390 | Using A 401(k) Loan To Buy Real Estate

If you tuned into our Q1 market update you heard that the doom and gloom around the real estate market has subsided and the signals are all there for prices to keep going up.

But many investors need a little extra cash for their down payment in order to get their next property.

So we're going to shine a light on an often misunderstood, and underutilized, source of capital that most have access to-

The 401(k) Loan.

Gregg Cohen, co-founder of JWB, and show host, Pablo Gonzalez, will help you get a better understanding on:

- How 401(k) Loans Work
- When it makes sense to use one
- Who has bought real estate with one in the JWB and why
- and more!

This piece of information could be what you need to take action and lock in the price of an investment property before interest rates go down and prices shoot up.

Don't wait until that happens to understand how to access your capital.

Join our real estate investor community LIVE: 
https://jwbrealestatecapital.com/nyai/

Schedule a Turnkey strategy call: 
https://jwbrealestatecapital.com/turnkey/ 

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Transcript

Pablo Gonzalez: 0:00

Today we got a special one. This is a, uh, often misunderstood concept, things that are scary stories inside of uneducated benefits rooms at companies. It's using a 401k loan to buy Real estate investments, what do you think, Gene?

Gregg Cohen: 0:17

Mmm, I'm curious. I bet you are, I bet you are.

Pablo Gonzalez: 1:38

Welcome everybody to the Thursday edition of the Not Your Average Investor show. I'm your host, Pablo Gonzalez. With me is always a man that I affectionately like to call GC, because of his genius concepts, because he knows how to generate cash flow, because he's a great co host, and because his name is Greg Cohen. Say hello, Greg. Hello, everybody. Great

Gregg Cohen: 1:53

to be

Pablo Gonzalez: 1:53

with you. It is great to be with you too, buddy. It is great to be with our community already rolling in, Everybody check it in. Everybody's ready for what? GC the roll call, baby. Not bad. We've got the MVP in the house. Mr. Lead, Bishop, everybody's heard of him. We've got the mystery man. Checking in, Mr. Denny Davies. Happy Easter friends. Happy Easter to you buddy. We got our lead off hitter. There we go, John Henning. John Henning with a good afternoon. We got Marty Quinn in the house. All right, Marty. Good to have you, sir. We got our regulars, Gary and Rosalind Riley from Marietta, California.

Gregg Cohen: 2:19

We regard you. We got

Pablo Gonzalez: 2:20

Leo Faraganan. Dun, dun,

Gregg Cohen: 2:21

dun, dun, dun. Faraganan.

Pablo Gonzalez: 2:22

Dun,

Gregg Cohen: 2:22

dun, dun, dun,

Pablo Gonzalez: 2:23

dun. With a good morning and a happy Easter. We got Beth Dill. Whitney in the house. All right, Beth. Have you, Beth. Welcome. We got the fairy godmother checking in from Monterey, California.

Gregg Cohen: 2:30

Ms. Glenn Filzan.

Pablo Gonzalez: 2:31

We got our famous Hollywood producer in the house. Mr. Justin Sena. Mr. Justin Sena. We got Sylvie Lumumba checking in from Worcester, Massachusetts. That's the second time. I think, I think she was here on Tuesday. Not a new name. Not a new name. But the second time she's here, even better. I know it because of Worcester. All right, there you go. I don't know if I'm even saying it right. Maybe it's Wushta, something like that. All right, we got Nadeem

Gregg Cohen: 2:54

Shah. All right,

Pablo Gonzalez: 2:54

good morning, good afternoon. We got Pamela Myers from Seattle.

Gregg Cohen: 2:57

So

Pablo Gonzalez: 2:58

kind.

Gregg Cohen: 2:58

Pamela Myers, one of the kindest people I think I've ever met.

Pablo Gonzalez: 3:00

Kindness. We got Charity Sacky Graham. Charity, welcome back. Recognize that name. Good to have you. We got Stevie B in the house.

Gregg Cohen: 3:06

Stevie B.

Pablo Gonzalez: 3:08

Good to have you. We got Eddie Harris. We got our favorite name to pronounce, Aaron O'Neill. Into the light. It's Aaron, good to have you, haven't said that in a minute. We got the Mama Bears in the house. Cody Adams. We got Big Papa in the house, we love when he calls him Big Papa. Pops, how are you my man? Coming in from Vegas, the co founder of The Co Founder. He wouldn't miss a show, he's out

Gregg Cohen: 3:24

in Vegas right now. This guy is so cool. Uh, we got a

Pablo Gonzalez: 3:26

ringmaster.

Gregg Cohen: 3:27

Drew Barnhill.

Pablo Gonzalez: 3:27

Drew Barnhill is here. Who else we got in here? This is good, this is good, we got our amigo.

Gregg Cohen: 3:33

Bill Shields. Buenas

Pablo Gonzalez: 3:33

tardes amigos. Bill Shields. Good to have you, buddy. Chris Lee from Fernandina Beach back in the house. Good to have you. We got

Gregg Cohen: 3:41

Billy Green.

Pablo Gonzalez: 3:42

Good morning.

Gregg Cohen: 3:45

Good luck.

Pablo Gonzalez: 3:46

Good morning from the Coribantically Ultra Cepedarian Ah, that's messed up, bro. Coribantically Ultra Crepadarian less mountains of Colorado. Billy. Thanks. You're really testing, you're really testing the limits of my lips and brain coordination. What else we got right along Raj in the house? All right, Raj. We got pop pop in the house. Everett Shapiro. Everett Shapiro. I haven't been here for a while. Good to have you, Papa. Vic Mudrick is back. Good to have you, Vic. Who else we got in here? Katrina. Oh, I just missed it because the chat is moving. Katrina. Katrina. Welcome, Katrina. Welcome. Come on in. we got the first family. Right? Right. Ken and Carolyn Maligne, the Patriarch and Matriarch.

Gregg Cohen: 4:27

We salute you.

Pablo Gonzalez: 4:28

And uh, okay, I think we got it. What a roll call. What a roll call. What a roll call. And we are glad you're all here. Our regulars are here. That have been with us for a long time. That have all the nicknames. That add so much value to the community. Make so much time. So we got a big announcement today.

Gregg Cohen: 4:44

We do have a rather large announcement. Super excited to share with everybody. Thank you. Breaking news! So, guess what everybody? I don't know what show number we're at right now. I forgot to check right before the show. We are close to 400 shows. And, wow. 400 shows. To think about where this community started. A little over four years ago and to think about where Pablo and I had this crazy idea to put this show together and in the beginning there were probably we could count the number of people that were attending live on the show, maybe on one hand and the number of people that saw all this wonderful content we could probably count on two hands, whether on replays or things of that nature. So to think now we have hundreds. of folks showing up live every single show. And to do that twice a week. We are just, I think there's a minute here. We just need to say, wow, what have we created as a community here?

Pablo Gonzalez: 5:43

And nowadays we get like 200 people a week showing up, which is incredible.

