388 | Are Non-Recourse Loans Worth It Right Now w/ Guest Investor Glen Shenkin

As interest rates start to go down, we know home buying activity (and pricing) will start to tick up, but what does that do for investors looking to buy with debt in their retirement accounts?

That's why we're bringing Glen Shenkin to the show as a guest investor!

Glen has built up a portfolio of homes in his retirement account.  These homes have amassed some serious equity.  He's thinking about refinancing some of them to pick up another home with non-recourse financing.  BUT he's getting close to retiring so he's cash flow sensitive!

He'll join JWB co-founder, Gregg Cohen, to talk about:

- how he built up his portfolio in retirement
- what the numbers look like right now for non recourse loans and cash flow
- why it may or may not make sense for him to buy with non recourse at this point in his journey
- and more!

Join us for a live look into a real life buying decision and get your own questions answered too!

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Transcript

Gregg Cohen: 1:17

Welcome to the Thursday edition of the Not Your Average Investor Show. I'm your host, Greg Cohen. We have an incredible show today. Today we have a very special guest and we're going to be talking about whether or not non recourse loans are worth it. These are loans that you can get by buying properties inside your retirement account for those who are not familiar with what a non recourse loan is. And we have an incredible guest that's going to help us dig into that and give you an incredible amount of value. As I mentioned, I'm Greg Cohen, and I'm super excited that you're here today with us on the Not Your Average Investor show. And as I mentioned, we have a very, very dear friend of the show a long time JWB client that I get to do a special introduction for. He, is an avid motorcyclist. He is a, was a member of the Merchant Marines. Was in corporate facilities and real estate management for 30 years and he saw the light and went deep into the education of real estate investing in 2016. Since then, he has flipped a number of homes over eight homes, but his real passion is being on that motorcycle and the passive income that can come with that. Investing in rental properties. And he found JWB in 2017 and currently owns four JWB properties that we've been able to build a portfolio for him. He is none other than a good friend of the not traveling investor community. Mr. Glenn Schenken. Glenn, welcome to the show.

Glen: 2:53

Welcome. Thank you. Hello, everybody.

Gregg Cohen: 2:55

There we go. How about that? Glenn is a supporter of JWB cares and Glenn. Was somebody who took up my daughter Bella as she offered to make bracelets to support JWB cares. So Glenn Thank you very much for your support for JWB cares for my daughter as she is You know a young entrepreneur and somebody who is passionate about creating affordable housing opportunities for people here in Jacksonville as well. So pretty cool. You're a

Glen: 3:22

little sweetheart. I'm glad I could help.

Gregg Cohen: 3:24

That's right. And Glenn was here for the, for the Not Your Average Investor Summit and got to see not just what's going on in downtown Jacksonville, not just to, to meet the team here, but to see all of you here. And everybody that we have as a member of the Not Your Avid Investor community, you guys show up in force every Tuesday and every Thursday. And we absolutely appreciate all of you. We've got, geez, 50 folks or so that are live here watching the show. And we couldn't do what we do without your support. So thank you all for being here and glad it's a perfect time for us to do a little something that we call the roll call. You in for it?

Glen: 4:00

Let's do

Gregg Cohen: 4:00

it. All right, my friend. Let's see who we've got here leading off today. Number one, we have Cody Adams, the mama bear, our community manager, saying hello to everybody. If anybody needs anything in the chat, or you'd like any information, or you want to reach out to JWB and set up a phone call, just hit up Cody here in the chat, and she will be happy to facilitate. So thank you so much for everything you do, Cody. And with that, we got the MVP, Mr. Lee Bishop, saying hello, everybody. We've got the early bird, Dean Curry, saying hello. We've got our leadoff batter batting fourth today, John Heading, saying good afternoon. We have the real estate maven from Denver, Colorado, Leslie Wilson, checking in. She says, greetings from Cancun. That sounds nice and warm. Hope you're having a blast down there. Leslie, we've got Allie King, JWB teammate, saying hi all. Awesome to have JWB teammate support in the show here. We've got John we've got Jeff Pettyjohn saying hello. We've got Gary, our regulars, Gary and Rosalynn Riley from Murrieta, California. We regard you. Thank you so much for being here. Let's see who else we have here. We have Mark Sauer saying hello from Cincinnati, Ohio. Mark, you're becoming more and more of a regular. We appreciate your support. I hope you're having a blast here on the Not Your Average Investor show. We've got the ringmaster, Drew Barnhill saying good day to all. Let's see here. We've got a past guest of the show here just a week or so ago. The man of steel, Mr. Vincent Barbarite checking in, saying hello. Good to see you, buddy. We've got the Shaw man, Nadim Shaw, saying hello. We've got the, the mountain man, Billy Green, from the, and, good morning from the infructuously tepid mountains of Colorado. Billy Green, always. Breaking out the Webster's Dictionary and tripping up Pablo and myself during the roll call. You're doing, you're doing a great job of that, my friend. we have, Pablo's lady, Jag Chata saying, hello, Jag. Great to see you. We've got, Steven Chmielewski. We've got Margaret Smith checking in. We've got just an incredible group here. So thank you all for being here. Adam Berger, hello from Cincinnati. It's great to see you all here. And with that, Glenn, I think we're ready to get the party started. You ready? I'm ready. All right, my friend. So, Glenn, let's talk about, before we get into non recourse loans and investing in rental properties with your retirement accounts let's get into you and your background and your background as an investor. Can you tell everybody about a little bit about yourself how you started to invest and the types of things that you're investing in and why.

