Hey everybody welcome in on this snowy snowy Wednesday wherever you’re joining us from let us know where you joining us from today hey everybody welcome in to the investing in real estate show today we’re gonna have some fun talking about how to retire at 40 how to retire by 40 Sean says hello from Brooklyn New York how much snow are you getting out there Sean we get this massive nor’easter once again and once again so the kids are off school just I’m over it I am over it I know there’s gonna be people are there I’m right in here and say they’re there joining us from there out in California and they’re living living large yeah Aaron is running us from Miami Florida there you go Wong from Miami thanks so much rub it in rub it in rub it in everybody so we’re gonna get this show started in just about three minutes South Africa Indianapolis Moses welcome Pottstown you’re getting hit with some snow right now Matthew Bishop Lakeland Florida hey Matthew yeah I guess California you guys are getting hit with some crazy stuff out there today too huh yeah they cancelled school last night I don’t know I you know growing up I don’t ever remember them canceling school like the night before did you guys ever have that growing up it was like he’d wake up and he would sit and listen to the radio and you would wait you know I was in Pennsylvania I would be all be waiting to listen for our school if it was canceled I’d be in one-hour delay a two-hour delay and you were hoping that they would cancel it but I never had the night before they send out a text message letting you know that hey your school was cancelled and that was never the case for me never never did you do all right we’re gonna get started in just a moment here it’s gonna pull up this today we’re gonna talk about how to retire by 40 and we’ll start here in just about one minute one minute one minute Jerome aramid says hey a guy you talked to me more than two weeks you never came back to me you can take care of this later I know you’re alive nobody emailed me the first appointment Jerome who did you talk to on my team let me know and we’ve got some people in from our team right here in the chat thread as well we can Mike you know a lot of times people will send follow-up emails it goes to your spam folder sometimes people when they initially signup for phone calls with our team they put in the wrong phone number and then they later writes it well I put the wrong phone number in and so our team will be calling and they can’t get ahold of you so I apologize for that and Rudy Rudy please check your spam folder please please please because our team is very good about follow-up and we have hundreds of clients around the world so I apologize for that you know because if someone sends you a PDF it might go right to your spam folder and then you’re like oh I never emailed me just check your junk folder and who are you talking to please let us know we’ll make sure we get you all squared away we have a waiting list for people to get on the phone with us for like a few weeks so I don’t ever want anyone to feel like we don’t get proper follow-up from our team that’s very important so I’ve got our team right now who is in our chat thread we’ll go through and make sure that we get you all taken care of so I apologize for that all right so we are live it is it is a.m.
And we’re gonna kick off the show after the show I’m gonna do you know to talk about this article talk about how to retire at 40 and then after the show we’ll kind of open it up for a few minutes of Q&A if that works for all of you and we’ll just kind of answer some real estate questions some of the things you’re struggling with you’re hoping to achieve and we’ll talk we’ll do that all right Forrest wants to knows are still owners software coming out for Morrison fest yes indeed in fact we’ve been working on it for for since like August it’s all custom it’s been a lot of tweaking we want it to just be perfect Peter Cook says I’ve had very good follow-up thank you Peter appreciate it and James Frederico o1r from our team is right in here he says hey Jerome I got you all reach back out to you and take care of you good good good all right so we’re gonna get started here and we’re going to talk about this in a second so first so again at the end of the show we’ll take some QA and we’ll do that as well let me just get this all dialed in we’re recording we got the audio up and running is everything sound ok guys you guys can hear me give me a thumbs up you guys are all good Brandon yes absolutely because some of those beat class properties you’re asking about the verb method absolutely because you know buying those 60 70 thousand dollar homes those the banks love they’re able to do you know easy refinances on those because there’s easy comps to pull in the neighborhood because there’s retail sales so I would stay away from like the 3040 thousand dollar stuff if you want to really do like a solid brr-brr method stuff if that’s what you’re looking for all right sounds good alright so we’re gonna get started all right all right and let’s get this show started all right today on today’s show we’re talking about how to retire by 40 a news article from the mainstream media it’s kind of total garbage that’s today’s show let’s dive into it hey everyone I’m Clayton Morris longtime real estate investor founder of Morris invest if you’re new to the channel thank you so much for joining us and subscribing I hope that you’re a subscriber because there’s where we talk about passive income building legacy wealth for you and your family that’s the goal right and the vehicle that we use is buy and hold real estate but I don’t care about the real estate right I don’t care about the four walls and a roof I just bought 15 houses this week that we’re about to rehab okay I don’t care what they look like because once we get them it doesn’t matter what I’m buying as a tax shelter and that’s what you should be focusing on buying a tax shelter that’s what this show is all about on today’s show I want to talk about how to retire by 40 and I want to preface this by saying that I got this from an email from a listener a viewer of our show who is getting involved in real estate investing Jesse Daley sent me this email and he said hey Clayton I hope you’re doing well man I thought you’d find this article interesting especially how the writer literally doesn’t mention anything about investing in real estate there’s only a one quick mention of a condo adding to net worth and nothing else in this article I’m so happy that your podcast teaches people how to truly invest properly and retire by the age of 40 this they should have interviewed you for this article so thank you Jesse I promised I would give you a shout out here on the show and I want to go into this article so again I have lampooned some of these CNNMoney articles over the past few years have done shows about these things because I just find them ridiculous I find them ridiculous that they’re telling people to invest in their 401k and then that’s the way that you build retirement that’s the way that you’re able to retire by 40 years old I mean how many people are you know you just like a show of hands you’re listening right now how many of you think you could actually retire by 40 years old just with your 401k of course you can it’s ridiculous the average 401k retirement in this country guess what according to Time magazine is 90 thousand dollars can you retire on that no way so I want to go through this article because it’s a lot of fun and Jesse sent it to me so these are tips from CNN money on how to retire by forty three proven tips three proven tips so let’s go Chris reading isn’t your average retiree he said goodbye to his working years at 37 and is now financially independent living his life on his own terms that’s great now he had 4500 dollars in debt and when he started working he got through all of that he finally found a well-paying job working cyber security took out a mortgage bought a condo and financed a BMW okay alright took out a mortgage on a home bought a condo