Gregg Cohen: 5:48

Absolutely. And you know, the show has really evolved over time. For those, a few of you who are watching four years ago in the very beginning. Pop

Pablo Gonzalez: 5:57

up was

Gregg Cohen: 5:57

there. Pop up was there. I know Lee Bishop was there, right? Yeah. You know, you have seen this show evolve a number of times and we constantly are looking. We're getting feedback from all of you saying, what can we do? What are we doing? Well, what can we do better? And so Pablo and I and our team have been really taking that to heart lately. I think some of the things we do really well are the same reasons that you all spend hours of your life hanging out with us twice a week on the show.

Pablo Gonzalez: 6:24

Yeah. We never take that for granted. This idea that you spend two hours a week on the show with us is such a huge ask. And we're just, it's, it's the best.

Gregg Cohen: 6:32

It really is. I mean, I don't know many places that people choose to be a part of an online community and spend hours upon hours a week. So just want to say thank you, and I think we all realize that we have something really special here. It is part of the content, but a lot of it is just you. It's you and your friends and those who are saying hello in the chat. There are real friendships that have been developed. We're also looking at the things that maybe we could do a little bit better. Heard a lot of feedback from all of you out there. Something we've known for a little while here is that it takes a lot of time to be a part of this community. And we've got really great insights to be able to share. Both from Pablo and myself, but also from you in the chat here. And you know, there's been this desire for more on demand content, more bite sized nuggets, more directionally to the point, like

Pablo Gonzalez: 7:21

easy to understand, easy to share, low time investment, right? Like be able to like share the message with your friends and family of what you're trying to do or what you're excited about that doesn't require them to come. Two hours a week to the show, right?

Gregg Cohen: 7:35

So we heard you and we're investing in that. And so we have brought on Mr. Justin Sena, who's in the background right there. He said hello in the chat. Big

Pablo Gonzalez: 7:43

time Hollywood producer.

Gregg Cohen: 7:44

Thank you. Totally. You know, heard. It's a big deal. Yeah. The shows that he's produced Sena, which shows would people know again? A little known shows like The Bachelor.

Pablo Gonzalez: 7:54

Amazing Race. Amazing Race.

Gregg Cohen: 7:55

Shark Tank. Not Your Average Investor Show. And Not Your Average Investor Show. You take your pick, which is the most successful. So we're really making investments here and the point here is to make more on demand, bite sized, impactful messaging that you can consume on the go. Think about the podcast, right? For anybody who has listened to the podcast in the past, we love the podcast. It's incredible, but it's largely been a replay of the show. What could we do to make this more bite sized, shorter, more to the point, and not ask so much of you all to spend hours and hours and hours each week here. So that's what we're doing. We're going to make a big shift here, and it's for the benefit of all, we think. what we're going to be doing is we're going to be Doing the show on Tuesday like we always have and we're gonna put all of our effort into making the show the absolute best We possibly can on Tuesdays. We're gonna ask everybody all of you to make sure that you can be there on Tuesdays We're not gonna do the show on Thursdays on a regular basis anymore We're gonna use that time to make sure that we dedicate ourselves to that bite size, intentional, high quality, shareable, consumable content that really communicates a lot of the messaging that we talk about in the show, but makes it more on demand, more ready for you all to consume in a number of different fashions. That doesn't mean that we're not going to do any other shows other than Tuesdays, though. We are going to be doing a lot of shows that are more intentional as well. Think of these as special. online events that we're going to be rolling out over the course of the coming months, where we're going to be able to hear your questions, your concerns, and do a deep dive specifically for you. You may be a certain person in a different part of the country, or you may have a different concern or question or how you can take advantage of rental property investing, or really any of the questions we talk about here on the show. So you're going to see a lot more intentional content. It's just not always going to be every Thursday.

Pablo Gonzalez: 9:48

We're going to test different times and different dates. So other people that can't make Thursdays at noon work for them or nine o'clock in the morning, if you're on the, on the West coast, right? So it's, we're really going to make this community more accessible to more people essentially, right? Because right now, if you can't come on only Tuesday and Thursday, it's really, really hard to be a part of this. So we want more people to be a part of it. We expect our community to grow. We expect our attendance on the shows on Tuesdays to grow. We expect the podcast to like. the YouTube channel to get better all because it's going to be much easier for you to share the stuff that you like with your friends and other people to tap in and feel like they're a part of it much quicker than having to spend two hours every single week, every, every, every week.

Gregg Cohen: 10:31

We ask a lot of, yeah, we ask. And this is, this is an opportunity for us to do more. And. Ask not so much of your time to do it, but hopefully deliver even more quality, and more impact to all of you. So we're super excited.

Pablo Gonzalez: 10:44

Instead of asking so much from you, we're going to ask more of ourselves. There we go. In order to make it easier. I like that. Yeah. Yeah. Yeah. I like that. So. super excited. This is, you are officially in the last regular Thursday show of the Not Your Average Investor Show. This takes place next week and we are super, super excited for all the great content that Hollywood producer, Justin, myself and Greg are going to be putting out for all y'all.

Gregg Cohen: 11:07

100%. If you are not a subscriber to the podcast, I would go there, go to wherever you consume your podcasts and type in Not Your Average Investor Show. So you can start to be a part of that on, on demand content. The YouTube channel is another great place. And Cody, if you wouldn't mind throwing these links up in the zoom chat for sure, uh, the YouTube channel is going to be a, another hub for a lot of this content already is, but it will continue to get better and better. And then our WhatsApp chat has really taken off and it's another place for you all to communicate even outside of the show. So all about access, all about quality, all about intentionality is what you're seeing from us here. And like I said, really, really excited to see how this grows this like minded community.

Pablo Gonzalez: 11:46

Awesome. So with that in mind, GC, want to get onto our, our regularly scheduled program? I think we should. The last regularly scheduled Thursday of the month. There we go. It's kind of momentous. This is kind of momentous. I like all the love in the chat. Thank you all for the support. And, why don't we just kick it off with Vic's questions? It's got a Q and a. We like questions around here. Vic Mudrig asked, this is someone out of the blue, but how many homeowners in Jacksonville buy flood insurance? Mine is coming up for renewal and now is over a thousand dollars. What's your recommendation?

Gregg Cohen: 12:14

So, I'm going to assume Vic is asking how many JWB, clients buy flood insurance. you know, as far as your question, Vic, asking how many homeowners in Jacksonville buy flood insurance? I don't know. I haven't looked that up. but I will tell you specifically for JWB turnkey investment properties, it's usually pretty rare that clients are buying flood insurance for their asset. And the reason is because it's extremely rare for your property, your JWB property, to be in a flood zone. there are zones that lenders use to determine, and FEMA uses, to determine where the flood risk is. And, you're not required to buy flood insurance if you're not in one of those flood zones by your lender. If it's good for the lender, most clients say, well, that's good for me because the chances, according to FEMA and those who determine the chances are relatively low for a flood. So overall, small percentage of JWB clients will buy flood insurance. Now, on the small number of clients that actually do own properties in flood plains, Um, what you should know is that before JWB presents the opportunity to you, puts our stamp of approval on this and says, we're going to recommend that you put this in your portfolio, we would have already done the research to figure out if it's in flood zone. And if it is, what we're going to do is we're going to build in the cost of the flood insurance into your property pro forma so that you'll know what those costs are going in. And quite frankly, if the numbers didn't work for positive cash flow or for returns on investment, including that flood insurance, we wouldn't recommend it to you. We wouldn't sell that property. So we do that ahead of time. Vic, I'm sure that's what happened in your instance as well, unless you've just decided it wasn't in a flood zone and you'd like to purchase it purchase the flood, the flood insurance. Either way. You should know ahead of time what it is, if you're going to be making a JDOD investment in a flood zone property. And think that's pretty long winded, but there you go. There's your answer. It's

Pablo Gonzalez: 14:04

so uncharacteristic. All right, Dick, thank you for the question. We appreciate it. Lee Bishop has a question. How many shows happened before Greg's hair started to turn silver?