Glen: 6:35

Sure. So a lot of it dates back to my early youth. My father was a builder. I grew up on the jobs, so very familiar with houses and lived a great middle income life as a kid. So I saw the value in houses. From my father. After that went to the Merchant Marine Academy, shipped out for six years and then a ship is very similar to a building. It just happens to float rather than sit on the ground. Got into corporate facility management and real estate. Did that for 30 plus years. And decided it was time to do something different. I, my son and I took a fortune builders course together and decided to get into the house flipping business along with investing as a fortune builder showed and made the introduction to JWB. So I thank them for that. I. probably wouldn't have known about you had it not been for them. so that was late 2016, 2017. I bought my first house with you. When I left my corporate position, I took my 401 and after learning about solo K's, I put the money into a solo K and purchased that first house for cash with you. I don't remember the specific years. I believe it was 2018. I bought the second house for cash. And then I started looking at the non recourse loans, which allowed me over the next couple of years to buy three additional homes then for me. One of the biggest advantages to doing it with the non recourse loan was I did it all tax deferred. I didn't owe any taxes when I developed the solo K. And you know, other than property taxes we don't, I haven't paid any taxes on any in the investment money.

Gregg Cohen: 9:02

Wow. I mean, that is something that a lot of us can learn from right there. I think your whole entire journey is something that a lot of people can relate to parts of it. And parts of it, people are like, how the heck did you do that? So let's kind of break down. You had a very successful career in, corporate, Facilities and real estate management. So let's just call it corporate America ish regular w 2 world there, right? You built up a nice retirement account of 401k there. You decided to have a change in your career and to go into More of an active investment or a passive real estate investment type of a scenario But you made a very different decision than what most people would expect average people would do. You decided to invest in your education so you could learn about things like a solo 401k and a non recourse loan which led you to have the opportunity to invest. in an asset and not have to be burdened by those taxes, which most other investors are, especially if they invest in real estate. They don't know how to do it without paying taxes. But most of, most of the folks here don't know even what those terms are. Can we just start, could, could, would you mind sharing what, And it doesn't have to be the technical definition, but to you, what, what is a solo 401k and what is a non recourse loan?

Glen: 10:23

So to me, a solo 401k is I get to choose what I want to invest in rather than Fidelity or Fisher or one of those companies giving me limited choices. The solo cake gives me unlimited choices. And having had the background in the real estate, as long as I did, I chose real estate, the non recourse loan. While you have to put down 50%, it does protect you personally from any recourse, thus the non recourse. So that was attractive.

Gregg Cohen: 11:06

Yep, and actually we'll, we'll dig in a lot to these non recourse loans on the show today. We'll go through what the current rates are and what the down payments percentages are that are required because a non recourse loan is specifically a loan that goes towards a property that is purchased inside the retirement account and property that is purchased inside your retirement account is completely different. Then a property that is purchased outside of your retirement account when it comes to the type of fining that you can get. And if we just start at square one, most people don't even think you can own properties in your retirement account. but Glenn and myself and many in this community are shining examples that you can do that. And if you, if you get to that level where you can actually see how that works, you're way above where most average Americans are because they don't think that's possible. The next step is how can you actually get debt or leverage to inside your retirement account to multiply the number of assets that you have in your retirement account. And that's one of the reasons we're so excited to have Glenn here today is because he's lived that as well. And the third thing is then you can see. How do you get to the other side where that debt is actually paid off? And for Glenn, Glenn, if you wouldn't mind, talk about your journey to where you are now with those four properties being completely paid off.

Glen: 12:30

So, after having bought the two for cash and the three for non recourse loans, I waited a couple of years and came back. Talked with Greg's team and said it was getting close to where I wanted the money to live on. We worked out a situation where JWB bought two of the houses back from me. I paid off all three loans and had enough money left over to buy a fourth house with cash. So that leaves me now with four paid off homes. And money coming in every month.

Gregg Cohen: 13:15

So, that's just a great example of a vertically integrated company who starts with a plan in place for a client and then works that plan all the way through to the end. And we're nimble enough to be able to adjust when certain things come up and we have the solutions and it's all under one roof. So, I mean this is a really cool example where not only can you start with that plan, increase the number of assets that you have in your retirement account. Meaning the number of properties you get in your retirement account because you got loans in order to get those. But then, through an aggressive schedule of paying those loans down, whether that's either through paying additional mortgage payments on the loans, or even just selling in assets so you can take the money that Glenn earned and pay off the other assets, however we can get there. It's to Glenn's advantage because now, because his lifestyle requires a certain amount of income, he doesn't want to have those debt payments on that, on that portfolio anymore. Now he can enjoy hanging out on the motorcycle and going to bike week and bike Toberfest knowing that he has four properties owned free and clear. And as we get into non recourse loans, Glenn, you and I were chatting before the show, but would that have been, would you have been able to have four free and clear paid off properties if you had not taken on the non recourse loans?

Glen: 14:37

No, I never would have been able to buy. the three additional homes from the original two without the non recourse loans. So it gave me the funding available for those purchases.

