The common age for investors to show up in the investing scene is usually at their middle age or later. From there, they would have to still wait before their efforts come to fruition. Instant gratification in investing does not happen. If it takes a lot longer before you reap anything, then why not start younger? Scott Carson talks with Derreck Long from Quest Trust Company about how the next generation can build long-term wealth by using a self-directed IRA. As Derreck takes us into his journey and experiences of realizing the value of investing young, he also shows the way he is getting everyone else involved and taking care of everybody while building a network and wealth for the family.
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Listen to the podcast here
Next Generation Wealth Building with Derreck Long
We have our good friend Derreck Long join us. He usually works out at the Houston office, but he’s in Austin hanging out there. How’s it going?
I’m excited. I’ve been excited about doing this show for a while now.
Our topic is all about generational wealth building. You’re teaching a class on that in Austin. Is that correct?
That’s correct. We’re going to be teaching a similar class to this one. It’s about getting your next generation of people excited, the kids or the grandkids. A lot of times, people don’t know how to approach or get younger people excited about being an investor.
We get so busy working on our stuff, we often forget, “Let’s get the kids and stuff involved.” It’s the whole, “I’ve got to pay for retirement and I’m going to pay for your education,” thing. Derreck, before we dive into it, share a little bit about your background because you’ve got a little different background and some of the other IRA specialists there at Quest.
I didn’t always start at Quest. I’ve been affiliated with them since about 2009, but I was doing a lot of background work for them, computer work, website design and those types of things early on. However, while I was doing that, I was in the military. I spent a lot of time in the army. It was what they call a Fifteen Yankee, which is a fancy way of saying an Apache mechanic. I’ve been stationed in Fort Eustis, Virginia and Fort Riley, Kansas and that wasn’t the direction I wanted to go. I joined the military because I started a small business on my own and I failed miserably. When I got out of the military, I was looking for something different. Honestly, it’s where I started finding notes, finding Quest and everything else. That was a basic part of my background, but it wasn’t always as an investor.
Let’s talk about how to get some explosive results. You’ve got a report that you want to share.
I’m here to talk about the next generation of building wealth. This seems to be a very complicated issue for a lot of people. Anyone that’s 30 years old and younger, one instant gratification. A lot of times, as an investor, that’s not what we need and that’s not what we’re looking for. It’s learning how to build wealth long-term. Notes are something that can provide that. Scott, you talked about that a lot. I’ve got a lot of information to go over. I’m going to dive right on in. I always start with my little disclaimer that I’m only here for educational purposes. I don’t fry tax advice, legal advice and investment advice. This is just for education.
I graduated from college in Arizona. I didn’t grow up here in Texas. I more grew up in a small town in Alaska. I’ve done a lot of traveling because I was a military brat. I got my degree in Global Marketing with a minor in Administration. I do speak a whole lot of Russian. After I got out of the military, I was able to save up some money. I felt like it was a lot of money. It was a whopping $5,000. I know that doesn’t seem a lot, but when you’re younger and you’re trying to save, especially on a military salary which is very small, I felt that I was rich. I was like, “What can I do? Where can I park this type of funds?” I started looking at what type of investments I can do on my own. I googled it. Obviously, the first thing that comes up is always stocks and bonds.
If you’re not a savvy investor or you’re not a billionaire already or something, you know about the stock market. You don’t know how it fluctuates. Stocks came up, real estate came up as well, some money mutual accounts that seem to give smaller returns, but it was safe and something called notes, which most people on this blog are very familiar with notes. At the time, I was not. These were some investments that I was considering my big $5,000 investment. While I was still young, my dad told me, “Derreck, you should consider real estate.” I was like, “Dad, I know better because I’m 25 years old and I’m smart.” Instead of listening to him, I decided to try the stock market and I put my money in something called penny stocks. A lot of people here have tried this or if you haven’t, don’t waste your time. What happened is I found some penny stocks on a platform that I was able to buy and sell quickly.
When I say quickly, we’re talking on average 45 minutes to an hour’s worth of time and I watched this market fluctuate. I took my $5,000 and I lived off it for a whole year only investing in penny stocks. I was getting lucky. I’ll buy something, I’d sell it when it went up quickly and I’d do it again and again. That’s making honestly a couple of hundred bucks a week. It doesn’t seem a lot, but at the same time, I was still a full-time college student. Those couple of hundred bucks a week was covering rent, food and beer so I was excited about that. The problem is after about a year or so of doing this, I made a bad investment and I lost it all. My full $5,000 was gone. As bad as it sounds, I wasn’t upset.