and financed a BMW on our way to success but then he started to wonder is this all there is he finally said I can’t do this for 40 years in his late 20s he started searching for alternatives and he read the book your money your life by Joe da Menendez and Vicki Robin and he said look there’s other ways of becoming financially independent so he then felt that he had enough to live the rest of his life on his savings and investments without having to work again it took two more years of showing up the cubicle for him to be sure than a 37 he finally walked away so what did he do okay here were his strategies here where his strategies for becoming financially independent and retiring at 40 years old number one save more save more okay so his strategy according to the CNN Money article is cut he cut back on going out to dinner and he cut back on buying lattes so he just started saving more really so let me get this straight that’s the way that you can sustain yourself for the rest of your life by retiring at 40 years old from your job it’s just having enough in the bank you think that you’re gonna have if the average 401k retirement is ninety thousand dollars can you really live the lifestyle that you want so now you’re cutting back on dinners in order to save some money you’re not buying coffee so what Natalie and I’ve talked about here on the show repeatedly is the idea of not having to shrink your lifestyle why not find out what your freedom number is using real estate find out what your freedom number is and actually have enough passive income every month coming in the cash flows you’re creating a tax shelter for yourself and enabling you to live the life that you want so you can’t go buy a latte I find that ridiculous you know David Bach wrote about that in his book the automatic millionaire a years ago and look if you’re $40,000 in debt yes maybe not buying a five-dollar coffee every day is probably not a smart strategy you know also if you’re a smoker you know spending ten bucks a day on cigarettes or whatever it’s probably you know not a smart strategy if you want to claw your way out of debt I get that part of it but as a way of sustaining yourself and retiring at forty years old just saving more savers are losers that money in a bank account is doing nothing for you what about buying performing assets that are actually producing cash flow I mean come on so when he says look where people get into trouble with savings that they think they have to use reusable toilet paper and eat chicken broth but real basically you just you’ll never spend zero dollars find a level of living that you’re come with and work on earning more without increasing your expenses so he’s just saying earn more save more cut out lattes and you can retire at 40 I don’t buy that for a second number to earn more okay that’s his second tip earn more great so let’s save more and earn more again a paycheck job the tax code is written for wealthy people the tax code is written for entrepreneurs who own businesses who own real estate that’s what the tax code is written for it’s not written for a w-2 employee so earn more so what he says is your actual jobs only part of your work in order to earn the kind of money where you can live on only half or less of your salary so take that extra money socket away that’s what he’s saying so work harder right work for a paycheck get taxed as like in the highest tax bracket by the federal government right because we know that paycheck employees under the new tax code or hurt the worst he says this career-boosting work can include earning advanced degrees oh that’s great so his other bit of advice on this is go out and spend a hundred thousand dollars on getting an advanced degree so go get your master’s degree that’s only what a hundred thousand dollars that’s only a hundred thousand dollars right just go get it a master’s degree so that’s smart so save more earn more by spending more on getting an advanced degree or certifications and then that way you’ll have people who will look at you more favorably in the office and be able to elevate you higher that’s great so it’s important understand the weak areas and he says look I finding mentors okay that’s good yes definitely finding mentors as a very smart move finding mentors who can help propel you and then number three he says invest more so he says the most powerful mechanism for investment right now it’s built into their job it’s the 401k invest in your 401 K and a two or three percent return contributing at the level where you get the employer match is a must and that’s your biggest benefit and that’s how you can retire by 40 that’s the article unbelievable so okay ridiculous right that’s how you could retire at 40 no no that’s not how you can retire it 40 and that’s not how you could live comfortably and live the life that you want and be able to produce legacy wealth for your family for the rest of your life so he’s now retired he’s living off of savings but he’s got no assets that are actually performing for him for the rest of his life he’s got a V BMW that he bought financed and he has a mortgage on a condo that he lives in he has no performing assets that is not financial intelligence any way you slice it wouldn’t it have made more sense instead of saving that money while he was working for that cybersecurity company to take that money and invest it in real estate by a performing asset that cash flows that’s how you control and move your family forward that’s how you can build true legacy wealth for you and your family but actually taking money and buying a BMW buying a liability remember all you need to remember is if you’re buying liabilities a liability is something that does not produce cashflow now if he bought that BMW and used it as an uber driver that was producing cash flow that’s a different scenario or if he rented out that BMW that’s a different scenario but I love these I love these articles and again this is all sort of couched around the idea of the mainstream media right the mainstream media wants you to believe that a paycheck employer job is the way to go that getting a 401 K having their company sort of automatically do it for you because you’re too dumb to do it yourself have them handle it have them streamline it and that’s how you that’s how you have a strong safety net we’ve been trained to believe that being secure is having a paycheck job you know again I come back to the I keep seeing this commercial and I’m sure so many of you have seen this commercial over the past few weeks I saw it first during the World Series and they continue to run this stupid thing where it shows a couple you know they’re in their late 60’s and they’re sitting there with a how it’s a Merrill Lynch advisor and the Merrill Lynch adviser says well it looks like the plan worked and you’re gonna be able to have that retirement you wanted and I looked at you look on the iPad app that they’re handing to the couple and he’s like honey we did it we can do it we can live that life we wanted retirement and it shows that their income is enough they’re gonna have about seventy thousand dollars to work with like if you look at if you actually look at the numbers on that screen seventy thousand dollars so now they’re almost at retirement and then the next clip it shows them in a boat with their granddaughter right there sailing off into the sunset like some small little boat with their granddaughter and the little girl says aye aye captain you know and she she’s driving the boat so this is their retirement they finally did it right they had a wait till they’re 70 to buy a boat and to be able to sleep in and spend a little bit of time with her grandkids be all because they had their month their money managed by a financial advisor that was taken out big fees and investing in a stock market and not investing in real estate and cash flowing assets so there you go that’s my frustration there you go that’s my my little my little two cents my little rant about these types of mainstream media articles and when you see them on TV just roll your eyes