The question I get asked the most is how do I raise money for my startup or investment fund? Well, my friends, I’ve got a gift for you. In this week's episode of Making Billions, my friend John Bowens is going to teach you how to access an $11T pool of unused cash from investors and funnel it into private investments while providing tax efficiencies for your investors. Leveraging new capital while funding your private deals are all critical skills we need in our pursuit of Making Billions.
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Website: pentiumcapitalpartners.com
[THE GUEST]: John Bowens is one of the most sought-after and respected educators in the self-directed IRA industry. As Director, Head of Education and Investor Success at Equity Trust Company, John draws from his 20 years in the real estate industry and his experience as an active real estate investor. In his travels across the U.S. and virtually, he has trained 60,000 investors during more than 400 workshops and classes, spreading the message about the power of building tax-free wealth and leaving a lasting legacy by investing in what investors know best. In addition to thought leadership in the industry, John has also directed teams in both the front-office and back-office operations with Equity Trust, focusing on the custody of various alternative assets, including but not limited to, real estate, notes, private equity, precious metals, and much more. John contributed to the book “Self-Directed IRAs: Building Retirement Wealth Through Alternative Investing” with Equity Trust Company Founder Richard Desich, Sr., and has appeared on several national real estate and
DISCLAIMER: The information in every podcast episode “episode” is provided for general informational purposes only and may not reflect the current law in your jurisdiction. By listening or viewing our episodes, you understand that no information contained in the episodes should be construed as legal or financial advice from the individual author, hosts, or guests, nor is it intended to be a substitute for legal, financial, or tax counsel on any subject matter. No listener of the episodes should act or refrain from acting on the basis of any information included in, or accessible through, the episodes without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer, finance, tax, or other licensed person in the recipient’s state, country, or other appropriate licensing jurisdiction. No part of the show, its guests, host, content, or otherwise should be considered a solicitation for investment in any way. All views expressed in any way by guests are their own opinions and do not necessarily reflect the opinions of the show or its host(s). The host and/or its guests may own some of the assets discussed in this or other episodes, including compensation for advertisements, sponsorships, and/or endorsements. This show is for entertainment purposes only and should not be used as financial, tax, legal, or any advice whatsoever.
The question I get asked the most is how do I raise money for my startup or investment fund? Well, my friends, I’ve got a gift for you. In this week's episode of Making Billions, my friend John Bowens is going to teach you how to access an $11T pool of unused cash from investors and funnel it into private investments while providing tax efficiencies for your investors. Leveraging new capital while funding your private deals are all critical skills we need in our pursuit of Making Billions.
WANT TO LEARN HOW THE BEST INVESTORS MAKE MONEY? SIGNUP FOR OUR NEWSLETTER:
https://mailchi.mp/d41cfc90bd9f/subscribe-to-newsletter
Subscribe on Youtube:
https://www.youtube.com/channel/UCTOe79EXLDsROQ0z3YLnu1QQ
Connect with Ryan Miller:
Linkedin: https://www.linkedin.com/in/rcmiller1/
Instagram: https://www.instagram.com/makingbillionspodcast/
Twitter: https://twitter.com/_MakingBillons
Website: pentiumcapitalpartners.com
[THE GUEST]: John Bowens is one of the most sought-after and respected educators in the self-directed IRA industry. As Director, Head of Education and Investor Success at Equity Trust Company, John draws from his 20 years in the real estate industry and his experience as an active real estate investor. In his travels across the U.S. and virtually, he has trained 60,000 investors during more than 400 workshops and classes, spreading the message about the power of building tax-free wealth and leaving a lasting legacy by investing in what investors know best. In addition to thought leadership in the industry, John has also directed teams in both the front-office and back-office operations with Equity Trust, focusing on the custody of various alternative assets, including but not limited to, real estate, notes, private equity, precious metals, and much more. John contributed to the book “Self-Directed IRAs: Building Retirement Wealth Through Alternative Investing” with Equity Trust Company Founder Richard Desich, Sr., and has appeared on several national real estate and
DISCLAIMER: The information in every podcast episode “episode” is provided for general informational purposes only and may not reflect the current law in your jurisdiction. By listening or viewing our episodes, you understand that no information contained in the episodes should be construed as legal or financial advice from the individual author, hosts, or guests, nor is it intended to be a substitute for legal, financial, or tax counsel on any subject matter. No listener of the episodes should act or refrain from acting on the basis of any information included in, or accessible through, the episodes without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer, finance, tax, or other licensed person in the recipient’s state, country, or other appropriate licensing jurisdiction. No part of the show, its guests, host, content, or otherwise should be considered a solicitation for investment in any way. All views expressed in any way by guests are their own opinions and do not necessarily reflect the opinions of the show or its host(s). The host and/or its guests may own some of the assets discussed in this or other episodes, including compensation for advertisements, sponsorships, and/or endorsements. This show is for entertainment purposes only and should not be used as financial, tax, legal, or any advice whatsoever.
