xhv8mzw7ge79waga35o97s2wbzpfr6 How to Integrate Income Properties Into a Financial Plan | FIG

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Randy Luebke

– Lifetime Paradigm, Inc. –

For more information contact:

lifetimeparadigm.com or randy@lifetimeparadigm.com

  Video Length: 47 min

How to Integrate Income Properties Into a Financial Plan.

- Randy Luebke, President, Lifetime Paradigm

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Randy is licensed in several fields as a Registered Mortgage Advisor, Registered Financial Consultant, Life Insurance Agent, Real Estate Broker, Mortgage Broker, Stock Broker, and an Educator.

After serving thousands of clients, he frequently finds out that most people struggle planning for their retirement because it is too complicated and sadly avoid dealing with it altogether or they seriously underestimate how much money they will need to fund their retirement for 20, 30 years or more. Randy understands how busy his clients are trying to keep up with hectic schedules and added responsibilities.

Due to these circumstances, Randy has found that most retirement plans either don't exist or they are seriously broken. They need help. He can help. 


Question is this if there was really a better, smarter, safer way to financially evaluate income property, to know how and why real estate works in a financial plan, and to learn how to find, acquire and manage real estate from afar? Would you want to know? How would that be a good use of your next 30 minutes of our time together if you learned how you agree, Okay, good, is that's what we're going to do. That's we're absolutely going to do so. You know, I realize now I have the slide twice. It's funny, you know, all of us had little speakers dinner last night, and then we all went home and do their homework and rearranged our entire presentations.


Last night, you know that that happened. That's okay. You want if you want to be smart, so I represented My name is Randy loopy. I am actually the co author of Mark colors. Most recent book called the


entrepreneurs guide to financial freedom which is available on Amazon and


Bible. And out here we have like a few copies as well. I say that because mark and I've been working together for about six years, every year for the last five years. We do all the real estate and financial planning training sessions around the country. We do one in Seattle, do one Chicago, we do one in our team Orange County, where I live down south, and then we do want to Honolulu. So if you guys want to ever travel to Honolulu, right after the whole trip, I'm your ticket, right? So anyway, you're going to you're going to see in in the presentation, this little book pop up periodically, because I've taken a lot of the information from this presentation that came from this book. And although I won't necessarily go deep on it today, you can read from the book and and go deeper on it yourself. So look for that little book itself. As it says I'm a registered financial consultant. I'm also invested visor representative. I'm a certified wealth protection planner and a certified


Medicaid planner. I'm a real estate broker. I've been a mortgage broker for 32 years. I'm also a life insurance agent. So basically I do everything that there is financial, except for taxes. I'm not an attorney. Right? That's why I partner with Mark Kohler because guess what he is a CPA and an attorney. Between the two of us we can really cover the waterfront. And I think what really sets me aside as a financial advisor is it's not all about stocks, bonds and mutual funds, stocks, bonds, and mutual funds are viable tools. We like them they have a purpose. But with a background in real estate and being a real estate investor, I realized that real estate is really a wonderful financial investment. And if you don't believe that, watch the first session, because we went really deep on why Real Estate's a great investment back we're going to cover that a little bit here in a minute.


This is our disclosure. And there's a lot to read here. And again, for those of you that weren't the session before, I apologize for those of you that weren't I don't want to just gloss over this because I think it's important. I pulled it out the part that I really want you to pay attention attention to


Investments are subject to risk, including market interest rate fluctuations. investors can do do lose money, unless otherwise known that they're not guaranteed. But why is this any investment? Whether it's real estate or anything that you're getting involved with, it's important to make a knowledge and informed decision. Right. And that's why you're here for the summit. There's a lot of good speakers I've been popping in from room to room here. And I'm really looking forward to listening to the full presentations from everybody. How about that guy this morning, by the way, listening awesome. He was so inspiring, intimidate. I got no he's got something about he's just awesome. But the point in all seriousness, this, you know, these are investments and we got it. We got to be smart, we got to know we got to understand the investment, make good choices and decisions about the investment or don't do it, you better stay on the sidelines. So we talked about in the previous workshop, the three states of money. Going back to high school, the three states of matter, everything to be solid, liquid or gas, it has to be one of the three at the same time.


There's no choice. Everything in the universe works that way. Money is the same thing. There's no choice your money is going to be spent Lent, loaned out or invested. Spending has a cost called what anybody you spend, when you spend your money? What happens? Is God, right? When you pay taxes, you spent your money, that money is gone. And the opportunity to make money from that money's gone, and it's gone forever. Right? So there's a cost associated with spending thing. When you buy a home and only free and clear, you financed it, and you find this to 100% with your own money, right? So whether you put 20% of your money in 80% of somebody else's where you put 100% of your money, 100% of that purchases, all with finance, that's important. Spending, lending. We talk about banks and bonds and you know, again, banks are really good about making us feel really good about doing a really dumb thing, right, which is we give them our money for free. Right. we lend them our money, we deposit money into our checking account.


