Real Estate Class and Retirement video part two. This is a two-part series covering the subjects of Real Estate and Wealth. Let’s get this started.
There is another issue with owning property in California that many don’t think about, the risk of having all of your eggs in one basket. Please allow me to explain. If you have one 3/2 that you buy for $1.5million in the San Francisco Bay Area, that’s 1 investment, that’s one rent collection per month, that’s one front door. If your one renter stops making payments, you lost 100% of your income. On the other hand, if you buy property like say in Missouri, a huge 3/2 in comparison to the California property will cost less than $100,000 each, or in other words, you can own 15 properties for the same $1.5million. Now if two of your tenants stop paying in Missouri, or even if 5 of them stop, you are still collecting on the other 13 to 10 doors respectively. The one door in California will bring in around $4k monthly but let’s give the market the benefit of the doubt and say it brings in $5k per month. Each of those properties in Missouri will conservatively brink in $1,000 each after all expenses but closer actually to $1,200 per month. That’s $15k to $18k a month. Which investment sounds better and less risky to you?
If you meet with a real estate investor who flips houses, they will understand what a Hard and Private Money Lender is. There is the Family Bank concept that I speak on in a previous video on here. The Indexed Universal Life investment or IUL for short has amazing benefits that I don’t have time to cover here in this video and must be qualified for, but is worth seeing if you do. One of the advantages of the IUL is you can borrow against it depending on the IUL at 0.24% and if you pay it back before the end of the year, it’s 0%, it’s like the HELOC but without the annual fees and much much higher interest rate. Or put another way, It’s like having $500,000 liquid cash in a bank account, maybe in a CD growing at a sad 1% interest may be, to buy and fix up a property, and even while that money is out of the account and is used to work on your flip or if you are a lender on other investors fix and flip, the original $500,000 is still growing in that interest growth account as if it was never touched. If something goes wrong and you can’t pay the loan back, instead of the bank foreclosing on your project, that amount you borrowed would then be deducted from the Life Insurance policy portion of the policy. No foreclosures, however, it would also mean you have that much less capital that you can borrow if need be from said IUL in the future until you return the borrowed amount back into it.
I don’t have a crystal ball, but it’s my opinion that in the San Francisco Bay Area that we will see a drop in real estate prices sometime in quarter 3 or 4 of 2022. The moratorium on forbearance mortgages ended in September of 2021 and those who couldn’t pay their loans off before, most likely couldn’t just begin to do so now that the moratorium ended magically. It will take 6 to 8 months conservatively for banks to foreclose on those properties. By the basic rule of economics in regards to supply and demand, this means we will have a lot of properties flooding the real estate market. That would make the average cost of homes in those markets drop considerably. Also, the low cost to borrow money right now is also overinflating the real estate market, if the interest rates on the refinancing and new mortgages go up, you will see property prices fall there as well. When money costs more to borrow and access, it affects everyone’s monthly budget and bottom line. Markets with already reasonably priced homes will feel less of an impact. I think of properties in Silicon Valley California like a Luis Vitton bag, the properties are way too expensive if compared to the price of the material alone. Yes in real estate it’s all about location, location, location, but compare a home in Florida with low taxes and no state taxes, a 3/2 there is under $200,000 and the same exact property around these parts is around $1.5million. It’s just gone too far at this point and like the S&P 500 since 2008, it’s bound to correct at some time. Again, these are my opinions.
I can go on and on about real estate, and I do cover a lot of what I said here and more on my website blogs at healthwealthandrealestate.com, and the blogs are just the text versions of my YouTube channel. I cover the subjects I am most passionate about, health and how I beat Type 2 Diabetes and no longer take insulin or pills; in wealth, I cover all kinds of subjects that are specific to my license as a financial professional, like the family bank I mentioned here today. and another on the 5 ways schools failed us which has the lack of financial education in there. Did you know that of the 7.5 billion people in the world, only 30% are considered financially literate, meaning 5 billion people need my help, and that means in the US alone, there are 330 million people so 231 million need this information. Finally, the last subject is on Real Estate where I cover 13 terms every real estate investor should know, 13 risks of owning rental properties, 4 reasons I will never invest in California, and more. I keep all my videos short, packed full of information and I hope you all find them useful. I have a calendarly link in the comment section below for a one-on-one, customized training based on your level of financial literacy and I can put together a plan based on your needs and wants for your future.
Ask yourself these five questions.
At what age would you like to retire?
How much would you like to have saved up for when you retire?
How much income do you need to live on for the rest of your life in retirement?
What are some of your BIG Goals and Dreams in retirement?
If I could put a plan together for you that would put your family in a better financial position, and I created this plan for you at no cost, is there any reason why you wouldn’t move forward?
I get asked by financial advisors who don’t all get these concepts or have never heard of them, how do I make any money doing this for free? Am I doing this out of the goodness of my heart? The typical financial advisor doesn’t like doing these deals because they can’t collect annual income for managing your money. The financial advisor also can charge up to $2,500 to do these investment plans before you put a penny into whatever plan they come up with. And they put you in variable-based accounts that have risks in losing your hard-earned money. Warren Buffet said rule one is never to lose money. Rule two is to refer back to rule number one. I like to share the great upside as well as the downsides on a particular investment and if I can’t answer your question, I have agents with 20 plus years of experience in my office to fall back on and CPA’s on staff as well but always recommend using your own as they know you best. I believe people need to know all their options in order to make an educated decision, to make the best choice for them specifically and I believe in sharing the pros and cons of each investment option.
Thanks for watching and please feel free to comment below or send me a message from the healthwealthandrealestate.com website on the “Get in Touch” link at the top of the web page where there is also a calendar link to customize a lesson for you there and in the comments section here below. Please like this video and subscribe to this channel so that you don’t miss any future content. I also would appreciate it if you shared my videos with friends and family as I love helping everyone and want to get to as many people as I can. I look forward to speaking with you very soon. Have the best week, spread joy and happiness, let’s make the world a better place one person at a time!