Download Our Free Guide to Self Directed IRAs!

Welcome back to another episode of the IRA Cafe podcast! In this installment, host Kyle Moody sits down with Michael Ciaburri, founder of Worth Avenue Capital, for an insightful look into the world of private lending and how self-directed IRAs can play a vital role in private credit investing.

Michael Ciaburri shares his journey from decades in the regulated banking industry – including his experience founding and leading a small bank in New Haven, Connecticut – to establishing his own direct private lending firm, Worth Avenue Capital. This episode dives deep into differences between traditional bank loans and private credit, exploring the appeal of speed, flexibility, and creative financing solutions that private lenders like Worth Avenue Capital can offer borrowers.

The conversation also spotlights how self-directed IRA investors, particularly high-net-worth and real estate-focused individuals, can strategically diversify their retirement portfolios by investing in syndicated private loans secured by real estate. If you’ve wondered about the nuts and bolts of using retirement funds for private credit, syndication versus fund models, and the real-world business of short-term bridge lending, you’ll find practical tips and inside stories here.

Key takeaways:

1. Private Credit Versus Traditional Banking: Michael Ciaburri explains that private lending is largely unregulated compared to traditional banking, giving lenders flexibility and speed. Unlike banks, private lenders focus heavily on collateral and exit strategy over cash flow, making them a preferred option for borrowers needing quick capital or those facing bank regulatory hurdles.
2. The Syndication Model Advantage: Rather than running large, fee-heavy funds, Michael syndicates his loans, which means no fees for investors and often higher net returns (typically 14–15% per year). This direct approach allows self-directed IRA participants to invest in private loans without the overhead or diluted returns associated with pooled investment vehicles.
3. Utilizing Self-Directed IRAs for Private Loans: Investors can use self-directed IRAs to participate as lenders in Worth Avenue Capital’s bridge loans. Interest income is returned directly to their IRA, amplifying the benefits of tax-deferred growth and giving investors a fixed, predictable return that’s secured by real estate.
4. Assessing Borrowers and Deals: Michael highlights the importance of due diligence, especially on the borrower – including background checks, analysis of personal finances and tax returns, and always requiring personal guarantees. He emphasizes that understanding the exit strategy is crucial to protect investors’ principal and assure timely repayment.
5. Borrowers and Market Focus: While Worth Avenue Capital started out as a last-resort lender, it now works with very successful businesspeople, real estate developers, and high-net-worth individuals who value speed and certainty of funding over the lowest interest rate. The firm lends primarily along the East Coast, focusing on wealthy communities and only doing deals secured by substantial real estate assets to minimize risk.

Whether you're a seasoned investor looking to enhance your portfolio's performance or just curious about the mechanics of private lending with IRA assets, this episode provides a practical roadmap for capitalizing on today’s opportunities in private credit.

Schedule a free consultation with our team today!

On this episode of the IRA Cafe, we sit down with of Worth Avenue Capital and he's going to tell you how he left decades of the banking industry and started his own private lending empire, Worth Avenue Capital. The great thing is you're also going to learn how you can use your self directed IRA to invest in private credit. Don't miss it. Well welcome in everyone again to another episode of the IRA Cafe powered by American ira. Wherever and whenever you are listening to us. A big thank you to you all for taking some time to listen to us today to learn a little bit about American IRA and the information that we're going to bring to you via our guest today. Remember that American IRA is your one stop shop for anything self directed related. Please Visit us at www.american ira.com to learn everything there is to know about all of the retirement accounts that you can self direct and use for a myriad of your investment objectives.

We look forward to having you visit us there. And not just there, but also when you want to hear more podcasts, not just this one, but all the others that have been recorded in the past along all of our webinars. Also find us on our YouTube channel which is American IRA LLC. You'll find us there in a great catalog of information that you can definitely learn from. And if Facebook is your thing, wherever you get your social media, always look for American ira. Subscribe like us and learn. Well, without further ado, we're joined today by Michael Ciaburri. He is the founder of Worth Avenue Capital where they provide commercial real estate and small business loans and a myriad of other things that I'm going to let him talk about with you today.

So Michael, welcome into the IRA Cafe and we're glad that you can take some time away from your schedule today to enlighten the folks that are listening here. So I'm going to give you the stage for a little bit to tell us about you and about Worth Avenue Capital.