Gregg Cohen: 14:13

So good. So good. My hair was not nearly this gray, uh, when we started watching Boston shops.

Pablo Gonzalez: 14:20

All right. Let's get to the subject of hand. GC, we've been talking about this for a long time, this whole 401k loan in order to buy rental properties. And I think it's particularly important because I think one of the biggest Roadblocks to people purchasing their next rental property is often coming up with cash for the down payment, right? And you've always said coming up with the down payment is the least of your worries That's the easiest thing to handle and this 401k loan is one of those levers that people misunderstand don't know that they have, are afraid of it because their mom and dad tell them it's scary and tell them scary stories at night about it. So why don't we dissect, why don't we dissect it? Talk to me. What is a 401k loan and why should real investors, real estate investors know about

Gregg Cohen: 15:02

it? Yeah, absolutely. So a 401k loan is a loan that you can take against the value of your 401k. You can take that money from your 401k. You can put it into Call it your personal bank account and you can use it as you see fit. There are no tax penalties. There are no, there's no tax burden. There's no taxable outcome from doing this when you follow the rules to do it. And it is a source of capital that is untapped. for many investors, especially those who are on the doorstep to investing in rental properties. And you say that you don't have the capital to do it. You, this is kind of that same thing I talk about a lot. You may have the capital. You just didn't know it. You may have the capital or you may have the connections to have the capital. You just didn't know it. Well, this is an example that we see often with JWB clients. And myself, I do use a 401k, 401k loan as well to invest where you can have that capital. You could have a significant amount of your down payment, which could help you in your goals of building that better retirement account portfolio.

Pablo Gonzalez: 16:10

Okay. So how does it actually work? So you just get money from your 401k and put it in your bank account and then you got to pay the bank or like what's, how does that work?

Gregg Cohen: 16:20

Yeah. So, what's happening here is There's, there's some rules around it. So, let's kind of put the rules out there. So, you're allowed in almost every plan that I've seen every company sponsored 401k plan that I have seen, you're allowed to borrow either 50 percent of the value of your 401k or 50, 000, whichever is lower. Okay? So, the maximum amount you're allowed to borrow from yourself, from your future self, is 50, 000. Now the process of actually doing that loan is actually incredibly easy and incredibly simple. There's no credit check there are no loan docs for you to figure out and to supply because who are you borrowing from? You're borrowing from yourself. You're borrowing from your future self. You're not borrowing from a bank. Okay. It is literally the money that you have already earned in your 401 company sponsored 401k plan that has been set aside for you to make investment decisions. And you have the opportunity to borrow against that. In essence, put that into a different bucket of money for you.

Pablo Gonzalez: 17:27

Okay.

Gregg Cohen: 17:28

And the reason it's important is because When you're investing in your 401k, when that money is there, your options for investing are quite limited. When you can move that money from that bucket, that 50, 000, let's say, from that bucket and put it into the bucket of your personal bank account, you now have all of the options of investing that you would like to have. And you also have the options of securing great debt and great leverage, which can help you to build a better real estate retirement portfolio as well.

Pablo Gonzalez: 18:00

Got it. So when you borrow against it, are you using the 401k as collateral and someone gives you a loan or does the money leave your 401k? Meaning, is that money still going to be invested in whatever I had it in before? And now I have this other cash to invest or does the money zero out of there and go somewhere else that you can invest it in?

Gregg Cohen: 18:20

It's a great question. The money zeroes out of the 401k and that let's just say 50, 000 in that example. We'll leave that 401k and then that would show up in your personal bank account, which then you could use to make great investment decisions.

Pablo Gonzalez: 18:35

Okay. Got it. Does that affect your monthly contributions and stuff like that from your paycheck? Because Kendra Anderson is saying your paycheck is going to be much less. So you have to be able to afford to do that.

Gregg Cohen: 18:46

This is, that's a really great comment. I can't wait for us to get a little bit more in depth than that because as with anything, there are pros and there are cons and there are misconceptions along the way. And it's really important for us to understand the power of this thing, but to understand how you can screw it up. Right, because it is not for everybody, but is certainly for some people who are not aware that it's there for them.

Pablo Gonzalez: 19:08

Got it. All right. So let's go into that. Well, first of all, Sandra Morales is asking, Does what you will be showing for 401k apply to rollover IRAs?

Gregg Cohen: 19:18

This is company sponsored 401k plans we're talking about.

Pablo Gonzalez: 19:21

Cool. So what are the misconceptions, right? Like, I remember when, when I was first being educated on my 401k, when I was a young 23 year old whippersnapper out of college in my first job, they were like, you can do this, you can do that, you can do that, and you can get a loan, but you never want to get a loan. Yes, exactly. Right? Yeah. So what are, what are the misconceptions that are out there about this 401k loan?

Gregg Cohen: 19:41

Well The misconception is that you should never touch your 401k loan. You should never touch your 401k, right? You've worked hard and let me just give the narrative, right? You've worked hard enough to put money into that 401k. You should never take it out until you need it because you're basically robbing yourself of a better future. People will say that you should never Touch your 401k because there's taxes that you would have to pay and there's penalties that you would have to pay if you access that money before age 59 and a half those are misconceptions that is not true when done correctly. But it's more of just this, this mentality that like, It's almost irresponsible for you to touch any money in that 401k. And, you know, I have a different, I have a different opinion on that. I think of the money that is in my 401k and the money that is outside of my 401k capital. I want to hold that money to the same standard no matter where it is. And if I have an opportunity to put money in a better place with more options and potentially better leverage options, and there's no taxes and there's no penalties to pay. My standard here is to make the best risk adjusted return for my money, no matter if that is in my 401k or if that's outside of my 401k. So, I think we need to break down those, those kind of preconceived notions here because if you adopt this mentality that whatever is in your 401k is the only way that that's going to build your wealth, and you look at the limited options that are available in your 401k, You might not get to the place that you want to go to as far as financial freedom and financial wealth and retirement. You might not get there. If you limit yourself to only thinking that old school mentality that your 401k is what it is, I will never touch it. The alternative approach is to look at it and say, I'm going to hold every investment that I make to the same standard, whether that's in the 401k or whether that's in outside of my 401k and that standard, if it's not hitting that standard and I have a way to not take the taxes and to not pay a penalty in order to adhere to that standard, I'm going to be open to it. And so that's the message. That's the not your average investor viewpoint when it comes to 401k loans.

