[00:00:00] Speaker A: Welcome, listeners. Welcome, listeners. You're listening to the deeds in the desert, the place where real estate investors tune in for the latest news and available investments at Ignite funding. If you're on the hunt for a low effort passive income stream, then turn up that volume and pull out the hammock as we get ready to feed you your weekly dose of real estate investing insights.
[00:00:30] Speaker B: Welcome, everybody, back to another episode of Deeds in the desert. I'm your host today, Izzy Arizari. I have with me the lovely Kate Buta, business development exec over here at ignite funding. And we're going to talk about why businesses should invest in trust deeds, not just real estate, but specifically trust deeds with us here at ignite funding. So let's just jump right into it. Let's start with Kate.
Tell us a little bit more about the people who are typically deciding to actually invest with the business account here at Ignite.
[00:01:00] Speaker C: You know, what could be small or big business owners, to be quite honest, some of them might just have cash that's laying around from the business that.
[00:01:09] Speaker B: They'Re not cash flow, not getting any.
[00:01:11] Speaker C: Type of funds, any kind of return whatsoever. So I'm seeing a lot of clients that are reaching out, looking for ways to generate some passive income in these business accounts. Right. These businesses might be an S Corp, a C Corp.
I have nonprofits even.
[00:01:30] Speaker B: Interesting.
[00:01:30] Speaker C: Yeah.
[00:01:31] Speaker B: Nice. I think it's interesting when I see people who decide to open an LLC strictly just for investing, they create new operating agreements, they get different people involved, and it's really interesting that they just decide to specifically open an account to invest with us.
[00:01:47] Speaker C: Yeah.
[00:01:49] Speaker B: Let's talk about why they should invest with us, though. You touched on a good point. The cash that they have sitting on the sidelines. But I noticed a lot of businesses don't invest in anything. They just have that cash sitting on the sides. And they may be looking for equipment or looking to expand their workforce, but they're still not figuring out how they can make additional funds. And I don't think a lot of businesses really look into investments in general. I think it's because they think they can't invest.
[00:02:16] Speaker C: Right.
A lot of them aren't exploring all of those options.
[00:02:20] Speaker B: Right.
[00:02:20] Speaker C: They don't want to put it in the market because of the volatility. They need it to be a little bit more liquid. Okay. But with the investments that we're offering and them being short term, we can get them into investments. If they say, I'm going to need my cash flow back in a year, we can look at nine month loans. Right. Because that's the lowest term we offer, 18 months if they don't need it for a little bit longer. Right. We can kind of talk about those things and what their needs are, what their cash flow, what they need to keep liquid versus what they could actually invest and earn on. And then they'll see that portfolio of theirs actually grow because of the interest that they're earning. So they're going to have more available cash.
[00:03:03] Speaker B: I can definitely see that. I wonder if anybody ever utilizes their cash to actually pay for bills, pay for w two employees. I really am interested to know what some of the business people actually decide to do. Can you give us some examples of some of the businesses that you manage right now as far as your clients?
[00:03:21] Speaker C: Some of my clients, new clients. Cpas. Right. I do have a lot of those CPAs opening up business accounts right now because they want to test it out before their clients. Before their clients. Right. And then they're going to refer their clients over as we're going into tax season. Right. Makes sense.
[00:03:37] Speaker B: Probably really busy right now.
[00:03:38] Speaker C: They are very busy right now. So them getting an account open is great. But that would be one nonprofit, the nonprofit account that I opened recently. Right. Again, a lot of them don't know what they are going to invest in. They don't think that because they're a nonprofit that they can, but they absolutely can do these type of investments in those accounts.
[00:03:58] Speaker B: What do you say to the investors or the business owners that get weary because the first thing they think of, oh, I'm going to have to pay taxes on this.
I don't want to invest to make more money right now. I'm trying to work at a loss or I'm growing too much. So I'm already making too much money. What do you say to those people?
[00:04:15] Speaker C: Well, obviously consult your tax professional. Right. Because the interest that you earned is earned interest income. But when you are running it through a business or you have a business account, there's a lot of things that can be offset for the business, your business expenses and such. And some of the earned interest income might be able to be offset through those expenses through your business if you're investing that way.
[00:04:38] Speaker B: And we don't want most business owners to assume that it's some kind of special tax form they're going to get because they're a business. It's a 1099.
[00:04:46] Speaker C: 1099 INT.
[00:04:47] Speaker B: It's the same thing every single time as far as investing, unless you're investing in qualified funds. But we won't talk about that right now, but yeah, that's one great point. It's just normal. Another form they give to their tax professional. Like you mentioned, cpas.
The other thing too is I think people think it's really hard to make an investment like the actual application process. So why don't we just jump into that, actually, and why it's so easy to actually do, because frankly, you should actually have all the documents already. So go ahead, jump into what does somebody need to have to submit an application?
[00:05:20] Speaker C: So documents that you're going to need to have on hand are for the business. So your business entity documents, your ss four form, when the IRS signed you the EIN number, right? A letter of good standing saying that your business, right, you've renewed your license, your business is in good standing, and literally a copy of your government issued id, whoever the authorized signer is going to be.