We think it's a good thing to do and to make us feel happy when we make savings, right. And we buy CDs from the bank all forms of lending to the bank as little or no interest as well. Right?


By the way, if you look in your wallet, you find greenbacks in their little dollar bills was the same as a little about Dollar Bill. Bill Treasury note note is another is a short term loan like a bond is just made to the federal government. What rate of interest Do you get paid MMOs greenbacks in your wallet? Zero, right. So the point is, investing means own right. So we buy real estate we invest in we own it, stocks, we own things you can all okay. So the point of this is that money has to do something it never can be one of the can never can be anything else. But one of these three, it always has to be one of these three at one time. Does that make sense? three states of money it's in the book is in the corner of the book, the drive and fly through this part. And there's not a lot of people here so we probably won't get off as many candidates as I did last night.


Last night, like five minutes at the end, I finally got to the point that my whole presentation.


I'm going to get through this with every recap here. Why do we like real estate? Great research arm, right? That's the biggest traction, you can get great rates of return on real estate investment, great tax benefits. I'm a financial consultant, I spend a lot of time counseling my clients and how to minimize their tax expenses. I really don't know of another investment that provides as many tax benefits and as good as tax benefits is only real estate. Right? It's just a really great tax tool.


You know, we talked a little bit about 1031 exchanges. Everybody familiar with that? 31 exchanges, right? Right beauty of a 1031 exchanges. Why don't we sell the property that we have profit and how we can kick the can down the road and paying those taxes will kick the Canada we kick the can and what happens eventually.


You die? Yes, we die and it's okay. Well, it's not okay. But you die because it's going to happen when it does all that traffic up.


down the road, it's a step up and basis. And now that real estate passes to your kids your ears tax free, right? 1031 is a beautiful thing. We have another tool called the deferred sales trust, which works similarly. And I like the temporary one exchange, which is limited to real estate, a deferred sales trust can be used for any appreciated asset. So if you have a company that you grown in value, stocks that's grown in value, artwork, whatever it is, it allows you to let that appreciate asset be sold. And then to defer the gains the taxes is actually saying that the games into some point in the future is called deferred sales process. Another good thing we like about real estate is this multi generational, right? You buy this piece of property, and if hopefully your kids become interested in real estate and you teach them how it works, you can pass that property on to your kids and their grandkids and your great grandkids and how wonderful to continue to build wealth that you can pass on from generation to generation, right, growing that wealth along the way. And again, when you die


You need to pass along tax free to them generation after generation. And then finally, I think the number one reason that you're here, and the number one reason I find real estate investors across the country are interested in owning real estate is because of control. Right? You're in charge. Wall Street, you have no control. Right? You go along for the ride, you hope you got on the right bus, you hope it's going to take you to the right place. And if it doesn't make money, if it doesn't, you got off in the right place and could kill it. That's the way it works. Okay. But with real estate, you have more control. It's up to your, your smarts, right, your kindness, your strength, your willingness to do whatever it takes to make it work. So control is a big thing for real estate investors. They love that. What do we not like about real estate? It's complicated. It's messy, it's expensive. And the biggest thing as a financial advisor, it's a liquid, right? You can't just cash up that piece of real estate in tomorrow and get cash flow from it. You have to sell it. You might not be able to sell it because it's a bad market or there's no financing right? Whether it



There's something wrong with the property. Real estate is an illiquid investment. And all I can say to that is each one of these four things that make it


that are not good things about real estate are in for more good reasons to own it, right? Because if you if you can deal with the complication and the mess if you can deal with the amount of money it takes to get into real estate, if you can deal with those things and deal with the illiquidity, then you can take advantage of those great rates of return and all the stuff on the left side, Real Estate's a good investment. Okay. We talked about stock market, Dow Jones industrials, s&p 500 and now we're going to talk about financial planning. Okay, I'm a financial planner, or financial consultant.


Most people when they walk in my office, at least the first time, this is what I see. They have money in their 401k IRAs, they have money locked up in the market, right is in typical securities types investments, and a strap. They go to their stockbroker and they go you know, I went to this seminar


in Provo, and it was often this, they said we should invest in real estate. And the guy that Edward Jones says I can help you with that we got these rates. Right?


So what's that? Well, it's a real estate investment trusts all they do is own real estate. And you know, what is really it's a stock, right? It's another security, right? Fact reach might even only own mortgages, there are mix of both, right? Doesn't mean it's bad doesn't mean any of this stuff bad just because of it. It's just not owning real estate directly. That's different. That's what you're here for. That's what you're here to do.


