ULM Expert Interview – Matt Allen

Matt is the Director of IRA Lending for North American Savings Bank (NASB) in Kansas City, Missouri.   NASB has been in business since 1927, is a publicly trading company (NASDAQ:NASB), and has well over $1b in assets.   Matt has been the director of IRS lending for NASB since 2003 has has been leading their increasingly popular program with IRA non-recourse loans.

Matt has been featured with the popular source of financial news and advice, Market Watch.  Matt has also been featured by brainstorminonline, prweb, and the Star Global Tribune.  Matt is a highly demanded speaker on the subject of IRA lending and the author of Leverage Your IRA: Maximize Profits with Real Estate.

As the Director of IRA Lending, Matt is immersed in the realities of the unfunded liabilities monster and the riskiness of dependence upon social security and other government funded social programs.   Matt is also active in assisting the many future retirees in responding to this issue by developing financial self-sufficiency right now, using their IRA.

Today we are discussing the instability of the financial system of the United States, why it is necessary to take your financial life into your own hands, and how to prepare and profit most properly using unknown investment secrets through your IRA (individual retirement account).

Jelani Asar: Well alright, here we are. This is Jelani Asar with The Unfunded Liabilities Monster and here today we have an interview with Matt Allen.

Matt Allen is the Director of IRA Lending at the North American Savings Bank.  He’s been there since 2003 and North American Savings Bank has been around since 1927.  It is a publicly traded company.   It has well over a billion dollars in assets.

As previously mentioned, Matt’s expertise is in the IRA – specifically self-directed IRAs – and something that’s called IRA non-recourse loans, which Matt will be getting into.   Matt has also written a book Leverage Your IRA: Maximize Profits with Real Estate.

And now a brief word on how me and Matt connected.   I went into a website named RTIR online and it’s basically a spot where experts – individuals who would like to share their information –  put up profiles on the website.   Then publishers – people who would like to interview these experts – come into the website and connect.

I went to the website specifically searching for experts on the topics: retirement crisis, unfunded liabilities, baby boomers, medicare, and social security.  Matt’s profile is one of the profiles that came up and he was using words that resonate with me pretty well.  For example, right in the headline he asks, “Is Retirement An Out-dated Concept for the 79 Million Baby Boomers?”  And I just did a piece about baby boomer retirement and just how huge of an impact that this big bump in the population demographic has.

Also, under the section where he outlines what topics he covers during interviews, the first line is, “There is a crisis coming in retirement and few Americans are ready for it.”   So, it’s gripping and it also just agrees with me personally.

So here’s Matt.

Matt, how are you doing?

Matt Allen: Great, great Jelani, glad to be on.

JA: Glad to have you on.  So, well, how bout a little bit about yourself and really what your position is.

MA: Sure, well has you mentioned earlier on, I’m with North American Savings banks.  We’re a publicly traded company based out of Kansas City, Missouri.  We have been around since 1927.

NASB - North American Savings Bank - WebsiteAnd we offer, every type of loan product pretty much.  We closed over $2m in residential loans last year.   And we have some niche products, one of which is our IRA non-recourse loan program and that’s what I’m in charge of.  I’ve been a part of that program since 2004 when we first enacted it.  Basically, we help investors purchase real estate within their IRA retirement plan or 401k and then we actually loan money through their IRAs to help purchase the real estate.

You know, I’ve been involved with that.  It’s been a great product and it’s, it’s something that’s opened a lot of eyes for people because they didn’t know they could invest in anything besides stocks, bonds, and mutual funds with their retirement plan.

JA: Yeah.  So is it only through the non-recourse loans that we’re able to invest in real estate through our IRA?

MA: Well, you know there are three ways you can invest in real estate through your IRA:

1. Pay cash.   When I say ‘cash’ I mean paying for the real estate with your IRA funds.  So for example, you have a $100k piece of real estate – single family home let’s say.  And you have $150k in your IRA account.  Well, $100k of your funds would go for the purchase of that home and you would own it free and clear.

2. Partner with other investors. Say you only have $50k in your IRA and there is another investor who has $50k in their IRA, then you could do a fifty-fifty split and the combination of the two of you would own that property free and clear.  Each with a fifty percent ownership.

3. Leverage.  It has to be a non-recourse loan, so that’s where our bank comes into play.  Let’s say you only have $80k and you don’t have another investor go in on the deal, then we would actually loan $60k to you.   So you would put down $40k through your IRA and North American Savings Bank would loan that other $60k.  So that helps you purchase that property without having the entire amount on your account.

Let me give you a background on non-recourse loans.

What actually is a non-recourse loan?