Sure Kyle, thank you. Pleasure to meet you and thank you so much for giving me a little bit of a forum today. Worth Avenue Capital is a direct private lender and we specialize in making short term bridge loans to real estate developers and investors and small businesses. All of our loans are secured by real estate, so I kiddingly tell people that we're sort of in the real estate business. Although we're not buying and selling real estate, we're lending on it. And I've been in business for 18 years. Prior to starting Worth Avenue Capital 18 years ago, I was President and CEO of a small bank that I started in New Haven, Connecticut, called the bank of Southern Connecticut and sold the bank many years ago. And when I was running the bank and my dad before me was president of another bank in Connecticut that he started and sold.

So we have a long history at this. But as I was running the bank, you know, many years ago, 20 plus years ago, you know, I was spending a fair amount of time, more than a fair amount of time dealing with bank regulators because obviously banking is probably the most heavily regulated business known to man. And I was spending probably 30 to 40% of my time dealing with bank regulators and compliance and regulation. That's not who I am. I'm a deal guy. I'm an entrepreneur, deal maker, and I like to lend money. And that's what I'm good at. And making deals for people and making money for people.

So I thought, well, I think the best move is to sell the bank and get involved in unregulated lending. And that's what private lending is. We are a fully unregulated business. The most important thing that we look at, and we do lend in multiple states up and down the east coast, is you look at the usury laws. Every state in the nation has different usury laws. As an example, we're closing a loan tomorrow in Massachusetts. They have a specific usury law that we will abide by. Connecticut, where we do a lot of lending from where I used to be located and know the state well, is far different.

Their usury laws are far different than Massachusetts, even though they're so closely geographically related. So that's what we really look at. But there's really no licensing involved. There's a few states that do require licensing. One is Vermont. I wouldn't make a loan in Vermont even if I wanted the license. There's just. There's not enough business up there.

I wouldn't, wouldn't want to venture up that way. So that's really what we look at. So really, anyone can get involved in the lending business. However, I caution. And there are a lot of people out there, I'll call them laymen who, you know, maybe savvy business people and know a lot about real estate and so forth, but really don't have my background or expertise in terms of lending money. And they try to do this business on their own and more often than not, they get themselves into trouble. As an example, you know, without mentioning names, a guy that you wouldn't know anyways, but a guy up in the Northeast who is a dentist And a very smart guy and a good businessman and he was lending money through me and doing very well. And I guess woke up one day and said, yeah, I could do this myself, you know, and I thought to myself, well, you know, if I need my teeth fixed, I'm certainly not going to try to fix it myself.

I'm going to go to a dentist. And you know, but the long and the short of it is I stayed in contact with him and they're giving me a few horror stories of things that he's dealt with as doing his own private lending. And I, you know, had cautioned him on that prior to him doing it. And he's like, geez, you know, I, I don't know if I should have just stayed with you and what have you. Just, just a small example. But the, the value added that I bring to the table that someone else in this business doesn't have is my pedigree. I, I actually have never run into anyone else in this industry who ran a bank and, and albeit it was a very small bank. But I'm actually shocked that, you know, because it's a natural progression to go from commercial banking to private lending.

I've actually never run into another guy who's run, or female for that matter, who's been president of a bank of any size that's in our industry. So I think that gives me a little bit of a leg up in terms of navigating and helping a borrower attain financing, as an example. I mean, I get calls every day from small businesses, real estate guys, whatever. Oh, I'm trying to, I'm applying for a loan with ABC bank and they'll tell me their story and they've already been to like four banks and I'll say to them, we'll call them Joe, for lack of a better name, Joe. You know, I can tell you that you're not going to qualify. The numbers don't work. Banks are cash flow lenders, meaning that you could have a building that's worth $10 million and have no mortgage on it, and you go to the bank and you want to borrow a half a million dollars, you would think, oh, that's a slam dunk for the bank, right? Not necessarily. If you don't show the cash flow and an income stream to obtain that half a million dollar loan, the bank won't give it to you.

They don't really care what the property's worth. Whereas in my case, private lenders like myself, we're collateral lenders, we look at real estate, collateral Loan to value, you know, maybe stay within a 60% LTV or less. And then most importantly, we look at exit strategy because we're short term. So a bank is going to make a commercial real estate loan. You know, they're looking at making the loan for 20 years. I'm not, I'm looking to make a loan for a year, maybe less, sometimes longer than a year, depending on the situation. So my first question to any borrower, one site. Well, the four questions, or the major four questions are how much do you want to borrow? What are you going to secure the loan with, what are you going to use the money for? And most importantly, how are you going to pay the loan back? So if the answer to number four is, well, I'm going to try to get a bank loan down the road, well and I look and they've got like a 590 credit score and they don't really show good cash flow and they've got a tax lien or whatever, it could be any kind of blip or what have you.

