Control Without Ownership – “Being the Bank” (Part 3)
Whenever I’m investing from a qualified retirement account such as an IRA, a Coverdell Education Savings Account, 401K, or Health Savings Account, I like to take “lender positions” in my investments.
I call this “Being the Bank.”
Why is this a good strategy? Mainly because there are fewer moving parts and the tax benefits inherent in investing with an IRA.
How does it work?
As a lender, I can set the monthly cash flow (interest payment) and equity participation percentage based on the economics of the deal. Since my IRA is for future cash flow, I can concentrate on equity growth and give up more of the cash flow to the managing partner until a future point in time when I want to convert equity to cash flow and start taking distributions out of my IRA.
As in the prior case study with a managing joint venture partner, my interest is severable and secured. If the joint venture partner fails in the management of the property, I can force him out via foreclosure.
I always have an equity margin of 30% or more in every deal, so my options are wide open in the event of default – I could easily just sell my position at a wholesale price and quickly recover my principal and go on to another opportunity.
This is another example of how “Control Without Ownership” is the key to profitable real estate investing for the busy professional. It provides the benefits, cash flow and equity without the headaches of ownership.
These are the types of investment structures that we put together in the Freedom Founders Mastermind Community. We have the deal flow, the experience, and the brain power to fast track our members to wealth creation and passive cash flow.
Our next Freedom Founders Mastermind meeting is in June and allow a small number of invited guests (3 seats left!) to attend.
If you’d like to join us, click here.
David Phelps, D.D.S.
P.S. I hope you are enjoying this new “series” approach of content. It’s my mission to deliver you value that will benefit you financially, professionally, and personally. The mission of the Freedom Founders Mastermind Community is to help you break free from the chains of your practice and give you your life back.
Stay tuned for my next series – and in the meantime, visit http://www.freedomfounders.com/freedom for more information our next mastermind meeting in June.
Dr. David Phelps DDS, a former practicing dentist, now spends his time helping other dentists and physicians create wealth and passive cash flow through real estate investing. You may read more about him at FreedomFounders.com.