How to Use Self-Directed IRAs to Invest in Mortgage Notes and Real Estate with Mat Sorensen

Distressed Real Estate and Note Investing
Distressed Real Estate and Note Investing
How to Use Self-Directed IRAs to Invest in Mortgage Notes and Real Estate with Mat Sorensen

In this episode of the Distressed Real Estate and Note Investing podcast, host Brecht Palombo talks with Mat Sorensen, CEO of Directed IRA and author of the best-selling The Self-Directed IRA Handbook, about how investors can use self-directed IRAs to buy mortgage notes and real estate properties. Mat covers key points to consider when using an SDIRA for retirement investing, how IRA/LLCs work, and provides some great info on tax codes investors should know about.

Visit to learn more about how to take control of your retirement by investing in what you know. For in-depth SDIRA details, check out The Self-Directed IRA Handbook, with tax rules, legal insights, and strategies for investing in real estate, notes, bitcoin, and other top assets.

Brecht: Hey, I’m on here with Mat Sorensen today. Mat’s an attorney and the CEO of Directed IRA by Directed Trust Company. That’s at, where they provide self-directed IRA and other retirement accounts for real estate and note investors. They’ve processed over a billion dollars in transactions and are the highest-rated for customers in the industry. 

Mat’s also the author of The Self-Directed IRA Handbook, which is the number one book on self-directed IRAs that has sold over 30,000 copies. He’s also a VIP contributor at Entrepreneur Magazine, and he writes on legal, tax, and retirement topics. 

Mat, thanks so much for coming on here today.

I know that talking about self-directed IRAs and how to get money to work outside of the casino – I mean, the stock market is something that a lot of folks are interested in in our audience and increasingly so as we get into this real weird economic time, so thrilled to have you on here. 

Mat: Well, I appreciate you having me. This is my favorite topic – retirement accounts and then real estate, whether it’s owning property or lending on real estate. I mean, that’s the stuff I love. That’s what a lot of our clients do, and that’s what I do with my own retirement account. So, I just love the topic at hand, and I’m happy to be here.

Brecht: Okay. Great. Well, the first thing we want to talk about here is we’ve got some key points when investing in real estate with an IRA – four key points, in fact, so if you could walk us through there and talk about that a bit.

Mat: So the first thing is a lot of people are like, wait, can I even do this? I thought you could just buy stocks, bonds, and mutual funds and be in the casino like you said. But no, retirement accounts can buy real estate. They can buy a rental property. It can do a loan on a property. It can buy an existing note. I mean, those are all assets retirement accounts have been able to own since retirement accounts were created. 

The problem is broker-dealers just cornered the market. Everybody started putting money in retirement accounts like, oh, well, we sell stocks to mutual funds. We better open up retirement accounts so people can buy that stuff with their retirement accounts, and they just took over the industry. 

So this is something that you’ve always been able to do as an investment. You can’t buy real estate that you’re going to live in or something like that, but we’re talking about investments. 

So, the first thing is the title, and that’s an important point. Let’s say you want to use retirement account funds. There’s like $35 trillion in retirement accounts, right? This is the most investable piece of money. Period. Ever. There’s no more money to be invested from any other source than U.S retirement accounts. And it’s people like you and me and people listening who have a little sliver of this that have just been taking the easy route, or they’ve been listening to a financial advisor, or they’d been lazy. Let’s be honest. And they’re just in the stock market. 

They own mutual funds, and they don’t even know what the heck they’re called, and they don’t even know what the mutual fund owns. So for people that are like, you know what, I know real estate better. Maybe you’re listening, and you’re more of a real estate person.

I believe it as an asset. I get it better. I can understand it. I feel like I have more of a competitive advantage. So, why are you buying a mutual fund? You don’t know what the heck it is. 

First thing I just want to say is you can do this, and you do it with your IRA; your IRA owns it. Okay. So that’s the first thing is that your IRA owns it; it’s not Brecht buying it.

It’s Directed Trust Company, FBO, Brecht’s IRA’s buying it. That’s who owns it is your IRA. So the first thing is to distinguish is, so am I doing this? No, no, no, your IRA is doing it. So it acts 

Brecht: So it acts like an entity itself.