Ryan Miller
My name is Ryan Miller and for the past 15 years have helped hundreds of people to raise millions of dollars for their funds, and for their startups. If you're serious about raising money, launching your business or taking your life to the next level, and the show will give you the answers, so that you too can enjoy your pursuit of making billions. Let's get into it.
The question I get asked most is, how do I raise money for my startup or my investment fund? Well, my friends, I've got a gift for you. In this week's episode of making billions my friend John Bowens is going to teach you how to access a $11 trillion pool of unused cash from investors, and how to funnel it into private investments, while still providing tax efficiencies for your investors who don't want to miss it to leveraging unused capital, while funding your private deals are all critical skills we need in our pursuit of making billions. Let's get into it.
Hey, welcome to another episode of making billions. I'm your host, Ryan Miller. And today I have my dear friend, John bones, John is the director of a $40 billion AUC trust company called equity Trust Company. So he helps people make massive returns in the private sector by helping investors and fund managers to leverage IRAs to place capital into private deals. So what this means is John is the guy you call to help you pull money from an IRA and invest it in private markets. So John, welcome to the show, man.
John Bowens
Hey, thank you so much, Ryan, great to be here. Excited to be to participate in this program. I've heard the show a lot or a lot of great things about it. And I think you're doing a great thing, spreading the word about how to utilize various strategies, specifically in the private markets. And you said it well, that's exactly what we do here at equity trust. And that's what I've been doing for the last 15 years is helping folks invest in the private markets using their IRAs, 401, Ks and various other retirement plans. So keep doing a good job out there and spread the word. And I'm excited to be here and participate.
Ryan Miller
We're certainly excited to have you when we connected offline and got to know each other, my jaw dropped that the stuff that you're able to do with IRAs in the private market. So there's so many myths that John's gonna dispel for us today about IRAs and using them in private markets. I know a lot of my capital raisers out there for these fund managers. They're already salivating just to hear what John has to say about how to, to tap into this massive trillion dollar market that we call IRAs, and how John's company helps private markets to access those capital in those IRAs legally. So before we get we're gonna get into all that before we do anything, bring us a speed like how did you become an expert? Where did this all begin for you?
John Bowens
Yeah, Ryan, so where it began for me is 20 years ago, I got involved in real estate. And while I was getting involved in real estate working for a small mom and pop real estate company, I was working my way through business finance school, and my trajectory, I thought at that time would become a financial advisor or financial planner, and everything I learned academically was called the 6040 model 60% public equities, 40% fixed income, but it was all public market investing. And I learned a lot about IRAs, 401, k's and various other retirement plans. And the power of compounding interest in the absence of taxation is what I call it. And so I knew that these retirement plans were powerful from a, again, compounding interest perspective, a wealth preservation perspective and estate planning and legacy planning perspective. But everything I learned was in the public markets. So my brain was trained to think and associate IRAs and retirement plans with the public markets with the stock market. And so I was working for this real estate company, and the father and son who ran this company, they had created all of their wealth in real estate and commercial real estate and residential real estate. And I got to know and got very familiar with real estate investing, got very passionate about it. And so I went to them at this time, this was call it you know, maybe 18 years ago, and I said, Hey, you know, you've never talked about IRAs, 401 KS or other retirement plans, and they were call it mentors to me, they taught me about real estate, they taught me about business and entrepreneurship. And nowhere did they ever teach me about retirement plans, IRAs, 401, KS, they didn't have a 401k for the company, or a simple IRA, or SEP IRAs, or any of these retirement accounts that I was learning about academically, they didn't have any of these types of accounts. So I asked them, you know, why, why don't you have these types of accounts? Why aren't you using them? They can be very powerful from a wealth creation and preservation perspective. And they said, Well, John, we don't believe in those accounts, because we don't believe in the stock market. And I thought to myself, Wow, and it hit me because I had never really associated IRAs and retirement plans, just with the stock market in the way that they said it. We don't believe in those accounts, because we don't believe in the stock market. And I hear that almost every day here at equity trust. I've been doing this for 15 years, I've trained over 60,000 investors and I can't tell you how many people they have felt the same way or that was their same perception was that IRAs and retirement plans, equal stock market investing. And then 15 years ago, I met our company founder dict sh and he's widely known in the industry as the pioneer of the self directed IRA industry. He's well, he's widely known as some people even referred to him as the inventor of the self directed IRA to invest in real estate and he started a predecessor company of equity trust back in 1974. And really, he started as a stockbroker. So he started as an advisor to the public markets with retirement plans. Coincidentally, in 1974, there was the Employee Retirement Income Securities Act, which really gave birth to IRAs, 401, k's and other retirement plans prior to that most Americans just relied on pensions and Social Security. And so Mr. devcich became my mentor. And he taught me that you could use IRAs and other retirement plans to buy single family rental properties. Never did I ever learned or know that you could go out. And let's say buy a single family residential rental property with your IRA, we call it a self directed IRA, which is just an industry term just indicates that you can take control and you can direct the funds, you don't have to rely just on the stock market or rely on a financial adviser. And so he taught me that I could go out and buy a rental property, and the cash flow would go back into my IRA. And then I could sell that property eventually. And all the profits go back into the IRA, and I have no long term