I know full well that within a year they're not going to get a bank loan. And then if we do make, if we did make the loan, even if I love the collateral and I like the guy and it's a nice deal, we'll be stuck in the deal because he doesn't have an exit strategy and he's if, you know, if he says, well I'm not going to sell the property, then I can't force him to sell the property short of foreclosing on the property, which you typically don't want to do. So that's what we need to know up front. Now if that same guy comes to me and says, you know, I've got some, you can see by my credit and cash flow things are tight. But I'm going to sell this building right away and I've got it listed with, you know, this specific realtor, whatever, that's a different story. Then I'm guaranteed to get paid out because we have a mortgage on the property and with as long as we have sufficient equity when they sell the property, we're going to get our money back. So those are some of the things that we look at. What's also interesting is I think that makes it myself a little bit different.

Our business different. Most private guys will not do second mortgages, which I will. And they also will not lend on an owner occupied house. So ABC Widget company wants to borrow half a million dollars. They need the money for working capital for their business. And the principal of the business says, I'll put my house up for collateral. I got tons of equity in it, I have no problem. A lot of guys won't make that loan.

And you say why? Well, because their answer is, which is wrong. Oh, well, he lives in the house. How can you get him out? Simple. He doesn't pay. You foreclose. Whether he lives in the house or doesn't live in the house, as long as it passes muster with the Dodd Frank Act. And the whole key with that is what are the use of proceeds for? If the use of proceeds are for the business, if the money is used for the business, there's no issue. Now if he wanted a home improvement loan, that's a whole different animal.

We don't make home improvement loans. That's a consumer transaction. We're not interested in that. But if he's clearly buying equipment for his business, or he's buying a building, or he's needs it to fund his accounts receivable, it's all good. You can take the house all day long. So there are a lot of loans that Worth Avenue Capital will originate and fund that other people will not. And the other part of it is a lot of these guys have a fund model. Although I do own two funds that I set up 10 years ago and they were expensive to set up.

I don't use them. I syndicate my loans. And that's where self directed IRAs come in, which we'll, we'll get into in a second. With a fund model, it's expensive to run the back office, which means that I would have to charge my investors fees. I have never charged an investor a fee, never, nor do I plan to. If you're in a fund model and they promise you, well, you're going to get an 11% return, well, it's really not 11% because the net return is less than that because they're taking money out to pay fees. I don't do that. My investors have been earning net, net, net net of everything, 14, 15% a year for the last 10 years or so.

So I don't have that issue. So when you syndicate a loan, and in the last several months and the past year or so, I've picked up a lot of individual investors who are investing with me through their self directed IRA and in most cases accredited investors, high net worth individuals. Everyone is invested in the stock market in some way, shape or form because you might have mutual funds or index funds or what have you. So if, you know, if your financial advisor puts together A pie chart. The good financial advisors, who's on top of things, gee, you ought to put a little money into Bitcoin or you ought to put a little money into private credit. And that's really where we fit in, is that that individual should have private credit as part of the pie chart. Because basically what we're doing is we're a hedge against the stock market. So, you know, if the stock market were to, you know, crash tomorrow, which hopefully doesn't, but if it did, your investment with Worth Avenue Capital is secured by real estate and it's a fixed rate of return.

So as an example, we might fund a loan at 12%, that's a fixed rate of return. And we'll probably prepay six months of interest upfront on that particular loan. So the investor is actually making a little bit more than 12%. So as an example, if it's a million dollar loan at 12%, that's $120,000 a year in interest divided by two. Six months of prepaid interest is $60,000. So on a loan like that, I might have five individual investors put up $200,000 a piece. And a lot of those individuals are funding it through their self directed IRA and the money goes right back into the IRA. So what happens is on that million dollars, $60,000 of it is prepaid interest.

So that goes right back to the investor and they can take that $60,000 and they can reinvest it. If they wanted to buy and not take any risk with it, they could buy a Treasury bill, let's say 4%. So the true return, cash on cash, is not 12%. It's a little bit more than that because you're earning money also from the prepaid interest that you got back and you reinvested that into a T bill as an example. And there are many ways that you could reinvest that money. So that's really the crux of our business. And I don't have institutional investors. They're very rigid in the way they invest.

