What's Holding You Back from Going from Midlife to Millions?

Happy Monday, one and all. It's, uh, Monday the 23rd of September, and, uh, we had a week off last week, but let's, uh, let's get going in earnest. Um, this weekend I was in California at a conference of Matthew Ferry, and, uh, great, great weekend. Um, spent a lot of time with friends who happen to be realtors, met a lot of brand new friends who are realtors, and we talked a lot about retirement planning. Um, we talked a lot about, um, you know, many realtors don't have 401s. They don't work for a group that offers 401, let alone any contribution from that employer. But there are a lot of, um, realtors out there who have been in W-2 corporate jobs previous to becoming a realtor, or they transitioned into becoming a realtor from, um, you know, more structured employment, as we know, the 9-to-5s, rat race if you like. Um, but they're still stuck in the rat race as far as, you know, retirement planning is concerned. Um, realtors have access to the MLS. They've got some of the greatest access to properties that are coming soon that aren't even on the market yet, and they get to sit in the seller's lounge and pitch listing. So we, we talked about a number of things around these areas and how can we help realtors, um, and other people acquire property. To set their retirement plan in motion and really to hopefully bring their retirement horizon forward and have them the freedom to do what they want sooner and to live the life they want to now. So, um, let's have a quick conversation today. We'll just talk about, um, let's use the topic of realtors for the day. I learned a lot talking to my friends and the people that I've met this weekend Um, we talked about, um, you know, the focus on doing transactions or deals, as, as realtors call them, um, in, in, in as far as they are a transaction on which commission is made. And it's kind of like, um, kind of like beef farming, you know. You grow, you grow the animal for a period of time over the, you know, 60, 90-day cycle of a, of a transaction, and then you kill the animal you know, it's slaughtered, and then you got to grow another animal again to slaughter later on. Um, you know, we want to be working as more, you know, dairy farmers where we're milking the cows once a month, milking the cash cows, which are the rental properties or whatever the investment is that we're investing in. Want to be able to milk them and come back and do more with, with the pro— with the animals. As far as the properties is, it's is harvest the rent every month. And from that, there's going to be the cost of raising the cow, feeding the cow, um, grazing the cow, and all of the expenses that come with vets, etc., which are ultimately property management, debt, um, the mortgage that you buy the property with, and any maintenance fees, vacancies that we need to cover. And we hopefully come out with, with a positive cash flow at the end of the month. But with property, we also have the opportunity for depreciation as well. Before we go and buy properties, we really want to look at structure of our, our assets. And, you know, we, we have ourselves, we have a Social Security number, which is a unique identity number for ourselves so that the IRS can track income and tax us. Um, but as far as the IRS tax code goes, that's probably one of those— that's one of the least favorable places to earn money is through your Social Security number. And quite a number of the agents that I met are receiving money through their Social Security number direct from their broker, and they're not being able to make even the most simple write-offs, which might be, um, mileage, um, marketing materials, that sort of thing. Um, where if we structure our assets correctly, then we protect ourselves from, you know, legal liability in many ways. And we also structure it in a way that the IRS tax code helps us to save money legally, ethically, and, um, you know, actually go through and, and keep more money in our pockets so we can invest more in the economy, bring more affordable housing to people potentially, and, you know, leave more available for the rest of the, the, the nation to, to benefit from. So as far as asset protection is concerned, one of the main things is having a living trust, a revocable living trust. That's really the foundation for owning nothing but controlling everything. When we die, if we don't have a trust in place, we don't have any succession set up. We might have a will, last will and testament, that tells the, you know, the probate court, this is where I wish my property to go, this may be the person I wish to take care of my business. But a living trust offers so many more benefits. It not only offers the, um, conveyance of property and assets, it also offers the opportunity to put power of attorney in place in case somebody's incapacitated unexpectedly, um, decision-making authority for medical, financial, and other, um, specifics. It also allows us to put a beneficiary in place and also a trustee, a successor trustee, When we set up a trust, we're really creating a separate entity from ourselves that owns the asset, which— look at your house. If you own a property, we're able to deed the property to the trust so the trust owns the property, not us. And then in case we pass at an unexpected time, then the property stays in the