Damion is a best selling author and founder of the eQRP. The eQRP is a fascinating tool for investing in your retirement account because with a self-directed IRA, you still need to pay taxes if you used leverage to purchase the asset! With a eQRP, you get full control of your check book and you don’t need to pay taxes on the gains of an asset, even if you used leverage to buy it!
Damion: If they had kept that in their IRA, their tax bill would have been $20,000 because they had like 90 percent leverage. It’s a huge problem. And so instead of paying that 20,000, they got to keep 58 instead of ending up with 38.
Hey everyone, and welcome to another episode of the Everything Real Estate Investing Show with Sean Pan. Today, we have Damion Lupo. Damion is the best-selling author and founder of the EQRP. The EQRP is a fascinating tool for investing in your retirement account because with a self directed IRA, you’ll still need to pay taxes if you use leverage to purchase the asset. But with an EQRP you get full control of your checkbook and you don’t need to pay taxes on the gains of an asset even if you use leverage to buy. If you enjoyed this episode, subscribe to the show and leave a review. We release episodes every Wednesday and Sunday and release the show notes on our site everythingrei.com. Enjoy!
Sean: Go ahead and introduce yourself and let us know who you are and how you got into real estate.
Damion: Hey Sean, I’m Damion Lupo. I got involved in real estate because 20 some odd years ago, I thought there’s no money in insurance and that I was on a path to making a million bucks a year, and I thought a million bucks a year seems terrible. I want to make a million bucks a month. And so I went to a seminar and thought “hey, this is how to do it. I’m going to be the next Donald Trump.” Now, this is before he was the president. So just understand, you know, nobody gets pissed off because I said that. It’s just that he was that guy that did all the real estate in New York. So that’s what I did. I basically modeled some people that had done stuff and started doing what they’ve done.
Sean: Awesome. You know, actually, I want to hear a bit more about your story because I actually read your book. And it says you made a lot. Of course, you know, you had the downfall during the crash, but now it seems like you went back up. So can you go through that really quickly?
Damion: Yeah, it’s so I went and did what everybody else did that was successful. I didn’t do what people did or that they said they did. So basically I went to seminars, did a lot of stuff, bought a lot of houses; had a hundred fifty houses, was building apartments and condos, and made a ton of money. And so I went from zero to 20 million dollars in assets; had about a five million dollar net worth and I don’t remember, twenty to thirty thousand a month cash flow. And because I made so much money so fast in my 20s, of course, I had to get a Ferrari and all the other accoutrements that you get when you’re stupid and young with a lot of money. And so I did that and I stopped listening to mentors and thought I was the smartest guy in the room. And in 2006-07 did a bunch of big projects that were supposed to make me about a million bucks each within 12 months. All the projects were negative in million. And so my net worth went from positive 5 to negative 5 and that’s when I went “okay timeout box! Reset!” and had to start over because my net worth went away like it was it was a true redo at that moment.
Sean: And then what do you do after that?
Damion: Well for a while I did the thing that everybody normally does is I just denied it happened. I just pretended that everything’s fine. So I kept driving my Ferrari until I realized, “Wait a second. I’m burning $75,000 a month and I have no income and like have no assets left!” And that quickly ends when you’re burning a million dollars a year on lifestyle, you run out of assets quickly. And so once the all the assets were gone, then I don’t really know who I was because myself worth and net worth were so tied together. And at that point I had to ask some different questions. So I did the smart thing which is I went and got help. And had a guy I worked with for a couple years and we asked a question. The question was “What is true?” We ask that question for almost two years. And what was true was that there was something beyond the net worth that I was here for more than just a bigger pile of cash in another Ferrari that Will Smith drove in bad boys or whatever. And so the question was what am I supposed to be doing and that really came to light about a month and a half before my dad died when he looked at me and he said, “My life was interesting, but there were just so many things that I wanted to do. And I realized there’s a regret piece if we don’t go after something deeply meaningful and purpose-based and my purpose…” When he said that to me I realized, “Okay. What is it?” And what I realized is it was teaching. And so now my teaching is to free people from financial bondage. It’s to break the financial shackles that we put on ourselves oftentimes with belief systems around money that we’re taught from our friends and family from birth. And so it’s different focus now. It’s not creating a billion dollars. It’s creating a billion impacts and freeing a million people from that financial bondage that keeps us trapped.
