Viewer Questions Part 2: HELOCs, Raising Rents, & Purchasing Properties with 401ks

Episode 177 May 16, 2024 00:24:53

Show Notes

 As the old saying goes, “You don’t know what you don’t know.” Yet, once you get in the game, it becomes a lot easier to know the right questions to ask! In this episode of The WealthBuilders Podcast, the WB Coaches continue to answer questions from our viewers. This week, it’s all about real estate.

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Episode Transcript

[00:00:00] Speaker A: Rate those, too. [00:00:17] Speaker B: Welcome to this week's wealth Builders podcast, where I am still with my amazing friends, Troy Peterson and Mike Davis. Welcome, you guys. [00:00:25] Speaker A: Hey, it's great to be here. [00:00:27] Speaker B: We're having all sorts of fun doing viewer questions. So what we're doing, this is part two, by the way, is we're taking the questions that we couldn't answer on recent webinars or the boot camp, and we're going through, and we are answering those. So we love to hear from you. And I really like answering these questions because I know, like, if someone is thinking this, there's going to be a lot of other people that are wondering about it, too. So we are going to dig right in here with part two. Can I start, you guys? [00:00:58] Speaker A: Let's go. [00:00:59] Speaker B: All right. This is from Rob. Rob, this is a great question. Which is better, cash out, refi or HeLOC? Ooh, that's a great question. [00:01:08] Speaker A: That is a great question. [00:01:09] Speaker B: Troy, do you want to, like, start out with that one? [00:01:12] Speaker A: Yeah, I give, the favorite answer that Frank and I always love to give is that it depends. My thought is this, if it's an investment property, a cash out refinance, if it's your home, a HELOC, because that way you're not locked into a long term. You've got liquidity. You can use it to acquire investment that then pays the HeLOC back real quick. [00:01:37] Speaker C: I like that. [00:01:38] Speaker B: Oh, that is good. Yeah. And I think, too, some of it depends on the interest rates that are happening. For example, we were just sharing this the other night. If someone has got a two or 2.5% interest rate, and the current interest rates are six and 7%, I'd probably do anything I could to keep that two, two and a half until rates settle down. [00:01:59] Speaker C: Absolutely. [00:02:00] Speaker B: So that's something to take into consideration, too. But I think that is a great answer. Mike, what do you think? Would you agree with that or any other perspective? [00:02:08] Speaker C: No. And just like you said, I think if you got a two or 3% on your home, you don't want to get rid of that. [00:02:14] Speaker A: That's right. So Billy calls that low of an interest rate. He calls an asset not a liability. [00:02:19] Speaker B: He does. And he says, we're not going to see it again. [00:02:21] Speaker A: No, we won't. [00:02:22] Speaker C: He actually says it's almost like free money. Yeah, two or 3%. [00:02:27] Speaker B: I look back, I don't want to get off on a rabbit trail, but I think, why didn't I just, like, buy, buy, buy, buy, buy, buy, buy, buy, buy. [00:02:33] Speaker C: And lock in but we all think that, so don't go there. Don't go there. [00:02:38] Speaker B: And the numbers need to work and all that stuff, too. All right, who is next? [00:02:44] Speaker A: I've got one we'll continue with on financing. [00:02:46] Speaker B: Okay, good. [00:02:46] Speaker A: This one's from Rita. She asked, could you help us understand how to walk in debt freedom while owning multiple houses with loans? [00:02:54] Speaker B: That is such a great question. [00:02:56] Speaker C: Wow, what a nice problem to have having multiple homes. Oh, yeah. [00:03:06] Speaker B: So is she asking, like, how do you reconcile wanting to be debt free, but yet leveraging? [00:03:14] Speaker A: Yes. She adds the comments, says, felt torn and confused about which way to proceed. Because the mindset that we hear a lot about is we're taught, let's get out of debt. And yes, there's biblical principles to that. And then we come in and teach the law of leverage, as Billy calls it, which says that you can use debt strategically to build wealth. And the two mindsets have a little time adjusting. [00:03:40] Speaker C: Well, if she's cash flowing, which hopefully she is, that's it. Then you should be able to sleep well at night, even with. If you owe on every single one of them, if they're cash flowing, I think that's a good