Hi everyone the lesson here for money evolution calm in today's video I'm going to be talking about the retirement planning timeline and some of the key ages and milestones that you might want to think about in terms of your financial planning and getting ready for retirement so let's start all the way over here on the left at age 50 is what we call where the serious retirement planning phase begin so that's the age where oftentimes people may have gone through a major transition maybe your kids have moved out of the house maybe your cash flow is starting to improve because maybe you paid some debts off or your house off or you're just starting to think about hey if we want to retire in 5 or 10 years what do we need to do to make that happen and what are some of the planning steps so 50 is the serious planning phase begins age 55 is another key milestone then not a lot of people are aware of but that's the age where if you get to that age and you've retired on or after your 55th birthday you can take penalty-free withdrawals from your 401k plan so that's a question we get a lot where somebody wants to retire 57 or 58 and they want to start taking some withdrawals but they don't know how to do it well if as you keep the money in your 401k plan you can take those penalty-free as long as you separate after age 55 59 and a half is what we call the normal retirement age that's where you can start taking penalty-free withdrawals from all of your retirement accounts 401ks and IRAs so that's the magic age that the IRS has put on us 62 is the age when you're eligible for Social Security benefits as an early collector so that's the earliest that you're eligible for your Social Security benefits 65 is the age where Medicare kicks in so that's another important milestone for many of you watching this you may want to retire prior to age 65 unfortunately before age 65 you're going to either have to hopefully have some insurance provided by your former employer or you're gonna have to go out into the exchanges and buy that insurance on your own that's something we talked about and some of our other videos there but 65 things get a little bit better you get on Medicare age 67 is what we call the full retirement what Social Security ministration calls your full retirement age so that's where you get unreduced Social Security benefits and then at age 70 is the latest that you can delay collecting Social Security so if you wait past your 67th birthday you're going to get about an 8% increase for every year that you wait but you can wait past that 70 but doesn't make sense to you're not going to get any additional benefit by waiting past age 70 and then 70 and a half is where whether you have a retirement withdrawal strategy or not the IRS has one for you and it's called the required minimum distribution rules or RMDs and that's basically if you have money in traditional retirement accounts the IRS has said hey you've gone long enough without taking it in this money out you need to start taking withdrawals and start paying some of the taxes on that money so all of this here that we're looking at if you think about how your income and expenses work while you're still working they're gonna be you know pretty consistent you've got some income coming in you've got some expenses hopefully you've got some cash flow leftover at the end hopefully you're saving some of that additional cash flow but then once retirement kicks in let's say you retired at age 57 well you might not have any income coming in or maybe you have a small pension or a big pension coming in but you're not even eligible for example to get Social Security benefits you may have higher expenses because you're paying healthcare premiums out in the exchanges so at age 62 if you take Social Security benefits maybe that kicks your income up maybe your expenses go down once Medicare kicks since there's a lot of this variability that's going on so one of the things that we want to understand as we're going through this retirement timeline is we want to understand a couple of things we understand what is our income today and more importantly or more specifically we want to know what is your tax rate today because that's going to be very important for us in determining what that future withdraw strategy is going to be and maybe how or where we save that money while we're still working so that's very important versus that tax rate out here in retirement the other thing we want to understand is what we call your retirement gap and everybody pretty much has a retirement gap that's why you say money for retirement so that you can start to take some withdrawals from your portfolio but understanding that gap is going to tell you or us how much money you might need to take from those retirement accounts it's also going to factor into the more money you have to take out the higher that tax rate is going to be so we're going to start to learn a little bit about what those tax rates are going to be throughout retirement and one of the things that we notice is generally from the time somebody retires to maybe age 62 or maybe even all the way to age 67 if you delay taking Social Security these are what we call the low tax years for many people and that that gives us some opportunity to do a couple of things number one it gives us a strategy for taking withdrawals because in these low tax years if we're in a lower effective tax rate we can take more money out of those retirement accounts and do it at a reduced tax rate we also can look at doing something called a Roth conversion and so basically what that is is saying okay we've got some money in a traditional retirement account and hopefully if that money grows between now and age 70 and a half those accounts can sometimes grow fairly large which means that at age 70 and a half if you haven't done anything preemptively before then you could end up in a potentially really high tax bracket so by doing a Roth conversion and taking advantage some of these low tax years kind of preempts that a little bit and as allows you to kind of spread that income out over a longer time period so having some really low tax years here and some really high tax years there we can kind of spread that out and keep hopefully things at a lower tax rate throughout retirement so those are some of the planning strategies that we do the other factor that goes into play here on having higher taxes is that also is going to affect your Medicare premiums so Medicare premiums if you don't know already is tied to the amount of income that you made from actually the prior two years ago basically and higher that income is the higher the Medicare premiums are going to be and sometimes that could be substantial as well so by keeping that income a little bit more consistent hopefully can maybe keep your Medicare premiums a little bit lower as well so these all of some of the planning strategies that go into it the last thing I want to talk about here is in looking at some of these low tax years the potential RMDs we want to look at where are you contributing money while you're still working and oftentimes what we see a lot is that people have put the majority of their money in traditional retirement accounts those are monies that they get an immediate tax benefit today because it comes off of your income and that's what people like but again what that might be doing is putting them in a position where they're paying more taxes in the future so for a lot of people you might want to consider look at making Roth contributions while you're still working and balance that out a little bit because that's going to be a situation where you're not getting any tax benefit today but you can take tax-free withdrawals in retirement so it gives you a little bit of a balance there so hope this has been helpful hope this is helped make some sense on some of the things you should be looking at at these different ages this is something we do all the time with our clients and we do this through our wealth vision comprehensive financial plan of course we get into a lot more detail a lot more information about the tax rates and some of these strategies here
So you want to become rich without any money? haha! you can totally do that! It's awesome. I know because I did. Kris Krohn here with Limitless TV and we're going to be talking about different ways of creating wealth. I'll even give you one of my favorite proven systems of exactly how I did it. So if you got no money and you want to become wealthy, if you want to become rich there's two different ways. Two different approaches you can do. You can either use a proven method or you can be the creator of a method. And I want you to understand the risk between both of these concepts. If you leverage a proven method, this is what I did and I'll share with you what I did. Or the difference of actually creating something novel like, like think of the guy that started Facebook right? I mean he created this really amazing idea now he's a multi-billionaire. By far, the safest way to become wealthy is to already leverage proven paths. That may not be your path. You may be, you may feel called the pioneer something different in something new. For me personally, my whole story in life began on my journey to creating wealth to leveraging proven existing systems. And this is coming from a place where I was $8,700 in debt.
I didn't, wasn't making enough money at my job to actually cover and pay all of my bills. The thing that made the difference was getting a mentor based on a proven path. There were three men that I worked with all of which had made over ten million dollars and these individuals all made their money through real estate investing. This is something anyone can do. In fact, the first fourteen months of being mentored I didn't buy a property and I wasn't making any money but I was following their system in their path of developing credit putting a little money in savings, penny-pinching.
It ultimately put me in a position to buy my first house. In my first house when people came over the for the for the for the housewarming party, what they didn't realize was this wasn't going to be my house very long. I really was renting out the basement it was covering my whole mortgage and I bought the house with $40,000 of equity. So the house was an investment and that house bought my second house and the equity in those homes bought my third house and with with no money, other than 14 months of saving five thousand dollars, thirty five hundred which I used to buy this house, same strategies existing in our world today. Those homes became 50 homes, became a hundred homes, became hundreds of homes, and I built all of that without any money out of my own pocket but I did it through working with mentors that knew a proven system and a proven path. And in this next video segment, I want to really share with you exactly how I did that because if you want to create wealth for nothing, you're going to need to take the right advice, stick to the plan, and execute it like I'm about to show you.
I'm going to show you exactly how I became wealthy with no money and I'm going to show you exactly how I did it and the advice that I took from my mentor and what it started with is, number one, is you need to have a mentor. Okay? This is someone that knows your situation, has been where you want to be, and is going to be able to give you the right kind of advice. The next thing that you're going to need is you're going to need a system. I'm going to show you the system right now. And then, between these two things, the last thing that I'm going to encourage you to need is a team. And team essentially means that you don't have to wear all the hats of all the successful operations of putting this in place.
