Episode Transcript
[00:00:00] Speaker A: You're listening to the Preferred Way, a retirement podcast brought to you by Preferred Trust Company, the preferred custodian for all alternative investments.
[00:00:09] Speaker B: Thanks for joining us today. Our webinar today we are talking with Tate of Turbine Capital. So, Tate, welcome to our webinar with Preferred Trust.
[00:00:19] Speaker A: Thank you so much for having me on. Been working with you for a few years now and you are definitely our favorite IRA custodian to work with.
[00:00:27] Speaker B: Oh, we appreciate that. You are our favorite investment sponsor. Actually, I'm not supposed to say that, but we do have our favorites. We do have. You like to work with. So what's new? What's new and exciting?
[00:00:40] Speaker A: We are growing like crazy. I'm actually in the podcasting studio that I co host the Passive Income Pilots podcast with.
That podcast is growing like crazy and, and we're raising a bunch of money and doing some great deals and I'm excited about the market cycle that we're in. So things. Things are great.
[00:01:00] Speaker B: That's awesome. Very good. Well, that's what we like to hear, especially right now when people are a little hesitant about things, it seems. So it's nice to hear some growth and some expansion and continuing to move forward for sure.
[00:01:12] Speaker A: Well, I have some macroeconomics to share with you and some market cycle trends that we can look at to assuage some of the uncertainty.
You know, nothing's assured. Right. But. But there are definitely some tailwinds that are lining up for us, so we're excited about those.
[00:01:28] Speaker B: Yeah.
[00:01:31] Speaker A: Well, thank you again for having me on. Very excited to share with you a little bit of background on our company and what we do and what we have in the works. So with that quick kick off on what to expect today, we're going to quickly review who we are, where we came from, what our team looks like, some resources that you can download. I'll go into a little bit of macroeconomics and state of commercial real estate. That's the area that I live in every day.
Some global trends that are very powerful, that are investable and are currently opening offering, which we've already had one or two clients come into through ptc.
So with that, who are we? So I am actually an airline pilot by trade.
That's my background. But I've been involved in real estate since I was in high school. Started buying single family homes when I was 24, 25 years old. I bought my first rental property and kept growing from there.
Transitioned into syndications after buying some small multifamily units and realized that, hey, syndication is just the Best you get to invest in teams who have incredible networks rather than having to do everything yourself and break your back doing it. So if you're listening to this webinar and you're a PTC client, you already know the power of alternatives. So I certainly don't need to talk to you about that. But there was certainly a parallel between physicians and pilots and a need that wasn't being met. And so we are now the world's largest network of airline pilot investors.
We have an entire ecosystem of airline pilot as a community and educational resources around that. But of course we are open to any, anyone under the sun. We have large investor group that includes physicians to name another group there we have business owners, attorneys, people from all sorts of backgrounds. We're certainly not limited to pilots, but that is our, our target audience, hence the name turbine capital. Like a jet engine, we also apply aeronautical decision making and risk management techniques that we see in aviation as part of our deal selection process as well as an incredible advisory board that looks over all of our deals. So currently we've raised in the neighborhood of $35 million. That's spread across about 140 properties, over a billion dollars of assets that we are invested in. That's over 13,000 units. We have 1200 members on our investor in our investor club and that includes pilots from all the major airlines, plus the Navy and Air Force.
We work a little bit differently than the typical investment sponsor and that is that we make strategic partnerships with operators. So meaning we're not the ones who are out there day to day asset managing, property managing these deals. We create strategic partnerships with a very small number of incredible operators throughout the country and we pool capital from our investor group after doing excruciating amounts of due diligence and, and we cherry pick the deals that we want to put our own money into and we, we scale use our economies of scale in order to give our investors a better return than they would going direct to sponsor. So if you're going to invest in, you know, X X Deal, if it's on our platform, not only has it been thoroughly vetted by, by our team, we're putting our own money into it, but it's also you, you will, our investors will, will receive a better return by coming through us rather than investing in that deal direct unless you have a half million dollars to invest, which, which might be a different case. So that those are the strategic partnerships that, that we align ourselves with and that gives us a, an incredible amount of agility. Uh, we're able to participate in a larger range of asset classes than if we were managing each one of these deals. So instead of being hyper focused on multifamily, we're able to participate in multifamily mobile home parks, self storage. We even did our an oil and gas deal last year which has been doing very, very well. But we hired two geologists from Fortune 500 companies to come in and run our due diligence. We can do that because we have the economies of scale. So we create these, these win, win, win scenarios between us, our investors, the investment sponsors.
This is what our team looks like. I'm not going to spend too much time on this. What I'd really like to highlight is our advisory board. So we have a couple of people that sit on our advisory board to essentially kill deals.
I personally am the one who is sourcing all of our investment deal flow. But then it gets passed on to our advisory board to look it over, stress test underwriting and really mull it over. So Michael Rhodes is, it is an amazing guy. He's been in real estate over 40 years. He's done everything from litech to self storage to syndications. He was the president of the Pennsylvania Self Storage Association.