capital gains tax. And I thought, wow, that makes a lot of sense. But is this real, and then I started examining the tax code. So I started going to 4975 of the tax code and the various IRS publications. And sure enough, I found directly on the IRS website, that real estate is a permissible event investment, but due to the administrative burden, most financial institutions just don't allow you to, to hold these types of investments. So it's not a matter of legality, but rather a matter of choice. Most financial institutions are just not geared have the technology systems, the infrastructure, or the personalized support to be able to help investors invest in these alternative assets. But I uncovered equity trust 15 years ago and met Mr. Message and learn that his company specializes in this. And so then I learned that it's not just real estate, it's not just owning a piece of real estate, like in a real estate syndication, or real estate fund or a private real estate investment trust. It's not just owning land, but I can also use my self directed IRA or 401 K rollover or SEP IRA or Roth IRA or other account, I could use these different accounts to invest in the private markets, not just real estate, but I could invest in a privately held company, for example, I had a customer that had an opportunity to invest in privately held shares of a software company that was developing human resources systems. And so he used his IRA to buy privately held shares in this company. So you can do private direct investments, I learned that it's not just using your IRA to invest in privately held companies, maybe even a privately held shares of a bank, you had mentioned that before you hit record, Ryan is investing in banks, you could use your IRA to invest in privately held shares of a bank. In addition to private direct investments, it's also investing in maybe a private equity fund or a venture capital fund. And so we have a number of customers here that use their retirement plans and invest in a variety of different private equity companies, private direct companies, like we talked about venture capital, and even beyond those types of structures, also investing in different types of privately held instruments like convertible notes, or safe agreements, whether it's debt or equity. There's a variety of ways in which you can use your IRA to participate in the private markets. And then outside of that we even have customers that buy physical gold and silver or even digital assets like cryptocurrency. But going back to our very beginning days in the early 80s, Mr. devcich, put together one of the very first real estate transactions with Ira investors, it was actually a real estate partnership, a syndication and there were about 22, Ira investors that each invested about $6,000 into this real estate syndication, and the underlying asset was a commercial building. And over 19 years on a triple net lease each of those Ira investors made about $200,000, all tax deferred with a $6,000, traditional IRA self directed investment. And so that was really the call it landmark flagship investment that was done. And then he went across the country and started advocating and teaching other investors on how to do this. And fast forward now to 2023. And we have over 200,000 customers, nearly 500 Associates servicing those customers. And as you said, at the very beginning, Ryan, we have over 40 billion in assets under custody and administration. So we provide a lot of education, a lot of information, what we don't do is provide financial advice. So we're not here to sell investment products, what we do is offer a system and a platform for individuals to be able to invest and take control. And that was one of the things that really appealed to me 15 years ago, right? See, I had to make the decision, do I go in the path of becoming a financial adviser and generating a fee on all of my customer accounts, which trust me, there were a lot of dollar signs there in 15 years ago, I could have went down that path. And there's possibility that I could have done more, I could have done better for myself, if you will, financially from an income perspective. But see, Ryan 15 years ago, that was not of interest to me, it didn't make sense to me to pigeonhole people into one specific asset class, the public markets, and I had a lot of passion, and I was getting a lot of experience around the private markets. And I am really glad that I made that decision, because it's really changed my life. And it's allowed me to change the life of so many investors across the country over 60,000 investors that I've trained. And so now my wife and I, we deploy our retirement account capital into single family rental properties, private money, loans secured by real estate to investors, and a variety of other private market investments. So regardless of what's happening in the stock market, we have a lot of confidence in the control that we have over the use of our IRA funds, and ultimately being able to chart our own destiny, rather than relying on what's happening in the public markets or rely on a financial advisor or financial planner that may not be able to offer the types of private market investments that we want to participate in.
Ryan Miller
Man that is very well said. So as you can see, uh, like I said, the capital raises are just licking their chops, just get ready to talk to you. And so, you know, just to distill a little bit of what you said is saying, Hey, we can help facilitate that. So a lot of people just assume that these registered accounts we'll call them that it's it's strictly limited to public equities. Well, that is one of those opportunities. You're here to open The eyes to people who have those registered accounts or those people looking to bring on investors who have them and invest in your fund. And so what you're saying is, hey, you can actually use these to invest in the private market. If you're at the wrong firm, they'll probably just say, No, it's not because it's not possible. It's just because it's not their policy. And there's a difference. When they work with you, though, you're able to get investors access their 401k for them at their own choice, they'll come to you. And they can invest in private funds, like venture capital, private equity, real estate, and more. This is phenomenal stuff, you're definitely my right hand guy. And so now that being said, I'd love to just spend some time talking about some of these strategies that we can leave some of our listeners with a deep sense of a competitive advantage. And so I'm just wondering, is there two or three things that you have found to be the most helpful when operating in this industry? What kind of information can you leave behind for either someone looking to invest in private markets, or possibly emerging fund managers who are trying to access those from some of their investors? What would you say some of those tips are?