You just need to tap into other people's brilliant abilities because anything that you don't currently know how to do you don't have to learn it you just have to have that person on your team. Here's what I did. The advice that I have received from my mentor that showed me the system that helped me put the team together was, number one, is I needed to develop my credit so that I could buy a house. For some of you that might mean credit repair. For me, I was young and didn't have credit so I needed to establish credit. I was told to have three lines of credit. I only had one. So I got two more credit cards and I was responsibly using them. How do you do that if you got bad credit? hire a credit repair company to fix that. Learn how to get good credit for the system to work. And then the second one was you have to have enough money for a small down payment. Which for me was $5000. And then the last thing that I needed to do for the system was I needed to stay in the same line of work for two years.
So for example, I couldn't be a seamstress or for a year and then like become a guinea pig trainer for a year because those are two very different lines of work. We're jobs um, so, these are the three things that I needed to have and then this is what happened. 14 months later, I possessed these things. 14 months later, I had developed my credit. 14 months later, I had saved my 5 grand and 14 months later I had completed my two-year work history. I was thinking about changing jobs. I didn't. Do you know why? cause I was following the advice of my mentor who walked me into the system. What I did is it allowed me to buy a house and I bought not just any ordinary house, I bought a house with $40,000. A pirate booty in it, right? I'm talking about equity. House was worth 150,000. I bought it for 110,000 so my net worth went up $40,000 which by the way was more than double what I made in a year.
So I'm talking about Kris Krohn starting out poor. Right? and then this house had a basement apartment and the basement apartment covered my mortgage. So that was kind of cool because I got to live for free. Which meant that I eliminated my biggest expense at that time in my life. The reason why this system was important was because twelve months later I was able to get a home equity line of credit. I got other videos on the channel here where you can research what that is.
And I was able to access this money and I used it to do what? I use it to buy a second home. Now I still lived in this home but I bought this house with well over fifty thousand dollars a pirate booty, is exciting. And then the other thing is I rented out this house and it had a $500 a month cash flow. So, collectively between my two homes my net worth was around $100,000 and I was living for free and getting paid 500 a month. Then guess what I did? Oh you're so smart. I did it again. I then, this was my P for primary residence, this was I for investment. The third house I did was that I moved into a new primary residence. This one became a rental and I rented it out and made $500 a month cash flow. So guess what? I'm making over a thousand dollars a month.
I bought this house with, you guessed it $50,000 of equity love that pirate booty and it also had a basement apartment that paid for my mortgage. Living for free, net worth of a hundred and fifty thousand dollars, making five hundred dollars a month here, five hundred dollars a month here. So are you starting to see how the system worked? the equity in this house then got used to purchase my fourth house which was an investment property that had a cash flow. And then I just started doing that system over and over again. Now by the time I have four homes I went into Phase two of the system. And Phase two of the system was now starting to approach people with money and saying, look at my track record on my portfolio. Look at my pirate booty, look at my cash flow, would you like some of that booty? and would you like some of that cash flow? I can find the deals. I've got a system in the team to make this work I need your money.
And you know what? everyone I approached that saw my return said what? I'll partner with this kid. And from that point on I started buying homes left and right without money or credit. Right now, I'm selling off one to two homes a month. I'm making tens of thousands of dollars every month on homes I bought years ago using someone else's money, reinvesting, and buy more homes. So this is a really fantastic system this is exactly how I did it. And again if you want to be wealthy with no money and do that, you can either go start a Facebook and go down and pioneer path something that's never been done before or you can leverage proven systems.
Alice is a school teacher at St. Paul's Lutheran School. She recently had a conversation with her students about goals. While it's a way's off, she's started thinking more about her own goals, especially with retirement. Away from school, Alice loves to bake. There’s nothing better to her than putting the right ingredients together and creating a tasty treat for her kids and their friends. Alice has started to look at retirement the same way she does baking. If you mix the right ingredients together and have a little patience, you’ll end up with something rewarding when the time comes.
Alice is smart. She’s knows the three key ingredients for retirement income. Let’s turn it over to our retirement chef to explain. Thanks Narrator Guy. So my first ingredient is the Concordia Retirement Plan pension fund. Check out that video out to see what an amazing benefit the pension is! The second ingredient is Social Security. I’ve been paying into this government fund since I started working. When I retire, I should receive money back to help me lead the life I want to live. But it’s the third ingredient that really helps me know I’ll have enough retirement income to meet my expenses.
It’s the Concordia Retirement Savings Plan 403(b). A 403(b) is the non-profit version of a 401(k), and the CRSP has some of the lowest fees available. That means I get to keep more for my retirement! As soon as the CRSP 403(b) began, I started investing because I knew this ingredient was in my control. I have my employer put some of each paycheck into the plan. I know that, if I need to, I can pause or change my contribution because the CRSP is so flexible. But even when things were tight or the markets were down, I still regularly saved something for retirement. It was like “set it and forget it and you won’t regret it!” I’m a baker, not a banker, so luckily Concordia Plans has top-notch experts who mixed my investments among the funds they offer. I didn’t need to be an investment expert, but when I wanted to learn more, CPS always had resources available to help. When I retire, I’ll still have expenses to pay for. Some of them, like medical costs, will probably rise. Thanks to my commitment to the Concordia Retirement Savings Plan, I’ll have enough money to pay for what I need.
Hey, what's up? John Sonmez here from simpleprogrammer.com. Tired of pushy recruiters sending you LinkedIn requests for jobs you have no interest in? Tired of blasting out resumes into the dark? If so, you should check out Hired.com. Hired.com flips job searching on its head by having top employers like Facebook come to you after you fill out one simple application. You also get your own job coach to help you on your next job search. If you haven't checked it out, I highly recommend you at least fill out the application. Just go to Hired.com/simpleprogrammer. When you get hired with Hired, you'll get double the normal sign-on bonus for using that link. Today we're going to be talking about real estate.
Yes. I have done some videos on real estate. Some of you are like, “What the heck? Why is this guy talking about real estate?” Well, I've done fairly well in the real estate realm. If you're interested, you can always check out my playlist on real estate investment and investment in general. I'm not going to go into all the details here, but occasionally I like to answer a few real estate questions on this channel. I got one here from Jonathan and he says, “I'm 21 and set a goal that I want to retire by 40 to 45.” Cool. “With 20K of passive rental property income.” Man, that's awesome. I like that. I love that goal. That's a good goal. “Currently saving money to buy my first property and hopefully, when I get a web development job I can speed up the process. My question is how do I plan for this goal?” This is good.
So, 21, Jonathan is 21 and he's thinking this way and he's got this plan by 40 to 45 to make 20K of passive income from rental properties. I love this. This is great. “Thanks for everything you do and have a beautiful day.” I am having a beautiful day. Thank you, Jonathan. “P.S. I was thinking of buying a duplex and live in one and I rent out the other one so basically the tenant pays my mortgage.” So, okay, there's a lot of ways to approach this. I think Jonathan has got his head screwed on right. Well, I'll start with the last, the P.S. of renting out a duplex and living in one side. I think that's a great idea. This is a fantastic thing. More people should do this. A lot of you young people out there that are thinking about renting or buying a house, consider buying a duplex and renting out one side and if you find the right deal which—it's out there, you could actually have the renters pay your rent.
You see what I'm saying? You could actually live for totally free by having a duplex and renting out one side. I'm not going to say it's going to be super easy. I'm not going to say that those deals are everywhere. It depends on where you're at. You're not going to find that deal in California or New York, San Francisco, not going to happen, but if you're in the Midwest you might be able to find that deal. I've seen it before. I think that's a great idea, but let's talk about the plan. 21, you want to retire by 40 to 45. You want to get 20K of passive real estate income. It's not going to be easy, but it's certainly doable. What you need to do is you need to calculate backwards where you need to be and have a real solid plan for this.