Pablo Gonzalez: 22:05

Got it. So, you know, what is the, what is the wrong way to do it?

Gregg Cohen: 22:52

The wrong way to do this is to take a loan against your 401k and go and blow it on things that do not produce a good return on investment. Got it. So it's,

Pablo Gonzalez: 23:00

it's literally like you gotta, you gotta get it and put it in something that's going to make you more money than what the thing was making you money in before.

Gregg Cohen: 23:09

That's one way to look at it to diversify into other assets that you might have too much of and want, you know, people like to diversify. So that might be another reason to do it. Consistency might be another reason to do it. If you're a little concerned about the variability of what you're investing in your 401k versus what you could invest in outside of your 401k cashflow. Might be another reason to do it if the things that you're investing in the 401k are not producing as much cash flow for you as they could outside of your 401k. So it's not one size fits all, but I would say generally those. three or four things that I just threw out there should factor in your, to your decision and that get back to that same standard is what I'm investing in in my 401k meeting the standard when it comes to returns, income that's produced consistency, diversification. And if it's not, and you have a way to access that capital that you do not have to get taxed on and you don't have to pay penalties on, we should be open to it because that's us being the best financial engineers for ourselves, which if you practice this and you do this. over and over, year in, year out. That's how you wind up at a better landing spot when it comes to retirement.

Pablo Gonzalez: 24:20

Got it. And as you're saying all this stuff, I, you know, you said that there's pros and cons. I'm hearing in some of the things that you said, a couple of the pros, diversification, you can generate cashflow from something that wasn't generating cashflow before you can get into a an asset class that isn't available inside of your 401k that you're attracted to. You can find higher returns in some things that maybe you have found that aren't in your 401k. Anything else on the pro side?

Gregg Cohen: 24:47

Access to capital. Access to capital. I mean, this is a significant amount of capital that you have, you know, the stats that you put together for the summit that we talked about, right? The median 401k balance in the, in the country right now is 118, 000, right? That's 118, 000. That is, Somewhat restricted to only investing in a certain section of you know, stocks and bonds, right? There's probably a menu of maybe 10 that you're allowed to do in most company sponsored 401k plans. Well, there's a whole other world of investments out there that can help you get to those, you know, to that goal a lot quicker. So capital, you know, it tends to be the biggest reason, especially when we're talking about rental property investments, that seems to be the biggest thing that holds people back. People might be 50, 000 away from investing in their first rental property. It takes a long time to save up 50, 000. So this is one of the best ways to get your foot in the door, to start investing in rental property investing because it's just not easy to find 50, 000 that you control, that you own, that you are not going to get taxed or penalized to use. You just have to adopt a different approach. Way of thinking.

Pablo Gonzalez: 25:55

Okay. That sounds good. Access to capital is nice. You mentioned cons. Are there any, what are the cons?

Gregg Cohen: 26:00

Yeah, you can really do this wrong.

Pablo Gonzalez: 26:01

Yeah.

Gregg Cohen: 26:02

I mean, we got to understand that in this Not Your Average Investor community that we have we're more financially savvy than most. And we learn from the community here. And there are many people that if you give them 50, 000 of their retirement account, In essence and put that into their personal bank account. Right at that moment, they don't tend to make great decisions. So if you are thinking about doing this, you need to do your due diligence. You need to make sure you need to go beyond this show. You need to talk to my team. You need to talk to your CPA. You need to fully understand this loan, which I'm happy to give you the, the, the high level overview today. The deets. The deets. But you also need to do the due diligence to understand what your money is currently doing in your 401k. It may be accomplishing everything you need in your 401k and there may be no need to take this this methodology today and it may not even be for you in the future. You need to fully understand what investment you're thinking about putting it into outside of your 401k. Is it accomplished? Is it a better risk adjusted return for you? If you're not doing that due diligence, you shouldn't do it. Because if all you're doing is taking money from your retirement account and going and spending it on big screen TVs and vacations and cars and other things that don't appreciate in value, you can really hurt yourself here, and I do not want that for any of you.

Pablo Gonzalez: 27:26

Correct me if I'm wrong, JC, but that's just kind of like a, that's almost like a disclaimer to any. Investment, right? Like you need to know where you're putting your money so that you're not doing it. Like, when I think of cons, I think of like downsides, right? Like, is there any kind of downside?

Gregg Cohen: 27:40

Yes, absolutely. So let's talk about one of the ways that it could, with all best intentions, not work well for you. Yeah. So when you're taking the 401k loan with your company sponsored 401k plan, that is assuming you're a part of that company. If you take out this 401k loan and then you lose your job or you decide to move on from that job, you only have a set period of time in order to pay that loan back. So you need to go into this type of investment with the mentality that if You lose your job or decide to move on from your job, there needs to be a backup source of capital so that you can repay your 401k loan in a relatively short period of time. The rules on that are you need to be able to pay that loan back by the time your next tax day is, including extensions as well. So you can get yourself some more time, you know, but let's say that you take out a loan in May of 2024 and then in June you get fired, okay, you're going to have to pay back that loan. that loan, let's say maybe 50, 000 by next year come tax day, which is April 15th, you would have the opportunity to extend it again till October. but the point here is you can get in trouble here if you do not have backup sources of capital or access to capital. Now, there are strategies to be able to do that. As well, right? There's ways to be able to access backup capital to make sure that you're not in a, in a tough spot. But yes, that is one of the biggest questions and the biggest concerns or cons. You do have to think through this in the event that you're no longer employed at that company.

Pablo Gonzalez: 29:31

Got it. So, I mean, I would think through job stability and how much you see your future there. Like if you're planning on leaving, probably not, not a good time, not

Gregg Cohen: 29:39

what you want to do.

Pablo Gonzalez: 29:39

I would also think that the type of asset that you invest in now comes into play, right? Like whatever asset you invest in, you want to have options to be able to leverage that asset to pay something back if you need to or something like that. What else am I thinking? What are the other kind of like, um,

Gregg Cohen: 29:56

I mean, I think you're just going to get a whole lot of a con would be people are going to call you crazy. Don't, don't expect to make a whole lot of friends by telling them about the strategy because I recognize, and we all recognize that. This is not a message that is generally shared with the public and, and, and it is not something that's generally received well to talk about, you know, touching your 401k. And it's a not your average investor take but it's one that goes back to the same core principles we talk about. Our job to deliver us the best quality of life and our retirement is to be our own financial engineers. And that means holding your money wherever it's invested, retirement, outside of retirement, holding it to that same standard. And if it's not hitting that standard for you, you need to be open to finding ways that you can hit that standard. And that's really one. This is one way to do that.

Pablo Gonzalez: 30:44

Yeah. It makes sense, man. I think of Doug or who we had in our first hundred shows back in the day Factory worker on a factory assembly line at Honda took out a 401k loan. And now four years later, the guy has like a hundred and something doors. He's no longer a factory worker. He's a full time real estate investor owns real estate. Right? So like you can do this. I think Irwin, who's here in the, in the chat, he's saying, He borrowed a 40 K about eight to 10 years ago for a down payment on a$250,000 rental home in Jacksonville. The home is now valued at 400 k plus 401k loan has fully been repaid and only owe about 150 K left on the mortgage.