Gregg Cohen: 14:53

So for everybody out there, this is a, this is almost like a complete life cycle of how a non recourse loan can be a tool and be helpful for your financial situation. So I think it's great to kind of share the big picture. We're also going to show the other side of the non recourse loan. We're going to talk about when it really makes sense for a client, and we're going to talk about when it doesn't make sense for a client as well. Cause there are some things that are a little scary about non recourse loans today as well, but it's really great to see such a, such a shining example of starting out with a plan, right? We've got a wonderful relationship with Glenn, of course, over the years, he's placed his trust in us and our team has continued to come up with those solutions so that we can match that income level. for the quality of life that, and the income level that is required for that quality of life for Glenn. So, I think it's really cool to see it come full circle. Glenn, could you take us back a little bit and just talk about, now that we've seen kind of the big picture, let's start at the beginning. Many people have no idea how to start when it comes to buying a property in their retirement account, or Where, how to go from a 401k that's in a, call it a W 2 kind of corporate America type job. how do you unlock that? How did you unlock that to, to get to a place where you could use that retirement account money to now have these four assets owned free and clear in your, in your solo 401k? Can you, can you talk about the challenges that you faced and then how you overcame those?

Glen: 16:14

the challenges because of the education I received, as you mentioned, I took a little bit different path, got some education the roadmap to rolling over out of my corporate account into the solo was fairly Easy J. W. B. recommended at the time. Horizon trust as a, partner to work with and through probably. Four meetings between JWB and horizon trust. the paperwork was completed and the money was transferred. So for me, the bigger challenge was going to get the education at the time to learn how to do it properly and then making the right connections.

Gregg Cohen: 17:06

I think that's where it all starts. We talk about the value of this community. It's the education that comes from this community. And then it's the, you know, just the connections to people that are, that are doing it. And for any of you who are thinking about wanting a better retirement account and a better way to do it, I'm sure you're gaining some confidence from. From seeing Glenn's story, and there's dozens of other stories from the roughly 80 folks that are on the show live listening in, so that's why I would encourage you to say hello in the chat and make a friend. Cause that's really where all this starts. It's the way it started for me as well. It started with education and with relationships. But there is some, there is some, some, it's not hard work, but it's, You know, it's a little taxing, that process of rolling over your funds from a typical 401k into a solo 401k. For everybody out there if you haven't done it before. But through those partnerships you're able to, to, to do that. It, it might take a few weeks. You have to find the right partner. It's a series of phone calls. There's some different terms that you need to understand. But when you start to think about the outcome that Glenn's created for himself, you start to see why it's such a an advantageous thing to do. Glenn, we're getting some questions here specifically from the audience on your, on the solo 401k activity. we've got the MVP, and he says, Glenn, is your solo 401k LLC, a Roth IRA account, or a straight self directed IRA.

Glen: 18:25

Is a straight directed, it is not a

Gregg Cohen: 18:27

Roth. It's not a Roth, right? And so we're, we're throwing around a few terms here. A solo 401k is a self directed retirement vehicle and you have different types of self directed retirement vehicles. Solo 401k is an example of that. There's also a self directed. IRA and there's a self directed traditional, excuse me, a self directed Roth IRA. And so there's a few different vehicles that we have here, but the key here is, and this is what Glenn shared early on, the reason that he did this is he wanted to have control over his investments. You know, if I'm kind of speaking for you a little bit, Glenn, you're probably looking at the options that you had in your traditional 401k, or excuse me, yeah, your traditional 401k when it was with your previous employer, and you're probably like, there's like five or ten options here. I want to do something else that I probably have more knowledge, experience, and I think is a little bit of a better asset. Did I, did I kind of put words in your mouth there, or is that largely how you were feeling?

Glen: 19:27

Well, that, that's exactly it. The 40, the self directed 401k gave me the opportunity to choose a multitude of investment vehicles rather than fidelity giving me a limited choice. Mm hmm.

Gregg Cohen: 19:45

There you go. So, control, more choices, and one of the things that that Glenn and I were talking about right before we jumped on the show is I, I hear of, there's a lot of folks out there that are switching jobs at this time. One of my best friends is just switching, switching a job. And I just was talking to him last week and I said, What you definitely should not do. Well, let me scale back a little bit. I try not to do always enough. I said, what you really, really, really want to take a hard look at is whether the best thing for you to do is to roll that 401k that you had earned at your previous employer into a new employer's 401k plan, or consider going the self directed option. Because what many people just do blindly, that's what they've been told is just they take their previous 401k and they roll it into their next. Employers 401k, but there's really not a whole lot of benefits to doing that. It's not like you're getting the matching on that, on that money. You know, your previous employer is not matching you anymore. Your new employer is going to match you on the money that you put into the new employer 401k. But if you just roll your previous employer's 401k into the new one, you're just restricting your options. You could do it like Glenn did, which take the previous employer's 401k, put that into a solo 401k, or a, or one of those self directed retirement account vehicles, and just open up your options there. You're not taxed on it. If you do it the right way, there's really no, no downside there. And then of course you would continue to earn your 401k and your new employer and hopefully get the match there. So just, if anybody's thinking about that, please take a minute and You can call JWB. We can talk through other clients that have had success rolling that over. I would definitely encourage you to reach out to your CPA and talk about that. I'm not a CPA. We don't have a CPA on staff here. So don't call JWB and ask specific tax questions there, but just know that there is an alternative there. And what that can do is free up potentially hundreds of thousands of dollars for you. that you could then invest in rental properties or private lending or anything that would be an alternative investment there. So, all right, Glenn, we got another one. Jeff Pettyjohn says, do you have to deal with unrelated business income, otherwise known as UBIT? And if so, how did you find an accountant to help figure that out and the taxes on it? Do you know about UBIT, Glenn?

Glen: 22:09

I don't. That's new to me. Hopefully I haven't missed something.