I try to be a little bit more creative in the way I lend versus the average fund. And it's probably because of my background. I ran a small bank and lent money to tons of small businesses and every one of them has different needs. I don't try to put a loan in a box. I don't lend it black or white. There's gray area with every loan. And as I learned many years ago, this is a people business. And yes, technology plays a key role AI all of that.

It's Critical to our business. But at the end of the day, this is about people knowing who you're lending the money to. That to me is more than half the battle. And understanding your customer, what is he trying to do? What is she trying to do? Are they good people? Are they honorable? Do they execute? That's most important. Maybe the numbers don't work perfectly, but I know that we're going to get paid back. And, and whereas another private lender might say nah, these numbers just don't work. I, I don't, I really don't plan on getting delving deeper into their background or whatever. I, I, I, I take the time to get to understand who they are and who we're lending to.

Does, you know, really unpacking a little bit of what you just talked about there, taking us through that, really that journey from beginning to end. And the differences in how you practice compared to the bank, does this mean that upfront costs, you know, if the person was able to get the loan from either the bank or you, what, what would an investor notice as some of the biggest differences on their end? Is it going to be a higher upfront cost with going on the private lending using you? Is it cheaper going the bank route but three times the hoops, you know, we kind of hear a lot of differences in the difference in using the bank as opposed to, you know, difference in using private lender. I mean, as you know, and you've spoken about it already, folks are willing to use their self directed retirement accounts to lend out to borrowers because they're able to allow certain things that a bank wouldn't allow. Or you know, you hear it's a much easier process for, for someone to private lend out to someone, but they're gonna require some maybe higher down payments on the front end. Can you talk a little bit about the differences of what the investor might notice on private lending comparative to what it might be like going through the bank?

Sure, it's a great question, Kyle. And in fact I'm in the midst of writing a book about private lending and I use this example within the book. So if you, let's say the average bank loan today was 8% and the average private loan is 12% and somebody's borrowing half a million dollars. Well, my loan, I can close that loan, let's say in two weeks. And yes, I charge points and what have you and there's legal fees irrespective of, you know, whether it was a bank or my company or a private loan. Let's say that 8% loan with the bank, they finally get approved, but it took two months to get approved. Now I've closed the loan in two weeks with minimal bureaucracy and a streamlined approval process with not reams and reams of paperwork. The bank has reams and reams of documentation.

They require paperwork. And six, eight weeks down the road, the borrower still hasn't closed the loan. Okay, so now the guy that closed the loan with me, he's already got that money. The money's put to work. He's already earning money on that 500. Okay, so you say, well, there's a 4% difference in, in costs. There actually isn't. Because if you factor in the time it took, if, let's say he finally closes the bank loan and it took two months as opposed to two weeks, but it cost him.

The bank required him to prepare all kinds of financial information. He had to hire his accountant. There's a cost to that. They needed some more legal documents that maybe I didn't require. Had to hire his attorney to do that. That costs money. Now, the two months that he waited to get the money, there's opportunity costs involved. So there's a cost to that.

There's a real dollar cost to that. So I would argue that the borrower that used our money at 12% and got the money in two weeks, he was better served with us than waiting the two months and getting a loan at 8% with a lot of extra costs involved that he didn't have with someone like myself as a private lender and the opportunity cost. So if you factor it out, maybe it's a break even. But the difference is he got the money in two weeks versus two months. You got the money in your pocket, you can do things with it. You can use that money to help your business, which in turn generates cash. So it's a case study that I use all the time. And it's gotten to a point where I've got.

Most of my borrowers are very successful business people. Back in the day, when I started in this business, guy like me, well, he's the, he's the lender of last resort. You know, Joe Smith went everywhere and couldn't get money, so he went to Michael Chaburri and he gave him the loan. You know, that's what the word on the street was 18 years ago, that that's changed dramatically. Now it's, oh, you know, the guy that's worth a hundred million dollars. And I do have a borrower who's worth all of that, who's this very Successful real estate developer in the northeast. And. And he pays handsome rates with me, but he gets it quickly.

And he tells. And people will ask him, why did you pay 13% for that loan? You're so wealthy and successful. His answer is, what do I care? Because I just borrowed $2 million. I'm going to turn that $2 million into $10 million. What do I care if it's 13%, 14%, and by the way, it's all tax deductible. The interest expense is tax deductible anyways. And he said, if I had to try to get that money from the bank, they'd put me through the ringer, you know, I'd have to give him 8,000 pieces of information and meetings and committees. And he said, I don't have time for that.