Sean: Yeah, that’s awesome. And so the reason why I brought you on the show today is because I actually heard you on Michael Blank’s podcasts, an amazing podcast, by the way. And you were talking about something so interesting. Something I’ve never heard of on any other book or podcast before and that is the EQRP. So go ahead and let us know what is the EQRP and how is that better than some of the other methods that are out there.
Damion: Well, I always say that there are a million methods and it’s not really whether something is good or bad. It’s just whether it truly is better. And it’s better based on somebody, specifically their situation. So the EQRP is the Enhanced Qualified Retirement Plan. We created this by putting things together that makes sense in the real estate investment space for retirement money. And so QRP is a broad term, just so that were clear, because I had somebody bring this up recently and they said “Did you just make up that term?” And I said “No! The IRS did.” And they said “Oh!” and they stopped drilling me at a live event. And I said, but what we did do is we created the EQRP and effectively what this is, it’s a type of retirement plan that’s under the 401 section, whereas most people if they’re doing real estate, they’re doing self-directed IRAs and that’s under the 408 section. Here’s the big problem, and this is something that Michael and I talked about and you brought up before we started the show, and that is that if you’re investing your IRA money in real estate and there’s leverage which means debt, you’re subject to a tax called UBIT or Unrelated Business Income Tax. And that happens because of the leverage. So there’s something called UDFI or Unrelated Debt-Financed Income. That means you’re making money from something or you’re making income from something that’s debt-financed. So bottom line is an IRA gets taxed if you use your IRA money and leverage to buy real estate or if you’re a part of a deal. So you say well that’s terrible especially if you own real estate with an IRA right now, you’re thinking “oh man, this is really bad.” The good news it can all be fixed. So either you can move money from an IRA into an EQRP. Or if you’ve got assets, this is the thing that that’s so cool… I had a client that came to us and said “hey, I just saw your presentation and we flipped a house.” Now I know it wasn’t in the Bay area where you make a quarter million dollars per flip, which is a crazy thing to me. But anyway, they made about a hundred thousand bucks and their net was about 58,000 and that was what their IRA was going to make. And they said “we’re closing on this but now we got to pay this tax.” And I said, “Well, maybe not” and they said “how?”And I said, “Well, we just move. It’s called an in-kind rollover.” We move the asset from the IRA into an EQRP and then when you close, you don’t have an IRA making money off of leverage. What you have is a qualified plan that’s exempt from this particular tax. And so you can you imagine I was like your best friend; and I got the Christmas cards and everything that year.
Sean: How does that work though? What’s the difference between using an EQRP versus an IRA? They’re both retirement plans.
Damion: Yeah so they are all retirement plans and it’s kind of like if you look at a Ferrari and a Ford Taurus, they’re both cars. So we can say “well what’s the difference? Well it’s all the underpinnings” It’s all the stuff under the hood and they’re governed by different things. There is a governor probably in a Taurus that will allow you to go however fast and with a Lamborghini or a Ferrari you can basically go as fast as you want. And the reason I bring that up is because with an EQRP, it’s governed under Section 401. And 401 of the tax code exempts UBIT from any type of leveraged real estate. Section 408 were IRAs are, they’re subject to UBIT from leverage. So it’s just how the tax code is written: one is subject to the tax and the other one’s exempt. We don’t really know why but it just is what it is.
Sean: So we say 401. Does that have anything to do with like 401K?
Damion: Yeah 401ks are the part of the tax code. When you hear 401K, It’s literally 401K. That’s the area of the tax code. 401 is the overall section for qualified plans and it’s where you’re going to see the exemption for leverage real estate inside one of these plans.