I can give you a general outline, but I haven't run the numbers so I can't tell you exactly. There are going to be some factors in here, but you actually need to take a spreadsheet and actually need to calculate this and figure this out. It's going to be fairly complex, but you don't have to be super detailed. You can kind of ballpark this, but you do need a spreadsheet. You can get some rough answers here, but calculate this out, 20K of passive income from real estate. Let's say 45. What does your gross need to be? You're going to have expenses, you're going to have rents, I mean you're going to have property management, you're going to have a bunch of things here. That can give you an idea of what kind of wrench you need to be pulling in. It's not going to be a 20K wrench, you're not just getting 20K. It might be like 30 or 40K a month of rents. In order to get 40K a month of rent how many properties do you need and how much will those properties cost? How can you divide that over time and put inflation into the equation a little bit here over that period of time? Work backwards and make a spreadsheet and run some scenarios.
This is going to take time and some planning. Like I said, you can rough ballpark it. If I were just going to give you what I think would probably work for you, it also depends on how big your budget is. How much money are you investing every year? How much money do you have to invest every year. If you can put 10K down onto a rental property every year that's different than, “Hey, I've got 50K to invest in real estate every year.” That's different. Or 100K. Those are all different scenarios. What you're planning based on your current scenario might—there may not be—there might be this gap and you might be like, “Well, how do I get there?” It might not be apparent.
You might have to do some other things. You might need to make more money in your job or start a side business in order to fuel that. I had to do that to reach some of my real estate goals. Think about that and calculate that out. I'll give you kind of a rough timeline, a rough plan that I would have if I were you which would be something like—and this was the plan I initially developed when I was doing this which would be to buy one property every year, regardless. The nice thing I like about this plan is that it's scalable.
The size of the property depends—is dependent upon how much money that you have in that year. When I first started in real estate investment when I was close to your age, I think I bought my first house at 19, but I really started doing investments around 21 and started this plan of buying one house per year. I think the first house that I bought I was able to put $10,000 down. It was like a $100,000 house or $120,000 house. The next year it was probably about the same and then probably like the third or fourth year I had more money. I was able to put $20,000 or $30,000 down. I got to the point where I was buying properties and I was putting about $20, $30, $40,000 down every year on a property when I buy it. Some of that was because of the real estate that I was already making me money. Some of it was because I was making more money in my job and I had businesses and side things going on which helped me to do that. That's the kind of plan that I would—it's not going to happen magically. I think that's the key thing. You actually have to have a solid plan for this and you can run these numbers and calculate this out.
There's actually a really good book that I recommend called The Millionaire Real Estate Investor. I think that's by Garry Keller, the founder of Keller Williams if I recall correctly. I don't recommend very many real estate books, simply because a lot of them are crap. The reason why I'm really going to recommend that book to you is because it has these charts that show you—it gives you a realistic expectation over 20 years what the value of a property is likely to be, how much money you're likely to make from it, cashflow and all that. Again, it's as complex equation. You're not going to be able to nail this down perfectly, but at least if you run the numbers and you do the best job that you can, you can have a ballpark idea and you can always adjust the plan. You've got to have—you've got to know where you are and where you need to go in order to reach these goals. I'll also recommend for you—I have a course that I created called Simple Real Estate Investing for Software Developers.
You can check that out here. If you buy that course, obviously it has a money back guarantee on it, but that's going to help you to give you the basics of everything I know about investing. Just to give you a background, I have about 26 rental properties. They are all paid off. I started investing when I was 19. I kind of know what I'm talking about here. I don't give a lot of bull shit advice about this. I give you exactly—practical advice on how to get started and how to do this.
The reason why I created the course, even though it might not seem like it goes along with a lot of my other content, it was just simply because I was tired of so many people giving BS real estate advice and doing all these kind of scamming, no money down, speculative moves that just doesn't make sense. You need some kind of practical advice so that's what I put together there. Go check that out. This is good. I think you've got a good plan here. You just need to develop the plan further and it's going to be very dependent on your individual factors and—I think you have information though to say, “Okay, can you do this in 45—by the time you're 45?” absolutely! I believe that you can. It's not going to be easy, it's going to be hard to do. 20K is a pretty big number but it's certainly possible, but you're going to have to start moving now, which it seems like you're going to do, and you have to have a plan and it's going to take a lot of work and a lot of effort and you got to find good deals in order to be able to do this in that time frame.
All right, I hope that is helpful to you. If you have a question for me, you can email me at [email protected]. Don't forget to click the subscribe button if you haven't already. Click that Subscribe. Click the bell to make sure you don't miss any videos especially if you like the real estate stuff because, hey, those videos might not show up and then you'd miss it and then you wouldn't find out the secret to life and how to make millions of dollars. All right, I'll talk to you next time. Take care .
I'M ASHLEY, SEE YOU NEXT WEEK. THIS MORNING, WE ARE TALKING THE WORD EVERYBODY LOVES TO HEAR, AND THAT IS RETIREMENT. HERE TO HELP US MAKE IT ALL POSSIBLE IS JEFFREY. GREAT TO HAVE YOU HERE TODAY. PEOPLE GO TO WORK EVERY DAY AND IT'S THE THING THAT THEY HAVE IN THE BACK OF THEIR MIND ALL THE TIME AND YOU SAY THERE ARE A BUNCH OF DIFFERENT STAGES TO RETIREMENT. IN SIMPLE TERMS, WE CALL IT BEGOGO YEARS AND THEN THE SLOW-GO YEARS AND THEN THEY WON'T-GOY YEARS. FOR MANY, IT SEEMS LIKE A DAUNTING TASK. HOW CAN PEOPLE MAKE THIS POSSIBLE? STARTING EARLY IS ALWAYS BENEFICIAL THAT EVEN IF YOU HAVE NOT STARTED PLANNING YET, YOU WILL GET STARTED. POSSIBLY A CERTIFIED FINANCIAL PLANNING PROFESSIONAL. GO TO THE WEBSITE AND YOU CAN FIND ONE. THE PLANNING IS IMPORTANT, ESPECIALLY FOR THAT GOING PHASE, IS THAT THE POINT WHERE YOU ARE JUST STARTING OUT AND PEOPLE ASKED THE QUESTION DO I HAVE ENOUGH TO RETIRE WITH? AM I GOING TO BE OK? AND THEN IT'S ALL ABOUT THE EXCITEMENT AND THE PLANNING. WHEN WE GET CLOSER TO THAT AND SAY I'M GOING TO RETIRE, ONE OF MY FIRST QUESTIONS, WHERE DO YOU GO? WHAT IS THE FIRST THING YOU'RE GOING TO DO? I WANT THEM TO BE THINKING ABOUT THE FUN THINGS.
ONCE WE KNOW THE FINANCES WILL BE OK, START PLANNING FUN STUFF THE MORE ACTIVE. WE DEVELOP SOME PLANS WHERE PEOPLE HAVE MORE MONEY TO TRAVEL WITH FOR THE FIRST FIVE TO 10 YEARS, AND AFTER THAT, PEOPLE TEND TO PULL BACK A LITTLE BIT. THAT IS THE SLOW-GO YEARS AND THE FINAL PHASE WHEN MORE PEOPLE ARE FOCUSED ON, WHAT DO I DO WITH THE MONEY I'M NOT GOING TO USE? HOW DO I TRANSITION TO MY FAMILY AND THE MOST TAX EFFICIENT MANNER POSSIBLE? AND I TALK ABOUT THAT IN MY BOOK.
THE BOOK HAS 30 YEARS OF INFORMATION AND IT'S A NICE, SIMPLE READ. BECAUSE EVERYBODY WORKS SO HARD ALL OF THEIR LIFE TO GET TO THE GOAL OF RETIREMENT. IN RETIREMENT IS SUPPOSED TO BE FUN. YOU'RE SUPPOSED TO ENJOY YOUR LIFE. EVERYBODY HAS A DIFFERENT PERSPECTIVE AS TO WHAT THAT IS. SOME GUYS WANT TO GO FISHING EVERYDAY. SOME MIGHT WANT TO DO DIFFERENT THINGS. GOLFING, WHATEVER IT MIGHT BE. WHATEVER IS IMPORTANT. THE MOST SUCCESSFUL KINDS WE WORK WITH RETIREMENT WISE ARE THOSE THAT HAVE A GOOD CIRCLE OF RUNS AND ENOUGH HOBBIES TO KEEP THEM BUSY. IF YOU'VE BEEN WORKING 40 HOURS, IT'S A LOT OF TIME. I'VE GOT ANOTHER STORY ABOUT THAT. LOTS OF TOGETHERNESS. IT REALLY IS THE DREAM FOR SO MANY PEOPLE. IF I'M COMING TO SEE YOU, HOW DO YOU PUT PEOPLE'S MINDS AT EASE? YOU HAVE THAT WORRY IN THE BACK OF YOUR MIND ALL THE TIME. WE TRY TO KEEP THINGS SIMPLE BUT WE HAVE A VERY SOPHISTICATED SOFTWARE THAT WE USED BEHIND THE SCENES AND WE ACTUALLY SHOW PEOPLE RESULTS.
