401k vs Real Estate - What Does Mark Cuban Say? - YouTube

Mark Cuban says that the 401k is a no-brainer and I want to challenge that

a little bit. I want to scrutinize that, look at the pros and

cons of that here on Limitless TV.

Alright, everybody. We're back here talking about 401ks and you know, we're

talking about it because it's the only real retirement plan that Americans are

really taught. Sure your tax advisor will mention IRA this or hey, someone will

tell you should invest in the stock market but at the end of the day, we're

really told, go get a job after you get your degree and put your money into a

401k and recently, Mark Cuban, a man that I admire, I love watching him on Shark

Tank, this is what he said though that was kind of surprising, he was comparing

the 401k to savings accounts and he said, "If you have a 401k match and you're not

forcing yourself to put in as much as possible,

you're an idiot." Now those are really strong words and I got to tell you right

now that on one hand, I totally agree with Mark, on another hand I completely

disagree. If you're comparing Americans who just as a whole are not really good

at saving then yeah, I agree with Mark. Putting money in a 401k is a really

smart choice. Why? Because if we're not putting in money in a 401k, we're likely

also not saving our money and as a result, what does that mean? It would be

better to put money in a 401k than nothing. Why? Because hopefully you're

averaging a few percent on your money probably doing better than you are on

your bank but what I want to also talk about today is where I disagree with

mark because the reality is, if you're putting money in a 401k, it means that

you really don't have a retirement plan. Let me break it down for you.

I want to talk about the difference between projected returns and actual

returns. I'm going to debunk right now the number one flaw in 401k thinking that

you don't get told because everyone's going to say for example, oh, hey let's

talk about your projected return and then we're going to compare it versus your

actual return and out there, let's just say, you know, we all have been through

the ups and downs or your parents were, where they were losing a 50% of their

money in that in their 401k's all in one swoop, in one moment and then it took

years to build it back up. Right now 401k's are actually on the higher end

of the cycle and what a lot of people don't realize is, we're still just

catching up from our losses from yours earlier but this is what we're told, hey

let's put money in a 401k and let me just kind of give you a feel for the way

that the numbers get misrepresented. If I have a thousand dollars

in my 401k and then all of a sudden that next year, I double my money, now this

doesn't really happen but let's just say I make a hundred percent return, look at

the percentages in the math. If I make a hundred percent return then that

$1,000 turned into what? It turned into $2,000 and by

the way, if you doubled your money in anything, you probably be pretty happy

but guess what happens the year next year? The market really takes a dump and

it goes down 50% which what's 50% $2,000? Well, that's $1,000.

Now hold the phone, I started with a thousand and now I'm back at a thousand

but guess what they're going to say I return if you want to take a 100%

up and 50% down, they're going to say that you are averaging 50%

on your 401k between the two years. Now look at that for a minute,

remove for a moment the fact that someone's earning fees whether you make

or lose money and someone else is charging you for managing your money in

this manner. Look at the fact that they're claiming a 50% return on

your money when the reality is, you're at the same dollar that you

started with but they're claiming it as a 50% return, these numbers get

grossly misrepresented on a regular basis and so what ends up happening is,

hey, I had a great year in the stock market last year, I had a great year in

my 401k's, I made 20% and I'm thinking, great. What does that really mean? What is

that 20% and what does it mean when you actually take into account your losses

and when you average that out? If you do the real math, if you do the actual math,

this isn't 50%, it's you've made money and you've lost

money and there are no gains, you're not up but someone else did get rich or

someone else did make money. So Mark Cuban, this idea of if you have a 401k

match, if it's your only savings plan or for those of you that like Dave Ramsey

out there, yes, have some type of savings plan and if you don't have a plan then a

401k is a really great default. For those you however that have been

watching my channel for a while and you're saying, okay, Kris. Well I know

that you're into this thing called real estate, let's just do a real quick 401k

analysis and compare it to what would happen if we put it into something like

real. First of all, the 401k sustainably tied

to the market, you have no control over it.

So I've got a really big problem at the end of the day with this idea that on

the 401k map, I don't have control but over my real estate, I also don't have

total control but I have a lot of control so let's just talk about 401k's

for a moment and let's compare it to the beautiful world of real estate.

Just closed on a couple of properties, made a nice little grundle of money and I want

to just talk for a moment about the differences. So I've never put money in a

401k. When I first got married, my wife, I think had up to I think $1,000 in a 401k

and as soon as we could take it out once we started seeing what the real estate

was doing, we did. It already right now seem to me like, well Kris, you don't

diversify. No, diversification is for people that don't know what they're

doing. I will not put some money in the IRA, the stock market or the 401k, right.

