Don’t let fear stop you from investing in your financial freedom! In today’s episode, Mercedes will advise you where to find the money for your first or next investment property! Learn how to focus on making streams of cash instead of piles of cash, why real estate investment is better than saving gold, and why you should perceive a real estate portfolio as a retirement account.
What You Will Learn About Where to Find The Money For Your Next Investment Property:
- Why Mercedes is not giving black-and-white advice on where to find the money
- The focus on making streams of cash instead of piles of cash
- Why real estate investment is better than saving gold
- What home equity is
- Why you should put emotions on the side and concentrate on math
- Why elimination of the debt does not come first
- How to unretire the money that you’ve had in property and put it back to work
- How you can use your retirement account to invest, and
- What kinds of tax deductibles can be achieved with this approach
- Why retirement is not an age
- Why you should perceive a real estate portfolio as a retirement account
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Speaker 1: This is Theriault Media. So, you want to be a real estate investor, but you don’t want to do the work. If there were only a way where someone else could do it for you. Now there is. Tune in here each and every Saturday on The Epic Real Estate Investing Show for Turnkey Saturdays with your host, Mercedes Torres.
Mercedes Torres: Hello, hello and welcome. Welcome to Turnkey Saturdays, a new podcast brought to you by Epic Real Estate Investing. My name is Mercedes Torres and I am lucky enough to be partners in crime with Mr. Matt Theriault, creator of Epic Real Estate Investing. If you’re just now turning into Turnkey Saturdays, this is the show really catering to real estate investing for busy people. Now if you’re unclear as to what real estate investing or turnkey real estate investing is, I invite you to go back to listen to the previous turnkey episodes that I recorded, where I go into great detail of what turnkey real estate investing really is, and further share the three types of people that are absolutely crushing it with turnkey real estate investments. Okay, cool.
So, today we’re going to jump into something that gets brought to my attention almost every single day by our callers and our clients. And it’s really where to find the money for your next real estate investment or for your first real estate investment property. Let’s say–and as you’ve heard Matt and I say a million times, that real estate is the final frontier where the average person can build real wealth in a reasonable period of time. You’re excited about attaining some cash flow in real estate investing and even think that the idea of using a turnkey partner is a good fit for you. But maybe you’re stuck a little bit. You’re stuck in the sense that you don’t have the money to pick up your first investment or your next property or, more likely, many people don’t think that they have the money. Or you have some money spread out in different areas of your life and you’re not entirely sure if or how you can access it and what’s the best way to use it.
In a nutshell, as I’ve said before, where do you find the money? Well, I speak to people all day long and, speaking from my own experience, I’m going to give you a few suggestions of where to look. Some may be obvious, so bear with me. But others may be not so obvious. And others can fall into the category of, “I had no idea I could do that.” Now as we go along, keep in mind that often more than one source can be used together in conjunction with another source to make something happen. You know your situation better than we do, and I’m not ever going to say that there’s one road to raising capital that’s going to be the best fit for you. I like to stay clear of advisors that are black and white in their advice. In the financial world, there are simply just too many moving parts and variables.
I mean not to mention that each person’s goals are different and their situation may be different, so a black and white answer or black and white advice can’t necessarily be applied universally. So I do not consider myself, and I repeat, I do not consider myself a financial advisor. That’s what financial advisors do. They give you a black and white answer and that so. I’d rather share with you what’s possible, and oftentimes I’m speaking from personal experience because I’ve used many of these strategies to build my own portfolio. Matt and I have plenty of real estate investing, and we’ve exercised different strategies. And so because we exercise different strategies, we’ve also implemented and incorporated different ways of using other people’s money or using our own money, in different vehicles. So I’d rather share with you what’s possible. And if it makes sense for your situation and you apply yourself, the very stuff that I do and what I’ve seen work for other investors can also work for you.
So relax a bit, drop your guard for the next 20 minutes or so, open your mind, hear me out, and see if these ideas can possibly work for you. Think of these ideas of a new pair of shoes that you’re trying on. Ladies or gentlemen, a pair of sunglasses. You go to the store, you pick them up off the shelf, you try them on. You look in the mirror, and if you like what you see, you buy them. If you don’t, you simply put them back on the rack. Cool. There’s no right or wrong here, people, it’s just what sells and some of these ideas may be tight around your feet, so to speak. Others may feel like a custom suit as if these glasses were custom made for you. Now, if you found this show, chances are you’ve been thinking about real estate investing for a while or maybe you already investing in real estate and there’s something preventing you from getting on to the next level.