trust and the succession of ownership of the property is already dealt with. It's a separate entity from us, so there's no probate to be questioning. Who receives the property or how the property is conveyed. It stays within the trust to the beneficiary. If we set up a structure of trust where we set up our assets in a trust to be conveyed to the next party, the beneficiary trustee, then we can also then have another trust set up for that beneficiary, or just structure the trust in which it's— it is, um, it is, uh, perpetual and the assets remain in the trust. Now, from that trust, we would then want to create a holding company, which is a holding company that receives the money from maybe active and passive income businesses. Active income may be you as a realtor or in your W-2 job where you receive active income, uh, or short-term rentals. And the passive income would be from the properties that you own as rentals. That's considered passive income. And owning assets in a passive manner allows us to do things like depreciation cost segregation and bring other tax benefits to us to offset the active income over here with the depreciation cost segregation, other tax benefits we have from rental properties. Now, I won't go too deeply into this today. We're just looking at structuring ourselves so we protect ourselves from other parties trying to sue us for things that maybe we have a car accident, we don't have enough coverage, or somebody tries to exceed what the coverage of the car insurance may be and they try and take some of our assets. Well, if we have a trust, we don't have any assets. The trust has assets. There's nothing for them to come after. So those are some of the things that we, we try and protect ourselves against. So trust, holding company, passive and active income companies, and we might have multiple passive income businesses depending on what your risk tolerance is. You may want to have one property per LLC. I don't recommend that, um, because it's a, you know, it's a tax return per LLC that you're doing each year. And then your active income, you know, you probably want to have one for realty income maybe another one if you got short or midterm rentals, and then other one for rentals, uh, you know, long-term rentals. I would suggest that we look at maybe 10 to 20 properties in an LLC before we start another one, because the leverage we have against the properties is going to determine how much risk there is for being sued. Um, because people like to come after people that have assets and think they can get money from people that are rich or wealthy and they feel entitled, um, or might be a situation which is reasonable, but we again protect ourselves by not having too many assets and not allowing too much equity to build up in the assets that are owned by those entities. So it's a much more complex situ— you know, conversation per person based on unique situations, whether you're married, whether you're in a civil partnership, or, you know, common law partnership. All of these things have different factors and, and situations that we need to consider., and we'll definitely put you in touch with people that can, um, consider those on a much deeper level for you and your situation. But that's really the overview of the basics here. Let's look at the benefits of acquiring property and how we can go about that. There are different ways that we can rent properties. You know, the trendy thing now is short-term rentals or room-by-room rentals. They call it co-living. I own one of these properties. I have owned a short-term rental. I've got some long-term rentals in different places. Um, some of those I've acquired with my money, some of those I've acquired without my own money. Um, but you know, other ways that we can do it is conventional debt. Generally, we've— if we own a house, we've got a mortgage, it's in our name or in a joint name. We could potentially go and get a second, uh, loan, a mortgage for a second property that we buy as a rental. Which won't be owner-occupied, so the interest rate won't be as beneficial because it's a money-making property. But that's where we would look at deeding it into the name of an LLC, or getting an LLC and applying for debt like a DCSR loan, Debt Coverage Service Ratio loan, or some other sort of debt, whether it's seller finance or otherwise, to fund acquiring those properties. Other ways that we can look at acquiring properties, if we have 401s that may be dormant and sitting still, just, you know, gathering dust effectively and losing money against inflation. One of the great strategies that we can look at is talking to people like Horizon Trust, who will look at the 401s, tell you about the benefits and the drawbacks about potentially converting, or what they call rolling over, the 401 into a self-directed product. There may be a tax penalty for pulling the money out the 401 because that's tax-free money. They tax it when you pull it out. But there are strategies that are in use by moving them over in certain ways that may give you tax advantages, reduce or eliminate the tax by rolling those over. The benefit of putting into a self-directed IRA is that now, as it says, you can self-direct the investments in which that money is put into, where 401 is pretty much limited to mutual funds and really you're at the mercy of the, the, the foreign