Just a wealth of knowledge. So he's our senior advisor. John Yost is actually on our investor relations team, but he participates as well. Christopher Nelson, who is an operator and very, very smart guy. And then last but not least, Salvatore Flight. Salvatore is the senior analyst at nuveen who oversees $147 billion in assets. And my favorite quote from Sal was on a due diligence call, he said I'm just here to be annoying.
And that's his job is to poke holes. So that is our team.
Some resources for you if you'd like to check us out further is the Passive Income Pilots podcast. As mentioned, I host that podcast with Ryan Gibson. We launched in March of 2023. You know we were ranked the top new finance podcast by on Apple podcasts in, in 2023. We're consistently in the top 100 in the investing category. So episode 80 drops tomorrow as we're recording this. We've got over 200,000 downloads and we've got really great reviews. People are loving the show. It's certainly not just for pilots. You'll find some episod there that are very aviation specific but for the most part there's some really great information on tax strategy and cost segregation studies. We just interviewed the National Real Estate Investment Group talking about how to insure your property. So a lot of a lot of really great information on the podcast.
And we have our Auto Flight ebook. So this is 70 pages of nuts and bolts of how syndications work, how the tax benefits work, how the, what a preferred return is, how, what's an irr. This is not a typical fluff ebook. That's just trying to get your email. This is, this is actually very valuable. I wrote this myself. Took about nine months to write this. Just 70 pages. But if you want to scan the code there, you can find it. There you go. If you go to our website turbinecap.com very easy to find it on our website as well.
So let's take a moment to review the state of the real estate industry. Where are we in the market cycle? Well, if we go back to, let's see, June 16, 2021, Fed holds rates and says I got to move my thought, my bubble here sees two rate rate hikes in 2023. So you, you mentioned that, you know, a lot of people are feeling some, some pain who, who invested in real estate 21 and 2022. And, and this is why, you know, this really was caught off guard in the real estate industry was the fastest rate hike in history. We were 0% on March 22 and on May 20 of 23 we had 5%. It was the fastest rate hike in US history. And while the economy digested these rates quite well, it hit commercial real estate very hard because commercial real estate is very sensitive to interest rates. And to explain kind of what happened here, this is going to be a fun little review. Most people are probably going to already be familiar with how this works, but we're going to learn how to fly here. So let's just use a typical multifamily property, right?
You have your total revenue, usually expense ratio might be about 50%. Then you have your debt service payment and therefore the cash flow that you have remaining is right there. This would be a debt service coverage ratio of 1.25x. That's typically the least amount of debt service coverage ratio that a bank would lend on. So this is what the minimum healthy financials would look like on a multifamily property where the additional 25% is being thrown off in cash flow. Well, what happens if debt service goes through the roof? Interest rates rise like crazy. Well, this is what happens. Your DSCR goes down below one and one is break even. So if you have a DSCR of 1.0, that means you're not making any money. All of your revenue is being spent on both expenses and on debt Service, it goes lower than one, it means you got a problem and you have a deficit. So let's learn how to fly here, right?
If you go and take a lesson at the local flying school, you're going to learn that income, sorry, thrust and drag, right, are the things that, that keep an air airplane flying and that creates lift.
So when thrust and drag are in equilibrium, then we're in stable level flight. So the altitude that you're flying at, I like to call your cash reserves. So income is thrust, expenses are drag. Those things usually are in equilibrium or you have some additional income and you're accelerating. That's a good thing.
The, you know, the altitude that you're flying above the ground is how much cash you have in the bank to weather a storm. So what happens is, what happens if a door flies open or you throw a massive parachute out the back and your debt service costs increase like crazy? Well, now what's going to happen? You can't stay in level flight here. You're going to have to pitch down and eat into some of your cash reserves and eventually that is going to result in a capital call or a foreclosure. And this is what happened. This is what we saw a lot in 2021, 2022 or deals that were purchased in 21 and 22 have started going back to the bank in 23 and 24 because of the massive increase in debt that was not forecasted. And this is what we saw all over the news was a housing bust comes for thousands of small time investors. So while we have a lot of recency bias, if investors were in some bad deals that maybe lost some money or had capital calls, it was likely due to the weak operations of unsophisticated operators who are overpaying for assets using floating rate bridge debt and their operations were falling apart.
Apartment cap rates obviously have risen dramatically, which means that commercial real estate is down 15 to 30% from its peak pricing. Cap rates, as many of you know, are inversely correlated to value. So as cap rates expand, value comes down, debt costs are drastically higher than they were a few years ago. It's not a great time to sell right now, however, it's a great time to buy. I'm proud to say that we've had zero capital calls, zero investor losses across 21 deals that we've done. We've been doing deals as a company for four and a half years now and all of our deals are going strong.
Fundamentals in the real estate, the commercial real estate industry though, remain strong. Lots of Dry powder on the sidelines. And inflation is a great friend to real estate, right, because rents rise and eventually as the storm settles and interest rates come down, that will help long term valuations.
So we, we actually see this as one of the best times to be investing in commercial real estate in the last 15 years.
Quick chart of the cost of buy versus the cost of rent. If you look at the cost of buying a home today to in off the charts with, with both the increase in residential real estate, the value of residential real estate and interest rates, cost of rent actually is, is quite affordable even though rents have increased drastically over the last few years. So in reality what's going to happen is, is these, these two lines will come together. Rents are going to rise once the massive supply side, which we'll talk about in a minute, is absorbed and interest rates fall, making it more affordable to buy.