Mat: Exactly. Just like maybe if you have a brokerage account with an IRA or 401(k), you know, that’s just a separate thing, and you don’t get to touch it.

It makes its investments. It grows, you know, you can pull it out later at retirement, or you can take a penalty and pull it out early, but it’s its own little thing. So let’s say you have an LLC and you’re investing in notes or real estate. That’s separate, don’t mix these two things in.

Brecht: Okay. All right. So, let’s move through these points here. One of them is control. Let’s talk about that.

Mat: So the first thing you need to do is you need to get to a self-directed IRA. So let’s say you have an old 401(k) at Fidelity, or you have an IRA at TD Ameritrade.

If you call up Fidelity and you say, Hey, I want to buy this non-performing loan with my IRA. They’re gonna be like, you can’t do that. And it’s not because your IRA can’t do it. It’s because your IRA at Fidelity can’t do it.

Brecht: They won’t do it. 

Mat: Yeah. They won’t do it unless you’re an ultra-high net worth customer with a $50 million relationship or more.

So they’re going to say you can’t do it. So you’re going to have to move your account. And so you’ll go from Fidelity to someone like our company-directed IRA. And it’s just like going from Merrill Lynch to Morgan Stanley, from Bank of America to Chase, you know, you’re just changing the custodian of the account.

It’s still an IRA or a Roth IRA or a SEP IRA or whatever account you have. It’s just, you’re over at a company that now lets you self-direct in whatever assets you want. So like here at our company Directed IRA, and there are 30 companies like us that offer these types of accounts, but, we’re going to say, all right, what do you want to buy?

I don’t care. I’m not going to recommend anything. I’m not going to tell you what to buy. You want to buy stock. Cool. You want to buy a mutual fund? Fine. I mean, don’t come to us for that, but like, no, I want to do this, buy this loan. Okay. I want to buy this piece of property. You buy that in your IRA, and we’ll help you do it.

So now you’re in control of picking really what you want to own. Retirement account owning it and the retirement account grows, gets the rental income or gets the interest and points. You know, it’s getting all that income and growing on a tax-deferred or tax-free basis, depending on whether you’re traditional or Roth.

Brecht: Okay. So I understand that you can’t use that money to buy your home, and there’s like this sort of self-dealing, kind of, but are there other restrictions on the type of real estate or any financing that might be associated with buying the real estate in your IRA?

Mat: Yeah. Good question. So you can’t buy assets for personal use, so it couldn’t be like a home, even like Airbnbs. We have a lot of clients that buy short-term rentals with their IRAs. And you can’t stay there. 

I have clients say, Hey, no one’s using it for a week. You know, it’s this beach house that my IRA owns, can I just go stay there? No, technically no. If it’s an attorney-client privilege call, then let’s talk about it maybe, but, no that violates the rules because you can’t have use. 

Brecht: Even if you pay?

Mat: Even if you pay. Because if you pay, then you’re doing what’s called a transaction with your IRA, paying your IRA 

Brecht: So more self-dealing.

Mat: It’s called a primitive transaction. Whether you use it and get it for free, or whether you use it and pay. Basically, when Congress created the rules, they’re like, we don’t trust people transacting with their own retirement account, you know, they thought people would do some crazy tax stuff. And I would probably tell you to if you could, but they kind of prevented that. So you can’t have personal use, nor could your spouse or kids or parents.

The mortgage is the other tricky thing. So you can get a loan. Let’s say you want to buy real estate. You wanted to go get a, you have enough money to put down on a property, but not have to buy it outright. You can put the money down, but you have to get what’s called a non-recourse loan.

There are probably seven or eight banks now that offer these loans to people’s IRAs, just buying single-family rentals. There’s a new bank every six months that gets into this cause they’re really good loans. But that’s a non-recourse loan, and it’s kind of in the bigger commercial real estate market.

Pretty much every loan is non-recourse, but in the single-family rental market, a lot of people are used to having a guaranteed loan, or they do the loan in their own name and put it in their LLC. 