WE COULD IMPORT ALL YOUR DETAILS NOW, WHAT IS YOUR LIFESTYLE EXPENSE, WHAT ARE THE ASSETS THAT YOU HAVE, WHAT IS THE INCOME YOU WILL HAVE COMING IN, AND WE HAVE PROBABILITIES. WE CAN DO UP TO 10,000 VARIATIONS BETWEEN NOW AND RETIREMENT WITH LIFE EXPECTANCY, SO WE TRY TO PLAN UP TO AGE 90. AND WE SAY, HERE IS YOUR PROBABILITY OF SUCCESS. THANKS SO MUCH FOR COMING IN. IF YOU WOULD LIKE MORE .
Let's take a look. If you're in your 20s 30s 40s or 50s – What is the game plan? Here this is really cool. I think this helps people and also maybe might motivate you to take action a little bit more. Let's say you're 30 years old, you want to have at least one times your salary saved. So if you're making $50,000 a year ,you want to make sure that you have 50 gramme in the bank. Let's jump up to 45. You want to have 4 times your annual income saved. Once you get into your 60s, right, that's 8 times. That's a huge number! And you know, procrastination is probably one of the key components of why people are not necessarily successful, but at least this put you in the… I mean one of the biggest questions Al and I I get is, “Am I on track? How do I compare to other people that you see?” Well this is a good idea to take a look at how much money are you making, multiplied by those factors, and then that's going to get you in the ballpark.
Right? Because I think a lot of times it's just simple arithmetic. How much money do I need to maintain the lifestyle that I want long-term? Most of you don't have enough. We're not here to put fear in you. We want to make sure that you're responsible to look at, “Hey, how much do I need?” To give you the confidence to do all the things that you want to do in retirement. Hey, Joe, why don't we do kind of a simple example of let's say some different ages. Perhaps your age 40 or 50 or 60.
Let's say you have $50,000 saved. Let's say you want to reach that $500,000 savings goal. Well, how much do you need to save per month to be able to do that? In this slide it's showing you $179 per month if you're 40. Look what happens if you're in your 50s. $862 dollars per month and if you're 60 you got to fast track this. That's $3,875 per month. That's of course at a 7% rate of return and assuming that you retired age 67.
Just four grand a month. Oh yeah, no problem. That does show why you want to start as early as possible when you're saving. .
In this video, I want to explain the 4% rule. This is also known as the Safe Withdrawal Rate – or basically the rate at which you can spend your money without ever running out of money. An easy way to calculate what this means for you – and how much money you’ll need to retire is by flipping it around and multiplying your yearly expenses by 25. For example, if you and your family spend $40,000 per year, you’ll need to have 1,000,000 invested to not run out of money.
There must be some limit to how long you can withdraw 4% and still have money left over, right? The study that explains the 4% rule is called the Trinity Study, and it looked at how much money you’d need to retire for every year between 1926 and 2009. The study found that if you invest 50% of your money in stocks and 50% of your money in bonds, withdrawing 4% of your money will be fine for 25 years, 100% of the time. Doing it for 30 years – you’ll still have money left over 96% of the time. only if you retired in a very unlucky year and never made any money after retirement including pensions or social security – the 4% rule didn’t work. So to make sure we’re all clear – the 4% rule isn’t 100% foolproof.
But those odds are pretty darn good – and even while I hope to retire from regular work longer than 30 years – i know I’ll continue to make money doing things i love which will make sure that the 4% rule does succeed. For those of you that want to be 100% sure your money will never run out (especially for those of you who plan to retire longer than 30 years), use the 3% rule and only withdraw 3% of your investments per year.
Let’s get back to the 4% rule and dive a little deeper. As many of you are probably asking, why is 4% the safe number and not 10% or 2%. Very simply, investing money will pay you dividends and increase in value at an average rate of 7% per year. On average inflation is about 3%, basically decreasing the actual value of the money you have. Combine those two numbers, and you’re a 4% – your net income will increase by 4% each year.
And if you spend that 4% without going over, you’ll end the year with the same amount that you’ve started… in perpetuity. Okay okay – i know a lot of you say this is crazy – what about the recession – you can’t predict stocks – and lots more thoughts. But let’s look at those numbers even deeper. Since 1900… over one hundred years ago, the average return per year has been 7% including reinvested dividends (meaning you reinvest the dividends – or the money the companies pay your for investing – into your investment). For inflation – since 1913 – over one hundred years ago, the average yearly inflation is 3.22% Even through the great depression, world wars, crazy years of inflation, more wars, and the great recession the average return rate has been 7% and inflation has been just over 3% What does this tell us? It tells us that investing is more about being patient and investing early rather than trying to time the market.
Now this doesn’t mean that it can’t change. Investing is a risk. That’s why you do it and make money from it. But world war iii could happen. another even greater depression could happen. and we have to be prepared for something like that. because if you retired with 1,000,000 in 2007, assuming you’d be able to spend 4% of your net worth per year, you were in for a surprise – which might mean going back to work for a few years and waiting out the recession.
Hopefully, if you did that… and left your investments in the stock and bond market, you would be in good shape. The key takeaway is that throughout the history of modern america – you’ll be fine to retire using the 4% rule. So calculate your yearly expenses… include some emergency padding… and start investing to get to that goal of 25 times your expenses.
There are many different factors that can reduce retirement income. The first may be fairly obvious, but it's the effect of death. For two spouses when there's a pension involved, the death of a spouse could mean the loss of a pension income. Now if there's a survivor benefit, that income may continue, so it's important to evaluate your options when making pension decisions. A lot of people use insurance to protect against this type of income loss. Another way death can reduce retirement income has to do with Social Security. When two spouses are receiving Social Security and one spouse passes there will be a loss of one of the benefits. Now, the surviving spouse will receive the higher of the two benefits, but there still will be some loss of income. The final way that death can reduce retirement income has to do with taxes. Moving from married filing jointly to now filing single can push the survivor into a higher income tax brackets. The reason for this is that the income thresholds for married filers is about twice what it is for single filers. This can have a major impact on the surviving spouse's net after tax income in retirement.
Taxes in general is another area that a lot of people overlook when it comes to retirement income. The reality is that taxes will take much more from you than the market ever can. For instance, going back to 2008 during the Great Recession, the average portfolio might have declined 20 to 30 percent, assuming it was well diversified, of course. That might have taken a couple of years to recover, but taxes in retirement can easily cost anywhere from 30 to 40 percent. And that's money that will never come back. So it's really important to consider where your different sources of income are coming from in retirement. Would it all come from pensions, Social Security, IRAs, 401(k)s, sources that will be taxed at ordinary income rates? Or do you have good tax diversification where you can choose from pulling money from maybe a Roth IRA raise or non-qualified accounts and really get a lot of control over your taxes in retirement? And finally, inflation. Inflation is absolutely something that can reduce your income in retirement. And it does this by reducing the purchasing power of your dollar in retirement.
Inflation isn't just something that happened in the past – things will continue to cost more in the future. So let's look back 30 years. 30 years is about the average timeframe for most people in retirement. So in 1989, the average cost of a first class postage stamp was twenty five cents. Today that same stamp will cost you fifty five cents. Also in 1989 the average cost of a new car was $15,000. Today the price of a new car will set you back on average $37,000. So you need to look at how well your different sources of income will keep up with inflation during retirement. For help optimizing your retirement income, visit us at PureFinancial.com. .