The money is there company plans, of course, is unless you leave the companies trapped there, right? You can't get it out to 59 and a half years old, right? Unless you have something called an in service, non hardship, withdraw privilege. That's a lot to remember. But you can ask your employer especially if you have a small company, a small company 401k plan, you can had a clause to the plan document. It's called in service non hardship, withdraw privilege that allows you to transfer


money out before you're 59 and a half years old, frankly, as a business owner, myself, you know, business owner is the sponsor of the 401k plan. Okay, that's important, because the sponsor, the 401k plan is responsible for all that money inside the plan. If literally, if the planet loses money or they have bad investments, they've got it employer owner could be sued by the employee, pretty bad situation. So frankly, if you really think about it, every employer should have an in service non hardship, withdraw privilege in their 401k document, because they should get that money out of there. Right. But the let the employee take the deduction, that's what they want, but then let it put it into their own IRA, where they can self directed and do what they want their penalties to use. Their good question is other other penalties to do that? The answer is absolutely no. Right? It's a rollover just like a rollover when you're 59 and a half or when you have a hardship like the fire right. Leave the company.


get fired. And there's a few other reasons that you could get your money out of the 401k. It's not a taxable event, as long as you have all the money from one trustee to the next. Don't touch it. If you do touch it, yeah, get rid of it in 60 days, right? You only do that once a year. Kind of a dangerous, dangerous thing, but no, no in ServiceNow hardship, withdraw privileges, this is not a taxable event. It's just a way out. It's just a way out.


So, oh, this is another thing. If you guys are out there looking for money to do investments, you're fine people have money in their 401k ask them if any of that money came from a previous employer. A lot of people will do that the role the money from one employer 401k into their new employers 401k because all that money from their previous employer can be rolled out directly


through the ServiceNow hardship withdraw quarters as part of the 401k lot doesn't have the document


That's an important thing as well.


Okay, so what can we do right now? That's the question to say, this is my problem. My second, my 401k. What can we do now? I want


to know if the real estate I already own is worth keeping, right? A lot of people have purchased real estate along the way they have it or maybe they inherited it. But is it really still the right thing to have in their portfolio? Right. So we're going to help you with that. Should I purchase more real estate? And how do I create an ongoing lifetime income stream, which is what I call financial independence? And this is what we talked about a bunch. So it seems like it's a new block. So,


you know, really, I'm the boss a little bit of a tangent here, but two, three generations ago, they didn't need me. Didn't need a financial planner, Grandma, Great Grandma, great grandma. Because what did they do? We went door 2030 years from the same employer. 40 years. They retired with what pensions, right. They had a pension


So security check coming in every month, they probably own their home free and clear, right? Because they live in the same home their whole life, I repay that mortgage job is out the retirement. So it's a little bit of savings and a pension in a for Social Security, a little bit of savings, no mortgage, they could live a nice, comfortable life for the rest of their life, which by the way, wasn't all that long. Because that was the other thing that happened. during retirement, Grandpa, unfortunately would pass away about five or 10 years after he retired and he retired at 65. And by 70, yet Fortunately, he was dead. Right now, Grandma, of course, they've got a little bit of life insurance, right?


That helps them improve their situation. And then they also got to remember this since 1945. After World War Two, essentially, the stock market has gone up, up, up up up in value, right. So the increasing in appreciation of that savings, they had savings rates, you know, I'm old. I confess, I'm old. I'm 60


66 and April, I'm bragging about that because I feel pretty good for 66. Okay. But back in in 1980 when Jimmy Carter was president, anybody remember that when Jimmy Carter was right, you got? Yeah. Jimmy Carter, right? So you can go down to your local bank and put money in the checking account. And they were giving you 12% interest in your checking account, you'd get a CD for 18%. Yeah. So what happened since then is interest rates have gone down, down, down, down, down?


Well, bonds go up in value as interest rates go down, down, down, down, down.


So grandma had all these bonds that were increasing in value, right? When they got a pretty good coupon, the interest rate Anyway, she had her social security check going up every year with inflation, right. She had a guaranteed pension for life. She didn't need a financial planner. Alright. And then when she died, she passed all this stuff on to you know, her kids and they didn't need one either.


Well, no, they did. Because what happened just two generations ago, how many people have in this room even have parents that retired with a mortgage in place? Right now, there's not a lot of people here, but a lot of lot of people do. And people are living a lot longer, much longer. And because of that, as they live longer, the cost of healthcare gets more and more and more expensive, right? bonds are, you know, mortgage rates are type of bond, like the lowest in decades, decades and decades and decades, right?


