GI73: Using Retirement Funds to Invest in Real Estate Tax-Free w/Scott Maurer

Scott Maurer is the Director of Business Development for Advanta IRA, a nationwide self-directed IRA administrator. Scott has worked for Advanta since 2006, helping thousands of people invest in alternative assets (mainly real estate) using their IRAs and old 401ks.

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Welcome to the Global Investors Podcast, a show that focuses on helping foreign investors enter the lucrative US real estate market. Host, Charles Carillo, combined decades of real estate investing experience with a professional background in international banking to interview experts in all areas of US real estate investing. Now here’s your host, Charles Carillo.

Welcome to another episode of the Global Investors Podcast; I’m your host Charles Carillo. Today we have Scott Maurer. Scott is an attorney and the Director of Business Development for Advanta IRA, a nationwide self-directed IRA administrator. Scott has worked for Advanta since 2006, helping thousands of people invest in alternative assets (mainly real estate) using their IRAs and old 401ks. So thank you so much for being on the show. Scott,

Thanks, Charles. Happy to be here and hopefully share some good knowledge and information with your listeners.

Yeah, no, I bet you will. So what was your background, Scott prior to starting with Advanta?

Yeah, as you mentioned, I started with Advanta back in 2006. I’ve been with the company for quite a while now, but before that, actually right before that I actually was graduated. I was in law school. So I’m an attorney by degree. I don’t do legal work for our clients. But I came out of law school. The owner of Advanta is also an attorney also a CFP. So I met Jack that way and started working then with him and the company. And at that point I was one of four people full-time that we had on staff. And we’re now up to over 25 people in two different offices, hopefully going to be three here soon, and then a couple of different locations. So my prior experience was in law school and actually even before law school, I was in, I was actually in recreation, which was a lot of fun doing a lot of youth programming for the city city of Clearwater here in the Tampa Bay area. So.

Okay, awesome. So tell us a little bit about self-directed IRA, if someone doesn’t know and how and why someone would use it.

Sure. So a self-directed IRA, it’s important to think for anyone who’s listening, who hasn’t heard that term before, self-directed refers to your ability to invest in things outside of maybe what a brokerage firm or what a bank may limit you to doing on their platform. So if you have an account with a brokerage firm, they’re typically limits you to investing in only the products that they sell, but IRS regulations allow for you to, to invest in quite a number of different types of assets. So a self-directed IRA could be a self-directed traditional IRA or a self-directed Roth, but what it’s allowing you to get your money, maybe out of the stock market, out of those maybe more conventional assets and invest in things that, you know, things that you understand and can and can control. So a lot of what our clients invest in with our re our IRAs and doing self-directed accounts is, is real estate based assets from single-family homes to multi-family syndications, to notes and mortgages. There are a lot of different things you can do once you get it outside of that brokerage account. So, you know, people typically looking to use these accounts because they’re either not comfortable with the stock market A and maybe you want to have some diversity or be they, they found a great investment opportunity that came up in real estate or, or something like that, where they can’t do that through the IRA that they have with the brokerage firms, they use us in order to make that happen.

Okay. great. And I mean, I imagine that people haven’t heard of a self-directed IRA, they’ve definitely heard of different retirement plans we have here. Why don’t, you know, major brokerage firms and banks offer self directed IRAs.

I mean, the answer Charles is actually they could, if they wanted to, but the, the reasons why they don’t is it doesn’t fit their business model. They are structured in a way to make money off either you buying and selling mutual funds or stocks on a platform that is very easy for them to you know, when you can go, you can click online, you just go buy a stock or buy a mutual fund or to sell, sell those assets. When you talk about self-directed assets, especially when people you consider real estate, let’s take a real estate syndication. For example, there are offering documents, syndication paperwork, it’s a subscription documents that have to be completed and physically filled out in order for your IRA to, or even you as an individual to become an investor. The banks and brokerage firms are simply not set up to handle those types of assets. So that’s why they don’t do it. It would cost them a lot more in manpower and other processes they would have to do, and their bread and butter really is buying and let, letting you buy and sell publicly traded assets. And so that’s just simply how they’re set up.

Yeah. Makes perfect sense. Because the amount of manual labor, I guess you’d say that has to be done is it is automated as me buying, you know, an index fund or a mutual fund or something right online.

Exactly. They would have to bring in more staff and train staff, probably, you know, this is again something that people who’ve ever talked to their broker about a self-directed IRA. You’ll find that a lot at the times that they have no idea what they are, because they’re not brought up in that world. So you’re talking about retraining, a lot of people and going, you know, creating whole new divisions of individuals again, and that’s not how they’re set up to make money. So that’s typically why they don’t offer it.