I spent a whole year living off $5,000 so I was like, “That was unique,” but it did teach me a lot. One of the negative impacts I found out was I didn’t have something tangible. I realized down the road I was gambling. I had no control over the stock. It wasn’t something I was holding. When it went up, it went up. When it went down, it went down. I was strictly guessing. I was getting lucky. The next thing was there’s way too much fluctuation. I once again had zero control when it was going up or going down. I didn’t know why. At the end of the year, something unique happened. I lost my $5,000 and Fidelity, that was the custodian I was using at the time, sent me 1099 for all the money I made.
I didn’t expect that. I never had to deal with taxes up to this point. I didn’t know what to do. I didn’t have any money to cover this taxation. I was like, “What do I do?” I called my dad and I was like, “Dad, I own a whole bunch of money in taxes. It was $1,000 that I owed.” It isn’t that much, but as a kid, I was like, “This is rough. What am I supposed to do?” I had zero training, zero help, no first-hand education. It’s not that investing in stocks is bad. I want you to understand that I don’t want you to take away that stock investing is bad. In my experience, each one of the impacts is something that was true and what happened. There are no tangible assets, fluctuation, tax implications and no training.
The training is honestly what it came down to so I decided to finally suck it up and talk to the experts. I went back to daddy and I was like, “Dad, I’m ready to listen. I lost all my money. What can I invest in?” He goes, “You can’t just start off being an investor. You first have to understand money.” I was like, “Help me out with understanding this money aspect.” He says, “95% of people will make money trading time for dollars.” This isn’t bad. Too many times, a lot of the motivational speakers talk about this aspect right here and they point this out as being a bad thing, but it’s not. I’m here to prove why it’s not. 95% of people would trade their time for dollars. This is doing your job and your salary income where you show up to work and you have to do something. In exchange for that time, you receive some profit back, which is your paycheck. Whereas 5% of people do something different and they earn money through residual income. It’s something where they do something once and they get paid over and over.
A great example is a cell phone bill. Verizon has me as a client. I walked to the store once every two years, bug them, I say, “My phone sucks, I want a new phone.” They have to put up with me for an hour. I’m a pain, but after that hour of putting up with me, Verizon gets a check from me every single month. My dad said, “That’s the side of the fence you need to figure out how to get on.” I was like, “That makes sense. I get it. It’s residual income, but doesn’t that cost hundreds of thousands of dollars?” He was like, “We’ll get to that, relax.” I was very anxious. I’m young. This is one of the hardest things to deal with. A lot of the younger generation wants instant gratification. It doesn’t happen that way. “There are different ways people earn income. There’s the active income and passive income.” He says, “The active income side is what 95% of people are doing. The passive income side is what that 5% of people are doing.” We have self-employed and an employee on the left side.
A lot of times people are like, “I’m self-employed. I’m a small business owner. Isn’t that owning a business?” I’m like, “No, you still have to trade your time for dollars.” If I run a donut shop and I don’t show up tomorrow, my doughnut shop doesn’t make any money. However, the goal is to hopefully open up several doughnut shops, open up several different places and have someone managing those. Now, you can take some time off. A great example of this as well is when we look at something like Quest. Quest started off with a few employees. It’s four or five of them. My dad is one of them.
My dad at the time was running a small business. He’s growing it and now whether he shows up to work or not, is that going to stop what Quest does? No. Is that going to stop people from investing in notes? Not a chance. Is that going to stop people like me doing this show with Scott? My dad slowly moved to be the owner of business versus self-employed. Understanding as an employee is the same thing. I have no desire right now to quit my job. Quest pays me very well so why would I quit? I make good money, but the amount of money I make, I need to start figuring out how to invest it and get on that passive income side. I need to be part of both the 95% and 5%.
It’s a cashflow quadrant.
Too many times, people are trying to go to one side or the other. It doesn’t work that way. You have to be playing both sides of the fence. I was like, “Dad, I get it. What else do you get?” He goes, “We have two problems with this.” I was like, “What’s the first problem?” He was like, “Taxes is one.” Remember when I was investing in using my own funds, I ended up in a bunch of tax implications. The next thing is the time. I don’t have a lot of personal time to dedicate being an investor. I was like, “If you’re trying to grow a small business, I can’t invest. I don’t have time to deal with the rental. I don’t have time to do a fix and flip. I don’t have time to deal with those.” If you’re an older individual, maybe you don’t have time as far as physical time left. I was like, “Dad, you have to have some solution.” He was like, “I do. It’s the self-directed IRA.” I’ve heard this term up to this point as a kid, but I didn’t know what it was.