Gregg Cohen: 31:21

Amazing. Yeah. Thank you so much Irman, for sharing

Pablo Gonzalez: 31:23

that. So those are, those are the types of things you can do and we have a case study. that Greg has put together so that we can go through the numbers. But before we do that, we've got a couple of good questions here from the, from the community. The first one is, let's go back to Kendra Anderson's question. She was asking, you know, is your paycheck going to be much less? So you have to be able to afford to do that. If you take a 401k.

Gregg Cohen: 31:43

Yes, absolutely. That's another con that we're going to talk through here. It's a con and a pro. I'm going to give you a different, different way to think about this, a different perspective. But yes, when you take out a 401k loan, It's actually very easy to pay back. It just comes out of your paycheck. It's not a separate loan that you need to pay back. It's very easy. The mechanics of paying it back is right through your paycheck. But what it does is it limits your net take home pay once you take out this loan.

Pablo Gonzalez: 32:09

Got it. Okay. Good to know. Remya Warrior is asking, are we allowed to use 401k loan only on passive investments or can it, can you use it for an active investment?

Gregg Cohen: 32:17

You can use this for anything. For anything. Absolutely. Absolutely. The money leaves your 401k and it goes into your personal bank account, and it's on you to make wise financial decisions. And there's actually two types of 401k loans you can make. One has a five year payback. That's the loan that I'm going to be talking about today that can be used on anything. If you are buying your primary residence, there is a different type of and it has a longer payback period, which limits the amount of you know, the, the decline in your take home pay. So you can look at both of those, but again, and the one we're going to be talking about here that's applicable to. Passive income investment properties or any other type of investment would be the one with the five year payback.

Pablo Gonzalez: 32:59

Vic Mudrick has a question. When you take money out of your 401k, is that not a taxable event?

Gregg Cohen: 33:03

This is not a taxable event, Vic. Now again, you have to make sure you do this correctly, but when you do a 401k loan, It is not taxable. It doesn't matter what your age is, and you're actually paying yourself back. The loan payments are actually paying yourself back. and that's not taxable. The only way it would become taxable is if you take the loan out and you do not pay the loan back on schedule, which is difficult to do because it's done through your paycheck, or you leave that company for whatever reason and you cannot pay that that loan back by tax day of the following year. Then it's viewed as a distribution and that would then be taxable at that moment. that year. And you would also be penalized for an early distribution. So I say all this knowing all of you know that I'm not a CPA. I'm just a real estate investor has been doing this for 18 years and takes out 401k loans for myself. So I know how it works. Please talk to your CPA. Don't take my word for it only. But yes, to your point, it is not taxable when done correctly.

Pablo Gonzalez: 34:09

Got it. Anthony Chen is asking how many times can you take out the loan and And can you do 50K then another 50K the next year without paying it back, or is it just one time allowed?

Gregg Cohen: 34:19

Great question, Anthony. I think that's a new name, by the way. Is Anthony a new name? I think that's a new name. All right, Anthony. Way to be, way to be here and then way to be bold and ask a question. We appreciate you. How many times can you take out the loan? You can do this as many times as you want. you do have to pay back that loan in order to then take out another loan. So you can't take out two 50, 000 loans. The maximum you can take out is 50, 000. And this is just how it is at JWB's company sponsored 401k plan. We have to fully pay that loan back in order to take out another. 50, 000 loan.

Pablo Gonzalez: 34:51

Okay. A couple more questions here before we go to the case study pop up. I think, I don't know if you answered this already, but doesn't 401k loan have a term date and if not paid back, doesn't that become taxable income?

Gregg Cohen: 35:02

Great question. Pop up is exactly right. So there is a term date. And for the loan that I'm talking about, it's a five year payback. If you do not meet the terms of your loan, then it does become taxable and you get penalized. It's rather easy to make that loan payback because The payback actually happens out of your paycheck. And so the most common time that somebody would not be able to pay it back would be if they lost their job or they left their job and then they might only have a year or less or potentially a little bit more to pay back that full balance that they took the loan out for. And if you can't do that, then it will become taxable and would become penalized.

Pablo Gonzalez: 35:42

Vic is asking, is this only for actively employed people?

Gregg Cohen: 35:46

This is for anybody that has a company sponsored 401k plan.

Pablo Gonzalez: 35:49

So you got to be employed by a company. Got it. Remya Warrior is asking, what is the interest rate on 401k?

Gregg Cohen: 35:54

I'm so glad you, you asked Remya. So, we've got to break down some preconceived notions about What is a interest rates and what is a good interest rate as well? So I'll give you the facts and then we'll talk through it. So the interest rate here is generally it's about one to 2 percent above the prime rate. And so the prime rate right now, it's about eight and a half percent. So in order to take out a 401k loan, what's happening is you'll be charged an interest rate. Generally, let's just say it's about 10 percent is, is kind of what the market is bearing right now. And this interest rate, and this is a big topic. I think we'll go into this a little bit more too, but the interest is being paid by me as a person and I'm paying it back to my future self. So where we need to rethink about interest here is where we are conditioned to think paying interest to the bank is like profit to the bank and loss to us. But here the interest that you're paying is you're paying it from yourself to your future self. Right. So interest is actually a cost to you today, but it is an additional contribution to your future self or your 401k.

Pablo Gonzalez: 37:01

It sounds like forced savings for you coming out of your paycheck.

Gregg Cohen: 37:05

Exactly. How many of you have said, man, I had a really great year at my job this year. I maxed out how much I could contribute to my 401k. I wish I could contribute. X amount of dollars more. That's really what's happening here. When you take out a 401k loan, you pay it back like you're supposed to the end of the day, that interest that you're paying is actually in essence, additional contribution into your 401k. It's kind of like supercharging your contributions.

Pablo Gonzalez: 37:31

Not too shabby. All right, let's get into this case study. Do you see before we get into any case studies, so I'm going to tell everybody here, as

Gregg Cohen: 37:37

you can tell, we're talking about something that is a financial tool and we're talking about estimated returns on investment. And, I want you all to do your due diligence. So these are based on estimates. Everything I'm going to share with you is not guaranteed. I am not a financial advisor or a CPA would encourage you to do any. And all of your own due diligence before making an investment decision.

Pablo Gonzalez: 37:57

All righty then. What

Gregg Cohen: 37:59

are we looking at, Gene? All right, so I wanted to put real numbers of what a 401k loan would look like. These are great questions that I think Kendra had and Remy had as far as what this is going to look like as far as your, now your, your monthly payment on the loan. Because I do want to make this very clear. The amount of your take home pay is going to go down, right? This is going to be less take home pay for you, and we need to make sure we can plan for that. So if you're somebody who is is making enough to support your bills, but you're not making more than than that at this moment for whatever reason, a 401k loan is probably not for you. A 401k loan is probably more for somebody that has excess income. that they may be putting towards savings, that they may be wishing they could contribute more to their 401k, because ultimately, as we can see here, when you take out a 50, 000 loan with a 10 percent interest rate, and you pay it back over five years, your monthly payment on that loan is going to be a little bit over 1, 000 a month.

