Financial Insider Explains Why the Wealthy Don’t Use 401ks

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the 401K is the worst investment you will ever make and it’s what they recommend to working middle class families and it’s a total scam yeah just like everything Wall Street whats in your pocket Wall Street what’s in your pocket guys pensions Insurance retirement plans like this one financial planners wealth managers you know you just got to know the credit card debt all that stuff the point is of course they want in your pocket well and to be fair the 401K was never meant to be a sole retirement fund it was meant to supplement pensions and other things that you had invested in the problem is is the middle class is squeezed so tight that they barely have money to even put in their 401K so some people listening maybe put money in a 401k others don’t but it’s most people’s only retirement vehicle and it’s just not going to be enough and it’s also not the best thing you could be doing with your money in most cases yeah think about it guys they’re allowing you to put money into a retirement plan they’re managing it and I would challenge any of you that’s fighting us on this what exactly is it invested in like think about that like if you have a 50 Grand in your 401k what is it invested in you don’t know you might say XYZ mutual fund but those mutual funds are super complex they have lots of different stuff well they like to make them complex so that way it’s like you just you’re just too um basic to understand so let me the financial advisor understand it for you and you’ll be fine plus fees you know yeah we’re going to get into that okay don’t jump ahead don’t jump ahead but but first um let’s kind of look at that average rate of return here’s before I go into this there’s one thing for sure the wealthy people aren’t using 401ks yeah so if you want to do what wealthy people are doing they’re not doing that so that’s to start but Jerry can you show um video One how did I lose money with an average return of 10% like WTF well here’s how we’re going to start out with 100 Grand right and then in year one that 100 Grand is going to go up 50% now we’re at 150 ,000 and year two we’re going to go down 50% now we’re at $75,000 year three we’re going to go back up 50% we’re at $112,500 year four we’re going to go down 50% that’s going to put us at $ 56,2 and in year five we’re going to go back up 50% that puts us at 84,3 75 that is an average return of 10% but an actual return of minus 15.6% so this is what they do to trick you and this is why if you keep following this channel here so I thought that was really interesting because whenever I talk to people it’s always like well if you get an average rate of return the average rate of return over the last 10 years has been you know 8% and there’s two things with that is the last 10 years are not going to be the next 10 years and I think we can all look at that pretty accurately but also so the average rate of return you don’t understand that because like he said the average rate of return and the actual rate of return can be very different yeah the the only thing that you should be calculating is return of capital right it’s still your 100,000 I like that uh strategy or the guy’s analogy there that was interesting obviously you’re not going to have 50% swings each year so that was a little dramatic but there were 50 each way so but I think the the point is well made yeah it’s just interesting because you know did your financial adviser ever tell you that did they tell you that the average rate return and the actual rate return are very different yeah probably didn’t mention that to you yeah and here’s the thing that I don’t like is if you investing with let’s say you have a 100,000 with somebody doesn’t matter if it goes up or down there’s no there’s no skin in the game by the people managing your money at all in other there’s still a fee they’re taking obviously they’re going to make more money if you make money but if you lose money if the actual investment goes down they’re still taking their fee they’re their their percentage whatever it is you know and so that’s another piece there’s there’s no the the manager and the investor are not aligned yeah exactly because it’s the manager ‘s entire strategy is to get more AUM assets under management that’s the whole strategy and then they make a percentage of that and then there’s so much that revolves around that and it’s not based on return right so let’s start talking about the cons of the 401K and then we’re going to get into what you know things that the wealthy people are doing that you could do instead but first let’s kind of Deep dive into this so let’s first start with tax deferral because that’s definitely uh a selling point of a 401k is you don’t have to pay tax on the money until you take it out that’s nuts like think about that guys it locks you up even more right like you can’t the other thing is you can’t invest it in your own stuff well I mean put put it this way do you think taxes are going to be less or more 10 years I mean let’s look at our property taxes let’s look at our home insurance what do you think taxes are going to be in 10 years that’s a good point they’re going to be higher it’s hard to know they sound make it sound like a benefit like oh you can put all this money in and it’s tax