So they don't have the bond prices going up. So they don't have to stop the volatility in the stock market. Bonds aren't going up in value, right. Cost livings going up, the cost of healthcare is going up is they have a mortgage, they have to deal with that too. It's way different. Now, the tax situation is far more complicated as well. Right? So it's very different. Right? So the point of all this is what we care about today is not retirement. It's not about getting that gold watch and getting the attention check is most


People unless they work for the government, their teacher or Sheriff or they work for the state, we're going to get a pension, all the rest of us we don't, it can happen, right? We want is financial independence. Here's my definition. When the asset you have provide the income you need to live the life you want.


Okay? When the assets you have provide the income you need to live the life you want. And you can do that when you're in your 30s. You can do that in your 50s. You can do that when you're in your 60s, right? In other words, you can become financial and you can do any, and if you choose to work, great if you choose not to work, great, right? We just want to make your financial independence. That's our job to get you there as fast as we can. Okay, so that's the question What can we do right now to achieve financial independence? Let's talk about what financial planning is what financial planners are, and it's kind of going into that a little bit here. This is a local guy here. His name is Carl Richards. He's He's in Park City actually is a financial advisor.


South Park City draws these things for the Wall Street Journal. I love it. Okay. So because they're so simple, but they tell the story. So this is a traditional financial plan, you make a bunch of assumptions, you wait a long time, and you see what happens. Right? So they give you the spreadsheets and the colors and the codes and the bar graphs and charts and this and that. The other stuff, we give that to you, and you're in your 30s and white, you're going away for like 40 years, and it's going to look like this. You can read richer, that's a financial plan. Yet, the problem with that, right is, you know, you're trying to use a linear approach to a nonlinear reality. Like life doesn't go straight up in a row, right? Life has ups and downs, things happening, you know, good things and bad happened in their life. So using that linear approach, that traditional financial planning approach just doesn't work. Real financial plan is that intersection between your money in your life, you know, what's your situation. I have clients that have longevity in their family, my wife's grandmother lived to the hundred


Three years old, there's somebody on the planet today, statistically, that's going to be 150 years old. That person is like, we don't know where we don't know what sex they are. But that person would be 150 years old is there, that's you.


You're going to need a lot of work.


Yeah, so So really, if the point is it's more personal, right? An actual planning is very, first of all, it's not about spreadsheets or bars and graphs. It's about listening to what your reality is what your family situation is. We that's another thing. You know,


grandma, grandpa, probably were married their whole life to 40 5060 years,


it might have been married today, people might have been married two or three times, they might have a couple, you know, sets kids and increasing ex spouses and who knows what's going on. There's just all the stuff that filters into financial planets. It's pretty fun, actually, that's why you can keep doing it. Right. So the financial planning classes, so


I have necessity, created my own financial planning planning process. I looked at the CFP model and certified financial planner model, which is like the model that you gotta go by, and I didn't like it. And the primary reason I didn't like it is again, the reason we're all here, it was really still all about stocks, bonds and mutual fund. It really was, and it felt I didn't feel that it covered all of the important parts of what a financial plan is. So let me describe for you what what they are. The four by four stands for four essential elements, and four sequential steps. These are the elements. So we are incoming tenants, asset protection, legacy preservation and tax optimization, walking through each one of those income independence what we just talked about five minutes ago, the assets you have, but the income need to live the life you want, right? That's a primary goal. We got to get enough assets together to provide that ongoing lifetime income for asset protection. You know, when you get stuff people want to take it from you.


Right. And I don't like talking necessarily about a guy with a gun. But there's people that will swindle your money is the IRS and always has their hand out, right? There's people that will take your money, and we're going to help you protect it. By the way, those of you that are younger, you know what your biggest asset is?




Wake up. Yeah, it's your ability to to make money, right, is your ability to think your ability to work and earn money and provide for you and your family's the biggest asset a lot of young folks have, right? And you need to be able to protect that. That's part of asset protection as well. So it's not just about corporations and jealousies and, you know, all that kind of stuff. We use those as tools, but as much more much broader than that legacy preservation, that's passing things down to our ears, right. How do we take what we talked about real estate being a multi generational investment, Real Estate's one of those things we have to do? But the problem is Mark was just watching marketing. Anybody see Mark Kohler thing


is fine. He's alive fine. You know, you know,


When you die, you don't have any control over your money because your debt, right? But you can have control over through trust, right? You can like


you can control your your assets to the grave. And that's important too. Because again, you want to protect your kids from creditors, you want to protect your kids from yourself from them making bad financial decisions, right? But for me, it's also more about not more about they're also about what if you're not good, but you're not able to make decisions about your money? In other words, what if you had a stroke, right? Or what if you develop Alzheimer's or dementia, right? So now you're alive. That's kind of like worst case scenario. Now you're alive. People are making decisions about you know about you and your money and you can't do anything about it. Unless you prepare for it. You want to do it. That's one of the elements of a good financial plan is the legacy preservation and then finally, tax optimization. Taxes are black, single biggest expense