– Are you looking forward to retirement? Of course you are. Check out our top 10 tips to make sure you're on track. The sooner you get started, the more likely you'll have a happy and healthy retirement. Tip one is take stock. How do you want to live in retirement? Do you want to move to a new area? Do you want to do a bit of travel? How much is it going to cost? How much do you have saved? Are you on track? If not, what are you
going to do to get there? Tip two. Plan for the rest of your life. Most people are in retirement
longer than they expect. While your health and family history will influence the length of your life, most people are living longer. In fact, you could easily
live into your 90s. Plan for the long term and don't forget that you may need extra
assistance as you get older. Tip three. Review your investments. For your savings to last
the rest of your life you need to have the right mix of growth and defensive assets and you also need to have something to bring in an income and also a bit of growth. Diversifying your assets across cash, fixed interest, shares and property can help smooth the returns. Tip four. Stick to your plan. Investments can quickly change in value and while it's tempting
to sell out of shares when markets go south, this is often the worst
thing that you can do. It's important to remain
focused on the long-term as they usually recover
if given a long enough period of time. Tip five. Get the structure right. By changing the way you own investments and the way you receive the income can reduce the amount of tax you pay and also increase the
amount of age pension or DVA pension you receive. Even if you aren't
entitled to an age pension, you may be eligible for discounts which can save money over the long term. Tip six. Get your affairs in order. Estate planning allows you
to pass on the right assets to the right people at the right time. Unfortunately we are all going
to pass away at some point. The first step in a good estate plan is by getting a will. You should also speak with your solicitor about enduring power of attorney and advanced medical directive. And remember to review your estate plan every few years as
circumstances change over time. Tip seven. Stay fit and healthy. If you stay physically and mentally active you're more likely to enjoy
a longer, healthier life. Take up a hobby, learn a new skill or maybe volunteer in the community. Tip eight. Rethink the move. Some retirees move to a new location that they've always wanted to retire in and it hasn't measured
up to what they expected. If this is something you want to do, perhaps move there
temporarily just to make sure it lives up to your expectations. Tip three. Review your investments. For your savings to last
the rest of your life, you need to have the right mix of growth and defensive assets and you
also need to have something to bring in an income
and also a bit of growth. Diversifying your assets across cash, fixed interest, shares
and property can help smooth the returns. Tip four. Stick to your plan. Investments can quickly change in value and while it's tempting
to sell out of shares when markets go south, this is often the worst
thing that you can do. It's important to remain
focused on the long-term as they usually recover
if given a long enough period of time. Tip five. Get the structure right. By changing the way you own investments and the way you receive income, you can reduce the amount of tax you pay and also increase the
amount of age pension or DVA pension you receive. Even if you aren't
entitled to an age pension, you may be eligible for discount. (upbeat music)
Hey everybody welcome in on this snowy snowy Wednesday wherever you're joining us from let us know where you joining us from today hey everybody welcome in to the investing in real estate show today we're gonna have some fun talking about how toretire at 40 how to retire by 40 Sean says hello from Brooklyn New York how much snow are you getting out there Sean we get this massive nor'easter once again and once again so the kids are off school just I'm over it I am over it I know there's gonna be people are there I'm right in here and say they're there joining us from there out in California and they're living living large yeah Aaron is running us from Miami Florida there you go Wong from Miami thanks so much rub it in rub it in rub it in everybody so we're gonna get this show started in just about three minutes South Africa Indianapolis Moses welcome Pottstown you're getting hit with some snow right now Matthew Bishop Lakeland Florida hey Matthew yeah I guess California you guys are getting hit with some crazy stuff out there today too huh yeah they cancelled school last night I don't know I you know growing up I don't ever remember them canceling school like the night before did you guys ever have that growing up it was like he'd wake up and he would sit and listen to the radio and you would wait you know I was in Pennsylvania I would be all be waiting to listen for our school if it was canceled I'd be in one-hour delay a two-hour delay and you were hoping that they would cancel it but I never had the night before they send out a text message letting you know that hey your school was cancelled and that was never the case for me never never did you do all right we're gonna get started in just a moment here it's gonna pull up this today we're gonna talk about how to retire by 40 and we'll start here in just about one minute one minute one minute Jerome aramid says hey a guy you talked to me more than two weeks you never came back to me you can take care of this later I know you're alive nobody emailed me the first appointment Jerome who did you talk to on my team let me know and we've got some people in from our team right here in the chat thread as well we can Mike you know a lot of times people will send follow-up emails it goes to your spam folder sometimes people when they initially signup for phone calls with our team they put in the wrong phone number and then they later writes it well I put the wrong phone number in and so our team will be calling and they can't get ahold of you so I apologize for that and Rudy Rudy please check your spam folder please please please because our team is very good about follow-up and we have hundreds of clients around the world so I apologize for that you know because if someone sends you a PDF it might go right to your spam folder and then you're like oh I never emailed me just check your junk folder and who are you talking to please let us know we'll make sure we get you all squared away we have a waiting list for people to get on the phone with us for like a few weeks so I don't ever want anyone to feel like we don't get proper follow-up from our team that's very important so I've got our team right now who is in our chat thread we'll go through and make sure that we get you all taken care of so I apologize for that all right so we are live it is it is a.m.
And we're gonna kick off the show after the show I'm gonna do you know to talk about this article talk about how to retire at 40 and then after the show we'll kind of open it up for a few minutes of Q&A if that works for all of you and we'll just kind of answer some real estate questions some of the things you're struggling with you're hoping to achieve and we'll talk we'll do that all right Forrest wants to knows are still owners software coming out for Morrison fest yes indeed in fact we've been working on it for for since like August it's all custom it's been a lot of tweaking we want it to just be perfect Peter Cook says I've had very good follow-up thank you Peter appreciate it and James Frederico o1r from our team is right in here he says hey Jerome I got you all reach back out to you and take care of you good good good all right so we're gonna get started here and we're going to talk about this in a second so first so again at the end of the show we'll take some QA and we'll do that as well let me just get this all dialed in we're recording we got the audio up and running is everything sound ok guys you guys can hear me give me a thumbs up you guys are all good Brandon yes absolutely because some of those beat class properties you're asking about the verb method absolutely because you know buying those 60 70 thousand dollar homes those the banks love they're able to do you know easy refinances on those because there's easy comps to pull in the neighborhood because there's retail sales so I would stay away from like the 3040 thousand dollar stuff if you want to really do like a solid brr-brr method stuff if that's what you're looking for all right sounds good alright so we're gonna get started all right all right and let's get this show started all right today on today's show we're talking about how to retire by 40 a news article from the mainstream media it's kind of total garbage that's today's show let's dive into it hey everyone I'm Clayton Morris longtime real estate investor founder of Morris invest if you're new to the channel thank you so much for joining us and subscribing I hope that you're a subscriber because there's where we talk about passive income building legacy wealth for you and your family that's the goal right and the vehicle that we use is buy and hold real estate but I don't care about the real estate right I don't care about the four walls and a roof I just bought 15 houses this week that we're about to rehab okay I don't care what they look like because once we get them it doesn't matter what I'm buying as a tax shelter and that's what you should be focusing on buying a tax shelter that's what this show is all about on today's show I want to talk about how to retire by 40 and I want to preface this by saying that I got this from an email from a listener a viewer of our show who is getting involved in real estate investing Jesse Daley sent me this email and he said hey Clayton I hope you're doing well man I thought you'd find this article interesting especially how the writer literally doesn't mention anything about investing in real estate there's only a one quick mention of a condo adding to net worth and nothing else in this article I'm so happy that your podcast teaches people how to truly invest properly and retire by the age of 40 this they should have interviewed you for this article so thank you Jesse I promised I would give you a shout out here on the show and I want to go into this article so again I have lampooned some of these CNNMoney articles over the past few years have done shows about these things because I just find them ridiculous I find them ridiculous that they're telling people to invest in their 401k and then that's the way that you build retirement that's the way that you're able to retire by 40 years old I mean how many people are you know you just like a show of hands you're listening right now how many of you think you could actually retire by 40 years old just with your 401k of course you can it's ridiculous the average 401k retirement in this country guess what according to Time magazine is 90 thousand dollars can you retire on that no way so I want to go through this article because it's a lot of fun and Jesse sent it to me so these are tips from CNN money on how to retire by forty three proven tips three proven tips so let's go Chris reading isn't your average retiree he said goodbye to his working years at 37 and is now financially independent living his life on his own