Pablo Gonzalez: 39:00

Got it. So you have to be able to like Take that into the equation,

Gregg Cohen: 39:04

take that into equation. Then look at your interest there. So over those five years, that would be a total amount of interest. That would be paid of 13, 741. Now again, don't get scared about this word interest here. I know we all think of interest going to a bank. In essence here, what you're able to do is additional contributions. into that 401k over a period of five years through that payback of that monthly payment payback on the loan and would equal about 14, 000.

Pablo Gonzalez: 39:32

Got it. Like a real, like governor telling you you're putting this extra money back into savings no matter what. Exactly. Okay, cool. What are we looking at here, Gene?

Gregg Cohen: 39:41

So I wanted to put this in terms of investing in a rental property. Let's say you're in the position where you're earning a great income and you have more money left over at the end of the month than your expenses are. And you're somebody who is excited about maximizing your 401k because you're trying to build for a better retirement account. And you're somebody that is saying, you know what? I really want to get my feet wet in rental property investing as well. I want to diversify. I want to have this be a part of my rental property portfolio. Let's just say that you're about 50, 000 light at the moment. Well, you can use a 401k loan done the right way and you can have access to that 50, 000. And so I wanted to bring up a real property that's available right now. If you're a JWB client or not, you could literally get on the phone, work with our team as we built out a plan and this property may be included in your plan. And just kind of go through the numbers here of how this would grow. And then also show you what would the effect be on your 401k balance today and then over the next 10 years. similar to the case study that Erwin gave us in the chat earlier. So that's a, that's a great reference point as well. So

Pablo Gonzalez: 40:51

got it. So we're looking at 1 Francis street, Jacksonville, Florida 9. This is a real property that you can invest in right now. And

Gregg Cohen: 40:59

yeah, so purchase price of 205, 017, by the way, you like that 17.

Pablo Gonzalez: 41:04

I do like that.

Gregg Cohen: 41:05

I asked, I asked our CEO, Adam, I said, why is the price 205, 017? You want to know why? Why is that? Because it's his daughter's favorite number, 17. So there you go. So 17 and this is a, a typical plan. This is not one size fits all, but many of our investors will put down 35%. Now let's talk about the down payment here because this 50, 000 that was in that 401k plan, it's not going to be able to buy a rental property in your 401k. For a number of reasons. One of those reasons is that it takes more down payment in order to buy properties in your retirement accounts, in your 401k's. So here you have the opportunity to take it outside of your retirement account and then use better lending products. And one of the reasons it's better outside of the retirement account is because you don't have to put more down. You can put down 35%. You could put down 30%. Uh huh. As little as 20 percent is what you could actually put down. But if you put 35 percent down here, your estimated down payment would be just under 72, 000. And I listed out closing costs, and prepaid taxes and insurance, and placement fees, and all these things. I even included the maintenance credit, which is important. Again, The incentive that we are running right now is that, um, when you invest in a JWB property, you get a maintenance credit. It's generally between 4, 000 to 6, 000 that goes towards paying your first 4, 000 to 6, 000 of maintenance costs. So, all of these numbers are exactly what you would see if you, uh, were about to invest in this property. Most important numbers here are your return on investment, estimated rate of return of a 9. 8%. Percent IRR and estimated year one cash flow of 174.

Pablo Gonzalez: 42:49

Got it. Um, it's been a while since on the property of the week We see a 205, 000 house. This is uh on the low end of the of the price spectrum I

Gregg Cohen: 42:58

did choose one that's on the low end of the price spectrum because there's a lot of people out there that are they may Have 30, 000 or 40, 000 to invest but they don't have 80 And this is a great example here. Your total initial investment on this property is a little bit over 82, 000. Well, if you're sitting there and you have 30, 35, 000 ready to go to invest and you have more than, and you have 50, 000 of a loan you could take from your 401k. This property could be your stepping stone, could be your first JWB investment property.

Pablo Gonzalez: 43:30

Interesting. So, if you are interested in this property, go to chatwithjwb. com, shoot an email to cody at jwbcompanies. com or info at jwbcompanies. com. So, all right. So, what's next here, GC?

Gregg Cohen: 43:42

So, let's just look at what you would be investing in if it was just this property, right? This doesn't take into account the effect of the 401k loan. I'm going to do that in just a second. But these are why. All of us as JWB investors love investing in rental properties. It's those, the initial investment that we have, it's the growth, and then it's the total value that we are able to deliver over a 10 year cycle. So for this property, the initial investment's about 82, 000. That growth would come to the tune of over 120, 000 that we project we would be able to earn for you over 10 years. That's through the five profit centers, which we're going to dive into in just a second. And in essence, what we're able to turn is 82, 000 into 203, 000 over 10 years, which if you run the numbers that comes out to a 9. 8 percent IRR.

Pablo Gonzalez: 44:33

Beautiful man. So 9. 8 percent IRR in this economy right now. Would work really nicely. And here are the five profit centers.

Gregg Cohen: 44:41

Again, not many assets out there pay you a number of different ways, right? Most traditional assets only pay you one way that only if that thing appreciates rental properties pay you five ways. Another way to kind of determine, is this a better asset for you? You're not only betting on the price of it going up. Although, as you can see, that is a significant part of it. So, the owner of this property over the next 10 years is going to earn net rental income. We would project that you'd earn right around 8, 000 of net rental income. Your tax savings would be a little bit over 3, 000 of taxes that you don't have to pay because you're investing in this asset class. You would earn just about 23, 000 of principal pay down. Not

Pablo Gonzalez: 45:24

bad.

Gregg Cohen: 45:24

That's your residents paying your loan down for you because you are serving them so well. Your loan from the bank. That's paying down your loan from the bank. Thank you. That's right. That's right. Not paying your 401k loan down. We haven't gotten there yet. Yeah. But this is your loan to the bank being paid down by your residents because we're creating such a wonderful living experience and they're choosing to continue to rent. And then of course there's home price appreciation. The

Pablo Gonzalez: 45:46

big boy.

Gregg Cohen: 45:47

You want to talk a little bit about home price appreciation?

Pablo Gonzalez: 45:49

Yeah. You know, every time that we look at people's portfolios, whether it's one property or a portfolio of properties, and you look across time, we segment it out in a pie chart. Right. Right. And when you look at the pie chart, it looks like a Pac Man where the actual Pac Man itself is the home price appreciation because that's the biggest source of wealth that you create over time when you're in a growth market like Jacksonville and then everything else, the net rental income, the tax savings, the principal pay down, that's all the mouth of the Pac Man, right? That makes up somewhere between like 25 to 40 percent of what you gain. But the Pac Man itself makes like 60 to 75 percent of what you gain. So that's why, you know, you shouldn't be surprised that you see home price appreciation be the number that dwarfs all these other numbers.