But I want to talk more about the supply side because demand is up like crazy, you know, with, with buying being so unaffordable. This is pushing tenants into the multifamily space. And we're not just talking about multifamily here. This, this is mirrored across many assets in commercial real estate. But multifamily is a great, great example. So if we look at multifamily new construction, this is the deliveries. And if you look at the starts that, you know, all of the starts were back in 21 and 22 when we had zero percent debt and the economy was going crazy. Those are now down 70% from their peak. And when you look at deliveries obviously delayed by 18 to 36 months, we had this massive wave of apartment deliveries in late 2023 into 2024, well, that is now dropping off drastically. So while we're seeing rents plateau or even decrease in a lot of metros, we expect that with construction starts down so drastically from their, from their peak that we will see absorption and rent growth re accelerated through the next few years.
And of course big tailwind shaping up for the real estate market in terms of entering a rate cut cycle. Again, commercial real estate, very sensitive to debt, very sensitive to interest rates. So headwinds, very strong headwinds formed in 2022 and we're seeing some tailwinds form now over the next few years. We are not big fans of trying to time the market. We prefer time in the market and buying over every cycle, buying at all points of the market cycle. However, it's hard to ignore the tailwinds that are shaping up for cre.
I'd like to take today to really Stomp on a global trend that I think is one of the most powerful trends that we're going to see in the next decade and that is onshoring and nearshoring.
Did you know that for the first time in 20 years we imported more goods from in dollar volume from Mexico than from China?
China is. Imports from China are falling off, off of a cliff. And that's for a number of reasons. Shipping costs are more than four times versus pre Covid. They spiked wildly during COVID came back down, but now they're back up. They're to about a 4x price versus versus pre Covid. Labor costs in China are rising. There's been supply chain chain challenges, intellectual property issues where you know, you get a product made overseas, someone copies it and starts selling a competitor product right there on Amazon next to you. And of course geopolitical tensions according to the reshoring initiative which we're going to look at some data from them in a moment here in 32% of use cases, so a third of use cases. It is cheaper now to manufacture in the US than in China. When considering all costs, increased supply chain resilience and reliability. This was a huge issue because the cost of a Ford F150 sitting there ready to be shipped to a dealership but it doesn't have a chip that it needs is astronomical compared to the additional cost to manufacture that part in the US to make sure that that supply chain is taken care of and secure. So this will impact where jobs are created. We're going to be talking about industrial today, but it's going to impact multifamily, self storage, retail, everything under the sun.
New survey shows that companies, 42% of companies in 2023 were exploring nearshoring meaning bringing operations, supply chains, manufacturing warehousing back home from overseas, up from 11% in 2021 and natural gas prices, energy prices here in the U.S. the United States is in a very advantageous position where we are the only manufacturing superpower in the world and we are a manufacturing superpower. We manufacture a lot of stuff in the United States, but we're the only country that's energy secure. Europe is very difficult for Europe not to import energy from Russia. China imports a lot of energy.
We have the ability to produce our own energy in the United States. Natural gas prices are about a fifth what they are in Europe.
And when you look at BlackRock's Private Markets Outlook, there are three highlighted areas for outperformance. One of it which being logistic hubs near major, near major cities Excuse me.
Jamie diamond was quoted a few years ago saying that we have reached peak globalization. Jamie diamond is the CEO of JP Morgan Chase.
We're entering a phase where globalization 4.0 the digital economy E commerce digital services are going to be more of that global economy versus building a car in Asia and shipping it across to the United States.
Instead of building goods overseas and shipping them, we're just going to see more digital globalization.
On this fact. US factories spending has nearly tripled since 2021. Job announcements for reshoring jobs have increased by 66% over the last two years. And if you'd like to look at this for yourself, you can scan this QR code or click the link there. This is a market study of over 400 case studies where either companies are bringing investment back home or there are foreign companies directly investing in the United States. To give you a little preview here, I'm going to take you through a few of these initial slides here.
1888 Mills Griffin Griffin, Georgia. This is a small one, but the the reasons they quote automation, technology redesign, shipping costs and Walmart. We'll talk about Walmart in a minute.
Call center for a supply chain company moving from China and Canada back to Mississippi.
Accuround from China and Europe to Macon sorry, Avon, Massachusetts citing delivery, freight costs, intellectual property risks, rising wages, labor concessions and U.S. energy prices.
ACE Clearwater from Hungary and China to Torrance, California. Quality control issues overseas and company and customers are willing to pay more for high precision quality. We're not even close to getting out of the A's. This is an alphabetical order, so encourage you to check that out. Very powerful stuff.
In addition, General Electric since 2017 has invested over $2 billion back in American operations. Apple's new MacBook Pro is being made in Texas and Walmart has committed to buying $350 billion of product to be assembled or grown in America, which this Walmart pledge is causing a lot of companies to move manufacturing back to the United States. Because Walmart will tell them, hey, sorry, we can't buy this product because we need to fulfill this $350 billion promise to buy these products that are created, are made in the U.S.
and of course, if you haven't heard of this one, Taiwan Semiconductor is building their new plant in Phoenix. This is huge. This is the largest foreign direct investment that a foreign company has ever made in the United States. $65 billion. So this is a, an example of not a an American company bringing manufacturing back home, but a foreign company who because of geopolitical risk has said, hey, we want to build our factory in the United States.
