Carl is one of the founders and principles of CAMA a self-directed IRA company. He comes from 3 generations of real estate investors and has been around real estate since he was born. He started as an engineer working with rockets but over time he saw that working in real estate he would have more free time in his life to do what he wanted. 

 

Carl Fischer Real Estate Background:

  • One of the founders and principles of CAMA Self Directed IRA DBA CamaPlan
  • Has been investing for over 40 years still owning his first property
  • His portfolio consists of residential, commercial, land and syndications
  • Based in Cape Canaveral, Florida
  • Say hi to him at: https://www.camaplan.com/ 
  • Best Ever Book: Keep It

 

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Best Ever Tweet:

“I love properties in the ROTH IRA because I will have tax free income for the rest of my life” – Carl Fischer

TRANSCRIPTION

Theo Hicks: Hello, Best Ever listeners and welcome to the best real estate investing advice ever show. I’m Theo Hicks and today, I’ll be speaking with Carl Fischer. Carl, how are you doing today?

Carl Fischer: Really good, Theo. Glad to be here with you.

Theo Hicks: That’s good to hear, and I’m glad you’re here as well. Looking forward to our conversation. Before we get into that, a little bit about Carl – he is one of the founders and principles of CAMA self-directed IRA DBA CamaPlan; he’s been investing for over 40 years and still owns his first property. His portfolio consists of residential commercial land and syndications. He’s based in Cape Canaveral, Florida and you say hi to him at camaplan.com. So Carl, do you mind telling us a little more about your background and what you’re focused on today?

Carl Fischer: Sure. That’s a great question. I appreciate the opportunity. I come from three generations of real estate investors. So my mom and dad, they were in real estate and their moms and dads were in real estate, so you can say I grew up around it. I like to take the tax advantages of real estate that it provides me. I still like real estate. I used to launch rockets at Kennedy Space Center in Cape Canaveral Air Force Station when I was younger, when manned spaceflight was very prominent, but all the times, I was still doing real estate as a side job. I graduated from Cornell University in engineering and did the rocket launching for almost 25 years. And while I was doing that, I bought my first property, I started developing property, building homes, building apartment buildings, industrial space warehouses, and also in apartment complexes, obviously, because my mom and dad started me out on it and I felt comfortable in that arena. Launching rockets was more fun, but real estate provided more financial freedom, so you could do the things you wanted to do.

Theo Hicks: Sure, thanks for sharing that. So you said that one of the reasons why you like real estate investing is for the tax advantages. So a lot of people obviously invest in real estate for the same reasons, and a lot of people know some of the most common talked about tax advantages of real estate. Is there any tax advantage that you wanna talk about that maybe not all the people know about, or maybe not a lot of people are taking advantage of, that they should?

Carl Fischer: Well, when I first started out, I had a job, I had W2 income and every time I’d buy a property, I got to take home more income from my job, so I really liked that. But when my dad died, and he died land rich and cash poor and owed some money on a couple pieces of property, I actually borrowed money from a gentleman who had a self-directed IRA, and that IRA lent me the money and I ended up paying him 12%, which was his lowest rate, and his highest rate at that time was 18%… And I looked at the risk associated with that and the tax advantages of it – and this was in 1993 before the Roth IRAs even came out… So he was making interest and not paying any taxes on it, and then would reinvest that money with other borrowers, and I loved the model, and then when the 1998– when the Roth IRA came out five years later, it only made that better. So a lot of people don’t subscribe to my thought process, but I have properties obviously; like I said, I’ve been in there 40 years, and my knowledge of the IRAs only came out in the 1990s. So I have properties both in the plan and outside the plan, and quite frankly, I love properties in the Roth IRA, because I have tax-free income for my whole life, and then my heirs will have tax-free income for at least ten years after I die from the same account.