I thought it was some magical accounts. I thought it was something that only certain people could set up. He was like, “It’s a made-up term.” My dad had to describe to me that the self-directed IRA is just made up. It’s what we call a marketing term. An IRA with anybody can be considered self-directed. The difference comes down to the custodian that holds your retirement account. Moving forward, I’m going to replace the term IRA with retirement account because that’s what it is. When we look at the retirement account, is it held in a public custodian like Fidelity or like Charles Schwab? If so, you can invest it in public assets, stocks, bonds, mutual funds, CDs and etc.
If I take that same retirement account and I move into the self-directed side, we can invest in private assets. Most likely it’s going to be real estate related, but it doesn’t have to be. Other private assets are small business or gold and silver. The big one a few years ago is cryptocurrency. Those are all private assets. It’ not that it’s better or worse, it’s just different. Some of the benefits that we go over are diversification. If all of my wealth that I hold is diversified in the public market, when stocks go down, the mutual funds go down. The CDs go down and everything on the public side goes down. If all of my wealth is put into a public asset, I’m not diversified. I don’t think you should move over your entire retirement account either. I don’t think you should take the full thing and move it over to Quest.
It’s critical because all of my retirement funds are on the private side, but I like to be controlling of it. I’m a little more stickler. I like to know what my money is doing, but that’s the diversification aspect. The next thing we’d like to think about is the tax savings. This is the biggest thing I can push. Understanding of my original example when I was talking about penny stocks, I ended up with a big tax at the end of the year and I didn’t know what to do with it. However, if I could have used my retirement account for those exact same investments, I would have had to pay zero taxation now.
You wouldn’t have been able to live off of it for a year though too.
We’re going to get to that because that’s a common misconception. Here are the pros and cons. The other benefit is something that I refer to as investing in what you know best. I didn’t understand why I was investing in the penny stocks. I googled how to take $5,000 and put it someplace. Google wasn’t my friend at that point in time. I also didn’t have anyone to help me. That sucks. When I’m looking at a piece of property. If I brought you a note and you’re like, “Derreck that is the worst note I’ve ever seen. You probably shouldn’t be lending money on that. You shouldn’t be buying that.” What does that mean? I shouldn’t buy it. At the same time, if I bring you a note and you’re like, “That’s a deal. Let’s figure out what we can do. Let’s joint venture and let’s do this. Here’s the exit strategy.” That is nice. That’s being able to take my retirement account and put it someplace where I can ask someone for real advice. That’s the biggest thing. We have all these types of plans that can be self-directed, traditional IRAs, Roth IRA, SEPs, SIMPLEs, 401(k)s, etc. but we’re only going to focus on one and it’s going to be the Roth IRA.
We’re talking about Millennials. We’re talking about your kids. We’re talking about trying to get kids excited on how to be an investor. The whole purpose of the story was I was young, I was dumb, I had to listen to someone else to help myself out and I still want to benefit now. We’re going to use the Roth IRA. Before we talk about it, we’ve got some minor restrictions. The first thing is investment restrictions, we’ve got transaction restrictions and people restrictions. The only one in this whole list that we care about is people restrictions. We refer to these people as disqualified people. The first person that’s disqualified from benefiting from an IRA investment is yourself. What this means is your IRA can’t go and lend money to you to buy something, but it’s not just you that it can’t lend money to. It’s a big list. If you want a copy of this, send me an email and I will gladly send it over to you so that way you don’t have to memorize it. I look at this list as lineal ascendants and descendants of an individual. It’s a fancy term of saying you, your spouse, your parents and your kids.
I call that the IRA macarena. No parents, no kids, no spouses.
If I have a retirement account, it can’t lend money, buy something from one of those individuals or sell something to one of those individuals. Your spouse, parents, kids or their spouses. We can dive into this topic and talk a lot about it. If you enter in or do one of those transactions, we call it prohibited. It was a prohibited transaction. It’s the fancy way of the IRS stopping your retirement account. They’re going to tax and penalize you a whole bunch of money. We’re going to dive back to that Roth IRA and some misconceptions about it.
Generational Wealth Building: A lot of the younger generation wants instant gratification, and it doesn’t happen that way in this industry.
