Using your IRA to fund Real Estate

John Harcar (00:01.07)
Welcome back to the show. I’m your host, John Harcar, and we are here today with Hampton Scurlock. And what we’re going to talk about is using your IRA to fund real estate deals. Remember guys, at Investor Fuel, we help real estate investors, service providers, and really all real estate entrepreneurs, 2 to 5X their business by providing the tools and resources that allows them to build the business they’ve always wanted to build and in turn live the life they’ve dreamed of. Hampton, welcome to our show.

Hampton Scurlock (00:28.932)
Glad to be here. Thanks for having me, John.

John Harcar (00:30.796)
Man, I appreciate it. I appreciate being on here and I look forward to talking about how to use the IRA. It’s been a big topic on a lot of my local our recent podcasts. But before we get into that, you know, before we get into the weeds, why don’t you tell our audience a little bit about who you are, where you’re from, how you got into real estate, kind of how you got here.

Hampton Scurlock (00:49.626)
Sure, sure, I’d love to do that. I’m actually in Louisville, Kentucky area and I’m the vice president of our local REIA. Been investing since the 90s while I was in college and right out of college and then got serious with it in 07. So.

Right after college, I was getting licensed and I was a certified financial planner and accountant in a previous life. So lot of my time was spent helping people, you know, build wealth, save on taxes, you know, become millionaire, multimillionaires and just, just making smart investment choices. and after several years of doing that and then going through their taxes, all the ones that had a lot of success,

John Harcar (01:16.738)
Yeah.

John Harcar (01:22.466)
Sure.

Hampton Scurlock (01:30.092)
and living the good life and then had, you know, seven figure bank balances and, and, and, and, know, it built up wealth. They all had one thing in common was that they had real estate and or business, but generally it was real estate. I I really needed to do what they’re doing. And so I started buying up houses and got serious with it. and, had pretty good timing because it’s market was going down and 06, 07. That’s really what I was starting to buy.

John Harcar (01:40.557)
Mm-hmm.

Hampton Scurlock (01:57.124)
was one of the few buyers in the area. So I was getting really, really good deals at the time and just kind of kept on buying, you know, throughout the ups and downs over the years. you know, built up a decent portfolio, stumbled into wholesaling, started flipping, got into some commercial property. So a little bit of everything over the years, but just, start off as a buy and hold investor, not knowing what to do, just know I needed to buy real estate. And, I had some mentors, you know, tell me, you know,

John Harcar (02:00.705)
Mm-hmm.

Hampton Scurlock (02:24.43)
don’t need to wait to buy real estate. You need to buy real estate and wait. Yes.

John Harcar (02:27.213)
mean, wait, yeah, get that equity growing. So that’s interesting. You are basically looking at other people’s money, in a sense. mean, you’re, it sounds like you’re a numbers guy. So you look at other people’s money and you found the common denominator being real estate. So how did you learn? I mean, did you just go out and buy property? Did you do a YouTube U? I mean, how did you get the skills to go out and start this?

Hampton Scurlock (02:54.054)
I hate to say it was impulsive, you had some basic research done and was living in a different city and thought I just need to pull the trigger and do it. was trying to do a little research, but it was some of the first two properties I found on Craigslist. And called a guy and he said he’s got four properties for sale. And he told me where they were. And it’s part of Louisville I didn’t spend much time in or wasn’t very familiar with.

But went and looked at the properties. I thought four is a lot to buy it off. yeah, especially for our first one, not having any clue what I was doing. any contractors line up? But the good part was that he was asking like $10,000 per property. So they were very affordable properties. I thought the risk would be minimal.

John Harcar (03:29.162)
I say your first one.

Yeah, I mean, woo, talk about getting knee deep.

John Harcar (03:42.059)
Okay.

John Harcar (03:45.997)
Mm-hmm.

Hampton Scurlock (03:47.746)
you know, for better, for worse, someone made him a really good offer on the two good properties or the two bigger properties. And I got the two leftover properties for $5,000 each and put a little bit into them. You know, I used IRA money to buy it because my plan was to just have savings built up. I practiced what I preach. I put money away, you know, bought those properties, used the IRA, fixed them up a little bit and then had them rented out. And it was all profit.