So from that aspect, I think it’s good. Yeah, will that work with stocks and bonds and gold and silver? Yes, it will. But like I said, I came from real estate; I still think real estate gives you a big bang for your buck as far as appreciation and cashflow and leveraging. So I just use all of those things together to provide a tax-free environment, and with tax-free, my net worth goes up and my cash flow continues to increase as I get older.

Theo Hicks: You said that when you buy a property with your self-directed IRA, the income from the property is tax-free?

Carl Fischer: Yep, the income from the property is tax-free and the appreciation is tax-free when I do it in my Roth IRA. And since I’m 59 and a half, I can take that money out the next day and have all [unintelligible [00:07:35].05] on it. So if I make $1,000, I take out $1,000. I just can’t beat that. Even with depreciation, everything else, and I’ve had buildings that I have had their 39 years of depreciation, as I said, and they’re 27 and a half years of depreciation or 27 years, 29 years, whatever it is, now; it keeps changing. So I understand both sides of it, but I really like using the IRAs, and I actually opened up a company after doing it for so many years, and the people I influenced and taught said, “Why don’t you open it up?” So my sister and I opened up CamaPlan so that we could give this to other investors.

Theo Hicks: Yeah, awesome. Because I’ve definitely heard of this strategy before. So just to be clear, so I have a self-directed IRA, I use that as a down payment on, say, a $200,000 property that cash-flows $2,000 per year; so that cash flow goes back in my self-directed IRA and then I can pull out $2,000 tax-free from my self-directed IRA?

Carl Fischer: You can if you’re 59 and a half. If you’re not 59 and a half, there are some ways to do it, but most people want to at least have it go in there and grow bigger. So I don’t recommend people do that before 59 and a half, unless they’ve got several million dollars in there and they’re done, then we can show them how to take it out sooner without any penalties.

Theo Hicks: So this is more of a long term play of continuing to put cash flow back into the IRA that grows at whatever rate your IRA is getting. Plus, you’re able to use that money to buy more properties. So what happens if you sell a property that’s owned by the IRA? How does that process work?

Carl Fischer: Your IRA sells the property, and when it sells the property, the money goes into the IRA. It’s that simple. Just like if your LLC sold it, the money would go into the LLC. Or if you sell it, it goes into your bank account, but it shows up just like you sell a stock or a bond. Most people are familiar with that. If it made money, you’re going to have more; if it lost money, you’re going to have less.

Theo Hicks: People that use this strategy, do most of them just buy their IRA or they do the IRA for the long term play, and then they also buy with their own money so that they can actually access the cash flow sooner?

Carl Fischer: Obviously, there’s people out there– some of our biggest clients are out there now, and they buy property and they like it because it’s passive income and you don’t have to pay Social Security and Medicare on any of the income, but then when they learn the tax-free advantages of doing it in a Roth IRA, a lot of them switch over, and then they try to focus on doing it in their IRAs. I mean, let’s face it. Once you make enough to live on, then you want to do all the rest that you can do tax-free. You’ve got your financial freedom, you’ve escaped from your job, you’re making whatever that number is – if it’s $50,000, or $500,000. Once you’re making that on the outside, you’re doing everything else tax-free.

Theo Hicks: You mentioned also that not only would in this situation I get the money tax free after I turn 59 and a half, but that my kids can also get it tax-free up to 10 years. So do you mind explaining that?

Carl Fischer: Yeah, it used to be up until December of 2019, you used to be able to put that down to your kids and they could have it for their whole lifetime. So let’s say I lived to be 90, I could give it to my granddaughter at 30, and she could have tax free income until she was 90 and died. But as of 2019, they said that the heirs have to take it out after ten years after my death, the beneficiary’s death or the owner’s death. So they can use that account. If it owns a piece of real estate, then that real estate will produce income for ten years. They can either sell the real estate or they can take the real estate out of the Roth IRA and deed it into their own name, and then it’ll continue to generate income, but they’ll have to pay tax on it after ten years… And that’s brand new.

