How to Buy Real Estate with Your 401k

Every year, I take a loan from my 401k plan to purchase a cash-flowing real estate investment. Are the bells and whistles going off yet? Typically when I talk about utilizing this strategy, I’m met with a lot of fear.

We’re told that we should under no circumstances touch our retirement funds, that we should never touch that nest egg, unless it’s an absolute life-or-death emergency. I have to disagree! This is the strategy I’ve used to build my real estate business.

I’m not talking about totally withdrawing from your account. This is different. I’m talking about taking a loan, under certain terms. Most 401k plans allow this with a few stipulations. Typically, there’s a maximum amount that can be withdrawn, and the loan must be paid back within one to two years.

Think about it: your 401k is YOUR money. And it’s just sitting there in some fund selected by your employer. Why give someone else the power? Why not take that money and turn it into a performing asset? Why not be resourceful? Why not leverage your money?

Here’s how it works: a 401k loan is a surprisingly simple process. You can log on to your 401k providers website, request a loan, and have a portion of your balance transferred to your bank account. Then you have a large chunk of cash with which you can purchase a rental property. 

You might be wondering about repayment. There is interest on this kind of loan. The good news is you’re paying interest back to yourself! You’re not borrowing from some big bank or other type of lender. Not only are you borrowing from yourself, but you’re also making your retirement account larger in the end!

It’s really a win-win. Also, most plans require that the loan be paid back automatically. The repayment is deducted from your paycheck until paid in full. Usually this strategy can be utilized once per year. 

Again, not every strategy is right for every investor, in every circumstance. There are many strategies out there! This is simply a method that has worked for me, and many of our investors. This can be a great way to begin your journey to financial freedom. 

How to Create Financial Freedom through Real Estate Investing

We all want the same things: to have enough money to cover our expenses, to not have to worry about finances at retirement, and to spend our spare time with our families.

The best way to meet all of those goals simultaneously is to create passive income through real estate investing. And the only way to embark on this journey is to set a clear, attainable goal. Financial freedom will not just fall into your lap. You have to set a goal and work toward it.

That’s why I’ve created the Financial Freedom cheat sheet. It’s a formula that was born out of my own frustration. My situation was not dire; my bills were paid, but at the end of the month, I wasn’t saving anything. Does this sound familiar?

I have good news: the Freedom cheat sheet is a free PDF designed to help you calculate how many properties it would take for you to be financially free. This cheat sheet contains the exact step-by-step formula I, along with hundreds of others of investors have used to begin building passive income and legacy wealth.  Once you have a specific goal in mind, the possibility of attaining it becomes very real.

How would financial freedom change your life? Would you go on more vacations? Would you be more present with your children? Would you stop worrying so much about work? Whatever it is you’re seeking, rental real estate can help you get there. 

Ready to find out your unique Freedom Number?

We all want the same things: to have enough money to cover our expenses, to not have to worry about finances at retirement, and to spend our spare time with our families. The best way to meet all of those goals simultaneously is to create passive income through real estate investing.

5 Stories of New Real Estate Investors That Will Inspire You to Take Action

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What’s holding you back from becoming a real estate investor? Is it a perceived lack of financial options? Do you have fears and hesitations about the process? Or maybe you’ve just never seen anyone else do it before?

All of those obstacles are surmountable. People become real estate investors every day, despite their finances and apprehensions. Here are five stories of real people just like you who faced their fears, took action, and began on their path to financial freedom.

Kevin Brooks – Kevin is the father of two young children; he and his family reside in Los Angeles, which is typically a terrible rental market. He knew that if he wanted to make a high return, he would have to invest away from home. Like most people, Kevin didn’t have $40,000 sitting around to purchase his first property. But once he realized he could simply take a loan from his 401k, the idea of becoming a real estate investor became a reality. Kevin’s story is a powerful testament to the power of setting attainable goals and taking action! Listen to Kevin’s full story here.

Matthew Stellas – Once he calculated his Freedom Number and learned about turnkey investing, Matthew became the proud owner of a Midwest rental property in a matter of weeks. He put his faith in the process, took action, and now he collects rent checks every single month. Want to hear exactly how Matthew did it? Listen to his interview here. Matthew is a fantastic example of an investor who did his research and made an informed decision to create passive income. 

Sylvia Grugett – Although Sylvia has a sustainable career in the corporate pharmaceutical world, it’s not lost on her that no job is guaranteed forever. She wanted a backup plan, and she decided that real estate investing could provide financial stability. She financed her first property by taking a loan from her 401k, and is now building a passive income through real estate. Here’s exactly how she did it.