Gregg Cohen: 22:13

Well, there's a reason that you don't know about UBIT. It's because you are not subject to UBIT. And again, I'm not a CPA. Consult CPA for tax advice. But when you invest within a solo 401k, you're not subject to UBIT. UBIT is unrelated business income tax. And, you can, it basically, if you take out a loan in your retirement accounts, you have the potential for being taxed on that money, that you earn as a percentage of it. And that's called unrelated business income tax. through Glenn's, relationship and education, he was able to learn about investing in a solo 401k and a solo 401k is not subject. So, it's all good that you don't know about YouBit, Glenn. You're not on the hook for it because, again, the value of your education, you know, again, a credit to our friends over at Fortune Builders for pointing in the right direction there. All right, Glenn, we've got another one. You guys are firing in some great questions. We'll take a couple more here and then we'll save a few for the remainder of the show as well. But, Conrad Gassney, which I think is a new name, Conrad, welcome to the show. Thank you so much for the question. Glenn. He says, when Glenn sold the two properties back to JWB, did he have to pay capital gains taxes?

Glen: 23:21

I did not, because the money rolled back into the 401k. before I turned it back over to JWB to buy the fourth house with

Gregg Cohen: 23:34

cash. That's the beautiful thing. This is how you're able to invest in real estate and not pay the taxes when you sell an asset. It's because it's in that tax deferred vehicle, which is the solo 401k. So great question, Conrad. And you're really getting to the, to the, to the, to the meat of what this call is, is that you can invest In assets and not be burdened by paying the taxes on it, which helps your assets grow tremendously. And, you know, eventually I get to a place like Glen is where those assets are paid off and his lifestyle is supported by money that he hasn't had to be burdened by the tax man.

Glen: 24:11

Yeah. And for that matter, none of the monthly rent is taxed either. I don't have to claim that each year because it's just going back into the solo. Okay. Okay. Exactly.

Gregg Cohen: 24:24

Exactly. So I, I will say it's not all roses. You do have to pay taxes at some point. And. Yes. You know, again, this is. Which

Glen: 24:32

I'm starting to do. There we go.

Gregg Cohen: 24:35

It's a tax deferral strategy. The cool thing is that. Glenn gets to decide how much he wants to be taxed. Whereas when you typically buy and sell real estate, right, you have to pay capital gains taxes on it if it's outside of a retirement account. When you do it inside of a retirement account, you can buy and sell assets. It all stays in the retirement account. When Glenn decides to transfer and distribute money from his Solo 401k to himself personally, then he has to pay the taxes on that. But I'd much rather be in control of what, what I want to pay the taxes on, rather than being forced to pay them the other way around. Now it's at a lower rate. There you go. Now it's at a lower rate. Glenda is living, portfolio management and planning and education and relation, he's living it out in front of everybody here, and you can see, You know, how it all coming together is how you can be super successful. and now you can ride your bike all down. I was asking Glenn, he, you came to, um, in the bike week, right after you did the summit and I was like, are you, are, did you, did you start your, your bike? Did you start your ride from, Massachusetts? He said, I'm not crazy, but I will tell you, you know, I've talked enough to Glenn to know that he's rides all over the country. Where's, where, where else do you ride? Other than bike week? No.

Glen: 25:48

I've been out to Sturgis. From Sturgis we went to the Grand Tetons, up to Yellowstone, crossed Beartooth Pass into Montana, back all through Wyoming. this year, I'm going to Glacier National Park, to do, there's a road called Going to the Sun, and it's supposed to be spectacular, so I want to go ride that this summer. The fall, I'll be down in Tennessee, in the Smoky Mountains. So if there's a road, I'll ride on it.

Gregg Cohen: 26:23

That's pretty awesome, man. I've, I've been out to Yellowstone and the Grand Tetons with my family, and I can just imagine, being an avid motorcyclist like you are, that's, I mean, that is pretty cool. That rides pretty cool.

Glen: 26:34

It's amazing. I would encourage anybody to go out to the Dakotas and Wyoming and Montana. I don't care if you're in a tour bus, on a bicycle, in a car. It's spectacular if you've never seen