So how can someone utilize a self-directed IRA to generate tax deferred or tax free gains when investing in real estate?

Sure. So the, the benefits that an IRA, just in general, we’ll talk about that in general, just render the benefits of investing through an IRA account, whether it’s a traditional or Roth IRAs or 401ks, is that the IRS gives you tax breaks for the gains that come back into your account. So as a stock appreciates and you sell it, and again, if you’re doing that inside of an IRA, there’s a tax consequence to you as that is all happening inside of the IRA account, the same principle involved when you’re investing in real estate. So if you own a single family house and you get rental income each month, or you sell the house five years later and make a profit, the gains from that real estate sale are treated the same way that the gains from a stock or mutual fund would be. So the IRS has given us these tax benefits to encourage people, to save money inside of an IRA. And by, by giving you those tax breaks, hopefully put more money into it. You’ll utilize the account and whatever assets that you purchase, whether it’s real estate you know, properties, syndications notes, mortgages, all the different things you can do. The income all comes back to the IRA with no tax consequence to you. And so you’re getting regardless of the type of asset and the reason, again, the IRS does that as they want to actually encourage people to you to save money inside of an IRA, use their IRA accounts so that when you hit retirement age, the more money you have saved for yourself, the less reliant you will be on government programs. So they give us these tax breaks inside of an IRA. And again, it doesn’t matter if the asset is real estate, a stock, a mutual fund that syndication that income is coming back, tax tax deferred back to the account.

Awesome. Yeah, it’s a great program from the government to be able to do that. And what types of investments can you make in a self-directed retirement account? I know we talk a lot about real estate and that’s what we do, but what, what else can you do through it?

So it really there’s, sometimes it’s important to maybe understand what you can’t do through the, through the self-directed account, but yeah, real estate, you know, single family homes, rehabs, rental, syndications notes, mortgages, tax liens, all those things in the real estate field, outside of real estate, we see a lot of people invest into privately held stock, you know, of a private company people investing in hedge funds, gold or silver cryptocurrency Forex. Again, the, the it’s almost limitless. The only things you cannot invest in with your IRA or retirement accounts is you cannot buy life insurance and you cannot buy collectibles as the two prohibited investments inside of an account. So outside of those two investments, just about any kind of other asset you can hold inside of an IRA. Now, the only other caveat to that is if you’re looking to buy real estate, you can’t be looking to buy real estate that you’re going to use on a personal basis. You cannot be a vacation home. You can’t buy a primary residence. It’s got to be strictly for investment, but outside of life, insurance and collectibles really we’ve, we’ve seen some really unique investments. But still most of what we see is, is real estate based.

So I know it gets kind of murky too. If you’re buying a house, you don’t live in it and you’re like renting it to a sibling or something, which is considered personal and that’s a forbidden as well.

Yeah. You have to. Yeah. For, for your IRA, there are certain disqualified persons you who cannot transact with your IRA. That includes yourself, a spouse, parents, and grandparents, kids, and grandkids, siblings are technically not disqualified. So in theory, you could rent a house to a sibling, but as you said, it gets a little murky that are you, are you charging your sibling, a market rent? Are you going to stay at, you know, to, to visit them in that house while they own it? So yeah, if you, if you stay away from family members and deal just with third parties, a lot of those rules and issues go right, and go out the window.

So you know, you talk one talking about assets you can purchase, and it’s pretty cool. I never even thought about the hedge funds. I wasn’t even thinking that way. You have clients that have actually purchased foreign real estate through their self directed IRA. How does that work? Wouldn’t even be something that I would I would imagine that it would be possible.

Yeah. So it’s the foreign real estate, the issue that only ever comes up is for us is the rules of the country in which someone’s looking to invest in. So again, the IRS restriction is no life insurance, no collectibles and no vacation homes, but there is no limitation on buying real estate in the U S or outside the U S so the issues that do arise, just come up from the laws of that local country. For example, you’ve had a couple of different clients who’ve purchased investment property in Costa Rica and Costa Rican law requires that real estate be owned either by a Costa Rican citizen or a Costa Rican corporation or entity. So the client to buy the property in Costa Rica had to set up a Costa Rican corporation or entity to buy the property through. And then we’ve seen that happen in a few other countries as well. So it’s, it’s not a limitation from the IRS per se. It’s just what the laws of that country required. And usually, like I said, there’s an easy workaround of setting up a domestic entity in that, in that country for your IRA to invest through, and then ultimately hold the real estate. And then it’s, it’s really working the same way as if the property was, you know, in your, in your neighborhood or in your state. All the income still is falling back to the IRA tax deferred.

