In this insightful episode of Executive Connect, Mat Sorensen breaks down the under-the-radar
investment tool every savvy executive should know about: the self-directed IRA (SDIRA). Mat shares
how he transitioned from being an attorney in the space to founding Directed IRA, now managing over $2
billion in assets.
He demystifies how SDIRAs give investors access to real estate, startups, crypto, private equity, and
more—beyond what traditional brokerages allow. Mat and Bryan dig into the tax implications (UDFI,
UBIT), using leverage, checkbook control, and how executives can take control of sleepy retirement
funds for exponential returns.
Chapters:
00:01 – Welcome & Guest Intro: Mat Sorensen
00:21 – How Mat Entered the SDIRA Space
01:45 – What is a Self-Directed IRA? Explained Simply
03:45 – IRAs vs. 401(k)s: Where the Real Money Is
06:00 – When You Can Move 401(k) Funds to an IRA
06:34 – Self-Direction vs. Checkbook Control
08:30 – Using LLCs for Real Estate Investing via IRAs
10:00 – Can You Use Financing? (Non-Recourse Loans Explained)
11:58 – UDFI & UBIT Taxes: What You Need to Know
14:31 – Strategies to Minimise or Defer UDFI Tax
17:00 – The Real Goal: Maximise After-Tax Wealth
18:52 – Investing in Startups, Private Companies & Crypto
21:00 – Unusual IRA Investments (Racehorses, RV Parks, Cows!)
21:48 – Final Thoughts: Stop Letting Retirement Accounts Sit Idle

Welcome to the executive connect podcast I have with me today, Mr. Matt Sorenson. Hey, Matt, it’s good to see you. Thanks for coming on the show.

Mat Sorensen (00:08.047)

Hey, thanks, Brian. Thanks for having me. I love being on talking about self-directed IRAs and real estate.

Bryan (00:13.804)

Yeah, yeah. So your company’s grown quite a bit. I how’d you guys launch into the self-directed IRA thing that you got going on?

Mat Sorensen (00:21.874)

Well, I I was an attorney in the space helping clients across the country use IRAs to buy real estate. And I had my first client, I mean, literally 19 years ago, be like, I want to use my IRA to buy real estate. And I was like, what are you talking about? I’d never heard about it. And then I dug into it. I’m like, this is a little thing. This is kind of a cool little niche. So I became an attorney in the space, kind of became the national expert on it, wrote the number one book, spoke across the country, represented.

Most of the companies that do this is their outside lawyer. Now they’re my competitors. So as we set up our own company, because we thought we could do it a lot better, or set up our own company, directed IRA back at the end of 2018. So today, we are over 20,000 accounts, 2 and 1 billion in assets. We’ve opened up over 1,000 new accounts a month.

So we’re growing fast and doing it the right way. Just kind of the old fashioned way. Like know what the hell you’re doing. Take care of people. Deliver a high level of service. Deliver expertise. And that’s what we’re doing. But it’s a cool strategy I think a lot of people just haven’t heard about. So that’s why we always love being on podcasts and stuff like this. Just so people are aware of it. And I know you’ve been in it and are familiar with it. We’ve talked, it’s been years, but.

Bryan (01:28.578)

Yeah, yeah.

Mat Sorensen (01:38.226)

So it’s kind of an interesting little strategy, which is why I decided to put my whole career into it, because I’m like, this is pretty damn cool.

Bryan (01:45.986)

Yeah, yeah, so I mean, most of our audience is corporate executives, but I would venture to say most of them probably have still never heard of a self-directed IRA. So maybe we can start there. So what exactly is a self-directed IRA?

Mat Sorensen (01:59.804)

So all it is is an IRA that can invest in any asset allowed by law. Most people think of their IRA or 401K, and they think of a broker dealer IRA. They think of like Fidelity, TD Ameritrade. And what can your IRA invest in? Well, what they sell. They sell financial products. So your IRA is at Northwestern Mutual or New York Life. What can your IRA buy there? Annuities, because that’s what they sell.