So let’s get started. We’ll shake things up a bit, do a little brainstorming and see if we can get you back in the groove of real estate investing or get started in real estate investing. All right, cool. Okay, so when looking into where to find the money and real estate investing, whether it’s possible to purchase in all cash or just provide a down payment, the obvious place to look is where you are currently stocking piles of cash. So where do you have money piled up? Now, remember, our goal, however, is to take our focus off of making piles of cash and place that focus on creating streams of cash. And that shift in mindset can come by turning your existing piles of cash into streams of cash. So, the first obvious place to look of course is your savings account or your CD. Places where you have your liquid cash being saved, like under your mattress or maybe even buried in your backyard.
I would also include in this category any cash equivalent like instruments like saving bonds or even gold or silver. And what’s the primary purpose of holding gold or silver in the first place? It’s not an investment strategy by the way, contrary to popular thinking. It’s actually a hedge against inflation. It’s a defense strategy. What most people don’t realize, real estate can serve the exact same purpose, but gold or silver don’t create streams of cash. Do they? So consider it. Consider any gold or silver you may have, and pretty much anything you’re holding as savings as part of a retirement account. Now, we don’t want to create a situation where you don’t have any savings, nope. In fact, it will be critical to have some cash reserves as part of a sustainable strategy to build a real estate portfolio. But if you do have a pile of money in your life and it’s making very little or making nothing at all, then putting it to better use may serve as a better option.
Now, remember, remember those sunglasses. We’re just trying them on, looking in the mirror and considering, and then choosing yes or no. Is this a good fit or is it not a good fit? Okay? Another place where there could be money hiding is to accelerate your real estate goals is in the equity that you may already have in your own personal home or in another investment property. Now before you get all excited, whether that’s a positive excitement in the sense of you didn’t think of accessing that, that’s a great idea. Let’s pick up another property, or whether it’s a negative incitement in the sense of no way, Jose, I’m trying to pay off my house. That money is staying put. Before you go either place, I want you to consider an alternative way of thinking. I’m in the mindset of my money should not get to retire before I do, and that’s precisely what home equity is.
Literally, it’s retired money. It’s no longer working for you anymore, but you still get up every single day and go to work yourself. I’m not okay with that. I want to retire before my money gets to retire. And my money will support me in retirement. At least that’s what I think. I feel like I have to provide a little more explanation here, so bear with me. And take some time to open up that stubborn mind of yours maybe, because the idea of tapping into equity of your primary residence is a topic that generates the most flack and confusion for most people. It actually saddens me that even after I go into deep explanation and illustration that some people still refuse to open their mind even remotely and consider the option and they may end up missing countless opportunities in their life just because they don’t consider the equity that they’ve acquired in either their primary home or an asset that they’ve acquired for retirement.
Now having said that, I’m not saying this strategy is the right fit for everyone. Well almost, but not everyone will understand what I’m trying to convey. The only way for sure to know whether tapping into your home equity makes sense for you or the home equity in other properties just gets down to simple math. And of course each person’s emotions. But really, there isn’t any room for emotion here. So do the best, put your emotions aside, and just focus on the math. Now, I’ve spent a lot of time in the past trying to and I will still continue to try to instill the notion into people that debt freedom and financial freedom are two totally different things. No one ever retires from debt freedom. By placing so much focus on attacking your debt without building streams of income is like a baseball team trying to win a game through just hitting the ball and never worrying about making it to home base.
Now you already know by now that I’m a Dodger fan, huge Dodger fan, we made it to the playoffs. We were in the playoffs actually, but it’s like tripping over the dollars to pick up the nickels. Or a better way of putting it, placing more focus on saving a nickel than making a buck. Debt freedom. Although there’s nothing wrong with it and I’m a big fan of it, being debt free just isn’t enough. It’s not going to get you to where you want to go. And by working on eliminating debt and staying debt free, you’re significantly prolonging your travels to financial freedom. Being debt free is not going to get you where you want to go. There’s still work to be done, and that work does not consist of just eliminating the debt. Now you can eliminate debt. Just don’t do it first. And here’s what I mean.