terms that's great now he had 4500 dollars in debt and when he started working he got through all of that he finally found a well-paying job working cyber security took out a mortgage bought a condo and financed a BMW okay alright took out a mortgage on a home bought a condo and financed a BMW on our way to success but then he started to wonder is this all there is he finally said I can't do this for 40 years in his late 20s he started searching for alternatives and he read the book your money your life by Joe da Menendez and Vicki Robin and he said look there's other ways of becoming financially independent so he then felt that he had enough to live the rest of his life on his savings and investments without having to work again it took two more years of showing up the cubicle for him to be sure than a 37 he finally walked away so what did he do okay here were his strategies here where his strategies for becoming financially independent and retiring at 40 years old number one save more save more okay so his strategy according to the CNN Money article is cut he cut back on going out to dinner and he cut back on buying lattes so he just started saving more really so let me get this straight that's the way that you can sustain yourself for the rest of your life by retiring at 40 years old from your job it's just having enough in the bank you think that you're gonna have if the average 401k retirement is ninety thousand dollars can you really live the lifestyle that you want so now you're cutting back on dinners in order to save some money you're not buying coffee so what Natalie and I've talked about here on the show repeatedly is the idea of not having to shrink your lifestyle why not find out what your freedom number is using real estate find out what your freedom number is and actually have enough passive income every month coming in the cash flows you're creating a tax shelter for yourself and enabling you to live the life that you want so you can't go buy a latte I find that ridiculous you know David Bach wrote about that in his book the automatic millionaire a years ago and look if you're $40,000 in debt yes maybe not buying a five-dollar coffee every day is probably not a smart strategy you know also if you're a smoker you know spending ten bucks a day on cigarettes or whatever it's probably you know not a smart strategy if you want to claw your way out of debt I get that part of it but as a way of sustaining yourself and retiring at forty years old just saving more savers are losers that money in a bank account is doing nothing for you what about buying performing assets that are actually producing cash flow I mean come on so when he says look where people get into trouble with savings that they think they have to use reusable toilet paper and eat chicken broth but real basically you just you'll never spend zero dollars find a level of living that you're come with and work on earning more without increasing your expenses so he's just saying earn more save more cut out lattes and you can retire at 40 I don't buy that for a second number to earn more okay that's his second tip earn more great so let's save more and earn more again a paycheck job the tax code is written for wealthy people the tax code is written for entrepreneurs who own businesses who own real estate that's what the tax code is written for it's not written for a w-2 employee so earn more so what he says is your actual jobs only part of your work in order to earn the kind of money where you can live on only half or less of your salary so take that extra money socket away that's what he's saying so work harder right work for a paycheck get taxed as like in the highest tax bracket by the federal government right because we know that paycheck employees under the new tax code or hurt the worst he says this career-boosting work can include earning advanced degrees oh that's great so his other bit of advice on this is go out and spend a hundred thousand dollars on getting an advanced degree so go get your master's degree that's only what a hundred thousand dollars that's only a hundred thousand dollars right just go get it a master's degree so that's smart so save more earn more by spending more on getting an advanced degree or certifications and then that way you'll have people who will look at you more favorably in the office and be able to elevate you higher that's great so it's important understand the weak areas and he says look I finding mentors okay that's good yes definitely finding mentors as a very smart move finding mentors who can help propel you and then number three he says invest more so he says the most powerful mechanism for investment right now it's built into their job it's the 401k invest in your 401 K and a two or three percent return contributing at the level where you get the employer match is a must and that's your biggest benefit and that's how you can retire by 40 that's the article unbelievable so okay ridiculous right that's how you could retire at 40 no no that's not how you can retire it 40 and that's not how you could live comfortably and live the life that you want and be able to produce legacy wealth for your family for the rest of your life so he's now retired he's living off of savings but he's got no assets that are actually performing for him for the rest of his life he's got a V BMW that he bought financed and he has a mortgage on a condo that he lives in he has no performing assets that is not financial intelligence any way you slice it wouldn't it have made more sense instead of saving that money while he was working for that cybersecurity company to take that money and invest it in real estate by a performing asset that cash flows that's how you control and move your family forward that's how you can build true legacy wealth for you and your family but actually taking money and buying a BMW buying a liability remember all you need to remember is if you're buying liabilities a liability is something that does not produce cashflow now if he bought that BMW and used it as an uber driver that was producing cash flow that's a different scenario or if he rented out that BMW that's a different scenario but I love these I love these articles and again this is all sort of couched around the idea of the mainstream media right the mainstream media wants you to believe that a paycheck employer job is the way to go that getting a 401 K having their company sort of automatically do it for you because you're too dumb to do it yourself have them handle it have them streamline it and that's how you that's how you have a strong safety net we've been trained to believe that being secure is having a paycheck job you know again I come back to the I keep seeing this commercial and I'm sure so many of you have seen this commercial over the past few weeks I saw it first during the World Series and they continue to run this stupid thing where it shows a couple you know they're in their late 60's and they're sitting there with a how it's a Merrill Lynch advisor and the Merrill Lynch adviser says well it looks like the plan worked and you're gonna be able to have that retirement you wanted and I looked at you look on the iPad app that they're handing to the couple and he's like honey we did it we can do it we can live that life we wanted retirement and it shows that their income is enough they're gonna have about seventy thousand dollars to work with like if you look at if you actually look at the numbers on that screen seventy thousand dollars so now they're almost at retirement and then the next clip it shows them in a boat with their granddaughter right there sailing off into the sunset like some small little boat with their granddaughter and the little girl says aye aye captain you know and she she's driving the boat so this is their retirement they finally did it right they had a wait till they're 70 to buy a boat and to be able to sleep in and spend a little bit of time with her grandkids be all because they had their month their money managed by a financial advisor that was taken out big fees and investing in a stock market and not investing in real estate and cash flowing assets so there you go that's my frustration there you go that's my my little my little two cents my little rant about these types of mainstream media articles and when you see them on TV just roll your eyes think about it for a second saving more earning more get an advanced degree spend $100,000 on a master's degree and then use a 401k that's how you're able to retire at 40 that is total garbage that is total garbage unless maybe the guy wants to go live in like Thailand by himself with no kids and he wants to live like in a hut somewhere for the rest of his life and he doesn't care about actually having any income or cash to be able to buy anything or any food or live the life that he wants I find it to be total garbage I'd love to hear your comments and your reactions to this please send them to us and I really thank you so much so that's gonna do it for that and thank you so much for subscribing to the show I really appreciate it this is the investing in real estate show you can please subscribe share it with your friends and and you know please go out there take action become a real estate investor because I believe it's the number one way to build wealth we'll see you next time everyone all right now with that that's the show so anyone who wanted to get just the shortened version of that but hey now we're gonna open up this agree to some Q&A here in the show we got so much so I saw so many chat threads coming through here asking questions alright so fire them up here alright alright Joel says I've also had an email a few times hit reschedule my call but no response and said ok Joel no worries we'll get you all straightened out I apologize like if people miss their phone appointments cuz like I said we Deanna with our team we have like calls are booked out I think about two weeks and so if we call them like goes to voicemail and then we're trying to reschedule it so we really try to make sure we can get on the get on the same get on the same on the same page Jinger I'm sorry again what's going on Jinger we'll get to the bottom of this so I'm gonna make a list of anyone who didn't get a call back so I apologize alright so can you guys tell me Arum says Glen and Nicole from your team have been great awesome ok so we will dial some of the stuff in ginger and I'm sorry I will get some of these people on your on your team to make sure we get it all taken care of thank you guys let's see all right you know I'm glad you're not upset no I just you know we if sometimes emails get back and forth and we're trying to make sure that everyone gets taken care of okay are Tuffle get you back on your property okay let's the ad tapper says what do you think about joint ventures they have the money I do appraisals marketing and brother does the renovations hey jayvees are great right you need to build a great team for real estate investing that's very important you have to have a great team to do real estate investing well Kelly just uh Kelly Cheatham says I want to hear more about your program great just booked a call with our team Kelly and Morris invest comm we're doing some great things and I'm really excited about some of the new properties that that we purchased that we're about to do we've already designed our contractors to dive in and start rehabbing