Theo Hicks: Okay, so the tax free benefits are ten years, and after that,  they are in some form or fashion taxed on that money.

Carl Fischer: Right. Once you put it into your own name, then you’re gonna make, let’s say, $100,000 thousand a year in rents, then you’ll be taxed on that $100,000 after ten years.

Theo Hicks: What advice would you have for someone who wants to raise money for their own deals, or they’re an apartment syndicator and they want to raise money from people who have the self-directed IRAs? So people are using it to buy their own properties themselves, but they’re investing in someone else’s deals. What advice would you give to that sponsor who’s trying to attract those types of people?

Carl Fischer: Well, we work a lot with those types of sponsors. Most of them already have people that trust them. The biggest issue we find is there’s no shortage of deals to get into, but what there is a shortage of is a knowledge and an understanding and a relationship built and trust built with syndicators. So if you’re trying to find people with IRAs, the first thing you have to do is get a hold of them. The second thing you have to do is prove to them why you’re worthy of taking their money, and then you’re fighting with 100 other people trying to do that. But we find that it works very well if people have people that have already invested with them in the past, if they just mentioned to them that they can use their IRAs. Most people have seven times more money in their qualified plans, IRAs, 401K’s than they do and their discretionary savings account or investment account. So I would say, instead of going out there looking for people with their IRAs, convert them and tell them about the fact that they can use their IRAs. And we help people get through it and if they want to put a group together, we’ll come in and do the presentation so that they don’t have to answer it and we invite them to bring their accountants and their attorneys, and CamaPlan does even do continuing education for accountants, attorneys, realtors, etc. so that they can learn about this and not be afraid of it.

So that would be what I would tell syndicators – get your people in there. Once they trust you, and they’re ready to do this, let them know that they can also use their self-directed IRAs, and they can put their own money into it as well. So you can talk to one person and have two clients – them and their IRAs. Does that make sense?

Theo Hicks: Yeah, yeah, 100%. I like that strategy. So the last question before the best real estate investing advice ever question, and that is if I have a self-directed IRA and I want to use it to buy real estate and I’ve got a deal I identified, what’s the first step I need to take in order to do so? Can I just do it myself or do I need to call someone else to do it for me?

Carl Fischer: Well, the first thing you have to do is you have to have an IRA custodian administrator to do it, because the IRS doesn’t let you hold your own IRA. There are some checkbook IRAs out there, but you first have to open up an account with somebody like CamaPlan. Once you have that account open, then you can either get a checkbook IRA and do it yourself, or you can get the contract, negotiate the terms of it and make your IRA the purchaser of it, send that information in to us and we’ll help you get everything done so that your IRA could buy it… And it’ll add 24 to 48 hours to the deal, but that’s inconsequential when you’re buying real estate, a day or two.

Theo Hicks: Yeah. I guess I have one more question, and I know these are probably super basic questions, but I can use my IRA as a down payment for financing; I don’t need to buy the property all-cash, correct?

Carl Fischer: That’s right, but you do when you get a loan – it has to be nonrecourse, meaning they can’t come back and put a judgment against you or your IRA, and we have lenders that will help people do that. In some cases, you may or may not be subject to, what they call, unrelated business income tax or unrelated debt-financed income tax, but don’t let that persuade you. A lot of people say, “Oh, that’s horrible. It’s terrible,” but in most cases, most people don’t pay much or any of that tax. So talk to us before you do it and we’ll put you in touch with people that’ll put your mind at ease.

Theo Hicks: Okay, Carl, what is your best real estate investing advice ever?

Carl Fischer: My best real estate investing advice is do your due diligence, know what you’re getting into, and have a system built so that you buy on the facts and not on the emotion.

Theo Hicks: Alrighty. Are you ready for the Best Ever lightning round?

Carl Fischer: Sure.

Break: [00:16:40]:09] to [00:17:42]:03]

Theo Hicks: Okay, Carl, what is the best ever book you’ve recently read?

