May 15, 2017

JF986: How and Why You Would Leverage Other People's IRA and Cash



Strange concept, but once you understand the intricacies of the tax law, and pair that understanding with leveraging other peoples money… you have a powerful tool!

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Quincy Long Real Estate Background:

– President and founder of Quest IRA, Inc., the premier self-directed IRA provider in the country.
– Licensed attorney specializing in real estate and an active investor
– Author of “Real Estate Investment Using Self-Directed IRAs and Other Retirement Plans.”
– One of the most sought after keynote speakers in the nation on the Self-Directed retirement industry
– Based in Houston, Texas
– Say hi to him at or
– Best Ever Book: RIch Dad, Poor Dad


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Quincy Long advice


Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any fluffy stuff.

We’re gonna be talking self-directed IRAs today with Quincy Long – how are you doing?

Quincy Long: I’m doing great, glad to be here.

Joe Fairless: Nice to have you on the show, my friend. A little bit about Quincy – he is the president and founder of Quest IRA, he is the author of “Real Estate Investment: Using Self-Directed IRAs And Other Retirement Plans.” Based in Houston, Texas, and you can say hi to him at his company’s websites, which are in the show notes link. With that being said, Quincy, do you wanna give the Best Ever listeners a little bit more about your background and your focus?

Quincy Long: Sure. Basically, besides what you said, being president and founder of Quest IRA Inc., which was founded back 2002, I’m also an attorney, an active investor. I’ve been a fee attorney for a title company, so I know a whole lot about real estate also, and I’m a certified IRA services professional, which means I have an expertise in IRAs in general, not just self-directed. Other than that, I can go into all kinds of other details, but I suspect most of the rest of it is not all that interesting to your listeners.

Joe Fairless: [laughs] You’d be surprised. I think we like hearing some stuff that we haven’t heard about before, but we will focus our conversation on  self-directed IRAs. What should we know about them? Let’s start broad and then we’ll get more specific, as real estate investors.

Quincy Long: I think the two key elements that you need to understand about self-directed IRA’s is 1) they are incredibly flexible. There’s just all kinds of things you can do to either defer, or in some cases, eliminate your taxes on your real estate profits. That’s the good side.

The downside of self-directed IRAs – and I guess I should confess that when my mother wanted to really know what happened in my family, she just asked me because she knew I’d tell her the truth, the whole truth, and nothing but the truth, whether it’d help me or not… But there is a downside to being in a self-directed IRA, and that it is self-directed in the self – it’s not us, it’s you. You get to make your own choices, but you have to make your own choices, because in a self-directed IRA you don’t have any investment choices approved or provided by the custodian or the managed trader. So that’s kind of the double-edged sword of the self-directed IRA. It’s an incredible tool, I’ve used it extensively and really enjoyed using it personally, besides having the company, but you’re responsible for your own choices.

Joe Fairless: As far as the type of investments that you’ve seen people make – real-life investments, versus just theory-based, what are some interesting real-life investments that you’ve seen people make?

Quincy Long: Interesting… Boy, I get to fill the hour with just the interesting ones, but the most interesting ones are really not necessarily real estate related… Some of them are probably not proper for airing online, but we’ve certainly had some interesting real estate deals; options are always structured in interesting ways, so I like options… Some of the most creative stuff that I’ve seen is actually in the area of notes secured by real estate, and how those notes are purchased, sold, created – that sort of thing.

Obviously, you can buy a piece of real  estate, and I don’t know that there’s anything particularly creative with that, except for where you buy it and when. We certainly had some home runs that people have made buying real estate in their IRA, and I could tell plenty of stories about that… But as far as the most creative and interesting things, I’ve gotta say it’s probably notes.

Joe Fairless: Why do you categorize those as the most creative and interesting?

Quincy Long: Well, maybe it’s just personal choice, because that’s what I like to do… But you can structure real estate notes, and — well, of course, you can buy performing notes that are existing, sometimes from institutional lenders. You can buy non-performing notes, but you can also buy partials from seller-financed deals. But the most fun that I have with them is actually creating them from the beginning, and structuring them in a way that you can basically get the note done and then sell off the first part of the note to recoup all your money invested in creating the note, and then keep the tail end of the note for yourself as a profit. That’s a really good way to build an IRA. It’s not really sexy, I suppose, but it’s an excellent way to build an IRA slowly and securely. That’s what I like about it.

Joe Fairless: What are some things that when you work with your customers they find surprising about the self-directed IRA process?

Quincy Long: I think the biggest surprise – and I don’t know why it would be a surprise – that people find is that we’re not here to teach them how to be an investor, we’re here to provide the vehicle through which they make their investment choices. In other words, we’re like luxury car dealers – we’re gonna sell you the vehicle, but we’re not gonna teach you how to drive that vehicle, and we’re not going to put your gas in it, which is your money, of course, and driving the vehicles, making your investment selections.