One of them being, “I can’t benefit.” We like to always talk about making contributions to a Roth IRA. For this year, it’s going to be $6,000. I’m talking about the younger individuals so if you’re over the age of 50, it’s $7,000 but anyone under the age of 50, $6,000 is the most I can put into a Roth IRA. There’s a second bullet point on there, “I can pull out my contributions at any point in time without any type of taxation.” In my previous example, I was able to save up a whopping $5,000. It’s not a lot of money, but it leads me to a question. Does anyone out there have a savings account? Are you putting in more than $6,000 a year in a savings account? I don’t think the majority of people are.
If I put money in a savings account, can I pull that money right back out very easily? You bet. If I put $6,000 in a Roth IRA, can I pull it back out very easily with no penalties and no taxes? Why bother in this day and age have a savings account? It doesn’t make sense. We’re going to get to a case study. This is a real case study I did of a friend of mine from the army. My buddy Brian, he found a piece of land that he wanted to buy. It was $9,500 so it’s not a lot of money. Brian proposed to me that we buy this piece of land because it was getting ready to go commercial. It wasn’t commercial yet. It was still considered residential. Our original plan was to buy it and sit on it for ten to fifteen years. A couple of problems Brian ran into is he didn’t have $9,500. I was like, “That’s okay. I can help you out there.”
We decided to go ahead and come together as a partnership. We came together. We both put our funds from a Roth IRA up for this deal. This was the physical name on the contract when we bought this lien, “Quest Trust company for the benefit of Derreck Long’s IRA as to undivided interest at 50% and Brian Mcday IRA as an undivided interest of 50%. This means that at closing, we each send off a little over $4,000 to the title company. It’s easy. Notice that we were both fairly young and we didn’t have to come up with a lot of money. Our plan is to sit on this piece of land for ten to fifteen years. That doesn’t sound like a bad investment to hold inside an IRA, does it? However, something magical happened.
There is a golf course. The golf course was trying to buy that piece of land from the seller for a long period of time and they finally gave up. When they heard that we bought it, they reached out to our agent and made us an offer for $15,500. We sat on the property for a little over a month, got an offer and we were like, “We’ll sell it.” I understand that maybe long-term thinking, I could have made more money, but remember the instant gratification. I’m young. I want the money now. Brian and I decided to sell the property at $15,000. A little over $7,000 went back to each of our accounts completely tax-free. Through this method, I don’t owe any money in taxation. I can’t benefit from that money, can I? In this specific scenario, two people came together with their money. If you look at the percentage of return, it’s a little over 58%. That is way better than I could ever get in a CD, a mutual fund, a stock or anything. I was able to do this with a friend of mine, but it can be done with your children. Imagine setting up a Roth IRA instead of that savings account for your child and doing a deal similar to this.
Let’s clarify that. You’re partnering with the IRA. You’re not borrowing the money from the kids’ IRA. That’d be a prohibitive transaction. Is that correct?
That’s correct. Notice where I showed the yellow name, that was a physical name. Quest Trust company for the benefit of Derreck Long’s IRA. That’s a real person and it’s a good way to look at it. Notice that Derreck Long did borrow the money. Derreck Long’s IRA used the money in there to buy a property. Brian and I are in control the entire time. To me, that’s what I was looking for. I had zero control when I had my money sitting over there in the stock market. When can I benefit from those funds that I’ve just earned? I always hear 59.5, however, we know that 59.5 and you have to have it from five tax years, but I can always pull out my contributions any point in time. That’s not all I can pull out. There are a few extra rules Roth IRAs have hidden within them that a lot of people don’t know or realize.
What I’m going to focus on is the first-time home buyer’s method. I can pull out up to $10,000 in earnings to buy my first house. That sounds good. Do you know what qualifies a first-time home buyer? Meaning I haven’t bought a house in two years. That’s it. I could use this method multiple times as long as I haven’t purchased a brand new house for myself. In two years, I can pull out the $10,000 in earnings. Let’s go through a little example. For my very first house that I was looking to buy, I bought it a few years ago now. In my Roth IRA, I had little over $7,000 in contributions at this point in time. From me doing note investing and that piece of land and things, I had a little over $11,000 sitting in there. How much can I pull out to buy my first house?
You can pull out your contributions plus the $10,000. You have a total of $19,300 in the account because you have the contributions plus the investments. I want to make sure we got that right.