But with the IRA, you can’t do that. So you get a non-recourse loan, and if you default, the bank can foreclose and take the property back from the IRA, but they can’t go after the IRA for any cash, nor can they go after you personally.

Brecht: I see. So it’s really, your loss is limited to that property.

Mat: Exactly. Which is nice, right? The catch is the bank wants 30 to 40% down. There’s one that does them at 25% down. And if you go to in the relationships or referral partners, you’ll see the bank list there – we have all the contacts and the bank officer at each bank that does them, so you can check it out.

But expect on 30% down, I’d say is the average, you’re probably like a point or two higher. So if you get a 30-year mortgage right now with a 2.75% interest rate, you’ll maybe get a non-recourse loan at 4% right now – we’re going to trend a little higher on the rate too.

Brecht: Okay. So is there other separation, like I’ve heard things in the past where you can’t self-manage that property, for example, or you can’t go do work on it.

Is that true? Or how does that work on real estate?

Mat: Yeah, there’s some reality to that, unfortunately. So basically, what you can do is administrative and oversight and management stuff. So let’s say – real estate’s the easiest. Let’s say I bought a property in my IRA. I can show it to a prospective tenant.

I can sign them, write the lease-up. The IRA is the landlord and owns the property. Of course, not me personally. Or you could use an IRA/LLC; by the way, we can talk about using an LLC.

Brecht: What did you say there? Because I think I heard – did you say this LLC owns the IRA? 

Mat: Yeah. Yeah. I’ll come back to that. Sorry. I gotta come back to that. Yes, you, you can do management and administrative staff, but you can’t do physical work. So there is a rule that basically says you can’t provide services to your retirement account. And administrative management oversight is always fine.

But let’s say you wanted to rehab the kitchen. You couldn’t go put the tool belt on and work on it yourself. The IRA could pay another contractor to do it, but you can’t go put on the tool belt and do it, whether you get paid or not.

Brecht: So you can hire and fire and direct, but don’t go doing your own demolition or whatever.

Mat: Exactly. 

Brecht: Interesting. What else do you have to think about if you’re going to buy? I guess the other thing I want to ask is it any kind of real estate, as long as you don’t live in it?

Mat: Yeah. I have clients that own water rights, raw land, family rentals, clients that invest in LLCs with a group of like five or six other people that buy a little apartment building.

Brecht: Oh, really. So it can participate in an LLC. So the IRA becomes a member of the LLC that owns the real estate?

Mat: Exactly, yeah, and we do that quite a bit, and at my law firm, I’m an attorney too. But let me go over the IRA/LLC, if you don’t mind, because a lot of real estate clients use that, and it’s also a good option to partner. To bring in multiple accounts or other people to do bigger deals. 

So when your IRA is buying an asset, whether it’s a note or it’s real estate, the IRA is the owner of that asset. So on property, it’s on the deed, right? It pays the rent. It pays the bills. And so hopefully, you have a property manager that can handle that stuff, and they just send the cash flow to your IRA. Lots of clients do that. 

Now a lot of clients don’t want to have a property manager. They want to bypass that. Or even if they have a property manager, they want what’s called an IRA/LLC. Some people call it a checkbook IRA, but it’s really an IRA in an LLC. So rather than your IRA buying and owning the product, your IRA owns an LLC 100% and is going to invest cash from the IRA into the LLC.

The LLC gets a bank account. And then you’re manager of the LLC. You don’t own the LLC. Your IRA owns the LLC 100%. But as manager, you can now act for the LLC. So now, when you want to buy a property, the LLC is the buyer on the contract, and you just sign the contract. If you want to pay a contractor, just cut them a check, you know. You don’t have to go through your custodian or property manager and kind of be hands-off; you can really take control.

So a lot of clients like the IRA/LLC because they get a checkbook and a debit card, and if you’re doing a rehab project or something like that, it’s so much easier to use the LLC. Plus, there’s asset protection of just the LLC, right? If something happens on the property, they can sue the LLC, but they can’t come after you as the manager, nor can they go after the IRA. You get that liability protection that LLCs have.