Gregg Cohen: 46:28

That's exactly right. And when you combine leverage with a growing market and home price appreciation, that's what really allows your gains to, to catapult to get much bigger. And so the lower amount that you can put down, combining that with appreciation is one of the big levers you can pull to have these better returns. The reason I point that out is because if that money is inside your retirement account, there are still ways to buy properties inside your retirement account, inside your 401k, inside your IRA, but you can't use the same type of leverage. You have to put much more down which just at the end of the day lowers that return on investment. So another reason to get that money outside of that 401k and put it to a great investment like

Pablo Gonzalez: 47:09

us. We got a quick question from the Wrightly's here. Do you know how many bedrooms, bed and baths this house is, GC?

Gregg Cohen: 47:14

I believe it's three beds and two baths.

Pablo Gonzalez: 47:15

Three bed, two bath. All right. Not too bad. Okay. So now let's look at it with the 401k loan included. What does this look, what are we looking at? Yeah.

Gregg Cohen: 47:23

So Pablo was asking me just to put this in terms of the viewpoint of the 401k. How would this look? How does the money, work because are you losing money by taking the loan out? How much are you gaining? What's the total net effect? So that's what I tried to show here. So let's just say that you implemented this strategy in 2024. Your starting balance of your 401k, let's say was 100, 000. And you took out that 401k loan. Your ending balance for your 401k, what you would see in your 401k is actually 50, 000 at that, at the end of that. And then you took that 50, 000 and let's say you combine it with another 32, 000. And you put that as your down payment on your investment property here on Francis Street that we were just talking. Well, at the end of the day in 2024, you started with 132, 000 of investable capital. A hundred was in your 401k and 32 was outside of it. And at the end of 2024, you still have 132, 000 of portfolio value. You just switched it around. Now you only have 50, 000 in your 401k. And now you have 82, 000 of equity day one in your investment property.

Pablo Gonzalez: 48:40

Okay.

Gregg Cohen: 48:41

Shall I go on? You shall go on.

Pablo Gonzalez: 48:43

So what I'm seeing is like what you put in, You know, you have your 100, 000 plus your 32, 000 that you were putting in to the rental property. You basically just shifted 50 from the 401k into the down payment for the rental property and you still have 132, 000 on day one.

Gregg Cohen: 49:00

Exactly. Right. You're not losing anything. You're just shifting it from one bucket to another. And let's say that you take out a 401k loan to do this and that has a repayment period of five years. So over the course of the next five years, you fully repay that. that loan. And so now let's go out, let's go out a little bit longer though. Let's go to 10 years cause that's a full market cycle. I like to look at full market cycles, 10 to 20 years. So now the year is 2034. Let's look at what your portfolio is and. You'll have to kind of work with me here in order to simplify this. I made a couple of assumptions. I assume that there was 0 percent growth in your 401k and contributions over the next 10 years just to simplify this. In reality, I would think that the money that you had in your 401k was still contributing and you were still earning. So just stay with me here. It's to make this investment to make this case study simple. And then the other thing I. I assumed is that the rental property investment is going to perform like we see our JWB clients performing. And for this property on Francis Street, it has a 9. 8 percent IRR. So I assumed that that grows because we did want to see how your money is going to work for you when you make this better investment decision. So with all that being said, 2034 looks like this. You now no longer have a loan outstanding because you fully repaid that through your paychecks over five years. Your ending balance of your 401k. is now fully repaid. It's not 100, 000 though. Look at what you've been able to do. That additional interest that you paid really is just additional contribution into your 401k. So your ending balance, assuming there was 0 percent contributions between then and assuming there was 0 percent growth would not be 100, 000. It would actually be 113, 741.

Pablo Gonzalez: 50:51

Not too bad.

Gregg Cohen: 50:52

Makes sense? Yeah. Cool. So that's an important concept. You're paying your future self and you're actually what you're allowing yourself to do is to make additional contributions. Then at the same time, what we've been able to do is show that this rental property investment continues to grow through all five profit centers. And this property is projected to take that initial 82, 000 of initial investment and turn that into revenue. Into 203, 000 at the end of 10 years. So in essence, what we've been able to do is to unlock an asset class. And you might not have had the ability to invest in. We've been able to do it early to been able to do it today, rather than waiting, however long it was going to take you to save up 50, 000 to do it. And we've been good stewards of our money here because we turned 132, 000 into 316, 000 over a 10 year period.

Pablo Gonzalez: 51:38

I mean, it looks awesome, man, right? Like you're just borrowing money from yourself. You are guaranteeing that you're going to save more into your 401k later. You're picking up a rental property. And at the end of the day, you take 132, 000 and turn it into 316, 000. That's not too shabby at all.

Gregg Cohen: 51:55

Now, this is how it works really well, right? This is the importance of financial education. It's the importance of having a team to support you through this process, right? This is a not your average viewpoint, but what I want to make sure people know is that this is a tool like any other, and it can be used for good for you, or it could be used for bad. This is a more advanced strategy and something that I would encourage. If anybody's considering this, reach out to my team. Make sure you talk to my team. Make sure you talk to your financial professionals as well, including your CPA because this is something that could be really good for you, but it's like anything else. What did Spider Man used to say?

Pablo Gonzalez: 52:32

With great power comes great

Gregg Cohen: 52:34

responsibility. There you go. Follow Spider Man on this one.

Pablo Gonzalez: 52:37

Yes. Follow Spider Man. If you want to, if you want a team to talk to you that's knowledgeable about this, go to chat with JWB. com and book a call and you can talk through it with your own personal financial situation. That first call is all about understanding if this thing works for you, you know, 401k or whatever you're planning, if your why is really going to work for this asset class.

Gregg Cohen: 52:55

And then finally, GC. So a big theme that we talk about a lot here internally and on the show and with our clients and with those who are reaching out potentially to invest is why invest today, not tomorrow. And there are real benefits to investing today versus waiting until interest rates drop. And what's likely to happen is home prices going up over the course of the coming months and years. So I just wanted to point that out just to Make sure people see a real example here for this property on Francis street. The purchase price today is 205, 017. Let's assume that what the fed is signaling happens and that they drop their fed funds rate and that indirectly the interest rates on our mortgages drop as well in 2024. shows us is when interest rates drop, home prices tend to go up because there's more buyer demand for that same asset. And historically, in normal years, when interest rates don't go down, Take all those years and take an average, Jacksonville real estate appreciates at a clip of 5 percent per year. So let's just assume that what historically normal has happened in non interest rate drop environments happens, but let's just say that home prices appreciate 5 percent in 2024. If you had made the decision to wait a year to buy this property, I think it's very likely that the purchase price will be higher one year from today. And if it goes up 5 percent next year, that same property would cost 215, 268. So buying today versus buying one year from now means you lock in 10, 251 of additional appreciation. And if interest rates drop, which we're assuming they are in this example here, all you do is you just refinance. You just refinance. The concept that you lock in your purchase price, and there's nothing you can do about that, but you can change your interest rate over time, is really a powerful, Concept that I hope everybody takes to heart because if you realize that you can make better decisions now before interest rates drop and before home prices go up.

Pablo Gonzalez: 55:11

Yeah. That's why they say date the rate, marry the asset. The thing that sticks out to me that I didn't realize because I've only, I've never gone to the refinance cycle. I've only invested now in five properties. Only five properties is the fact that a refinance does not cost the same as when you're closing on a home. Correct. A refinance is what, like three to five grand or something like that?