John Bowens
Yeah, so the first is very simply, but you have the ability, if you're out raising capital for your venture capital fund, your private equity fund, maybe you have a startup company. And so it's going to be more of a private direct investment. And maybe that's through an actual shares or a membership interest, limited partnership interest, especially in real estate for those out there that are syndicators. And they're setting up specific entities for specific Real Estate projects. Or maybe it's outside of an equity position. But it's more of like a debt instrument, maybe a convertible note, or maybe a safe note or safe agreement type structure, regardless of the type of investment structure for the most part, you're going to be able to raise capital from Ira investors. And a couple of things to point out here is there's there's just over 11 trillion in IRAs. And if you look at IRAs, 401 K's pensions and other retirement plans, there's over $23 trillion. And that's as of 2023. Here, and when you look at alternative assets, specifically the types of assets we're talking about, so we're not talking about like a publicly traded REIT, you know, some people try to put that in the alternative category. When I speak to alternative investments or the private markets, I'm talking about all assets away from publicly registered, if you will, or publicly listed assets. So again, everything that we've talked about so far real estate, private equity funds, private direct investments, venture capital funds, so on and so forth. And so there's this huge opportunity out there. And we certainly believe that it's untapped. In fact, there's only approximately 150 billion in true alternative investments, like we're talking about here in IRAs. So there's over 11 trillion and only 150 billion in alternative assets. And we have experienced an incredible amount of growth over the last since I've been here. 15 years, when I started with the company, we had about 100 employees less than 100 employees, we now have nearly 500, we started back in when I started 15 years ago, we had maybe 10 billion we have over 40 billion in assets under custody now. So an incredible amount of growth. And we're seeing more people more Americans are waking up and saying, You know what, that 6040 model doesn't necessarily make sense for me. Now, I can't advise and tell someone that the 6040 model doesn't work for them. Right? What I can tell you is that there are a number of folks that come to our organization. And they seek out some of our education that we have, whether it's on YouTube, or webinars or other informational opportunities we have, and they are interested in sort of breaking that mold of 6040 within their IRA. And they want to invest a percentage into the public into the private markets away from the public markets and into the private markets. The other thing I'll mention, which I think is an interesting fact, is the IRS reports. This was a study that was done back in 2016 ish. It was a Government Accountability Office study. And in this study, they reported the IRS reported that there were about 9000 IRAs that had a balance of $5 million or greater, only 9000 IRAs out there with a balance of $5 million dollars or greater. And they reported that 25% of the value of those IRAs were in or are in what are called unconventional assets. So what do you think unconventional assets are alternative now? Exactly. Alternatives? I don't really like that nomenclature of unconventional, right? You know, and even alternative investments, you know, some people, the public, sometimes things will alternative must mean bad or alternative and must be, you know, too much risk. But it needless to say, those are alternative investments. Specifically, they mentioned in this report, real estate, private equity, hedge funds, everything that we're talking about here. And they went on to say that, and I'm paraphrasing a little bit here, but they went on to say that most likely the growth of these accounts was because of those unconventional assets. So the wealthiest of wealthy, the top 1% of 1% have been utilizing these strategies of using IRAs to invest in alternative assets for a lot of years. And most of the public has not been informed of this. And so that was one of my missions 15 years ago was I want to scream at the top of a mountain and tell as many people as possible that are willing to listen that hey, you can invest in the private markets with your IRA funds, you just have to find the right company and you have to create the right structure. And you have to have the willingness to take action and be active with your retirement plan. You know, that's that's not putting it with someone and setting it and forget it. That means actively looking at investment opportunities, working with and networking with the right people and directing your funds into the investments that make the most sense for you. And there's all sorts of individuals out there that can help provide support and help provide information and guidance with respect If he's different private market investments, so for anyone out there looking to raise capital, know that there's an appetite out there for people to use their IRAs and 401 Ks, will you meet some opposition? Yes, you know, folks may have a financial advisor or financial planner that is not open to alternatives in an IRA. So you might have to spend some time educating that particular investor on what it means to use an IRA to invest in alternative assets and equity Trust has some educational resources that we can provide to you and to your potential clients that can help inform them better of how this works and what the process is. And then at that point, once they come to equity, trust and open and fund their self directed IRA, they then direct their funds out for their private investments. And the good news is, is when a fund manager or when someone has a private direct investment opportunity, they provide us the supporting documents for the investment, we review it for administrative feasibility only, we're not a fiduciary to you or your client. So there's no I'll call it labor intensive, lengthy and expensive review process, we simply collect the documents, we do a surface level review, and then we determine if we can custody that investment and 98% of instances, we can custody that investment, and then the customer comes to equity trust. And so what that allows our customers and the folks that are referring us clients, the fund managers, the private equity managers, that hedge fund manager, so on and so forth. This allows them to have the peace of mind knowing that they're going to be able to do things very quickly, and they're going to be able to do it at a reasonable cost. So it's not going to cost 1000s of dollars to work with equity Trust, the customer doesn't have to pay 1000s of dollars. And you'll learn that fund managers, they aren't paying equity Trust, the client is paying an annual fee in order to direct their funds for their investment. So it's a pretty straightforward and simple process for folks to be able to direct their funds from their IRA into various private market investments.