Gregg Cohen: 26:49

it. 100%. What it does to me is it just takes all the problems that we all face in the world, and when you're looking at the beautiful mountain ranges, it just makes them seem really small, which I think is really good for us. You know, you're just like, listen, beautiful day. The big problems that we think we all have, we can overcome them. All right. So I wanted just to kind of do a little bit of a teaching moment here to help everybody understand when non recourse makes sense for you as an investor and when it doesn't. So, I've put a couple of slides together for everybody here All right, And we're going to start off with our lovely, uh, disclaimer, uh, which, always got to do as we have more and more folks checking out the show. We're about to get into some numbers here as I show the difference between, uh, when non recourse can really work for you, and when, might not be the best idea. And so we're going to look at expected returns on investment, we're going to look at real numbers. these are estimates, these are not guaranteed, and I am not a financial advisor. So, I would highly encourage you to do your own due diligence before making any investment decisions. And, with that, we will get this party started here. So, big question right now is, does a non recourse loan make sense? So I put some numbers here together. And we're going to go with the scary part of non recourse loans first. Let's talk about the scariest part of a non recourse loan. The interest rate, okay? What you have to understand from an interest rate perspective, is that non recourse loans create a very different set of risk for the lender than what a typical loan on a property would be that is not in your retirement account. So think about when you go to the bank and you buy your primary residence, you know, the interest rate's relatively low. And the reason is because if you don't make your payment to the bank, well, the bank is going to say, not only am I going to take the house back, But I'm going to damage your credit for seven years so that you can't buy another house. And that's a big decrease of the risk for the lender. And that's one reason why your interest rate is so low, relatively speaking. Well, when you buy a property in your retirement account, you're getting a very different type of loan because you are not your 401k. You are not your IRA. It's a different entity and your 401k or your solo 401k or your IRA does not have a social security number. And so for a non recourse loan, which is the type of loan that would have to be made in your retirement account, the lender is taking on way more risk. Because if you don't, if your 401k doesn't have a social security number and the 401k doesn't pay the loan back, well, the bank will take the house and But they can't attack your social security number. It will have no relevance to your personal credit score. And so, for that, those lenders need to be compensated. And as interest rates have, you know, gone higher, they were up to, jeez, 8%, you know, October November of last year. You would expect that the interest rate that's required for a more risky loan for the lender would also go up. So, a little bit of background there. All that to be said, the most scary part of a non recourse loan is the interest rate. Interest rates on non recourse loan right now are 15%. Prior to this, they were 12 percent and even at one point they were down to 10 percent when interest rates in the economy were a lot lower. But as interest rates have gone up, non recourse loans are now at 15%. Non recourse loans also require 50 percent down, so 5 0 percent down. Whereas, when you're buying a property outside of your retirement account, you'll be able to get loans and put down anywhere from a minimum of 20% up to typically 30 or 35 percent is pretty, pretty standard for outside of the retirement account. So, all these things are a part of investing in your retirement account and using debt This is just how non-recourse loans work. And I know that's new for some people. You know, but Glenn, when you started down the process, and I think it was your first, I think it was, I, I think it was three of the first five properties you purchased, had non-recourse loans on them, correct? That's right. You, you walked in knowing similar things, right? Knowing that interest rate was gonna be higher and higher down payment, why did you make the decision to do a non-recourse loan knowing those things?

Glen: 31:17

At the time, I was still, working pretty regularly and wanted the tax deferment ability. So, aside the 401k, let me do that. And to the best of my knowledge, you can only get a non recourse loan inside of the retirement accounts. Is that correct, Greg? Correct.

Gregg Cohen: 31:41

That's right, that's right, because your lenders, by definition, need to be willing to make a loan with no recourse. Recourse means they can't go after your retirement, go after your social security number if you don't pay the debt back. So yeah, if you are getting debt, if you're getting leverage and you're buying properties inside your retirement account, you won't be able to go to Bank of America or a traditional bank and say, hey, can you give me a loan in my retirement account? They'll look at you like you have. three heads. They'll say it's not possible. It is possible, just not through them. And that's where, you know, a non recourse loan comes into play. So, the interest rate's a lot higher than we all want it to be, but we need to train ourselves to think about the outcome here and understand if the risk is worth it for us to get to the desired outcome. For Glenn, his outcome was that he wanted to be riding motorcycles five to ten years after he started his investment portfolio with JWB and he wanted those assets to be paid off free and clear and he had a certain set, a certain bag of money, let's call it, And he said, I want to get as many assets as I can in that portfolio. And I want it to be owned free and clear when I'm, you know, five to 10 years down the road. And because he had that investor mindset, he went and he said, okay, well, I understand that my interest rate is higher than what I want on these non recourse loans, but we can put a plan together to get those assets into my portfolio and then get those things paid off quickly. And we were able to pay those things off. Geez. I think it's been six or seven years since you took those loans out, Glenn. So it's not like those loans need to be in place for 30 years. It's not like we have to pay 15 percent for 30 years. It can be used as a tool. But I want to show you a place where investing with a non recourse loan probably doesn't make a whole lot of sense for you as an investor right now. And so now we'll get to the numbers on the screen. So what I'm showing here is if we look at the top section here, this is if you were to come to JWB and want to buy one property inside your retirement account, let's say that you had about$130,000 in a 401k that you rolled over from a previous 401k into a solo 401k, and you said JWB, I'd like to to buy a property in my retirement account. Well, we would start to run some numbers like this, okay? We would see that you could purchase one property. 50 percent down would mean that you come out of pocket about 130, 000. This would include your down payment and your closing costs and all that good stuff. So you technically could do it from that perspective. But then we're going to look big picture and we're going to say, okay, well, what is your return on investment? Your initial return, your initial investment would be about 127, 000. We'd be able to generate significant capital over 280, 000 over the next 20 years. To put your portfolio value at about 407, 000 estimated by that year 20. But we're looking at how much is your money working for you. And your total return on your investment, your internal rate of return, is just 4. 9%. I'm here to deliver better returns than 4. 9%, generally speaking. It's not the worst. It's a consistent asset. But that's not everything. exciting. For me, it probably is not exciting for you. So that's the first thing we're going to look at. We're going to say, well, I don't know. I don't know about that. The next thing, and probably the more important reason why it's probably not a good fit for you as a client right now, is this year one cashflow number. You know, we talk about assets that pay for themselves every single month and every single year and that are assets because we have more income going in than expenses going out. And so we always look at year one cash flows for our clients. And for most clients, we want that to either be break even or slightly positive. It's okay to go negative for a certain client, a certain plan. We're not afraid to go negative. But they have to have other income sources to offset whatever negative and there needs to be a reason to go negative. You need to have a better return on investment potential. So it's okay here. But when I look at 7, 000 negative in year one, I don't like that. And so if anybody was to come to my team and say, I've got 130, 000 in my retirement account. I want to buy non recourse. We would politely say, hey listen, we don't think this is the right thing for you because of kind of the path that I've just walked you down right here. Now, there's other investments that you could do with JWB. There's private lending with JWB where especially in your retirement account, that can work quite well. So we would probably go down that path there. Glenn, anything that you see here that I didn't cover or something to point out, or do you think that was, that was largely kind of what you would have said as well?