deferred until you take it out but no it’s you’re you’ll probably end up paying more than you would if you were pay taxes now even with you know without that compounding interest on the tax right yeah I would rather make a lot of money and pay tax than than had it somebody else and and have it deferred well and I think a lot of people you know they a lot of people online that I was looking they think that their 401K is not taxed at all as long as they wait till they’re 59 and a half to take it out and that’s not true there’s an additional penalty tax if you take it out before 59 a half but it’s still taxed that’s so long yeah you can’t have access to your money without a penalty they basically take your money and stick it in jail right well and you could be Los money gaining money you don’t know you don’t know how this investment’s even going to do but you can’t and don’t you pay tax when you pull it out at 59 you do exactly you pay tax on it later and um so it’s only a defer incrementally so it’s def only deferred until you take it out and taxes they’ll probably be more I think there is something called a Roth that you can move it into but not exactly sure um I think there’s a way to do that but to your point it’s good yeah I mean with a Roth I think you pay taxes is as you put it in correct but you’re still I think taxed on what the gain and that’s the other part of it is do you think the capital gains tax is going to be more now or more in 10 years or in not 10 years in yeah whenever you take it out because that’s what the politicians keep going after is that capital gains yeah tax and you guys probably know that tax is what pays the bills for the government so MH um and the government uh doesn’t not have a balanced budget so that’s a pretty logical theory that um they’re going to want to have more tax on on the people to pay for their expenses absolutely and then the second thing you started to dive into in that is fees and you know whoever is in charge of your 401k is charging you fees uh fees have actually lowered on 401ks in the last few years but they’re usually between you know half a point and 2% yeah so think about that there’s no real incentive or real tie to if your portfolio loses one or two or 3% a year they’re still making pretty close to what they’re making that’s the the point and you know a traditional real estate deal if it’s structured correctly and you’re investing in it the sponsor or the GP let’s call it the general partner they get paid after after all the money so that’s the way it’s supposed to be so let’s say you put a million bucks into a real estate deal as an LP there’s a waterfall where there’s first a preferred return not a estimate a real preferred return so let’s say five six seven 8% whatever that might be that’s paid first then the actual million is paid second then the actual sponsor is paid third which is the GP let’s say in most cases so so in most cases people that put the deals together don’t make money until all the equities paid back the the wealth management business the 401K specifically let’s say the those those are they get fees regardless of the up and down of the of the of the performance yeah and exactly and on average like just looking at you know average calculations 1% of fee will take away 22% of the cash that you earn by the end of the 401K on average okay yeah now your fees might be less than you know 1% they might be more but that’s a that’s a huge number and let’s don’t forget once you give up that money and sits in a 401k jail you better hope that they’re putting it into some kind of a uh inflation adjusted uh program because that that’s another way like right now if you you have cash let’s say sitting in savings you’re getting clobbered because of inflation but you can put it into inflation adjusted Vehicles it doesn’t have to it can be stock Investments or whatever doesn’t have to be real estate it can be whatever you just better make sure but if it isn’t if it’s in something that if it’s in some industry that that is going down um then you’re even more at risk so then you have you have the inflation number it’s kind of like my dad when I told I tell everybody that story when my dad passed away um it’s kind of a weird thing but you got to dig into your parents finances and my mom um u in in our case was relying on my dad so the kids dug in but my dad had a $10,000 insurance policy that at the time he bought it he thought my gosh this thing is the greatest thing on the planet you know your mom’s covered and I remember that $10,000 insurance policy it did pay out it pay basically paid for his funeral which is something but it wasn’t what he was anticipating and it didn’t adjust with inflation had it adjusted with inflation it would have been well over $100,000 but it wasn’t so you you know you have to take a look at what the money’s invested in yeah and before we even get to that you know people you know they they put it away they work so hard and you guys just put it away and you trust right but a lot of people listening probably don’t even know what fees they’re paying right now I would guess that most don’t and not to mention the fact that guys there’s there’s other things going on inside of the you know in inside of the jail so one the the fee you could probably ask and that you would find out so let’s say it’s 1% or two that that’s something