John Harcar (03:53.421)
Mm-hmm.

John Harcar (03:57.462)
Okay.

John Harcar (04:16.351)
Nice. So you got those first two properties.

Hampton Scurlock (04:17.912)
And that, you know, then the cash had to go back in the IRA, it built up, built up and then.

Hampton Scurlock (04:25.85)
First two properties, $5,000 each. Using the IRA, and they didn’t even require that much to get ready. was just good deals and needed some cleanup. And one of them needed a new tile floor. And we hired the wrong contractor to do it, had to do it twice. So you kind of learn by doing. So we had the school of hard knocks that you kind of learn as you get into this business what to do, what stuff’s going to cost, what you can’t do, and what corners.

John Harcar (04:30.017)
That’s incredible.

John Harcar (04:40.823)
Mm-hmm.

Mmm.

John Harcar (04:55.232)
Yeah.

Hampton Scurlock (04:55.726)
You you can’t or can’t cut. but had those properties for several years and, you know, after a couple months, you know, it builds up enough cash to go buy another property. And now you’ve got three properties free and cleared. builds up enough cash to snowball into the next property.

John Harcar (05:07.193)
Okay, so that

Yeah, that’s what I was gonna that’s gonna be my next question is like when one you know, long did it take for you to then go out and start doing? More you had two under your belt seems like you caught the bug a little bit So, you know how long did it take you to go out and buy more and were you still doing the same thing about using your IRA or equity or what? Were you how are you funding?

Hampton Scurlock (05:30.65)
Yeah, trying to use, trying to use IRA and had a, had a 401k. So trying to use all the IRA money. I could, because I saw the tax benefits and that I didn’t want to increase my taxable income. And I had a day job at the time. And my plan was just to reinvest it and just keep growing it and growing it. So the IRA was a good way to go. I didn’t have to bother with 1031 exchanges. It kept my tax returns pretty simple because you miss out on the depreciation, but on a $5,000 property, that’s not much anyway.

John Harcar (05:41.825)
Mm-hmm.

John Harcar (05:49.761)
Yeah.

John Harcar (05:59.694)
Yeah, right it’s not five hundred thousand it’s only five thousand

Hampton Scurlock (06:02.526)
Um, yeah, yeah. So, so, but all, but all the rent, you know, all the gains when you sell a property, it all goes back in the IRA and there’s a Roth IRA. So was all tax free. paid the tax on it upfront. Um, and just, it kept building up, you know, add a property here, add a property there. And then I had somebody bring me a bundle of properties and I was able to buy the bundle. I jokingly, I stumbled into wholesaling.

John Harcar (06:13.431)
Mm-hmm.

Hampton Scurlock (06:29.978)
because I bought this bundle of properties and went to go change the lock on one or go, go, go, go, go to the property. The neighbor came out and cussed me out and said, I can’t believe this guy sold you this property. was going to give him $8,000 more. And you know, he’s, he’s a piece of garbage. You’re a piece of garbage, you know, and I just shut my, I stuck my hand out there. It was like, nice to meet you. You know, if you want to give me $8,000 more, I’ll consider selling this property to you. You you seem like a nice guy. And, uh, so I closed on it, resold it.

John Harcar (06:55.691)
Mm-hmm.

Hampton Scurlock (06:58.938)
made $8,000 and thought, wow, that’s pretty easy way to make $8,000. I didn’t have to change the lock. And so that was my first foray into wholesaling. I hadn’t watched any videos. I just stumbled into it and I was like, I could do this as I’m buying bundles. Maybe I’ll keep some, maybe I’ll sell some. And it was another way to build up the IRA or build up income. And then eventually,

John Harcar (07:01.393)
Sweet super simple. We’re like can it all be like this? Yeah

John Harcar (07:20.557)
Mm-hmm.