But your IRA has always been able to invest in real estate, private companies, startups, private funds, oil and gas deals, crypto. Like it’s always been able to do that. You just can’t do it with a broker dealer because they don’t sell that. So you need these call of self-directed IRAs. And there’s 20 companies or so that do what we do. We just happen to be the best. But there’s 20 companies that do this. And when you have an account with a self-directed IRA provider,

We’re like, well, what do you want to invest in? You want to buy real estate? You want to invest in a small business and a private fund and a startup? It’s whatever you’re into. And so it’s a little different than just typing in a ticker, buy SPY or buy Apple. It’s a little different than that. But it allows greater investment options for people, as we say, take control of their retirement to invest in assets that they know and believe in as opposed to just being fully invested in the stock market.

Bryan (03:21.25)

I think most folks probably think about their 401k, but I think we probably need to distinguish that from the IRA. And can people invest with their 401k? Usually those are governed. There’s governing documents for those through their employer. So I think what we’re talking about here is when people have rolled the money out of their 401k into an IRA.

Mat Sorensen (03:39.686)

Yeah.

Bryan (03:45.75)

Can we maybe just talk through that a little bit just to try and tease out and distinguish what we’re talking about here?

Mat Sorensen (03:51.206)

Yeah, so now 401ks can be self-directed to it’s a little more complicated, but most people who are doing this are using an IRA. Now there’s $44 trillion in US retirement accounts and that’s true trillions, right? When do you use that word? mean, the only time I use it is in this presentation when I talk about this is like, so there’s so what this is where all the money’s at in America and like this 44 trillion is the most investable set of dollars anywhere period. There’s no more money anywhere.

except in US retirement accounts. And we’ve all got a little sliver of that 44 trillion. Well, the biggest bucket of the 44 trillion is actually IRAs. Most people think most of the money’s in 401ks. It’s not. $17 trillion of the 44 is actually in IRAs. Then you got about 15 in 401ks. Then you got pensions and some other smaller buckets of money in the retirement account space. But IRAs already have most of the money in it.

Now most of that originated from a 401k. They left that job, they rolled it to an IRA. People don’t work at the same company for 30, 40 years anymore. They jump around and they might have four or five different employers during their lifetime. And they might have…

four or five different 401ks that could have been rolled into an IRA at some point. now that’s what most people come to a self-directed IRA with. They already have an IRA at Fidelity, or they got an IRA at TD Ameritrade. They’ve got a Roth IRA at Schwab. And they’re just like, well, I don’t want to buy what they’re selling. I want to invest in an oil and gas deal. I want to invest in a startup or a private equity fund. Well, you transfer that same account, your Roth IRA at Schwab, to a Roth IRA at Directed IRA.

and now you can go and do it. Now the 401k is tricky because a lot of 401ks, like if it’s a 401k where you still work and you’re not yet retirement plan age of 59 and a half, the employer can lock you down and say, hey, as long as you’re still an employee here, we use Vanguard, that means you’re using Vanguard and that’s all you can do. So you’re kind of locked in and you can’t move. But once you’re no longer employed or you hit retirement plan age of 59 and a half, you can move that money even if you still work there.

Bryan (05:47.938)

Thank you.

Mat Sorensen (06:00.721)

if you’re at retirement planning, you can move that to an IRA wherever you want, whether you’re like, want to go to fidelity or I want to go to directed IRA and self-direct. So that’s the, there’s kind of a little snag sometimes on your current day job 401k.

Bryan (06:16.046)

So what exactly does a self-direction mean? Because I know there’s this distinction between the self-direction through a custodian, but there’s also this feature in some plans, or some ways people have things set up where you can actually have checkbook control of your IRA as well. Do you guys owe for both, or can you maybe talk to us a little bit about that?

Mat Sorensen (06:20.485)

Yeah.