So that’s called the IRA/LLC. And it’s a single member, meaning the IRA owns it 100%. There’s no tax turn with the IRS. You do have to pay your fees to the state to keep it active. And yes, if you live in California, that’s 800 bucks. Sorry. 

But it’s a pretty cool structure. I think probably two-thirds of real estate clients use an IRA/LLC with us.

Brecht: Really? That’s interesting. And, and there’s no self-dealing or issue with that with your managing and directing, or are you able to get around that when you have the LLC funded?

Mat: You still are stuck to management, administrative tasks.

So you still can’t go work on the property. So you’re the president of the company that never shows up at the office, you know, you’re the official person signing stuff and doing things for the LLC. Meeting the contractor, looking at the property, screening the tenants, all that, you can totally do that. You just can’t do the physical work. 

Now you cannot take a salary. And so, in my book, I have probably 20 or 30 cases on this issue. On the IRA/LLC and how it works and what people have screwed up. So there are some people that have taken salaries, and they get audited, and they lose in tax court.

So you definitely can’t take a salary, and that needs to be in the documents for the LLC, which we, of course, do, or any attorney that knows these knows how to draft it properly. But yeah, you can be a manager, and you’ve got the same prohibited rules though that apply. 

Brecht: All right. So I want to get into talking about notes a little bit, but first, I have a separate question, which is that there are some pretty hard income limits on having an IRA right, on contributing, or is it just opening an IRA?

But I know a lot of folks who are above the income limit for that. And so is there any way around that?

Mat: Yeah, absolutely. So first, most people who self-direct their retirement account that buy real estate or a note are not starting at zero. They’ve already got an IRA at TD Ameritrade, or they got an old employer 401(k) that’s sitting around that they can just roll over, and they just work with those dollars immediately. So that’s the first thing.

Brecht: Can you roll anything into that IRA, any retirement account into that IRA?

Mat: So the only catch is, like, let’s say it’s a current employer 401(k), but you still work. Those companies usually lock you in and say, you can’t move out while you still work here. Unless you’re at the retirement age of 59 and a half or older, and you still work there, or you quit. 

Brecht: Okay. So if you’ve built up a decent 401(k) and now you’re not eligible to open an IRA, but you can still roll that 401(k) into an IRA, but you can’t contribute?

Mat: Yeah, absolutely. There are no restrictions on rolling into an IRA, income or otherwise. 

Brecht: So, it’s only contributing to it, which is the income restriction is putting new money into it from income or whatever, but any past accounts you can roll into it, it sounds like.

Mat: Correct. And the income restrictions on IRAs are complicated. Let me just say that. But frankly, with the complication comes opportunity with the tax code.

The first thing is traditional IRAs. There’s no income restriction on that as long as you don’t have a 401(k) and a day job. So some people are like – you could make a million bucks a year and be self-employed and still be able to make an IRA contribution.

The people that get restricted on IRAs are people that are like, oh, I work, and this is a traditional IRA. I work at a company that has a 401(k) or employer plan. They put in money for me. Now I’m restricted if I’m considered high income. So if you don’t have an employer plan that throws money in a 401(k) or a spouse, you don’t need to worry about the IRA income limits on traditional IRAs.

Brecht: Interesting. 

Mat: So that’s a little technical. The second is the Roth IRA does have an income limit on it. We love Roth IRAs here because, you know, you put your money in, and you don’t get a tax deduction, but the money comes out totally tax-free. So if you’ve got an amazing deal and opportunity, Roth IRAs are awesome because this is like a tax-free investment vehicle.

Put all your best deals into that account because they come out tax-free.

Brecht: So the money goes in after-tax and then comes out tax-free, right?

Mat: Exactly. Once you hit 59 and a half or later. But the nice thing about the Roth is even though there’s an income restriction on high-income individuals, you can always do what’s called the backdoor Roth IRA. 

With that, basically, what Congress did is they removed the conversion restriction on income. So basically, what you do is you make a traditional contribution that’s non-deductible, and you convert it to Roth. It’s a two-step process. But at the end of the day, you get 6,000 bucks in a Roth.