Glen: 36:33

Spot on, Greg. So

Gregg Cohen: 36:36

then I said, all right, well, let's come up with a scenario where a non recourse loan at 15 percent could work for you. And so that's what this slide is showing. So now, same things that we're looking at, starting out with the purchase details. Well, now we're going to buy one property inside your retirement account with one cash purchase. And cash purchases have a tremendous amount of net rental income coming in, as well as the other profit centers. But that's where cash purchases shine. So we're going to put a portfolio together. We're going to have one cash purchase in your retirement account. We're going to have one non recourse loan. This might be some, somebody here is listening, where let's say you just left a job and let's say that you had 400, 000 in your 401k with your previous employer. And you're saying, I want to be able to have the options and the control and the flexibility to invest in what I want to invest in now that I'm no longer a part of that previous company, just like Glendon. Well, if you came to JWB and you said, listen, I've got 400, 000 in this old 401k, how can I build a better portfolio? This is a path that we may go down with you. So if we bought one cash And one non recourse loan, that would put your total portfolio investment to about 358, 000 here. The cash purchase, I'm using a purchase price of, and closing costs included, of around 230, 000. And again, for the non recourse loan purchase, you're able to put 50 percent down, so your total out of pocket is about 127, 000. Now, over 20 years, The numbers start to change. Your total initial investment of about 358, 000. We bring returns through this asset and through JWB's management of over 880, 000 over 20 years. And that brings that total portfolio up to over 1. 2 million by year 20. That's what it would be estimated at based on historically accurate data. assumptions. And that means your money is performing a lot better than what it was previously. It's performing at 7. 1 percent for a return on investment each and every year. And getting 7 percent in your retirement account with the consistency that comes along with owning real estate, I'll take that all day every day. Most people don't have that and certainly don't have the consistency or the income that's generated in their retirement accounts. And then of course, we're looking at year one cash flows. And now because we have the influx. And the large amount of net rental income from the cash purchase That offsets the negatives that come from the non recourse purchase, and year one cash flows are over 3, 000 for this portfolio that we're talking about. So two examples here. The first one, just a non recourse loan, doesn't typically make sense today because of the net rental income and because of the lower return on investment. But non recourse still does have a place. It has a place in a combination type portfolio, where if you combine it with cash and non recourse, you can set yourself up for a better retirement through rental properties. How'd I do there, Glenn? Perfect. Cool. So here's the big win, and this is what Glenn is living out, right? The goal here is to use the debt to your advantage, and then let's pay off that high interest debt as quickly as possible, either with the cash flows that are happening every month and every year, or even other sales of other assets. But whatever we can do, let's keep that debt for that non recourse loan there, For as short a period of time as possible, because when we do that, we open up a tremendous amount of net rental income when you need it. When Glenn wants to be traveling and all those wonderful places and riding his motorcycle, you know, his lifestyle right now needs that and he's sitting in a place where it's all paid off and you can too. But I wanted to show you what it looks like and the power of getting more assets in your portfolio. And here's the way it looks. Thanks. Okay, if you were to invest in one cash and one non recourse property do that let's say while you're relatively young and give that 20 years or 30 years not only do you have that one cash property paying you a tremendous amount of net rental income. But because you use non recourse loans to your advantage, you now have two assets that are fully paid off. And so looking at these two assets that are fully paid off after the debt has been paid back, this is how it starts to change your life. And this is why we believe that retirement is best suited with a better asset, like rental properties investments. So year one cash flow starts at 3, 300 combined of those two purchases. But by year 30, that non recourse debt has definitely been paid off. And look at the amount of net rental income that you're expecting in retirement when you need it. 50, 000 just for that year. And next year, it's going to grow on top of that. And the year after that, it grows on top of that. And so hopefully for everybody, this just reinforces when you buy rental properties, it's not going to change your life from a net rental income perspective, and really from all five profit centers. It's not going to change your life that day. But give it 10 years. Give it 15 years. Give it 20 years. It's that cash when you need it that really does make life either a little bit easier or a whole lot easier, especially as you get closer to retirement. All right, Glenn, so I think now would be a great time to dive into your personal journey. You know, you're okay with that?

Glen: 43:09

Let's do it. All right. Yes.

Gregg Cohen: 43:10

And so for everybody this is something that we love to do is to put the, kind of the big picture together for all the clients that are courageous enough to jump in the hot seat like Glenn. And what I do is I put an entire port, I put their entire portfolio together and I look at all five profit centers for them. So Glenn's never seen this reporting. He of course is a JWB client and we have our monthly reporting, but it doesn't show the home price appreciation. And you know, that's a big component, like we talk about. So Glenn's going to see his total returns for the first time here with all of you. And Glenn, thanks for being a great sport and being open to sharing your success here.

Glen: 43:49

Oh, that's great.

Gregg Cohen: 43:51

So here are the four, the four properties that you still have under management with JWB. and you can see that the one in 2017 was purchased with all cash. Then the next two in 2018 and 2019 were purchased with those non recourse loans. And then through us managing the portfolio together to pay off the other ones and sell some of the assets, you were able to purchase another one in 2022. And I think you purchased that one with all cash. Is that, that line up correctly? That's how it worked out. There you go. So, we've got a great example of cash. and non recourse and portfolio management here with Glenn. And here's how it's shaken out, my friend. After your, or through your seven years of ownership with and of those properties and management by JWB, your return on investment year over year in your tax deferred account, so you haven't paid taxes on it yet, you've earned 10. 24 percent returns each and every year and a total profit of over 305, 000. Pretty cool, huh? That's

Glen: 44:53

Awesome.