Hampton Scurlock (07:27.354)
got into flipping. it’s from buying and holding, not knowing what I’m doing to all of a sudden you’re wholesaling, all of a sudden you’re flipping and real estate, it’s amazing. There’s so many different ways you can make money. Even if you don’t know what you’re doing, you can learn, you can find a mentor, you can figure it out as you go.

John Harcar (07:39.693)
Yeah.

Hampton Scurlock (07:48.708)
But so that’s kind of my story, story in a nutshell there.

John Harcar (07:49.656)
So let’s talk about some of the challenges to even first getting into it, right? mean, I know there’s a lot of it is mindset, you know, when you get into it first and foremost, but then obviously it’s having some of that basic knowledge. So what are some of the challenges that you came across or maybe mistakes you made?

Hampton Scurlock (08:11.054)
Yeah. In hindsight, I mean, I pulled the trigger early. You know, I didn’t really research the area. didn’t have contractors lined up. hadn’t talked to a bunch of investors. didn’t, I didn’t, you know, check out the neighborhood after dark. I didn’t go there during the day. I thought what I found was two good deals and jumped into it. And it all worked out. And my thought was the risk was so little.

But I did have family and friends tell me I’m crazy because you know, 06, 07, the market was crashing. That’s why these houses were so cheap. And I had a family member tell me, you know, what do you think and why you get real estate’s down 50%. What if it drops another 50 %? And I had to tell this family member, said, look, it’s a $5,000 house. It’ll rent for 700 bucks. You know, back then I said,

John Harcar (08:45.431)
Mm-hmm.

Yeah.

Hampton Scurlock (09:05.93)
Even if the darn thing blows up or blows away or sinks into the ground, I’ve got another one next door. I’ve got the lot I can sell. My downside’s pretty minimal and I’m not planning on selling it. So if it’s worth 5,000 a day and it’s worth 2,500 next year, I’ll just keep renting this sucker until I’m old gray and now I’m halfway there.

John Harcar (09:11.447)
Mm-hmm.

John Harcar (09:21.389)
keep running out making the money on it. Yeah, yeah. Well, and that’s what a lot of people don’t understand too is right. Yes, it was in a bad market. mean, if it dropped it, if it dropped another 50%, you have a lot more to worry about than you holding onto that house. But they, yeah, they just don’t get it. All they know is what the mainstream is out there and they don’t know, you know, people that aren’t informed don’t know.

Hampton Scurlock (09:45.518)
Yep. A lot of doom and gloom out there. There’s always ways to make money in real estate, up market, down market, sideways market, innovative or smart. If you solve problems, that’s one of the main things and being a real estate investor or being in the real estate field, solve those problems, you’ll make that money.

John Harcar (09:52.366)
huh.

John Harcar (09:58.872)
BAM!

Yep. So you’re holding these properties, right? And you’ve got some rentals. mean, what decided, what made you decide you want to flip?

Hampton Scurlock (10:11.7)
just, know, you see, you see TV shows, you talk to other people, you see the guys cashing the big, you know, big checks like the golfers, you know, see on TV. and just, you know, at some point I thought, gosh, you know, I could, I can buy and hold these rentals and they can, they could spin off income and it would take a little while to build up enough, you know, cash to buy another one. Or I could occasionally, you know, flip one or buy one and, and, and hold it for a year or two.

John Harcar (10:15.885)
Hehehehe

John Harcar (10:21.015)
Mm-hmm.

Hampton Scurlock (10:40.322)
and then sell it or sell it to the tenant and then reinvest that money into two or three more properties and keep the machine growing and accumulating that way with adding chunks of cash or chunks of equity into the pound and the machine to keep it growing.

John Harcar (10:42.775)
Yeah.

Okay.

John Harcar (10:58.881)
Yeah that makes sense okay so now what is your what does your business look like now like do you have a team is it just you are you holding most stuff are you flipping wholesaling what’s your business kind of structure now?

Hampton Scurlock (11:07.128)
It’s primarily me.

