lystn

In this episode, Michael and Tom speak with Zac Breverman about how to start investing and ways to get capital without taking a bank loan.    Zachary.Breverman@duncannewman.com --- Transcript   Michael: Hey everybody, welcome to another episode of The Remote Real Estate Investor. I'm Michael Albaum and today I'm joined by Tom Schneider and a very special guest, Zac Breverman. I'm gonna let Zac introduce himself today, but we're going to be talking about all things financial advisor related and how we as real estate investors can use some of the tips, tricks and resources, Zack is going to be sharing with us as rocket fuel for our investing. Let's get into it.   Theme song   Michael: Alright, so Zac Breverman, you are a financial advisor and certified financial planner, the executive vice president with Duncan Newman and Associates. Welcome to the show, man. So happy to have you.   Zac: Thank you. I'm really excited to be here.   Michael: And just so everybody knows, Zac, you and I go way back, we went to high school together, we went to Cal Poly together, we were roommates at Cal Poly. And for some reason I've known some you were still friends to this day.   Zac: I mean, you really locked me in here, and I couldn't help it. But just stick around. And it's been amazing to watch your journey throughout your real estate investing career that you've really paved the way for,   Michael: Right on. Thanks so much, man. So today, I would love it. Obviously, I know your story in your background, we're gonna be talking about Certified Financial Planning stuff, financial advisor type stuff, but we'd love for you to share with our listeners a little bit of background on you, and how you got into the CFP game. And then also a little bit about your investing background, because I know that you're also a real estate investor.   Zac: Yeah, definitely. So I've been a financial advisor for about nine years now. And really, it was one of those things where right after college, I was looking around at different career paths. And I noticed that in the financial advisor world, there were a couple things I really loved about it first part, obviously being able to work with clients and help them accomplish these goals. And I know it kind of sounds cheesy, but it is pretty incredible. To see people start to invest and kind of see those dreams turn into realities over time, no different than in real estate, right. So I really gravitated towards that. Not to mention, I do just love the investment side of it. I really love getting involved in picking mutual funds, or ETFs, or stocks or bonds for that matter and working with clients to figure out a portfolio and a game plan for them.   So I've been doing this for about, like I said 9-10 years now, during that period of time, I realized diversification is important in our in our portfolios that we manage for clients. And then I was looking at myself and how I manage my own portfolios. And I quickly realized that there's one big asset class that I thought was important to add to my portfolio. And so going back to 2015, I bought my first investment property, I say, give you an idea of where I live. I live out in Los Angeles in California, of course, and I found a property out in Texas outside of Houston, that turned out to be a really solid investment and own it to this day, and it's continuing to cashflow well and we've been continuing to look for opportunities from there.   More recently, I actually moved and was able to convert my previous primary residence to a rental. And so that's been a really fun adventure as I've not only turned it into a rental and started getting some nice income from it. But the fun part for me was it was local, and so I could actually manage it. So I was the one boots on the ground, found the renter setup the all of the processes it took to make sure collecting payments and making sure that if there's anything wrong at the property, I could fix it. And so it's been a really fun adventure to not only have an investment property out of state, but also have one local that I could actually manage.   Michael: That’s so killer. And so you're drinking the kool aid to which I love your CFP and you're doing real estate investing?   Zac: Absolutely. I think everyone needs that diversification. And so it became really important component to me. And I fell in love with that, quite frankly, that's awesome.   Tom: I’m curious. How did you find that property in Texas? You know, back in 2015? Are you talking to moneybags Albaum here for some advice on investing, but yeah, just curious.   Michael: You should have been using Roofstock.   Zac: Yeah, that's true. I should have I quite frankly, it was one of those things where, actually, Michael, I don't even know if you had real estate at that time.   Michael: I did.   Zac: You did. Okay. Yeah, I didn’t remember. So my dad had connections to Houston from his. He went to college at University of Houston. And he had some friends there that became real estate agents. And so over time, he made those connections and quite frankly, I kind of just jumped on board this bandwagon. So my family has some houses in Houston as well. And using that real estate agent, he's also a property manager and made it an easy process for me to buy that property as well. I was going to mention one of the things that it was pretty cool about that Houston house is fortunately, it's gone up quite a bit in value. And so I've been able to do some cash out refinances. And that's really what led me to being able to buy our place in LA, at least a good portion of it along with my wife's savings as well. So it has been one of those vehicles that they always talked about that is supplemented my life also.   Michael: Zac I talk about that realtor all the time with other friends, because does he own like 50 houses in Houston and self insure?   Zac: Yeah, so he owns more than 50. There's some crazy stories from back in the day, how he was able to buy all these houses on the insanely cheap price. So he has all these properties. And he decided that there's just no reason to insure, because of the cost of actually ensuring all of them, he might as well self insure the income is incredibly good. He has provided I understand very, very little in the way of debt on these properties. So it's just their cash flow machines. Yeah. So why do you need insurance, when he's not spending nearly the income that's generated? So he's really helping to control his expenses a lot.   Michael: I was explaining to somebody recently what the whole concept of self insuring was. And, you know, let's say it was 50 houses and you know, it was about 1000 bucks a year to ensure each one that's 50 grand, he's throwing away at insurance, when if the house even if the house does burn down, it might cost 50 or 60, to rebuild it. So right, it's a wash, you know, one year in and the likelihood of that happening is pretty close to nill.   Zac: Yeah, absolutely. And especially when you're talking about properties, and in Texas, where the values are dramatically less than what they are, are here in California.   MIchael: Right. And the rebuild cost is cheaper.   Zac: Exactly. Yeah. So you know, here in LA, if you can find a house for as we were actually just recently talking about this, Michael? Yeah, you know, if you could find a house for under a million, you're feeling pretty good about it. If you're in some of the the bigger cities, or bigger parts of LA, I should say, were out there. It's nothing in comparison. It's pretty amazing, different California perspective, it's really amazing.   