Sean: So technically If an employer had, I guess, an investment opportunity and it’s under the 401K, then someone can invest in it and they wouldn’t be subject to UBIT here?
Damion: Yeah, that’s right. And so any 401K could modify its plan and allow people to do real estate investments. The problem is 401K’s that are governed, that companies have are not going to want to have all their employees investing in real estate because it would be utter chaos. So I mean, it’s just true. That’s why you’re stuck with equities, stocks and bonds because they can be governed and they can be fee’d. And that’s the reason most people have never heard of this. The difference here is that this is set up for you to do exactly that. The plan is built so that you can go out there and have a checkbook and invest in five seconds. Super fast super easy and you don’t have any transaction fees. So it’s a lot better option for anybody that’s doing real estate.
Sean: So how much does it cost to set up a EQRP?
Damion: So it varies depending on whether you have employees or you don’t have employees. And t depends on the complexity. So it ranges from about 1,500 to about 5,000. It really depends on the complexity and then there’s an annual and both of those are flat. And so here’s the big difference when we’re looking at most financial institutions that set up plans or manage money, they are charging something called AUM, assets under management. It’s a percentage. It’s one or two percent of your assets. Sometimes it’s lower. But basically they just keep making fees. The more successful you are the more they charge you even if they haven’t done anything. And I frankly think that that’s a criminal model that they’re getting paid more. I mean the system is set up for Wall Street to make a ton of money on your back. So this is set up so that you pay a fee for support and compliance and it’s flat. We do the same work. We charge you the same amount. It doesn’t matter if you have a million or a hundred million or a hundred thousand, it’s all the same.
Sean: Who is the EQRP for? Is it for like a typical person who works a day job and has a retirement account and wants to invest some of that retirement account into someone’s deal? Or is it for someone that does their own business?
Damion: So it’s set up for anybody that has a business. And so one of the things people say is “We’ll I’m a W-2 and I don’t have a business.” Well, if you’ve heard Jay-Z recently and you heard what he said, “Man, I’m not a businessman. I’m a business, man” You know, like everybody is a business. You’re a business. I’m a business. Whether we have an LLC, a corporate or something formal, we’re all a business. So if you go out and consult, if you sell something on eBay, if you have a lemonade stand in your front yard, you’re in business. So it doesn’t matter what it is. It’s made for somebody that wants to do something other than stocks and bonds. That’s really what this is for. If you want to do real estate or you want to buy a physical gold or you want to invest in chocolate farms in Panama, It’s really up to you. It’s a question of what are you going to do with it? It’s not a question of whether you can qualify if you’ve got employees or no employees or you work as a W-2 or you’re a freelancer. It doesn’t make any difference. This thing works for everybody. That’s one of the differences. It’s a huge difference that this plan is adaptable to anybody. Anybody that wants to use it for the right things is eligible. We just make sure that they have the business piece built into it.
Sean: And you’re saying like a case study, is someone wants to flip houses. If you try to flip with your self-directed IRA and doesn’t get hard money loan 90% leverage, that has been tax on 90% of your profit.
Damion: That’s it. That’s the best way to describe it. If somebody says “Well, how does the formula work?” What you just said is what they should listen to.
Sean: And but if I use the EQRP instead, suddenly I got through taxes on any of it?
Damion: No, in fact the case that I was giving where they made $58,000. If they had kept that in their IRA, their tax bill would have been $20,000 because they had like 90 percent leverage. So it’s a huge problem. And so instead of paying that 20,000 they got to keep the whole, they got to keep 58 instead of ending up with 38. So you can have all the leverage you could have 99 percent leverage. Just imagine that. You find a great deal and the owner’s going to finance something and you buy a house for a hundred thousand, you give them $100,000 down and then you sell the house 450. You turned a thousand into 50,000. So that’s pretty great unless you it’s an IRA and you’re losing out. You’re going to write a check for ten or twelve thousand dollars.