Hampton Scurlock (11:13.786)
It’s a little unique that we still do quite a bit. It’s primarily me. I’ve got some people I do partner with. I do private lending. So one of the issues that some people run into when they’re trying to do these IRA deals is you’ve got to have cash to do it or a partner because many of the banks and private lenders won’t loan to an IRA because it’s a separate entity. supposed to be a non-recourse loan. And so I found it a little kind of a niche that

John Harcar (11:18.966)
Okay.

John Harcar (11:35.649)
Mmm.

Hampton Scurlock (11:43.48)
rather than having more properties that are doing more flips and having those type of a tenant and toilet issues, I can loan money out and help people grow their portfolios and have a little different types of headaches, but a little more passive income and loan of money so they can grow their IRA. I can grow mine at the same time, but I’m able to fund some of their IRA deals that the banks won’t lend them money on. the company’s called IRA Lend.

and iralend.com. We focus in the Louisville area, but we’ll do a tri-state area. And it’s been a nice little niche from a lot of investors have liked, you know, work with me because they thought they’d have to keep contributing to their IRA or flip a property or sell something before they could do any deals in their IRA. And we’re able to help them get started. Sometimes a little to no money, little to no of their own money. If the deal’s good enough, we can make it happen.

John Harcar (12:24.449)
Mm-hmm.

John Harcar (12:36.621)
Did you have to go get any specific training, learn any specific processes or anything to do the lending or just did you have that knowledge for back when you’re doing the financial stuff?

Hampton Scurlock (12:48.866)
a little bit of knowledge from when I did the financial stuff. And if you’re an investor, you’ve probably looked into borrowing money or you’ve run into the cash going up and down and wondering, hey, is this flip going to sell? Is this person going to repay me? And I found five more deals, but I can only buy four. Or which form I’m to buy? can I buy all five if I did this or did that? So just to…

So I had some of the knowledge from before, but if you, if you’re an investor and you’d look to borrow money, that also helps you as a lender. So, you know what, what, you know, 10 years ago I was in their shoes and Hey, this is what I would like to see as a borrower, you know, or, while still protecting myself as a lender. you, kind of learn what you’re comfortable with and try to, you you gotta look at it from your, perspective. You also looked at it from your, partners or your, borrowers, know, or the buyers, the sellers perspective as well.

John Harcar (13:23.757)
Mm-hmm.

John Harcar (13:44.478)
Sure.

Hampton Scurlock (13:46.882)
and just talk to other lenders, talk to other investors, and we find a product or solution that works for most people or try to at all costs. It’s just been kind of long.

John Harcar (13:47.105)
what their goals are.

John Harcar (13:56.718)
Now, are there specific properties or projects or things that you lend on versus don’t lend on?

Hampton Scurlock (14:08.416)
Yes, I don’t want to do any loans to owner occupants. So it’s just, it’s kind of a no-no or you find yourself subject to additional regulations. So it’s primarily only for investors or new known non-owner occupant loans. And I like to loan to people with IRAs and one, because they’ve got some big tax benefits and they’ve shown that shows me. So they’ve got some discipline. They’ve, they put aside some disposable income or they’ve

John Harcar (14:18.242)
Mm-hmm.

Hampton Scurlock (14:35.938)
You know, plan for, plan for rainy day. They’ve set up a retirement account. They’re, doing the right things by putting money aside, but maybe they just don’t have enough in there to go out and buy a house or two paying cash. But if they can find a good enough deal, I did one recently with a person had a great deal, but they had no, they had less than a thousand dollars in their IRA. So they came to me asking, Hey, can you fund this deal? I was like, what do you have to put into it? Or, know, can you do it down payment? And they said, well, I got, I got about a

John Harcar (14:36.076)
Yep.

John Harcar (14:56.365)
Hmph.

Hampton Scurlock (15:05.528)
thousand and first I made sure they’re talking American dollars it wasn’t pesos or anything but it was American dollars and we’re able to make that work because they got such a good deal on the property and they were helping the sellers out solving a lot of problems that hey you know they came to the closing with no no money down and they probably you’re gonna make 80 80 plus thousand dollars on a flip when they’ve got nothing out of pocket we’re able to defer some of the payments because they didn’t have

John Harcar (15:10.573)
Hahahaha

John Harcar (15:20.194)
Yeah.