I'm pretty biased because I found a strategy that works for me and the

reality is, I do not have any friends that put money in a 401k and become

wealthy, none. So why put your money in anything that's guaranteed not to work?

With a 401k, you have no control with a real, with real estate, you have some

control. I may not be able to control what the market does when it goes up and

down but I do own this asset and I can choose the strategy of what I'm doing

with it so if you've watched some of my videos on short-term buy and holds on

single-family homes, I'll take you into the very best markets

around the nation where you can be earning 15%, 20% plus, those are

really aggressive returns. You do that for ten years and compound it and grow

that, you can build a nice little fortune, a nice little retirement income for yourself.

So for some of you, if you really explode it, you can build a fantastic level of

financial freedom with that model. So I've got no control here, I have some

control over here. The next thing is, I want to talk about speculation. My 401k,

it pays me no cashflow. Now this is a violation of one of my investment rules,

if I put money into it, it should pay me and I'm not talking about just some day, I

wanted to pay me now. There's no cash flow that comes in on my 401k, there are

some exceptions to this rule because I will take money and invest it in

business and some businesses don't immediately pay cash

flow but ultimately you're going to see me always investing in either real estate

or business because those are the two things with ROI's big enough to give

you a chance for retirement so while I don't get a cash flow over here, guess

what real estate does. Real estate pays me and in most cases, it pays me monthly.

Now that's really important to me because if I'm actually getting paid

then I'm getting freedom dollars coming into my bank account on a monthly basis.

This is a really big deal for you because you buy a property and you have

a $300 month cash flow, that's not life changing but $300 might cover

your car payment so you do three four more deals and now the sudden, guess what.

Your mortgage is taken care of, your biggest expense for the average person

when you're making $1,000 a month cash flow or $2,000 a month cash flow in real

estate, you can't retire but you know what? That's now socking away one to two

thousand dollars a month that you can snowball into your next deal and fast

forward several years and guess what that snowball turns into, bigger and

bigger and bigger and bigger and bigger. Cash flow is a big part of what makes

that happen and real estate is a business, it also means that when it has

its downs, it'll pay for itself with that cash flow. When a 401k has downs, you may

never recover from it or you'll have to be dedicated for years to step into any

kind of recovery. The next thing is that 401k for me, it has no equity which means

it can grow with time and it can expand and it can become more but real estate, I

can purchase it with equity, that's like saying I could buy a stock for $1 but

now on this side of the fence, I have the ability to buy that stock for a 20%

discount or for 80% of its value and I think about that for just a minute, that

equity that you walk into creates what I call a margin of safety so if the market

tanks with a 401k, even one dollar, you're out. With real estate, if it goes down a

dollar, you're not out, you actually have some built in protection and so that's

another big difference of why I love real estate compared to a 401k model.

There's another thing that I love about real estate, is that I have the ability

to multiply my assets, it's just not applicable here

on the 401k side of the offense. What I mean by this is as my real estate

portfolio grows, I can make my real estate make babies and I'm

going to stud out my real estate and I'm going to remove some of the equity or I'm

going to sell off a property and I'm going to put it into additional property so that

it can expand and so that it can grow and so that it can become more. Friends,

these are just some of the reasons why at the end of the day Mark Cuban's says

401k, you'd be an idiot not to participate and I would say if that's

your only strategy for getting where you want to go in life but if you've been

subscribing to my channel which you have done correct, subscribe, ring the bell. If

you're subscriber and you've been watching some of these videos, I hope

that I'm waking you up to a call to go back to our original roots, the family

farm, the United States Constitution where we were taking care of when we

have real estate, it's written to benefit the individuals that do. Get back to that

model because it wasn't broken, it does work, I don't know how to do it with a

get-rich-quick sustainable model but I will tell you that if you'll be in it

for a 10-year period of time, you can create a great deal of freedom in your

life with it so at the end of the day, friends, weigh these out and no, I would

not have both in your life. I would pull out of your 401k, I would go into real

estate because I believe that it's going to give you so much more than your 401k

everyone and that's putting your financial freedom and your financial

future into your hands. This is a pretty polarizing opinion and some of you might

agree with you, some of you don't, you know what though? Go ahead and comment

below, share your thoughts, share your ideas and share your point of view and

then make sure you subscribe and ring the bell and we'll see on one of our

next videos.