period, you will spend more on taxes and your life anything more than your mortgage more than your credit card interest more than, you know, whatever it is you think you're spending money on. Uncle Sam's always got his hand out, right? And so we want to help you to minimize those taxes because what did I say about the three states of money, right stem land and in spend land invest by when you pay taxes, you're spending money, it's gone forever, right? So we want to be able to help you keep more of that money by optimizing your taxes. Those are the four elements. How do we do that? We use these four sequential steps. Step number one, optimize everything. What does that mean? Know your little older than say the guy behind? Right? That's a gift. Okay. Yeah, yeah. You probably have a whole bunch of different things that you've accumulated different strategies, different investment, different things that are going on your life and you're certainly somebody coming right out of college. Right. So what we do is we lay all our cards on the table, we want to see all the different assets you have money, see all the different liabilities you have as well.


mortgages, you know, student loans, cars, leases, all those types of things. And then we consolidate, simplify, right? And put all those things together so that you have a system that you can not only manage, but you know that everything you have is doing all it can for you. That's optimization. Step one, by the way, that can be, you know, suddenly it takes us a month to do together, it could take us a year just depends on you know, what you got going on your businesses and what have you a lot of real estate and get more complicated, but that's the first step. Second step is I want you to eliminate that. Anybody Dave Ramsey fan? Dave?


Yeah, I like john. Hi, Dave, a lot. I think you'll see a lot of people can see my, my stuff here, because he influenced me early on as well. I like to think that I take a lot of what Dave does, and I made it actually better, right? Because Dave, Dave actually proposed me I've heard of nothing personally, but he talks about, you know, financial gurus to talk about two kinds of debt. Dave, there's two kinds of debt. Okay. There's good debt and bad debt. There's good debt, which I


I call productive debt and bad debt reduction. Reactive debt is debt used to acquire things that usually get consumed or depreciate in value, right? So you buy a car goes down in value by boat goes got a lot of damage on a trip, whatever it is you put on that credit card that you bought, that doesn't produce income, depreciate goes down in value, you have debt for it, that debt when it all go away, right student loans, Lisa's car loans, credit cards, by the way, as a financial planner, if I'm going to lose somebody as a client, this is where I was. Right? Because I see it all the time. People come in believer, not 7080, hundred and hundred and $20,000 worth of credit card debt.


Imagine. Yeah, I mean, it's huge. I do see people coming more and more often was the huge student loans to huge student loans. I had, I had one guy just recently $500,000 in student loans. is a doctor in you can actually afford


Because then he's going to make a million bucks a year. But what's worse is the person that has $150,000 student la got like, like a


healthy senior line. You know, I would agree it's not going to make any money. They say they're going to make $40,000 a year. Right? And you have $150,000 in student loan debt is that these are all bad debts. What does God right? So we put people on a debt plan to accelerate those debts, we use a technique called snowballing, which is Dave Ramsey, and we make that debt go away as fast as we can. And again, a lot of people that I meet don't want to do that. It's like the guy this morning, you know, his legs cramped up and he wanted to lay down and not move. But with the debt, we got to make the debt go away because the debt doesn't go out, go away, then all that money that's going to service the debt can't go into financial independence. So we have fights over that. I like I said, this is the place where all these people because you know, they want to get to step four, which is the same in the past, right? Mark likes to say


That's like, I want to get to the dessert tray right away. That's the dessert trade the flag stuff, right? paying off debt isn't fun, especially when I tell them Yes, right. You know, we can get you out of debt and just like two years, and they're like, you know, depressed. But when you look at the credit card statements, they looked at the minimum payment, they see that they're going to get out of debt in about 20 years, they've been the minimum payments, right? So two is better than 20. Right? Pretty simple. Anyway, we get a debt. And the third thing is we want to establish significant liquid cash reserves. I think there's a slide in there. We're going to go in a little deeper with that. I'll save that for a moment. And then against that, so four steps, four elements. This is what a financial planner should look like. Okay.


Financial Planner, a real financial planners, a fiduciary consultant and coach. What is it fiduciary?


Tony Robbins wrote two books. Wow, that's a really small picture books recently. And he really uncovered a whole lot of stuff in there, which I was pretty happy to see what


He found was the 93% of the of the quote financial planners were for broker dealers, right? Which means that they're held to what's called a for dude, not a fiduciary but a suitability standard, right. Now what does that mean? The suitability standard means I can recommend that you should buy this investment invest your money for this particular investment. If it goes off and you lose all your money, you can't sue me as long as you can afford a loss. So if you can take the hit, I did my dude. Okay, so you can't do that fiduciary has to always do this in your best interest. That doesn't make us you know, bad It doesn't make us anybody that's smarter than next guy down the street but it does make us accountable to make a decision not based on my commission based on what's best for you. Right so real financial planner, first of all should be a fiduciary, right but should always be acting your best interests and most people don't even know that their advisors, not a fiduciary for that. They work for broker dealer and they're responsible primarily to their employer.