Mat Sorensen (06:34.725)

Yeah, so there’s kind of two options when you get into self-directing. It depends on what you want to invest into. Let’s say you just want to invest in a private fund, whether it’s a real estate fund, a private equity fund, an oil and gas fund, whatever it is. If you’re doing that,

or you’re investing in a startup, you’re just going to do a self-directed IRA. You open an account with us, let’s say, you transfer the money from Fidelity. Let’s say you’ve got a $400,000 IRA at Fidelity. You’re like, well, I want to do $100,000 in this private fund.

Okay, open up the self-directed IRA, direct IRA, transfer over 100 grand. You don’t have to move the whole thing, just whatever you wanna self-direct. And then you have a self-directed IRA account. That could be a traditional IRA, a Roth IRA, a SEP IRA, could even be health savings account. All these different account types can be self-directed. But there, when you invest in the private fund, your IRA’s just gonna invest in that company. It’s an LLC or a limited partnership, and it just buys the units or the shares in that company.

Now there’s some a lot of clients actually one of the most popular investments is real estate. And so a lot of real estate people who self direct. Let’s take that same example of money’s a fidelity transfer over 100 grand you want to do a real estate deal. Well they’re like yeah I want to buy that rental property on 123 Green Street. It’s one hundred thousand dollars for example. Well what a lot of those self-directed investors do is rather than have the IRA own the property they have the IRA invest in the LLC.

and the IRA owns the LLC 100%, the LLC in turn owns the real estate. And that’s popular because in the LLC you get a checking account in the LLC, so your IRA’s cash gets invested in the LLC. The LLC has a business checking account, there’s banks we work with that are familiar with this and they know what the hell this structure is. But then you as the IRA owner can be the manager. So now the LLC is gonna buy the property on 123 Green Street. They’re gonna be on the contract and on title.

Mat Sorensen (08:30.863)

and your LLC bank account receives the income, it pays expenses. Now, the thing with IRAs is when you’re doing deals is you’re not using those assets. Don’t want to make sure everyone understands that. This is an investment, right? This is like a rental property some tenant’s staying in, or it’s a property you’re rehabbing and paying a contractor to fix it up so you can flip it for profit. But the LLC sometimes is called a checkbook IRA or an IRA LLC. It’s more of a strategy.

You know, it takes a self-directed IRA. It’s an extra step in the process because rather than the IRA investing its cash into the private fund, the LLC or the limited partnership or the corporation that’s private, and just owning those shares, getting profits from the company back into the IRA, the IRA has a list like holding company LLC in the middle kind of that you can manage and have a bank account.

Which for certain real estate investors, like you’re buying a rental or you’re flipping a property, is a much better structure. That’s what we use for a lot of our real estate clients.

Bryan (09:30.702)

Okay, yeah, so, you know, know real estate, people don’t normally pay cash for real I mean, it does happen, right? Developers will buy a piece of land cash, they’ll build on it, but there’s generally some sort of financing component to most of the transactions. Does that play into, you know, how all of this works with an IRA? you know, can you talk about that a little bit? And then also, you touched on a little bit about the outside benefits piece. Can we talk maybe a little bit about…

what you can and can’t do in terms of outside benefits.

Mat Sorensen (10:02.895)

Yeah, so first your IRA can buy real estate with cash outright, and we have lots of people that do that. You can also get a loan to leverage the purchasing power to buy more real estate than you could otherwise buy. If you think of your IRA buying stock or a mutual fund, you can’t get a margin trading account on an IRA. don’t let you do that. But your IRA can buy real estate and use debt to leverage the purchasing power of the IRA.

Now when you get a loan to buy real estate, you have to make sure you get the right type of loan. It’s called a non-recourse loan. And there’s banks that specialize in these loans. There’s probably about 8 to 10 banks now that do these loans where your IRA is buying rental real estate, and they’re lending money for the down payment. These are kind of like DSCR loans, if you’re familiar with them, like Debt Service Coverage Ratio loans, where they’re like,

What’s the debt service that you’re going have to pay for the mortgage to own the property? What’s the rental income we expect you can get? And then does the property appraise enough for the value we’re lending you? They don’t look at the credit of you, the IRA owner. The IRA doesn’t have credit itself. They’re looking at the property, and they’re lending on the property. Now, under those loan terms, if the IRA

misses its payments and doesn’t make the payments on the loan, the bank has the right to foreclose and take the property back. They can’t come after the IRA, and they can’t come after the IRA owner personally. That’s what’s a non-recourse about it. But they do have rights to the asset they lent on to foreclose and take that property back. So you can use a non-recourse loan to increase the purchasing power. So maybe you want to buy a $300,000 property and you have $100,000. You could possibly put $100,000 down and get a loan for the other $200,000.