Gregg Cohen: 55:30

Yeah. It's typically about 1%, maybe one and a half percent of the value of the loan. Okay. So for a typical JWB asset, think maybe somewhere in the ballpark of maybe 3, 000.

Pablo Gonzalez: 55:42

So a home like this, a 215, 000 home next year would be about 2, 100 bucks.

Gregg Cohen: 55:48

I'm not even talking about the, it's, it's of the, the loan amount. Oh, so if you put, you know, 20 percent down, 180 grand, 160, 000 is your loan or, or a hundred, you know, so this would be under

Pablo Gonzalez: 56:00

2, 000 to refinance and you would have locked in, you 10, 000 of home price appreciation.

Gregg Cohen: 56:05

Very likely. Yes.

Pablo Gonzalez: 56:06

Okay. All right. That's, that's a good, good reason. Talking

Gregg Cohen: 56:10

about principal pay down and tax savings and net rental income. And so, yes, that's a very simplistic look at it, but we're

Pablo Gonzalez: 56:18

talking about it this way now, man, because to me, refinancing before felt so like abstract, but like, if you look at just like home price appreciation plus class for what you're going to make versus and locking in the price today, which is not going to go back down once it goes up. It's, it's a no brainer. If, if, if you're thinking, should I wait to do this or not?

Gregg Cohen: 56:37

You know, we never know what the world is going to throw at us. So I am not going to say that it's impossible for home prices to go down, but I'm going to look at history as a guide. 97 percent of years in Jacksonville, home prices have appreciated in Jacksonville. Rents have never gone down nationally in any of the years that we've ever tracked it going all the way back to 1985. And so while I can't sit here and say that this is absolutely going If your job is to make the best decisions to make the best risk adjusted rates of return happen for you, then this is a strong move. So I'm excited to see how this plays out. And the fact that we're going so strong saying that as interest rates come down, we expect home prices to go up. Because what I want to do in a year from now is to look back at this video, look and see how it turned out and then show how many investors of our clients took this advice and were able to lock in this additional appreciation.

Pablo Gonzalez: 57:29

As you have done multiple times in the course of this show, when everybody was freaking out about one thing and you were calling for what ended up happening. Exactly. All right, buddy. Well, we got two more questions here before we get out of here. We got Billy Green out of Mountain Manor asking, wasn't there some odd rule about using the loan, the 401k loan in conjunction with certain family members? Does that ring a bell? Maybe misremembering?

Gregg Cohen: 57:50

rings a bell a little bit. So I think we're talking about something different here. So. This 401k loan is available to anybody who has a company sponsored 401k plan. In my experience, I'm sure there's company sponsored 401k plans out there that it's not possible, so do your own due diligence. But everything that I found and with our clients, I haven't found one that it's not available for. But Billy, what you might be thinking of is When you have a retirement account, you might be thinking about who you can borrow from or who you can lend to. So, I think Billy's a little bit more on the active side as an investor. And so, if I'm switching my hat now to using my retirement accounts to lend or to buy things from other people you cannot lend your retirement account dollars to someone else. your dad or your mom or your son or your daughter. There's that vertical line that you are restricted from making a loan to or buying something from inside your retirement account. So I would imagine that's probably what you're talking about.

Pablo Gonzalez: 58:49

Got it. Yep. That was it. No up or down lending. Uh, and MVP Lee Bishop may have heard of him. He's asking, what about the health money you hold in case you need it, but it is not spent during the year? May you put that into a retirement accounts and put that money to word of house?

Gregg Cohen: 59:03

Yes, absolutely. So what Lee, the MVP is talking about here is another advanced strategy that is similar to what we're talking about here and is very little known. And I'm talking about using your health savings account, your HSA. to invest in a better asset class. So this is what I do. I have an HSA. I've contributed to it over the years. I've built up more in my HSA than I need to take care of my health care costs for the year. And so that amount, that's more than what I need. I pull that out of my HSA. I use a self directed IRA custodian, and I put that into another IRA. Which then I can do things like private lending or own rental properties. So it's similar to in the fact that yes, you can use a health savings account to invest in real estate. Where it's not exactly the same as you. You cannot get a for a an HSA loan for 50% of the value of that account. So slightly different, but the overall premise there of using your HSA as a tool to deliver better financial performance for you and not just being locked into it, just being there. is a great concept, Mr. MVP.

Pablo Gonzalez: 1:00:13

Great questions is only one of the reasons they call him the MVP. All right, Anthony Chen, last question. Any option for self employed solo 401ks? Can you still take 50k out?

Gregg Cohen: 1:00:23

It's a good question. You know what? I didn't, I didn't fact check myself on solo 401ks. I'm not sure about that one. I would encourage you to reach out to your CPA, financial professional, or just do a quick Google search, probably put you in the right direction there.

Pablo Gonzalez: 1:00:37

Good job, GC. you know, I've heard a lot about these 401k loans. I never really understood it. I feel like I have a really good grasp of it right now. And I thought you did a really good job putting together the visuals, the case study, man. I really appreciate it. Thanks, buddy.

Gregg Cohen: 1:00:46

It's all, all, uh, your direction and the community's direction, right? You guys have been asking for this. So we're here to deliver. and we appreciate all the insight.

Pablo Gonzalez: 1:00:54

Yeah. great questions and great insights from the community. As always, as always, we are never take it for granted that you take an hour of your day to join us here on Tuesdays and Thursdays. This is the last regularly scheduled Thursday show. Look out for special events we're going to be doing on Thursdays, but going forward, I'll You can clear the Thursday thing, and you can just make sure that you're here on Tuesdays, because we're going to put twice the effort into Tuesdays, and we're going to put five times the effort into this on demand content with our Hollywood producer that we got over here.

Gregg Cohen: 1:01:25

Logistically, just so you know, nothing has to change. That same link that you have to be here on Tuesdays is still that same link. There's nothing new that you have to do. Just show up on Tuesday. That's all.

Pablo Gonzalez: 1:01:36

So, uh, Eddie Harris is saying bye Thursdays. Yeah, let's, uh, Thursdays has been good to us, man. Thursdays was with the, the birth of the GW fan favorite. And we've got a lot of great investor stories on Thursdays. We'll still have some of those investor stories on Tuesdays. Including this Tuesday when Milady is going to join us. Jag Chata, fresh off the Not Your Average Investor Summit. She's going to be joining us on the show. You're going to hear her story. She's from San Diego, invest from 3000 miles away. And I think it's going to be a really, really interesting show. Do you see,

Gregg Cohen: 1:02:07

I remember one of the best conversations I got to have at the summit was sitting in the bus. Next to Jag and talking to her about her experience. She is an incredibly savvy investor and somebody I know we're all going to really benefit from and learn from. And she's just a wonderful person. So I'm excited for her to share the stage.

Pablo Gonzalez: 1:02:24

Not surprised

Gregg Cohen: 1:02:24

because she's always asked really, really

Pablo Gonzalez: 1:02:26

good questions out of here. So I'm, I'm looking forward to that conversation. Hope that you all have a wonderful weekend, but both from now till then one tiny little piece of advice. Don't be average. See you on Tuesday.