Now we've talked about the demand side. So we have a ton of demand now for warehouse, manufacturing and supply chain logistics infrastructure here in the United States. Now, just like multifamily though, we had a huge wave of supply hit the market in early 2023, which is why you're seeing some, some vacancy rates rise and some pressures on rents.
However, just like multifamily, construction starts are way down. Industrial development, we had this boom in 2021 and 22 and then a significant decline to a 10 year low.
And most of that development focused on very large facilities in a few key markets, namely Southern California, Houston.
You know, think Amazon, right? These huge warehouses, vacancy rates are still near all time lows for properties that are smaller than 100, 100,000 square feet. So some of the these smaller vacancies, smaller facilities, have much lower vacancy rates. And a lot of times those vacancies are functionally obsolescent buildings. So buildings that don't have the clear height. So you know, when you see a 3% vacancy in a market, it could be that that 3% is not because companies don't want to rent it, but it doesn't work for them.
So the supply and demand gap will narrow over the next 12 months. We, we see this as a very opportunistic time in the market to participate in creating some of this industrial space.
Excuse me.
So predictions for the near future here in the US market is that superpowers will flex their supply chain muscles more earnestly and global. They will see global shifts in supply chains. We'll see absorption increase in secondary tertiary markets, heightened competition for prime land positions and demand consistently begins to out outpace supply in 2025. We'll see rent growth rebound in 26.
So with that, a few key points here that if you're going to invest in an industrial deal, it needs to be well located, must be right sized, cap rates remain compressed. So it means that in a lot of times it's better to build than to buy. And we're seeing very attractive yields on cost, but you have to mitigate the construction risk. So with that, like to introduce you to a, an offering that we currently have open. We have a couple of offerings open, but the Bel Air deal is kind of a match made in heaven for, for IRAs.
This is a three to five year hold. It's a ground up development in Wichita, Kansas. We're building 430,000 square feet of industrial warehouse manufacturing before we dive into Bel Air. I'd like to give you a an overview of a project that we did 18 months ago called Iron Horse in the same market. So we purchased this in early 202023 and built 330,000 square feet that are now done. Certificate of occupancies are acquired. Building one was completed in under 12 months. Building two was delayed four months. It was staggered four months later and was also completed in under 12. We use GMAX contracts meaning guaranteed maximum on both of the buildings to mitigate construction risk. What that means is it can only cost us so much money.
We had a per square foot maximum and if there were any overages, the contractor had to absorb those.
But they came in under budget even under that that gmax. And Building one has signed a triple net lease with a company called Agco. They're a global manufacturer of agriculture equipment.
We got above pro forma rents and we're breaking even just on Building one. Building two is in the final stages of leasing. So while we're saying this was a three to five year hold, to be honest, if interest rates were a little bit lower, we'd be in and out of this thing in 24 months.
Excuse me.
Timelines and budgets beat pro forma. And our initial intention was to as mentioned, sell out of this as soon as it was finished. But because interest rates are elevated, cap rates are a little bit elevated. And of course we've seen this big supply glut hit the market. It doesn't make sense to sell right now. And so we're choosing to recapitalize. So we are planning to refinance this, return a good chunk of investor money and we're going to continue to cash flow it until disposition.
That refinance will be at a 65% loan to value, but we expect to again return a good chunk of investor capital, cash flow it. And we just got the appraisal back.
We have made investors about a 61% return in 18 months on this deal. And this is in Wichita, just down the street from our new deal. These look like renderings, but they're actual drone photos from the finished product.
So with that, Bel Air is actually in a better location on a larger lot. The plan is to build 430,000 square feet over two buildings with the option to build three additional buildings in a potential build to suit. We have a lot of optionality in terms of how we can do this.
It is fully entitled. The land was purchased about nine months ago. We have a 100% property tax abatement for the next five years and a 95% tax abatement for an additional five years because of that entitlement. The, the value of the land has already increased. We already have about a $3.2 million worth of equity baked in which is fantastic. And this is in partnership with Aspen Funds. You may have heard of them. They're fantastic. They're. I would say they're the most intelligent operating partner that we work with. If you haven't checked them out, highly encourage you to. They're fantastic.
Interesting story that Dan Schulte, their chief operating officer was formerly the senior vice president and general counsel for Wadell and Reed, which is a mutual fund company. And he actually when he was with Waddell and Reed they developed the adjacent parcel to Iron Horse, our previous industrial deal. And so he kind of had the inside scoop on the adjacent parcel which is what we built the Iron Horse project on same construction partner Crossland which has been fantastic. They're the ones who came in ahead of schedule and under budget on the last build. And of course Nai Heartland as our broker partner. Some examples of what Crossland builds, they're, they're a pretty amazing construction company.
We believe that Wichita is just a fantastic market again more of a secondary market but much more unsaturated. And it's a huge manufacturing hub.