that everybody should be able to quote you pretty easily but then there’s other fees based on the trades that they’re doing there’s front loaded and back backloaded fees that uh based on the financial products that that they’re putting you into so don’t forget it’s your money they’re investing it um often times um where they want and um and typically the just like anything guys the financial industry is incentivized with um various products that they’re trying to get you into and some of them might be doing great but it it behooves you to to to to really be educated on where the your money where your hardworking money is actually going so Brandon just posted something interesting on YouTube I haven’t checked the math but he said I did the same calculation using 10% swings instead of 50% and at the end of 10 years the average 10% return the 100K turns into 105.7 K and that’s without taking out any fees ah very good so so so with fees it’s negative net net right and again if it’s you know who wants to who wants to do that just for tax deferral um and you know uh I guess well you know the 41k was a bit of a mistake right it start it was in 1978 and it started off with a handful of companies and then it just grew like crazy and it became a way where Wall Street could actually legally get people to invest with them from their paychecks and that’s essentially what’s happened and and so now you’re you know now it’s I think people are slowly um you know starting to realize that um um you know maybe it’s not as great as they thought but to your point the wealthy no one I know has a 401k well and here’s the thing is that you know I think people are starting to open up their eyes to a lot of things and this is just another thing that you maybe should look at and a lot of people on YouTube are saying what if your employer matches it right like is it better if your employer match that’s a good point yeah that’s an excellent point yeah yes of course does and and that is um if you think about it um employer matches is a huge piece because now typically there’s some kind of vesting so what that means is there’s it’s usually zero in the in year one let’s say 20% in year two you know 40% in year three and then by the sixth year you’re you’re fully vested so if they if they put $100 in you get zero of that in year one and then 20% of that and it keeps going up and the reason they do that is to keep you at your job longer because now you’re walking away from a vesting so that definitely can juice the return though it can but there still is probably things that are better for you to be doing with your money even with the match well I think it all boils down to the exact same thing and that’s Financial education do you want to turn your paycheck over to somebody else and if you do do you know where it’s invested do you know all the fees um and are you taking an active role in your own money or is it better for you to do that somewhere else I mean that’s kind of the whole point of this channel well and you know for some people the 401K may be the best option because maybe you’re busy you don’t have time to deal with it you’re making money this is just part of your retirement plan not the whole piece but if you want to make the most money that you can to retire it’s going to take some work because you’re going to have to get educated if you have someone do it for you then you’re going have the 401K and that’s better 401K is better than nothing it’s better than doing nothing but it’s just isn’t really the best vehicle for that and I wanted to go into inflation because you had mentioned that and you know the returns in the last few years have been 4 to 7% in a lot of these 401ks well what’s inflation been and what’s inflation really been too not just what are the government saying but like what has it really been yeah so guys what is a one- month t-bell been four and a half five so and that’s completely in your control backed by the government so do you want to turn it over to U somebody in a 401k and do 4 to7 % and hopefully that hopefully that’s right and um or would you rather have control of your own money um you know I I just I just paid a bunch of tax on that interest you know I had a bunch of money in those 30 in those 30-day T bills um for um you know for income tax and it was interesting because I I didn’t really track it too well but I I had a lot of money sitting in these as as we try to deploy into real estate deals I want it making money somewhere but I also want have access to it so the the the availability of having that money is is um and being liquid is more important for me um and that’s because I’ve taken an active role in my in investing my own money and and I think to to your point this is a this is a do do you want to take control of your financial future or not do you want to put your money into 401k and if you do you should ask the right questions I have a there’s all kinds of ways that my CPA every year says um you know to to put money into different things and so one of them was a Define benefit plan for me personally right so I had never heard of it but I I put a bunch of money into the defined benefit plan I I have I think a two or three million dollars in there now but the the point is I just put this money into this def in this Define benefit plan so it is a type of retirement plan it’s not necessarily