The you know, consultant and coach again, of consultant is about analyzing the situation and helping you figure out ways to get it done. That's what consultants do. Here's your problem, how do we fix it? And then the coach have to along the way, right and make sure that it happens. I took this instance on our website team you can read this to smaller read understand that, but I went through Tony's book and I found his seven characteristics of the ideal act, this is a great thing to take to your financial advisor. See argue this argue that argue that and Tony must have called me before I wrote the book because I also have a


good thing. Good thing.




Next thing, before we get into the actual numbers part of it, this is another thing I like to walk my clients to a call the perfect investment. Okay. I just asked them, Look, if I had an investment, it was 100% safe 100% liquid, it gave you 100% greater returns on your money, and it was 100% tax efficient. So you got a tax deduction when you put it in a group tax deferred and you guys


Pull out 100% tax rate, right?


And you don't have to do anything for you. Hundred percent passive. How many guys want invest in that with everybody, right and know what everybody wants? That is the perfect investment and it doesn't exist. It absolutely doesn't exist. So the question is, it doesn't exist, you know, you're going to compromise on something, what are you willing to give up? Right?


If I put my money into real estate, what am I going to give up? Mostly acquitted? Right, I'm going to give up liquidity. If I put my money in a checking account, what am I going to give up rate of return and tax efficiency? Because even if I did get interest on that money would be taxed? Right. So you're always going to give up something in any investment. What are you willing to give up? Okay, that's a good paradigm to look at investments, right? To help you understand what you're, what you're doing more depth in the book, right?


This is a list.


Mark Kohler said, Hey, can you like give people example. So I put this little matrix together, of all the different types of investments. I can think


up. So here's, you know checking in savings, money market account stocks, bonds, mutual funds, exchange traded funds, income property, milks life insurance, businesses annuities, and again, whether the state is you know, lending investing, you know,


tells you what the state is, and whether you can see none of them here are perfect, right?


income property, almost, right. The almost This is the liquidity, right? That you give it up. No investment perfect. No investment perfect. You always going to be about something.


This is not in our book is almost there, we just not quite time to to get in the book itself. But this is a matrix, because when you start out investing, we have to build the foundation right where we invest. So I don't know if you can read this. But down here I have a Roth IRA and the Kalyan. I'm assuming


that we're starting with a young person for this purpose of the matrix. And if you're older and have more money, you may be up here.


Somewhere, but the idea of a rod is that, you know, you you pay the taxes today, right? And then the money goes in there and it grows tax deferred and you can take it out tax free. That's pretty cool, right? problem is with that that the formula


you may remember this I think from like, junior high school math, algebra, but remember eight times b times c equals c times b times a member that at all, so one times two times three equals six, three times two times one equals six. Okay? So let's pretend A is the tax you pay in your money going in and B is the interest you earn on that money over time and then see is the tax you pay when you take the money out? Okay, so I start with $100,000 Okay, and I'm going to put it in a traditional 401k I get the whole hundred thousand dollars that goes in why because a the tax I pay up front is zero, right? Because all deferred, so my hundred thousand dollars goes into my 401k Now let's see over time 130


thousand dollars becomes $200,000 doubles in value. Okay, and now I'm going to start withdrawing the money see and I'm going to pay a 25% tax so my my hundred thousand went in intact everybody got that right and it doubled the 200,000 and now I'm going to pay a 25% tax when I take it out how much do I get to take out?




Hundred 50,000 right 25% tax so I $150,000 of spendable money net, okay, Roth


hundred thousand dollars 25% tax because we're going to keep the taxes the same. Okay, how much goes into my Roth 75,000 7000


doubles 250 to a pay any tax when I take it out? Know what do I got 150,000 Wow, they're equal.


They're equal. You get that? The Wrath and the 401k are exactly equal. So I can't have a change in my tax rate. When I take the money out


Rap doesn't necessarily a magic bullet that's going to make you all kinds of money. It doesn't matter right? So if I believe my taxes will be lower when I take the money out, I'm better off putting it in pre tax today. If I think the taxes are going to be higher tomorrow then I'm better off paying the taxes today getting it over with and then withdrawing it without paying taxes on it. That makes sense right? no magic bullet now who knows the taxes will be higher lower in the future anyone


know why right? I mean that you got a government that's in debt over its head right. So we got you know, we got that right. There's the likelihood is taxes will be higher, but the reality is none of us really know. So what the solution for me is diversify. Right? diversify taxes, just like you would any investment and so you might have some money in rock and you might have so many and Ross like investments. This Cali is a cash accumulation life insurance policy, which works just like a rock the benefit of the Cali though