If you're a pilot or you, you are familiar with the aerospace industry, Textron, Aviation, Spirit Aerosystems, Beechcraft, all of these big aviation manufacturers, home base in Wichita and a bunch more that you'll recognize.
This is where the location is in northeastern Wichita there and right next to the integrity Technologies, a $1.8 billion potential project.
Some aerial photos here of what the property looks like right now.
Quick overview of the the property highlights here.
Project budget is 37.3 million. This is going to take 13.2 million in equity to, to take down and yeah we, we believe that it's a very strong, very risk adjusted opportunity.
Sorry, these came out a little bit small but construction cost per square foot is 67 per square foot and that is GMAX contract. So it cannot cost us a dollar more than $67 a square foot. Our yield on cost untrended 7.6 and, and yield on cost with trended is 8.3. So that's essentially your cap rate. If we were buying this property brand, you know, secondhand, we'd be buying it at 8.3 cap rate which is fantastic when you consider it's a brand new class A facility.
Business plan here is going to be construct over 12 to 18 months lease up and stabilize and then again lots of optionality in terms of building to suit further buildings or we could sit on it, hold it, refinance and return investor capital.
Some of the architectural drawings here and of course the debt we want to highlight debt always 24 million debt a conservative 65% loan to cost and we have this nice 2 plus 2 so it's an interest only 2 two year interest only period with a mini perm option if we want to keep it for another two years if it doesn't support a sale once we finish construction.
So to kind of overview we think it's a really strong development opportunity. This is a carbon copy of what we just did on Iron Horse.
Same construction partner, strong yield on cost and lots of tailwind shaping up for the for the asset class.
Additionally the principals are co investing including myself and this is the biggest one the debt is full recourse meaning the the principals are personally guaranteeing the debt. So it really shows the alignment of interest and how much you know the general partnership team believes in this deal is that they're willing to sign on that debt. So if the deal were to go sideways they would be personally responsible for it.
Quick cash flow here. The LP size if you were to invest 100k looking at getting about 177 back in year 3 this is a 3 to 3 to 5 year hold is what we're saying conservatively but we think we can be in and out a little bit sooner. The reason I think that this is a great deal for an Iraq while there is debt associated with it, it's not a cash flow deal and we're seeking highest invest return resources and uses here and this is all available on our deal room so it's a $50,000 minimum. Would love to have any of the PTC clients in and we're looking at a a net IRR of about 17 to 21%.
Key reasons to invest would be in my opinion high demand for class A industrial buildings.
The development arbitrage meaning that we're getting a really strong yield on cost versus purchasing existing assets and we've mitigated a lot of that construction risk through the GMAX contract. The management team co investing personal funds and securing the debt we have very conservative and I would say you know, comfortable debt with that two plus two option. The GMAX contract again mitigating the construction risk is just huge and having the optionality to build one building we could potentially build the second building to suit for the tenant that leases building one and Then the optionality to build up to another three and to end here, a quick cap rate sensitivity.
If you are familiar with cap rates and you're familiar with, you know, brand new shiny class A building, it's not any stretch of the imagination to think that you could exit this thing for about a five and a half percent cap rate. That would deliver a very strong equity multiple over a short amount of time. But you know, even in a worst case scenario, still healthy returns. And today we have extended an offer that we are going to waive half of our acquisition fee for any PTC client. So we're doing a one and a half percent acquisition fee on this deal. So on 100,000 you'd be saving $750 on your acquisition fee. So if you're a PTC client, you will get, you can get into this deal for a 0.75% acquisition fee rather than a 1.5.
So anyway, we'd love to have you in preferred trust. Makes it really easy. You can just email them indicating your preference to invest with us. They take care of all the paperwork. You will need to jump on our dashboard and subscribe. But we can walk you through that process and of course we'd love if you join our investor club and get on our email for future opportunities. And you can do that with the QR codes here or by going to turbinecap.com so with that I'll turn it back over to you. Thank you for letting me ramble for, yeah, a half hour.
[00:36:35] Speaker B: Thanks Tate, we appreciate it. That's great information. And yeah, so let's, let's talk a little bit about how investors can utilize a self directed IRA to invest with Turbine.
So Preferred Trust Company. So we're going to talk a little bit about self directed IRAs and how you can use your retirement funds to invest in alternatives such as what Turbine is offering here, which is a great option for an alternative investment. Okay, so first let's talk about what is a self directed ira. So I think it's super important, you know, we, we typically don't wake up and think to ourselves, oh, I need to open a self directed IRA today. But we do wake up thinking about our retirement, thinking about investments and ways we can live better in our retirement. And one of those options is to invest in alternatives through a self directed Iraq. And really with this type of retirement account you have full control over the investments that you select. So instead of being kind of boxed in by your financial advisor or somebody who's telling you what to invest in, you get to do the due diligence, you get to perform the research and you really get to decide for yourself and invest in things that you know. So the control is really in your hands when it comes to a self directed ira. So definitely different, definitely something to really think about beforehand. Because Preferred Trust company does not make investment decisions for its clients. We are not licensed to do so. So you really have to be comfortable with that concept. There are fabulous investment sponsors out there like Turbine that can, can help you along the way, but it's really ultimately up to the account owner and what they invest in.