a 401k but the point is there are things that where I get credit and that makes sense to do but the what was interesting and what was frustrating with me is that uh I don’t have access to that money I can’t use it I can’t I can’t do anything with me for me personally I can’t do anything for my family personally with that money it has to be invested somewhere else so that’s the money I use to invest in some of my friends stuff you know because I get hit on all the time want to throw some money here or there and that’s what I use it for but um U once you once you turn it over like that now you’ve again you’re completely Reliant and there’s rules and restrictions around um you know it’s funny I was texting with kosaki yesterday and you know I said money money is processional if it’s treated well what procession means is when you drop a pebble in the water and there’s those concentric Rings if if money is treated well it’s compounding and control actually destroys procession so what that means is the minute you put rules and control around it it it it it does the opposite of what should be a processional effect so that’s what you need to look at and when you have the full freedom of being able to invest your money how you want then to me that’s that’s complete control and that’s when you potentially could have a processional effect with with money so Jerry if you want to play video clip to here’s why investing into a 401k is keeping you broke so this is John and he’s contributing $5,000 per year into his 401k so the 7% return and a 3 and half% salary increase every single year John will have about $1.4 Million by the time he turn 65 now it sounds great and it sounds like a lot of money but it’s actually not so if inflation stays at 3% every year in 30 years this $1.4 million will only be worth $576,000 in 30 years now you have to really start thinking about this do you want to shave off the quality of your life to maybe have some extra money by the time you’re old even if you have hundreds of millions of dollars when you’re 65 you may not be able to fully enjoy comment below if you want me to make a video on how to use a 401k to build a six figure income right now so I thought that video was interesting right because it touches on what you were saying about inflation and I think the most interesting part of that video is that he kept inflation at 3% for all those years and as you know we talk about on this show we’re going to be having you know some pretty massive inflation probably over the next 10 or 20 years so his money was halfed right and that’s him putting 5,000 a month I mean that’s more of a chunk of money than most people are going to put and inflation at 3% yeah and I think this is kind of the point like just go back and take a look at what things cost 10 years ago and and and and you know for you to think that in 10 years from now that might not happen again or and go back 20 years go 20 years and go 10 and you’ll see things are more right um I got to tell you a funny story um denil and I were um having a nice lunch yesterday outside it was beautiful and I decided to drive through this neighborhood that I showed her in 2021 I said this is a neighborhood you might want to look at and it’s right on the park and and there are these beautiful homes it’s sitting there and the homes were three and a quarter and um at the time and I said let’s let’s let’s drive by this neighborhood and let’s go see what the prices are and she goes oh they’re probably in the 500s right now so anyway so we go sit down we eat lunch and we pull out Zillow how much were they they’re 750 so now that doubled and and the point is that was in four years you’re not always going to hit those numbers guys you’re not but the point is is they do happen right right now things are really hot really expensive so it’s easy to pick honor but the point is three years ago pre pandemic it was very different and we’ve had a hell of a run so um now you can’t do that with 41k money and that’s the point well so before we go to there let’s uh Jerry can you pull up the chart on the averages so I think that this is interesting right and I don’t like to look at the average balance because those can be skewed by people putting a lot of money in I like to look at the median balance because that’s more accurate right so on the median balance for somebody that’s retiring on their 401K is $70,000 70,000 that’s it the average balance is only 2 uh 32,000 but the median is 70,000 so you know based on that video we watched where inflation staying at 3% and everything else that’s not enough money to retire higher and that’s what the average 65-year-old has on their 401K also don’t forget the 65y olds were the Boomers they went through the all the good times right it’s not like us Millennials or gen Z where we have massive inflation and we can’t buy a house and we’re struggling to pay our bills the 65-year-olds right now have a median of $70,000 that’s all they could put away and make in their 401K so for those of you watching that are millennials that are gen Z most you’re your median balance adjusted for inflation is probably going to be less than that and that is not enough money to retire and I I’ll just tell you one thing I was watching the um the Chiefs game yesterday the Bills beat the Chiefs um and there was an um commercial that came on I I don’t know