Pulling Money Out of 401k - For Real Estate - YouTube

Should you pull money out of your 401k for real estate? Hmm.. Let me think about

it. This is a real estate channel and I believe in real estate, I don't know what

I'm really going to say but it's all coming your way right now.

Friends, today we are hoping to end the great debate on 401k's.

Should you use them to invest in real estate? Should you pull your money out?

How do you pull your money out and you know what? Honestly, it can be a little

complicated so we've brought our friend Mr. whiteboard today and of course,

Steven Michael Miller who's going to help lay down the law on exactly how this

goes. - Absolutely. - So get pumped and get excited. So today, Steven, 401k's,

first of all, can you invest in real estate by pulling money out of it and

can you invest it by not pulling your money out?

- Yeah, the reality is, I don't think that this is really a debate of should I

or shouldn't I, there are cases where you should and there are cases where you

shouldn't and we're going to talk about I think both of those right now and kind

of just get into some of the details of how your 401k can help you invest in

more real estate. - And you need to understand that yes, you can invest in

real estate with your 401k, you can also invest in real estate by pulling your

money out and the great debate of should you or shouldn't you really comes down

to one simple mathematical equation.. Can you do better in the real estate market

than you can do in the 401k market? And hands down on our last 3,500 homes,

nearly a billion dollars in real estate, the answer is definitively yes, you can

outpace the market because the 401k markets will go up and down and

sometimes you're winning you're up 20%, sometimes you're down 50% as we look at

the really big swings but over time, over 20 years, do you know what it really

averages out to? 3% to 4% so the question is, can real estate do better

than 3 or 4%, Steven? - Yeah, absolutely can. We've been talking about this for years

not only talking about it, we've been showing people exactly how to invest

their money that they currently have in a 401k in the proper real estate so

let's talk about first of all, the yes, right. When do we pull money

out of a 401k to invest in real estate? There are some great things that we

want to mention here. First of all, when you're pulling money out of a 401k, it's

probably because you don't have enough in there to buy a home outright. What

does that mean? - Well, you know, when you use a 401k, you can actually pull money

out and then you can either buy real estate with

loans or you can buy it paid off free and clear outright and so this whole

first option here, we're going to assume that you have $100,000 in a 401k, it's

just a round number. Your number will be higher or it will be lower but I think

you're going to understand the principle really well. So on this side, we're going

to assume that yeah, we're pulling money out and then we're going to come over here

later, I'm going to say, how would you invest in real estate without taking it

out of the 401k? So assuming $100,000 and you want to

pull it out, here are the first couple things that you need to be aware of.. Real estate,

we're going to show you on this side how you can make 20% a year on your money,

on this side, we're going to show you how you can make 10% while still leaving it

in the 401k and the reason why we're getting 20% over here is because we're

going to buy real estate with leverage, we're going to buy real estate with

taking the money out of the 401k, we're going to go to banks, we're going to put 20%

down and then we're going to make roughly 15% 20% or more percent a year on our

money and the two things that you need to be aware of is that when you pull

money out of a 401k, there's two things that are going to happen. - Right there. - Go

ahead. - Oh. They're going to smack your hand. They're going to do everything that

they can to make sure that you don't pull your money out of your 401k. Those

two things are first of all, penalties. You're going to get about a 10% penalty

when you pull your money out of your 401k, right. That penalty can hurt.

Most people don't like losing 10% of their portfolio. - But that's

one perception. I actually call it a cost of business because it's unavoidable.

What this hundred thousand now becomes $90,000 because $10,000

is going to go as a penalty and you know what? That's enough

for some people to say, lose $10,000?! What a bad mistake. Friends, don't

forget that we are stepping out of making 3% to 4% on our

money and stepping into making 10%, 15%, or 20% on our money

and let me ask you, Steven.. Is a 10% penalty worth it in order to

have your money growing at many times the pace. - Oh, absolutely. It's not just

worth it, it's something that you definitely should be doing. - By the way,

look forward to your penalty, be excited to finally get it out of the beasts

hands and get it into your hands where you are in control. The second thing that

you need to be aware of is that when you pull the

money out, it's a taxable event under this scenario and you're going to have to pay

taxes and if you're pulling out, now the $90,000, it's going to add

$90,000 to your income for the year, it's going to put you up into

a higher tax bracket. Our team will actually show you how to pull some out

maybe this year, next year, depending on what month you're in and we'll figure

out the best way to do it but you're going to have to pay taxes.

Steven, regardless of when they take that money out, it doesn't matter what age

they ever get to, will they have to pay taxes? - Oh, you're always going to have

to pay taxes even in a 401k, those funds are just tax deferred so at some point,

you're absolutely going to have to pay taxes, just be aware of that and if you

want to do better than what your 401k is doing, which by the way, is never going to

retire you, okay, we we've talked about this before then you want to do other

things in real estates the best thing to do. - So let's say for this example that we

have 10% going to penalties and 20% going to taxes and there's 70% left over,

that would be $70,000 and let's say that you use that to purchase two properties.