Ryan Miller
And that is phenomenal. And you had something called a little side, I'd love for you just to spend, you know, 30 seconds talking about what InvestmentDistrict.com is to you? Yeah, absolutely.
John Bowens
It's a it's a public domain through equity trust, it's called investment district.com. And so at equity trust as a directed custodian, we can't sell investments, nor do we want to sell investments. We're not in the business of advising on specifically what allocations one should place into various assets, were a directed custodian. And we allow customers to invest in the private markets like we've been talking about. And then if people want allocation to the public markets, still, we do have the facilities and infrastructure for people to Actually Trade mutual funds and stocks and ETFs and other public securities, even Treasury securities potentially, or bonds or CDs. So we have those facilities for individuals to participate in the public markets in the private markets. But what we do in order to help provide some pathway for investors that maybe want to get exposure or identify different investment opportunities, we have this investment district.com system, and it's a public online website, anybody can go to IT investment district.com. And you'll see a variety of different investment sponsors, precious metals, dealers, so companies that sell physical precious metals, cryptocurrency providers, you'll see on their private debt investment sponsors, so from private equity, to private debt to individual notes, mortgage notes, there's a variety of different opportunities that folks can browse. And then they can sort of pick your own journey process, they can find the companies that they want to explore, and they want to research further, we don't endorse or recommend any of these companies, these are companies that we have mutual clients. And so we want to make sure that we make those opportunities available to anyone that may want to learn more about how they could use their IRA to deploy their capital into these various investment opportunities. And so as a fund manager, for an individual that is maybe looking to scale their capital raising efforts, there's an opportunity for us to work with you and be able to help you participate in that platform called investment district.com. So folks can reach out to us and we can explain the process and how that works.
Ryan Miller
Yeah, I love that. And you know, another point, you and I were talking offline, and you mentioned something that I'd love for you to just unpack a little bit here. Is your opinion on the historical behavior of the financial industry and whether they were as upfront or, you know, I don't know, if you want to use the word misleading or not i That's a strong term. But I'd love for you to unpack your viewpoint on the financial services industry, and maybe they haven't been telling everything to their clients. Is there anything that you can speak to that?
John Bowens
Yeah, you know, really goes back to my upbringing, academically. And that decision I made 15 years ago. And I don't know if I would say misleading, I think that some folks, some consumers, investors are misled, to think that they can only invest in the public markets or investing in the public markets is the safest way for them to invest. And I will say that investing in the private markets is not for everybody. You know, there are some folks out there that don't have the tolerance for it. They don't understand it. And maybe investing in the private markets isn't right for them. But a lot of the folks that I spend time with a lot of the folks that I network with and Ryan, I know a lot of the people that you bring on your show and the folks that you network with and we have a lot of common acquaintances, they've made their money, they have created wealth, far in excess of what the stock market has made over the years by investing in the private markets and during turbulent times they have been able to weather the storm and so those are the individuals that I've spent a lot of time with because those are the individuals that I see finding a lot of success. Now, let me make sure I mentioned that investing in the private markets, of course, carries risks. And you have to understand when investing in private market assets, that although the returns could potentially be much better, the risk could be greater. And you have to assess that as an investor, and you have to understand where your tolerance levels are. And I've also mentioned as far as investing in the private markets, is, you're likely not going to have the liquidity that you would have in the public markets. So you're gonna, you're gonna forfeit some liquidity, but what you should get back is a better return, or the potential for a better return. And so those are some things just to reframe that. To answer your question, though, Ryan, what I learned 15 years ago or so is that it's sort of a society issue, you know, society has been has been, I'll say, trained. And I was trained from those very beginning days to think that the only way to invest with a retirement plan was investing in the public markets, going back to my very first mentors in real estate, who said, We don't believe in IRAs, because we don't believe in the stock market. And that, to me, didn't make sense. And I believe that every man, woman and child in this country should have some exposure to the concept of using an IRA to invest in the private markets. That doesn't mean they're going to invest in the private markets, but they should have some exposure to it. And you know, it's interesting, Ryan, in 2020, at the end of 2022, there was