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Purchasing Real Estate with an Annuity - YouTube
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can you use an annuity to buy a rental
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property that's today's video let's dive
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in hey there I'm Clayton Morris I'm the
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founder of Morris and vast and rehabbed
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hundreds of houses and you probably know
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the power of real estate you've heard it
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you've heard that your friends are doing
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it but you're frustrated because you
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don't know how to take action you don't
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know how to find properties you don't
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know where to look well that's what this
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channel is all about it's our goal to
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help you overcome those fears and to
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take action and to become a real estate
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investor just like I did and so many
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hundreds of others have so that's what
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this channel is all about and today
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we're going to talk about annuities now
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I got this question on my Facebook page
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from one of our viewers and asked me
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this question Clayton can I use an
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annuity to buy rental properties and
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this is a question that's very similar
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to one that I've posted about 401ks and
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borrowing from your 401k in order to buy
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rental properties if you're curious
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about that I've got a whole video on how
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to do that just click on the card right
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up here and you can watch that the power
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of retirement vehicles in order to buy
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properties is fantastic again I like to
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look at these types of vehicles whether
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it's your 401k or an IRA that you have
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or unintuitive as your own money right
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it's your money that you've put into
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these retirement vehicles you should be
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able to tap into them so can you use an
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annuity to buy a rental property the
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short answer is yes I'll give you the
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longer answer in a moment but I first
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think it's important that we define what
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an annuity is we'll throw this up here
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on the screen so an annuity our
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retirement investment vehicles created
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managed and maintained by life insurance
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companies so money deposited into these
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types of accounts they accumulate tax
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deferred until it's withdrawn several
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types of annuity contracts are available
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from countless different insurance
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carriers out there I know that I had in
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the years past invested in certain life
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insurance policies that were set up like
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annuities but often they
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very high fees and I had a I had a I
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think it was a whole life insurance
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policy we later found out I was paying I
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think $15,000 a year almost $16,000 a
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year to have this particular annuity or
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life insurance vehicle for retirement it
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was all buried in the fine print and we
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had to get out of that thing and you
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know why I got out of it because the
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penalty was worth less to me than was
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using that money to acquire rental
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properties so that's what I want to talk
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about in today's video now I don't know
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of an annuity or life insurance company
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that will let you borrow from your
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annuity to buy real estate but I do know
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that you can take that money out of that
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annuity in order to buy real estate
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now this particular viewer had written
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me this question she has $50,000 to use
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and she's got that in an annuity now you
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can take that money out obviously you
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wouldn't be able to touch it until
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you're 59 and a half but under the IRS
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guidelines you can take this money out
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at a ten percent penalty and in some
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cases it may be even less than that
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maybe five percent again you need to
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check with your life insurance company
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before you take the money out but in
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most situations as even my tax
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accountant Tom will write one of the
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smartest real estate tax accountants in
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the world has said he said look very
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often these penalties are way lower than
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it would be worth you taking them to in
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order to buy rental properties think
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about it if you're gonna pay a 10%
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penalty to get this money out but you're
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gonna be making 12 percent annualised
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ROI a return on your rental property so
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you take that tax hit in that first year
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of 10% but you're making 12% and that
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every year after that you're making a
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12% annual return no brainer there's no
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way you're getting that kind of a return
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by having it stay in that life insurance
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policy and trying to make interest that
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way it's a no-brainer so for instance we
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recently took the penalty on an IRA that
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we would have paid taxes on years
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we ended up cashing out that IRA took
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the 10% tax penalty in this calendar
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year in order to buy rental properties
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again the idea is that I want to have
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access to that money now not 159 and a
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half so if it's worth it to you to take
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that money out in order to buy that
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first rental property that 10% penalty
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may scare you but I'm telling you when
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you purchase that rental property that's
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also offsetting your taxes now I've got
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a whole series of videos here on this
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channel that talk about the benefits of
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a tax of you know you having rental
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properties and then how to offset your
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taxes with those rental properties so
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not only are you buying a rental
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property it's offsetting your taxes then
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you're also getting the benefit of the
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cash flow so again to my knowledge you
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can't borrow from one of these
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retirement vehicles one of these
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annuities to buy real estate and then
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pay it back you have to basically do a
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withdrawal take the 10% penalty on your
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taxes and then you're off scot-free so
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it's not like you're paying that back
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into the annuity but again I would check
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with your life insurance policy provider
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because I'm sure there are so many
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different vehicles out there right now
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and there may be some that will let you
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withdraw it if you pay it back without a
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penalty but take a look at this penalty
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issue because I know it sounds scary to
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a lot of people but when you it comes
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down to straight math folks and if you
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find help you're making 12% minimum
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return on a rental property and the tax
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penalty is 10% but it's probably going
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to be offset by the purchase of real
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estate so you won't even actually end up
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paying that 10% penalty because the
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purchase of real estate will mitigate
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any other taxes you have to deal with so
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once you start to understand that it
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comes down to simple math as my wife
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likes to say and you're trading one kind
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of interest for another but one is way
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more valuable then it becomes a
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no-brainer so again get all your ducks
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in a row talk to your insurance provider
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and find out what the deal is with your
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numbers if you do or withdraw
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and what you can expect to pay if you've
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got a great rental property to me it'd
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be a no-brainer I would be buying that
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rental property in a heartbeat so can
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you use an annuity to buy rental
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property the answer is yes there's gonna
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be a small penalty for it but I think
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you'll be better off in the long run
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that's my take I'd love to hear your
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comments you can post your comments in
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the thread below and tell me what kind
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of different annuities you guys have and
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use again I'm not a tax accountant so
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you definitely want to seek the advice
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of your own accountant or your lawyer I
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want to say that as a disclaimer but I
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would love to know what different
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vehicles you guys use out there in order
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to save for retirement again please
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subscribe to my channel there's a big
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bubble right here just tap that and
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subscribe and we have tons of other
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videos and helpful playlists for you in
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order to go out there and take action
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have become a real estate investor I'm
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Clayton Morris we'll see you next time
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everyone
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