If I take money out of my own property, especially at today’s low-interest rates and redeploy that money into another cash flowing property, I’d be all over that. This can be done by refinancing any of your properties that you’re carrying a mortgage on, including your primary residence, and taking the cash out. In this case, depending on what interest rate you’re currently refinancing out, it could completely lower your mortgage payment or stay in the same ballpark. And that alone can put you in a better position in regards to your monthly income and debt to income ratio. But there alone you wouldn’t be. You’d also own a new investment property via the cash that you refinance from your primary residence or another investment property. And even if this refinance did raise your monthly payment just a little bit, the new income property that you just acquired with the money that you pulled out can help offset that.
You’ve unretired the money that you’ve had in property and put it back to work. And now it has improved your situation by number one, acquiring an asset that covers the new debt that you have, and two, by depositing additional cash into your bank account every single month. Now, if that’s not having your cake and eating it too, that I don’t know what is. Now maybe the math in this situation isn’t quite perfect for your particular situation, and just one move like this may not be checkmate for you to be financially free. But if using the home equity to acquire your first or next investment property, or even if it helps you acquire the first mental log jam to get you into the game and increase your monthly income even if only by a little bit, it begins a snowball effect in helping you afford to acquire more and more property. Thus, more cash flow.
Once these streams of cash flow are established, by all means, you may want to wish to redirect the money back to pay off debt, or to create an entirely separate pile of cash. Think about it, the cash that you borrowed out can be paid back and the debt will end, but your cash flow from the new property that you acquired, it will go on forever. Again, this is an area that not everyone follows me on the topic, but I’ve seen it done with great success. And it’s responsible for many of my clients’ success. It’s a strategy that keeps my personal portfolio growing. And with interest rates as low as they are, perhaps this particular strategy speaks to you. Okay, next let’s look at a pile of money inside your retirement account. I have found that often people who have no liquid savings will actually have a fairly decent amount stashed away in a retirement account, especially in an old 401k that was established by a previous employer that you’ve worked for at one time.
There are a few things you can do with the money inside a retirement account, and it really all depends on the status of your account. Now, I’m not going to go in through all the details and variable, but in general, you may be able to roll over the money in a self-directed IRA and you may be able to purchase real estate directly. Or, some money in the IRA can act as a partner to help you purchase real estate. This can be an exciting strategy and it will definitely help you. But you certainly want to seek competent legal assistance to do this correctly. Because if you do it incorrectly, there can be consequences. So if you can’t roll over your retirement account or a 401k because you’re still working with your current employer, you can probably take out a loan against it. If you roll over your retirement account, maybe because you’re still currently employed with your employer that’s holding your active 401k, you can probably take out a loan against it where you pay yourself back with interest.
Now, I’m pretty sure the interest is tax deductible as well and you want to confirm that with your CPA, but how cool is that? You can borrow from yourself, from your current active 401k with your employer, and you can pay yourself back with interest. And that interest is tax deductible. That’s a double dip. And by the way, it’s not you paying back the funds that you borrowed from your 401k. It’s your income property paying in back. Basically, it’s your tenants. This might be viewed as a triple dip on your investment dollar. Now, can Wall Street money make that happen for you? Finally, we might be able to forget a loan. Forget the rollover and just plain old withdraw some or all of the funds in your 401k. Now, this is often where I lose people and sometimes downright just inspire full-on rage.
And if this happens to be you, just remember we’re trying on those shoes. Gentlemen, we’re trying on those sunglasses. We’re looking in the mirror. We’re seeing how we look, we’re seeing how it fits. And if we like what we see, we’re going to look deeper. If you don’t like it, just put it back on the rack. Okay? No one is forcing you to do anything here, not even recommending it, as I can’t. I simply can’t recommend or advise anything. I’m not a financial advisor. I just personally speak from my experience. I don’t know your situation, and you know your situation better than we do, but our solutions, none of these are one size fits all solutions. Now, just open your minds and follow me as I’m sure you’re immediately thinking if I withdraw funds from my 401k, what about the penalties and the taxes?