It’s a little bit different than a loan that most of your listeners are accustomed to.  When you buy a single family home, let’s say in Georgia, you’re going to sign a personal guarantee on that promissory note.  So if something should happen, then the lender could go after your other assets – whether it’s your checking account, your savings account, your automobile – to recover any losses they couldn’t recoup from the sale of that home on a foreclosure.

Whereas with a non-recourse loan, the lender doesn’t have that option.  The only collateral is the property itself.  So the lender can only take back the property; they sell it; if they don’t recover the losses well then, they’re just outta luck.

And that’s required by the IRS.

So the IRS requires a non-recourse loan to use with your IRA account.

JA: Alright.  So that (the IRA non-recourse loan) is a way to protect yourself.

MA: Yes.  It does have some benefits, yes.

JA: Have you been seeing a growth in demand for this type of lending?

MA: I have.  You know, when we started this program self-directed IRAs were really getting some traction nationwide.  And so every year it’s increased as the awareness level’s increased.  It’s still a niche product but more and more people realize that you can buy real estate with a self-directed IRA and they want to diversify their retirement plans.  This is an excellent way to do it.

JA: Right.  Do you think the growth in demand has anything to do with the financial climate and the financial crisis?

MA: I do.   I believe so.  In ’08 when everything kinda – you know, the perfect storm – real estate collapse, the stock market – people got scared, concerned, and a fair amount of trust was lost.  So they are looking for alternatives.   They don’t want to put all they’re eggs in one basket so they’re looking at those alternatives and a lot of them are doing their own homework.

Not relying on their financial planner or their family and friends who they may have gotten advice from in the past.  They want to do their own homework and they’re coming across self-directed IRAs and they’re looking for real estate.

To give you an idea, for the listeners, in a self-directed IRA you can purchase anything within that plan except life insurance and collectibles such as wine, coins, stamps, and automobiles.  So if you think about it, if you’re only prohibited from buying collectibles and life insurance – that’s a pretty wide range of options for you.

Some things people are buying besides real estate – they’re starting their own companies, they’re starting a bank, they’re buying tax liens, cattle – you know you can be very, very creative, although real estate is the most popular option at this point.

JA: Ah.  I saw a video that you have on the NASB website and its about your book, Leverage Your IRA.  One point that stuck out to me is that you were saying, “I know you are wondering whether or not you’ll actually have enough in your retirement to actually be sufficient.”

Do you think people are – I’l say it like this – how set do you think people are?  How prepared to think people are?  Or unprepared?

MA: The majority of people are unprepared.  They haven’t save enough.  They’ve lost a large amount lately.  Lots of different factors and variables.  Most people (laughing) do not save enough to live that retirement that they want to live or even to sustain what they’ve built up.

You know, it’s almost a tragedy that most people aren’t prepared for their golden years and I think that’s one of the things people really need to start taking into consideration.  Starting now.   “What am I doing now to create that lifestyle to be comfortable when I retire and enjoy myself?  Am I saving enough?  Am I looking at different alternatives?  What am I doing to educate myself and prepare so I don’t have to work well into my seventies to live a comfortable life?

JA: Right.  Yeah this is really interesting.  I mean, there are so may people that I know who are getting close to that time and it’s just – they, they don’t really have anything set.

MA: Right.  You know, social security – I mean, a lot of people – that’s, that is pretty much their income once they retire and in most cases that’s just not going to be enough.   Especially if you still have a mortgage payment and a car payment – that really depletes quickly.

When social security was enacted back in, I believe it was the thirties, the life expectancy was 62 years old, so that’s where people are taking social security now but people are living a lot longer so it doesn’t quite play into their time frame.  So they need to either work longer with they current job, or get a part time job if they haven’t prepared themselves for the later years.

JA: Okay, now a few points that popped up while you were speaking.  Ah let’s see, on the topic of social security – I noticed that you have on your profile on the RTIR that you were saying that a simple solution to the social security crisis and the social security problem is to raise the age.

MA: Yeah, that’s something that I know Congress is looking at – increasing that age – and I’m not going to say that’s a complete fix.  Although something has to be done with social security because it’s gonna run out.  For the two of us – we would probably be considered younger – we still have quite a few years before retirement, I’m not counting on it to be there, to be honest.

JA: Me niether, hahahaha.

MA: I’m relying on my own due diligence.  If it’s still there then well, that’s, that’s just an extra income that I didn’t plan for that would be great.

JA: Right.

MA: But if you increase that age to 70 then that really does help alleviate some of that pressure and free up the amount of funds that are available so that more would go into social security and people our age would still be able to be rewarded for all the money we’ve put in over the years.

So, there’s not a simple solution but I know that’s something that’s definitely in the works and who know if it’ll get passed and some of the people would be grandfathered in obviously because you can’t take that income away from them.