I do that. I’ve been doing it for years. 

Brecht: We’re doing that too.

Mat: Yeah. You could do that at Fidelity. Every place that has any level of sophistication on retirement accounts does backdoor Roth IRAs. 

Now you might have a lot of self-employed people that listen too. Another cool option is what’s called a solo 401(k) or solo 401(k). Because that’s basically a 401(k) if you’re self-employed and you’re the only employee, or maybe it’s just you and a spouse and a business partner – you don’t have any other employees, you know? So in the solo 401(k), you can put $58,000 a year into it. You can be making 10 million bucks a year, no income restriction.

So the solo 401(k)’s a really good option for someone that’s like, I’m a zero man, but I’m self-employed, I’m making good income. And $6,000 isn’t going to get me very far, Mat. Right? There are other options. There’s a solo 401(k). But you can self-direct and buy real estate and notes as well.

Brecht: So you have the same much higher limit, like a 401(k) does over the – because I think it’s mid-fifties, right? Did you say $58,000?

Mat: $58,000 you can put per year on a solo 401 (k). 

Brecht: And then you can take that and move that into your IRA after that, you’re saying?

Mat: So you can just self-direct the solo 401(k) right as a solo 401 (k); you don’t need to just move it to an IRA. You’re just going to go self-direct the solo (k). And we do those here too. I mean, we have thousands of them. 

Brecht: That’s interesting. I didn’t know that. I thought it had to be a self-directed IRA. I didn’t know you could invest in real estate. 

Mat: Yeah. Let’s say it was an old employer 401(k), you know, Vanguard or Fidelity or whoever. I don’t mean to always pick on Fidelity.

Let’s say Vanguard. Vanguard just doesn’t let you do it. So you got to move it to a self-directed IRA. That’s just your only option. And actually, if you were self-employed and you did a solo 401(k), you could move that 401(k) to a solo 401(k) also, but a solo 401(k) can be self-directed from the get-go, you know, you just use a company like ours that lets you buy real estate or notes or other alternative assets.

Brecht:  Okay. Well, so speaking of notes, let’s talk about that a little bit because a lot of our folks are interested in notes, and in particular, there’s a lot of folks interested in non-performing notes, which with performing notes, you’re clipping coupons, right? I mean, you just have this money come in, and I get that, and with non-performing notes, there’s sort of some work to be done, not with a hammer, but you get them re-performing or do workouts, and there are all kinds of different stuff. Talk a little bit about how that works and how you avoid getting into trouble. 

Mat: Great question. I speak at a lot of note conferences, and that is the threshold issue for someone doing non-performing notes. If it’s a performing note and we even have clients that just do new loans, you know, someone rehabbing a house – they’re doing acquisition or rehab financing. Cool. Just do that right out of your IRA.

You know, that’s easy. You don’t need an LLC. We’ll just lend the money out, get a lien on the property. Easy enough. We do 20 of those a day. Let’s say, though, I want to do non-performing notes because I want a little bit of upside. I get that this is going to take some work, but I wanna work it.

That’s when you’d use the IRA/LLC. And what you do is we would have the IRA invest cash in the LLC. The LLC has the bank account you’re managing. Now you go out, and the LLC gets the non-performing loan. 

What you can do is you can do kind of the light collection activity at first. Send some nasty letters, make some phone calls, you know, try to get it performing. You can’t do the legal notices and the foreclosure and all that stuff. The LLC would hire that out and pay them to do it. 

But, you can do kind of the first round initial stuff, getting it back performing, phone calls, the correspondence as manager, because that’s all administrative and management of the asset. It’s not physical worker services to improve the asset.

It will improve the asset value, but it kind of falls more on the administrative-paperwork-communication side. We don’t think the IRS wants to discourage you to do that. You know, at the end of the day, they want your IRA to do well, really. I mean, a lot of people hate the IRS, but really, they want it to do well, you know what I mean?