Depending on your age, this is true. And depending on your current status with your employer or the status of your 401. But here’s why it might still be a good fit for the right person. And at the end of the day, it really comes down to the rate of return that you’re getting now versus the rate of return that you can expect from a cash flowing investment property. Many times, an early withdrawal penalty and the taxes have much more of a psychological power than a mathematical power. And politically correct advisors are all too glad to avoid the topic by just letting you glide down the path that you’re already on because let’s face it, it may serve your financial advisor to keep you in the vehicle that you’re currently on. But to me, if you can get your money to perform much better, or safer, or faster somewhere else, then recouping the cost of the transition may even quicker get the money that you invested and the penalties paid off in a much quicker fashion and get you making money forever.
Let’s look at it this way. If I’m driving along the highway and I miss the off-ramp to the airport, for example, I’m certainly going to eagerly turn back around and backtrack a little bit because I know that once I’m on the plane, I’m traveling a lot faster to get to my destination than I am driving. I’ve been seeing in the news lately that the stock market has been hitting highs. We all know that that doesn’t last forever. Maybe it’s a great time to check if your retirement account moves make sense. Maybe it’s a great time to check if your retirement account moves might make more sense for you. And here’s where people get stuck, or they just flat out get stopped in their tracks. And it’s usually uncertainty and fear. You see to make your investments grow, your job is to place your focus and efforts to see if there’s more coming in than going out.
People, it’s just math, its plus, and its minuses. That’s it. You want more pluses than minuses. And where people get stuck with liquidating their retirement accounts or even imagining the thought of liquidating. It’s that the minuses have these big ugly labels attached to them. Labels like taxes or penalties. But at the end of the day, they’re just minuses. And if you could afford a couple of minuses in your portfolio in exchange for a bunch of pluses, even if they’re little pluses, over a long period of time consecutively without you doing work, then the pluses might be a better fit for you. Would you agree with that? Now once again, not every strategy is going to be a good fit for everyone and you certainly want to do your own due diligence. You certainly want to seek legal professional advice, but to wrap it up, the thought about retirement accounts, let’s just say this. Look at the pluses and the minuses, put your emotions aside, and simply do the math.
After all, to me, retirement isn’t an age. To me, it’s the amount of passive income. It’s the luxury that comes with living from the passive income that you’ve acquired. That’s it. For example, if you need or if I need $4,000 a month to live, then as soon as I get $4,000 a month in passive income, then I’m free. So let’s just say that I obtain $500 for each of my properties. Five hundred dollars a month in cash flow. Then that means I need eight properties to be financially free because eight properties times $500 a month is going to give me my $4,000 a month in passive income. Then my $4,000 a month comes in whether I have a job or not, whether I wake up to go to work in the morning or whether I’ve reached the traditional retirement age or not.
Here’s my approach. I think retirement accounts are a good thing. I think they’re a really good thing, I just don’t think they’re the first place where I should focus on putting my money to work. So for me, my real estate investing portfolio is my retirement account. But get this, it’s paying me now 20 years before I hit the definition of retirement age. Now, just so you know, I do have retirement accounts. However, I see them as vehicles to maximize my tax liability. When you start stocking up cash flow and as your real estate investment portfolio grows, you start to experience a little extra cash, meaning your cash flow is exceeding what you need each month. You need places to put this extra cash, and I think that retirement accounts are great places to put this extra cash. But, it’s a great place once you’ve hit your financial freedom. Retirement accounts are great, they’re great for asset protection, they’re virtually impenetrable.
Think of O.J. Simpson. Now, that’s probably not the example that you want to hear, but it is a realistic point of reference. Because it doesn’t matter how many lawsuits and trials he’s lost. Nobody is going to be able to touch O.J. Simpson’s NFL pension. His retirement accounts are protected in the same way that retirement accounts are. And they’re great tools for holding money in nontaxable environments, but that’s not necessarily why they’re named retirement. If it’s your goal to work until you’re 65, then maybe they do serve that third purpose. But if you’d like to retire before you’re 65 like me, retirement is not a primary benefit for you. Anyway, I seriously can talk about the strategy forever. And I’m sure it’s going to come up again, and whether you agree with me or not, it really doesn’t matter to me. Unless you can prevent a faster or more secure way of retirement or an alternative opinion, a bunch of hypotheticals or what-ifs aren’t going to change my mind. And not because I’m closed minded on the subject by any means, but because I am financially free. And I’m practicing what I preach. I am retired, I have 20 and I’ve been able to do it 20 years plus before society says I’ve hit retirement age. So all of this retirement funds gobbly goop is something I avoid in my life completely.