So let's go down a little bit and talk about the benefits of having a self directed ira. So we did talk a little bit about the idea that you get to select your investments and this obviously leads to greater opportunity for diversification. So you know, you're limited in your typical traditional IRAs with stocks, bonds and mutual funds, usually anything that's publicly traded and whatever is in the suite of products that your financial advisor, that company that he works for. So really you're looking at a limited scope of investment opportunities. And with a self directed ira, it really opens it up to alternatives. So we're talking about real estate, talking about startup companies and real estate in many different forms. So you can have rental properties, you can have fix and flips, you can be in REITs and different types of funds. So there's a great deal of wealth to come from retirement in all different opportunities. So that diversification is huge. Asset protection as well, having your investments inside of that IRA provides that extra line of asset protection for you. And of course there's tax advantages, pre and post tax advantages. Depending on whether you're going to use a self directed ira, that's a traditional or a Roth, you can have either and then building wealth for your beneficiaries. Obviously we're talking long, long term for when you retire and then even past that time. So self directed IRAs, great benefits, not just the diversification.
Working with the right partner is something, you know, we talk about the investment sponsors and really doing your due diligence on who you want to invest in. But I with, but I think it's important that we also look at the custodians sometimes, you know, as investors. I don't think we always look towards what company is holding our ira. We're kind of a means to an end. You have to have one if you want to use your retirement account to be able to invest in alternatives. We don't always look, you know, be behind the door at what the custodians are doing. And that is super important because there is a difference between all of us. We are regulated by the IRS and by the DOL and by the states that we're licensed in. But there is that licensing scope. So there are IRA service providers out there that are not licensed. Right. They do not have the regulations behind them to be. To be holding the assets that they're holding. So you need to be careful and do your due diligence. You want to look at the reputation, start looking at how many years they've been in business. You can look at the state they're actually regulated in and licensed in to see how their examinations have gone each year, to see if there are any outstanding complaints about them with the state that they're registered in. So it's good to look at that level. What investment options do they offer? We're all kind of created differently when it comes to that. Some allow digital currency to be an investment, some allow foreign investments. Just kind of runs the gamut. So if there's an investment that you're looking for, specifically, make sure that the company that you're working with is able to hold that and is willing to hold that. There are very few things that the IRS says you can't invest in. And it's a. It's a handful of things. And then from there, each custodian kind of decides what investments that they're going to allow their clients to invest in. Depending on their comfort level and their risk adversity, the security measures around the custodian, what type of insurance they have for your investments and for your IRA is super important to look at. And then their educational resources along with their client services. We get told a lot of times that the reason why we are chosen as their custodian is because we answer their calls, we return their emails, and not waiting on hold for four hours for someone to answer the phone, which makes us very proud. So this is. These are all things to look at when you're deciding which IRA company you want to work with. A little bit about preferred trust. We were founded in 2007. We are licensed, regulated and audited. So we are licensed and regulated by the State of Nevada Financial Institutions Division, like I mentioned earlier, also regulated by the IRS and the dol. And we do go through annual examinations by the state as well as our third party accounting auditors. And we have federal regulations that we have to follow. So we are required to go through an annual federal audit examination each year. So total we have $3.4 billion in alternative assets that we custody. And again, that kind of runs the gamut from real estate to digital currency, precious metals, startup.
Anything that you can, you can think of. Our clients have gotten pretty creative over the years.
So really how we work, obviously we are not licensed to give you advice on what type of investments that you should select. What we can do is tell you what you can and can't invest in. We can teach you the IRS rules and regulations so that you make sure that you're making investments that don't disqualify your ira. So a big part of what we do is to provide education to our clients. Not only do we process the requests that you, you make for the investments, but we provide that education behind it so that you know and can feel comfortable in what you are investing in and that you are not disqualifying your IRA in any way. Guidance and support in that area, more personalized service and then fast and efficient processing. One of the things that the owners wanted to make sure we understood is how these investments actually work. Having them had background in the real estate industry. Being able to process things efficiently is very important. We know that time is money and every day that your IRA isn't invested are potentially losing out on that return of investment. So we do work as fast as possible.
All right, so the different types of accounts, I think this is important to go over. A lot of our clients will call up and say, well, I'd like to open a precious metals IRA or I'd like to open up a real estate IRA. There is no such thing as a precious metals IRA or a digital currency IRA. There are four types of IRAs that have been set out by the US government. And that is a traditional IRA, a Roth IRA, a SEP IRA and a simple IRA. What those IRAs can hold is dependent on what is allowable by the irs. So an IRA can hold stocks, bonds, mutual funds, anything publicly traded. And it also can hold alternatives such as real estate and digital currency, precious metals, that type of thing. So there's just those four types of accounts. It's just what your custodian specializes in and what they can hold that makes the difference between them. So your traditional IRA is your pre tax, right? You are building your wealth in their pre tax. The funds do not get taxed until you take a personal distribution of those monies. Roth after tax accounts. So this is fantastic. You know, for those of you really wanting to build wealth, as long as you hold that account for at least a minimum of five years, then once you do Start taking distributions. There is no tax on it. You do want to wait until you're at least 59 and a half though, so you're not paying any penalties as well. And Then simple and SEP IRAs, these are fantastic also for our pilots and physicians, professionals that may have their own business. Right. And aren't being offered a retirement plan by their current employer, or maybe they are the employer and a 401k is too big, it's not cost efficient or effective enough. So we're looking at a smaller IRA type of plan, a simple IRA, which is for an employer that has 100 or less employees. And then a SEP IRA is really more for the self employed person or maybe someone that is employed, them and their spouse. So these are great options. Contribution limits are a little bit higher than your traditional and your Roth accounts. So definitely something to consider and something that we can discuss. When you call Preferred Trust for a consultation. We can go over all the different types of accounts and kind of really find out which one will work out best for you. And we always say that you do want to talk to your CPA or a tax professional because we're all a little bit different. Different. So you do want to make sure you're still able to make contributions to the account you're thinking of opening and all of your options there.