thing. [00:03:53] Speaker B: Yeah. And it seems like it's almost personal debt, kind of separating the personal debt from the debt or the mortgage that you're leveraging to actually build wealth. And so we don't agree. We don't encourage anybody to have a lot of credit card debt or consumer debt. And by all means, at some point pay that home off and you can put a heloc on it. Like we were just talking about leveraging that HELOC for investment properties. But I think that there is a lot of confusion out there because people are tying that type of debt to sin in some way. [00:04:31] Speaker A: There is. There's two proverbs that come to mind. One says that the borrower is servant to the lender, and that's the one that's prevalently taught to get people to pay off debt. And I think that's good to get rid of consumer debt. But there's another proverb that says blessed is he who lends to the poor. And the reason you're blessed is because by lending to the poor, you're empowering them to make an investment into something that can make them wealthy. And the hebrew mindset of the Old Testament says that debt is a good thing if it generates income, it's a bad thing if it's a liability. So you need to learn to separate those two. [00:05:08] Speaker C: That's good. [00:05:09] Speaker B: That is really good. And Tricore Global is all about that. And that is providing financing to entrepreneurs in Uganda because they can't get financing at the regular banks at a decent rate, which empowers them to get out of poverty, which is amazing. And I actually did some study on that too. I don't have like a really strong. I can't tell you exactly where this came from, but I will tell you, I was curious about how jewish people, because they're known to be wealthy, right? So I wanted to learn about that. And so I was reading up on it and I really came across what you just described. They know that there is a different kind of debt and that if you use other people's money to leverage to build wealth, that that is not considered bad debt. So hopefully that clears up some of the. [00:06:01] Speaker C: I think if you look at it, she has multiple homes. If you look at it, that this is a business and that helps you with your mindset. Oh, I just have a lot of debt. No, you have a business that's making you money. I believe that's how the jewish people look at it. [00:06:16] Speaker B: Yeah, that's really good. So it's that separation. [00:06:19] Speaker C: It is. [00:06:19] Speaker A: And I think that's the key that we need to emphasize. It's got to make money. If you have multiple homes with mortgages that cost you money, well, that's a recipe for bankruptcy. We don't recommend that. But if they have multiple homes that generate money in excess of what the mortgage debt is, then that's a positive thing. That's how we work it. [00:06:37] Speaker B: That's really good. That's awesome. All right, who's next? [00:06:42] Speaker C: I've got one from Angela Rose. How do you know Angela? [00:06:46] Speaker B: We know Angela. [00:06:47] Speaker C: How do you know when it's time to raise the rent with a tenant? That is such a great question. [00:06:55] Speaker A: Yes. [00:06:56] Speaker B: Well, you're our property manager. We have an expert here. [00:07:00] Speaker A: I know that was going to come back to me. So. Well, we review rental rates every year at lease renewal. And my philosophy is if the market has raised dollar 200, then I might increase it $100. So I'm still below market. That encourages my good tenant to stay put because it's cheaper to keep them in place than it is to replace them, but that way I can still renew them for another year at a better rate. [00:07:30] Speaker C: That's really good. [00:07:31] Speaker B: That's really good. So you have access to MLS. What if somebody is managing their own property? [00:07:37] Speaker A: Oh, that's a great question. And if it's their first couple properties, I hope they are managing them. Yeah, because everybody needs the experience of managing. You can use rentometer, you can go on zillow and look at rents in that zip code and see what the competition is renting for very often. Often rents aren't like a home sale. You don't list it for 2500 a month and then wait for people to make offers. So. Cause a rental mentality comes in and says, if they want 2500, I'm only gonna look at houses that are 2500. That's what I can afford. So you can see what it's listed at and it's a pretty good comparable to what you're gonna get. [00:08:14] Speaker B: That's awesome. [00:08:15] Speaker C: I