exchanges, the, the national exchanges, you know, um, NYC, um,, you know, the, all of the, the main stock markets that they have stocks in, whether it's international or domestic stocks. By making it self-directed, we then have to align with a certain set of rules around the IRS's rules for what types of investments you can invest in. Now, for example, I couldn't invest that money into a flip that I'm doing, but I could lend that money to a friend of mine that has a 401, uh, has a self-directed IRA. Or has a project going on. I could lend that person the money, and they, if they had a self-directed IRA, can lend me— could be the equal amount of money, or a similar amount of money, or a very different amount of money— so that I can borrow from him. He can make money, and I can pay interest on his investment, and vice versa. I can pay him or her on interest on, on their 401k or self-directed IRA. So the difference in return is changing massively. Other things that you can self-direct in, and this is not a limited thing, you can invest in precious metals, you can invert, invest in several ways, but we want to be talking to a, what they call an intermediary, or a, um, a, an agent who is an independent party that can just validate that the investments you propose to make do, are, are qualified investments from a self-directed IRA. What we could look at is, um, buying property with your self-directed IRA. This is a very popular and very worthwhile, um, opportunity to use. Say you have $100,000 in a self-directed IRA, go and put that as maybe two down payments on two properties that are each maybe, uh, you know, $300,000, and then get debt in the, in the remainder to acquire the property. That way you've got some equity in the property, you can cash flow the property, but all the cash flow comes back into the self-directed IRA because it can't come back to you because it's a tax advantage situation. So it comes back into your self-directed IRA, the bank account that holds, then you start building value in that, then you can use that capital to go and buy yet another property. So we can now snowball Now we got 3 properties cash flowing, then we can go and buy another property in maybe a year or 2 years, and we can keep doing that. Maybe we got 10, 20 properties in the next 10 years. Now we've got a lot of cash flow to play with. After 10 years, those first couple of properties that you bought, now you've probably paid down 25% of the debt. With an amortized loan, obviously we're going to be paying off the principal more quickly towards the end of the loan. But we're making headway on paying that interest down. One other thing we could do is to refinance some of those properties so we leverage them at a higher level, so the loan-to-value is higher. We can pull that money out tax-free and go and buy more properties for your self-directed IRA. So we could compound very quickly the number of properties we have. Maybe in 15, 20 years, maybe you've got $20,000 a month, or maybe even more cash flow that then replaces your income from your W-2. That could mean early retirement, it could mean less work, semi-retirement, or it could mean you just have more income that you can still pour into more rental properties for a longer period of time and now have a much more abundant life and retirement. These are the things we're talking about with Midlife to Millions, are strategies where we can bring you into understanding how money works, how money can work, and how the tax code can work for not against you, and to bring you into alignment with the dream that you've had, the, the dream life that you've had for retirement. So many people think of retirement as 65 years old, but when they get there, they realize they don't have anywhere near the either passive income, residual income, or savings available to them to be able to leave the working environment. And I wish this for myself and for everybody along the journey, to be able to engage, understand these strategies, and free themselves from you know, the rat race, as Kiyosaki calls it, and, uh, get out of the rat race and start enjoying life from a different, different place. Living in survival with money is, is a terrible feeling. I've been very familiar with this. Is maybe not covering the bills, maybe it's not having sufficient to, to do, you know, many fun trips, or maybe it's just knowing that in the future you're not really in a position to be able to build more. Than you, you just have on a day-by-day, month-by-month, paycheck-by-paycheck income. So we really want to change that. We want to change from the feast and famine model into the dairy farming model where we're just really harvesting milk, or the fruit tree analogy where we're just taking a fruit, few fruit every month and not cutting the tree down to, you know, take one larger sum, but we expand and, and take money over time. There's so many ways you can invest money other than, you know, buying your own properties with your self-directed IRA to buy with your self-directed product. We could also look at multifamily if you want to be completely hands-off. There's multifamily deals, maybe oils. There's other things with great tax benefits that we can, that we can invest in. I'm going to keep it short for today. Let's, let's reconvene next week and we'll talk on a different strategy next week. Thanks for your time. Bye-bye.