Those loans, you typically got to put 30 % down, though. It’s not like you’re putting 10 or 20 % down. Because of the nature of those loans, they’re generally going to be 30%. Some banks even require 40%.

Bryan (11:58.158)

Okay, are there any special tax implications that go with that, like this UDFI and UBIT situation? Can you maybe talk through that a little bit?

Mat Sorensen (12:06.917)

Yeah, so basically what the IRS says is they’re like, and this is, know, for purposes of today, this is, I mean, I have a whole book on this, by the way, you know, I have a full day conference on this stuff. So if you’re like, dude, he just went right over my head, Matt, I just heard what the heck a self directed IRA is. And you’re talking about UDFI tax. Just hang in there. Okay, it’s all right. When you buy

like an asset with let’s just take the real estate example I did you you bought a property for 300k 100 000 of it was the IRA’s money invested the other 200 000 was from a loan well the IRS looks at that and they’re like you know 100 000 of this was IRA money so when the profits come back to the IRA that was one third of the purchase you don’t have to pay taxes on that because IRAs don’t pay tax when they make money but the other two-thirds of the purchase

That was debt. That was not IRA money. We’re gonna let the money go back into your IRA, but you’re gonna have to pay tax on profits from that. Because that wasn’t money you contributed to your retirement account or grew your retirement account with. You’re basically juicing your retirement account by using this debt. So they’ll let you do it as long as it’s a non-recourse loan, but they make you pay tax on it. Now from our perspective, it’s a dang good deal actually.

Because when you sell the property, which is when most people end up having to pay this if they have a gain, they have appreciation on the property, you get capital gain rates, which is 20 % max if you hold it over a year. And it’s only on the debt. It’s not on the money that your IRA put in. So if I think of my IRA buying 100,000 of mutual funds or stocks, I can only buy 100,000 of assets. But if think of my IRA buying real estate, it can buy a $300,000 asset that can appr-

that can appreciate on $300,000. I can get cash off of $300,000 of an asset. So it’s a nice perk for those buying real estate because they can increase the purchasing power and buy more assets. Again, you do pay tax, but you never had that $200,000.

Bryan (14:07.309)

Right. Yeah, okay. And so, I mean, is it common for people that perform, you know, instead of selling, you know, I know that you guys have a law firm too, or you’re a member of a law firm. Is it common that people try to defer those taxes using various strategies too? And is that something that your IRA company or maybe your holistic law firm or however you’re set up, they can help with as well?

Mat Sorensen (14:31.025)

So there’s definitely strategies to try and minimize that tax or defer it. And that would be in my law firm, KQS Lawyers. We advise clients across the country on just business and tax planning in general. And then obviously we have a niche in this self-directed IRA space. So there’s some strategies there. I mean, one of the things we’ve seen clients do is if you pay the debt down before you sell it, the IRS doesn’t charge the UDFI tax at the time of sale, as long as you hold the property for 12 months with no debt.

And so there’s a number of little things that you can do to try and get around it. But what I would say is what you’re looking for in your retirement account is an overall return on investment. I’m trying to get my retirement account as big as possible. One thing when people focus too much on this UDFI tax is they’re like, that sounds complicated.

And I’m like, OK, sure. Keep buying 100,000 worth of assets with your 100,000 in your IRA instead of buying 300,000. Like if that property goes up 10%, do you want a $30,000 increase in your retirement account, or do you want 10,000? Well, Matt, on that 30,000, 20,000 that I got to pay tax on, cool. Why are you worried? You’re way ahead. It’s 20%.

Bryan (15:43.896)

So will it.

