The Scary Truth About Your 401k

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Let's talk about the 401k. If you're like most Americans, you've been conditioned to believe that the 401k is the best retirement plan around—the end all be all. Chances are, you've seen advertisements for companies like Fidelity and Merrill Lynch that aim to convince you that your retirement will be rosy if you just contribute a small chunk from every paycheck to your 401k. 

This is a blatant lie, and the sad thing is that most people believe it! They spend the majority of their lives contributing to a 401k with the false promise that maybe someday they might be able to enjoy their lives. Here's what's really going on: those big companies make a lot of money off of your plan. This is why they're running commercials. Not to line your pockets, but theirs. 

Did you know that the average 401k at retirement is only $90,000? I don't know about you, but I don't think I could live on $90,000 for the rest of my life. Am I saying you should ditch your 401k completely? No. I realize the 401k does have some benefits. In fact, when I had an employer sponsored plan, I used it to create my own financial freedom.  But if you've been led to believe that the 401k is the ultimate retirement plan, you've been lied to. If you've been told you should under no circumstances touch your 401k, you've been lied to. That's what makes my blood boil: innocent people being taken advantage of. 

If you're thinking, "But Clayton, everyone knows it's important to diversify your portfolio," I challenge you to think about that message too. I'm sure your financial advisor is a perfectly nice person, but he or she has probably recommended you diversify by investing in stocks, bonds, or annuities. Why? Because he or she receives a commission-based wage. This isn't some conspiracy theory, it's a fact. Check out my interview with financial advisor Brent Sutherland. 

So if retirement companies and financial advisors don't have your best interest at heart, who is going to be your advocate in creating financial freedom and planning for retirement? You are. Go out there and take personal responsibility for your wealth building, because no one else is going to do it for you. Read Rich Dad Poor Dad, subscribe to my podcast, and start to challenge every message you've ever been told about retirement. 

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Top Ten Podcast Episodes of 2017

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2017 has been an exciting year here at Morris Invest! I left behind my 18-year broadcast career in order to focus on my true passion: helping other people achieve financial freedom. A big part of that is providing consistent, quality content through our podcast, Investing in Real Estate

This year we covered a wide range of topics, sat down with some incredibly knowledgeable experts, shared our personal experiences, and documented stories of new investors who put their dreams to work! We truly love putting this show together for you three times a week.

Whether you're a faithful subscriber or are new to the show, we're so glad you're here! Thank you to all of you who have listened, subscribed, and left feedback. Here are the top ten episodes of 2017: 

10) How to Balance Assets vs. Liabilities
In our family, we try to calculate our net worth frequently, and we suggest you do the same! On episode 106, Natali and I sat down to discuss how to assess your assets and liabilities, and how to be appropriately leveraged in order to grow your portfolio.

9) You CAN Make Money with Low Cost Rental Properties – Interview with Robert Shemin
There are a lot of naysayers out there. You know the type: they spend every waking hour perusing internet forums, discouraging people from taking action. The problem is, the people that say you can’t are usually the very people who have never even tried. And one thing those kinds of people love to say is, “You can’t make money investing in low cost real estate!” That’s why we brought millionaire real estate investor, Robert Shemin to the show to discuss how he made his fortune exclusively through low cost properties.

8) Don’t Buy a House, Rent Instead
Most people pride themselves on owning their home. After all, it’s a major component of the American Dream. But as mortgage rates and home prices continue to surge, it seems that owning your primary residence might not be the best use of your funds. On episode 198, I sat down to discuss the major reasons why you might want to rethink owning your own home.

7) How to Leverage Debt to Build Wealth – Interview with Robert Kiyosaki
All of us at Morris Invest did a little happy dance when this episode aired back in August! Apple even featured this one on the iTunes home page! Talk about a highlight of the year.. Robert Kiyosaki, author of Rich Dad Poor Dad appeared on the podcast to share his personal real estate strategy, what has changed since he published Rich Dad Poor Dad, and the importance of having the right team by your side.

6) How to Leave a Legacy and Build a Life of Positivity – Interview with Lee Cockerell
What does it take to run a successful business? There’s not a magic formula, but a positive mindset goes a long way. On episode 206 Lee Cockerell, speaker, author and former Executive Vice President of Operations for the Walt Disney World Resort shared how you can create lasting success in your business by cultivating a mindset of positivity.

5) From Zero to 26 Properties in One Year – Interview with Jack Hoss and Josh Koth
One of our first-ever case study episodes highlighted the story of a new real estate investor who set a goal to replace his income from his photography business with passive income. Josh Koth’s story was already one of my favorites, but since that initial interview, he’s made incredible strides in his real estate career, including gaining a business partner and skyrocketing his portfolio!

4) Don’t Fall in Love with Real Estate, Fall in Love with ROI
One of the main pieces of advice I give people is to not fall in love with real estate, and instead focus on return on investment. The reason why I have to constantly repeat this mantra is because it’s really easy to fall into this trap! In fact, it just happened to me one weekend this fall. I almost abandoned my entire real estate philosophy! On episode 222, I discussed how I got an idyllic notion in my head, and eventually came back down to reality.