[00:05:44] Speaker B: Oh, and then the w nine that you'd have to sign in most instances. Some people like to select the business as taxable entity. So that's why we need the EIN and things like that.
[00:05:53] Speaker C: Correct.
[00:05:54] Speaker B: But as far as some of the business docs like Kay had mentioned, articles of an organization, operating agreements, all stuff you should have had to create when you did create the business itself. I think the one thing people miss out on the most is the certificate of good standing. I know we've had a struggle for the last couple of months in trying to make sure that people are submitting that, and it's important for us. We are compliant, we are regulated. So we do try to ensure that our investors are doing the same. So if you're in good standing, you've paid your taxes and everything is good on that front, you should have no problem getting one of those certificates of good standing. Aside from that, the minute they decide to get all those things in order, submit the application right on our website, we'll review it, making sure that we have all the documents that we need in terms of the business itself. And if everything's good, they're ready to go. No fees to invest. Right. They have nothing to worry about as far as fees. And then from there, it's just like selecting an investment, just like in any other type of account, a cash account, a trust, whatever have you.
[00:06:49] Speaker C: Yeah, that's exactly it. So when we get that information, it normally takes us 24 hours to open the account, and then at that point, you're ready to place your first investment.
[00:06:58] Speaker B: Nice. Let's jump into some of the other benefits for some of the business investors that are doing this. You mentioned one of them actually putting their money to work, actually earning additional income, compounding interest and things like that. I think that one of the thing that they don't think about, though, is diversifying. Because if you have all of your money into your business, what's the difference between what we always tell everybody? Don't put all your money in one basket. That's kind of what you're doing. We understand you want to invest into your business, you want to grow your business, but at the same time, you should diversify some of your funds. Not everything needs to go into improvements on a building or not everything needs to go into, let's say you're a service company and you're buying the more vans for your fleet or something like that. Pull back a little bit on that. Utilize some of those cash holdings that you're going to have that typically do sit on the sidelines. I mean, as a business owner, you're the one who knows the best. You know what you're going to be receiving every year, you know when your down side of the year, you know your down season is. So I think that's a big concept that a lot of people don't really think about too much. Is diversifying your company, not just yourself.
[00:08:04] Speaker C: Absolutely.
[00:08:05] Speaker B: Let's actually jump into something else. I know I talked a little bit about qualified funds a little earlier, but let's talk about this, because you've been getting so many accounts, I feel lately has been crazy. I've been seeing all them, and it's kind of making me spin because I've noticed a lot of people are doing checkbook, llcs. So for those that don't know what this is, I'm going to let Kate explain it the best because she deals with this on a day to day basis. So, Kate, what is a checkbook, LLC?
[00:08:29] Speaker C: So a checkbook, LLC is an account that's opened normally underneath an IRA account in a lot of directed a self directed IRA in a lot of cases. And you as the investor are directing those investments, meaning you have authority to put those funds wherever you would like.
[00:08:47] Speaker B: Outside the stock market.
[00:08:48] Speaker C: Correct. That's where the checkbook part comes in. So you can actually dictate where those funds go. It's a lot easier to transact that way.
I'm seeing a lot of people open accounts that way through the checkbook LLC, and there's several self directed IRA custodians that can do that. Also, there are a lot of self directed IRA custodians that are opening business accounts. So the business is actually located in the IRA.
[00:09:19] Speaker B: Oh, yeah. It's held within. Correct.
[00:09:20] Speaker C: Held within the IRA. And what that does is that keeps the funds that you were earning in interest tax deferred because the business sits in the IRA account. And there's a lot of self directed iras that are out there now that are having clients set up business accounts in their directed IRA funds to keep those funds tax deferred for them.
[00:09:43] Speaker B: Yeah, it's great. I mean, especially the tax sheltered environment, like you said, depending on how they have it set up, whether it's set up in the traditional way or if it's set up in the Roth way or some of the other intricacies I don't want to get into.
[00:09:54] Speaker C: We could go down a rabbit hole.
[00:09:55] Speaker B: Yeah. Then we'll be here forever. And then we'll have to make this a three part series. And I'm not trying to do that, but yeah, it's great. The potential of being able to do that. If anybody is wanting to do that. We do work with four different self directed custodians that could assist in the business owners that are wanting to do that and invest in trustees, specifically in a tax sheltered environment. If that's your strategy, if that's something that you really want to do, it's a great means of doing it. The one other thing, too, is I really like is for some reason, since 2021, I've noticed the ramp up of business accounts that have been coming in. It's been crazy. I remember the first couple of years I was here, it was very rare to see a business account. It was always typically cash and IRA funds. It wasn't really business related. And I've noticed a lot of people create llcs specifically just to invest here. They get some friends and family together and they decide to create a business where they're going to put their funds together and they're just going to strictly invest. And that's how their operating agreement is even created. It's strictly to invest and then the interest is paid out monthly to them on the 15th of each month. And I think it's a great opportunity to allow people to really diversify their entire portfolios, not just on a smaller cash scale, but even on a larger scale. And I think that's one misconception people have, is they think they have to have a business established already and you don't have to go through the process. You want to open up a business account, go ahead and check with your CPA, your tax professional. YouTube is a great resource.