Hampton Scurlock (15:33.882)
even money in the IRA to make payments until the thing’s sold. So we were able to structure a kind of a win-win solution for them. And now that little thousand dollar IRA they have, it’s going to be 80,000 plus in less than a year. And then they may not need me on the next one. They can go find a house that’s under that amount, or maybe they need me for less of the future, funding half of a deal, less than half of a deal next time, and not funding at all.

John Harcar (15:37.42)
Right.

John Harcar (15:57.614)
All right. Well, let’s talk a little bit about more about that. Obviously, as a theme of our podcast here, using your IRA to buy real estate. OK, why would someone choose to do that versus do a hard money loan? Maybe go find a private lender, those type of things.

Hampton Scurlock (16:14.468)
Yeah, the and I’m doing the private money or hard money type of lending. There are, think there’s a couple of national lenders that will loan to your IRA, but a lot of times you’ve got to at least 30 to 40 % down. The payments are the interest rates are the 14 plus percent range, plus a few points, plus some fees upfront. And so it’s pretty, pretty costly.

but there’s not many people doing these non recourse loans. So the banks, most hard money, most private money won’t loan to your IRA. So it’s kind of a niche product that there’s not a lot of people doing those loans. So there’s a good opportunity as a lender. It’s sometimes tough if you’re a buyer or investor looking for funds or looking for somebody to fund your IRA because the banks just…

John Harcar (16:47.991)
video.

Hampton Scurlock (17:10.136)
Because it’s a non recourse, you can’t give a personal guarantee. So it’s too much risk for the bank and they won’t touch these type of loans. So you got to find a partner, find somebody like me or one these national lenders that will actually do a non recourse loan at decent enough terms where it still makes sense for you to pull the trigger and do a deal.

John Harcar (17:15.147)
Alright. Right. Okay.

John Harcar (17:30.103)
Got it. What specific information does someone need to bring to you to be able to have you help them out?

Hampton Scurlock (17:37.368)
Yeah, we have, we have a ability to actually partner with people. So sometimes we’re able to, you know, do equity sharing. Other times it’s just a straight loan type of a relationship. A few investors have come to me because they’re newer and they may want some help. They may want to use, you know, crews or people that contractors that we’ve used to help get, get a flip done. And they need a little hand holding or consulting as part of the deal. So we can work or figure that out as well. But I usually want to see that they’re, you know,

their purchase price, they’re getting the property to good at a good price, good value, and that they know their actual repair numbers and they’ll be able to make a good profit allowing for time delays, cost overages, materials that may go up in cost. And there’s still enough margin there where we’ll be repaid and they can make a profit and everybody’s happy. So it’s kind of a case by case basis. And I like to do repeat business or people I know and

John Harcar (18:22.07)
Sure.

Hampton Scurlock (18:37.174)
and trust I’ve done business with before, but we’re also expanding and taking on new borrowers, new projects. just has to make sense.

John Harcar (18:46.989)
Okay. That’s makes sense. Are there any specific areas where you won’t lend on or do anything like that?

Hampton Scurlock (18:54.586)
If they want to live in the house, it’s just, that’s a no-no for a private lender. And sometimes we’ll tell people, said, Hey, you know, why are you doing this in your IRA? You know, I’ll have that conversation with them. And many times we’ll talk them out of it. I’ll say, Hey, you could go borrow money. You got equity in your house. You’ve got cash outside of your IRA you could use. You wouldn’t necessarily need a loan.

John Harcar (19:13.301)
Hampton Scurlock (19:23.322)
I’ve had one of my buddies says, hey, are you trying to talk yourself out of business? I was like, hey, you want to, I’ll be okay one way or the other. I just want to make sure you’re making the right decisions and you think, think, think, think about all the possible, you know, sources of funding you have. And I’ve talked myself out of deals before where they’d like, oh, I didn’t think about that. Or I could, I could tap into that and do this and leverage that. said, yeah, you don’t need me. Come back to me for the next one. Um, because the IRA, you know, the rents and the gains have to go back inside the IRA.

