"Better Mortgage and Crowdfunding Strategy"
Personal Finance Expert
Episode 34: "Best Deals"
Listen to the Podcast Here:
Welcome back to The Real Estate Nerds Podcast! On today’s episode our host and attorney Scott Smith welcomes investor Jordan Goodman to discuss a topic we haven’t covered as much as we would like to–funding real estate investments. Scott and Jordan have a truly inspiring conversation that may have you thinking differently about financing and sourcing funds for real estate investments. Stay tuned through the end to hear some of Jordan’s favorite free mortgage tools.
Jordan Goodman on Crowdfunding and More
Scott Smith invites Jordan Goodman onto the show. The two investors chat about Jordan’s crowdfund and crowdfunding more generally, as well as risk mitigation in these contexts.
[1:00] Jordan comes from a financial journalism background and runs the popular website MoneyAnswers.com. He has become the author of 13 books, many about real estate.
[2:37] Jordan discusses crowdfunding, which has only been possible by Act of Congress in 2012. The spirit of the law was to give investors access to funding they otherwise may not have, while also benefiting developers.
[3:47] Jordan mentions the fund he is involved with and its 8% yield. It is called the Secured Real Estate Income Strategies Fund (SREIS). Visit the fund’s website for more information, including an inside look of those managing this fund. Jordan is on the board as well.
[5:00] Jordan touches on the two strategies that make this fund work: “The first is forced appreciation, meaning they’re doing something to the building to increase the value of it.” Next, they use collaborative lending to partner with the developer and keep a profit share. Both the investor and the fund receive profit returns from sales.
[7:00] Scott asks Jordan how the fund handles the risks inherent to the real estate market: “Obviously real estate has risks. So we want to mitigate those risks.” Jordan explains the ways that risk can be mitigated–by having lenders have “skin in the game,” through diversification. Diversification can be geographical or across asset classes. He also mentions the thorough underwriting they engage in.
[10:10] Jordan’s fund offers options. Investors may choose to receive monthly payouts or reinvest profits to continue to draw on the high returns.
[11:00] Scott points out that the rise of crowdfunding has attracted some bad operators on to the scene. He asks Jordan what investors should look for in a fun. “Track record is key,” Jordan explains. Jordan also believes leverage and the fund’s strategy (degree of speculation) are essential metrics to look at. He gives some concrete examples, pointing out that his fund doesn’t rely on an area’s appreciation, but rather on adding value. He gives an example of one investor whose cashflow doubled on the same property.
[13:00] The two investors touch on the dangers of loaded funds, which lack incentives for any of the key players to perform well. The more invested operators are, the better crowdfunded models tend to perform. In the case of Jordan’s fund, the profit sharing is split 80% to shareholders and 20% to management. Each gets paid “on the back end” based on the performance of the fund.
[16:50] Jordan and Scott talk the essential metrics that make Jordan’s fund that make it a good choice for those seeking secure, regular income off of passive real estate. Scott wonders if the fund is more secure in some sense, such as against recession, than real estate itself.
Jordan Goodman’s Investing Toolkit
Scott and Jordan change focus to practical tools any investors can use, giving particular attention to their mortgage payments and strategy.
[18:50] Scott asks about ways investors can get involved with some of the activities and funds Jordan has discussed. Jordan turns away from crowdfunding to point to another of the most essential tools for the average investor: “The Mortgage Optimization Strategy is a way to pay mortgages off much faster than you ever thought possible. It can be used on homesteads or investment properties.” Jordan highlights the fact that most mortgages aren’t making money, and in fact the average mortage holder is making many interest payments and few principal payments.
[19:32] “The Mortgage Optimization Strategy allows you to pay off the principle much faster–without extra income,” Jordan explains. He goes on to explain that some are able to pay of a 20- or 30-year mortgage in as little as 5-7 years. He gives an example of how this works using a Home Equity Line of Credit (HELOC). For a more in-depth description of this process, visit www.truthinequity.com. The tools are absolutely free and help calculate a mortgage based on the strategy.
[24:00] Jordan elaborates, stating: “There are three things you need to make this mortgage strategy work.1. Equity on your house.2. Decent credit score to qualify for the HELOC3. Positive cashflow to push the principal down.” He believes most of our listeners have these three things, particularly those with tenants paying down those mortgages faster for you. Jordan has written an entire book chapter on this strategy.