I'm competing in a competitive marketplace in commercial real estate. I got five of the guys that want to buy that building. I want it. I need to be able to access the cash fast. And there's. There's your answer, you know, and it

really, folks, those of you who are listening right now, if you're driving around in your car this evening and you are trying to find a widget, if you're trying to find something at a certain store, but you're really just basing what you're looking for on price, how many places have you gone to right now to find the best price on what you're looking for this day and time in gas prices? How many miles and how many different places around town have you driven to find gas at $0.03 cheaper? And how much gas did you burn to do that? I have this conversation with a friend of mine a lot, Michael. And to your point, look, we're all going through things where we're having to tighten up the straps right now, okay? I mean, if you've been to the gas pump or the grocery store lately, look, I. I'm very sympathetic to that. I understand that we all go through it ourself. I'm married to a teacher. We are very conscious on a lot of the things that we do. We budget a lot on things. But once in a while, I will say, hey, look, it is not such a bad idea to spend a little bit more knowing that my time at our ages, my time, is what's more important to me right now than saving a couple of dollars.

And to your point, if you now take that to the level of the loan and the opportunity cost, if you can close in two weeks as opposed to something else closing in two months, well, if we're talking about a building with occupancy that, that person number one, already in, in the month and a half that, that six weeks of time that they saved, the landscaping has already been, been done, it's already being watered and they've got a tenant in the property that's paying rent. So exactly. That offset there. So no, that was a really good. I really appreciate you. You're paving the way for us on that. And you know, you talk about just your, your, your banking background. It's not just the banking background.

If I'm, if memory serves me correctly, I think that pretty much your education all along was, was banking as well. And was, and you were. A lot of people don't know this. How many people out there know what the mascot is to the University of Delaware? I saw that and I was like, man, he's a fighting blue hen. Look at that.

The blue hen. Yeah, I actually Stonier, which is the quote unquote, the Harvard of the banking schools, which I graduated from many years ago when I attended Stonier, that's where it was. It was at the University of Delaware. So I spent three summers there studying to get the degree. Now it's at Wharton at the University of Pennsylvania. My dad attended the school. He went to Stoner. He graduated in 1969.

I was a little boy. And in those days it was at Rutgers in New Jersey. So the schools moved around a bit. And then also spent three summers at the University of Wisconsin in Madison where I received another banking degree. But prior to that. So, yeah, I was born for this, so to speak, and was groomed for this at a very young age and just became disenchanted with the banking industry, say, 20 years ago. And that's when I pivoted shortly afterwards to form Worth Avenue Capital because I saw opportunity in this business. Whereas in, let's face it, 18 years ago, most people didn't even know what private credit was.

Today it's, you know, there's trillions of dollars of private credit loans on the street as we speak and, you know, players far bigger than I am. I'm just a small player in the industry and the, you know, the Blackstones of the world and the blackrocks and whomever are in the business in a big way. Blue Owl Capital. And they're lending, you know, hundreds of billions of dollars in this business. And it's because the banks have left a void. The government is so stringent and onerous in terms of the way they regulate these banks, that there are certain Things the banks just can't do. Because if they do them, they will be punished. And I know firsthand, you know, you say the bank, the regulators, they won't care.

Well, really make that loan and you see what happens. And it could be an excellent loan, but because it didn't cash flow and the loan is being paid like as agreed, no issues. The bank says, you shouldn't have made this. The regulator say, you shouldn't have made this loan. Doesn't cash flow. Yeah, but he's paying it every month. And we expect to get paid up. They don't care.

Sorry. We're going to have, we're going to make you put a reserve against this loan. Well, guess what? That comes out of your capital and now you show a loss on that loan immediately. In this business, in private lending, I don't have that issue. We don't have to worry about that. We don't have anybody looking over our shoulder that we have to worry about taking care of them to make sure this works. So I get a lot of loans from banks. You know, the banks say, we just can't.

This is a good guy, good business. We think it's a good loan. But we know if we originate and fund this loan, we're going to have a problem with the regulator. So it's probably a loan you could do. And I look at it, yeah, it is a loan I could do and I'm going to make it. Thank you very much. I appreciate it. You know, so that happens a lot.

What, who, who are really. What is the breakdown really of your clientele? Is it going to be more the investor? Is it going to be more of a developer on commercial property? I mean, you know, how small of a project are we talking about? Do you still have maybe the friends that you're doing, you know, a single family, you know, investment property with. Or. I mean, are we really talking about. Look, this is, you know, Michael has, has graduated up to. He's doing only really the, the corporate size commercial lending. Or do you have a range at all?