Gregg Cohen: 44:56

And look at how we broke that down. That's why it's so exciting, especially to be able to share these stories live with all of you and to have our Not Your Average Investor community come into the hot seat with me. When we start to look at how we got there, most people pay no attention. They, they give no credit to home price appreciation, but we try to show people is over a full market cycle. You can count on home price appreciation. If we didn't count on home price appreciation, Glenn, do you think we'd be missing the boat a little bit? And when it comes to your portfolio?

Glen: 45:28

Just a bit.

Gregg Cohen: 45:31

Over two, well, 224, 000 of home price appreciation, just in those four assets that Glenn currently has under management with us. In reality, it was higher than that because Glenn made profits on the properties that he sold as well. So this is actually not reflecting that, so it'll only get better and better. Speaking of the other profit centers, You have 21, 403 of principal paydown. Now, what that's reflecting is those non recourse loans that Glenn took out for those properties. The principal that gets paid back every single month increases his equity, increases his return on investment. And so, that really adds up. That's why we talk a lot about these five profit centers and principal paydown is one that many people don't know about. Forget about another one that people forget about, the tax savings component. Although I've got to be honest with you, Glenn, this one, I know for a fact here, this one, I think I messed up the numbers on it because it

Glen: 46:28

looks a little well,

Gregg Cohen: 46:30

well, I was going to say I messed up the numbers because I forgot that your most recent purchase was in your retirement account. So when all of your properties are purchased in your retirement account, the tax savings actually is already built in. So we don't claim credit for additional tax savings there. But when you're saying it's a little bit low, you're right, because you've saved so much when it comes to tax savings. It's because you bought it in your solo 401k, not specifically about the tax savings. So. That's on me. That's on me on this one. I forgot that most recent one was in your retirement account. That tax savings component should be zero there. And the only reason,

Glen: 47:06

especially since the appreciation from the two that you bought back is not included in this

Gregg Cohen: 47:14

exactly that I didn't

Glen: 47:15

pay taxes.

Gregg Cohen: 47:17

And that was a lot more than 4, 287, so, it's a win, it's actually probably underrepresented, but you know what, that's on me, right? One of our core values at JWB is to fail forward and empower people to make mistakes, and I live that out every single day, so. the one that I know is accurate there, too, and I know is, you know, something that has been, really impactful for you is the net rental income. And so over 55, 510 here of net rental income delivered to you through just these four properties, again, doesn't include those other two that you had at one time as well. So if we break down how we got to this total wealth pie for Glenn, we start to see something. And for, for our, friends, our veterans of the Not Your Average Investor community, you see this every time we're lucky enough to have a client on the show with us. It's this pie. And I try to show everybody the way that you're going to build your wealth is not equal. It's not equal to each profit center. There is one profit center that dominates the total wealth pie. And that's what you see here. So home price appreciation has accounted for over 70 percent of Glenn's total wealth pie. And what I share with folks is And you see this, it's the same thing over and over again for all of our clients, regardless if they started a purchase in 2007 like Glenn did, 2015, 2012, even before then. If you look over time, you're going to see between 60 to 80 percent of your total wealth pie comes from home price appreciation. And that's why it's so important to pay attention to home price appreciation. You need to know what the market that you're investing in is expected to appreciate at, and the way you figure that out is you look historically. What is it appreciated at? What are the opportunities for more people to want to come and move to your area, to your your MSA, meaning your region, because that continues to drive population growth. And the other thing, the reason why you need to pay attention to home price appreciation is because If you understand how this is going to be so impactful, you need to buy and hold the asset. And that's where the team component comes in because no matter how good the profit potential is, if you're like average investors, when it comes to rental property investing and you don't have great management, you're not going to last long enough. You're not going to be in it for 10 years. And so when you can be in it that long, that's when this asset really starts to shine. So with all that, Glenn what are your thoughts overall?

Glen: 49:54

Oh, I'm so thankful that, I've walked the journey I've walked and that I'm with JWB.

Gregg Cohen: 50:04

You know, we just love serving clients just like you, Glenn. I mean, it is. No. You know, when I started this company 18 years ago, I was like, man, I hope one day that somebody will trust me with their retirement account. Somebody that worked 30 years to build up their retirement account, served in the Merchant Marines. It's done all these great things. I hope to, to earn the trust of that individual at one point. And you gave us that trust. You know, we had never met prior to you investing with us. So you took a leap of faith there. No. And, you know, you, you putting your trust in us is, is what it's all about. And we just love these success stories. We get to do them over and over and over again. You guys get to see it here on the Not Your Average Investor show. It's, it's normal course of business here at JWB. That's why we love what we do. So thank you, buddy. Thank you for being here today. And thanks for being a JWB client.

Glen: 50:56

One other, probably crazier piece. The first two houses I bought by seeing them online, I didn't even come down to physically see them.

Gregg Cohen: 51:07

So I'm curious, you're the son of a, of a builder, right? You have real estate in your family. Did anybody call you crazy for doing that?

Glen: 51:14

Yeah. A lot of people like You didn't go look at the house? I'm like, no, they were great videos of it.

Gregg Cohen: 51:23

that's a common hurdle for people. What, what would you say to somebody who's thinking that same thing that might be on the cusp of investing with JWB? What, what would you tell them?