Josh Koth – As a self-employed photographer, Josh wanted an extra stream of income that wouldn’t take up his time. He realized that real estate investing could be totally passive, and decided to begin acquiring properties. He identified a clear goal: to replace his entire salary with passive income. He’s making it happen, here’s how you can too.

Keith Rorer – Keith is a single-dad who has always had an interest in real estate. He found that working as a realtor on the weekends did not fit his schedule or his lifestyle. As a parent of two teenagers, Keith’s time is his most valuable resource. Once he discovered he could earn a passive income through buy and hold investing, while still having his nights and weekends with his kids, everything changed. Keith is well on his way to financial freedom. Listen to his story here.

Are you ready to replicate the success of these investors? We can show you how. First, calculate your unique Freedom Number to determine how many rental properties you will need. Then, book a free, no obligations call with our team to discuss how turnkey rentals can help you accomplish your goals.

What’s holding you back from becoming a real estate investor? People become real estate investors every day, despite their finances and apprehensions. Here are five stories of real people just like you who faced their fears, took action, and began on their path to financial freedom.

5 Advantages of Buying a Turnkey Rental Property

Investing with a turnkey provider can be a fantastic way to get started quickly and passively. The turnkey company finds a property in a proven rental market with high ROI, rehabs the home, and places it in the hands of a trustworthy and established property management team. This process allows investors to collect cash flow without having to work, or worry! It's a great option for investors who want to make money without doing the heavy lifting. Here are five major benefits to purchasing turnkey rental properties: 

1)  Saves time! Many people that I know who are striving toward financial freedom are not looking to create a second job. Investing in real estate can be time-consuming if you’re going it alone! The process goes like this: find a property with high ROI in a great market, appropriately rehab the home to make it suitable for tenants, screen tenants or find a property management team. If you want to spend your free time with your family, working with a turnkey provider allows you to invest without putting every second of spare time toward your investing business.

2)  Immediate cash flow. Working with a turnkey provider is incredibly passive. Not to mention, turnkey providers are so experienced, the entire process is streamlined. Someone else does the work, you sit back and collect rent checks! 

3) Cheaper entry point. Unless you are well-researched, you’ll probably make a few mistakes starting out. I did—I overspent on the purchase and rehab of my first few properties. A turnkey provider knows how to find properties under market value. They also have all the pieces in place—materials, contracting team. Working with a turnkey provider is a great way to keep your costs low.

4) Diversification. Having a diversified portfolio is always a good idea, and turnkey rentals can help you spread your wealth around. Here at Morris Invest, our properties are in select Midwest markets. For most existing investors, our properties are typically located far away from their other investment properties.

5) Retire early. If you aren’t out there actively finding properties and rehabbing them, you can build your wealth faster! Turnkey properties speed up the process, so you can reach your Freedom Number quickly.

Ready to move forward with turnkey rental properties? Or do you have some lingering questions? Our team loves to talk to investors like you.  Our calls are free, with no obligations. Pick a 30-minute time slot from our schedule and we’ll discuss your goals and how turnkey rental properties can help you reach financial freedom. 

Five major benefits to purchasing turnkey rental properties - a great option for investors who want to make money without doing the heavy lifting.

Does a Bad School Rating Equal a Bad Rental Market?

I always suggest that investors comprehensively research the rental market and neighborhood before purchasing a property. This means assessing metrics such as crime rate and vacancy rate. But how does a school rating factor into the value of a rental property?

This can be difficult to decide. Of course, you want to find a property with the best value and the highest ROI. But at the same time, you want your property to be in a safe neighborhood where tenants will actually want to live.

Typically, a school rating system ranges from 1-10. If you’re evaluating a neighborhood, and you notice that the local school district in that area is low, it can be alarming. But I’ve found that there’s a piece to the puzzle that is not so obvious.

In the neighborhoods where I invest, there are actually fantastic charter schools! Since charter schools operate independently from the public school system, they are not factored into the rating.

We consistently have fantastic, reliable tenants in these areas. So if you’re wondering if a low school rating could impact the success of your rental property, be sure to check the area for charter schools!

It’s critical that you do your research, but you also can’t always take these metrics at face value. The internet is not always the most accurate resource, such as crime data websites.

We would love to hear your thoughts on this topic. Head over to the Morris Invest YouTube channel and let us know what you think about low school ratings.

How does a school rating factor into the value of a rental property?