Well, it's another great question, Kyle. About 80% of my clients or borrowers are either real estate developers slash investors. The other two.

Wait, excuse me. Excuse me. Russ. I hate the cut here. I've got an animal downstairs that's losing its mind. Is there, is, is that coming through? Do I need to do something with that? He just, he, he, he just got quiet. But I mean, he's been for a few minutes. He's been going on and on and on, and I'm Like I, I would just hate for us to get all the way to the end and you find that that's happening through the whole thing.

So, so. Okay, all right. No, there's not right now. So if, if it's okay, I'm going to start that question over again. And Michael, it really is, it's going to be.

Yeah, no problem.

I, I apologize for that, guys. I just.

No issue.

Yeah. Okay, so I'm just going to start with. Good. Okay. So, you know, as you've kind of been talking, Michael, about, you know, the different types of investors out there, who, who is your typical investor? Is it going to be an individual? Is it going to be more, let's say, of a developer is. And if it isn't an individual, are they doing small projects? Are we, or are the developers going to be doing large commercial projects out there? Do you have a range or just certain aspects of lending?

Well, just to sort of dovetail on what I was talking about a few minutes ago. So you got the investor side and the borrower side. We'll start with the borrower side. So 80% of my borrowers are real estate developers, slash investors. The other 20% are comprised of small businesses that, you know, come to us on a, probably on a consistent basis in and out, borrowing here, borrowing there. And they all have real estate collateral. In fact, I've got, and I'll, I'll say this, I'm proud of this. I have a borrower that they've been in my family, I'll say, going back to my dad, 50 years, their father and my dad, my dad used to lend money to them in his banking days to when they started their business many, many years ago.

And, and they're still, they followed me to Worth Avenue Capital and they have bank financing, they have banks that they deal with. But you know, they'll call me up, we need 300,000 quick. I got these three properties, we'll put them up and within like a week to 10 days, the money's in their account. So, you know, I've got a few of those where they just come consistently. Now on the investor side, our typical investor is the high net worth accredited individual investor, many of whom are investing through a self directed ira and a lot of them love real estate because our business is obviously heavily tied to real estate in that all of our loans are secured by real estate. So I've got a lot of guys and females as well who are real estate investors who say, gee, you know, I got a lot of money tied up in Real estate and it's kind of in a liquid investment. I love my real estate and I want to keep it, but it's, you know, your business is far more liquid because I can make a loan, invest in a loan and get the money back in six months and have you relend it and you're turning cash over. So it's really mostly successful business people, but a lot of my investors are very real estate focused and are in the industry who like to invest with me as sort of a side business for lack of a better term.

What do I, you know, you were talking about self direction there, which of course is near and dear to my heart and a lot of our listeners here. So talk about the typical investment of how someone is going to use their self directed ira. Lots of things that we hear. To your point, someone might be really big into real estate but they might want to take a step back. Don't want to be the boots on the ground, don't want to get their hands dirty on this one. However, they've got the liquidity to be able to help others maybe get to what they've grown into. So they're looking to lend on that. So is this a way that folks are able to invest their cash from their self directed account with you and then you are putting that money to work? Is that what I'm hearing on this?

That's exactly correct, Kyle. In fact, I think I've mentioned we're closing a loan in Massachusetts tomorrow and in the syndication that I put together, two of those individuals that are investing, are investing through their self directed IRAs. And in fact one of them is a first time investor. And by the way, geographically these investors are all over the country. I'm sure you have a client base that could be in all 50 states. So we're agnostic in terms of where the money comes from. They want to get to know, you know, really they're investing with me because they're, they're trusting me and my background and my expertise and my reputation that I obviously know how to underwrite a commercial loan. So yes, I mean I think that the, the individual investor who's using a self directed ira, probably a lot of that is already invested in the stock market.

Some of it may be invested in, in hard real estate that they, they own real estate through their self directed ira. So this would be sort of a third way. Oh, and by the way, they, they may have crypto, they may own bitcoin through their self directed ira. So this could be say a fourth asset that they're investing in, in private credit. So that really creates some excellent diversification for the investor. They've got real estate, they're invested in the stock market, they're invested in crypto, and they're invested in private credit. So they have several streams of income and asset growth to sort of build their wealth on.

