Invest in Cattle
“Retirement Guy” will show you how you can use the Check Book IRA LLC concept to buy cattle and other unusual investments in your Self Directed IRA LLC.
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Invest in Cattle
One of my favorite investments for really a lot of reason is the Three Texas Cowmen. Two of them own ranches and one of them owned what is called a feed lot where when the cattle get to be a certain age they take them to this feed lot and they feed them corn. It is kind of like going to grandma’s for Thanksgiving. You just eat all you can eat and that’s a feed lot.
When they send those cattle there, they make money on it. I mean it is a business deal. You can buy the cattle. This one guy had a feed lot, so he had the employees to feed the cattle and the cowboys to doctor them if something went wrong. It is really a good way to make money. If you think about it, the cattle get fatter every day. So whatever they bring per pound, they make more money.
It is an area that these cattlemen understood. They were delighted when they found out they could actually use their IRAs to do this. This investment was a safe investment for them. It was in familiar territory, something they were very used to with. Familiar people, and something they could kind of go and kick the tires on. They could actually go see their investment. Like one of them told me, “If this goes wrong, I can eat my IRA.” As long as you are not a vegetarian. But he said, “You can’t eat an Enron stock certificate.” So they were really excited about that.
And what we did was, since there were three of them and they were going to be equal partners, a third, a third and a third, then that means they’re below the 50% prohibited party rule, once we set up the LLC for each of them to be a third owner, their Check Book IRAs could make loans to that LLC without any problem at all, totally within the guidelines.
They could joint venture with one another. “Hey, you put up the cattle. I’ll put up the money. We’ll take out the expenses, and we’ll split the profit 50/50 or 60/40 or 70/30 or whatever.” That’s the flexibility that they had with a Check Book IRA. But they were just dumbfounded that they could do that.
They were so excited to get out of the stock market. Like they said, “We don’t trust them anymore. (A) We may not even understand the company that we are investing in, and (B) you may not be able to trust them. There are companies that they are cooking the books, or in some cases, they are in bed with the government, and they get a good deal or they don’t get a good deal. We just don’t know what we are doing.”
But in this area, what the Check Book IRA LLC did for them was allow them to invest in something that they were very familiar with their whole life, dealing with people that they had dealt with for a long time. Being able to actually go out and look at their investment, to make decisions, and to make instant decisions.
Several of them talked about all of the money that is being printed up. They said, “This protects us against inflation. It allows us to take our IRAs and buy cattle, buy something that if inflation goes through the roof, the cattle will go through roof, and at least our buying power will be the same.”
Well, these guys were pretty sharp. With their businesses they had set up corporations. So they had 401(k)s. They had SEP IRAs. They had simple IRAs. They were glad to hear that we were able to take the different IRAs and roll them into one IRA for them, and then create the LLC to combine those things.
It was a lot of fun. I enjoyed doing it. I have a cowboy background. In fact, in the winter time, I go down to Arizona and rope. In fact, I won a saddle here last year which was kind of cool. So we talk the same talk. But the whole idea of the Check Book IRA is, you may not understand how to deal with cattle but you may have other areas that you totally understand.
We had a guy who is a commercial fisherman, and he knew that the fishing licenses were going through the roof. So we set him up with a Check Book IRA. I don’t know anything about fishing or commercial fishing licenses, but as long as it’s not life insurance or collectibles, as long as he is not buying or selling to a close relative, it’s perfectly acceptable. So guest what? He takes his ROTH IRA with $50,000, buys a commercial license. They grew up to $100,000 the next year. He made $50,000 with each ROTH IRA in an area that he knew that he would do well. I mean, I did not know anything about it, but for him he felt very comfortable. And that is some of the flexibility you have with a Check Book IRA. To be able to invest in what you really know, what you feel comfortable with, what you understand.