3) Getting to 17 Properties for Financial Freedom – Interview with Ember Pilati
I think we can all agree that the big wigs like Robert Kiyosaki and Robert Shemin are pretty fantastic. However, there’s something powerful about hearing a relatable, real-life story. Reaching financial freedom is not some far-fetched goal. This is a real accomplishment that real people achieve every day by putting a plan into action. That’s why I love sharing the stories of investors like Ember Pilati who are making their dreams happen.

2) 8 Tax Deductions for Real Estate Investors
My favorite tax accountant Tom Wheelwright likes to say, “if you’re a real estate investor and you’re paying taxes, then you’re doing it wrong.” One of the top benefits of real estate investing is the enormous overall implication on your tax burden. On episode 225, I shared eight deductions your tax advisor should be accounting for. I talked about expenses like travel, education, and much more. If you want to make sure you have all your bases covered in order to lower your taxes, you’ll want to hear this episode!

1) A Conversation with a Millionaire Retired Landlord  
After I quit my day job earlier this year, our accounting team advised we pick up a few more rental properties before 2018 in order to mitigate our overall tax burden. Natali and I came across a deal unlike the bulk of our portfolio, and decided to pull the trigger. I walked away from the closing with a life lesson from a successful, but tired landlord. In episode 241, Natali and I sat down to discuss what we learned from this experience. 

Here are the top ten real estate investing episodes of 2017 from Morris Invest.

How to Stop Setting Yourself Up for Disappointment

If there’s one common theme I’ve noticed from speaking with investors, it’s this: it’s not until we relinquish our fears that we can take action. If you let fear hold you back, you’ll never succeed. I've committed to not sweating the small stuff, and I challenge you to do the same.

In real estate investing, you have to trust the process. If you’ve done your due diligence, and put all the pieces in place, then it’s time to stop worrying. The best thing to do is to take a step back, and take a deep breath. If you spend your time immersed in anxiety, pondering the potential obstacles you could face, then you’re just looking for ways to be disappointed.

And if you look for those disappointments, you will find them. You can always find a reason not to take action, to hesitate, or to procrastinate. You can let the fear of failure stop you. In fact, you can find a million reasons not to take action: the possibility of dealing with the Board of Health, or the chance that you might have a vacancy, etc. Do you really want these small issues to create you from building wealth? 

The true difference between successful investors and those who sit on the sidelines is that successful investors view no situation as an emergency. In life, and in business, obstacles are inevitable. It’s how you handle those obstacles that matters.

The reason this topic is on my mind is because I too, struggle with sweating the small things. However, this year I’m committing to look at the big picture, and to stop worrying about minor details. I hope you'll consider making the same commitment in order to succeed. 

Ready to take action? We'd love to match you with a cash-flowing rental property in one of America's best rental markets. Click the red button below to book a call with our team. 

It’s not until we relinquish our fears that we can take action. If you let fear hold you back, you’ll never succeed.

Calculating Depreciation on a Real Estate Investment

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Depreciation is one of the most powerful tools available to you as a real estate investor. Why? It helps you keep more money in your pocket, instead of sending it off to the federal government at tax time. This is a fantastic method used to mitigate your overall tax burden, so you’ll want to know exactly how it works in practice.

Per the federal government, every year for 27.5 years you can claim depreciation on a property to offset rental income. This is because the government recognizes that things fall apart over time, and the value of your property will decrease. 

Let's say you own a rental property valued at $50,000. Here's how you would calculate depreciation on that investment: 

$50,000 / 27.5 years = $1818

That's $1818 you can claim on your taxes every single year for 27.5 years to offset your overall tax burden! In this scenario, let's say your property brings in $5000 every year in rental income. Instead of paying taxes on the full $5000, you get to subtract your depreciation!

$5000 annual rental income - $1818 in depreciation = $3182

Wouldn't you rather pay taxes on $3182 than $5000? It's a no-brainer! That money adds up every year, for 27.5 years! That's why depreciation has incredible implications in real estate investing. 

To learn more about maximizing depreciation, check out this podcast episode where I interviewed tax genius, Tom Wheelwright. We spoke extensively on cost segregations, deductions, and more. 

If you want to learn more about how rental real estate can help you create passive income and offset your taxes, let's talk! Click the button below to schedule a free 30-minute call with my team. We'd love to discuss your real estate goals! 

Depreciation is one of the most powerful tools available to you as a real estate investor. Here's how to calculate depreciation and keep more money in your pocket.

Real Estate Tax Deductions You Need to Know About

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My favorite tax accountant Tom Wheelwright likes to say, “if you’re a real estate investor and you’re paying taxes, then you’re doing it wrong.” One of the top benefits of real estate investing is the enormous overall implication on your tax burden.

