The beauty of American Entrepreneurs is that we benefit others by learning from one another, sharing, making the idea better, and benefiting others by taking that idea (business, service, product) to a new level for others to use. Early on in his real estate investing career, Carl Fischer learned a little known technique to invest your retirement accounts (IRA’s, 401K’s, etc) in real estate, and defer taxes on profits until retirement. For those making nice returns in real estate, you understand the profound impact that this could have on your financial situation. Carl’s company, CamaPlan, helps others use these same self-directed techniques. Once you understand the power of self-directing, you’ll quickly realize the power of this tool to build your long-term wealth.
Mike: Welcome to the Flipnerd.com podcast. This is your host Mike Hambright and on the show, I will introduce you to VIP’s in the real estate investing industry, as well as other interesting entrepreneurs, whose stories and experiences, can help you take your business to the next level. We have three new shows each week, which are available in the iTunes store, or by visiting Flipnerd.com. So without further adieu, let us get started.
Hey, this is Mike Hambright, welcome to another exciting Flipnerd VIP interview show. Today I have with me, Carl Fischer, who runs Cama Plan, it is a self-directed IRA company and there is a lot of myths, and a lot of opportunities with this self-directed IRA’s. We are going to talk some more about Carl. Learn his background, and talk about self-directed IRA’s and Cama Plan in general, in just a moment. But before we get started, please take a moment to recognize our featured sponsors.
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Hey Carl, thanks for joining us today.
Carl: Hey Mike, thanks a lot for having me here.
Mike: Good, good and so I understand, you, before we get started. You just got back from the National Rio Cruise, is that right?
Carl: That is absolutely correct. We left out at Fort Lauderdale, went down to Saint Thomas, Jamaica, and Haiti, and it was definitely a lot warmer than it is, in Philadelphia. And I am still in Florida, it hurts me to have to go back to that smell and ice, and freezing temperatures.
Mike: I can appreciate that. So while we are here, tell us how the cruise went overall. Just kind of hot off the hot press information. How was it?
Carl: I think it was great. There were more people showing up to the National Rio Cruise, than there was last year. They had a new forum on there, where they did a lot of fan [inaudible 00:02:52]. There was actually some [inaudible 00:02:53] that were done. There were a lot of discussions with a lot of very intelligent people, on where the market is, where it is going, the different hotspots, and what is hot and what is not anymore. So, I found it very entertaining, as well as informative. I could not think of a better way to spend a week, when it was freezing in Pennsylvania.
Mike: Yeah, awesome. Well, tell is a little bit about your background, and how you got started. I know you, like many of us and many folks, did necessarily start in real estate, but found your way there. Why don’t you tell us a little bit about, tell us a little bit about Carl.
Carl: Well, I will tell you that my grandparents on both sides of the family, were in real estate. My mom and dad had their own real estate, and I come from a large family of 12 brothers and sisters, and they all have real estate. So, we were introduced to real estate and a very young age. I used to think it was okay to be [inaudible 00:03:57] septic tanks on Thanksgiving and things like that. So, I was not afraid of real estate, as I got older. We were in the construction business, so I was building houses, it just felt very good, to be there. It was natural because you did grow up about it, and you just learned a lot about it, and saw the different things and you learned from your parents and grandparents.
So, not being in real estate was one of those things that I never thought I wouldn’t be in. But I graduated as an engineer from Cornell University, and I launched rockets for 18 years, at County Space Center, working on the shuttle, commercial vehicles and also, tightened US air force launchers.
Carl: But while I was doing that, I just kept buying and buying real estate because the more real estate I buy, the depreciation I would be able to get, and the more money that I made, I was able to keep. So, I started at a very young age, buying real estate. My first piece of property, I bought in 1977. So, I have been in it a while. And I am very real estate oriented from that aspect, and have just been in real estate ever since then. So, it is more interesting, how I got into the self-directed IRA’s because I had read every book there was, on saving taxes and watching more and more taxes leave, and go out of the way. And the more money you make, the more taxes you pay. And as you buy real estate and pay it off, and you depreciation goes away, you learn that you are paying higher and higher taxes.