think about it for a second saving more earning more get an advanced degree spend $100,000 on a master’s degree and then use a 401k that’s how you’re able to retire at 40 that is total garbage that is total garbage unless maybe the guy wants to go live in like Thailand by himself with no kids and he wants to live like in a hut somewhere for the rest of his life and he doesn’t care about actually having any income or cash to be able to buy anything or any food or live the life that he wants I find it to be total garbage I’d love to hear your comments and your reactions to this please send them to us and I really thank you so much so that’s gonna do it for that and thank you so much for subscribing to the show I really appreciate it this is the investing in real estate show you can please subscribe share it with your friends and and you know please go out there take action become a real estate investor because I believe it’s the number one way to build wealth we’ll see you next time everyone all right now with that that’s the show so anyone who wanted to get just the shortened version of that but hey now we’re gonna open up this agree to some Q&A here in the show we got so much so I saw so many chat threads coming through here asking questions alright so fire them up here alright alright Joel says I’ve also had an email a few times hit reschedule my call but no response and said ok Joel no worries we’ll get you all straightened out I apologize like if people miss their phone appointments cuz like I said we Deanna with our team we have like calls are booked out I think about two weeks and so if we call them like goes to voicemail and then we’re trying to reschedule it so we really try to make sure we can get on the get on the same get on the same on the same page Jinger I’m sorry again what’s going on Jinger we’ll get to the bottom of this so I’m gonna make a list of anyone who didn’t get a call back so I apologize alright so can you guys tell me Arum says Glen and Nicole from your team have been great awesome ok so we will dial some of the stuff in ginger and I’m sorry I will get some of these people on your on your team to make sure we get it all taken care of thank you guys let’s see all right you know I’m glad you’re not upset no I just you know we if sometimes emails get back and forth and we’re trying to make sure that everyone gets taken care of okay are Tuffle get you back on your property okay let’s the ad tapper says what do you think about joint ventures they have the money I do appraisals marketing and brother does the renovations hey jayvees are great right you need to build a great team for real estate investing that’s very important you have to have a great team to do real estate investing well Kelly just uh Kelly Cheatham says I want to hear more about your program great just booked a call with our team Kelly and Morris invest comm we’re doing some great things and I’m really excited about some of the new properties that that we purchased that we’re about to do we’ve already designed our contractors to dive in and start rehabbing see Charlie 18 says our new Hara Sean wants to know one of the price of the new house is being built our new houses the three-bedroom two-bathroom right around seventy seventy thousand okay Charlie eighteen I’m gonna answer this question how does it LLC save you on your taxes on your rental how does it LLC save you taxes on your rental properties a lot of the stuff I’ve been reading times about pass-through income I never thought I thought that that was taxed the same way as a sole proprietor yes however remember that under the new tax law as a pass-through entity as a pastor entity you’re now getting an additional 20% deduction 20% and remember when you have your your properties in an LLC you’re being taxed as a business and you’re able then to depreciate spread that money over all those other your w-2 income and those other things so I’ve just an all series of videos on understanding tax shelters and remember what you’re buying as a tax shelter so forget about buying real estate you know I have talked about Lane I like for repairs so repairs add to your tax shelter helps mitigate your overall cash flow because remember what you’re buying in the beginning in a 3-stage is a real estate investing right buy own and cashflow what you’re buying in the beginning you’re adding to your net worth so I don’t care about the cashflow necessarily until years later but you’re buying and adding to your net worth you’re creating a tax shelter for yourself you’re able to mitigate your w2 income you’re able to offset all of those things so I would love to hear what you guys thought about today’s show and the article please let me know I’d love to hear you which you you know what you thought about that Kelly are speaking of the computer program Oh Kelly yeah we’re building a personal owner portal for our clients that the software I mean it’s just it’s and make it much easier so that we don’t like our team doesn’t have to send out Purchase Agreements it’ll be right there because we have so many clients it like we’ll have like three or four clients and want the same house and so a little like yeah give you a purchase agreement and it’s kind of like first-come first-serve and then our team has to send out a purchase agreement wait till it’s signed and all that BS so this will make it very easy for them to be able to click right on it and then open up DocuSign and be able to do it and pretty great Ryan Millie says okay what are the mechanics after purchasing one property to purchase another property or two and repeat the process over and over again where does that money come from well ideally it could come from a bank right or it could come from private money it could come from you know we we talked about a company that we work with called fund and grow less you know if you go to our if you go to our website Morris and vest com slash funding you don’t pay them any money until they actually if they get you money zero percent Interest but why would look at okay so let’s just take the mechanics of that to answer your question so I would say you know buying like a sixty seventy thousand dollar rental property and then leveraging that right so maybe putting or or if you have the cash to do that right that ideally if you could come out of the gate you have the cash to purchase your first one free and clear that’s more of a B Class play you know that’s sort of B minus like 60 65 70 K place play that’s kind of maybe you know it’s transitioning up to sort of an a-class neighborhood and it you know coud appraised in a few years at 80 or 75 that’s the play right so buying that if you could buy that with cash right and then refinancing a pull some equity back out of that and then be able to roll that next amount of cash the bank just gave you into your next property into your second property and then into your third property a buddy of mine here in New Jersey started and did that on an eighty thousand dollar property he now has over two thousand units here our DNA and money when he started and he bought that first property that first property allowed him the snowball and all of these other properties and identity jjh yeah unfortunately JJ was said you purchase second property in Indy in November we’ll hopefully get an answer for you an update on where we’re at with the rehab and we’ll also make sure we connect you with the right management team if you’re having some issues you know we work with a 8 different property management teams so what gets you sort it out so just you know email our team you know the team you know our team at Morris invest email us we had a really really really unusually harsh winter that set us back about four or five weeks on construction this year with like a deep freeze we had stuff all the way through Michigan into Indiana down into Pennsylvania where we just had all kinds of problems Ryan you are absolutely welcome thank you so much Sean says you weren’t able to pull cash off the cards they got through funding to grow yeah that’s unfortunate we have literally