there was some legislation that was being proposed, and I'm not gonna get into details, all the legislation, but in this legislation, they actually quoted a Georgetown University study. And in this Georgetown University study, they talked about how if 401 K's had even just moderate allocations to alternative investments, real estate, private equity, and hedge funds were specifically mentioned that Americans would have 17% more savings. Anyone can look it up here, Georgetown University study, and they specifically say this, the pensions have been investing in alternative assets for years and years and years, private equity, hedge funds, real estate. So why why doesn't every American Why don't more people in their 401 ks and IRAs have access to these private market investments? Well, for years and years, it was very difficult, it was very cumbersome. And there just wasn't a lot of technology to access these markets. But now the technology exists, the infrastructure exists. And we've been one of the leading providers from a technology perspective and building out this infrastructure so that everyone can participate in the private market, and participate in these various private assets, whether it's real estate, or it's investing in a private direct company. And then just to conclude, Ryan, you know, going back to what you asked, as far as being misled, some people, they aren't necessarily misled. But if they go to a financial adviser or financial planner, that individual may not have the incentive, or the knowledge or expertise to help that person understand how they can invest in the private market, it doesn't mean they're doing a bad job, some may, right, you have to look out for that, right? There's bad actors out there. There's, there's, there's bad financial advisors out there, and there's lots of very good financial advisors, right, you just got to understand who that individual is. And I always use the analogy, I think a lot of people can relate to this. It's sort of like the medical profession. So some Americans go to their financial advisor, and they sort of look at that person as being the end all be all of advising them on all matters financially, insurance investments, their retirement plans. Well, guess what, some advisors don't actually have a very strong skill set in IRAs and other retirement plans. They don't have specific certifications with that. So for example, I have a certification through the American Bankers Association, which is the certified Ira services professional. And so I have a specific skill set around IRAs and requirement of distributions and contribution limits and eligibility and all of those types of matters. And so some advisors don't have a strong skill set in retirement plans, doesn't mean they're bad advisor, they might be very good over in this area, but they're maybe not going to be good for you, if you want to focus on growth and longevity of your IRAs, 401, k's and other retirement plans. And so I always use the analogy in the medical profession. When you have a specific complicated medical situation. Usually, you don't just have one specialist, you'll hear of certain patients that have, you know, maybe three or four specialists, they have their oncologist, they have their orthopedic doctor, they have multiple doctors and specialists that are actually teaming together to address the specific matter at hand. And you want to think about that, from a financial perspective, to have the right financial health, you want to make sure that you're bringing in multiple members of your financial team. And you're not just relying on one single financial advisor or financial planner, it's sort of like family offices, some people out there might not be familiar with family offices, I've been working with family offices for a lot of years here. And for those of you that are familiar, a family office, generally when someone gets to about $100 million or more in net worth, at that point, it makes sense for them to start their own family office where they have a CPA, they have investment managers, it might be just a team of three or four people or it might be an office of 10 people depending on how much net worth they have and how much assets they have to manage. And so the wealthiest of wealthy people use multiple people to manage and preserve their wealth. There's a reason why the Rockefeller family wealth has lasted many, many generations. And then a lot of other people, it's only last maybe one or two generations, right? And so we as individuals, and the way that I manage my money from my wife, and I is is I tried to take the same strategies and techniques that the wealthiest of wealthy people are using, and I just do it in the small confines of our family unit. Right? A lot of times the strategies are the same. They might be on a much smaller scale, but the strategies are the same. So I know that was a little bit of a long winded answer. But I can't encourage folks more to do their own due diligence and treat equity trust as one member of their financial team, just like all of the other individuals that they're working with and networking with.
Ryan Miller
Man, phenominal answer just for basic stuff, not necessarily for the fund manager or anybody but anyone listening who is interested in leveraging, they're even getting an IRA. Because look, I have people just got news that there's a high school in Texas that listens to the show to learn about finance. So we've got listeners from all kinds of places and ages and different experience levels. I'm just wondering, let's really simplify it. What if you could just walk through just real quick basics of the Roth IRA?