Carl: So, I was still launching rockets when my dad died in 1993, and he died land rich and cash poor. And he actually had a loan that he owed like 28 percent, was interest rate because he defaulted when he was sick, the year before he died. And I went out and I found somebody to lend me money out of a newspaper. And to make a long story short, it was from his IRA. And I saw the low loans of value and 12 percent return, that he was getting on it. But I moved the interest rate from 28 to 12. And he said he gets 12 to 18, and a lot of people say that. But after a year I got everything back together and I said, “Look, I can refinance this property and pay you all up, unless you drop your rate to 7 percent.” He said,
“Carl, I appreciate it, but I have got people waiting in line to borrow money from 12 to 18 percent, and you are the lowest I have, out there. So, no thanks.” So, I refinanced and give it back to him, but then I looked at it and I said, “This is really a good thing. If I can make 12 percent, and if the person does not pay me back like in my situation, it was a 30 percent loan to value, he was going to make a bunch of money.”
Carl: So, that is how I started getting into all the self-directed IRA’s, and coupling it with real estate and notes and loans. I could not think of anything better.
Mike: Okay. And are you, and have the primary always been a buy and hold type guy or did you, have you been involved in other common things, wholesaling or fixing up houses and reselling them?
Carl: Can you repeat that question, you dropped out for a little bit.
Mike: Yeah, I was just curious, if you, are you primarily a buy and hold guy or have you flipped houses before, been a wholesaler or other things, or primarily buy and hold?
Carl: I am primarily buy and hold, I think that is the way my parents were, and my father you know, used to let you run into the post office box and pick up the checks, and then open up the envelopes and pile them up. So, that is what I learned. I also found out that, it is a lazy man’s game too, if I flipped houses, then I have to go find another one. Whereas, if I get a good deal on a buy and hold, the money just keeps pouring in. And so, I do like to buy and hold.
Mike: Yeah, I talked recently to number of folks, and once you have been a real estate investor for a while, and done a number of deals, you always look back and regret, if you are a fix and flip type guy, like I am and we have a rental portfolio as well. But you always look back and regret the ones that you did not keep. Like, I wish I would have kept that now. Of course at the time, it made sense, it made business sense for whatever reason. But, you definitely always regret that you did not keep more.
Carl: Well, I would say that, but I can look back to 2006 – 2007 and 08 and I said, “I should have sold more, at that point of time.” Because I could have bought them back for half the price. Because I have properties in Florida, and I have seen them go up and have seen them go back down, and now they are coming back up again. So, it is definitely a cycle. Do not beat yourself up too much for it. And not that I have not ever flipped, but I have bought stuff and I have had it rented, and people did come in and say, “Hey, interested in selling.” My answer is, I am always interested in selling, if it is high enough.
Mike: That is right.
Carl: But primarily, I buy and hold.
Mike: So, after you got a feel for some of the power of self-directed IRA’s were, how did you make the leap to say, “Well, I am going to start a company, to enable other people to do this?”
Carl: Well, in 1993, when I first found out about them, it was very hard to get any information. Al Gore had just invented the Internet, so it had started to help me find information on self-direction. But there was not nearly the books out there. The IRS was not very familiar with it. I actually called up the bank of the person that gave me the loan, when my father died, and I asked the bank, how do I do that? And they told me, I did not have enough money, and not to bother them, they only did it for their high net worth individuals. And I called the IRS and I called a lot of people around town. I went to my accountant, and my attorney, my financial adviser, my banker, asked them if they knew anything about it. And they said “No, that sounds too good to be true. I do not think it is legal.” So, after another year and a half, of researching it and figuring it out, I finally pulled the trigger and did an experiment, and then ran it by my accountant and attorney. And they said, “Hey, no that is fine, you are allowed to do that.”
And like I said, I come from a big family, so I have a pretty big sphere of influence. And I said, well look at this, everybody likes it and I started talking to other real estate investors. And it was just a quick easy way to get 15 to 50 percent better returns on your real estate, if you are not paying any income tax on it, depending what tax rates you are in. And I had read all the books on saving taxes and moving refrigerators and depreciation. This was just a no-brainer, to pick up like 50 percent better returns. And I could have the best tenants and the lowest rents, which was one of my philosophies. I would rather not have a place rented, than to put a lousy tenant in there. And not having to pay taxes, just helped me like my tenants more.
Mike: Right, right. And so, what triggered you, seeing that has a great vehicle for your self, to starting Cama plan, and starting a business, to help enable other folks to do that?
Carl: Well, once I started telling other people about it, they said,
“Hey, we trust you Carl, we like you, but we have to ship our money all over the United States, to these custodians etc., why do not you just open up your own company.” I did not have a software background, so I brought my sister in, who is about 15 years younger than I was, and graduated from
[inaudible 00:12:22] and had a very good accounting and systems and software background. And she said, “Yeah, I love this.” And as a result, I ended up doing the deals side of it and sales side of it, and she works the back office and set up the systems. And everybody liked it, so the whole company just kept growing. Yeah, it was more work than I thought it was.