funny grows enabled our clients to raise over 20 million dollars for purchases of real estate so I’m not sure why that person had an issue they’re very very good at walking you through step by step I just would say reach out to them and make sure that you’re working with them they they have a thing with gold money so basically they use the cards to buy gold and then you transfer the gold into cash it’s like a little bit of a few hoops to jump through but hey it’s 0% interest for a year you know hey beggars can’t be choosers right we were able to get a hundred and seventy six thousand dollars in cash because of them in order to purchase real estate so it’s an amazing strategy so again and you’ll save like five hundred bucks if you go through our website because we’ve asked them to do that for people who watch us and who listen to us so if you go to Morris invest com slash funding check it out it might not be for you if it is great just check them out you know I have a phone call with them Joe Joe wants to know what appliances do you provide actually I don’t do any appliances in our properties now that is to say if we move into some of the b-class properties we some we will sometimes put in a fridge and stove and things like that but far as a washer and dryer we have I made that mistake when I first started in Michigan I bought all appliances and found out that I didn’t need to that it’s commonplace that tenants will provide all of their appliances they will usually typically go down to a local you know like a little scratch and dent company etc or that’s where I bought my first appliances when I had my first condo in Florida I went to a local scratch and dent place they’re brand new that may have like a tiny little little scratchy scratch on the side and you get a great deal on a bundle of appliances so that’s what most client most tenants will do and then they’ll keep them for many many years so you don’t have to worry about it so Daniel wants to know what’s the fee for you guys to do investing for me there is no fee with us at all I know some other companies charge like ten percent all that stuff we don’t do that you’re just buying the house we just you know and try to get it all stabilized for you with property management team and cash flowing so you don’t have any additional fees you own the property free and clear Jimmy says how do you organize your banking system for your real estate business great question Jimmy you know we have a couple of podcast episodes Natalie and I do where we talk about how to run your you know your family business and finances for real estate investing if you want to check out the investing in real estate podcast you can do so and we have some of those episodes you know the short answer is that you want to have bank accounts set up for your taxes you want to have bank accounts set up for your LLC that owns your rental property and personally so I have LLC’s that own my rental properties those LLC’s have their own bank account so when the cash flow from the tenant comes in I Clayton Morris don’t touch that money that goes into the business then I can pull that money out but you can’t commingle money like you don’t if it’s a business that owns your real estate you don’t want that money coming in to your personal bank account that’s called commingling that’s illegal the IRS does not look favorably upon that so you want to do everything aboveboard making sure that everything is flowing the way that it should Bobby yes what’s the best way to start a property management team no cash but at the time and looking to help investors well I would say to start a property management company takes about a hundred and fifty thousand dollars I know this to be the case so right away to be spending one hundred and fifty thousand dollars to set everything up okay you’re gonna need you’re gonna need to pay for software things like rent manager appFolio those types of things you’re gonna want to hire an accountant you’re gonna want to hire an office manager you’re gonna need to hire leasing agent you also need to get a brokerage right you need to have a brokerage license to make sure that you can manage property so all those things cost some money so to start a property management company that’s what about that’s what it roughly costs and then about if you have more than 100 properties the rule of thumb is for every hundred properties or so you’re gonna want to add another human being to your to your company to facilitate those properties that came to me as a friend of mine who ran his own property management company those are the exact numbers that he used James wants so what’s the area oh it’s just on the website to find the gold funding option so just go to Morris and Vess comm slash funding it’s sort of a hidden page because we don’t like promote it but it’s there if you sign up like I said you’ll save 500 bucks once they get you the money you don’t pay anything until they get you the cards Peter said spoke briefly with your guy Justin have a self-directed IRA I was interested that was a month ago he was going to keep an eye out for a property and haven’t heard back Peter I will follow up with Justin or you can just you know feel free to reach out to Justin as well from our team because we we can set up a whole dashboard for you for the self direction so I’ll make sure that Justin gets back to you Peter I’ll have our team make sure we go through this comment thread to take care of it okay how can you cash out on a $40,000 property well so $40,000 homes are tricky because banks are lazy or appraisers are lazy so a bank is going to hire an appraiser to go in and they’re going to those types of properties they’re being sold every day to investors like I might buy thirty of them right but guess what they’re all off market so they’re not being sold on a multiple listing service like you buy a house for a hundred thousand right with a realtor and so when an appraiser goes to pull comps in order to appraise the property they don’t have any comps to work with the only cops they have are ones that are on the MLS the ones that they end up pulling end up being ones that are like foreclosures or pre rehab so you might have a forty thousand dollar house and you know it’s worth forty forty three forty two but they might appraise it at twenty because the only thing they could find that sold recently on that street was a foreclosure that’s not been rehabbed yet so you can’t you kind of at a crapshoot if you’re planning to do a refinance here’s my suggestion it’s just move up into those sixty sixty-five seventy thousand dollar homes and then you’re putting like you know then you’re able to pull almost like the full equity out of that house or close to it if the bank then cuts you a check for fifty fifty five great then you can roll that into your next property so I just would say told code don’t try to go super cheap if you’re planning on doing a refinance banks are lazy and you’re frankly just at the mercy of these banks you know I can pull up sales disclosures with hundreds of sales where the house is selling for forty three forty five but guess what the appraiser will not look at that and so then you’re at the mercy of like a foreclosure that’s on the Multiple Listing Service and unfortunately it’s it’s just difficult now we’ve had people who’ve done refinances on forty thousand dollar homes and you know like one of our clients recently bought one for forty three it appraised for fifty five but again it’s a crapshoot he could have just as easily had the appraiser come back and say you know well we think that house is worth twenty two so remember what you’re buying is cash flow when you’re buying that low and you’re trying for that high of are a lie you’re you’re sort of like the investor that’s buying 50 properties like that they don’t care about ever refinancing they just want the ROI they want the cash flow I hope that makes sense sure our Lara says I’ve got a shooter I think I missed it sorry zip past it Ahmad it’s kind of invest the United States if I’m not a US citizen yes you can you know