have a handful of friends that are investors in Pueblo, and so I just ask them, you know, what are you getting on that three bedroom, two bath, you know, and they go, I'm getting this. I go, wow, man, that's a lot more than what I'm getting. So you can just rub elbows with people. You get a little bit of an idea. [00:08:33] Speaker B: That's a great idea. Like when people, you know, they go to the cafe and they're drinking coffee or whatever the chitchat. That's so good. Well, this is a great question. This is from Ben Kroger. And Ben says, where would you recommend starting? Should I start a business, real estate, both, or should I make real estate my business? Oh, what do you think, guys? [00:08:58] Speaker C: That sounds like it depends offer. But if your real estate is just like really turning, I feel like real estate is probably one of the easiest businesses to start. I mean, if you're trying to get into another type of business, you're going to have to have a lot more knowledge. I'm not saying you don't need knowledge in the real estate business, but I tell you what I mean, I started with Billy writing things down on a napkin. I don't think there's too many businesses you can do that with to get started. So I think this is something that you do have to get the knowledge and the wisdom about it. But I feel like it's one of the easiest to start. [00:09:37] Speaker A: I would agree with that. And real estate is a business. There's nothing wrong with the business of real estate. My business is real estate. So they go very well together. I'm thinking of a very interesting statistic I heard an economist share last night on an interview I was watching. She said, in comparing the wealth of the elderly population, those who owned real estate versus those who don't, their wealth quotient was separated 60 to one. [00:10:03] Speaker C: Oh, wow. [00:10:05] Speaker B: Whoa. [00:10:05] Speaker A: That tells me that real estate is what you want to invest in, regardless if your heart's to pursue business, still buy real estate. [00:10:12] Speaker C: That's good. Wow, that's good. [00:10:15] Speaker B: Yeah. It's kind of that principle, too. It's not necessarily how much you make. I mean, it is what you make, but it's what you do with the money you make. So even if somebody is making a lot of money, maybe they're a doctor, they're making $300,000 a year, but if they don't do anything with that money, they're going to end up just paying that to the government, and then they're not going to be investing in anything unless their business is saleable at some point, that's going to actually build wealth down the road. So I think that is really good. You know, I heard a statistic about doctors that actually, so they make so much money in their lifetime, but so many of them, when they retire, they don't have money left. And so if this principle, if you're a high w two wage earner even, is really important, what are you doing with the money that is above what you need to live on? And real estate's a great answer. [00:11:11] Speaker A: Great answer. [00:11:12] Speaker C: Well, brunch, that's why he got involved. He said he was making dollar, 475 an hour. But he says, this is a thing. If I don't work, I don't get paid that $475 an hour. So he started investing in real estate and getting his money to work for him. So it doesn't really matter if you're making a ton of money. Like you said about the doctors, if you're making a ton of money, but if you're not working, that money doesn't come in. Well, real estate, it comes in. [00:11:40] Speaker B: It's that orchard. Yeah. [00:11:41] Speaker C: Oh, that's great. [00:11:42] Speaker B: Right? In the triple x factor. [00:11:44] Speaker C: Yes, it is. [00:11:44] Speaker B: You know, too, this is kind of a personal story, but I even remember back in college, if I had a goal of something that I wanted to buy, I'm amazed at. I would waitress during college. I was amazed at how much cash I could save up because I had a purpose for that money. Right? [00:12:05] Speaker C: Yeah. [00:12:06] Speaker B: What I love about real estate is when you get in it, it actually creates a purpose for that money. And it's amazing how you can align your spending up knowing, like, no, I want to get another property or I want to buy, you know, this house. But I just remember all the way back so many years ago that I just really pondered, like, wow, how come a month ago I couldn't save anything? But yet when I decided I needed money for this all at once. I've got a bucket. [00:12:33] Speaker C: Full vision. Yeah, I was gonna say that. I think we're so unlike that. I brought back so many memories. Some of them not so good, but anyway. [00:12:43] Speaker B: All right, all right, who's next? Troy? [00:12:47] Speaker A: All right, I got one from Sharon. This is a good one. It's about the tax advantages. She's asking us to please elaborate on the tax advantage of writing off a house over 27 and a half years. [00:12:59] Speaker B: Oh, that's a good one. [00:13:00] Speaker A: That is a good one. Depreciation, Mike, you want to start with that? [00:13:04] Speaker C: Well, first of all, it's called a phantom loss. You really don't lose, but the government allows you to 27 and a half. So it's a hundred thousand dollar property. It's $3,600, I believe, a year, that you can have a phantom loss for that one property. And so you can make $3,600 if your cash flow is $300 a month. Which would you teach? You can make $3,600. And the government looks at that as, oh, you didn't make anything this year. [00:13:35] Speaker A: That's right. Tax free income tax and appreciation is tax free. [00:13:39] Speaker C: Appreciation is. Billy, he has a plan. You could make $100,000 a year and pay no taxes. Legally. Legally. [00:13:48] Speaker B: By doing it through real estate. [00:13:49] Speaker C: Through real estate. [00:13:51] Speaker B: Now, there is a caveat in there for higher earners, right? [00:13:54] Speaker C: Yes. [00:13:55] Speaker B: And that is, where is it, 100,000 or 200,000 household income that you're not able to take that depreciation? But that's where you want to learn about the real estate designation, because in Bill Brauncheck, actually, at the time that we're recording this, we've got a real estate event this weekend, and that's one of the workshops that Bill Bronchik is doing and helping people to understand the real estate designation. But if you follow those steps, it takes away that cap, I guess, based on your income, and you can. I don't think you have any cap, then. [00:14:29] Speaker C: It's. [00:14:30] Speaker B: Right. [00:14:30] Speaker C: Yeah, it's endless. [00:14:31] Speaker A: Once you have the designation, you can write it all off. But you do have a, I believe it's a $25,000 cap if you don't have that designation. [00:14:40] Speaker B: And that. And you only get that if you're under a certain amount of. [00:14:45] Speaker A: Correct. [00:14:46] Speaker B: Yeah. So that's. That's the kind of stuff that we show you at wealth builders, because if you just go in, you start buying properties, and you don't understand some of these other connection points, you know, you could end up doing your taxes and your accountant could say, I'm sorry, you can't write this off. Right? [00:15:04] Speaker A: That's right. [00:15:05] Speaker B: So. But it is a. It is an amazing opportunity. [00:15:08] Speaker C: But when they start learning these things at our workshops and coaching, then they can go to their accountant and say, well, what about this? And if they can't go, well, I'm not for sure. That's when it's time to get a new accountant. And it will save you tons of money having the right accountant. [00:15:24] Speaker A: The question I learned to ask my accountant when we got to where we had enough properties and enough income was not, can I do this? But how can I do this? [00:15:32] Speaker B: That's a great question. We are going to do this. So create that pathway and keep it legal. [00:15:38] Speaker C: Yes. [00:15:39] Speaker B: That's really good. All right, Mike, do you have one? [00:15:43] Speaker C: This is from Rachel. She said, I heard you say late last year that you were going to position yourself for spring of 24 to buy real estate. So given this weird market, is that still a strategy you're planning? [00:15:57] Speaker B: Yeah, that's probably a question that was directed towards Billy and absolutely. He just said that recently and he'll be talking about that again with the workshop that. That this airs after. But you can still get the copy of it. You can go to our website and get a copy of that. But he said that this is the time he's been talking about for almost three years. And he said what he is seeing now in this market is he is going to go in and buy. [00:16:24] Speaker A: It is a good opportunity if you see what's going on in the market. And Billy does such a great job of laying out exactly why this is a good time. And I can't wait for him to share that at the conference. I look forward to his market data reports. I love his graphs. [00:16:40] Speaker C: I