Sean: And the whole point of investing in IRAs in the first place is because you don’t want to pay those taxes. And I feel like in most podcasts or discussions around the board especially for passive investing like syndications, they say “hey open up a self-directed IRA account and that way you don’t pay your taxes on your profit.” But that’s totally not right.
Damion: It’s not right. The IRAs really they’re promoted because of the fees involved and it’s, I mean, sometimes you’re stuck with an IRA like if you inherit an IRA, you can’t change it. If you have a Roth IRA, you can’t change it. It’s stuck as in the IRA system. But the reason that they’re promoted so much is because there’s actually more money in IRAs than there is in 401Ks. There’s seven trillion versus five trillion and it’s because the fees. Custodians charge transaction fees, assets under management fees. They charge and the average is two to four thousand dollars a year. So when you have am EQRP, it’s a tenth of that. It’s literally 10 times more in an IRA which is crazy. But that’s why we don’t hear about them. And so the alternative is you do something where you’re in control of. And custodians don’t necessarily like that because they don’t make fees off of it. So it’s a better plan for anybody that’s going to do something where they’re taking control of their money.
Sean: So in this case, you’re actually given the checkbook and you can write checks yourself without having to have custodian write it for you?
Damion: You get the checkbook and you get to choose whether it’s going to be deferred money or Roth money or both. So you have all these options inside of this. A lot of times people would like to use a Roth. Roth just means that your money goes in after taxes and then you never pay tax again. So maybe you have fifty thousand dollars that goes in and now it’s going to grow forever, never being taxed and when you pull it out, no tax. With IRAs, there are limits. If you make too much income, you can’t literally do a Roth. With an EQRP, you can do it at any income level. There’s no limits. You can contribute at any income level like there’s literally so many cool things about this. And no restrictions that the IRA doesn’t even make any sense when you start comparing.
Sean: I mean if you say it’s like a 401, it’s under the 401 code. So same as the 401K, I’m assuming it’s like 19,000 contribution limit or I read in your book there’s another kind of limit which is 52,000. Is that right?
Damion: So the total limit right now if you’re under age 50 is $56,000 per person. And so if you have a couple in a house, it’s a hundred twelve thousand. If you’re over age 50, it’s over a hundred twenty thousand for a couple. So an IRA this year is 6000. An EQRP under that 401 section is over 50,000. We’re talking 10 times difference. So you just think about it. What are you going to do with $6,000 in an IRA? Nothing, like you’re going to end up being old and broke. It’s going to suck. The EQRB gives you options to get a lot of money in and when you think about the options of putting money in, 50,000 a year, and then looking at the Roth, I mean you could put in a half a million dollars over a decade. And it could all be tax-free growing and then take it out tax-free. You’re talking about the ability to have a very wealthy retirement and potentially a very wealthy life in general.
Sean: And so how complicated is it to set up an account?
Damion: Well, if it did take somebody that actually has a plan built. And so for us to do it, it takes us a couple of days to do it. And once we build it somebody gets to run it out of their checkbook and we take care of compliance. So is it complicated? Not for the person that’s using it. It’s really very straightforward because you’ve got a team. A big part of what we do is become part of somebody’s team. We don’t just hand them a binder and say good luck. Hope it works out. Like that’s a terrible plan. And unfortunately a lot of people are out there saying “hey, we’ve got this really easy app and you can do these things.” You don’t want to have an app for a qualified plan. You want to have a team that’s part of your compliance and keeping you in line so that you can do it right because if you mess it up, the penalties are pretty severe. When you have a team, you’re not going to mess it up because your team is going to make sure you don’t.
Sean: Right, because if you mess up anything for retirement account related stuff, you lose your whole account, right?
Damion: You could have penalties that can literally beat the entire account. I mean, it’s pretty bad. And so we just make sure you don’t do that. And that’s the value in a team. People say “what’s my first step?” The first step in investing is to get a great team because if you don’t have a team you will mess things up because you don’t know what you don’t know. You don’t even know what questions to ask.