just book a call with our team we have people I mean we have a lot of investors Canada and New Zealand all over the world who invest with us do I see Florida getting to California prices within 10 years seeing a lot of new construction and price hikes there in Tampa yeah a lot of those coastal areas you know Tampa those types of places Clearwater Miami of course I don’t see them getting to California craziness you wanted let me tell you a California story the reason it’s ridiculous so like the same house that I might do in Michigan or Indiana and then our clients would buy maybe like a 3-bedroom 1-bath in the $50,000 range right well there was a 3-bedroom 1-bath last week on the market in the bay area for $900,000 and guess what it was condemned it’s a condemned house selling for $900,000 in the bay area that’s California it’s crazy absolutely crazy Mario says I was thinking about buying houses in my name under a HELOC on my primary residence and then when I get to three to five houses to a portfolio loan and all three to five and an LLC is that okay yeah I mean but why would you need to buy them if you’re using a HELOC to buy them just buy them in an LLC now you know there’s no reason you should buy them in your own name at all ever buy them buy them in an LLC if you’re using the HELOC it doesn’t matter how you use the he lock key lock is cash right you could go out and buy a boat if you wanted to with your he lock the bank doesn’t care you’re just writing a check from your he lock so why not buy them in your own name now I’ve started buy them in an LLC today you’re using the he lock on your primary residence it doesn’t matter the bank doesn’t care what you’re doing with that money you just have to pay it back but I to me having a HELOC is one of the killer strategies I love a key lock on my primary residence I use it to buy properties all day long Michele says what are your thoughts on using quicken loans to buy a house I’ve never done it you know hey if you can get good rates and good terms from a bank to buy to buy a house great go for it I don’t see why not video teaching can you recommend a bank for a HELOC on a New Jersey property lakeland la ke Lakeland Bank we love them they’re fantastic smh ninja on the funding Grove fees no notice he you’re refinancing very quickly so you’re gonna refinance very very quickly by that fifty sixty thousand dollar home and then get it into a long-term 30-year note and you pay off the you pay off the zero interest credit cards and then you recycle them so that’s what fund and grow does they recycle and get you more zero percent and then you can just rinse and repeat that’s why it’s a great strategy so you’re not keeping those cards for you know with like you bought a house on a credit card for twenty years you’re refinancing it within that first twelve eighteen months and yes you can quit claim deed you can move a property to an LLC Kevin wants to know thoughts on an umbrella insurance versus LLC well that’s well I say you have both I mean I would definitely have insurance and also have your properties in a limited liability company the reason you have your properties in a limited liability company is so that people will come after you personally that’s the key right you don’t want people if tenant slips and falls because a handrail wasn’t fixed on your one property and this happened to a buddy of mine in Philadelphia he has a property and a girl was drinking one night she came home to the condo she slipped outside because the sidewalk had like this much of a differential and sued him fortunately you know he had insurance but fortunately the case got dismissed or dwindled down where he only had to pay like seventeen thousand can’t come out of pocket seventeen thousand to pay for this girl slipping and falling at his property because he had the property at his own name so don’t put properties in your own name if you don’t need to there’s no reason to forest so to have a bank you recommend for refine 50k rentals I guess it just depends yeah I mean there’s a couple you know State Farm actually the insurance company has a refinance program a national program Northpoint Bank all one word with an e at the end North Point also has a refinance program they’re a national company as well you could look into them Daniel says how do you tell if a property is a B or C class that’s a great question I’ve got a whole video series here on our YouTube channel about how to understand that so you can if you want to look that up right here on the channel it goes more deeply into that but the short answer is an a-class neighborhood I like to avoid an 8 class neighborhood or those two you know two hundred three hundred thousand dollar homes two-car garages maybe they have a swimming pool they’re in the best neighborhoods I stay away from those as an investment property because you’re gonna have the most moving parts that break you’re gonna have the most entitled tenants that cause the biggest headaches and cause you the biggest problems so garage door openers that break garbage disposals that break multiple heating and air systems that break you know avoid those those also have the most volatility those tend to be the areas where those in a big recession lose their job the a-class neighborhoods we saw that across the country right these a class neighborhoods where people lost their jobs and all these houses went into foreclosure and people couldn’t pay their rent or the value plummeted significantly so let’s say they’re renting it from you for $3,000 a month in an a-class neighborhood and everyone loses their job all around that a class neighborhood now the rent is you know you’re gonna have to go down like 20 2022 hundred a month or even 1800 a month we saw that in Manhattan right people renting Manhattan apartments for thirty five hundred bucks a month the recession hits and guess what all these Wall Street people lose their jobs etc and those went down significantly you could rent a place in Manhattan for eighteen hundred a month instead of the 35 that you could before the recession but guess what those C class neighborhoods say the same those C and B class neighborhoods roughly stayed the same it’s consistent cash flow those are the people that tend not to lose their jobs those are the people that are working blue-collar b-class is kind of moving towards an a-class it has better schools slightly lower ROI but I’ve been buying a lot more B class properties lately personally because you know when you get to a point of having find enough cash flow you really want to start thinking about buying those more expensive B class because you’re creating more of a tax shelter for yourself you’re creating that bigger spread that bigger tax shelter and you’re adding to your net worth more significantly so but C and B are my favorites so I’ve been a lot of C and I’m starting to buy a lot more B yeah lisa says that’s why I like condos no outside maintenance but then I don’t like the associations right I do not like HOA fees and I’ve got a whole video on HOAs because HOAs honestly you’re sort of at the mercy of these people I mean you’re literally at the mercy of these people and you never know when they’re going to decide to change the bylaws and make it so that you can’t rent the place or they’re gonna hit you with a big roof assessment you’re gonna have to pay you know $5,000 for a new roof on the property you have no control over that so homeowners associations I’m not a fan of Daniel we don’t we don’t have a number for you to call us because we want to be able to schedule it with you so just go to our website click on the schedule a consultation button you literally answer like eight questions like your first name last name best email address to get a hold of you make sure you type in your phone number correctly and then we just ask you a few quick questions like how many properties do you currently have what are your goals and then you pick on the calendar the time that you want to schedule a call with us it’s very simple so it’s up to you you know that you got the kids from to p.m.