There's some great people out there, and a lot of people are helping people get invested in multiple ways. And I think I really like seeing that more people becoming educated more. And then for those that want a little bit more information, we have tons and tons of content right now on our website, from our blogs to the current podcast you guys are listening to, to the webinars that we do, tons of different videos on YouTube. I think it's a great resource for people to really look into and see if this is something that fits into their portfolio. What's a strategy that you typically see with some of your business investors? Are they typically starting off lower? Are they wanting to go invest in their backyard? And what I mean by that is invest in something in the state that they're in. What are you typically seeing from your business investors?
[00:12:03] Speaker C: The business investors, I would tell you, are a lot more open minded. Really? They're not necessarily business owners. Yeah. They're not necessarily want to stay in their own backyard. Right. I explain to them the loans that we're putting out, why we put them out there, the different loan to values on them, what the value is in the property, and then we kind of talk through what those investments look like for them and what they're thinking they want to invest in. Right. And then we kind of move from there as far as what they're looking for.
[00:12:31] Speaker B: How do they feel about being locked in the terms that we have? I know our investments are short term, nine to 18 months, but how do they feel about that? Some business owners have a five year plan. Some business owners are just trying to figure things out.
[00:12:46] Speaker C: Right.
[00:12:46] Speaker B: How do they feel typically when you tell them this is an illiquid investment?
[00:12:51] Speaker C: Well, when you talk to the ones that have that five year plan that's out there, right. It kind of throws them for a loop because they're like, what do you mean? I don't have to be in that investment for three to five years. It's only 18 months.
[00:13:02] Speaker B: Because what they're typically used to.
[00:13:04] Speaker C: Right. And that is what they're typically used to. So that kind of throws them for a loop. But then when you talk to them about diversifying your portfolio in real estate, being in multiple loans, and they're all paying off at different times. Right. And kind of explaining that to them, they're okay with that. Right. They're like, okay, this could be a really good thing because we talk about cash flow, right? These aren't liquid investments, but if they're all paying off at different times and you're investing in three or four, five different investments and they're all going, it's the cycles. Right? This one might pay off now and then your next one's in six months, for example. I will tell you, maybe the smaller business owners that want to stick their toe in the water also for the same reason, like the loan terms, because they don't know what they're going to need. Liquid. Right.
[00:13:53] Speaker B: That is true for the small business owners. You never know what's going to come up. You might have a large event coming up that you're trying to get ready for. You may need a large amount of consumer goods, expenses you didn't budget for. Yeah, there's just so many things. And so I think that's one thing that we do a good job of making sure that people understand, is that you are locked up in that period of time. If you need that $10,000, the minimum investment you make back at any point. It's not easy to get out.
[00:14:21] Speaker C: No, it's not easy to get out. And that's why we talk about it before you go in and I talk to the clients about, is that 18 months okay with you? Right? Are you going to need those funds? If you're going to need those funds prior to that, then you just let me know and I'll find loans that maybe we've already funded six months ago and we're releasing new tranches for. And then maybe what a tranche loan is. Go check out that episode. But there might be a year left on it, or twelve months or nine months, what have you. And then that gives you the opportunity to stick your toe in the water, experience what these investments are like, and then go into the next one for 18 months.
[00:14:59] Speaker B: Nice. I think it's great. From the income strategy to diversifying, to just starting something new and actually making your funds work, I think it's a great opportunity that I really wish more business owners. It seems like over the years there are more. I just wish more would understand it even on the bigger scale. Because it's not just the small businesses, it's the large businesses that have 50 plus employees that have a million dollars of revenue. And what are they investing in? Probably like Jenny Mae's things. Typical cds stuff. That's okay, 4% is cool, but 10% is way cooler.
[00:15:34] Speaker C: Yeah, exactly.
[00:15:36] Speaker B: But that's pretty much all I had for today. I know we hadn't really had very much content on the podcast on deeds in the desert about why businesses should invest, but there's tons of different resources out there for business owners who are potentially looking at investing. I think trustees is a great option for them to consider in terms of diversifying their portfolio but also giving them more means of making more income, especially because the interest is produced on a monthly basis for them.
[00:16:01] Speaker C: Yeah, absolutely.
[00:16:02] Speaker B: Again, if you want to learn more about this specific topic, you can go check us
[email protected]. You can go search all of our different platforms. We really appreciate you guys listening in on today's episode of Deeds in the desert. I'm your host, Izzy Razari. Thank you again, Kate Buta, for joining us today. And we'll catch you guys on the next one.
[00:16:18] Speaker C: Thank you.
[00:16:21] Speaker A: Thanks for joining us this week on Deeds in the desert, where short term investments meet long term investors. We hope you enjoyed the content so much that you share it with all your friends. Who doesn't like learning about passive fixed income, right? Still hungry for more education? Visit our
[email protected], or if you're ready to take the leap and start investing, give us a call at 702-7610 and schedule a free investor consultation.
