a story about someone you’ve helped.

[email protected] (12:27.278)
Sure, I’ve interviewed a lot of people, as you can imagine, and one of the stories I really like is there’s somebody, like a well-known person out there, and when I was interviewing that person, he was telling me how he used to make these little micro loans for mobile homes, and he has a Roth IRA, and so he’d make these micro loans to people for mobile homes. I mean, I guess, you know, that’s how it worked. And they would pay off, and he would, you reinvest and keep it going.

and going and going and keep that money just building and building. And he grew that into a million dollar Roth from a small account, just being, you know, persevering, being diligent. He just kept at it. So that’s, you know, that’s something that you can do, but you want to start off with a plan and then work your plan. Yeah.

Christian (13:16.059)
I think that’s the most important step as well, right? Is you have to work with a professional that can provide you that plan, right? You can figure these things out on your own, sure, but you’re gonna spend so much more time in making mistakes along the way trying to do it. It’s better to actually have a professional that knows what to do and can set you up for success ultimately, right? So.

[email protected] (13:24.366)
Yeah.

[email protected] (13:36.814)
That’s true. there’s so many, well, know, podcasts like this where you can learn so much from so many different kinds of people. So for free, you can listen to podcasts. If you want to spend a little money and go to, you know, a seminar or a conference, that’s a great idea. can meet other investors, talk to them. What did they do? How did they do it? And learn from not just the speakers on stage, but the audience and the people that you’re networking with at the cocktail hour. What are they doing? What does their portfolio look like? What challenges do they face?

Christian (13:46.692)
Mm-hmm.

[email protected] (14:06.798)
And then you can simply use your self-directed IRA to invest, know, in those deals. It’s a pool of money to invest in deals that you’re going to be learning about.

Christian (14:17.465)
Your network is your net worth, right? Awesome. Well, let’s talk about, you I know you serve on the board of directors for the council of aging, South California and Rita, right? So how has your work there influenced your perspective on retirement planning?

[email protected] (14:34.062)
Well, of course, it fits right into my wheelhouse because, you know, the Council on Aging is all about taking care of the elderly. And when I can see it from that perspective, in other words, working directly with elderly in Orange County, California, where we’re based, can see the need. It’s very obvious. And some people who haven’t saved for retirement live in what’s called SSI homes, Social Security Income Houses, or, you know, are kind of homes.

Christian (14:37.563)
Mm-hmm.

[email protected] (15:04.016)
It’s not great because, say your social security is like maybe $2,500 a month, well most of that’s going to your housing and to stay there and to be cared for. And what’s left is really for meds, so there’s not a lot left for things like socks. So you don’t want to be in that situation where the only place you can stay is one of these SSI homes. It shows me the importance of saving for retirement when you see people who haven’t done that and the situation that they’re in.

is one of the things we do is to outreach to them and you know have ombudsman come by and provide them a hey what do you need maybe a sweater maybe some socks or something and sit down and talk to them and a lot of people at that age are lonely and they don’t have family and so it’s it’s a great an incredible organization it’s really really serving the community and proud to be part of it.

Christian (15:57.391)
I love that. It’s all about the community as well, right? I always believe, you know, if you give and you give, you’re going to receive, right? And it’s all about providing as much information to the public as possible, right? So let’s talk about your book. You know, obviously we don’t want to, you know, expose everything in the book, but how about we just, you know, share a little bit of some gems, you know, some key takeaways from your book that could maybe just help some investors, you know, maximize some of their retirement savings.

[email protected] (16:23.63)
Well, again, the book is a guidebook. And so it does guide you through retirement. First off, the history of retirement, like how did retirement begin? Because if you think about way ancient times, retirement isn’t in the Bible, for example. It’s work till you drop. But we have this concept of working for so many years and then retiring. if that’s what you, in fact, what’s fire, financial independence, retire early, that’s a thing.

Christian (16:26.203)
Mm-hmm.

Christian (16:50.491)
Yep.

[email protected] (16:53.684)
retiring seems to be a goal for a lot of people because then you can do your avocation or what you really passionately love to do. So the book, you know, covers things like this, but it also is a how to guide how to self-direct what to do and what not to do. So I think in that sense, that’s why it’s a really good resource book. Wait a minute, how do do this? Now, of course, anytime you want to know more about self-directed IRAs, you can always hit us up at Udirect.

email us at info at you direct IRA comm and we will give you a 20 minute free consultation But regarding the book again, this is your resource and a real how-to guide so that that’s what you’re looking for in this book

Christian (17:36.635)
I love it, I love it, I love it. So something that I’ve heard about a lot too is, know, IRS rules and regulations, right? So I’m interested to know, you know, how did those rules and regulations impact, you know, IRA investments and what should investors watch out for to stay compliant on that?