I think some people maintain the illusion that somehow we’re investment advisors, and of course, there’s no way with the structure of the company that that can be done. Again, I don’t know why that would be a surprise to anybody, but they just perhaps don’t understand the product. But having said that, it’s an incredibly powerful and flexible tool, and we do provide a whole lot of free education about the things that people have done and can do with self-directed IRAs; perhaps then people say “Okay, great. Can you set that up for me?” Well, the answer is no, but I can allow you to do it once you get it figured out.

Again, other than that, the biggest other surprise would be how genuinely flexible it is, and all the crazy things that people do and can do with them.

Joe Fairless: Once you have an account set up and you’ve identified an investment opportunity – and I imagine usually you’ve already identified the investment opportunity and that’s why you’re setting it up, usually – what type of paperwork is required to invest in it?

Quincy Long: It’s actually pretty easy. The first thing they’ve gotta understand is that the titling has to be done not obviously in their individual name, but in the name of the IRA. For example, if it was your account, it would be something like you would be making the offer on the real estate or creating the note or whatever you’re doing as Quest IRA Inc. FBO (for the benefit of) Joe Fairless IRA number 12345 or whatever it is. So titling is important, but once you’ve got the titling right, the next task is to read and approve all the documents, because as I said, it is a self-directed IRA, so you have to read and approve everything because you are the decision-maker as the client.

And then the third step in the process, of course, is to submit the direction to invest, and there are different direction to invest forms based on what type of an asset you’re purchasing, whether it’s a note or real estate or a private placement, or something like that. Once those steps are followed, then we actually fund within 24 hours of when you submit all the proper paperwork.

Joe Fairless: When you attend a conference and you’re speaking at the conference, what’s the angle of your presentation that you usually talk about.

Quincy Long: Well, my presentations typically are always educational and never salesy, if you know what I mean, because I’m not very good at that. But what we do is we typically will educate on the types of accounts that are available and the types of investments that clients make with those accounts, and then we typically tell just a few investment stories to give them a better idea of the types of transactions that people can and do in a self-directed IRA or other type of account.

Joe Fairless: Can you tell us a story that you typically tell that usually resonates well with the audience?

Quincy Long: Lots of stories… Let me tell you this one, because it’s a pretty simple one. Joe, one of the things is people are not understanding that it doesn’t take a whole lot of money to invest in real estate, so that surprises a lot of people. But I’ll just give you this one example… I wish it was from my own portfolio, but unfortunately it’s not. We had a client that knew somebody, was kind of around the corner from his office in downtown Houston area, and she was being foreclosed on for delinquent taxes.

She was a little old lady, the house was not worth very much at all — in fact, it was probably worth whatever it took to tear it down, but the real estate was in the pass of development, if you kind of get my meaning on that… And he knew that the real estate development was coming, but wouldn’t get there for a couple of years. And she wanted to stay in the house; she knew she was getting [unintelligible [00:11:44].21] would probably have to move in with relatives or into a care facility within a couple years, but she wanted to stay in her house as long as she could.

So she asked him for help, and he arranged to purchase her house for the delinquent taxes of roughly $10,000. Then he also agreed to allow her to live in the house rent-free for two years, and that would give her time to make her transition. And at the end of two years, she moved on and he sold the property that he paid $10,000 in his Roth IRA for $290,000 to a developer who tore it down and put up a townhouse. That’s a pretty good return on investment, I would say… Wouldn’t you?

Joe Fairless: It’s a win/win for everyone, it sounds like.

Quincy Long: So that was a great deal… You just tell me when to stop, I can tell many stories of different types of investments. If you want real estate specific, one from my portfolio that I thought was pretty good – not a home run, but not a bad deal… Because as I said, you can invest in real estate directly or indirectly, and indirectly – I mean you can invest in things like limited partnerships that purchase property for various things. I do invest in a lot of shopping centers myself, for example, through limited partnerships. But the one deal I did that I thought worked out pretty good – and I like this; the story is important because it demonstrates something called the ERR… Do you know what the ERR is?

Joe Fairless: No, what is that?

Quincy Long: That’s the Effort to Return Ration.

Joe Fairless: Okay.

Quincy Long: And by that, I mean that everybody gets hung up on the dollars, but it’s more important to understand how many hours it took you to make those dollars. In other words, a per-hour return on your investment is the best way to really judge an investment, if you see what I’m saying. So in this particular case, I invested in a limited partnership and we paid $500,000 cash for a triangular piece of property with a small house on it that was located North of Dallas, Texas. And basically, we were gonna hold it for up to 5 years, and the rent from the house would pretty much pay the taxes and whatnot on the property, which it did.