John Bowens
Absolutely, Ryan, the and I'm glad to hear that there's a high school out there. If I can help mold the minds of the youth of this country and how powerful these IRAs and Roth IRAs are, that would absolutely make my day. So I'm really excited to hear that the Roth IRA, I consider to be one of the most powerful financial tools. And here's the reason why a Roth IRA, when you put money in the money goes in after tax, it grows tax free. And when you when you take the money out, you pay 0%. Tax, I call this again, compounding interest in the absence of taxation, incredibly powerful, I invest as much as I can, with my wife and I's Roth accounts, we buy real estate, we make private money loans, we do all sorts of investing with the Roth and will never pay tax will never pay tax on the growth will never pay tax on any of the distributions. So as long as we follow all the rules and all the guidelines. Now let me put this into perspective for folks, I have a client, and this is a little smaller transaction. But imagine when I tell you this, how this can build over time. So a client I worked with last year, he had about 13,000, and some change in a Roth IRA. And he's from Dayton, Ohio, he flips real estate, and he found a deal, he found a single family property, and he bought it the purchase and rehab was $75,000. And his investment with his Roth IRA was only about 13,000. And some change. But where did the other money come from? Again, this was a $75,000 deal. Well, he brought in an investor partner, so he had an investor partner that wasn't related to him, he brought that individual into the deal, they created a joint venture, and they flipped the house. And he ended up making 34,000 tax free in his Roth IRA, he grew his Roth IRA from 13,000, and some change to over $47,000. And he paid 0% tax, no capital gains tax, eventually, when he takes the money out after the qualified retirement age of 59 and a half, he'll pay 0% tax, it'll likely continue to grow that account tax free. And if he decides to not use it in his retirement, but instead maybe he wants to leave it to his children, or he wants to leave it to his grandchildren, he can then leave it to those family members and they pay 0% tax, the Roth IRA can be an incredible estate planning and legacy planning tool, not just a tool for retirement savings and planning. I have another client, a husband and wife that started with about $200,000. In old 401 Ks, they rolled those over into traditional IRAs. And then they converted their money into Roth IRAs. They did this back in 2010. And they refer to themselves as stock market refugees. Their names are Kevin and Cynthia. And so they came to equity Trouts, they rolled their money over they converted it to Ross, they paid about 75,000, they convert that money from a traditional to a Roth, which anyone can do that you can convert your money from a traditional to Roth, you just got to pay the taxes now. And then you don't have to pay the taxes later. And so they have since they've done over well over 20 real estate transactions. And they've grown their Roth IRAs to over a million dollars in properties. And they still have 14 properties in their Roth IRAs generating 130,000 in tax free cash flow. And that's after all expenses, that's net tax free cash flow, they pay 0% tax, and they're over 59 and a half, so they can distribute money anytime they want, and pay 0% tax. But when I asked them, What do you plan on doing with the account, they said, John, we have like 100 rental units outside of our Roth IRAs, we don't plan on ever using any of this Roth IRA money, they want to leave it to their children. And if their children have children, they can leave it to their grandchildren, and the children or grandchildren pay 0% tax. So I can't encourage folks enough to consider the Roth IRA. I'm not telling you that you have to do it, I'm just telling you consider it research it. And lastly, I'll close up this segment with mentioning that some people are told or think that they can't contribute to a Roth IRA because they make too much money. See, there are these rules. They're called Magpie limits, modified adjusted gross income limits. And basically what these limits say is that if you make too much money, you can't contribute to a Roth IRA. So for example, if you're married filing jointly, and you make over 218,000 in a year, you can't make a full contribution to a Roth IRA. But here's the deal, here's what you can do, you can do what's called a backdoor Roth contribution. So viewers can listen, listeners can write that down, backdoor Roth contribution, it's not a legal term, you're not gonna find it in publication 590 or IRC 401 or 408. All right, that's light reading for any viewers out there that are going into screensaver mode. So you can contribute first to a traditional IRA, and then you can immediately convert over to a Roth IRA. Again, this is known as a backdoor contribution because there's no limitations on contributing to a traditional IRA. As far as your income is concerned, you just have to have earned income. So you go into a traditional and then you immediately convert over to a Roth IRA. And so when you hear in the news, how in the world does that multimillionaire have a Roth IRA with millions of dollars in it? How in the world did these people grow their Roth IRAs to over $5 million unconventional asset investing, and they oftentimes do it through creative ways to get money into the Roth. And one of those ways is this backdoor Roth contribution that I'm talking about. So some people out there might have 401 K's 403 B's other retirement plans, as long as you're eligible, you can roll those over into a self directed IRA. If you want to convert you can you don't have to tax deferred savings is still very powerful, tax free savings could be considered even more powerful, but it just depends on an individual situation and where they're at in their life. And I think that's really important to mention, Ryan is that moving money over from one account to another, it does not trigger a taxable event, meaning if you have a 401 K, and you roll it over into a traditional IRA, you're not going to have a tax or penalty, as long as you go about it the right way. If you then want to convert it to a Roth, yes, you're gonna pay the taxes because you're going from tax deferred to a tax free Roth, but just rolling money over from one financial institution to equity trust via a transfer from an IRA or rollover from a 401 K, there's no taxes or penalties, and you're not borrowing against the account to go buy real estate or invest in private market investments, your IRA is actually making the investment your IRA is going to take registration or take title to that specific investment. So when my wife and I buy real estate with our IRA, the deed to the property says equity Trust Company custodian for the benefit of our IRA, or if we invest in a privately held company that shares let's say, if that privately held company, or in the name of our equity trust, IRA, and then all the profits flow back into our IRA, and we get to recognize the tax advantages.
Ryan Miller
Wow, phenominal. So for all of you, either holders of your IRA, or private investors, both of these, as you can see from listening to John, that there is a very solid market for getting capital out of these vehicles and into private investments, not only for the holder of those investments, but also the private fund manager. So as we wrap things up, is there any if people want to reach out to you to get more information? What's the best way to connect with you in equity Trust Company?