Carl Fischer: My favorite book is Keep It by Joe Luby, and it’s a way to do Roth conversions, and it’s less than $20, but it saved me tens of thousands of dollars. So I would put that one on the top of my list.

Theo Hicks: If your business were to collapse today, what would you do next?

Carl Fischer: I would probably retire and just do more fishing and hunting. I doubt I would start a new one.

Theo Hicks: So you did say that you’re an investor in your bio. So what is the best ever deal that you’ve done?

Carl Fischer: One of the best deals that I did was I bought a property under contract in New York City, and I got an offer to purchase it while it was still under contract, and I made, I think, $160,000 – this was probably 20 years ago (maybe not quite that long ago) – in about a month and a half, without any work, without even closing.

Theo Hicks: What about a deal that you’ve lost the most money on? How much did you lose and what lesson did you learn?

Carl Fischer: Well, there’s two of them that come to mind. One of them is I was in a syndication and I didn’t do the due diligence. I let someone talk me into letting them do it. So they went up, and if I’d gone and spent the time, it wouldn’t have been much – it would have been one trip up there – I would have seen a lot of the deferred maintenance and the expenses associated with it… And that probably cost me close to $100,000.

The other one is I’ve done some private lending and I didn’t make sure that the taxes were paid on the property for about three years, and when I had to foreclose on the property, I found out I owed three years worth of taxes. I think that was a $12,000 to $15,000 mistake that I could have fixed in five or ten minutes. So I look at my mistakes as dollars per hour – one phone call, one lookup on the computer, and I would have known that and I would have saved $15,000.

Theo Hicks: What is the best ever way you like to give back?

Carl Fischer: I like to help people, I like to educate them. I’m a big believer in teaching a person to fish versus giving them a fish, and I always tell people, I can help a lot of people, but I can only carry one, and one of the things I want to do is know the difference between that.

Theo Hicks: Absolutely. And then lastly, what is the best ever place to reach you?

Carl Fischer: You can reach me at camaplan.com on the website. You can call in to our phone number 215-283-2868. My extension is 227. You can also email me at info@camaplan.com, and if you ever talk to one of my staff and not myself and you don’t get the right answer, just set up a conference call or a meeting with me and we’ll be available for all clients.

Theo Hicks: Well, Carl, thank you for joining us today and also thank you for offering to do the conference calls for our Best Ever listeners and providing email addresses and phone numbers. So Best Ever listeners, definitely take advantage of that, because Carl knows what he’s talking about when it comes to the tax advantages of investing with your self-directed IRA, and also if you’re a syndicator, raising money through other people’s self-directed IRA.

So just to summarize what we talked about, you talked about the tax advantages of the IRA, which is the tax-free benefits, and you’re able to pull that money out when you’re 59 and a half, and your kids are able to also have that money for tax-free for up to ten years after you pass away.

I really liked what you said about raising money from people with self-directed IRAs, and you mentioned that one of the best approaches is to just mention it to the people who already invest with you. So rather than going out and finding brand new investors to invest with you through their self-directed IRAs, ask the ones that you already have, because you mentioned that people have seven times more money in their self-directed IRAs than they do in their regular savings account. So you’re gonna have the investors trust because they’ve invested with you and you’ve done what you said you’re going to do and sent them their distributions. So you can mention to them that they can invest with their self-directed IRA and see what they say.

If you want to invest with your self-directed IRA, the first thing you need to do is have an IRA custodian like CamaPlan, for example, and then your best ever advice was to have a system in place so that you buy on the facts and not emotions, and making sure you do your proper due diligence, and you hinted that what happens if you don’t do proper due diligence when you talked about one of the deals you had lost money on. So Carl, thanks again for joining us today. Best Ever listeners, as always, thank you for listening. Have a best ever day and we’ll talk to you tomorrow.

Theo Hicks: Thank you, Theo, and a great summary.

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