The only thing we did to improve the property was we got the liquor license extended to the city limits, which included now our property. Well, that of course increased dramatically the value of the piece of real estate by doing that, and we ended up three years and nine months after we bought it, selling the property for 2,5 million dollars, because the path of development once again was headed North of Dallas into this little town called Melissa, and that’s where the piece of property was.

I think that’s also a great story, and the great is not because we made a good return – which we did – but in my case, all I did was read the private placement memorandum and evaluated the deal. So I spent a sum total of about 4-5 hours on the deal, and made a pretty good return for my dollars invested, in a very short period of time. I thought that was an interesting case.

Joe Fairless: Yeah… And you invested that via a your self-directed IRA?

Quincy Long: I did, indeed. Yes.

Joe Fairless: Based on your experience, Quincy, as both a real estate investor, because you have invested in real estate, clearly, and then also as an expert in self-directed IRAs, what is your best advice ever for real estate investors?

Quincy Long: Well, the best advice ever I would say is to learn how to use OPM and OPI – other people’s money and other people’s IRAs – to boost your own IRA. I think that’s a talent that not enough people have. Among the note deals that I’m talking about, if you can create a note – I purchased one at a 30% discount (a $30,000 note for $21,000)… And then when I sold the — well, I didn’t sell the property; the investor that was borrowing my money sold the property and created $30,000 worth of notes. Well, I sold off the first lien note of $21,000 and kept a $9,000 second lien. That just created that money for free.

So if you know somebody with money, you can partner your IRA with their IRA, and as long as they’re not disqualified people to your IRA, you can do some very creative and innovative things. I think using other people’s money to create wealth – or creating free money, as I like to call it – is the best thing I can think of to do with a self-directed IRA. That’s what I like to do, that’s what I try to do every day.

Joe Fairless: Are you ready for the Best Ever Lightning Round?

Quincy Long: Sure.

Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.

Break: [00:16:51].17] to [00:17:34].28]

Joe Fairless: What’s the best ever book you’re read?

Quincy Long: Best ever book I’ve read is Rich Dad, Poor Dad, because it gives such an interesting twist on how money is handled and treated.

Joe Fairless: Best ever deal you’ve done? You might have already mentioned it.

Quincy Long: Well, I hope the best deal I’ve ever done is participated in a different real estate transaction, where we bought 196 acres on Maui for $900,000 cash from a bankruptcy estate, which we got a 2,5 million dollar offer before we closed on the property, and turned it down because we think we may be able to sell if for maybe 10 million or more. So that isn’t completed yet, but I believe it’s gonna be one of my biggest investments with the dollar return for effort hour.

Joe Fairless: Wow.

Quincy Long: I hope that’s the best.

Joe Fairless: How long ago did your group buy it for 900k?

Quincy Long: They bought that 3-4 months ago now.

Joe Fairless: Oh, very recent.

Quincy Long: Yes.

Joe Fairless: What’s the hold period?

Quincy Long: Up to five years for that kind of property. We’re gonna market it to the ultra-wealthy. There’s a lot of Chinese and other Asians that visit Hawaii, so that’s the target. There’s some movie stars and what not that have property in the same area, but it’s also a good property for eco-tourism. Just fantastic waterfalls and caves… Probably for the holding period we’ll do some eco-tourism to pay the costs of the property until we can find the correct ultra-wealthy buyer that can write a check between 10-20 million dollars. That’s the plan at this point.

Joe Fairless: Wow. That’s a completely different business model, that’s fascinating. Quick follow-up question on that – how do they approach finding potential buyers?

Quincy Long: Great question, actually… And of course, this is through a limited partnership, so again, I’m not doing any of the work, because I have 4-letter words like W.O.R.K. Some other 4-letter words I’m okay with, but not that one. So basically, we’re at the end of this month or in the month of April sending a professional film crew out to document and film the property, because it’s kind of a rugged piece of property, you can imagine that of course. And then there are sites that are catering to the ultra-wealthy type properties, the trophy properties, if you will. So there’ll be a large internet marketing campaign specifically to target the ultra-wealthy individuals that might be able to afford such a property.

Joe Fairless: Interesting stuff. What is the best ever way you like to give back?