This is what I had from earnings from investments plus my contributions in total. I use my Roth IRA a lot. There are a lot of investments. When I went to go buy my first home, this is what was available physically in there. As a kid, at the time I was 28, is that a large down payment for a house? It is. I’m putting almost $20,000 down to buy my first home. I didn’t pull out the full $17,000. I only pulled out what I needed because I have a different plan in mind. My plan is to buy this house now and I’m going to live in it for two years. The reason I’m living in it for two years is I get to avoid some capital gains tax. After two years, I can reuse my first-time home buyers. I’m going to buy me another house. I’m going to rent out the current house that I lived in.
As a kid, I want some instant gratification. Being able to pull out money from my retirement account for a down payment is huge. I can use this house now as a rental once I find a secondary house to go move into and live in. Now I’m building up nice portfolios. Hypothetically, if I did this once every three to four years, by the time I’m 50 on paper, I’ll have over $1 million. That is awesome. This is just the first aspect of it. The next thing is understanding how to bring in other people like my friends and family. I found a unique borrower and I did this note. They’re a good friend of ours and they’re out here in Austin. They found a house, they bought it, but they needed money for the rehab for only $45,000. There’s a first lien position. I didn’t charge him any points where I was going to charge him 12%.
The reason I didn’t charge points is because I made them cover my Quest fees and my attorney fees. People are like, “No points. That’s awesome.” If you count the Quest fees and the attorney fees, it equals a point right there. This seems a good deal. However, many people see the $45,000 and they think, “I’m going to earn 12%.” This is about teaching other individuals. The next thing that I did was instead of me putting up the full amount of money from my account, I want my girlfriend to get excited about being an investor. Not only that, I want her parents to get excited about being an investor. If I can get her parents and my girlfriend both excited, I’ll end up with a lot more capital to work with whether I’m buying notes, buying physical property, doing fix and flips, etc.
I have this great idea to bring them in on this note. Let’s help the family but through baby steps. What I did is I use my Roth IRA and it had a little over $24,000 that I use to put up front. I also use a health savings account of $1,000 to put into this deal as well, but I use my girlfriend’s account of $8,000. I talked to her parents and I wanted to make them feel comfortable. They each set up their own Roth IRA and put in $6,000 each. Notice that if we add all these up, it equaled $45,000 that we did the loan to. They got their first payment of 12% on $12,000. There’s 1% because it’s 1% a month, but they were excited. The house went on the market. Once the house is sold, they’re going to get all their funds back. What do you think are they already telling me, Scott?
Let’s do it again.
Now they started to feel more comfortable. If you look at the method that we utilized, I used my own money and I took the majority of the note. The reason why is they see that I’m putting up half of the note more than half. They don’t feel so scared to put up their $6,000. Not only that, I’m showing them that I’m teaching their daughter. Now their daughter is getting excited about being an investor and doing these types of things as well. I’m building trust and building relationships. When this deal pays off, are they ready to do the next one? They’re going to be a part of your next Note seminar as well, Scott. I’d like to say it’s building wealth for years to come. I’m not just trying to build wealth for me, I try to build wealth for the family. If I can get everyone else involved, it gives me a lot of capital. It helps take care of everybody and overall, it makes sense. That’s my presentation.
I always like to go over little ways to build a network. Things that helped me when I first got started is business cards. If you don’t have business cards, you’re silly. I show up everywhere. If you’re around Houston especially, you’ll see me at almost every single real estate event, whether I’m speaking or not. I’m passing out my business cards, passing out folders and flyers, collecting what I can to build my list. Don’t be shy. Before I started working at Quest, I was a little bit of a shy guy but I learned that if you want to be an investor, say it loud. Say it proud. Scott, if you are shy, do you think you’d get half the deals you get?
No, not at all.
You’ve got to be excited all week. Have an elevator speech. Everyone else with this is something that I can say in an elevator. I always like to say, “I’m Derreck, I got some money to lend. What do you have?” That’s it. It’s basic, simple and straight to the point. Go to local REIAs, go to local meetups and find shows like this. It’s a great place to meet people. My girlfriend found a unique house from watching one of the podcasts. She was on Facebook Live and people are commenting. Someone made a comment about how they’re having issues with this house. My girlfriend responded and said, “What’s the issue? Where is the house located?” She strikes up a great conversation. It’s a unique way to find deals and make those contacts, which leads me to travel to educational events. That’s what I have for you.