Sean: Exactly. And when it comes to investing in disqualified things, since there’s no custodian who is kind of like that barrier to I guess not investing in the wrong thing?
Damion: Well it your question earlier, like who’s this for. It’s not for the person that’s reckless or that’s scheming. It’s for somebody that says “okay, I understand there are rules and when I don’t know the answer or when I’m going to do a deal I’m going to call the people on my team.” And so you can get in trouble for doing disqualified transactions. Like if you go buy a property that you’re going to go spend the summers at, that’s a disqualified transaction. If you do a deal with your kid or your parents, those are disqualified. So when you do a deal, here’s what happens; our clients call us and they say “here’s my deal. Am I in compliance?” And we say yes or no. And if no, we can fix it and make sure that they are in compliance. But the truth is you’re not going to know you what you don’t know because this area of the tax code is incredibly complex. So it’s like saying “I know enough lawyering because I Googled it and so I can defend myself in a lawsuit” or give me a break, like you get an attorney, you get people that are specialized and they become part of your team. That’s the first step in any investor or business person’s life.
Sean: Yep. So we’ve heard a lot of good things about the EQRP. What are the cons, especially compared to self directed IRA?
Damion: Well, the con is that sometimes people are so nervous about not having control that it’s going to keep them up at night. Because we’re trained to be too stupid to run our own money. We’re we were trained and told “look it’s too complex. Give us your money and we’ll manage it for you.” And a lot of times people have a big pile of money in their retirement account and they’re so not used to actually taking responsibility that it freaks them out. And so the con is you’re in charge. You’re going to be the trustee and you’re the administrator. There’s nobody that’s telling you what you can and can’t do, so it’s not for the person that’s either going to be reckless or is so uncertain that they’re going to be up all night. I mean that’s truly why you would not do that. Because otherwise, why would you pay a custodian just to babysit your money? I mean, that’s crazy to me.
Sean: I think the reason why a lot of people in real estate are learning more about the subject of IRAs isn’t really for themselves, but it’s more for raising funds from other people from their retirement accounts.
Damion: This is one of the biggest things that we’re seeing. Anybody that’s doing real estate, you run out of money. You do a deal and you run out of money or you don’t have enough money. I mean for you to get a four walls and maybe a garage is a million bucks. And so it doesn’t matter whether you’re in the Bay Area or you’re somewhere else, you’re going to run out of your own money in real estate. The EQRP is the tool to use when you’re going out to people that you want to raise money from, that are going to be your partner, your investors. And you’re able to share with them this tool where they can invest in your deals and they’re not going to get hammered if you say “hey go invest in my… I want you to invest in my deal and you can use your self-directed IRA” You as the person that’s putting the deal together is going to get sued by somebody because they’re going to be so pissed off that they paid you a tax. So this is a way for you to raise all the money in the world, give people options to invest in your thing, and they’re happy because they’re not getting killed with 37% taxes.
Sean: So the strategy that you’ve seen people do is they go to like a group of investors and they kind of educate them on what the EQRP is, help them create accounts, and then use those funds to fund their deals.
Damion: Yeah. Usually what happens is because this is such a specialized area, people that are wanting to do deals will leverage us and will become a part of that team. So we’re helping to educate, so we’ll do webinars with people. Sometimes, we’ll actually I did a live event in Washington, DC for a meetup group and investor meetup group last week. And we were there and there were about 30 people and we educated them. And so we become a part of people’s team and it gives them a lot of authority and value and they’re bringing people in. I mean, I wrote the book on EQRP and so for me to be able to share that with investors groups, it gives them a lot of value to share with other people and it makes their deal a lot easier. When you’ve got unlimited money, by the way, there’s twenty five trillion dollars sitting there, you’re not going to run out of that money. So all the money in the world that you ever need for your deal is inside the retirement accounts and this is the tool to be able to give that to people and you’ve got it you’ve got a team that’s willing to and loves engaging people because it helps us break more shackles the more that we can help your people.