if you saw this or not but it was a a very large health insurance company let’s just put it that way I will say what and they were bragging because this guy had a big heart problem and that insurance company paid the bill so it was like a you know was a true thing right but guess how much the heart problem cost $950,000 okay so what what people don’t realize is that there’s just one small Medical in that case it was a large example there’s just that could be wiped out with one thing mhm and 70 grand is not a lot of money no I mean most people you know it’s going to cost that that might be if they own their home free and clear and they don’t spend any money you might be able to get two years out of that maybe but most people if you have rent and everything else you just get one year out of that so it’s just not it’s not practical it’s not if you guys are just putting money away in your 401k and thinking you know hoping for the best thinking everything’s going to be okay like that’s not a good strategy and you know there’s better strategies and that’s kind of what I wanted to get to and some people online are talking about a self-directed IRA or I’m sorry self-directed yeah Ira like you can do something like that but but at the end of the day we prefer anything with real estate yeah but here’s the cool part about self-directed though first of all guys you may or may not know this because I’ve I’ve been all over the world and actually researched this in most countries so in Australia they’re called super uations in uh Canada they’re called RSP retirement savings plans you start to look at other countries in other countries you actually have the power to invest the money how you want in the US you do not just look it up and so um and so what now what they this new industry is emerging and I guess it’s not that new there’s huge companies in this now but essentially you can move your money out of these retirement plans into what’s called a self-directed and the self-directed plants means exactly what it means it means that you can self-direct and so you can move it laterally and um telling you it’s not that easy and the reason I know is because we have a lot of investors that invest with MC from their self-directed but so let’s say they have a bunch of money sitting in an irod hasn’t done that great and they want to move it into a self-direct well the the the financial planners the companies that that’s invested with make it really really hard to get that money and move it laterally the good thing is that there’s no tax or anything like that you have to move it over and it’s literally self-directed and how the self-directed companies make money is they charge an annual fee essentially and there’s other little fees and stuff like that so you got to do your homework I’m not advocating one or the other I’m just saying that’s how the thing works but then at that point you can direct it how you want what’s still frustrating to me is that like I had money and a self-directed maybe I want to buy my my uh my my uh kid a house maybe I can’t like you there are things you can’t do with that with your money maybe maybe I want to buy a a little place and and get out of Scottdale for you know the summer I can’t I cannot use that money because it’s it’s restricted again control kills procession as I said earlier so um but the the point is self-direct it is one step you guys should be looking at that certainly um but only if you understand what to do with it because now it’s in your hands and you still have to invest it exactly and Jerry can you we’re going to skip that one video and go down to that last video 401K everyone’s told that’s your retirement right they just completed in 2024 a study on the last 20 years for the average 401K it’s producing 4.2% inflation is sitting sitting at 4.1 which basically means if your money’s in a 401k it’s breaking even and here’s the bigger problem combine your 401K with maybe a more lucrative you know Ira earning at 6% let’s just say your money’s earning 6% to put in perspective the difference between 60% and 6% 60% is not 10 times more with compound interest it’s literally a 100 times more plus and so a lot of people don’t understand that so you you got some money you save in a 401k and Ira for someday it’s earning these single digits and at 6% in 20 years all it’s done is triple so I was like cool my 50 Grand turned into 150 Grand in real estate if all you were earning was was earning 25% which is four times the ROI it makes 27 times more money it makes $4.3 million in that same span of time understanding Roi is actually a really big part of the game so you know that’s why we like real estate right yeah because in real estate moves with inflation and I think that’s really important to know and and I was actually having this conversation with my dad um the other day because you know they’re in their retirement age now and everything else and I was trying to explain to him you know cash flowing properties Social Security doesn’t count that income unlike stocks know on rental income guys unlik stock I don’t know if you guys realize that that’s a huge thing let’s don’t just jump over that MH in order to get Social Security you have to basically not be working right Social Security doesn’t count rental income as part of your income so imagine that imagine if you had eight or 10 rentals that