[email protected] (17:55.086)
Okay, yeah, so one of their sources for the IRS is irs.gov, website. And IRAs, the traditional and the Roth are covered in publication 590. So irs.gov and then the little window there type pub 590. And you’ll see the publication 590A and 590B that talk about how to get the money in the IRA and then how the money comes out and how it’s taxed and those kinds of rules. So it’s a great resource.

Christian (18:21.531)
Hmm.

[email protected] (18:25.2)
But when it comes to the rules about what you can’t do, the prohibited transactions, that’s in the Internal Revenue Code. So that’s IRC, Internal Revenue Code 4975. And IRC 4975 talks about what’s prohibited. For example, your IRA could not make a loan to your child to go to school because your child is a disallowed party.

You’re not allowed to have personal benefits. So if you are a GP and you’re raising capital your IRA cannot invest in your deal because then You’re offering services to the plan and you’re benefiting the asset and also you’re taking you know Presumably some sort of income from this too. So you would have personal benefit So these are some of the things that are clarified in the Internal Revenue Code 4975 that describes prohibited transactions

Christian (19:15.013)
Wow, that’s incredible information. That is something that I honestly wanted to know about, so I’m glad that I’m hearing it from the expert now. So I know going forward for myself and I know everybody else’s as well. how about we, know, I’m always interested in, I always ask my guests this, right? You know, if you could go back and you could give yourself, your younger self, maybe, you know, your eight year old version of yourself, your 10 year old version of yourself, just one piece of financial advice, what would that be?

[email protected] (19:43.448)
Just keep saving, you know? Like Dory, just keep swimming. I’d say just keep saving.

Christian (19:45.275)
Mm-hmm.

Just keep saving, keep swimming.

[email protected] (19:51.542)
Yeah, I mean, we’re going to, you’re going to need it. Let’s just put it that way. You’re going to need it. So that’s, I think it’s a good idea.

Christian (19:54.383)
Yeah, it’s true.

The earlier you plan to start now, the greater it’s going to set you up for later, right?

[email protected] (20:01.866)
And the more security it gives you, the less anxiety you’re going to feel because you know you’ve got this nest egg, this plan for your future. It gives you peace of mind too.

Christian (20:12.707)
I could not agree anymore. Well, Kaaren, I am, thank you so much for your time. I wish we had another hour to speak on these topics, but unfortunately we are running out of time. So I’m going to toss it over to you now. How about you just share to the audience, you know, where they can find you, how they can work with you, you know, spend as much time as you like on that.

[email protected] (20:30.158)
Sure, sure. I mean, our website is full of great information. Our blog is just like, you know, bursting with great articles on pretty much every aspect of retirement savings you can think of. So it’s the letter U, UdirectIRA.com is our site. And if you want the book, the book is biggerpockets.com slash SDIRA for the book. There you go. In fact, I believe it’s on sale today. So, but anyway, it’s always available. It’s not expensive and you can also get the Kindle version. So there’s that. So the book.

reach us and to really get started with a conversation, email us at info at udirectira.com and we’ll get back with you and set an appointment with you and talk about what your concerns are. We’ll ask you what are you looking to invest in, where are your funds today to see if you can move them over, and then talk about the strategy and you know that you’re looking at for this investment. You know how is it structured and will that fit? In other words, are you investing with disallowed

or how does that structure actually look and does it fit into a self-directed IRA. So we’ll discuss all these things with you.

Christian (21:37.883)
That’s amazing. Kaaren, thank you so much for your time today. I know I learned a lot. I know the audiences as well. Guys, we’re going to share all of Kaaren’s descriptions in the links on our socials as well. So be sure to check Kaaren out and definitely make some time to work with Kaaren. I know you definitely will not regret it. I’ve had such an amazing time with you today, Kaaren, and I’m just wishing you nothing but success, continuation in your business, and all your endeavors. So thank you. All right, guys. We will catch you on the next episode, as always. And take care, everybody.

[email protected] (22:01.976)
Thank you.