do, too. [00:16:40] Speaker B: Isn't Becky not so lucky? [00:16:42] Speaker C: I do. Yeah. [00:16:43] Speaker B: That's so good. All right, you guys, this is a really good question that came in. We get this type of question a lot. This is from Timothy. And Timothy says, how do you use a 401K or IRa to purchase properties? Well, I can start this out. You guys probably know a little more technical. We're in the process of this right now with Bill Bronchek getting Dave's 403 B moved over. But basically what you do is you have your IRA or your 401K or in our case, a 403 B because he's a pastor, and you move it into a self directed IRA with a custodian that can handle the real estate part. And so I think. What were the names of those Ira. [00:17:26] Speaker A: Ira Club Equity Trust Corp. [00:17:29] Speaker B: Yes. [00:17:30] Speaker A: Those are a couple of them that we've worked with that do really well. Bill Bronchek does a lot with Ira club. [00:17:36] Speaker B: Okay, got it. And so. And we just call Bill Bronczyk. We need to care. [00:17:41] Speaker C: This is another big one. [00:17:44] Speaker B: So the money goes in, it gets transferred in. You don't have no tax consequences from that. It's not like you have to do a withdrawal, and then from that point, you get a checkbook and you're able to write money out of that checkbook. But here's the thing. There are some very specific guidelines that you need to follow. And so just make sure you're working with someone that gives you those guidelines so you can stay in that safe place. [00:18:11] Speaker A: I would add to that, if you are entrepreneurial by nature, you've done business, then, yes, the checkbook, the 401k solo type checkbook plan makes perfect sense. If you're not, you might want one with an actual administrator that can do it. I've got a lot of clients that do things with equities trust Corp. And I've worked with them for years. They are wonderful. And we've closed in seven days. They would direct wire funds, do everything, but they take care of all the paperwork to keep you out of the hot water. [00:18:40] Speaker B: Oh, that's good. [00:18:41] Speaker A: It just depends on where your gifting is and your talent. [00:18:43] Speaker B: Yeah. And I don't know if you're like me, I don't like to spend time on paperwork, so I'd rather spend time on something that brings in more income than me trying to hash through paperwork. [00:18:54] Speaker C: There you go. [00:18:55] Speaker B: So that's really good. All right, who's got another quick question? [00:18:58] Speaker C: I've got a really good one. [00:18:59] Speaker B: All right. [00:19:00] Speaker C: This is from Breca. She said, ask, are there workshops on what to do after we obtain a property? How do we rent it out? Work in contracts, property management and et cetera. [00:19:11] Speaker B: And we did not plant that question. [00:19:14] Speaker A: But that's a great question. [00:19:15] Speaker C: It is a very great question. [00:19:17] Speaker B: Well, Mike, do you want to start that out? [00:19:19] Speaker C: Well, we have so many things for you, but this weekend we have real estate workshop. You know, and this is the great thing. You know, a lot of people, you know, we're not car salesmen. And not that if you are a Carson Ozman, that's no bad pun intended, but, you know, we, Billy's heart is to help people. And this is why he does this, having real estate workshops. So that statistics prove that real estate makes more people wealthy than anything else. And guess what? You can use that wealth to build the kingdom of God. So what greater way to build the wealth? By getting into real estate. But you do need to know what you're doing. It's not super hard, but you still, I, compared to like being in a circus at a trapeze, you know, if there's a safety net, I'm going to be 65 this year. I'd still jump on that thing. I would do it, but my wife would probably wouldn't want me to. But anyway, I would do it. I just thought because that would be a drilling rush. But if there's no net. Yeah, I'm not going to do that. When I was 20, I probably would, but now I'm not going to do. But I just feel like, you know, we have workshops, we have coaching programs. [00:20:31] Speaker B: Coaching is like none other than our coaching program. [00:20:35] Speaker C: It's such a one on one. And when you get a piece of property, we put the net out and help you to say, no, don't do this, don't do this. So I just think, I know there's a lot of programs out there, but I tell you what, this is a God thing. It really