see Charlie 18 says our new Hara Sean wants to know one of the price of the new house is being built our new houses the three-bedroom two-bathroom right around seventy seventy thousand okay Charlie eighteen I'm gonna answer this question how does it LLC save you on your taxes on your rental how does it LLC save you taxes on your rental properties a lot of the stuff I've been reading times about pass-through income I never thought I thought that that was taxed the same way as a sole proprietor yes however remember that under the new tax law as a pass-through entity as a pastor entity you're now getting an additional 20% deduction 20% and remember when you have your your properties in an LLC you're being taxed as a business and you're able then to depreciate spread that money over all those other your w-2 income and those other things so I've just an all series of videos on understanding tax shelters and remember what you're buying as a tax shelter so forget about buying real estate you know I have talked about Lane I like for repairs so repairs add to your tax shelter helps mitigate your overall cash flow because remember what you're buying in the beginning in a 3-stage is a real estate investing right buy own and cashflow what you're buying in the beginning you're adding to your net worth so I don't care about the cashflow necessarily until years later but you're buying and adding to your net worth you're creating a tax shelter for yourself you're able to mitigate your w2 income you're able to offset all of those things so I would love to hear what you guys thought about today's show and the article please let me know I'd love to hear you which you you know what you thought about that Kelly are speaking of the computer program Oh Kelly yeah we're building a personal owner portal for our clients that the software I mean it's just it's and make it much easier so that we don't like our team doesn't have to send out Purchase Agreements it'll be right there because we have so many clients it like we'll have like three or four clients and want the same house and so a little like yeah give you a purchase agreement and it's kind of like first-come first-serve and then our team has to send out a purchase agreement wait till it's signed and all that BS so this will make it very easy for them to be able to click right on it and then open up DocuSign and be able to do it and pretty great Ryan Millie says okay what are the mechanics after purchasing one property to purchase another property or two and repeat the process over and over again where does that money come from well ideally it could come from a bank right or it could come from private money it could come from you know we we talked about a company that we work with called fund and grow less you know if you go to our if you go to our website Morris and vest com slash funding you don't pay them any money until they actually if they get you money zero percent Interest but why would look at okay so let's just take the mechanics of that to answer your question so I would say you know buying like a sixty seventy thousand dollar rental property and then leveraging that right so maybe putting or or if you have the cash to do that right that ideally if you could come out of the gate you have the cash to purchase your first one free and clear that's more of a B Class play you know that's sort of B minus like 60 65 70 K place play that's kind of maybe you know it's transitioning up to sort of an a-class neighborhood and it you know coud appraised in a few years at 80 or 75 that's the play right so buying that if you could buy that with cash right and then refinancing a pull some equity back out of that and then be able to roll that next amount of cash the bank just gave you into your next property into your second property and then into your third property a buddy of mine here in New Jersey started and did that on an eighty thousand dollar property he now has over two thousand units here our DNA and money when he started and he bought that first property that first property allowed him the snowball and all of these other properties and identity jjh yeah unfortunately JJ was said you purchase second property in Indy in November we'll hopefully get an answer for you an update on where we're at with the rehab and we'll also make sure we connect you with the right management team if you're having some issues you know we work with a 8 different property management teams so what gets you sort it out so just you know email our team you know the team you know our team at Morris invest email us we had a really really really unusually harsh winter that set us back about four or five weeks on construction this year with like a deep freeze we had stuff all the way through Michigan into Indiana down into Pennsylvania where we just had all kinds of problems Ryan you are absolutely welcome thank you so much Sean says you weren't able to pull cash off the cards they got through funding to grow yeah that's unfortunate we have literally funny grows enabled our clients to raise over 20 million dollars for purchases of real estate so I'm not sure why that person had an issue they're very very good at walking you through step by step I just would say reach out to them and make sure that you're working with them they they have a thing with gold money so basically they use the cards to buy gold and then you transfer the gold into cash it's like a little bit of a few hoops to jump through but hey it's 0% interest for a year you know hey beggars can't be choosers right we were able to get a hundred and seventy six thousand dollars in cash because of them in order to purchase real estate so it's an amazing strategy so again and you'll save like five hundred bucks if you go through our website because we've asked them to do that for people who watch us and who listen to us so if you go to Morris invest com slash funding check it out it might not be for you if it is great just check them out you know I have a phone call with them Joe Joe wants to know what appliances do you provide actually I don't do any appliances in our properties now that is to say if we move into some of the b-class properties we some we will sometimes put in a fridge and stove and things like that but far as a washer and dryer we have I made that mistake when I first started in Michigan I bought all appliances and found out that I didn't need to that it's commonplace that tenants will provide all of their appliances they will usually typically go down to a local you know like a little scratch and dent company etc or that's where I bought my first appliances when I had my first condo in Florida I went to a local scratch and dent place they're brand new that may have like a tiny little little scratchy scratch on the side and you get a great deal on a bundle of appliances so that's what most client most tenants will do and then they'll keep them for many many years so you don't have to worry about it so Daniel wants to know what's the fee for you guys to do investing for me there is no fee with us at all I know some other companies charge like ten percent all that stuff we don't do that you're just buying the house we just you know and try to get it all stabilized for you with property management team and cash flowing so you don't have any additional fees you own the property free and clear Jimmy says how do you organize your banking system for your real estate business great question Jimmy you know we have a couple of podcast episodes Natalie and I do where we talk about how to run your you know your family business and finances for real estate investing if you want to check out the investing in real estate podcast you can do so and we have some of those episodes you know the short answer is that you want to have bank accounts set up for your taxes you want to have bank accounts set up for your LLC that owns your rental property and personally so I have LLC's that own my rental properties those LLC's have their own bank account so when the cash flow from the tenant comes in I Clayton Morris don't touch that money that goes into the business then I can pull that money out but you can't commingle money like you don't if it's a business that owns your real estate you don't want that money coming in to your personal bank account that's called commingling that's illegal the IRS does not look favorably upon that so you want to do everything aboveboard making sure that everything is flowing the way that it should Bobby yes what's the best way to start a property management team no cash but at the time and looking to help investors well I would say to start a property management company takes about a hundred and fifty thousand dollars I know this to be the case so right away to be spending one hundred and fifty thousand dollars to set everything up okay you're gonna need you're gonna need to pay for software things like rent manager appFolio those types of things you're gonna want to hire an accountant you're gonna want to hire an office manager you're gonna need to hire leasing agent you also need to get a brokerage right you need to have a brokerage license to make sure that you can manage property so all those things cost some money so to start a property management company that's what about that's what it roughly costs and then about if you have more than 100 properties the rule of thumb is for every hundred properties or so you're gonna want to add another human being to your to your company to facilitate those properties that came to me as a friend of mine who ran his own property management company those are the exact numbers that he used James wants so what's the area oh it's just on the website to find the gold funding option so just go to Morris and Vess comm slash funding it's sort of a hidden page because we don't like promote it but it's there if you sign up like I said you'll save 500 bucks once they get you the money you don't pay anything until they get you the cards Peter said spoke briefly with your guy Justin have a self-directed IRA I was interested that was a month ago he was going to keep an eye out for a property and haven't heard back Peter I will follow up with Justin or you can just you know feel free to reach out to Justin as well from our team because we we can set up a whole dashboard for you for the self direction so I'll make sure that Justin gets back to you Peter I'll have our team make sure we go through this comment thread to take care of it okay how can you cash out on a $40,000 property well so $40,000 homes are tricky because banks are lazy or appraisers are lazy so a bank is going to hire an appraiser to go in and they're going to those types of properties they're being sold every day to investors like I might buy thirty of them right but guess what they're all off market so they're not being sold on a multiple listing service like you buy a house for a hundred thousand right with a realtor and so when an appraiser goes to pull comps in order to appraise the property they don't have any comps to work with the only cops they have are ones that are on the MLS the ones that they end up pulling end up being ones that are like foreclosures or pre rehab so you might have a forty thousand dollar house and you know it's worth forty forty three forty two but they might appraise it at twenty because the only thing they could find that sold recently on that street was a foreclosure that's not been