We don’t write so we want you to pick the time that best serves your needs it’ll go on your calendar we’ll send you an email reminder about ten minutes before your call and we’ll jump on the phone with you and talk to you for like thirty minutes Chad boys wants to know how is Capp West you know I heard good things about them years ago but then I think I heard things kind of fell off and I haven’t really actually heard many people using them so I don’t know I’ve never used cap West what if you want to live duplex a class neighborhood your thoughts well Rodney I mean some few if you want to live in the property that’s up to you right because that’s a different animal than investing in a property but if you want to live in a duplex than in a class neighborhood great you buy it I would rent out the other side so that they’re paying your mortgage that’s an investment right that’s an investment property in a class neighborhood so you know go for it you know just a matter of whether if you’re in an a class neighborhood are you likely to have a higher turnover on the rent because people want to have their own single-family home they might not necessarily want to split a house with somebody if they’re in a class neighborhood you know when I was younger I was fine kind of having a shared wall with somebody but now that I’ve got three kids and I’m an adult there’s no way I want to share a wall with somebody else you know I want my own place I want my own yard what do I think about a land trust well it’s funny you mention that as our tax accountant thinks that they are a total mistake so I do not do anything in the land trust sam says I spoke to Glenn a few minutes ago awesome
Joe: Hey, it’s Joe Crump. I’ve got another video here for you. This one is from Karen Smith in Columbus, Indiana. Karen: “Joe, can you explain the millionaire matrix? Does it really work and can you do it without down payments or using your credit?” Joe: Absolutely, it works. The Millionaire Matrix is a structure that I teach that shows people how they can actually make a million dollars in equity and in cash within 2 years by buying just one property per month using no credit and no down payment.
And instead of just me explaining it in this video with a talking head, I’m going to pull up a little power point here and show you exactly how this process works. Joe: I created this little power point to show you what the Millionaire Matrix is and how and why it works. Joe: Before you can understand how it works, you need to understand the principles behind it and why it works. That brings us to the idea of businesses in general. 90% of all of the businesses that start up fail in the first year, whereas 90% of all new franchises succeed. Why is that? Why would franchises succeed and businesses in general, not succeed? And the big answer is — systems. Franchises have step by step systems to show the business owner (the person who’s implementing the tactics in the strategy of the business) how to do each little system in the business.
Joe: Let’s take the ultimate systematization — McDonald’s. If you go to a McDonald’s, everything is done the same at every McDonald’s that you go to because each of their processes is spelled out in a specific system. They have a system for making a Big Mac. They have a button to press when it’s time to flip the burger. They know how many burgers to put on there, they know what order to have with a picture of a hamburger, and how to put it together where it shows you that that’s where the bun goes and that’s where the hamburger goes and that’s where the lettuce goes and that’s where the special sauce goes. And it makes it very easy for people that are not very skilled to put together a hamburger consistently all over the world. Whether it’s here in Indianapolis or whether it’s in Wisconsin or California or Berlin or Paris or Ireland — it doesn’t matter — wherever you go to a McDonald’s, you’re going to get the same burger — it’s going to be put together the same way by the same skill level of people.
Now, McDonald’s has a 200% employee turnover every year. That means that they’re constantly trying to train new people. For them to get that consistency, they have to have a system in place to make that business work. Joe: And that’s what I’ve created in the Push Button Method and the mentor program. I’ve created systems so that I can take new people (people that have never been real estate investors before) and give them a system and say, ‘Step 1, do this. Step 2, do this. Step 3, do this.’ Joe: That takes us to the next question in the process here, which is what types of deals make you money.
You need to understand that as well. In real estate, there’s only two types of deal that’ll make you money. One is properties that you buy substantially under market value, either for cash or as an assignable cash offer. And two is properties that you can buy at market value or below but you can buy them on terms. Now, by terms we’re talking about zero down structures that I teach; subject-to, multi-mortgage, land contract, contract for deed, lease option, assignable cash deals. Those are terms and if you can buy properties on terms like that, then you can make money even if you buy them very close to market value. Joe: That’s going to take us to the next step which is the beginners Millionaire Matrix. Now here’s what we want to do with the Millionaire Matrix and the goal of each system. We want to be able to make $5,000 per deal. We want to be able to do one deal per month. We want to be able to work 10 hours per month. That means hours per week. We want to be able to have $200 residual income per deal.
That residual income I’m talking means every month you’re going to get $200. We want to buy 10% under market value; it doesn’t have to be dramatically under market value because you’re buying on terms, and I’m going to show you why that makes the difference. And you’re going to want to sell it for 10% over market value and I’m going to show you how to do that. Because we’re selling it on terms as well so we can sell it for more than it’s worth. So this is the basic concept for the Millionaire Matrix. Joe: Now let’s take an example deal — how the Millionaire Matrix and an example deal would work within it. Joe: Every deal is going to be a little bit different and you’re going to make a little bit different amount of money on each one, but this is sort of the model that we’re going by. I used the $100,000 as sort of the market value of the property simply because it’s a nice round number.
I know that the market value across the country is all over the place. You should probably go by percentages rather than this but I want to show you, even on a lower end market, that you can still make this kind of money. On a higher end market you’re going to make more money. So let’s start with a lower end market and then you can extrapolate from there. Joe: Let’s say you’ve got a purchase price of $90,000. The market value is $100,000. The financing — you’re not putting any money down, you’re not getting a new loan — you’re buying it subject to the existing loan. Which means that the property is going to be deeded to you and you’re going to take over the payments on the loan — without qualifying on that loan (remember that).