So what are some of the most unique investments you have you’ve made or seen made through a self-directed IRA in your 15 years?

Yeah, I think a couple of them come to mind. We had, I’ve had, I saw two different movies movie projects that people invested in one was a comedy. I think they went straight to video. Then I looked at the perspectives that did look like it was going to be a big hit. But it was something again where someone was raising a couple million dollars or more in, in a private placements for that movie. So that way there was one, like I said, straight to video comedy, there was another documentary film that somebody who was raising capital for to, to be able to use that money. So the IRA was a passive investor in that project. I still think the most, the other unique thing that I saw, someone invest in an alpaca like a farm animal and, and made, made money basically in shedding season when there, they were able to sell the for from the ELPAC, which is valuable and had somebody buy a mausoleum crypt. For those of you who don’t know, mausoleum, crypts actually have titles. You, when you buy one, while you’re still alive, it has a title on it. And our clients basically came across a deal where he was getting like a two for one deal. Somebody that somebody who was somebody who was selling few Crips and he says, Hey, these are, these usually are twice as expensive as that. So he bought them inside of his IRA, kind of just like the flip them at some point, basically they make a profit.

Oh, wow. There’s a will. There’s a way. Right.

Exactly. Exactly.

So this is another thing that I found interesting when we were talking earlier is that you actually have foreign clients that have self-directed IRAs through Advanta. So why would they have that? And about half of our listeners, Scott, just so giving you background are foreign are foreign based,

Right. So the reason we have foreign clients is because at some point those individuals have worked for, or maybe they’ve worked in the U S at some point, or they’ve worked for a US-based company in which they were offered a 401k, possibly offered a 401k plan through that company. So even somebody who may be working overseas or they’re working for a US-based company may have a 401k that is established and subject to the, you know, to the laws of the United States. Still once they leave that employer, they are able to move that money from that 401k to an IRA account. So even though they’re not a us citizen, the requirement to have an IRA is not, you know, nationality it’s, whether or not you have a US-based US-based income and therefore a US-based retirement account. So anyone who has worked for us company or has lived here for a little while, might’ve built up some funds in a, in a retirement account that they were paying, you know, they were paying already income taxes to the us, and they were deferring some of that into the 401k. They were able to take that money then, and enroll it to an IRA once they left that employer.

That’s awesome. Yeah, that’s a, that’s a great thing in the green option for people that aren’t, aren’t S don’t live in the U S or don’t live there anymore. So

There’s, there’s, so there’s some restraint. You can’t necessarily keep contributing if you no longer have US-based income, but if you did have it at one point and you had that 401k, then you can still use the account. You just can’t add anything more to it as far as out of your own pocket.

So I was reading up on self-directed IRAs, and I had a question, they have these checkbook control accounts and say for, so for our listeners, say, for example, I’m a hard money lender, and I make it investments frequently, right? And on rather short notice, if anybody’s ever worked with a hard money lender, it’s a pretty quick process. And if I want to utilize my self-directed IRA, is there a possibility of setting up checkbook control to make the process of funding loans faster and easier?

There is. So you can basically hold your investments added van almost in one of, one of two ways. One is having us as the administrator hold the asset. So in your example, every time you needed to, you wanted to make a hard money loan. You would contact us, we’d have the cash sitting here. You’d let us know what w what the loan was going to be. We would need to see the loan paperwork, et cetera, before we could release funds out of the accountant. Typically that process can take two to three, four days just depending on who’s involved. That’s one way is to have us actually hold the asset and hold title to it and do all the administration. The checkbook option involves you setting up a, you typically a limited liability company or an LLC that is 100% owned by your IRA account and what you would do in that scenario, rather than having advan hold onto your cash and issue funds out for each different investment as they come up, you can actually upfront have a, send the cash in your IRA to the LLC, to an LLC bank account. And from there you can, you, as a manager of the LLC can disperse and hold those different loans. It’s kind of taking the cash out of the account with us, putting it into an LLC bank account, and the LLC it’s theirs. We want to see documents that your IRA owns that LLC. But then from there, that cash is in an account that you can control to issue those hard money loans out at, at, at your convenience, and possibly working much more quickly, not paying nearly as much in fees, because you’re handling a lot of that paperwork. You do still have to follow the rules like you can’t lend money to yourself and those disqualified persons we talked about, but it does give you a greater degree of control for sure.