Sean: Yep. And by the way, shout out to your book because that book is amazing. I got it from your website and it’s like a comprehensive retirement account book. It’s not just about EQRP. So anyone that’s interested in it, definitely go on the website and check it out. You want to give a quick shout-out to your website where they can find that book?
Damion: Yeah, it’s just to get the book go to theqrpbook.com. And if you’re on your mobile phone right now, the easiest way for you to engage is send a text message to the phone number 72-000 and type the word QRP. So QRP to 72-000 and it will literally get you the cliff notes of the book. And then if you want the physical book, we’ll send it out to you and it’s on me. I mean, I’m going to send it out to you. No charge because my job is to educate and empower you and so I’m not going to put any boundaries or barriers to that. If you want to learn about this, it’s my gift. Just do that.
Sean: Yeah, it’s super well written and very easy to read too. Actually tried writing the same book a couple years ago as an e-book 15 pages took me many many many hours and it does not do your book justice at all. So yeah props to you on writing that book.
Damion: I appreciate it. It took two years. So it takes a lot of time to make something simple and actually useful and understandable. And so I appreciate you saying that and people will find the same thing. It’s readable. It’s not the Harry Potter novel. It’s actually technical information, but it’s not going to make your eyes go crossed.
Sean: No, you can actually read it.
Damion: That’s right.
Sean: So that’s all the questions I had about the EQRP. Is there anything that was missing that we didn’t discuss?
Damion: Well some of the fun stuff that people can do with this, I mean that’s really cool. Like a lot of our clients like to take some of their money and buy physical gold. You can physically by gold and take possession of it, which you cannot do with an IRA, self-directed IRA. So that’s a cool thing. I happen to be a big fan of gold. And so if you are you can do that. You can buy cryptocurrency. And one of the neat things that is also unique to it and not available with an IRA, you can borrow up to $50,000 out of your funds anytime. So it’s 50 thousand or fifty percent of your assets and that gives you a line of credit for anything you wanted to do, which is really powerful and useful when you actually need cash and you don’t have access to it. So it’s again something that’s not available in an IRA and a very very useful tool when you need cash when you need it. Now, you don’t have to go to apply and beg a bank to give you some money. You just write yourself a check.
Sean: Yeah, super interesting. You want to go more into this whole line of credit thing? Because there are often times when you just need a couple thousand dollars and sometimes you might have in the bank, you don’t want to open up or you don’t want to refi out of your property. So like what are the terms for this $50,000?
Damion: So you write that you write the check and you’ve got five years to pay it back. And it’s basically an amortized loan. But that basically means equal payments over five years and you can pay it monthly or quarterly at the at least quarterly. And you just pay back and you’re paying it back to your plan. So you’re not paying interest to somebody else. There’s no fees involved. You literally just pay it back. And then now your account has that money plus a little bit interest that you paid. So you just get to put more money into your plan. And generally it’s prime plus 1 which is right now is about 6% in 2019. And so it’s a very very easy way, very affordable way to give yourself money. If you wanted to go look at what… you wanted to go do a deal and you needed earnest money, this is a great way to do it. Like have your plan go and put the earnest money down writing a check if that was something that you wanted to do, because you’re able to loan yourself money. Meaning your plan doesn’t necessarily have to buy the property. You could just say “hey, I want to go buy a property up and so I’m going to loan myself out of my plan 10,000 bucks” Or here’s a really good idea. If you’re looking at a property and you want to make a statement, have a 40- or $50,000 earnest money check. People pay attention to big earnest money checks. Well, if you’re loaning it out of your plan to yourself, it’s really easy and it’s going to cost you very very little for that actual interest for a month or two or however long you need it. So very powerful way to use that $50,000 for things that you probably have never thought you could actually use it for.
Sean: And to clarify on this, this is not you putting earnest money deposit for your plan to purchase the property to flip it. It’s like if I wanted to do it on my own personal account, this is where I’m going to get some extra funds I didn’t know existed.