So, they don’t want to discourage that, plus they know – how do they restrict that? In the rules, we’ve always been, if you want to do non-performing loans and get involved more, do the LLC. You can get up to the point before you got to do the foreclosure and legal action.

And we don’t see any prohibitive issues with that. 

Brecht: Okay. So what other gotchas or warnings, or what else do I have to know about investing in notes with an IRA specifically. 

Mat: Notes are pretty clean. You just can’t loan yourself money. 

Here’s one I see quite a bit though that’s a problem. People will call and say, I know I can’t loan myself money, but can, let’s just say, this is me and you having a conversation. 

Hey, my IRA will loan you money because I can’t loan it to myself, and then your IRA will loan me money because you can loan yourself the money. And therefore, we’ve basically gotten the money out of our IRAs without a distribution or anything like that.

You can’t do that. All right. That’s not okay. Even though I know some companies in our industry let it go. I’m like, no, that’s a problem. 

There are two other things that I think are important. One is the partnering, like how can I partner, and there’s also a weird tax called UBIT that I should probably explain.

Brecht: Let’s do it. 

Mat: All right. Let’s hit the partnering. That’s more enjoyable. 

Brecht: Yeah. Because a lot of our folks are looking at pools or individual notes, and they can’t take the thing down themselves. And want to raise money from other folks. 

Mat: Yeah, totally common. Let’s just do an example.

I do an example when I teach, like someone buying an apartment building for 1.5 million, they need one-third down. And if you think about it, you’re like, well, I got a hundred grand in my IRA. My spouse has a hundred grand in hers. We have $200,000 of personal assets. Oh. And my sister would want to throw in a hundred grand from her IRA.

Well, we’re at $500,000 pretty fast there to do a much bigger deal than we could have done just any one of us or that I could have just done with my personal money. You can pool all those different sources of funds into one LLC. So if there were like five partners there, my IRA, my spouse’s IRA, my personal funds, and my sister.

Okay. There are four partners. And we break up the ownership in the LLC based on the dollars everyone puts in. So if my IRA put in a hundred grand of the $500,000, it’s going to own 20%. Right? So we just break up ownership solely based on dollars invested. 

Now we can’t buy, like, here’s what you can’t do. I can’t go set up the LLC personally and then have my IRA come in later and buy me out and basically buy in – that’s prohibited, but you can all co-invest at this formation of it.

So it does allow people, even just within their own means or with them and their spouse and their retirement account and personal funds, to combine a lot more to pull off a deal. So that’s kind of one variation. 

The other is maybe there are just five or six other investors that want to each throw in 50 grand or a hundred grand or, you know, or and some throw in variable amounts, and they just get an ownership allocation based on the dollars they put in.

That’s totally cool. You do it in the LLC. LLC owns the note at the end of the day or property, whatever the case may be. LLC pays all the expenses, gets the income, and then distributes it to each party based on their percentage of ownership in the LLC. 

Brecht: And there’s no conflict investing both my personal or family trust funds and IRA funds into a single LLC together as partners.

Mat: Yeah, totally cool. You can do that. You gotta be careful. You gotta go in at the same time, though, because if we’ve formed the LLC and put your IRA and you personally in there from the beginning, you haven’t transacted between each other. You just co-invested into an asset at the very same time.

Let’s say you went in again personally first and then six months later, you’re like, I want to get my IRA in, and I’m going to be like, you can’t do it because you basically got to transfer ownership that you personally have over to your IRA. Now we’re doing something that’s called a prohibited transaction. As long as you kind of think about it at the head and go in at the same time, you can partner in.

Brecht: Okay, well, I think we’ve been chatting for coming up on time here, maybe 25 minutes, something like that. What else do folks need to know? Or what can we leave?

Mat: There’s the UBIT tax. I shouldn’t finish on this one. So there’s a tax that can snag some real estate investors with an IRA.

It’s mostly people flipping property. So basically, IRAs are designed to receive investment income. Interest income, points, rental income, capital gain when you sell property or a note. That’s all cool in an IRA. You don’t pay tax on it, and it’s all growing tax-deferred in your traditional account or tax-free in your Roth.