All right, so we're going to focus on the Roth IRA a little bit today, which is a great vehicle to get started. If you've never had a retirement account before and you want to get started making some contributions and opening an account, it is based, your contributions are going to be based on your modified adjusted gross income for the year that you're contributing. For an individual that's based on 161,000 and a married couple 240,000. So again, we really stress the need if you are a high net worth earner, right. You want to talk to a CPA and make sure you sit down with them and kind of map out what the best plan is for you as far as which IRA to select.
So here, turbine, obviously in real estate. So here's a list of our most common investments that our clients are really utilizing to increase their roi. So we've got real estate, precious metals, digital currency, natural gas, like energy companies, private startups, private debt. So these are all alternative investments that you can research more into and figure out what's right for you.
And so the investment sponsor, obviously you always want to look at them as well. Remember, you don't have an investment advisor when it comes to selecting what you're going to invest in. So you really need to perform the due diligence. You need to make sure you're looking at the track record of the investment sponsor, their experience, their strategy. I think Tate really outlined that very well in his presentation and what they can provide. But it's great to ask the questions and find out the information, know how they miss, mitigate their risk, know what their exit strategies are, and if they have a really solid knowledge of the market that they're in. So these are all things you want to look at when you're vetting that investment sponsor the cost of an ira. So that's one of, you know, the hot topics that people want to know. And so a little bit different than if you're in stocks, bonds and mutual funds, if you're in a traditional ira, those particular companies and your investment advisors, they're actually making their money off of your investments versus us making a flat fee. So because we don't provide investment advice, we can't make money off of the income that's derived from any of your investments. So we set, set processing transactional fees that we make our money off of. So to open an account, for instance, there's an IRA establishment fee. And as we get towards the end of the presentation and we have a little offer for you, we're going to waive some fees for you to get started. And then there's always an annual IRA administration fee, and that's for us to oversee the custody of your IRA and all of the reporting that goes into the federal government for your retirement account. But we're pretty straightforward. Everything is disclosed. There's nothing that's hidden when it comes to fees. With Preferred Trust Company, everything is on our fee schedule, which is also on our website. Preferred Trust company dot com.
All right, and so these are some of the services that Preferred Trust offers when you have your IRA with us. So we obviously have to report your information to the IRS in the form of your annual tax documents. We're also going to process any contributions into the account or distributions from the account. We're going to process your investments and provide you an online account portal so that you can view your account 24 hours a day, seven days a week. You'll be able to see not only your holdings, but you'll be able to see all of the transactions that happen in your account for the entire period that you've had your account open. We also offer annual statement packages and monthly statement packages. For those of you who want monthly, we have phone and Email support. And we talked a little bit about earlier and that continuing education as well, which is a huge part of what we do.
All right, how to get started. So this is the best part of it, opening an account. We make it easier and easier. So today you can apply online. Very simple process. It's actually an electronic form that we will send you a link to, or you can grab it directly from our website. You just fill out your information, a couple parts about your beneficiaries, you submit it into Preferred Trust and then we get started in processing it. We will have to know how you're going to fund your account. So it could be a direct transfer from another retirement account, another IRA that you already have open somewhere else, or it can be a rollover. Maybe you have an old 401k somewhere that you aren't using a TSP plan, a defined benefit plan. There's lots of options there. Or maybe you're just going to get started and you're going to contribute to the plan for the very first time. So we'll talk about funding options with you to find out how we're going to bring money into that account and then we'll work with you to step through that process. We take care of all of that for you so that you don't have to. Once the funds make it into your new account at Preferred Trust, then you are selecting your investment and watching the income come through. So it's a pretty straightforward process. We obviously know that. We want to make it as easy as possible for you and make it as streamlined as possible for you.
So there you can, just like Tate, we have our A QR code there. You can scan this to your phone and get started with an application with Preferred Trust today. And we are going to waive the $50 account establishment fee for any Turbine, anybody interested in investing with Turbine who sets up a consultation with us. And we will be waiving the establishment fee once you fill out the application and we have an account open for you. So great opportunity here to get an account started with a little discount there.
And that's Preferred Trust Company.
[00:52:38] Speaker A: That's great. And can I just say to, for anybody that's looking at setting one of these, we, we see a lot of investors come in who are, are interested in, in coming into our deals and they're looking at, okay, how can I invest? What cash do I have available to me?