Let me put it this way. We love the rock because we can put the money in it grows tax deferred comes out tax free. problem is we can't take it out of that until we're 59 and a half or we're going to get, you know, some penalties, right? We got the width, and we got five years and a few other things. Plus, once you take it out, you can't put it back in. Plus, if you make too much money, you can't put it in the first place. Right? So the Cali doesn't have any of those restrictions. You can put the money in today, you can take it out tomorrow, you can put it back in the next day, you can make a million dollars a year, right? And you still have the ability to let that money grow tax deferred and pull it out tax free anytime you want it. So I put it down at the bottom because it's a great place to start. For for somebody that that's younger, we use Kelly's a lot of different ways, but that's one way and then you see the next level up. I put IRA I put some rock conversions. I don't advocate rough conversions across the board again for the reasons I just told you unless you know that your taxes are going to be


excuse me, your taxes are going to be different in the future than they are today. A rock


Conversion may not be a good idea ever, right?


And then it's a good time to start investing in property real early right income property. You may actually I put primary residence here, but a lot of my clients will invest in income property before they even own their home, their renters. Okay, they're renting property, but they're buying investment properties to rent others, right? Why? Because they want to create financial independence, they want to create that asset that provides the ongoing income so someday they won't have to work and you work your way up the matrix and we have some really good fancy things cash balance and


I know I got 10 minutes left now I'll get through this but you know, 401k we like it better than the IRA because you're able to put away a lot more money right? And and, and you can do a more tax efficiently dollar for dollar. You're still between the the 401k and the profit sharing plan. You're limited about $60,000 a year. But when you add on what's called a cash balance with plan, which is a special kind of defined benefit plan. Now we can do that today.


hundred thousand dollars a year. That's significant right to $300,000 a pre tax money going into your retirement plan that you can self direct. That's a big deal. In the captive insurance company, you can put over $2 million a year a year tax. Well, tax deferred, and well anyway, lots of money. So this is the matrix, okay. And it's not in the book. But if you want this, I'll email it to you. Just send me an email says matrix. Okay, I'll send that to you. So now we got to get into the real reason I brought you guys here. So this is a spreadsheet that I created


for my clients that come to me, and they and this particular client had a bunch of rental properties already. So the first thing they wanted to know what should they keep them, right? So you missed the first session on how to evaluate real estate. So unfortunately, you're not going to get this but we put the properties in here and we do a quick evaluation RV factor, and it tells us whether we should keep this property or get rid of this property, whether we should take equity out of it and


Put it into more properties or not. Right? So it's a quick and dirty evaluation of their entire real estate portfolio, which we pull off their tax returns.


Now, I'm going to take, let me just kind of go back here.


Let's see we have six properties and rentals. And then we have a primary residence for the first and the second I got that. Now, what can we do? So we have the value of the primary residence $400,000 and they'll $287,000 on it. I'm going to say they have $125,000 in cash investments earning 2% they have a 401k of $250,000 only 5% maybe they have $995,000 of rental properties that's giving him $7,375 rent per month not bad. They'll $546,000 or average interest rate that we got through that previous spreadsheet 5.85% their average turn left on their mortgages are 25 years. Okay? All looks pretty good. Looks pretty normal.


They have


Altogether $470,410 tied up in total equity in that property in those properties, a lot of equity in that real estate, right? So, scroll down to the bottom here, and we can evaluate this right now. But that's $7,862 a year is providing them a 1.7% return on their investment. Not that good, really, right? Because what's happened is they bought good properties, and then they appreciated in value. So all that equity is not earning them in the interest anymore. They're getting a principal reduction 60,060 $700


a year, they have depreciation, and you put it all together, and this little portfolio is giving them about a 4.6% rate of return on their money. So that's all the money they haven't real estate, all the money in their 401k all the money they haven't savings. What can we do?


Let's see what the potential would be. Okay, so we take that $995,000 real estate, hypothetically, we're going to sell it all right. No, we're not going to really do that.


We just want to show what you could do. And we're going to pay 8% selling costs to do that. So 6% Real Estate commission 2% costs, and we're going to pay off the loans and we're going to have $368,685.