cash flow and you’d still get Social Security Now the irony is is you you’ve invested that with your own money anyway it’s your it’s you’ve invested your own money that way and the whole goal here now you can get burned on real estate I want to be clear you can give it to somebody and they can lose it for you you can invest of yourself and you can lose it you know but the the goal like my sister I was talking about my sister how proud I am of my sister she was just buying like a house every few years and then the tenant would pay it off that’s the goal right and she was a bookkeeper she worked on a modest salary her and her husband did extremely well just by slowly chipping away and and there their strategy was just to have one cash flowing uh piece of real estate and have the tenants pay it off over time treat the tenants great and make sure they’re not um underwater make sure cash flows um and let the tenant pay down the mortgage mhm that’s it that’s the strategy and then at some point that mortgage is paid off and that rental income whatever it is because there’s still going to be expenses you’re still going to have property tax you’re still going to have insurance you’re still going to have those kinds of things whatever that income is it’s not uh used against you when you retire yeah and I I like real estate too because it moves with inflation so rents move with inflation so if you get this fixed mortgage right now what do you think rents are going to going to be by the time you retire they’re going to be more and you’re going to have this fixed 30-year mortgage because you’re going to do it right that’s what you’re going to do but you’re making more money so you know you don’t have to worry you know when I retire in 30 years I’m not worried that rents are going to be exactly what they are now and I’m going to be making the exact same cash flow that I am now because that’s not what’s going to happen you know just the basics of inflation rent’s going to be more I’m going to have more money to cover my expenses some of my expenses are going to be higher but my main expense my mortgage will either be paid off or it’ll be the same price as it is right now yeah and one other thing I want to point out guys one of the massively greatest things about real estate itself is of course you cannot do this with 401ks it’s called Leverage so you could actually if you’re going to buy say $100,000 worth of a mutual fund stock and your 401k it’s going to be it’s it’s going to do its thing or you can take $100,000 and buy a $300,000 house or $400,000 house and that OPM make sure it cash flows that OPM or other people’s money provides the debt so you can take a 100,000 same thing instead of buying mutual fund stock put it as a down payment to a rental go match it up with $200 or $300,000 of debt and and and then of course now you’re in the management business now you’re in the rental business but that’s kind of the point and then that renter pays that off for you so it’s the same 100,000 but now you’ve got appreciation on the three or 400,000 you have appreciation on the debt you have the appreciation on other people’s money instead of just trying to make money on your hundred you’re making money on the entire thing and that’s exactly why you want to use leverage with that 100 and most most of the financial planners and wealth managers are not going to lever up your your the amount you have and so that’s just one big thing there’s so many others from a tax standpoint that you can get on real estate don’t let’s don’t forget you know they they pump up the 401K with a tax deferral well on the real estate side you get depreciation you get it’s a nonoperating expense to offset your tax you know and and so there’s all these things that you can do on the real estate side it’s just you know think of the 401K think of Wall Street as one big marketing piece that’s what it is and everybody’s in your pocket um and and they’re looking if if you want to where does a 100% of the money come from you us that’s where it comes from all of it and everything is OPM everything’s other people’s money insurance companies other people’s money money pensions other people’s money retirements other people’s money you know um that’s all other people’s money credit card debt other people’s money like student loans other people’s money like it’s all other people’s money even if you put money in a bank the Bank owes you interest and so they lend it out other people’s money which is really your money so when you have complete control when you move it over to a self-directed or invest it yourself and you can use other people’s money so just be smart about how you are investing your own money do you hand it over to somebody and be part of OPM and let them manage it or do you use your own and then also borrow or invest alongside of other people’s money so peaceful Warrior said I did something during the pandemic and people thought I was crazy but I took 65,000 from my retirement which was money the company I worked for gave gave me after 25 years and I bought real estate nice how did you do no bu he did I bet they did better than well I I don’t think he probably would have pumped it up you would have done well right but yeah and again let’s let’s have your tenant it’d be interesting to see how you’ve done on that of course just like um anything longterm it’s