Mike: It always is, is not it? Everything is always more work than you thought it would be. Well, talk a little bit more about how, because one of the things I actually do not use, self-directed IRA’s at this point, and there is no good reason for it at this point, that I do not. But in some time, I think that is something that will change soon. But talk a little bit about, some of the issues that some folks have, depending on their, because it is really a long-term planning tool. Like some folks that are interested in saving taxes, that part is great. But they do not have the ability to take that profit and put it away, until they are 59 1/2 . Is that the right age?
Carl: Yeah, 59 1/2 for IRA’s, and 55 for 401K. I always tell people not to, if you are hungry and you need to put food on the table, now is not the time to be putting money into an IRA or a 401K. But it was kind of pretty simple, when I had a job and I was launching rockets and I liked it. I have made enough money there. And I had a 401K there at the company. So basically, they would put an extra couple of thousands in my account, a year, based on how much I worked on how much I made. Whereas, I started buying houses in my IRA and 401K. And once I did that, I could have as many houses I wanted, and the tenants were putting $1000 a month, into these accounts. All tax-deferred before 1998, it was all tax-deferred. So, to that I found out about the tax-free, Roth IRA’s and. I do not know anything better, it was the best way I have found, to grow wealth. If you have W-2 money, you are being 40 to 50 to 60 percent, depending on your state and federal income taxes, not to mention some local taxes that are out there. And use tax rates just keep going up because I was there in the Reagan years, when it was 28 percent, was the maximum tax rate. Now, the maximum tax rate is 40 percent. They are throwing another few percent here and there, with Obama care.
So, losing 50 percent of my income, was not very entertaining to me at all. So, by putting these houses.
Mike: But Carl, you have got to pay your fair share.
Carl: If I can still make enough to live on.
Mike: I understand.
Carl: I know, you are joking a little bit, but we are also providing housing for people. Whereas the stock market, I have no control over. I do not like it, when they kill Bin Laden, and the market goes down. They riot in Greece, and the market goes down or oranges are great in Brazil, and the market goes up. That is no way to plan your retirement, and I want financial freedom. And the self-directed IRA, the do-it-yourself IRA, lets me invest in things I know and understand, and have some sort of control over. Not that anything is risky right, I have property right around Kennedy Space Center, and when the shuttle moved out of here, and a lot of the other programs shut down, the economy was decimated and that happened right after the real estate bubble burst. So, you understand a lot of these things, but you have to play through them, and you can figure out what to do, to some extent. And it is not like, you did not see it coming. It was not like they warned you, that the shuttle was going to be closing down, that did not, not a chaotic exit, but a, I do not know what you call it, a step-down exit, overtime, which was a little bit easier to handle.
Mike: So what you think, some of the big misconceptions about self-
directed IRA’s is? I guess one of those things, just to kind of T it up for you is, I think a lot of folks, assume they have to use their own money, but there are some folks that purposely rely on creating a private bank, with other people’s money,. But can you just talk a little bit about some of the, you love them, but talk a little bit about why some people will love them, but they just are not aware yet. What are some of the reasons why, more people do not use these today?
Carl: I will tell you the first one is, after they hear a presentation from me, they go to their advisers and several of them still say, it is illegal. Even though there has been court cases about it, there are 100’s of books on it, there are articles on Bloomberg, there is videos about it. Forbes magazine writes articles. You can Google it, it is in Wikipedia. They will still say it is not legal. And once they say that, and it is a trusted adviser, a lot of times people push it off to the side, and will not touch it for another couple of years. That has changed in the past ten to 15 years because of all of this new Internet and the books etc, that are out there, on the subject.
The next thing they tell you, is that it is risky. And I have to kind of explain to people that, putting your money with a self-directed company, is not risky at all because it sits on an FDIC insured bank account, until you are ready to use it. So the risk comes from, what you invest in. And since you have complete control over what you invest in, if you are good in the stock market, and you have learned it, and your parents were in it, and you understand it, and you have got the tools to manipulate or help you understand it more, then great, stay in the stock market. I bought that red yellow green software, which pops up on TV, at 2:00 A.M in the morning, trying to get to the stock market. But quite frankly, I read a book on blackjack, and I think I would be better at blackjack, in Atlantic City, than I would do, with that. So, risk comes from not knowing and not having an understanding of what you are investing in. Like I said, I am biased towards real estate because I grew up around it, I studied it, I was an engineer, I know how to build it, etc. So, everything has a certain amount of risk to it, but not knowing the information, creates a lot more risk. And I do not think anybody watches their money, better than themselves.