Damion: Yeah, so forget about your retirement plan actually buying a property for a second. Just what you said. If you said I want to go buy a property myself like personally or my LLC or whatever, you just want to go buy something, your plan can loan you up to 50,000 bucks. You’ve got that in your personal checking account. And then now you can go out there and write a big old earnest money check and make somebody pay attention because that actually does make people focus when they see big dollars.
Sean: Yeah, that’s actually pretty amazing and you just write yourself. You don’t need anyone’s approval or anything like that.
Damion: No approval and I’ll give you another one that’s really cool. If you’ve got kids and having kids are expensive, they cost a lot of money. Well, usually you’re spending money on kids, that is after tax. You make money then you pay taxes and then you spend money on the kids. Well one thing you can do is the tax code was changed in 2017, and it was really good for real estate investors, and it also changed the tax brackets. So up to 12,000 dollars in income is zero taxes. So if you’ve got kids, you can pay your kids up to $12,000 out of your business, whatever you’re doing and it’s a deduction for the business. So there’s no tax. It’s a deduction. And then the kids make that 12,000 bucks and there’s no taxes. So you literally took twelve thousand dollars out of your family taxable income. One of the cool things is your kids could take that 12,000 and put that into a qualified plan. It could be into a Roth account. Basically, it’s a way to get twelve thousand dollars into your kid’s accounts so that you take it out of the taxable income and potentially put it in an investment account in a Roth account and it can grow. And if you’re saying “well I want to do that, but maybe I want to save for my kids college”, that’s cool. All the contributions you make into the Roth account, you can pull all those out at any point tax-free and penalty free. So put $12,000 in for 10 or 15 years. Hey, you’ve got a hundred or hundred fifty thousand dollars you can pull out, use for college and all the growth,continues growing the rest of their lives tax-free. So it’s a really cool strategy that you can use just because the tax code changed.
Sean: Yeah. And by the way, are you guys the only ones doing this QRP strategy?
Damion: So there’s a lot of companies that set up qualified plans. We own the EQRP. It’s our registered trademark process and it’s what we build so it’s unique. There is nobody else that can or does use it. Sometimes people try to rip it off, but the reality is it’s a unique process that we’ve built.
Sean: And how did you guys decide to figure this out?
Damion: So what happens in real estate in business, if you’re smart, you’re looking for problems. You’re looking for problems that aren’t solved, you are looking for pain. And what we saw was a lot of people had parts of the puzzle, but they didn’t have the whole puzzle and we said, “okay, well, there’s got to be a way to do this where we use the tax code and we set things up that protect for liability from lawsuits and also give people control. Plus, allow people to invest if they’ve got in real estate, even if they are employees.” So we basically took all the problems that we saw in the marketplace and spent a few years building something that would solve that problem. And to me that’s innovation. Finding problems and solving them, not just repackaging something and calling it a different name. You’re literally solving a problem and that’s what we did.
Sean: As far as like forced withdrawals after you reach a certain age, is that the same as an IRA?
Damion: It is called an RMD, a Required Minimum Distribution, and those are different between qualified plans like 401Ks and EQRP and IRAs. With the IRA the only thing that doesn’t trip up a forced distribution is a Roth IRA and that just keeps growing. With a qualified plan you are forced to do a distribution at 70 and a half based on your life expectancy and there’s a portion, or you can just convert it to a Roth IRA when you hit 70, and basically there’s no required minimum distribution. That’s today’s laws though. And we are seeing an overhaul in congress with the 401Ks and with qualified plans. So you never really know what’s going to be their year to year. Right now the big push is insurance companies are wanting to put annuities into 401Ks. So that’s the change, raising the age from 70 and a half to 72 is another part of it. But they’re very similar. It’s basically 59 and a half is when you can start pulling money out generally without any penalty and then 70 and a half is when you’re going to start just taking distributions, unless you convert everything to a Roth IRA at that point.
Sean: Even if it’s a Roth 401K or Roth QRP still they distribute it?