I let the guru argue over that strategy about the funds, about the fees, about the faculties. I just don’t have time for that in my life. At the end of the day friends, it’s pluses and minuses. And I’m only mentioning retirement funds because if you already have money stuck in the traditional system, you might be able to use it as a lifeline to swing to the other investing side of it. By just tearing off a few old band-aids to make that transition. Okay, I’ve harped about that enough. Let’s move on. But I feel I can never talk about this enough to thwart the imminent rebuttals. Because regardless of what I say, the rebuttals are going to come. I know they are. And with that said, before you fire away a rebuttal on the subject of liquidating the retirement account, just please look at your own situation.
Are you financially free? Have you created the streams of income that you would like to retire comfortably tomorrow? If you’re not, then please consider just the context and the content of your rebuttal. Again, if you like the way the glasses fit, put them on. And if they don’t, put them back on the rack and let’s move on. I actually do have a few more creative suggestions that I’m excited to share with you on places where you can look into finding piles of money for your next investment strategy, but the areas that I just shared so far are most likely to pertain to most of the people that are listening to our podcast. There’s a lot more to chew on and to look into. So what I think I’m going to do is I’m going to hold off and share it in the next coming episodes. Because as many of you know, Matt created something called The Epic Pro Academy and it’s mainly for active investors. And Matt always says to move at the speed of instruction. So I’m going to share that same thought with you.
Move at the speed of instruction. I know you’re not here to be lectured to, but if anything that I spoke about today resonates with you, then take some time right now and really look into it. Maybe refinancing your home or considering tapping into your 401k maybe a huge chore. Taking an afternoon to look into these options, to do the research, to look into what it would cost to refinance your home or to speak to your employer about actively borrowing into your 401k, it may be a chore. But the chore of staying on the core shackled onto your job for the next 10, 20, or 30 years, I would argue that’s a bigger chore. If refinancing your home or taking money out of your retirement account seems like it might actually move your dreams closer to retiring sooner and even building a real estate portfolio, then I would highly consider that.
Wouldn’t that feeling of being in motion, of having your first real estate investing cash flowing deal or your next one, wouldn’t that be worth a little research? Maybe for you, it’ll be combining a few strategies together. Maybe it’s the angle that will allow you to take the next step. Or maybe none of these strategies are actually right for you, but let it be that you did a little math to come to that determination so we can rest easy knowing that everything that’s being told, if the math doesn’t make sense, then stay on the same track that you’re on. But if the math does make a little sense, then do what’s best for you and consider the options. In other words, don’t let fear or apathy decide for you. Don’t let what you’ve been told your entire life decide your future. Meaning, you’ve all been told now how to invest.
I shared many suggestions with you that you may consider. And who knows, maybe these suggestions are a good fit for you. It’s simply the pluses and the minuses. And if the pluses and minuses might be scary, do something different. You’ll likely know what’s possible for you once you do the math for your own situation. And make an educated decision on what’s best for you. If you’re stuck on the road of real estate investing, take time now, run some numbers, reach out to your mortgage broker. Have a conversation, or even just go online and download your 401 statement and see what’s really working for you or not. Of course, you can also give me a call. I’ll be happy to run through a couple of scenarios with you, hold your hand through the process or even point you in the right direction. I don’t have all the answers for you, but I can certainly tell you what’s worked for us and what’s worked for so many of our clients.
At the end of the day, I just want to help you get moving or point you in the right direction. If you want to take us up on our offer, just go to cashflowsavvy.com, that’s savvy with two V’s by either dialing the phone number or filling out the contact us page, we’ll get back to you. Or reach out to our office. And don’t worry, if these money ideas didn’t work for you I have some more remaining ideas as I previously mentioned and I promised to cover them in a few upcoming episodes. But I’ve talked enough for now. I’ve given you plenty to chew on. I’ve given you much food for thought, and I promise to discuss it in another Turnkey Saturday episode. And so in the interim, go to cashflowsavvy.com if you need our help or share this episode with your financial advisor of choice. And maybe together you can do the math. Thank you for trying on those awesome sunglasses and seeing if those shoes are the right fit for you. And thank you for joining me with an open mind. I’ll see you on the next Turnkey Saturday episode.
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