But what if I’m flipping property – is that capital gain? So if you’re doing flips, basically what the IRS is trying to determine with your IRA is, is your IRA in the business of flipping property? Because if you’re IRA’s in the business of flipping property, they’re going to assess a tax called Unrelated Business Income Tax or UBIT.

Basically, the short of it, you know, and I got three-hour classes I teach on this to other professionals, so I’m just giving the down and dirty, but basically the short of it is you can flip one or two properties a year with your IRA. Don’t worry about this tax. You’re not doing enough where you’re in the business of it.

If you’re doing three or four, you’re kind of a gray area. If you’re flipping five or more properties – this is like per tax year and flip, meaning you’ve owned it less than a year. You’ve done five or more of those, and you’re going to just have this tax, and the tax rate’s 37%. So it’s pretty nasty. The money comes from your IRA, and your IRA files a separate tax return.

So, if you’re flipping, just go with a little bit of caution on it. 

Brecht: In that case, would you be – I guess this is probably a prohibited transaction, but does it matter if it takes an equity or a debt position in a flip like that? Can it loan money into a flip that your company –

Mat: My IRA can’t loan to my flip. But my IRA could loan on your flip. And I’m just getting 10% interest and two points or whatever, whatever the market.

Brecht: But you got to keep yourself out of it. There’s no way that your IRA loans your other company to do a flip. Can’t do that. 

Mat: Right. Can’t do that. And there’s no way to try and engineer that. I’ve had clients pay me a lot of money to try. There’s not a legit way to do it. 

Brecht: Yeah. And just to be clear, I’m not trying to get around any taxes that I should be paying.

Mat: Yeah. Asking for a friend.

Brecht: Yeah, exactly. Well, cool. So, is there anything else that folks should know or they should be – actually, I did have one question you mentioned earlier, California, you said, sorry, it’s $800. 

Is there any reason that – I’m living in Oregon right now – is there any reason that my IRA here in Oregon – can it have a Delaware LLC? Where it’s only a hundred dollars a year to do, or is it that kind of thing not okay?

Mat: You could, but we don’t really recommend that. Go into places like Delaware or Wyoming, or Nevada. It’s rare that where we think it makes sense for someone to do it.

We’re usually setting up the LLC in the state where the client lives or the state where they’re buying property. Let’s say you’re in Oregon, but you’re like, no, I’m buying property in Arizona or Tennessee. You know, I’m going to set up a Tennessee LLC for your IRA because when you go to buy a property, they’re gonna be like, is this LLC in Oregon registered in Tennessee, and you’re gonna have to register it anyways. So then you’re paying Tennessee fees anyway. Plus the Oregon fees. 

Now, if you’re just lending, let’s say you’re an Oregon resident, and you’re just lending. I’d probably just do an Oregon LLC, even if you’re lending into other states. You don’t need to register for lending into other states unless you want to foreclose and take a property back.

Maybe if you’re doing non-performing notes in a specific state, you might go register the LLC.

Brecht: So if I have an LLC here, if I start an LLC here in Oregon and I’ve got personal funds, and I have IRA funds, and that happens at the same time in order to avoid any issues, is it okay to raise further money from outside of those two? 

Mat: Yeah. As long as it’s not someone who’s considered disqualified to your IRA, which would be like your spouse, your kids, your parents, but let’s say it’s like, nah, this is my neighbor. This is another real estate investor friend of mine. Cool. They could cut it. They’re totally unrelated. They can buy into the LLC. 

Brecht: So it sounds like immediate family’s got to get in all at the same time.

Mat: Right. So the list is like your spouse, your kids, your parents, kind of think of your lineal family line, but your siblings are not disqualified. Your sibling could come in six months later, your IRA could loan your sibling money on a deal they’re doing. They’re not disqualified nor like your aunts, uncles, cousins, more distant family.

Brecht: Is there anything you can leave us with to help the folks who are looking to raise money from folks who have these self-directed IRAs? 

Mat: Yeah, Just remember – $35 trillion. There’s $35 trillion in retirement accounts. I mean, I give a lot of presentations. I speak to a lot of angel investor groups and stuff like that.