Through my experience investing in real estate (and working with a great tax team), I've learned these powerful deductions that can alleviate your overall tax burden: 

  • Depreciation - The current tax code allows an investor to claim depreciation on each property for 27.5 years in order to account for wear and tear. Claiming depreciation is a powerful tool for mitigating your overall tax burden.
  • Travel – Whether you invest in your backyard or out of state, travel expenses count as business expenses. Keeping track of mileage, car rentals, airfare, and hotel stays is a way to qualify your business expenses are eligible write offs. Even meeting with your accountant or attorney can be a deduction.
  • Vehicle – If you use your vehicle for business purposes, you can write off a percentage of your vehicle purchase. Tracking mileage and gas is also a way to turn your daily driver into a legitimate tax deduction.
  • Meals and entertainment – When you have meals that qualify as business meetings, you can count them as a business expense. Natali and I have lunch dates with an agenda where we speak solely about our real estate business.
  • Education – Enrolling in courses or classes to broaden your real estate knowledge counts as a business expense! Even services like Lynda or a subscription to the Wall Street Journal are educational expenses that qualify as business expenses, and are therefore deductions.
  • Pay children – Since our real estate venture is a legal business entity, we are able to give our children jobs and pay them accordingly. They work for our business by doing small administrative tasks. For example, every Saturday, it is their duty to shed documents, put stamps on envelopes, and deliver outgoing mail to the post office. Similar to any other employee, this counts as a tax deduction.
  • Home office –  If you have an office in your home used solely for business purposes, you can claim part of your home as a business expense. There are strict stipulations surrounding this one—your office must have a door, and it must be exclusively an office. A guest bedroom/office or home gym/office does not qualify.
  • Management fee -  If you’re working with a property management team, their monthly fee is a legitimate business expense.

We aren’t CPAs, so please consult your own tax advisor. However, as you grow your portfolio, it’s incredibly important that you work with an accountant who understands real estate. Hear Tom Wheelwright’s tips for hiring the right accountant on Investing in Real Estate! 

There are some powerful deductions that can alleviate your overall tax burden as a real estate investor and small business owner.

The Powerful Appeal of Single-Family Housing

If you're running the numbers, it might appear that purchasing a multi-family investment is a better choice. On paper, the ROI is higher. However, I’ve noticed something interesting about single-family properties that makes them a better long-term investment vehicle. 

There's an interesting psychological pull that occurs in a single-family home. Tenants love coming home to a single-family house. It feels like their house, and they want to care for it. It just feels good to come home to an actual house with a driveway and a yard. Their children can grow up in an actual house and sleep in their own bedrooms; their pets can play in the fenced-in yard. 

They view the property as their home, and I love that. Not only do the tenants take care of the house, but they also tend to stay a long time! It’s not uncommon for me to sign a multi-year lease on a single-family home.

If you look at the numbers, multi-family rental properties tend to have a higher tenant turnover rate. The tenants simply don’t get attached like they would to a single-family home. An apartment or duplex simply doesn’t have that homey feel.

I do own a few duplexes, but there’s something about single-family homes that works for our business. I don’t have to deal with some of the issues that accompany hosting multiple tenants on the same property. There are bound to be issues when you have many people living in one space. In single-family homes, you don’t have your tenants complaining about each other.  

Interested in picking up a totally done for you single family home in America’s best rental markets? Let’s talk! Pick a 30-minute time slot from our schedule, and we’ll talk about how turnkey real estate can help you reach your goals.

On paper, the ROI for a multi-family investment is often higher. However, I’ve noticed something interesting about single-family properties that makes them a better long-term investment vehicle. Here's why you should consider investing in single family housing as a landlord. 

Why I Love Low Cost Rental Properties

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If you spend any time in internet forums, you'll hear a lot of opinions why it's unwise to purchase low cost rental properties. You'll hear horror stories about how affordable homes are in unsafe neighborhoods with unstable tenants and high crime. 

This could not be further from the truth. I love low cost properties! In fact, low cost rental properties are how many successful investors, including Robert Shemin, have made their fortune and achieved financial freedom. And you know those naysayers hanging out on internet forums? The thing is, most of them have no first hand experience to back up their claims! I'd rather follow in the footsteps of people like Robert who know what they're talking about. 

The bulk of my portfolio is centered around single-family homes in the $40-50k range. These homes are in America’s most affordable cities, in C neighborhoods where blue collar Americans live. My tenants are great, hard-working people. Many of them are nurses, principals, post office workers, and long-haul truckers.

If you were to walk down the streets of one of these neighborhoods, you would understand that it is not dangerous or scary at all. These are perfectly safe neighborhoods. In fact, here’s a video!

Why do these types of homes in these types of neighborhoods work as an investment? Cash flow! A typical home in the markets where I buy brings in $700 in rent every single month. Additionally, these neighborhoods are largely unaffected by economic downturn. Long-haul truckers and nurses don’t lose their jobs when the economy crashes.

More expensive homes just can't compare when it comes to ROI. Sure, you might be able to bring in more every month, but the cost to acquire is much higher. I like to say that A class properties make for A class headaches. Read more about that here. 

If you're interested in picking up your very own low cost property in one of America's best rental markets, book a call with our team! We'd love to match you with a property that will bring you closer to your goal of financial freedom.  

Low cost rental properties are how many successful investors have made their fortune and achieved financial freedom. Here's why they can be so great!