I do not care, how good your broker is, his first responsibility is to himself and his family, his second responsibility is to you. If he can make you money, great. And people say to me, that the stock market is not guaranteed. Well I will tell you, for some, it is guaranteed. It is guaranteed for your broker, his boss and his company. And all the infrastructure associated with it. So, I do not want to basically hear the risk portion of it.
And the third part that is out there, is that it is complex, there are a lot of rules and regulations. And that is true. There are rules and regulation, but that is the same for everything. And Cama plan is there, to help you through those rules and regulations. We have a lot of classes, we bring in accountants and attorneys to do the classes. We bring in financial advisers, we bring in fund managers, to talk to you and educate you, on the different things. So, I think, that is probably three of the biggest myths that are out there.
And you did mention one of the other things, is that they do not understand that their IRA or 401K, can actually take out a loan. If they do not have enough money they say, “Putting 5000 or 6000 into an account, will take me forever to get enough money to buy houses.” In your situation, you can flip a house with 100 bucks I am sure. If you do the assignment side of it.
Mike: Can you comment on that for a second. So you can run, can you run assignments, that is one of the things that we have talked about before. I talked with other people. As a professional real estate investor, if you are going to assign a property and make 10, 20, $30,000 whatever, can you run that through your, can you run those profits through your self-
Carl: If your IRA buys the property, and then flips it, yes.
Mike: So, you are more of a wholesale, if you take ownership of it, and then resell it, you can run it through there, yeah.
Carl: Or you can deal with it through the assignment, with $100 and just sell the the paper. I actually seen that happen. On a simple deal, a woman was buying a $200,000 commercial property, and the inspector went out and said, “I will give you 250 for it.” They got together and the attorney said, “Well we’ll just assign it.” They were not going to do a double closing, but they said we will just assign it over” and nobody had any qualms about it, so they signed the contract and she picked up 50K in her IRA. And she was a little bit upset, because she could have done that in her educational savings account, if she knew it was going to go that way, and that she could have used that money to pay for her daughter’s college. She was going to the University of Penn, at the time, and she would not have to wait any amount of time, to use that cash and not have to pay any of it.
Mike: Yeah, that is awesome. So I think, you are going to tell us a little bit about, can you tell us about, just a little bit high level about, folks that find other people, that can, essentially become their private bank, and they could open up an account with you, and then help fund their deals?
Carl: Yeah, there is a lot of people who do not know how to find deals. And if you look at, what the CD rates are at the banks now, in IRA’s you are getting less than 1 percent. That is not going to make any difference in anybody’s life. But as you also know, that the banks will not lend on anything that is not in pristine condition. They have a really hard time, lending on a rehab etc. so we have a lot of clients who will actually lend money out of their IRA, to rehabbers. And as a result of that, the rehabbers will borrow the money, nowadays it seems like 8 to 12 percent. It used to be 10 to 18 percent, but I guess based on the market and where they are, we see most of them coming in around 8 to 12 percent. But still, if you get 8 to 12 percent for a year, while they fix this house up, stabilize it, season it and get the renters in there, and either sell it at the end of that year or if they refinance it, the big 12 percent on the money, and they are in first position on a house that was being rehabbed, so they had very little risk. It was like that first deal, that I did, after my father died.
Everybody still finds that it was so much easier and faster, to go to a private lender and get that money, and then put the property up. And then if you find someone who is not afraid to own that property, then it is even better because the say “Hey, if you do not pay, I am taking it over.” But there is a lot of people who just do not want to own the property and much rather do lending. Does that make sense?
Mike: Yeah, yeah. And can you talk little bit about one of the other myths, or misconceptions is that, it is too complicated to get the money out of an IRA, to fund a deal, and the fees are overwhelming and stuff like that. Can you talk a little bit about, what a typical transaction looks like, and maybe, I am not sure if you can talk a little bit about, what somebody would look to pay in fees, on a typical, let us say a residential single-family home type deal?
Carl: Sure, I will give it your real simple. Let us say someone is going to go lend money on $200,000 residential property. They are going to lend 150,000, rehabber is going to put 50, buy it for 50,000 and then rehab it for 150. They will make out a draw schedule, they will draw up a note and a mortgage, and have the title company or the attorney draw it up. And the only difference versus doing it yourself or having it in your IRA, is that the borrower, then the IRA will be Cama Plan, for the benefit of Mike’s IRA. So, that will be on record, as the titleholder, the address will be the IRA office. And you will have the attorney draw the note of mortgage out for the deed of trust, depending upon what state you are in. I have seen+ some people just take a bank mortgage and note, and go ahead on word and take out Bank of America, and put in, Cama plan for the benefit of their IRA. And they have exact bank documents, that they have used.