JA: And then with this issue with, as you were saying, this issue with the money just running out – I mean, I was just looking at the US Debt Clock just to refresh my memory before we began and I mean, the amount, the amount that’s promised is just astronomical by comparison to the amount that’s coming in.

MA: Yeah it’s almost, I almost can’t comprehend it.

JA: Right.

MA: It’s so large.  It’s almost a fictitious number (laughing).

JA: (laughing)

MA: Are we going to be able to take a chunk out of that or is it always just going to keep increasing my astronomical numbers.  So, it’s scary – how much debt the country accrues every year.  I think it’s something that as US citizen we really need to start taking control of our own financial situation and not rely on the the government.  That entails making wise decisions and educating yourself and preparing yourself and doing different things than you’ve done in the past.

JA: Right, okay.  Now on that – two points.

MA: Yes.

JA: Now, okay.  So, let’s just say that social security runs out.  Realistically speaking, what, what happens at that point?  Because, there are so many people who, regardless of their income level, are two paychecks away from being empty.  And let’s say that they are relying upon social security and it’s not there or it’s so insufficient that it might as well not be there – I mean, what really happens at that point.

MA: That’s a great question because it’s, you know it’s – I wish I had a crystal ball to see what happens to the American society.

JA: (laughing) It might explode.

MA: Yes, yes (laughing).  Because that would be a very, very, very – bad situation – for the country as a whole. Hopefully people that we elect in Washington will come up with a solution well before that possibly could happen.  I really hope things will get straightened out and we’ll have some answers.  Somebody will come up with a great a idea that will allow social security to continue and it will never be depleted.

But for now, you just can’t count on it.

JA: You were also talking about developing financial self sufficiency.  What do you think the best ways to do that are?  There have been quite a few experts who have been saying, “I told you so.   You don’t want to rely on the job.  The safe, secure job is a myth now.  You’ve got to go into business and investing.”  Do you agree with this notion?

MA: Well, I think a very important factor is diversification.  Don’t rely on one thing solely.  In today’s world we have a huge leg up because we have the internet, where we can read about so many different things.  In the past we did not have that luxury.  We’ve had to rely on books and by the time they get printed they may be out-dated.

Now we don’t have to talk to the financial planner and friends because we can research on our own from our own home and come up with some good solutions and plans of attack to help sustain our retirement plans and see that growth of our money more than inflation occurs.

For example, self-directed IRAs – I’ll bring that up again – there are 10-15 different companies out there that offer self-directed IRAs and they all have great websites.  Somebody could go to these websites and within a day learn the basics of self-directed IRAs and look at buying different asset classes.  On our website – IRALending.com – we link to all of their websites.

There are just so many great resources out there.  I always tell people, that’s the first step – you need to educate yourself first to be financially stable – take that first step, don’t rely on somebody else, and do it today.

JA: Well, I’ve been thinking about financial self-sufficiency pretty heavily and thinking about what I would need to do – looking in the long term.  I keep coming back to this idea that I really want to get into real estate.  Although I don’t know how to do this, I don’t know what steps to take.   I look into tax liens which can be kind of like a step into real estate – a way of getting in there.

Also, a mentor of mine was saying that he wouldn’t touch real estate in the United States with a ten-foot pole for years to come.  So my question is – for someone like me who’s interested in real estate, interested in diversifying and investing, and building financial self-sufficiency – what steps would you suggest as far as getting this actually manifested?

MA: Well, the first steps – we’ve covered this – is just to educate yourself.  Self-directed IRAs are a solid step.  Although they have to be truly self-directed IRAs.  You know, some of the large brokerage companies will tout that they offer self-directed IRAs but what that really means is that they offer you the choice to choose between their own products – stocks, mutual funds, securities basically that they offer in their own plan – but it doesn’t include real estate.

You have to find a truly self-directed IRA company.  Give them a call.  Talk to them.  Tell them what your plans are.  How they can help.

And all you have to do is you rollover your funds from your IRA or 401k plan –  you just roll them over into your self-directed IRA and from that point forward you can make your own investment choices, including real estate.

You know, your mentor who said he wouldn’t invest in US real estate right now, I can understand his thought behind that if you’re looking for the appreciation in a rapid time frame – it’s probably not going to happen.  You have to take into consideration that prices are really low right now and you can get great deals and the cashflow you earn from a property within your retirement plan – that grows tax free also.  If you have excellent monthly cashflow, it’s going to go back into your IRA and that’s going to accumulate over time too tax free or tax deferred and the same with the appreciation.

