Equity & Help Inc

IRAS and 401ks are the best possible investors for E&H they are already used to low attention long term investments. they are not trying to “get rich” off their investments they just want to grow money they can use to retire on. The first step with any client is to find out if they have a 401k or an IRA with over $120k in it. They you determine is their money is in either an IRA or 401k. 

401k

401k is a government code which refers to a government system where an individual can put a portion of their paycheck(usually the company puts some extra money in too) into an investment account that will make interest. Usually about 4-5 % annually which is low compared to our 8%-12%. These individuals cannot withdraw the money without huge fines until they are 59 ½ years old (weird number I know). The advantage is by doing this they will save 1000s on taxes! For a 401k this investment account is controlled by the company, meaning all employees' money is invested in the same thing, Usually a traditional investment account that’s based on low risk stock investments. Companies like Vanguard or Prudential manage some of the biggest 401k accounts like Best Buy, Amazon, etc.

IRA

IRAs (Individual Retirement Accounts) are created two ways. If someone has a 401k and they want to be able to determine how the money is invested, they can move their money from a corporate 401k into an IRA. Individuals are also allowed to create and add money to and IRA without there ever being a 401k. There are many companies to help people start IRAs. But an IRA and 401k both exist based following the 401k law. IRA’s are still managed by an IRA firm, Prudential, Vanguard, Specialized IRA, etc. (most 401k companies also manage IRAs but there are quite a few companies that just do IRAs) Each IRA company is somewhat unique and depending on the IRA company they will allow their customers to invest in different types of assets, some only do stock firms, some allow things like Robinhood, some only allow oil or gas investments. and the best ones allow investments in REAL ESTATE!

If the potential client works has a 401k you will need to have them convert their funds into an IRA. If they have their funds in an IRA that doesn’t allow Real Estate Investing, then you’ll need to convert them to one that does (Specialized IRA, and Equity Trust Co are our favorites!)

There are two types of 401k/IRA

Standard 401K/IRA

Standard 401K money goes in and you don't pay taxes on it when you earn it. So if you make $500 a week and put $100 a week into your 401K then you would only pay an income tax on the remaining $400 that went directly to you. BUT later then you want to take money out of the 401K you will then have to pay taxes on whatever amount that comes our they call this TAX DEFERED

When you put money into a 401K the company invests it for you in the stock market. so the money in there usually grows around 2-5% per year. So with a standard IRA you may end up paying more taxes when you try to take it out. since you'll be paying taxes on a larger sum. But since tax brackets are factors, if your withdrawals are all of your income in the years you make withdrawals you may be in a lower tax bracket which means you’ll pay less taxes.

Tax rates change all the time. so the hope is that if you put money into an 401K when the tax rate is 20% you might take it out when the tax rate is 15%

Roth 401K

With a Roth 401K you pay taxes when the money goes in. So you might put 10k in in a year, even though that money never made it to your bank account. You will have to pay taxes on that 10K and it will affect your tax bracket. Years later when you go to take money out, you have 20k (because of interest) even though you made 10k in extra profit you won’t have to pay any taxes on any amount taken out.

Since on a roth you pay taxes when it goes in, if you got paid $500 and put $100 into the 401k you would still have to pay taxes on $500 even though you can only spend $400 now. 

With both 401K types you are investing money which means there is always a chance you'll lose money. So if you put in 100K and the stock market crashes it is possible that you will only end up with $80K. so in a standard 401K you would end up paying less taxes when you only withdraw $80k in a roth 401K you would have already paid taxes on $100k

Whoever your client is, they already determined which 401K they are using when they were younger. So this isn't something to guide them through nor does it affect E&H in any way. I just want to make sure you have a full understanding of the system!

Important! On all 401K there are huge penalties that they pay if they withdraw their money early. And even then, there are limits. NEVER NEVER NEVER suggest they withdraw their funds from their 401k and invest it with us. This is a horrible idea for them and will cause issues down the road. Investing with 401ks and IRAs takes about 1-2  months from start to finnish with the funds moving from one entity to the other and all the paperwork involved. Be sure that once it starts it will finnish, and just keep  in friendly light communication with the PI during the process. Pushing them will not help much. 

Even though there is a lot of time added they don’t require a lot of attention, these will be your easiest investment cycles. so if you can just line-up a constant stream of investors with 401k/IRAs that will be the most money you’ll make as a PIC/PISC

When we deal with 401ks and IRAs it's important that the money never goes to the client directly. To keep things clean, the money goes from the IRA company to us and the profit goes directly to the IRA company. the IRA handles distribution to the investor, we are not involved. Also if the investor has properties with his own cash and an IRA(401K) then we have to treat them as two separate clients and their money can never be transferred between those accounts.

So if you want to sell homes to someone with either a 401k or an IRA. 

Step 1. You must find out where their money is, is it in a 401K or an IRA, If IRA, which IRA company is it with? TD Ameritrade, Prudential, Equity Trust Co, Specialized IRA CO, etc

Step 2.  You must get in touch with the company and make sure they can work with our system, this is easiest! We already know about the most popular!

Step 3. If they can't work with our system, then you must get the money moved into Specialized IRA/Equity Trust Co. There will be paperwork you must help them fill out from their old IRA/401k, then make sure they are in communication with and set up with the new IRA/401k Company of their choice.

Step 4. Walk them through the Direction to Invest Form (DTI) Make sure you help them though it, do not let them “do it on their own”. This just adds more unneeded time (usually an extra 2-3 weeks) even if the PI says it will be done tonight. Also make sure they submit a form which authorizes you to talk to the IRA company on the clients behalf. (without this it will take much more time and effort, and you will have to call and bother the PI often.)

Step 5. Call the IRA company and get verification the forms have been completed properly. And an estimate on how long it will be before the money is sent to us.

Step 6. When the money comes and you sell the homes to the investor (The IRA company doesn’t need to sign anything) you must then send word and possibly forms the IRA company provides to the IRA company so they can log it in their system. That’s basically it!