John Harcar (19:26.829)
You

John Harcar (19:32.481)
Yeah.

John Harcar (19:43.7)
Mm-hmm.

John Harcar (19:51.98)
bright.

Hampton Scurlock (19:52.122)
And they’re supposed to stay there until 59 and half. And you keep rolling them over and keep growing, growing, growing. So I’ve had some people say, well, I want to do this deal. I’m going to make $50,000, but I want to take, you know, 10 or $15,000 and buy a truck or buy a car or take a vacation. And I have to say, well, I’m not an accountant. I’m not a, I’m retired from that. I’m not a lawyer, but you got to think about the taxes and penalties you may pay face. you pull this money out of your IRA, why don’t you do the deal outside your IRA? And then can use that money without.

John Harcar (20:19.682)
Yeah.

Hampton Scurlock (20:20.782)
penalties and restrictions. And sometimes they decide to do it, you know, in an IRA, other times it’s outside or, you know, they may split it up where they’re actually doing a deal with some, some of the IRA owns and some they own outside the IRA. There’s some rules you got to follow, but, but that, that’s a possibility as well. They, or they partner with somebody and do some of it, you know, in or outside their IRA and partner with somebody else. So they’re not having to borrow as long as everybody’s bringing something to the table and it,

John Harcar (20:46.551)
Mm-hmm.

Hampton Scurlock (20:52.725)
It’s again one of the other great things about real estate is sometimes you can have sweat equity, can have expertise that brings value and you may get included on a deal because you’ve got money or because you have a contact or you’re bringing something to the table that adds value in some way, shape or form.

John Harcar (20:57.004)
Yeah.

John Harcar (21:08.417)
Yep, 100%. 100%. And I love the fact that he says sometimes I tell people like, maybe it’s not the right deal for them by doing that. Or I think that adds credibility and adds, you know, more builds that trust factor, right? When you’re being honest with people like that. So a lot of great nuggets today. How, if people want to get a hold of you and talk more about using the IRA or really anything real estate, how would they, what’s the best way to get a hold of you?

Hampton Scurlock (21:34.734)
Yeah, you can call or text. I’ve had the same cell phone since I started investing in the nineties. So it’s still the same, it’s a, a, it was the old star tech, the star tech 5,000, whatever it was, you can put on a necklace and have it. Yeah. Just about that big and open shut and yep.

John Harcar (21:39.031)
Still a flip phone?

The big ol’.

That would yeah, Remember my dad driving out with that big old one. It’s like this big. It’s like a big old like I’m gonna choose This is way back in like the break that big old thing with a beer Okay, well cool

Hampton Scurlock (21:57.934)
The brick.

Yep. That, that, but yeah, they can get hold of me. cell phone numbers, eight, five, nine, four, three, three, three, Oh nine five. Um, the podcast we have is called investor tribe. And, and, and our website is INV tribe.com. And we release a new episode every Wednesday and it’s, it’s kind of a local regional type podcast. We get a lot of, a lot of different speakers, a lot of good information on there and travel a lot of fun. You know, it’s, usually wearing a wine shirts and pretty laid back and

John Harcar (22:28.301)
Cool. Okay.

Love it.

Hampton Scurlock (22:32.706)
I think that’s why they, a couple of investors called me the dude just because the Hawaiian shirts and then some of the other people’s like, it’s the IRA guys. And then they kind of blended the two and it was, it’s the IRA dude. Yeah.

John Harcar (22:38.569)
I’m gonna stick.

John Harcar (22:44.129)
The IRA dude. Right on. Well, Hampton, thank you for all that you shared today. I mean, I think you dropped a lot of good information. And I hope folks out there that are listening picked up a lot. And if you have anything that you want to talk to Hampton about, we’ll have all the information in the show notes so you’ll be able to reach out to him. And I hope everybody just enjoyed the show. And Hampton, thank you again for your time.

Hampton Scurlock (23:09.077)
Thanks John, thanks for having me.

John Harcar (23:10.658)
You’re welcome buddy. Bye bye.

Hampton Scurlock (23:12.346)
All right, take care.