John Bowens
Yeah, absolutely. So websites a great resource to get more information, TrustETC.com. So that looks like trust excetera.com, or just search equity Trust Company where easy to find, for folks that maybe want to sink their teeth into some more information or education, we have a lot of video content, educational video content on YouTube. So you can go to YouTube, just search equity Trust Company, Ryan, I love the content and information you provide to the public, real education and content, not hype or fluff. And we're the same way. I think that's why our goals are very much well aligned in terms of educating the public. And so you'll find our YouTube page and videos is very content rich. So I encourage folks to go there as well. And when they go to our website, they'll find our phone number. So if somebody wants to call in and speak to one of our Ira counselors, and ask questions and talk about how you could potentially educate your clients better on using self directed IRAs, or maybe you're a fund manager, or you're somebody that's out raising capital, but you're also investing your own money, and maybe you want to invest with other investors, well, you can absolutely do that with your IRA or 401 K. And you can imagine if you're using your IRA or 401 K, and you're investing in private market deals, and then you're out raising capital and educating people on hey, I do this as well. And here's the company that I do it with, you know, that obviously, you can provide a lot of credibility there. So I'd encourage folks to consider that as well. But Brian, really appreciate it. And you know, we're easy to find online. Our office is in cleat right outside of Cleveland, Ohio, in a city called Westlake. We also have an office in Sioux Falls, South Dakota, we are chartered in South Dakota as a non Depository Trust Company. So that allows us to be an IRS approved custodian to custody, these IRAs and the alternative assets within these IRAs. And if anyone was ever interested in seeing our brick and mortar here, our facility, which is where I'm actually sitting in our recording studio in Westlake Ohio, folks are more than welcome to pay a visit to Cleveland, Ohio, I know there's oftentimes not a whole lot of reason for people to come to Cleveland, Ohio. But if you did want to come pay a visit to us, we're more than welcome. Or we're more than happy to welcome you to our office and show you around and help educate you more, right? Well,
Ryan Miller
I owe you a visit. But I feel like I'll take a an airplane rather than a train to come visit you in Ohio. So So that being said, you know, and I know and we didn't really cover this, but you actually work with private funds to be the person to help if they have investors that want to access your IRA, you can actually be that hired professional that work with private investment funds to help some of their clients to access that capital who actually want to invest. Is that right?
John Bowens
So when you say that you mean if a fund manager or someone wants to invest? They want to refer someone to equities. Are you referring to myself personally?
Ryan Miller
Exactly. So say like, here's a fun everybody knows Cardone Capital. So let's say Cardone Capital could work with you, if they got investors on the line who have IRAs, they can say, Oh, we've got a third party that we work with, with our fund who can help you with that if you do want invest in our fund, there are ways to do that. Let us send this over to you. Right, I understand you can kind of be that third party expert for other funds like that.
John Bowens
Absolutely. In fact, that's how we've built our business. We've built our business through word of mouth, we've built our business through connections like this podcast like this other opportunities. Ryan, I know you routinely are invited to speak on some very large stages with a lot of notoriety. And so that's what we do, we shout from the top of the mountain about how this works, because a lot of people aren't familiar with it or know how it works. And if someone has a fund or is raising capital, they can use us as that vendor, if you will, that service provider that they can refer clients to and have the peace of mind knowing that those customers are going to be taken care of. And those customers aren't going to be sold into a different investment or advise in a different direction. Because we're unbiased, we're agnostic to the types of investments we don't give investment advice, and we can help that customer and help you can take him by the hand and help them open their account and fund their account and then direct their funds for their investment. So we're very high hands on with our customers. Every customer that comes through our doors, we have a single point of contact that works with them through their entire process of setting up the account and making their investment. And then of course, if you're the fund manager, you're going to be working with a dedicated contact here that's going to help them through that process. And we do work with a lot of the large private asset providers out there, because they've identified us as one of the largest, if not largest alternative asset custodians in the industry, and they want to make sure they're working with a company that's been around for a very long time, and a company that can provide the individualized personalized service that they desire for their customers.
Ryan Miller
That's brilliant, so you know, just to synthesize everything, learn to leverage IRAs for private markets. Also learn to work with professionals like Equity Trust Company, whether you're an investor or a fund manager, you can use them on both sides of this transaction to open up IRAs for private markets. And finally, learn to structure your investments with tax efficiencies in mind. You do these things, and you too will be well on your way, your pursuit of making billions.
Wow, what a show. I hope you enjoyed this episode as much as I did. Now, if you haven't done so already, be sure to leave a comment and review on new ideas and guests you want me to bring on for future episodes. Plus, why don't you head over to YouTube and see extra takes while you get to know our guests even better. And make sure to come back for our next episode where we dive even deeper into the people the process and the perspectives of both investors and founders. Until then, my friends, stay hungry, focus on your goals and keep grinding towards your dream of making billions