Okay. Awesome. Is that something where you, you guys would assist someone doing that? I imagine you’ve done it before,

So we have plenty of clients that have done it. We do not set up the LLC. So even though I mentioned, I’m an attorney and I could, I know how to do it. I’m not permitted to do so. But we certainly have referrals to attorneys or CPAs that can help you set up the LLC. We have we’ve had number of clients that do it themselves as well. So we, we don’t assist with that process. We certainly can help with the IRA getting that set up, getting the money move, and then giving you all of the instructions you need, and possibly again, referring you to somebody who can help set up that LLC for her 500 or 600 bugs.

Okay, awesome. That’s great. So what does the process look like from start to finish, say I’m into, I want to invest passively F and I have a existing retirement account, and I want to work with this through a self-directed IRA, for example.

So the, the process involves is, is a couple is a couple of different steps in the process. First step is, would be opening up the account. So it’s, it’s filling out our paperwork to establish the IRA similar to the, the documents and paperwork. You’d fill out to open up a bank account. And in that packet, and in that initial part of the process, you would let us know where your funds are currently held. They’re either held in another IRA with another firm, or maybe they’re held in an old employer’s plan, like an old 401k or four Oh three B plan. Once you let us know where those funds are at, we will help you then pull those monies from those other, those other custodians into the self-directed IRA. Now, I always want to point out, you do not have to move your entire balance. So if you came across an investment that was a, you needed a hundred thousand dollars for the investment, but you got 200,000 in your IRA. You only need to move that a hundred thousand dollars to us to make that alternative investment. So the first step is opening the account, and then also then transferring money from another IRA or rolling over from a 401k. Once we get the account established, the second phase kind of kicks in where you tell us what it is that you want to invest in, whether that is a piece of real estate, a, a note or mortgage, basically filling out this paperwork and telling us, Hey, this is what I want to invest in. We look over the documents, look over the paperwork, make sure it properly shows your IRA account as the owner.

Okay. Interesting. Yeah. And then, so that’s great. That was one of my questions is going to be about moving over a portion of it or all of it. Can I still, can you still make contributions to say you have a, for instance, a Roth IRA, and then you had a self-directed Roth 401k, or is that, or however it works, can you do contributions if you’re still underneath that, that maximum

You can. So a self-directed IRA again, works just like the IRA, a traditional or Roth IRA would work with the ability to make contributions and do other things. So nothing is different there. The only thing the IRS limits you on an annual basis is how much you can put in out of pocket into one of those accounts. So you’re limited, for instance, for Roth IRA, to put in up to $6,000 a year into the account. That’s if you have a self-directed account and a regular IRA at 6,000, between both of them. So you can make that contribution directly to the account with us too, with the other firm, however you decide to do it again. Another important thing to note, again, there’s no restriction on how much you can transfer between accounts. There’s, there’s no limitation there. There’s also no limitation on earnings within an account. So although you you’re limited to say $6,000 a year out of pocket into a Roth, there is no limitation at all on the earnings, in the accounts. So if you’re in an investment, that’s spinning off 10, 20 grand of income a year, that’s, that’s fine. There, there is no limitation on that.

Interesting. Okay, great. So just so our listeners know Scott and Advanta recently assisted one of our passive investors on investing into a, one of our recent real estate projects with a self-directed IRA and unlike other IRA companies and our investors have used avant has another level of verification as you, I guess you would say that you can use B that they use prior to dispersing funds. Can you tell us a little bit about that when you speak to say, for example, in our situation where you’re speaking to us, the sponsor on that?

Yeah. So what we want to make sure when we’re making an investment is one of our primary duties to our clients is, is the security of their funds and their investment, and making sure that they have approved the investment, make sure they understand what’s going on. So before we sign documents before we wire money out of somebody’s account for an investment, we go through and make sure the client has reviewed and approved all the paperwork. And that includes actually the wiring instructions and it kind of the additional level of verification we will do as well. Once we have all this approved by the client, we also will call the investment provider in this case, Charles Erie, you and your group call up and say, Hey, we want to make sure these are the correct wiring instructions and verify them with you on the phone as well. Cause the last thing we want to do is send money out to the wrong account. And then to have to try to get it back that’s that’s not being a responsible custodian to our clients. And so that’s, that’s an extra step that we do is verifying again, all the details with the client, but also then verifying the details with the investment provider as well.

Yeah. Verifying the wire instructions. That’s one of my biggest fears when we’re sending out information. And at that time when we’re actually doing a raise and we’re buying a property and you have to keep on just letting people know, you know, we’re not emailing you anything, it’s all through the portal that we have. And I’m so worried about someone sending money, the other to another place. So we really, really verify it. So it’s great that you guys are there as another layer of verification of protection, I guess you would say between you and them wiring money to an account that you’ll never get the money back from. If it’s the wrong one.