If anyone would like an IRA, please give us a call at 855-FUN-IRAS. I would love to talk to you about this more. We have a great expo coming up in August that Scott is speaking out. We also have a boot camp coming up called the Financial Independence Day Bootcamp. If you’d like to go ahead and bring on some family members and listen to the boot camp live, it will help people. We have ten to twelve speakers coming on with moderators all there to help you out. It’s very similar to this. You get to interact with each speaker and each person can be talking about something different. If you’re interested, come see Quest. Give us a call and let us know what we can do for you.
We’ve got some questions, “What are the maximum incomes for being able to contribute to my Roth IRA?”
The maximum that you can contribute if you’re under the age of 50 is $6,000.
No, what are the maximum income as far as was what he meant.
A lot of people have bad misconceptions. They are thinking, “If I make too much money, I can’t contribute to a Roth IRA.” That’s not the truth. No matter if you make $1 million a year, you can still make contributions to a Roth IRA. You just have to add an additional step. Some people call it a backdoor conversion or backdoor Roth. What we do is we put the money in a tax-deferred account, we fill out a little one-page form and then we can convert the funds over to a Roth. It doesn’t matter how much money you make. Anyone can make a contribution to a Roth IRA. If your CPA is telling you otherwise, get a better CPA or read the tax code.
You could start a traditional IRA for $1,000 or $500. You make the conversion. You’re going to pay the taxes on whatever you contributed to at that point. Now, it’s a Roth. You can still contribute to it on an annual basis, $6,000 a year.
We do have some clients that they utilize both accounts. They make way too much money on their self-employed. They paid themselves from their business so they set up two different tax-deferred retirement accounts. One is a traditional IRA and one being a SEP IRA. The traditional IRA is either $6,000 or $7,000. The SEP IRA is unique and it’s up to 25% of what you pay yourself. As an example, if I pay myself $100,000 a year, I can contribute $25,000. I can immediately take that $25,000 and convert it into my Roth IRA plus the other $6,000 I’ve put into the traditional, put that in the Roth allowing for very large contributions. It’d be better if I talk to one of our IRA specialists.
He’s responding, “A traditional account and then convert it. It’s exactly right.” Someone said, “It doesn’t have to be a taxable income to set up an IRA.”
You do have to have what is considered to be earned income to set up any type of retirement account. Earned income be in 1099, W-2, Schedule C. Things that people always ask those questions on, “Does this qualify or is this qualified?” One of the things that seem to come up is Social Security. Social Security does not count nor do dividend payments. Those don’t count unless you claimed them as outside of investment income. If you have questions about that, let me know. Remember that W-2, 1099 and Schedule C are the three main things that we’d like to see in order to make a contribution to any retirement accounts.
Derreck, you’ve got to tell me a little bit about this new thing you’ve got going on. This new online event. When is this that you have twelve experts? I haven’t heard about this.
Generational Wealth Building: Do you know what qualifies a first-time home buyer? You simply must haven’t bought a house in two years.
It’s going to be another online boot camp, but as for financial independence, Quest is big with the community with our vets and with everyone else. We wanted to put something together just for the independent stays and everything else. We’re doing a financial boot camp and we’re calling it Financial Independence. The plan for it is to bring in as many speakers as possible and let each of them talk about different topics. We’ll have you come in and talk about notes. We’ll have someone like John Hyre come in and talk about the 401(k). We’ll have Nathan go on and talk about him doing his own investments and those types of things.
Is there a cost for it?
It’s going to be $100 for a ticket. However, if you sign up for an IRA now, what we’ll do is we’re going to give you a discount on that ticket of 50%.
If you use the code Carson 19, it is a discount on your registration fee for the event. If you’re signing up for a new IRA, you should get a bit of a discount.
If you’re one of Scott’s students, we do have permanent coupon codes for you such as that Carson 19. You also have your own hotline and things. Let us always know. When someone answers, we do a lot of work with Scott. All you have to do is say you’re one of Scott’s students and you’re going to be patched right through to one of the top experts. I always like to think that in this world you need to have continuing education. Unfortunately, a lot of our younger generation, they know better. I knew better. If you’re not open to always learning something new, I don’t think that your mind is going to keep it expanding. You start to get closed off, which is when you start making bad decisions. Be open to listening to new speakers. Be open to listening to new podcasts. Be open to working outside of your comfort zone. If you want to be a real investor, that’s one of the big keys. That gets back to that being shy. You can’t be shy. Let’s be loud and have fun.
You have to get the word out of the secret. I always make the joke that you can’t be a secret agent in real estate and succeed.
I do want to bring up our Expo. Scott, you’re at our Expo last time. How packed was that thing?