What's some of the differences or what's one thing that you would ask an investor to consider when making the investment, you know, when they are looking for a good sound investment, for example, you know, into the private credit and maybe even expand a little bit to say, well, what should someone. Or if they have the question, well, you know, you'll get folks that'll say, well, can I just use my personal funds or you know, which is better to use my retirement funds. Now, obviously I can't answer the question because we're not permitted to give any tax, legal or financial advice, suggestions or opinions. But if somebody were to ask you, hey Michael, look, you know, I know that you've got a wealth of information here. You've seen it from all sides. You know, tell me the pros and cons of really going at it, you know, with my personal funds as opposed to my retirement funds. Great.

Another great question. And, and I have a couple of people who do both. They invest through their self directed IRA and they also invest in with their liquid cash. It just depends on their situation. Obviously the nice thing about the self directed IRA is the earnings that you derive from investing with me are all, it's all tax deferred. So that, that's an excellent part of the business is you don't. If you're investing through your liquid cash, then you're going to pay the short term capital gain on the interest income that you earn from a specific loan. Whereas with the self directed IRA you get your income and it's all tax deferred.

You don't have to worry about paying taxes on it for the time being, which is also a real plus. So to answer your question, Kyle, it's sort of a mix and a diversification. Depends on the investor, what their short term needs are and their long term needs are. And it's always a balancing act to make sure you're trying to protect both sides of the equation.

What do you actually, when you're evaluating a deal, you've been, now this is one thing that we can say, look, you've done this forever. You are the utmost expert in this field. So you've probably forgotten more things than people even are thinking about what to ask and what to do when they're going at making the investment. So what are some things that, when you're evaluating a deal that you're looking at the questions that you're asking, and maybe yours might be on a larger scale, but that someone who's listening to us here or watching us today or at some other time that they should think, oh yeah, I didn't even think about that yet. Let me add this into my arsenal of how to evaluate my next deal.

Well, if the most important thing, and I briefly mentioned it before, is the person so know who you're lending the money to. Are they good people? We do background checks. Obviously, I get, I get solicited by a lot of people that I don't know, never met before or spoken with, and they seem like good people. But, you know, I, I have a, I have a private eye that I use, a former alcohol, tobacco, firearm guy, an ATF guy, and he, he's down here in South Florida with me and he does my background checks. And, and in most cases, they come out clean. But you never know. Sometimes there's something that you didn't know about that could be, you know, it could be a deal breaker based on what's on their background check. But in the most, for the most part, the background checks come out clean.

So that's step one. Step two, what's the, does their business, if it's, if you're lending to a small business, what kind of a business is it? What kind of income are they generating? Is there enough collateral with the real estate that's involved? Does the exit strategy work? If they say, well, we're going to pay you off through cash flow, do they have enough cash flow to pay off that loan as opposed to, well, we're selling that property, so there's no way you're not going to get paid. As soon as the building sells or the house sells or whatever it may be, you've got a mortgage on it, so you're going to get paid in full. So that's the easy part. The difficult part is when they want to try to, well, I'm going to go to ABC bank and I'm going to refinance the loan and will pay you off that way. Well, then I've got to really analyze their financial condition to make sure. Do they in fact, will they in fact qualify for that loan? Because if not, then we're stuck. We're in the deal longer than we'd like.

And yeah, even if he continues to pay the interest every month, that's all great, but I need to find out how are we getting our principal back? That's what's the exit strategy. So those are all things you got to look at. And the two things that I look at before everything is their updated personal financial statement and last year's personal tax return. Those two documents tell me pretty much 95% of what I need to know. It tells me what kind of wealth they have and it tells me what kind of income they have. And from that I can immediately say, yeah, this makes sense or no, this deal just doesn't make sense based on what he just sent me. And yes, I do ask for the business financials and tax returns or what have you. But again, the PFS and the personal tax return are the two most important documents.

And the other thing is we do not make any non recourse loans. Every loan that we've ever made and will continue to make is with a personal guarantee. If they don't have faith in the venture, why would we? Simple enough. And I do it sometimes with wives and that's always a sticky situation, getting the wife involved. My answer is, well, if your wife doesn't have faith in you, why would I, you know, what's your argument to that? It's a tough rebuttal and we don't always ask for wife's guarantees. I'm just using that as an example. Now, if the wife owns substantial part of the assets in the family. Yes, she owns the building with her husband or she owns the house with her husband.

Yeah. Then she's going to sign. And in most cases they don't resist. But there are cases where no wife doesn't want to sign, but she owns half. She owns your house, she owns your building. Without her, I can't do it. And that doesn't happen very often.