Obviously, a lot of investors come in with cash, but I, I, I look at IRA money a lot of the time as money that's collecting dust so it's either an old employer's 401k, we say, say a lot of people that come in where they were with an airline and they, they, you know, they made it the majors. Just so They've got a 401k that was with Spirit or with sky west or something like that, that's sitting there and it's doing nothing. And you can roll that into an ira. Additionally, for our military folks, they've got this amazing thing called the tsp. And you can roll your TSP funds into a self directed ira.
Additionally, when I think of, you know, I think of different buckets of money that I want to invest in, different, different styles of real estate and different alternatives.
The benefit of syndications is the fact that you can diversify, you can diversify across many different opportunities that have different characteristics. Some have great tax benefits, some have great cash flow, some have no cash flow and high upside. And just to add a little bit of flavor, the way that I think about running my own portfolio is if I see a real estate syndication deal that has really great tax benefits and really great cash flow, let's say like a mobile home park deal. We actually have one of those open right now, but didn't mention on the, on on this because it's to me not a great deal to put into your ira. Not to say that it's, it's not okay to do that. We have, we have a few IRA investors that have come in and that's, that's completely fine, but you're losing out on that tax, tax benefit of all that depreciation when you're investing in cash. Additionally, if it's throwing off cash flow, I want that coming into my bank account so that I can either spend it or save it versus going back into an IRA account where I have to build up a critical mass to invest in another real estate deal. So I'm looking for low cash flow deals with minimal tax benefits with highest overall return to put into my ira. So that's how I, I think of my own, my own ira. So definitely a fantastic wealth building tool as part of your quiver.
[00:55:07] Speaker B: Yeah, absolutely. I think sometimes, obviously people don't know about these things. The question that we get a lot of times is, well, is it illegal? Because the people that they've been working with, their current financial advisors, they don't really tell them about that because that's not what they specialize in. They specialize in the publicly traded. And so they don't, they don't really, they don't a they don't want to lose a client.
And B, it's not something that, you know is in their space. In their space in particular. But that's one thing we do let clients know is that, hey, you don't have to, you know, transition all of your funds into a self directed IRA for alternatives. You know, one of the biggest things is keeping diversified, not putting all of your eggs in one basket. So give it a try, move some, have a partial transfer over. You can do as many transfers from one IRA to another as you like, like throughout the year. So if you get started and you give it a try and you think it's fantastic, and you, you see that you're getting the returns that you like, then transfer more. So that's one of the biggest things we try and let our clients know.
[00:56:12] Speaker A: And you can have as many IRAs as you want, right?
[00:56:14] Speaker B: Correct. Yes. Now, contribution limits are spread across, but remember, that's personal funds that you're putting into the account, not necessarily what you can build in income. But yes, you can have multiple. What's really nice about the alternatives? You know, obviously you can do one, one self directed IRA for all your alternatives and then you have, you know, your standard IRA for your publicly traded, but you can have multiple. So I think people sometimes worry about that too, that, well, I don't want to have more than one, or can I not have more than one? But yes, you can. Absolutely.
[00:56:49] Speaker A: Yeah. So you don't have to transfer your entire IRA.
[00:56:52] Speaker B: Correct.
[00:56:52] Speaker A: Over to PTC. You can, you can invest, you know, 50,000 just for a specific deal, plus, you know, a few hundred bucks for, for, to cover the fees.
[00:57:02] Speaker B: Correct? Absolutely. Yeah. And you'll find that a lot of people, they'll get started with that initial 50,000 and then they like what they see and they'll put another 50,000 in. And you know, so it's great to be able, you know, again, you have to look at your risk, you have to do some research, you have to know what's best for you. We always recommend having a CPA in your corner. But alternative, it's a great way to diversify and not keep everything in the stock market.
[00:57:30] Speaker A: You know, I glossed over that during my presentation. But that's our reason for existing. Right. Especially in the, in the pilot realm, pilots end up being extraordinarily public market heavy, stock market heavy, because we have very generous 401k plans that are, that are employer provided, but everything's in the public markets. So over, you know, 20, 30 years, 40 years, sometimes of a career you end up with, you know many millions of dollars exposed to market fluctuations and you want to build a separate war chest of of wealth building assets that are non or negatively market correlated or at least not in the publicly traded market. So.
[00:58:15] Speaker B: Right.
[00:58:16] Speaker A: Huge proponent of SDIRAs.
[00:58:18] Speaker B: So yeah. Well thanks Tay. We're glad you were able to join us today. And then just a reminder to anyone out there you have questions, give us a call. Preferred Trust Company.com is our website.
We also you'll find our toll free number on there and our consult page on there as well.
[00:58:38] Speaker A: And if you want to reach out to us infourbine cap.com T U R B I N E.
[00:58:46] Speaker B: Great. Thanks so much Tate. We appreciate you being a part of the webinar today.
[00:58:50] Speaker A: Thanks for having me on.
[00:58:52] Speaker B: Thanks for joining us for another episode where retirement savers meet alternative investments. Can't wait for the next episode. To learn more visit our website@preferred Trust Company.com.