You had 500 plus people at it. You had a bunch of vendors. It was a great event. I’m excited because you’re doing it in Houston now, your home territory versus Dallas. It is slated for August 23rd, 24th and 25th. We had over 80 of our mastermind members in attendance that came in and hung out. They brought their spouses or other people along the way to hang out for two days last time, but you’ve expanded to three days now. You have Friday, Saturday and Sunday for the event.
We did that based off of some people’s topics from last time. We’d like to always take comment cards. They’re all we can do better what people liked and it made more sense to spread it out evenly and allow for longer breaks in the middle for people. We’re doing ten-minute breaks and people were barely paneling out of the room before the next speaker was going up. This time, we have it planned and we’re expecting close to 1,000 people. When we did it in Dallas, that is not our home base. We have an office Dallas team and awesome Dallas office. We have a gorgeous classroom. They do classes every Wednesday up there, but Houston is our headquarters. We have 110 or 115 employees out of that office alone. We are looking forward to it. The expo could be the biggest thing on August 23rd, 24th and 25th. It’s right at the end of the summer.
You got tickets online as well if you go to QuestExpo.com. This is going to be held at The Royal Sonesta Houston Galleria. There is a room block involved there. If you wanted to jump on it, I would do it quickly because the room block will fill up quickly like it did last time. You’ve got a different set of tickets. You’ve got your regular general admission. If you use the code Carson 19, it should give you a discount off of those tickets as well. It’s the best discount of anybody as what I’ve been told.
Some people are like, “I’m not a Quest client. Will it be something that I can come to?” If you’re not a Quest client, you’re only hurting yourself because Quest is the best customer service in the industry. They’re willing to jump on the phone and walk you through different things even if you’re not a client. Plus, the fact to help close quickly, you’ve got the online portal, which is rock and rolling along there. Where else are you going to have the opportunity to come and rub elbows with potentially 1,000 other investors?
If you have any students here in Austin, we’re doing a class here. It’s great for networking. We’ll also buy you lunch. You can’t beat that.
It’s Lunch and Learn at Quest Trust Company. You’re doing a lot of lunch and learns across your Houston your Dallas and your Austin office.
Every Tuesday, Wednesday and Thursday, each office hosts a Lunch and Learn. Tuesdays in Houston, Wednesdays in Dallas, and Thursday is in Austin. Not only that, the second Tuesday of the month we do a big Mixer in Houston. The third Wednesday of the month, it’s in Dallas and the last Thursday of the month in Austin, we do a big Mixer in the evening. There’s a lot of fun to come to because there’s a bartender and there are free foods.
I liked that you rotate it Tuesday, Wednesday, Thursday so you know exactly which city to make it a little simple for you. They could come in, spend some time and just drive those areas and spent a great day networking with people. Usually, the Trillion Dollar Mixer are getting 60 to 70 people in Austin. The Houston ones are getting 80 to 100. Dallas also has a great space up there with Rebecca and Haley managing that office.
The last Trillion Dollar Mixer that they did in Dallas had a little over 100 people.
Derreck, let’s bring this back down a little bit. You’ve got some great events. You provide some great stuff out there. I totally admit that I goofed up. I was like, “You can’t use it for yourself. You can’t live off.” I forgot that you have the ability to be able to pull money from your Quest Trust self-directed Roth account to use it for educational expenses. What are some of the educational expenses that students can use in college?
They can pull out up to $10,000 from the retirement account strictly to use for education expenses. It’s labeled as higher education. What is higher education? Could this be used for books? Some people would say yes. Typically, we see it used for tuition. When you think of the $10,000 in earnings from it, you can fly to that in a tuition expense. We do see people use them for trade schools, a mechanic school, a hair school, but remember that it’s labeled as something that’s for higher education. Being able to utilize a retirement account for your school expenses, but also for any other personal needs such as the first-time home buyers and a medical expense, those are beneficial.
What do they classify as a medical expense? Is it someone that goes into the hospital going for a copay?
A medical expense is a little bit more defined. It does have to be like, “I ran into some major medical issues. Here is the surgery bill.” It’s not an HSA. We do have two other accounts, an ESA and an HSA that cover more tuition and more medical expenses. The ESA, the Education Savings Account, if you’re under the age of eighteen, it can be used just like a Roth. When you put money in it, you can pull it right back out very easily. It grows what we call a tax-free and the earnings can be pulled out for any school expenses. This is huge because unlike the Roth IRA where it has to be for higher education, school expenses, backpacks, school supplies, laptop, computers, tuitions and more. The Health Savings Account is the same thing, but for medical expenses.