Flipping Houses vs Owning Rental Properties

Flipping houses and owning buy and hold rental properties are two of the most popular real estate strategies. These two strategies work very differently, and generally I recommend that you choose one path. But which one is right for you?

It depends what your goals are, and what you envision your lifestyle to look like. House flipping entails finding the right deal, fixing it, and then selling it to make a profit. Usually you’re looking for homes that are deeply discounted, and in disrepair. Flipping can be a great way to make money, and that’s why it’s alluring. Many flippers can make anywhere from $40,000 to $70,000 on one deal alone. However, it’s important to remember that flipping is transactional.

It’s like having a paycheck-based job. You have to work constantly, and always be on the hunt for the next project. Flippers have to hustle! A typical project takes about six months to complete, and then once you profit off the sale, you’ll need to move onto another to make more money.

If you want real estate to be your new full-time career, then maybe flipping is for you. For most new investors, passive income is the way to go. Buy and hold investing is a great way to sit back and collect rent checks, without neglecting your family, job, or other commitments. If you're thinking that being a landlord doesn't sound very passive, read this post on hiring a property management team. 

If you put the right safeguards in place, renting out your properties can be passive and scalable. Our properties earn an average monthly rent of $700. Each property brings you cash flow every single month, the tax benefits are tremendous, and it’s a great way to build your net worth. No contest, owning rental properties is the winner in my book.  

What are your thoughts? Come leave a comment on our YouTube channel. We love hearing from you!

If you’re interested in a totally done for you buy and hold experience, book a free, no obligations call with our team. We’d love to talk about your goals, and how you can attain financial freedom through rental real estate.  

Flipping houses and owning buy and hold rental properties are two of the most popular real estate strategies. These two strategies work very differently, and generally I recommend that you choose one path. But which one is right for you?

How to Buy Rental Properties Out of State

When most people decide to become a real estate investor, they typically start searching for properties in their hometown. I get it. It seems like the easiest way to begin. If you find yourself searching for homes on Zillow, or driving around your neighborhood, I’d advise you to stop as soon as possible.

Hear me out: The markets with the highest ROI are most likely not where you live. I know for me, the best properties are not close to home. Here in New Jersey, it’s expensive to acquire a home. And don’t even get me started on the property taxes…

That’s why I recommend investing across state lines. You might think that sounds scary. Most people think that being so far away from your rentals sounds like a pounding headache.

It can be, but it doesn’t have to be. If you put the right strategies in place, your real estate business will run seamlessly, and you’ll reach your ultimate goal: passive income! Here are seven steps you need to take in order to invest out of state.

1 ) Know that you can’t do it alone. You need to have a team in place; otherwise you’ll be pulling your hair out. You can either use a turnkey provider, and if you’re interested we’d love to help you with that. Otherwise, get busy assembling a team. You’ll need to surround yourself with reliable people you can trust—a contractor, property manager, insurance company, and a title company.

2) Fall in love with ROI, not real estate. I’ve said it before, and I’ll say it again: all properties are the same! They’re just four walls and a roof. It doesn’t matter what your property looks like. What matters is that you’re receiving cash flow every month. Find the right deal, not the cutest house.

3) Choose a legal entity. Personally, I use LLCs at the discretion of my accountant and lawyer. You should also consult your accountants and lawyers. Once you figure out which business structure is most beneficial, and in which state you need it, it’s very simple to set up. Find the department of state website in your property’s state, and click on the “Start a New Business” tab. In my experience, it’s very easy and costs about $100.

4)  Use a property management team. This is critical. If you’re thinking, “I can collect a rent check myself,” please reconsider. There are endless benefits to working with a property management team. They’re experienced and on site. They know the market, how to price appropriately, how to screen tenants, etc. Here’s how to find the right team for the job.  

5) Do your research! Take a look at the market, the neighborhood, and read up on the process of real estate investing! If you need a few suggestions, here are five of my favorite real estate books. However, there is such a thing as doing too much research! Don’t get so caught up in the learning phase that you never take action. There has to be a balance. Figure out the basics, and then learn as you go.

6) Get an inspection. Your property needs to be up to codes. Additionally, this is not ALL about the money. Part of your motivation should be to provide a safe and stable home for your tenants. For more about appraisals and how to handle them, check out this video series.  

7) Now, relax! If you’ve got these pieces in place, everything will work out. If you make mistakes along the way, don’t allow it to derail your progress. Stay motivated, focused, and start collecting those rent checks! 

Investing across state lines might sounds scary. Most people think that being so far away from your rentals sounds like a pounding headache. It can be, but it doesn’t have to be if you put the right strategies in place.