[25:34] When Scott asks Jordan for additional resources on mortgages, Jordan explains some benefits for professions he knows as American heroes, consisting largely of those in the military, helping professions, and medicine. There is a program known as Heroes Come First that such people can take advantage of at www.heroescomefirst.com or by calling 1-888-487-6114.
[27:58] To conclude, Jordan offers one final resource: VerifyMyMortgage.com. They will conduct a detailed analysis of how much you should be paying, and their system can find many errors. Often, investors have overpaid their mortgages and are eligible for lower payments and even refunds.
Connect with Jason Goodman
Connect with Jordan on MoneyAnwers.com, where you can find his weekly Money Answers Radio Show among many other free investing resources.
Thank you for joining us on today’s episode of the Real Estate Nerds Podcast.
For even more free educational resources on real estate investing and the law, check out the Royal Legal Solutions blog. You can also reach our host Scott Smith directly, connect with him on LinkedIn, subscribe to the Royal Legal Solutions YouTube channel, or join our investor community on Facebook.
Don’t forget to subscribe to stay up to date and have the most current episodes of the Real Estate Nerds Podcast directly in your listening library. Every subscription helps us create new, custom content for you. What did you think of today’s episode? What would you like to hear more about in the future? Leave your thoughts and questions in the comments section below, or leave us a review in the iTunes store. We love hearing your feedback, so fire away. Join us again next week for another investing conversation with Brandon Hall. Thanks for listening and joining us on our journey to become better investors!
Hosted by Scott Smith, Lead Attorney and Founder of Royal Legal Solutions. Schedule your personal consultation now. If you have questions about our content or suggestions for future episodes or guests, reach our podcast team at firstname.lastname@example.org.
When making business decisions that affect your long-term goals, like what types of investments to make with your retirement dollars and which vehicles to use, it really is best to be aware of all of your options. We frequently talk about the Solo 401(k) and Self-Directed IRA as tools for funding your retirement. But what about life insurance? And what about the stock market? What if we told you there is a tool that allows to to reap some benefits of both? It’s called Indexed Universal Life Insurance–and some investors have found it a useful addition to their retirement plans.
What Is Indexed Universal Life Insurance?
Indexed Universal Life Insurance (IUL) plans are a variety of permanent life insurance plan that features a cash-building element. One primary benefit of these plans is that the policy holder gets some of the gains of being associated with the stock market without all of the risk Wall Street is famous for. This is in no small part because of how these policies are designed. IULs earn in part because they are directly linked to a market index, such as the Dow or the S&P 500. Any gains remain within the policy, albeit a cap rate will limit how much you can make. However, you are protected during a particularly bad year for your index with an IUL. The worst case scenario with these plans is that you make nothing, but you never actually lose money no matter how poorly your index performs. The protection of your principal is actually derived in part from the same cap rate that limits your gains.
How much money do policyholders stand to make? Historically, returns run between 5-9%. The S&P Index has actually returned at 9-11%, but the upside limit on UILs stems from the account’s cap rate. For this reason, many advisors argue that the UIL can make a wise addition to a retirement or estate plan once more traditional and self-directed accounts are maxed out.
Tax Benefits of Indexed Universal Life Insurance (IUL) Plans
There are three key tax benefits of IULs. First, you may pay into the policy with pre-tax or after-tax funds. Withdrawals from the policy may be made tax-free if you are under 59 1/2. Such withdrawals are regarded as loans, with your death benefit serving as collateral. Any funds paid out to the beneficiary are also tax-free, including normal benefits upon your passing. This is true regardless of their value.
Ask the Experts at Royal Legal Solutions About Your Retirement Planning Options
Regardless of where you are in the retirement planning process, Royal Legal Solutions an assist you. We have extensive experience educating investors about self-directed investment options. Many of our investor-clients love our Solo 401k information, product, and compliance services. Our Self-Directed IRA services can also be helpful for retirement planning, as the SDIRA is yet another vehicle that allows you to diversify and take total control of your investments. To determine which of the available retirement planning strategies are best for you, consult with one of our experts at Royal Legal Solutions. You may also contact us with any questions you may have about your options.