in there for the long haul my my sister she was buying houses when I mean this is crazy to think about but they were like 40 50 Grand um years ago you know she just retired she’s older than I am okay well now those houses are worth a lot and so the houses have gone up the tennants paid them off and she’s sitting great and at the time um you know it they seems like a lot well and I two different things you know between your sister and brother because your brother and my brother are very similar they you know invest in their 401ks and they work corporate and everything else and your sister was more of a real estate entrepreneur well your sister knew exactly what her cash flow number was going into retirement she knew exactly how much per month she had to live on she knew when she was ready she knew she had the whole strategy where your brother and my brother both you know they just know what they have in their balance right now but that could change year to year yeah and they don’t you know they have to be careful with how much they take out because it’s a set number so say it’s 500 Grand that’s it your sister has cash flow month after month after month until she sells the properties where on the more you know 401K Ira side you just have X amount of money and it can stay invested but you don’t really know what that’s going to do and a lot of times in retirement people go into really conservative Investments because they don’t want to lose money and so you’re more on a budget because you don’t know how long your life expectancy is that’s a good point and let’s don’t forget that um my brother’s really really bright um but he worked hard and he put us handed his money over to to um to people and they manage it for him and you know he’s happy which is great but to your point that they know exactly what they’re going to spend over their you know their life and um I just I don’t want anybody telling me that I want I want to be able to um I don’t want to have to sell assets to live I I want and I want the cash flow to to continue to and I want to use that as my what would call my unlimited or infinite banking that’s what I want I want to be able to if if a if my asset that I own goes up um a house apartment building whatever it is and I decid to do a Cash out refinance that’s taxfree period I can put more debt on it free I don’t have to sell it um I just keep harvesting it and I’ve done this over and over and over we buy real estate deals we build them and we put debt on them and then we do cash out refi and we wait for another 5 six seven eight years and we do another cash out refi and we wait 5 six eight years we do another cash out refi and I never sell the asset you know I’m doing a a trip today to one of our assets that we bought um in 2003 so I’ve owned this property for 21 years I bought it for 9.7 million it’s worth uh in the mid-30s and I’ve done to two cash out refi already on the on the asset um and we got our money back in 2007 so at that point I’ve been infinite the whole time the cash out refi is not taxable because it’s debt and we just keep harvesting it and not not to mention the several hundred, of cash flow we get every year so you know and there’s other tax benefits too so you know when when you when you build up your retirement plan you basically have to pull out principal in order to live and then you get paid you have to pay tax on that right absolutely um so the point is is to be smarter about where you’re investing your money if you guys like this show we also have a podcast that you should check out um it is on all of them Spotify Apple everything else it’s the Ken maoy show we go more in depth uh a little bit on numbers and things in this show and talk about what MC companies which is Ken’s company is doing but now let’s get to some of our questions those on YouTube make sure you ask some questions and I’ll pull a couple Ginger is saying or I’m sorry let’s start with Robert sorry Jerry Robert I am a new investor in a small Market what strategies or property types would you recommend to ensure consistent returns new new investor small market so I’m not quite sure um here’s the thing like whatever um you gotta you got to start with the return that the investor needs right so let’s call it 6 78% cash on cash whatever that is and then back in so it doesn’t really matter it could be a self storage could be an office building could be could be anything could be a single family house could be a duplex for unit it’s hard to know um and I but I find that our investors want different things at different times so we have some investors that want class a brand new new development stuff you know we have a new project called Mason Ranch that we just put out to our investors and uh a lot of people want that brand new and um you know it’s going to be something we hold for a long time we we’re going to build it for whatever it cost to build and then we’ll do a Cash out refinance when we put permanent debt on others want more forced Equity so it just depends and and so um and also I hope small Market um I’m not sure exactly what that means uh there could be more risk there you definitely want um something very Diversified so um but it it’s all going to boil down to the real estate itself it’s hard to know it’s not enough information well something that concerned me is he said um are there any features