Instead of those properties, I don't the average RV factor, I think was below point 7% of is a pretty low RV rent to value for those that missed the first section, the gross rents divided by the value of the property, we're going to repurchase more properties, but with a higher RV factor of 1%. And we're only going to put a 25% down payment. So we're going to leverage up sorry, Dave Ramsey, we're going to leverage up our investment. Why? Because that leverage is going to increase our rate of return and actually reduce our risk in owning these properties. Why is that? Because we're gonna have more cash so we can set in cash reserves, we're going to have less equity for some


lawsuit potential so we get asset protection there, and we get to buy more real estate, which is going to give us more diversification because we own more properties to get more sources rent from so all those reasons advocate. Let's put a special


down payment and buy more properties, how many more properties we're going to buy $1,140,000 worth of real estate. Okay, remember, we had almost a million now we're going to get $140,000 more with an RV factor of one. Now let's look at what that does to our rate of return. And again, I'm skipping through all the details of the calculations because it was in the first session, you can watch that first session to see how I came up with these final numbers. But what I did is I took away 25% of the gross rents, right, just right off the top and


paid for the new mortgage at five and a half percent. And here's what happened. My cash flow went from $7,000 to $27,000. And now I'm getting a 7.4% cash on cash return return.


My principal reduction went up to $10,000 a year 2.9%. My depreciation because I went from properties that had high land values to properties that had high building valleys because land I can't appreciate went to $33,000


dollars a year guaranteed by the government for 27 and a half years, right? Whether I have a tenant in there or not, I'm going to get this income. That's another 9% a year, put that together have no appreciation. Here's what I'm looking at 19.3% on that money that was sitting in that real estate $71,000 a year pretty significant change. This is taking the real estate and paint, taking the haircut on all the selling costs and transforming it. And then I go But wait, there's more. Because what if we took the house and pulled a little bit of equity out there? Say a 75% loan to value if we could earn 19.3% on that excess equity? That's another 20 $300.


What if we took the liquid cash reserves from $125,000 down to 100? Assuming to 100 from 125 to 100. And what if we took a loan on our 401k our money dropped in our 401k right, we can take a loan of $50,000 pay ourselves back. Remember all the interest that's on that 401k loan that you're paying is going back to you


Right, who's paying the interest on that 401k loan? your tenant, right? Because we bought real estate with all that money. So now I have another $8,324. So what we did is we transformed that to $14,869 of income, same net worth $935,300. But my return went from $40,000 a year 4.3% number, that's everything real estate money in the bank money in the 401k to $86,000 a year with a 9.2% average rate of return, and we still have 25% equity in your home, we still have half of our money sitting in our 401k we still have a lot you're 25% equity in the properties we had. Now, is this the right thing to do? Probably not. But is it a possibility? Absolutely. And that's what I show my clients, you know, before you ask this question, because I've only got three minutes let me but it has the next session. Alright, great. So let me just roll back to here.


So, again, what I'm showing you is possibilities when I'm showing you something and Merrill Lynch will never show you right in going to happen.


So let me flip back to the PowerPoint here and


back up.


And then we'll take questions because I'm the next speaker so I can talk as long as they want. Okay, so takeaways from session two, there's no perfect investment, including real estate. It's not a perfect investment. a financial plan is a process. It's not a sales pitch. And unfortunately, a lot of sales. financial plans are about buy stocks, bonds, mutual funds, life insurance does all it comes back to it's really about you and your life. A financial planners, a fiduciary, a consultant and a coach. You can and most important, you can really live the life you want. This kind of ties in with the guy this morning. You can really live the life you want tomorrow, if you start to make better, smarter, safer financial choices and decisions today. If you want to walk out of here with one thing, that's the best thing to walk out of here. Now, Korea


is handing out a financial assessment. This is my little, you know, giveaway to you.


So a couple things, we have about 20 copies of Mark Kohler rainy, Lucky book out there still to, to sell the 20 bucks apiece, I'll be happy to autograph it for you. And I think Mark still here and he'll do the same. You're all going to get a financial independence tool kit, which is a really, it's a great good gift you're going to get, how to budget you're going to get how to get rid of your debt, you're going to get 12 different financial guides. And finally, as a consultant, I charge to 65 an hour for my time, but everybody for being here is going to get 30 minutes of my time for free. And your ticket for that 30 minutes is to give that assessment to Corey when you leave here today. So if you have time, between now and the next session, fill it out. If you don't have time, at least put your name and email on there and Corey will get back to you because we want to get that assessment because we have that consultation. I want to have a good idea about what's important to


And what we can do to help you. So thank you all for attending. And now I'll take your last question.




The last the last.


Yeah, the question was when I took the money out of the 401k, did I count for the money that was lost because I was in the rate of return the money in the 401k was 5%. But now it's going to get 19.3%. So it's actually you're going to make more money, because I took it out. What I thought you're gonna ask me is, does that count for the loan? And I did, right? Because the loan is 5%. And I even took it out and pretended you weren't going to get it. But the truth of the matter is that 5% that you pay an interest goes right back to you. Yeah, so there wasn't a loss. It was actually a game. And the more money I could have taken out, the more money I could have made, which would make it even better. So now, thank you all for joining me here and I hope you come back for session three.

– Fourplex Investment Group –