So, that part of it is pretty easy, once the paperwork hits our office, it will be funded within 48 hours, of us getting a hold of the paperwork. We will help the people through it, we will give them an orientation call, tell them everything that they need. Now the fees associated with that, you pay a one-time fee of opening up your account of
$50, you will pay $95, for us to go through the closing of that note and the recording of it. And every year that you have that note of $ 150,000, you will be paying $ 275. So if you have that note for a year, you will be paying 375, about 4 1/4. If there is any wiring fees or overnight fees, that gets added to it as well.
Mike: Right, so you probably. So somebody was going to fund a house that someone else was going to basically, remodel and resell or flip the house, then you are probably looking at the total of $400-$ 500 or fees somewhere?
Carl: Right. And if they are making 10 percent of the money of 150,000, they make 15,000, so they pay 500.
Mike: And you could even potentially pass that through to the borrower, some sort of origination.
Carl: Absolutely, a lot of them do, but 500 bucks is nothing. When you look at the 15,000 tax-free. If you are paying 40 percent on that 15,000, if you did it in your own money, you would be losing $6000.
Mike: Right, right, I understand. Awesome, well tell us a little bit about Cama plan and how there is other self-directed IRA’s out there? How do you differentiate yourself for the value that, why folks work with you and some of the values that you provide.
Carl: While one of the things like to say is, we are investors and we build our systems for investors. I think we have a business model that purports to have good customer service because we do not take all of our fees, just based on how much money you have. It is not based on the value. We have two ways of doing fees. One is, based on the value of your account, and the other one is, based on the assets. As an example, if someone has $1 million horse farm, they are only paying $275 a year, for that asset, which is to say, that somebody has $100 thousand house. And if you do not do anything with it, there is no other fees associated with it.
The other thing is, we always tell people to call our office, see if you get an answer, see how fast you get a live person, compared to others. We also provide education, a majority of it is free. Take a look at our website, Camaplan.com, look at the different investments, look at the webinars that are there, and I think you will see that, we are more interested in having people do good, and send us their [referrals], than we are trying to sell a bunch of courses and products, out there.
Carl: So, just take a look at it. I guess, one other thing is, we do not charge any annual fee, when you are sitting in cash, only if you have bought something that we have had to do work for.
Mike: Yup, okay. Awesome, just one last thing. Primarily my audience, folks that watch our show and are in real estate, but with self-directed IRA’s, can you talk about at a real high-level, all the things you can do. I know you can hold precious metals and other things. It does not necessarily have to be real estate, is that right?
Carl: Absolutely. We hold real estate, we hold notes of mortgages, shares and closely a privately held LLC’s, LP’s, precious metals, tax liens, and some direct registered stocks. So, that is primarily the areas that we work in. You can invest anything, we do have timber rights and oil rights. We actually have a couple of llamas, we also have sports tickets at different sporting events throughout the nation. So yes, it is pretty much anything, except for the IRS prohibits. And I will just let your audience know, the IRS prohibits life-insurance and collectibles, such as antiques, alcohol, collectible coins. That is what you cannot invest in. But it is a very small list, and again, check our website, C-A-M-A-P-L-A-N.com or give us a call at the office, 866-559-4430.
Mike: Awesome, awesome, we will provide that information below the video as well, so folks can find you easily. So, Carl, thanks so much for joining us today and for your information. Appreciate it.
Carl: Great Mike, I appreciate you giving me a chance to talk to your audience, and I look forward to us seeing more of your shows.
Mike: Fantastic, and efficiency good luck at getting back to the cold Northeast or good luck at not getting out of. I do know which one of those you want to hear, but.
Carl: I am going to wait at least another day, but hopefully it is going to warm up this week and the Groundhog is rolling.
Mike: Yeah, all right. Awesome Carl, hey thanks so much for your time, appreciate it.
Carl: Have a good day Mike.
Mike: You too, bye-bye.
Mike: Thanks for joining us on today’s Flipnerd.com podcast. To listen to more of our shows and hear from incredible guests, please access all of our podcasts in the iTunes store. You can also watch the video versions of our shows, by visiting us at flipnerd.com.