is. The real estate workshops, the wealth builders family in general, it creates such an atmosphere of saying, you know, God's going to help you do this. We are going to connect with you. And I know I can just keep going. I'm excited about this. It really is, because I know God wants people to prosper, Karen. [00:21:07] Speaker B: Absolutely. [00:21:08] Speaker C: So this is an awesome thing. So thank you. It is. [00:21:11] Speaker A: And we've got two workshops a year. We've got the master class that somebody can get into. [00:21:15] Speaker B: Yes. Both business and real estate. [00:21:17] Speaker A: Beautiful. So there's opportunities to get the education that you need to get started. [00:21:21] Speaker B: Yeah. [00:21:22] Speaker A: And it's education with heart, too, because the heart of God is in the. [00:21:26] Speaker C: Middle of the right motive. Yeah. [00:21:27] Speaker A: Yeah. I love the teaching that Bill Bronchek does on how God is the greatest real estate investor of all. [00:21:31] Speaker C: That is so good. [00:21:32] Speaker A: Yeah. [00:21:33] Speaker C: Well, Karen, what do people need to do to find out more about this? [00:21:37] Speaker B: Yeah, so that's a great question. So go to, if you want to find out about our events, go to events. And we have, we do a lot of free webinars. We've got any workshops that are coming up that are there. Also you can go to and you can put in the search button masterclass. And we did a business one and we did a real estate one and they are phenomenal. So if you want to. Maybe you can't come to an event or maybe you're not ready for coaching. Those masterclasses really walk you through what you need to know. And we even do some calls on those that first year after you purchase it in a group setting so you can answer questions. But if you really want to get into real estate or get into business and have a guide, if you want to have professionals around you, if you want to have someone there that you can call to walk you through a problem, the coaching is the way to go. Or if you want to scale up, you want to go to that next level. And so to learn more about that, go to And then there is a little tab that says coaching. Click on that and you can go ahead and get signed up for the coaching program. Or if you want to learn more about it, we're happy to set up a 30 minutes consultation. I just have a recent example of how valuable this coaching is. I don't even know if you know this, Troy, but one of our properties down in Florida, we got this certified letter that said there is a. That our fence is infringing on our neighbor's property in the back. Well, we didn't build the fence. We just put a fence up. We don't know whose fence this is, but they were. They was just really. Well, anyway, it was such a blessing because Levi could just pick up the phone, he could talk to Frank, he could talk to Bill Bronczyk. We weren't in this alone. So this is something like, wow, what do you mean that we have to deal with this concrete fence that's not even ours, but it creates a pathway where you have the support and you have the guidance on how to deal with things that come up. But then on the positive side of that, we don't want to say that you're going to have a ton of problems, but you will have some problems that you're going to need help with. It's just part of doing business. But on the positive side, just getting in with people to help you think the way that God wants you to think, to help you to make good decisions in your business, to help you get some help with people that are sold out to God, that we are all doing this because we love God and we want to help you succeed. There is just nothing like it. So I would encourage you to check that out. Thanks for seeing that, Mike. [00:24:21] Speaker C: All right. [00:24:22] Speaker B: All right, guys. Well, this has been really fun. Do you have any final words you want to share with people before we sign off here? [00:24:27] Speaker C: It's been great. I think what you just said takes the fear factor out for people. [00:24:32] Speaker A: That's it. [00:24:33] Speaker B: Yes. That's really good, Troy. Yeah. [00:24:36] Speaker A: I think the biggest struggle we all face is understanding how much God wants to give you. And I think of the story in Isaiah. I think it's chapter seven, King Ahaz and the prophet comes to him and tells him to ask God for his sign. And he refused to ask God. It made God angry that he wouldn't ask. And I think we all need.

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