Glen: 51:30

trust JWB, you guys are probably one of the most ethical companies that I've ever dealt with. it's just refreshing to know in today's world you exist.

Gregg Cohen: 51:44

Thank you, buddy. Thank you. it means a lot. It means a lot to us. It's, it's who we aspire to be. It's the 115 folks that we have here at JWB all using our North star as doing, doing right by people. And that's really rare in today's day and age. And, and, you know, it's easy to do right by people when we get to serve such wonderful clients. So thank you, buddy. All right, Glenn, we've got a number of questions here to round out. If anybody has any additional questions, go ahead and fire them in right now and and we'll send us out on a high note here. So, we have one question and the person says, what do you recommend if I am less than 10 years away? Glenn, how would you answer that? If somebody is thinking about investing in rental properties and are less than 10 years away from retirement, what, what would you say to them? I

Glen: 52:30

mean, it's the time to start. I was, less than 10 years away myself. So, don't wait, jump in.

Gregg Cohen: 52:40

So, when I talk about how the, the asset works so well over a full market cycle, and I talk about how holding for the long haul is important, I think people in their minds start to say, Oh, well, if I don't hold on for 10 years, then it doesn't make sense. And that's absolutely not the case. But what you got to compare is, how does this asset work compared to your alternatives today, one year from now, two years from now, three, four, five, six years from now. All I'm saying is you get the best and most upside by hanging in for a full market cycle. But if you look one year from today, two years, three years, five years, and you compare it to where you're investing right now, very likely that it's going to be better than it And what you're investing in one year from today, two years, three years, four years, five years as well. And if you're curious about that, start to actually just run the numbers. Look at what your money is investing in today. Look at what it's done over the last three years. And then you can look at the numbers that we've just shared here with Glenn's portfolio, where I would encourage you to reach out to JWB. We can sit down and show you the returns that we can generate for you. That's where you can reach out either just reach out to Cody here and she's happy to facilitate a call for you, or you can send an email to info at jwbcompanies. com, or you can go to chat with jwbcompanies. com. But start with looking at what are you comparing it because I think what you're very likely to find is that One year increments, three years, five year increments, real estate still wins. Great question. We, we really, really appreciate those. A longtime client, Mike Foster and Mike, I just personally wanted to say, thank you, Mike, you sent in one of the most incredible testimonials that we read aloud in the team meeting on Tuesday. It was the testimony that you gave about Jamie Crawford and our private lending team. So thank you so much for sending those testimonials in. Means the world to Jamie and to, and to us. So thank you. And Mike's question is for those with funds in a self directed traditional IRA where potentially enormous UBIT is not avoidable after selling, would you still recommend investing in property with a non recourse loan there as well? So I know Glenn, you're not really familiar with UBIT. So I'll take this one. Right. And Mike, I think this one is that classic answer that is that we throw out there a lot because it's real. It's is, it depends. It depends on your tax situation. It depends on your investment alternatives. And I think that's where, you get on the phone. you, you know, everybody here at JWB Mike. So I think this is a great opportunity for us to sit down and just kind of map out the numbers with you. And then of course, for you to, you know, bring your own tax consequences and your knowledge of your own tax situation to it, and we figure out the best answer for you there. So I think, I think that's the classic answer. It depends, my friend. We've got a long time client, Vic Mudrick saying and asking a question, how do you handle RMDs, which are required minimum distribution. So how do you handle RMDs when required for the solo 401k, especially if you don't have another retirement account to pull that from? Are you familiar with required minimum distributions, Glenn?

Glen: 55:50

I know of them. I'm not quite that old yet. So, I have not had to deal with those, but I am starting to take distributions already. So that probably will not be an issue for me.

Gregg Cohen: 56:05

Required minimum distributions are something that needs to be considered again with the planning process. It's something that You know, first, you want to reach out to your CPA, that, that, you know, due diligence is really on you because we, we don't know your tax situation and we're not CPAs ourselves. So start there, but when you come to JWB and you say, okay, I want to put my portfolio into rental properties, I might be closer to 70 or 72 as required minimum distribution start to become more and more of a thing and you know what those required minimum distributions are going to be. It's very easy for us to put a plan together to make sure that there's enough assets to be able to do that required minimum distribution. So it all comes back to the planning and and so Vic, I would encourage you to reach out to your portfolio manager here at JWB and if you're considering adding more properties in your retirement account, we can plan for that and set you up for success. All right, Glenn. Well, thank you so much. I want to say thank you to everybody for being here on the call. I thought it was just incredible to have Glenn here. I thought the questions were incredible. Hopefully you all got some information and value out of this, especially if you were putting yourself where Glenn was seven years ago and trying to find a better way to build his retirement account. I just think there was so much to relate to there, Glenn. Thank you so much for being here. Thanks for sharing your story. And you enjoyed it. I had a great time. Yeah, we did too. We really do. And thank you to all of you. It's never lost on Pablo and myself that you all spend so much time, give so much of your own time and your, knowledge and just the good people that you are to welcoming everybody into the community. So thank you all for being here and spending an hour with us. We're really excited for next Tuesday's show. I'm sure all of you have heard or read articles or heard podcasts on it, but the National Association of Realtors Settlement Bombshell Settlement is really going to change the real estate investing industry, the real estate industry overall. And so we're going to do a deep dive on that on Tuesday's show. Pablo will be back in the house. I hope you all will be as well. And until then. what advice do you have for everybody, Glenn? Don't be average. Thanks everybody, see you later.