that are good in slower growth areas and you know you don’t really like slow growth areas yeah yeah I’m not sure why you would want that um I think probably because it’s his local market would be my guess oh yeah well uh We’ve made these decisions before excuse me um we’ve invested in Oklahoma City and Tulsa for example um very slow growth um now it did grow over time but very slow we made a decision to pull out of those markets and and and invest them into others that were growing faster so um and we’ve seen that a lot you know we’ve seen areas of Houston that have been really slow growth and areas of Houston that have been really high growth same thing with Tucson so right now Tucson’s growing very fast um we’ve seen slow growth in Las Vegas right we just bought in Las Vegas and um now it’s growing very fast so those markets can change um and so I personally would rather have something in a in a in a higher growth than a slow growth absolutely so let’s go on to Mason’s question Mason’s asking are there situations where you would sell a property and pay the capital gains instead of utilizing a 1031 our property is barely cash flowing but it has appreciated that’s a great question I actually have thought about this a lot so if if you’re you have to calculate everything you got to calculate your tenant pay down on the mortgage you got to calculate what the tax would be and you have to include that in the final number so it might be that you’re just barely getting by on a cash flow basis but you have to look at the whole picture so what’s your tax exposure and you have to calculate that if there really is a capital gain then that comes away from um now of course the real question is is what are you gonna put it into right so that’s a personal choice me I like to keep my stuff in real estate long term um even if it’s I have stuff from time to time that struggles you know and you just manage your heck out of it but if you’re in a if you’re in a situation like um like denil and I were looking at a um an like an Airbnb neighborhood in in Florida remember the one it was a Destin yeah um no Orlando Orlando the entire neighborhood was Airbnb literally period well there were I think we counted there like 20 or 30 houses for sale in there now that’s different because now you’re starting to see prices come down you’re kind of locked into a certain model um you know on that particular case if I had a lot of equity I would probably cut my losses and move it but um you know real estate always have lots of choices but you would probably 10 31 I mean I think the only reason that you wouldn’t 10:31 it is because you need the money you need it for something or you have a better investment but you’re going to pay well depending on how much it’s appreciated you’re going to pay pretty high tax on that so you really if you can want to roll it into something else if can unless you need the money the the the problem could is always that if you know what are you putting it into so we all often times find that people that are stuck in 1031 make bad purchase decisions because if I’m if I’m the seller and somebody comes to me with 1031 money I know they’re in trouble not in trouble I know that they’re um they don’t really have room to negotiate much because they’re trying to save tax so that’s the other side of it you know if you’re if you’re if you’re you think your 1031 money is um um uh strength it might not be you know because you might overpay going in and then of course you got to calculate your cash flow going in on then on the next one so we’ve looked at this extensively and um um it depends on it depends on what you’re doing absolutely so let’s move into Devon’s question Devon said do LPS have any decisionmaking power or just the GP so to be clear the GP is the general partner like a Ken or a rock in a deal and the lp are the limited partners and they’re the investors in the deal under Kenan Ross it’s a good question um you have to look at the operating agreement and that’s the governing document for everything so just like anything so just like leases on apartments are different from place to place so are the operating agreements generally the word limited means limited so but and there’s a tremendous amount of legal jargon inside of an operating agreement so um it’s hard for me to know but I would say generally no generally no um you know the general partner is what you’re signing on for and um but things are pretty clear in those documents so I would start there well and realistically you know do as a limited partner would you want a committee of people limited partners to be deciding or would you rather have the people leading the investment that you invested in deciding yeah and that’s the whole point that’s why the general Partners typically in charge um of the uh partnership and U you know on the things require tax or potential loans or liquidity issues or you know they’re the ones dealing with the lenders and usually in charge of the property management companies or or whatever it might be so again follow back to that operating agreement and if you guys are interested in investing with MC companies we do only take accredited investors but you can go to invest withth mc.com foryoutube or Mason Ranch uh to learn more have a good one see you guys next week see you guys

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