You’re going to sell this property for $110,000 to a new lease option buyer. You’re going to sell it on a one year lease option or maybe a 2-5 year lease option if you choose to do that. At closing you’re going to make $5,000 on the lease option fee at closing of this deal. The equity left after the lease option fee is about $15,000. You’re taking $110,000 sale price, you’re taking $5,000 from that, and that means you’ve got $105,000 that they still owe you for the property. You only owe $90,000 so that means there’s $15,000 in equity. Now the monthly loan payment on this 90,000$ loan that’s there — let’s say its $900 a month and you’re going to lease this property for $1,100 a month. This is an example deal. Joe: Let me also reiterate — you’re buying this property subject to the existing loan. That means that you’re not putting any money down and you’re not qualifying for a loan. They’re deeding you the loan. You have complete control of the property but it’s subject to that loan that’s existing on there.
You’re buying it for a little bit under market value but not that much under market value. You’re selling it for a little more than market value but not that much over market value. You’re selling it on a lease option which the buyer may or may not exercise. You’re getting a lease option fee at closing — you’re making $5,000 at closing. And you’re going to have that equity left in the property, and if they exercise that option, you’re going to make that other $15,000. You’re going to have that loan payment that’s on that existing loan of $900. And you’re going to get a lease income on that property of $1,100. So you’ve got $200 of positive cash flow every month. So that’s sort of the model of this whole thing. Joe: So let’s go to the next frame here. This breaks down to doing one deal per month over the first year. I’m going to show you how to become a millionaire basically over a 2 year period.
Month one — let me bring my little arrow up here — cash at closing, making $5,000, that’s the lease option fee. The $200, remember the difference between the $1,100 and the $900 a month payment so that you made $200 a month on that. Equity payoff this month, you didn’t make anything. It hasn’t paid off. Nobody has exercised their option. Equity buildup — you’ve got $15,000 because you bought that property and there’s $15,000 of equity. Remember the spread — you bought and sold it for $110,000, you got $5,000 and they still owe you $105,000, and there’s a $90,000 mortgage. That leaves $15,000 on there that’s your equity. Joe: And then a tax benefit based on $100,000. This is depreciation. If you take this property and you depreciate it by years, and then you divide that by 12, you’re going to end up with an actual tax savings in your pocket of about $106 based on about a 30% tax bracket. And these are just general numbers here but they’re pretty close.
Joe: Month 2 — you’re going to do the same thing. You’re going to do another property, make another 5 grand, make another $200 a month and so now your monthly residual income is going to go up to $400 a month. You’re not going to get any payoff because the year hasn’t passed yet. You are going to build another $15,000 of equity in the property. And now your monthly tax benefit is going to be $212. Month 3 — $5,000 -same thing – it just goes up every month for the whole year. Let’s go all the way down to the bottom of the year. At the bottom of the year you’ve made $60,000 in cash at closing from just doing these 12 deals. And believe me, I’ve got people that are doing 5 or 6 of these a month on a regular basis because they’ve set up the systems that I’ve given them to do that.
Joe: The next thing is the monthly residual. Just from what’s going on here, you’ve made $15,000 the first year in that; residuals. Equity payoff — nothing’s paid off the first year yet because nobody has exercised their option yet. Equity buildup — you’ve built $180,000 worth of equity in the deal and you’ve made $882 in taxable savings during that first year. So in that first year in the Millionaire Matrix, you’ve made a total amount of cash of about $83,000. You’ve made total equity of about $180,000. So you’ve just made $263,000 in the first year doing only one deal per month. Joe: Now with these deals, if you have 8 or 10 hours of work into these deals, that’s a lot of time in these deals. So remember there’s a startup learning curve. And there’s going to be the time that it takes to set this process up, to get this system going; all of that stuff. But the actual time of the deals is very, very low. And once you learn how to do it and once you get it going, it’s going to be easy to keep it going.
Joe: So let’s go to year two, and look at the second year. Things start to change dramatically in year two, if you’re going by this model. And we have different models that we go by. You don’t have to go by this one. But I’m just taking a simple model and how it can expand your income very, very quickly. Let’s look at month one. You’ve got $5,000, your residual income is now $2,400 a month because you’ve got 12 deals (and you only have to keep 12 deals like this because they’re going to be paying off as they exercise their options).
So as the first one pays off and you get your equity out of the property because they exercised their option, you made $15,000 equity payoff in cash plus you bought a new property, so you’ve got $15,000 new equity buildup and now you’ve got 12 months’ worth of tax savings over 12 properties. So you’re going to be making about $1,200 a month in tax savings, which is pretty substantial when you start making this kind of income; it’ll save you a lot of money. Second month — same thing. Joe: Now, keep in mind — this is the big variable — how many properties are going to actually exercise their option? It’s going to be much less than the total amount, so you may not make this full amount. There are ways to optimize this process and get more of the people to exercise their option, and I show you how to do that.
I’m not going to spend the time on this video to do that. Joe: But let’s look at the bottom line on the second year. $60,000 – same as you made last year on the cash flow. Monthly residual — it well over doubled. Equity payoff — assuming that they exercised their options, just made a nice chunk of money on equity payoff. Equity buildup — you make another $180,000 on top of this $80,000. You made $15,000 in real cash money in your tax savings through depreciation, so it was a really nice year two. Then your second year on the beginners Millionaire Matrix is total cash at $284,000, and total equity of 180,000$. The grand total of year two is $464,000. I add that to the $263,000 and you’ve got $750,000 in your first two years, not quite the million that I promised you but pretty darned good. Joe: Let’s say you get better at what you do, that you get a little bit better at the process. As you’re doing this, how much will you improve? Will you get 100% better? Will you get 75% better, 50% better, 25%? How much better are you going to get at this process after one year? I venture to say that it will be more than you think.
But let’s say that you only get 25% better. If you get 25% better at better price from the seller on your property, instead of getting 10% under market value, you get 12.5% under market value. Not very much — next to 2.5% better on your price. Let’s say you get 25% down from your buyer so instead of getting $5,000 down you get $6,250 down. Let’s say you get 25% more lease money monthly and your $200 goes to $250 a month. Let’s say you get 25% higher price from your buyer — instead of getting $110,000, your price goes up to $112,500; not that much more. And you do 25% more deals a year so instead of doing 12 a year you go up to 15 deals a year. Now this is very realistic to think that you can get just 25% better. I have people that get 100% to 500% better at what they do and their production goes up with that statistic. The ability that you have and the talent that you have in this grows as you do it.