And I can’t tell you how many companies are there pitching the next cool startup or whatever it is. And I’m like, guys, the money is all over here in retirement accounts. And it’s more likely that someone you’re talking to – just think of your immediate network, who you may go raise money from, where do you think they’re going to have six figures or more to invest in a deal?

Do you think it’s in a savings account or a personal brokerage account? Probably in an IRA or 401(k), but do you know how to explain that to them? They don’t even know you can do this. So you got to educate them. So a lot of times for people raising capital, I’m like, I don’t want to sell you about doing it for yourself. If you’ve got retirement account funds, cool. 

But if you raise money and do deals, this is a huge tool, even if you’re just working with your existing network of people. Like we had a hedge fund that we did some presentations for. They just went to their existing group of people who they – that was a few thousand in their network that they had invested with over the years.

And they got about 20% of them to put in retirement plan dollars into their deals. That was just their existing pool of people – they didn’t have to get any new people. They’re just like, these are people who already know us, and one-fifth of them put more money in with their retirement account. I just think if you can educate on it, let people know about it. 

One thing I’ll say is, self-directing your IRA or 401(k) – it’s not easy, but it’s also not rocket science. It’s kind of like playing a board game. It’s like, you just can’t open it up and think, you know, what the heck you’re doing and move pieces around. You gotta kind of play with someone that knows what to do. You gotta read the rule book, but once you’ve done it a couple of times, it’s the same thing over and over again. 

So don’t be intimidated by it. There’s a little bit of a learning curve to get it. But just learn what you got to learn. You know, like if you’re a note person, just learn what you need to know for notes or real estate. Don’t worry about the crypto stuff or precious metals, or startups. Don’t stress about it, you know? 

And then that education becomes very powerful to the people you talk to. And I’ve had some clients – I have a long-term law firm client that just fixes and flips properties in Southern California. I probably say, he’s got 20 investors, IRAs that fund all of his deals, and he basically went to them, and he was literally, he would just meet them at like, honestly like real estate investment clubs and stuff. And this guy’s got a huge deal flow now, but he started doing this maybe ten years ago. He would just go to people; he’s like, what’s the return you’re making on your IRA?

And people would be like, I don’t even know. Or they’re like, terrible. And he’s like, what if I could pay you 10% and I’d secure you on real estate. Yeah. They’re like, uh, really? You would? They turn into this guy’s best friend, you know, I think, just engaging the conversation. 

Brecht: So you’ve mentioned education a couple of times, where should we send folks to educate themselves so they can educate their potential investors.

Talk a bit about that. 

Mat: So We have a learn page there. If you just go to, we have webinars, I have the Directed IRA podcast. If you’re new to the subject, just start on Episode 1and the first 10 bring you up to speed on the basics. 

I do a self-directed IRA summit once a year – this year, it was October 22nd and 23rd in Scottsdale. We do a golf tournament with a charity ball in connection with it. We got a lot. 

I wrote my book. If you like reading books, you know, I know some of my clients are like, I’m not going to read a book, but, you know, my engineer, clients and pilots, and doctors, they read the book, and that’s 20 bucks on Amazon – it’s called The Self-Directed IRA Handbook.

There’s a lot of resources. I think the easiest place to go to is and hit the learn page, tons of free content, and links to the other places you can find. 

Brecht: Okay, well, cool, Mat, thanks so much for coming on here.

You answered some questions for me, for sure. And I’m certain for a lot of our listeners. It’s been great having you. If you’re watching this on YouTube or if you’re listening to this on Spotify or somewhere else, come on over to to find Mat Sorensen’s page. And we’re going to have links to all the resources that we talked about today, like the learn page and the podcast and the book and all that below this video there on the page. 

So that’s it, Mat. Thanks so much for being here. Really appreciate it. 

Mat: Yeah, my pleasure. My pleasure. Thanks, Brecht.

Directed IRA Learn Page
Directed IRA Podcast
The Self-Directed IRA Handbook
Self-Directed IRA Summit

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