Exactly, exactly. That’s, you know, once, once you click send it’s, it’s gone and you know, I mean, if something that happened, usually you can get banks to reverse the wire or check into it or put a hold on it, but that’s not guaranteed. And so that’s the reason why we make sure we put that other, that extra level in there.

So when you’re working with all these different investors that are going in alternative assets, what mistakes do you commonly see or have you seen people make whether they are the holder of the 401k or whether they are maybe working with the sponsor directly. And they’re, you know, they’re obviously it has to be passive where have they not set up? The 401k takes it, you know, they have to spend more time before they set it up. Or what other issues have you seen? In, in regards to that,

A couple of things. I think one, sometimes people think that, you know, in this day and age with sending money when you can, you can log onto your smartphone and transfer money between accounts or Venmo or whatnot, send money to a friend that everything just happens right away. And when you’re transferring money from another IRA or rolling over from a 401k, in some cases that transfer can happen within just a few days. Sometimes it does take a few weeks and it really depends on where that money is coming from. And that’s something that we, again, try to educate people upfront on is the expectation. If you’re moving money from a fidelity versus some Merrill Lynch, even though they used to, you think they’re the same company or they both do brokerages, they both have different processes and processing times. So it’s, it’s understanding upfront that the process is going to take at least a week from the time we get the account open sometimes up to two, maybe three weeks, depending on who your other custodian is. So I think not allowing enough time is one as far as we’ve, we’ve certainly had some people that had their investments not pan out to what they thought would happen. And I think there, the mistake the client had was maybe not doing enough due diligence or you’re not fully understanding the investment. And they kind of jumped in with both feet without really truly understanding. And that’s not our role at Advanta. Our role is to hold the asset and invest in what you direct us to do and have you approve of the documents for us and tell us that, you know, this is what you want to do. So it’s important to always, when you’re going to make an investment to do your due diligence on the investment, sponsors the paperwork and be comfortable you know, obviously in doing what you want to do, right?

Yeah, definitely. For sure. So I know a Scott from a meetup he has in Tampa that he co-hosts and Scott, tell us more about how our listeners can learn more about you and your company and any type of events you guys do.

Sure. You can go to our website at Advanta, And on there, you’ll get a couple of things there’s links to, there’s an events link where you can sign up for any of our free webinars that we have. We usually offer one or two a week on different topics related to self-directed IRAs and in real estate or even other investments outside of that. [email protected], you can also link to our YouTube. You find the link to our YouTube page, which if you miss a webinar, you can go to our YouTube to watch, watch it, then, you know, a day or two later, and you can also certainly access all of the other prior recorded webinars that we’ve we’ve had in the past. So I would encourage you to go to advanced or just call me directly. A number is (727) 581-9853. And my direct extension is 1123. You can just give me a call. If you have a specific question on your account that you don’t think a webinar or a website’s really going to answer, because it’s a little more specific than that. Call me directly. I’m happy to walk through, answer your questions and go through what that process looks like.

Yeah. And one last thing to any listeners, if you are a sponsor and you want to offer this as an additional way for your passive investors to invest you don’t have to learn everything just reach out to Scott. And then when you have someone that’s interested exactly what I do, I just send the information to Scott and Scott takes care of it. And kind of keeps me an update as we go through the process, as he says you know, allow the, you know, the two to three weeks, cause that’s sometimes how long it will take. So make sure that you start it early in the process and that the sponsor that you’re investing through, if you’re living in a partner, they’re aware of what you’re doing. You don’t want to tell them at the last hour that Hey, you know, I want to use my self directed IRA because as Scott was saying, it’s a very long-term process. So what I’ll do is I’ll put all those links into the show notes. And I want to thank Scott so much for coming on the show today,

Charles, thanks for having me. It was a pleasure.

Talk to you soon.


Hi guys! It’s Charles from the Global Investors Podcast. I hope you enjoyed the show. If you’re interested in get involved with real estate, but you don’t know where to begin, set up a free 30 minute strategy call with me at That’s Thank you.

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About Scott Maurer

Scott Maurer is the Director of Business Development for Advanta IRA, a nationwide self-directed IRA administrator. Scott has worked for Advanta since 2006, helping thousands of people invest in alternative assets (mainly real estate) using their IRAs and old 401ks. Scott is a frequent speaker and lecturer on the topic of self-directed IRAs and has also appeared on many real estate and investment podcasts. Scott is also an attorney and a member of The Florida Bar, although he does not give legal advice to Advanta clients.

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