So that’s why we’ve seen our business, especially this particular product – so many investors are out there saying, “I could get this single family home for basically nothing and I’m going to bring in that monthly cashflow and I’m going to better than I would’ve done in the stock market.

JA: Right

MA: Now, buying real estate – there is more that goes into it compared to, you know, buying a piece of IBM stock online – you don’t have to collect rents, you don’t have to monitor the property and handle the upkeep, so it’s a little more time consuming but the payback can be a lot more.  The rewards would be greater too.

People will typically go in looking to buy one home and usually they choose something close to where they live.  They can drive buy and make sure it’s okay.  Then over time they build up their confidence, know how to take care of it for their retirement plan and then they’ll expand out into different markets.

So it can be done, even for people where this would be their first investment property.

JA: Do you place heavy emphasis or any emphasis on the need for having a team so you have a team for property management  and that is not a responsibility you have to take care of?

MA: Yeah, that’s a good recommendation.

When we’re lending non-recourse loans, we require you to either have a property manager or live within thirty miles of the property.

So I personally would say that having a property manager is an excellent route to go because you’ve got someone who’s experienced in dealing with tenants.  They would be receiving a certain percentage of your monthly rent although that can alleviate some of the troubles that you have by knowing that someone who’s experienced does have a handle on the situation.

That’s always a good recommendation – look for a property manager.

JA: As far as your own investments, do you have a specific focus?

MA: Me personally?

JA: Yeah.

MA: Diversifying is what I’ve been doing and what I continue to do.  Real estate, ETFs, stocks, mutual funds, tax liens – just continue to do that.

Like I mentioned earlier, the perfect storm happened in 2008 when everything just collapsed and that typically doesn’t happen.  In the future, when one market collapses the others will help maintain economic stability so you’re not hurting as bad.

Look at different alternatives.  Don’t rely on everybody else.  Do your own homework.

JA: Okay.  Ah so let’s see, a couple more questions.

So I’m on your North American Savings Bank website and you were saying that you have a list of self-directed IRA companies?

MA: Yeah if you visit our website – IRALending.com is what we use to market that product and if you’re on the main page of IRALending.com, scroll towards the bottom and there’s a hyperlink that says ‘self-directed IRA companies’.  If you click on that it opens up a list of IRA custodians, administrators, IRA LLC facilitators, and those companies can establish a true self-directed IRA.

JA: Right, I see it.  Okay.  And any words that you have based upon what we would find in your book?  Also, on the topic of your book, I noticed that your facebook page is set up like a squeeze page.

MA: Yes.

JA: That’s great.  So I input my email address.  Am I going to be receiving your book?

MA: Well we do offer that, where we do give away free copies.  Yeah I will give you a free copy of our book and anybody listening to your blog, this particular blog, if they send me an email with their mailing address we’ll send them a complimentary copy.

So if they’re interested in buying real estate within their IRA – just specific to your listeners.

JA: Okay.

MA: But yeah, you know the book itself – it’s titled Leverage Your IRA: Maximize your Profits with Real Estate – for anybody that’s looking to do this, I’m one of the authors of the book.  We also have a couple of representatives of some of those self-directed IRA custodians and a CPA that has contributed a chapter.

So it is a good resource.  It explains what you can and can’t do, how do you get a loan, exit strategies, prohibited transactions, etc.

So it’s a great way to get introduced to this and then you can expand out, read other books, and look and the different websites, things like that.

JA: Great.  Well, any specific points that you’d like to touch on?

MA: Well, you know we’ve covered a lot today and I think you definitely hit on some of the key topics that have drawn some attention lately and again for those people listening – they’re obviously taking the next steps and they found your blog so they’re looking to educate themselves on specific topics and I just recommend that they continue to do so.

Look for that team, like you mentioned earlier.

If you’re going to buy real estate in your IRA account, look for a CPA a real estate agent, and a self-directed IRA custodian that can help you with that because once you get that team in place it makes it so much easier to make decisions just because you have that experience behind you.

So always look for somebody that’s done it before and mimic them and not reinvent the wheel.

JA: Great.  Well thank you Matt.  Definitely appreciate your knowledge.  And I know that a lot of people listening to this very deeply appreciate you, because this issue is affecting them so personally.

MA: Right.  I’m glad to be on.  I hope your listeners learned something from this.  Again if they ever have any questions they can always visit our website or contact me directly and I’ll be more than happy to help.

JA: Alright so that’s IRALending.com.  Any other ways to contact you directly other than IRALending.com?

MA: My email address is mallen (at) nasb (dot) com.   So send me an email letting me know that you heard about us through the blog and just include your mailing address so we can mail you a free copy of our book.

JA: Great.  Well thank you Matt.

MA: Alright, thanks Jelani.

JA: Alright, cya.

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