Well these two properties are now free of the 401k, they're now producing, let's

just say that each one is producing $400 a month of cash flow so for the first

time in your life, you're 401k was paying you nothing, now it's paying you

$800 a month. Let's assume you bought those properties with some equity, now

all the sudden you have recuperated your taxes and penalties there, you've got

$800 a month and guess what we want to do with these two properties in time.

- You're to turn those into more. - We're going to multiply them like rabbits, we want two

to become four, four to become eight, eight to become a lot of properties and

now the sudden, you're taking back financial control of your life and all

those hard-earned saving dollars in your 401k can mean something for you now and

they mean something every single month. $800 a month for a lot of people, an

extra $10,000 a year, that's a really big deal. $10,000 a

year is a lot to find, it you can fund a lot of things or vacations or trips or

or things that you've wanted to do that your 401k has been getting in the way of.

So this is one option and now I want to talk about well, how could I have my 401k

helped me invest, Steven, in real estate and even avoid the penalties and taxes?

So I want to talk right now, we're talking to the uber conservatives and I

know we've got people here on our channel that are wondering, okay

look, this all sounds fine and good but as much as you guys say it, I still don't

want to pay my penalties and I still don't want to pay the taxes and I want

to keep my growth inside of that 401k or inside of that IRA and that's where

this strategy may come in useful for you. In this scenario, you'll need to

use and have enough in there to purchase an entire property. So in this option,

where you're saying, no, I don't want to pull my money out of a 401k or IRA, I

actually want to keep it in there and still invest it in real estate which by

the way, if you understand 401k's and IRA's, they're typically tied to

the markets, right. So they go up and down with the market as the market goes up

and down. Real estate though is something that can

be done inside of a 401k and IRA, you can actually do what's called self-directing.

Now self-directing just means you become the custodian, you become the person that

has control over your IRA or 401k. You can now with that control, go off and buy

paid off real estate. - Now there are restrictions if you leave it in the 401k.

You cannot buy leveraged real estate, instead, you can really generally only

purchase paid off free and clear real estate and with this hundred thousand

dollar self-directed, we can take you to markets where you can buy a hundred

thousand dollar house and on this scenario because it's paid off, we're not

using leverage so instead of maybe making 20% a year, we're now maybe

making 10% a year but I want to ask, is 10% more than 3% or

4%? - Absolutely. - It's more than 3% or 4%, I have a paid off

piece of property. Let's say that after all my expenses that this property is

producing ironically $800 a month so I either own a paid off property

conservatively doing 800 a month, I own two properties in this scenario

and the question is, Steven, should I self direct my 401k or should I take the

taxes and penalties and buy real estate and the question is, which one's better?

- Yeah, the other day, I really think it comes down to a couple different things.

Number one, personal preference. Number two, what's your risk tolerance?

Those two things I think are the biggest factors in what you're going to do or do

I have enough to pull out and this way or do I want to keep it in

here and just grow it inside? - Yeah and I'm going to tell you right now, it

really also comes down to your goals. If you're saying, wow, I feel so far

away from what I need for retirement and I need to focus on producing a powerful

residual income, hands down, this is going to be the option for you because we want

to take two homes and turn them into many homes. When you buy a paid off home,

what you're doing is not just earning 10% instead of 20% but you're also slowing

down your growth because you have one property growing in the market instead

of two properties growing in the market and ultimately, this is going to be a

slower path to getting where you want to go if so that makes this a very

appropriate path if you're close to retirement and you actually say, I

actually have a lot of what I need. I looked at my social security, I looked at

the other investments and I looked at this and I'm adding it all up and hands

down, I've got enough money for retirement by choosing this path. If

you're far away from retirement, you're probably going to want to look

more of this direction but the bottom line is, instead of making 3% or 4%

your 401k, there are some different options that you have of how

you can go out there and start investing successfully in real estate. If you want

to get a more in-depth and a more accurate analysis of what you want

to do, then you have a chance to talk with me, Steven and the rest of our team.

Just go ahead and click this link in the top corner and we're going to reach out to

you and we'll actually walk you through your very specific options so even if

you only have 10,000 or 20,000 and a 401k or if you have a half a million dollars in

a 401k or other assets, we'll be able to do a comparison analysis of equity in a

home or other assets and again, if you have very little or no assets, that's our

specialty because we'll go into partnering and lease options and some of

our other creative strategies because bottom line is, no matter how old you are,

no matter how young you are, now is the time to get out there, there's a way for

you to invest successfully in real estate. If you want some help navigating

how to maneuver those 401k's, how to use them, should you self-direct, should you

just pull it out and pay the taxes and penalties that cost a business go ahead

and click up here, contact my team, reach out and we'll start getting you hands-on

information on what it would look like and exactly the kind of properties that

you can step into right.