rehabbed yet so you can't you kind of at a crapshoot if you're planning to do a refinance here's my suggestion it's just move up into those sixty sixty-five seventy thousand dollar homes and then you're putting like you know then you're able to pull almost like the full equity out of that house or close to it if the bank then cuts you a check for fifty fifty five great then you can roll that into your next property so I just would say told code don't try to go super cheap if you're planning on doing a refinance banks are lazy and you're frankly just at the mercy of these banks you know I can pull up sales disclosures with hundreds of sales where the house is selling for forty three forty five but guess what the appraiser will not look at that and so then you're at the mercy of like a foreclosure that's on the Multiple Listing Service and unfortunately it's it's just difficult now we've had people who've done refinances on forty thousand dollar homes and you know like one of our clients recently bought one for forty three it appraised for fifty five but again it's a crapshoot he could have just as easily had the appraiser come back and say you know well we think that house is worth twenty two so remember what you're buying is cash flow when you're buying that low and you're trying for that high of are a lie you're you're sort of like the investor that's buying 50 properties like that they don't care about ever refinancing they just want the ROI they want the cash flow I hope that makes sense sure our Lara says I've got a shooter I think I missed it sorry zip past it Ahmad it's kind of invest the United States if I'm not a US citizen yes you can you know just book a call with our team we have people I mean we have a lot of investors Canada and New Zealand all over the world who invest with us do I see Florida getting to California prices within 10 years seeing a lot of new construction and price hikes there in Tampa yeah a lot of those coastal areas you know Tampa those types of places Clearwater Miami of course I don't see them getting to California craziness you wanted let me tell you a California story the reason it's ridiculous so like the same house that I might do in Michigan or Indiana and then our clients would buy maybe like a 3-bedroom 1-bath in the $50,000 range right well there was a 3-bedroom 1-bath last week on the market in the bay area for $900,000 and guess what it was condemned it's a condemned house selling for $900,000 in the bay area that's California it's crazy absolutely crazy Mario says I was thinking about buying houses in my name under a HELOC on my primary residence and then when I get to three to five houses to a portfolio loan and all three to five and an LLC is that okay yeah I mean but why would you need to buy them if you're using a HELOC to buy them just buy them in an LLC now you know there's no reason you should buy them in your own name at all ever buy them buy them in an LLC if you're using the HELOC it doesn't matter how you use the he lock key lock is cash right you could go out and buy a boat if you wanted to with your he lock the bank doesn't care you're just writing a check from your he lock so why not buy them in your own name now I've started buy them in an LLC today you're using the he lock on your primary residence it doesn't matter the bank doesn't care what you're doing with that money you just have to pay it back but I to me having a HELOC is one of the killer strategies I love a key lock on my primary residence I use it to buy properties all day long Michele says what are your thoughts on using quicken loans to buy a house I've never done it you know hey if you can get good rates and good terms from a bank to buy to buy a house great go for it I don't see why not video teaching can you recommend a bank for a HELOC on a New Jersey property lakeland la ke Lakeland Bank we love them they're fantastic smh ninja on the funding Grove fees no notice he you're refinancing very quickly so you're gonna refinance very very quickly by that fifty sixty thousand dollar home and then get it into a long-term 30-year note and you pay off the you pay off the zero interest credit cards and then you recycle them so that's what fund and grow does they recycle and get you more zero percent and then you can just rinse and repeat that's why it's a great strategy so you're not keeping those cards for you know with like you bought a house on a credit card for twenty years you're refinancing it within that first twelve eighteen months and yes you can quit claim deed you can move a property to an LLC Kevin wants to know thoughts on an umbrella insurance versus LLC well that's well I say you have both I mean I would definitely have insurance and also have your properties in a limited liability company the reason you have your properties in a limited liability company is so that people will come after you personally that's the key right you don't want people if tenant slips and falls because a handrail wasn't fixed on your one property and this happened to a buddy of mine in Philadelphia he has a property and a girl was drinking one night she came home to the condo she slipped outside because the sidewalk had like this much of a differential and sued him fortunately you know he had insurance but fortunately the case got dismissed or dwindled down where he only had to pay like seventeen thousand can't come out of pocket seventeen thousand to pay for this girl slipping and falling at his property because he had the property at his own name so don't put properties in your own name if you don't need to there's no reason to forest so to have a bank you recommend for refine 50k rentals I guess it just depends yeah I mean there's a couple you know State Farm actually the insurance company has a refinance program a national program Northpoint Bank all one word with an e at the end North Point also has a refinance program they're a national company as well you could look into them Daniel says how do you tell if a property is a B or C class that's a great question I've got a whole video series here on our YouTube channel about how to understand that so you can if you want to look that up right here on the channel it goes more deeply into that but the short answer is an a-class neighborhood I like to avoid an 8 class neighborhood or those two you know two hundred three hundred thousand dollar homes two-car garages maybe they have a swimming pool they're in the best neighborhoods I stay away from those as an investment property because you're gonna have the most moving parts that break you're gonna have the most entitled tenants that cause the biggest headaches and cause you the biggest problems so garage door openers that break garbage disposals that break multiple heating and air systems that break you know avoid those those also have the most volatility those tend to be the areas where those in a big recession lose their job the a-class neighborhoods we saw that across the country right these a class neighborhoods where people lost their jobs and all these houses went into foreclosure and people couldn't pay their rent or the value plummeted significantly so let's say they're renting it from you for $3,000 a month in an a-class neighborhood and everyone loses their job all around that a class neighborhood now the rent is you know you're gonna have to go down like 20 2022 hundred a month or even 1800 a month we saw that in Manhattan right people renting Manhattan apartments for thirty five hundred bucks a month the recession hits and guess what all these Wall Street people lose their jobs etc and those went down significantly you could rent a place in Manhattan for eighteen hundred a month instead of the 35 that you could before the recession but guess what those C class neighborhoods say the same those C and B class neighborhoods roughly stayed the same it's consistent cash flow those are the people that tend not to lose their jobs those are the people that are working blue-collar b-class is kind of moving towards an a-class it has better schools slightly lower ROI but I've been buying a lot more B class properties lately personally because you know when you get to a point of having find enough cash flow you really want to start thinking about buying those more expensive B class because you're creating more of a tax shelter for yourself you're creating that bigger spread that bigger tax shelter and you're adding to your net worth more significantly so but C and B are my favorites so I've been a lot of C and I'm starting to buy a lot more B yeah lisa says that's why I like condos no outside maintenance but then I don't like the associations right I do not like HOA fees and I've got a whole video on HOAs because HOAs honestly you're sort of at the mercy of these people I mean you're literally at the mercy of these people and you never know when they're going to decide to change the bylaws and make it so that you can't rent the place or they're gonna hit you with a big roof assessment you're gonna have to pay you know $5,000 for a new roof on the property you have no control over that so homeowners associations I'm not a fan of Daniel we don't we don't have a number for you to call us because we want to be able to schedule it with you so just go to our website click on the schedule a consultation button you literally answer like eight questions like your first name last name best email address to get a hold of you make sure you type in your phone number correctly and then we just ask you a few quick questions like how many properties do you currently have what are your goals and then you pick on the calendar the time that you want to schedule a call with us it's very simple so it's up to you you know that you got the kids from to p.m.
We don't write so we want you to pick the time that best serves your needs it'll go on your calendar we'll send you an email reminder about ten minutes before your call and we'll jump on the phone with you and talk to you for like thirty minutes Chad boys wants to know how is Capp West you know I heard good things about them years ago but then I think I heard things kind of fell off and I haven't really actually heard many people using them so I don't know I've never used cap West what if you want to live duplex a class neighborhood your thoughts well Rodney I mean some few if you want to live in the property that's up to you right because that's a different animal than investing in a property but if you want to live in a duplex than in a class neighborhood great you buy it I would rent out the other side so that they're paying your mortgage that's an investment right that's an investment property in a class neighborhood so you know go for it you know just a matter of whether if you're in an a class neighborhood are you likely to have a higher turnover on the rent because people want to have their own single-family home they might not necessarily want to split a house with somebody if they're in a class neighborhood you know when I was younger I was fine kind of having a shared wall with somebody but now that I've got three kids and I'm an adult there's no way I want to share a wall with somebody else you know I want my own place I want my own yard what do I think about a land trust well it's funny you mention that as our tax accountant thinks that they are a total mistake so I do not do anything in the land trust sam says I spoke to Glenn a few minutes ago awesome