Bryan (15:48.131)

Right.

Mat Sorensen (15:49.49)

On $20,000, it’s like $4,000. You’ve made $16,000 more in the grand scheme of things. I think some people get like notched onto it too much, particularly real estate investors. They’re like, well, if it’s not any tax, I don’t want to do it. I’m like, OK. So it’s important to know, but I would just know the debt. And you can buy with cash too.

You can also private lend your IRA. That’s very popular too. Just your IRA can lend to other real estate investors and get interest in points. That’s what I do with my account right now. I lend at 12 % interest in two points. Really clean, really easy, not taxable, right? Can get a 16 % annual return because I do six month loans, so I get my two points twice a year. And so, and again, I think the goal of most people getting into a self-directed IRA is they’re trying to invest in an asset they think is going to get a better return.

Some people are doing it to diversify because they think they’re over invested in the stock market. But most people are coming to it because they’re like, yeah, I hear the stock market’s up. And it has been up and down lately. But they’re like, I hear the stock market’s up, but my account isn’t. I’ve got this target date fund that can’t seem to break 3 or 4 % a year. And they’re like frustrated, right? So they’re trying to get it to an asset that’s going to have a higher rate of return. Because the one thing we all want,

when we hit 59 and a half is the biggest account possible, right? Well, how do I do that? Well, I can put more money in as contributions, but the better way is to invest it better, invest in assets that will grow and build you wealth.

Bryan (17:24.984)

Yeah, I think that’s an important point too. I traveled in the real estate sector for a long time and a lot of people are really focused on minimizing taxes. But I think the important conversation piece here is we’re trying to maximize after-tax gains, not minimize taxes. So to your point earlier, I would much rather have made the larger number and gone ahead and paid more tax. Sometimes that’s a really good problem to have that you’re paying high taxes.

Mat Sorensen (17:53.03)

Yeah. Yeah, I mean, think sometimes the, you know, and I’m a tax lawyer, so you know, I mean, this is that sometimes like the tax tail wags the dog for some people, they just like it’s so focused on the tax benefits. And I see this in certain assets. And I’m like, you didn’t even look at the investment, you just asked a bunch of tax questions, because you’re held down on not paying tax, and you just made a dumb investment.

You know, and so you gotta make sure you’re lining both those things up. We wanna be tax efficient. Don’t get me wrong. I mean, I’m about paying only what you exactly have to and nothing more. But I wanna also invest as best as I can and get the best return. Because that’s how you build wealth. You don’t build wealth by trying to avoid taxes. You build wealth by investing wisely, not working your butt off every day, but by using that income to go invest in assets that…

that appreciate over time and can create income or cash flow for you. and debt can be a great tool in doing that.

Bryan (18:52.472)

So, I mean, we talked a lot about real estate, but I mean, are people able to use these vehicles to invest in operating companies as well? Or maybe there’s some unique things that people need to know about if they do that instead.

Mat Sorensen (19:04.111)

Yeah, absolutely. mean, your IRA can invest in a private company with lots of IRAs that invest in startups. You know, the most famous one is Peter Thiel, if you’re familiar with him, right? He’s the guy that has the $6 billion Roth IRA. And everyone’s like, how do you have a $6 billion Roth IRA or Mitt Romney, right? When he ran for president, there’s like he has $100 million IRA. Like, how did he do that? Well, they both invested in private companies. They didn’t go buy a mutual fund or a publicly traded company. So Peter Thiel was famous for being the first

outside investor in Facebook. He put $500,000 into Facebook. He was the first outside investor that did this, that put money into this thing. was still thefacebook.com. And I think he got like 10 or 20%. I can’t remember the ownership stake he got for that. But it turned out to be one of the best investments of all time, right? Made him over billions of dollars. And he did it in his Roth IRA, where he’s going to pay no tax, right? And so startups are possible.

and many clients use Roth IRAs if they think it’s gonna go to the moon. So but you can invest in small business, big business doesn’t matter. It’s just as we’re getting a lot of companies privately owned longer, less companies go, you know, public nowadays, you’re seeing IRAs to get more involved in the mix. So could be an operating company. It could also be crypto. mean, your IRA can invest in crypto, it can do an oil and gas deal.