Damion: Yeah, the qualified plans have a tripwire at 70 and a half for deferred or Roth. You have to start taking it out if you’re going to keep it inside the qualified plan.
Sean: Okay, that makes sense. And I know for Roth IRAs, you need to have the account for over 5 years or something to be able to pull out your principal. Is there such a law for the QRP?
Damion: Yeah, the five-year rule is the same for all retirement accounts. And so if you’re thinking about this strategy, one of the things I suggest is get an account set up with a Roth account sooner than later, even if you put a hundred dollars in it because it starts the clock. It starts the clock January 1st of the year that you put the contribution in. So you want to start that clock because if you’re 55 years old, that’s good. That’s by 60 you’re able to pull that money out if you waited until you’re 60 and then convert the money. So you one thing you can do is you can convert deferred money into a Roth. If you had an IRA with a bunch of deferred money, you could move it over into a EQRP and then convert to Roth, it starts that five-year clock. So this is something where you just want to get it done sooner than later. Even if you converted five bucks, you want to start that clock.
Sean: So if I have an account already, let’s say like Vanguard, Fidelity and that’s a Roth and then open with you guys three years later. Does that three years count or is it like account specific?
Damion: It depends on the money, the base of the money. And so it also depends on whether it’s an IRA or a qualified plan. So there’s nuances and you can definitely get into the weeds on these things, but bottom line if you’ve got your money in the Roth state for five years, you’re clean. If you don’t then you need to look at the circumstances around.
Sean: Okay, and that again, that’s any Roth account?
Damion: Yeah, the Roth. There’s always a five-year rule.
Sean: Okay, cool. Alright, so that’s all the questions I have for you today. Do you have any last minute tips that you like to give our listeners?
Damion: Yeah. I think the thing that people ask me all the time is what should I invest in? What should I do first? My answer is always the same thing: invest in yourself and educate yourself on the tools. And get around people that are going to support you with with the right mindset because if you’re around the wrong people or the wrong information, sometimes people say “well Google said this” and I say “really? What else did Google say? Because I can show you some stuff that make you cry and laugh at the same time because Google it says everything , (depends on what you’re looking for. If you want the truth”) you go to the expert sources and they can document it. So that’s what this is all about. This is about the expert source, and it’s documented so TheQRPbook.com is going to give you the real tool. Not Google’s version of whatever people have thrown onto blogs. That oftentimes is not right. So get the information and then make your own decisions and you’ll be able to figure out what’s right for you.
Sean: Yeah and how can people get in contact with you?
Damion: So basically the best way to go is to get a hold of the book. There’s my phone numbers on the book and you can you can connect with me directly that way. But I mean really what I don’t want people doing is contacting me without at least getting some of the resources even the cliff notes. You’re going to get the cliff notes when you order the book and again the book is free. I’m going to send a copy to you. The cliff notes give you some basis and then you can connect with me. So start there. I mean I want to educate you first and then I want to talk to you but I don’t want to talk to you and then try to recite the entire book over the phone. I think that’s a huge waste of everybody’s time.
Sean: So yeah. Thanks a lot for your time. Again, thank you so much for educating us on the EQRP. There’s definitely something that’s not known, you know, and I think it should be known. More people should know about this.
Damion: Yeah, absolutely. I mean the more people the better except for Wall Street, but I don’t really care about Wall Street or protecting them. I want to protect and empower people because Wall Street has enough power and money. Main Street is where we need to shift the power and control.
Sean: Absolutely. Well Damion. Thank you so much for your time today.
Damion: Thanks for having me.
Here are some of the key takeaways from this episode. The EQRP is a great tool for investing in a retirement account without worrying about paying for taxes because you use leverage. Educate yourself and visit Damion’s site to get his free book about the EQRP. It’s a very easy read and you’ll be a master of all things retirement accounts after reading it. You can find the show notes on our site everythingrei.com. Hope you all learned a lot. Thanks and have a great day.
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