And don't let that be a distraction or a detraction really I should say for our listeners out there, because those of you who do have the self directed IRAs, if you are having to leverage, you know that the only way that you can do so is with the non recourse loan. So it sounds like anything that you'd be able to invest with, going into certain deals with Michael and his team, it's going to be the 100% going in. All right. But really in that case, you're not leveraging to do those type of, those type of private credits anyway. You're going to be going in 100%. So completely understand what you're saying on that. On the non recourse Side that. That it all must be recourse in what you're doing with your lending.

You're down in south Florida, you mentioned, and it seems like from what I remember that just a few states on the northern side of Connecticut up there. Was there a Massachusetts? A little bit. My point being is that do you only center your business in certain areas? Are there only certain areas, states you lend in? Like you just said, you wouldn't do any lending in Vermont. It seems like just a handful.

Yeah. I mean, another great question. What we try to do is lend up and down the east coast, but I don't typically lend in northern New England, although I like New Hampshire. New Hampshire's an excellent state to lend in. So really, it started New Hampshire, Connecticut, of course, Massachusetts, I'm closing a loan tomorrow. Rhode Island, I'm closing alone later this week. And then all the way down to Florida, down the eastern seaboard. I would like to start lending in Tennessee, which technically is not the eastern seaboard.

It's not really the Midwest either, but it's sort of in the middle. That's a state that I've wanted to lend in. Haven't found the right deal yet, you know, and possibly some. Some of the other states in the Deep South I have some interest in. But, you know, I don't want to stray too far because we're small and I can only be in one place at one time. And I want to stick to our knitting and what we do best and in the areas. But I. I'll probably never go out to the west coast or say the Midwest, per se.

Texas is also a state I'm interested in and haven't had some opportunities there, but it hasn't hit yet, so.

Gotcha.

Yeah. And the other part of. Is we like wealthy areas. And I don't. I'm not saying that because I'm. I'm trying to be a snob. It's not at all. It's because, as an example, the loan we're closing on in Massachusetts tomorrow is in a very, very wealthy suburb of Boston, and we have a very low loan to value.

God forbid the loan were to go into default, which I doubt it will. There's. There'd be no issue in. In getting the real estate back and getting the money back without issue. The loan that I'm closing in Rhode island is in a very, very wealthy small community near the water. In fact, it's a waterfront town. It's a town that I know well. Actually, again, if there's ever a problem, we're not going to have an issue getting our money back.

We do a lot of lending in Greenwich, Connecticut. Greenwich, Connecticut is one of the wealthiest towns in the country. We like to lend here in Palm Beach. Palm beach is a very wealthy area because I figured that the real estate will hold its value if there's ever a downturn in the economy. Yeah, everybody gets hit, but the wealthy communities don't get hit quite as hard as some of the other areas. So it makes for a more safe lending environment for us.

Well Michael, that about wraps it up here on this episode of the IRA Cafe and we're really thankful for your time today. I know that we're going to be belief seeking you again. Come back around on the on our webinar platform. So when you are listening, when you're listening to this podcast out there, you may have already seen Michael on our webinar series and if not, make sure you tune into that. You can always do that on our YouTube channel and then at any time tuning in or at least doing your research on American IRA's website at www.americanira.com. well, that brings us to a close of another episode of the IRA Cafe powered by American ira. I'm Kyle Moody in the Business Development Office and also surrounded by great team members on our operational side. We want to thank our guest Michael Chabri today with Worth Avenue Capital and again remembering that they provide commercial real estate and small business loans out there.

Also doing the private credit that you can use your funds to get in touch with Michael and get that self directed IRA account with working and investing in that private capital and private credit as well. So until we all meet again wherever and whenever you can catch us on your podcast venue, we look forward to seeing you. Then everyone remain safe. We'll talk to you later.

Thank you again Kyle. Appreciate your time. Thank you.

Absolutely man. It's a pleasure.

American IRA llc, a North Carolina LLC Africa, is a third party administrator for New Vision Trust Company, a state chartered South Dakota trust company. As a neutral, self directed IRA administrator, American IRA does not recommend or endorse any investments, individuals or entities including financial representatives, promoters or companies. American IRA and the IRA Cafe are not responsible for other statements, representations or agreements nor do we evaluate the quality or profitability of any investment. American IRA does not endorse guests on the IRA Cafe Podcast. Guest opinions are their own and do not necessarily reflect the views of American ira, its subsidiaries, associates or custodian. Participation in the podcast is voluntary and no compensation is provided. American IRA is not a fiduciary and cannot offer financial advice. Please consult your CPA or another professional before making financial decisions.