If you qualify for a Health Savings Account, you can put money in there and you get to take that money as a tax deduction. Plus, you can pull out that money completely tax-free plus the earnings tax-free for any medical expenses. Over at Cinco de Mayo, we had some fun, we partied and the next day, I had to go to Walgreens to buy some Tylenol. Instead of me using my personal funds, I end up using a Health Savings Account to buy those. Medical expenses are anything you can relate back to keeping yourself healthy. For me, that was Tylenol at the time. It could be hand sanitizer or it could be Kleenex.
You’re using personal funds and reimbursing yourself from HSA for those expenses though. You’re not going there like, “I got a debit card for my HSA account.” That wouldn’t work that way. Could you use your Roth IRA to pay for sorority or fraternity dues?
I’m going to say, no. However, when we look at the distribution form, it asks you why did you pull the funds out and you say for higher education. However, when you physically ask me, I’m going to say stick to the higher education covering the real tuition costs. If you can argue one way or the other, maybe get away with it, but it does state in and the IRS tax code for higher education.
What’s the biggest mistake you see from young people, the Millennials or the people that are coming into their ages going into the workforce? What’s the biggest mistake that you see, Derreck?
I would label not taking action. Scott, how many times do you work with someone and they’re scared to take that next step? It’s something that’s very hard to get people to overcome, especially when they have someone else whispering in their ear that supposedly knows better but they’re broke. I’ve run into that issue a lot. Someone says, “That doesn’t work. Here’s what works. You work hard for 50 years, put money in your 401(k) and you retire.” It doesn’t work that way.
The 40/40 club doesn’t work where you work 40 hours a week for 40 years to retire in 40%. That’s not fun. I’m glad that you brought up the cashflow quadrant because a lot of people are like, “When you start off, you’re exchanging your hours for a paycheck.”
There’s nothing wrong with that. Too many people look at that aspect and they take that the 95% is bad. I don’t want to be part of the active income side. No, it gets you to the passive side and it’s not something that happens overnight. I even built a full Excel spreadsheet proving that and going over.
Generational Wealth Building: If you’re not open to always learning something new, your mind will stop expanding and you’ll start to get closed off, which leads to making bad decisions.
What’s the best way for people to get ahold of you?
I’m going to give 855-FUN-IRAS, but that is a non-automated line. We have fifteen or sixteen IRA specialists on staff that can answer that call. It’s non-automated, which is unique in this day and age. If you’re one of Scott Carson’s students, use this coupon code Carson 19. We’ll help you out. We’re here for you. We answer the phone immediately and we return emails. If you want to send me an email, the best email is IRASpecialist@QuestTrust.com.
That’ll go to all your IRA specialists. It won’t just go to you. It will go to everybody. You can reach out immediately.
You can address my name so I’ll respond to it. I’m getting ready to go on a cruise so if you email me personally, I might not see it. I always like to give that email out because it reaches out just in case if I’m not available, someone’s there to help you out. That’s how we work. We’re not here to sell you anything. We’re here to help you.
Thank you so much for the great stuff and for sharing a great presentation.
Thanks for having me on. I appreciate it. This was a lot of fun. I’m looking forward to doing it again. There’s a whole slew of topics we can cover.
You have fun in Austin. You’ve got a great group down there. Make sure to tell Ingrid, Katie, and Michael to keep rock and rolling out there. Thank you so much, Derreck.
Thanks, Scott.
As always, take action. You heard it from Derreck, that’s the biggest mistake. People are not taking action, going out and putting these things in the process. Start it. You don’t have to put a whole ton in there but start building habits and building those great saving things. Start paying yourself first and before too long, you keep planting those little trees. You keep putting that money in the bank for yourself. You’ll look back and it will be bigger than you ever expected to be. Go out, make something happen and we’ll see you all at the top.
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About Derreck Long
Derreck Long served in the military from 2010 to 2014. After leaving the military, he went to college at Northern Arizona University on the GI Bill where he received his degree in global marketing. Shortly after, Derreck started working with the FBI translating Russian documents but wanted something more fulfilling, so he began learning how to become an investor.
This is when Derreck started experimenting in notes and has been a private lender ever since. Since becoming a real estate investor, Derreck has done a large range of notes from equity appreciation and 2nd lien notes to the traditional 1st lien for a fix and flip style investment, and he has become an expert on Self-Directed IRAs, lending through his retirement account held at Quest Trust Company.