This is a skill and you build that skill through this process. Joe: So let’s look at the second year Millionaire Matrix if you’re 25% better. Now you’re making $6,200 instead of $5,000 so that jumps that up from $60,000 to $93,000. That just increased your income by 50%; right in the first column. The second column goes up a good deal as well. Your equity payoff went up almost $100,000. Your equity buildup went up by $100,000. Your tax benefits, well, they didn’t go up at all. But still, you just increased your income by a substantial amount of money. So just getting 25% better at the second year of the Millionaire Matrix — now you’ve made $730,000 that second year. You made $260,000 the first year, so NOW you’re at the million dollars. Joe: This is a realistic model and it can work. Again, part of the biggest downfall of this process is the amount of people that exercise the option which is less than we would like, but keeping these properties — you also continue to build your equity and you buy down the notes.
You get the depreciation and those other things start to grow. So that’s not a bad thing, either. Joe: So this is a great way to do it. This required no money and it required no credit. All it required is your effort to follow through with the step by step system of putting together subject-to deals, of finding buyers for those subject-to deals and filling those properties.
And you do this all without risk because you’ve got so many contingencies in the deals that you’re doing that and if you don’t find a buyer for the property that you buy, you don’t close it. I think the whole beauty of this system is that you never have to close a deal until you know that it’s going to make you money, so instead of everybody doing zero down (which everybody talks about and I talk about as well) you’re not really doing zero deals.
What you’re doing is cash out deals, all the time, without using your credit. So it’s very exciting stuff. Joe: That’s the Millionaire Matrix. it’s a very powerful way to buy properties. It creates cash flow for you upfront so that you can have a sustainable business and it also creates that long term growth and wealth building that anybody needs if you want to retire from this business and be wealthy. It’s an exciting process. This, by the way, is what I teach in my six month program. It’s what I teach in my Push Button Method. So, either one of these programs will get you into more detail about exactly the step by step process of how to put all of that together.
I’d love to work with you and to help you and make your business and your dream come true on this. Thanks. Bye. .
How can I replace $70,000 a year in annual income with rental properties that is the subject of today’s video hi everyone I’m Clayton Morris the president of Morris invest let’s dive into it so how do we replace seventy thousand dollars a year in annual income with passive income with rental property income from tenants every month providing cash flow from the properties that we own you might think that that sounds like a tall order but it’s not and I’m going to show you how simple it can be to actually replace that annual income you know a little story about me that’s in fact how I got started I was frustrated sitting down with my wife one night I said we were frustrated with our bills and I said how come at the end of the month where we still have more bills to pay and we don’t have enough paycheck to cover it aren’t we doing well what are we doing wrong the problem was that we weren’t putting the money to work for us to start creating cash flow in our lives and creating passive income so I put together and it was really the foundation of my freedom cheat sheet it’s the number that changed everything for me by the way that link you can download a free pdf it’s like three pages long sit down with your husband or wife and go through it totally free the link is right below this video and it’ll walk you through step by step with some numbers and figures on exactly how to figure out how many houses it will take for you to recover that annual income but I want to tackle the $70,000 question specifically most of the houses that I buy and that my company rehabs and sells are in that forty to forty five thousand dollar range okay single family homes two bedroom one bath three bedroom one bath and some duplexes okay duplexes or you know door on each side typically and two bedrooms on each side or three bedrooms on each side those are the types of properties that I buy now I buy them low and I fix them up and I place a great tenant in the property each of those properties will cashflow about $700 let’s just say for round number $700 okay now think about how much is $70,000 a year how much are you probably making per week well let’s bring out the calculator so $70,000 a year let’s divide that by 52 weeks that’s about thirteen hundred and forty six dollars a week that you are earning from your paycheck okay thirteen hundred and forty six dollars a week so now let’s figure out how many houses it would take us to replace seventy thousand dollars a year in passive income seventy thousand dollars right it’s a simple formula if each of our houses is bringing in seven hundred dollars a month that’s a simple formula right seven hundred times 12 gives us $8,400 okay now let’s take that 70 thousand dollars and let’s divide it by eighty four hundred that’s eight houses that is eight point three properties eight houses bringing in seven hundred dollars a month now imagine if you’re buying a forty thousand dollar house if you had to bring a little bit of money to put down as a down payment or deposit you were able to reach out and get private financing or seller financing on a property then you’re able to accrue these properties very quickly now some of the things I didn’t talk about in this video and I can dive a little deeper now that we always want to take out money for for vacancy and repairs on our numbers right so that eighty four hundred dollars a year let’s multiply that now times point six so we’re gonna remove forty percent for vacancy repairs and expenses this is just to be totally conservative with your numbers so let’s take that eighty four hundred dollars and let’s multiply that times point six so we’re bringing in about five thousand and forty dollars per property per year okay so now let’s take that five thousand and divide it by seventy thousand so this will be a totally conservative number but this will help us really make sure that we’re totally covered should something go wrong maybe we have a vacancy for a few weeks or a month or two in one of our properties this will take in that into account so seventy thousand dollars let’s divide that by five thousand forty that gives us thirteen point eight properties so let’s round that up fourteen properties fourteen properties would bring you about seventy thousand dollars a year in net income that would replace that $70,000 paycheck that you’re making every year then in other videos in this series I’m going to go through exactly how to find properties how to acquire properties but just for the sake of this video I wanted you to start to put your mind in a place where you can begin to reverse engineer that number for a lot of people you don’t think that you’re going to be able to create passive income or bring in that much cash every year hogwash I do it hundreds of thousands of other investors out there do it every day they do it exactly the way that I do it some buy residential properties some buy commercial properties it doesn’t matter it can be done that’s what I do I’m Clayton Morris