Bryan (20:10.094)

Thank

Mat Sorensen (20:30.767)

Mineral rights is particularly popular more than like drilling or that type of stuff with your IRA because there’s other tax benefits to do that personally. But I mean, really the world’s your oyster. mean, we have clients that own professional soccer teams in Latin America with their IRA, clients that have owned every type of crypto you can imagine, share of a racehorse, clients buy cows with my partner Mark, he’s co-founder of the company.

cows in his health savings account, right? So all this type of stuff you knew. I’ve invested in private companies with my IRA. Like I invested in Breeze Airways. It’s an airline privately traded right now. You can’t buy it on the stock exchange, but I invested through a private equity fund into Breeze Airways. It was the same people that did JetBlue that started Breeze. So.

All this stuff’s available to you. My IRA’s invested in an RV park, okay? It’s invested. mean, all this stuff is, I’m like, it’s all available, you know? It just can’t be used for personal purposes. You’re not buying like real estate to live in personally. You’re not investing in your own personal small business or company because it creates this privative transaction risk. Everything else is fair game for you to invest in.

Bryan (21:48.248)

Well, hey, Matt, thanks for taking the time to let us know about this. know, folks are interested in learning more about your company and how to get one of these set up. You know, what should they do?

Mat Sorensen (21:59.29)

I’m best way to go is just directed IRA dot com so we have a ton of educational resources there you can book a call with our team to to answer any questions or to get your account started and what I would just say is is you think about you your retirement account you think of your sliver of that forty four trillion I mentioned earlier is

best thing that you can do is be involved and engaged, whether you’re going to self-direct or not. I think too many people, this has just been sleepy money. They let it go in their IRA or 401k and they forget about it. I think that’s a major mistake. How much time and effort do you put in every day working your butt off, earning money?

Let’s let our money work for you. And if you’re someone that’s got hundreds of thousands or millions in your IRA or 401k, your wealth is going to be built focusing on that, not on your butt working off every day. Because we want our assets working for us, not our ass working for us. So get over to directdiary.com. We can help with any of the self-directed questions there. And thanks for having me, Brian.

Bryan (22:59.052)

Yeah, yeah, thanks for having thanks for coming on and that’s executive connect podcast All right, we can cut it there. Did you hear all that beeping?

Mat Sorensen (23:08.337)

Yes, I kept getting like bings in my ear. I’m like, oh, you guys telling me to stop talking? I don’t know. Was I going too long?

Bryan (23:12.18)

No, hopefully it was just like a look. Did you hear like an actual being or was it just like a pause? Yeah, Melissa, you didn’t turn your bings off. Our editor is going to have a hell of a time editing all that out.

Mat Sorensen (23:16.721)

Yeah, it was really loud too actually.

Mat Sorensen (23:28.911)

as maybe five of them.

Bryan (23:31.084)

We’ll figure it out. But that’s a lesson for us for the next one of these. We have a new Mac. So I think her notification thing is synced.

Mat Sorensen (23:32.463)

Yeah.

Mat Sorensen (23:37.891)

all the notification beings out i thought some like yeah so i must my student yeah who knows that

Bryan (23:47.79)

We’ll figure it out. Our editor is pretty good. going through growing pains here. We’ve got all the professional mics set up and everything, we’re kind of Mac ignorant at this point. So we’ll learn that for the next one. But yeah, Matt, thanks for taking the time.

Mat Sorensen (23:51.3)

Okay, cool.

Mat Sorensen (24:01.423)

Yeah, yeah, tag me when you guys if you share it on your social and we’ll try to reach out on our end too

Bryan (24:08.022)

Okay, do that. like I said, we’re out and we go to Phoenix five, six times a year. So I’ll send you a note the next time we’re there. Maybe you could peel away. Yeah, yeah. All right, man. Thanks for taking the time. It’s to see you. Bye.

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