Quincy Long: What I do every day… Somebody asked me a question recently – if I was rich enough to retire, what would I do? I said I’d educate people about self-directed IRAs, of course, because I actually enjoy doing that and I think it’s important. I’ve just finished my estimated taxes before I’m going to Europe – tomorrow, actually – for three weeks… And I’ve finished my estimated taxes and looked at the dollar amount that I’m gonna have to pay as an estimate, and I just got sick to my stomach and I thought “I need to do everything I can…” I’m all for paying your taxes that you owe, but no more than that. I don’t want people to be a tax donator, as I call them. When you do a deal that you could do tax-free, you’re a tax donator, and I just have a real problem with that, because I don’t think the government uses the money as wisely as I would if I had that money.

So again, I believe in paying my share of taxes, but not a single dollar more. I believe in that so much in fact, that teaching other people how to avoid paying taxes by using the government’s own rules that they laid out for us is almost like a mission to me. So that’s what I like to do to help people – teach them how to get out of paying taxes using the government’s own rules and following those rules.

Joe Fairless: Do you have a book on that? Or somewhere else that you have that info?

Quincy Long: Yes. Our website does have a whole lot of information and pre-recorded webinars. We do classes every Tuesday at [9:30] in the morning central time, and at [6:30] in the evening central time, and then also on Wednesday evenings we also do another class out of our Dallas office; the other two are in our Houston office. Those are done by Facebook live. Also, we have pre-recorded webinars that we have done that people can access from our website, and we do all the social media stuff. We’re not quite as adept at podcasting as you are yet, but we’ll no doubt get to that at some point this year, we hope. So we use various techniques to spread the word. I am working on a book, but it’s not completed yet.

Joe Fairless: We’re looking forward to that one. And if you think about your real estate investments, what’s a mistake you’ve made on a deal?

Quincy Long: Oh, that’s easy… I’ve made lots of mistakes. And yes, I’ve been very successful, but anybody that tells you that they’ve never made a mistake has either never done a deal or they’re lying. I would have to say, again, because I do a lot of note deals, my biggest mistake was doing a deal where I did plenty of due diligence on the property, but not enough due diligence on the person that was borrowing the money in that case. I always make the strong suggestion that anything you’re doing, you do due diligence on the deal itself, but most importantly you do due diligence on the people.

I failed to do that, frankly… So I had a great and perfectly valid hard money loan out of my account from the perspective of the property, and we ended up foreclosing on it and it’s been a great rental, and we’re getting ready to sell it after a couple of years of renting it. But four days after the buy borrowed my $200,000, he turned around and went to a different title company and borrowed another $215,000 on a property worth about 270k. Then he also sold it at a third title company ten days later for — I don’t remember the number, but he took a $45,000 down payment… And I found out later he had partners at the foreclosure sale where he bought the property for $100,000, so he took like half a million dollars from people on a property that he had a net of $100,000 in. Basically, after all of this broke and I ended up foreclosing on the property and did due diligence on the individual, I found pretty strong evidence that he’s a crook.

Joe Fairless: Yeah, that’s jail time right there.

Quincy Long: Had I known that, of course I would not have made the deal in the first place. I think that’s my biggest mistake and my biggest learn – you have to do due diligence both ways: people involved, as well as the property or the deal itself. And that’s true for real estate, it’s true for notes, it’s true for private types of investments like limited partnerships, stuff like that as well.

Joe Fairless: Where can the Best Ever listeners get in touch with you?

Quincy Long: There’s several ways, but the best way to get a hold of me is simply to go to our website, which is They can, of course, call our center here in Houston, Texas at 855 FUN IRAs. If they wanna submit a question, we do answer basic questions on my blog site: There’s some interesting blog posts there of questions that people have asked me that I’ve answered. You can scroll through those and get some information there. Ask a question if you want to, and it will come to my e-mail.

Joe Fairless: Quincy, thank you for being on the show, talking about a whole range of topics, from self-directed IRAs and some interesting investments, and then some success stories as well as some interesting stuff that you’re investing in on a limited partnership side. The land flip – I would have sold at 2.5 million; I buy it for $900,000, got an offer right before we close for 2.5 – done! Write me the check, I’ll give you the [unintelligible [00:26:28].26]

Quincy Long: To be honest with you, I voted to sell, but you know, when you’re in a partnership it doesn’t work that way.

Joe Fairless: Yeah, I’ve realized through all these interviews – I’ve interviewed about 1,000 people – that when you have money on the table like that and you can double your money before you blink an eye, then you need to do it and then maybe put it in something more long-term and take the chips off the table. But who knows? It could work out, and I hope it does, as well as the other opportunities that you mentioned that you’re doing. And doing due diligence on the operator just as much, if not more so than the deal itself. I know a lot of people look at the operator first before they even look at the deal.

Thanks so much for being on the show. I enjoyed these stories and I enjoyed our conversation. I hope you have a best ever day, and we’ll talk to you soon!

Quincy Long: Thank you very much. Have a great day!


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