Michael: Alright, Zach. So I want to shift gears here a little bit and talk about, you know, the financial advisement things and the financial advising aspect of real estate investing. And so if someone has been saving up for real estate, you know, they want to make a purchase, but they don't have enough money yet. How would you advise them? What would you tell them to do with their cash? Do they put it in a bank? Do they invest it? You know, what, what are some options for these folks?   Zac: Sure. Yeah, it's an interesting question, because obviously, it takes time to build up for that first downpayment, if you're planning to put 20%, down, or even even less than that. And so it really comes down to more about timeframe. So if you think it's going to take more than one year, as an example, to accrue enough money to actually buy a property, in many cases that make sense to go and invest, right, there's risk associated with it, of course, right, the stock market goes up and down this year, with a pandemic, we've learned that all too well, we saw the stock market dropped dramatically, and in February and March and come roaring back up, and then the rest of it from that point to today. And so you have to understand that there's some risk associated with it.   But hopefully, over a year or two years, if you have that kind of timeframe, the market will grow and help you build up that savings account so that you can go out and buy the property, give you a little bit of a boost to there. The hard part is if you're if you're really close, if you're six months, you're nine months to buying a property, it just doesn't make sense, in my opinion. And the reason is, is because we don't know if a pandemic is going to come in three months from now, right in December. Sure, there was some news coming out out of China, but we didn't know what was how that was going to affect us here in the US. And next thing I know, we're we're talking about a stock market that's down 35%. And so because of that, you really have to make sure that you have enough time to let the investment recover, if there is a pullback, and in a 3-6-9 month timeframe, in my opinion, it's not enough. And even in a in a year, it's a little it's pushing it depending on how high risk or how much you're in the stock market versus the bond market. So just want to make sure that you've got enough time frame to ride through any of the volatility that may come in the short term. And then hopefully, it helps you give that give you that boost.   Tom: It's a super insightful and just thinking about, you know, time horizon of buying and how much at risk, you want to put those funds. I'm curious, I'd love your input on just kind of general position on you know, you have your wealth and your investments in certain places, right, and real estate and equities and bonds. Is there any general guidelines you give to clients or friends or whatnot as ways to kind of mix that around it? Also, do you typically recommend having a what kind of cash position you know, as a as a percentage, and I know everyone has a unique situation, but I'd be curious to hear your kind of general guidelines.   Zac: Yeah, absolutely. It's a good question. So from my perspective, you I'll start with the emergency fund part of it. You, you really do want to always have some cash position or an emergency fund, from my point of view, it does depend on who you are. But if you have somewhere in between, I always say three to six months of expenses, right? So look at your budget, and try and figure out what three months of expenses looks like or six months, then you're you have enough time, I should say you have enough cash to cover a potential hard time, right? Whether you lose your job  or a pandemic. But if you're tying real estate, what if someone doesn't pay their rent for one month or two? Are you able to cover it through your cash that you have in your reserves? So I always like at least three to six months worth of cash on hand.   From there, that's when you start talking about investing, right? That's cash is kind of the core part of your portfolio to allow you to do all this other stuff. And once you start looking at at the broader perspective of Do you want to buy stocks? Or do you want to buy bonds as an example, not to sound like a broken record, but it comes down to the timeframe. If you've got 10 years, you can go ahead and be fairly aggressive, and take advantage of the stock market opportunities, right, we know the stock market, at least historically, has gone up quite a bit more than what the bond market has done historically. Bonds are still great investments getting you way more than what the banks are paying, you obviously take on risk their bonds can, you know, companies can go bankrupt and so that bond can can lose its value.   But you know, if you're buying quality there, you're probably okay. Or you're buying a mutual fund or an ETF you'd be just fine. So the longer the timeframe, the more you want to add to the stock market. So it is something where Unfortunately, it is a bit of a time horizon question. Younger investors definitely can take on more risk, assuming that they've got a job, and they're planning on continuing to work and take advantage of the different investment opportunities out there.   Michael: And Zac, when you say time horizon, what do you mean?   Zac: Yeah, so it's really about how long until you think you're going to need the money. So I know in, say, for example, I need I need to buy a car. And two years from now, two years in the investment world is a relatively short period of time, it's not six months where I need to keep the money in cash. But maybe in two years, I need to be a little bit more in a balanced portfolio, I say balance, it has stocks and bonds in there. If you're talking 10 plus years, then you can start looking at having more allocated toward stock and less towards bonds. So it's just a matter of trying to find your comfort, right? If you're looking at the stock market, and the downturns make you really uncomfortable, then it's probably something where you don't want to have a lot in the stock market.   It's no different than real estate in that case, right? Sorry to cut you off there. But I was gonna say it's no different in real estate, right? If If you can stomach the market changes or something happening, where you have a huge expense because the AC goes out? And you'd be okay long term. But if, if that makes you really uncomfortable, it's a little bit of a different story.   Michael: Where would you put on the risk spectrum, real estate? Now, we know that there's some liquidity aspects of it, where it's not as liquid as some of these other. But in talking about time horizon, you know, where do you plug real estate in and thinking about that?   Zac: Yeah, I mean, for a time around, then I always like to think about real estate as at least a five year investment, personally, five year or greater. And the reason I use that as my scale is because if there is a market downturn, then there is time to allow the real estate prices to recover. You don't want to have to sell when the market goes down, whether that be stocks or real estate. So I always think about it at least a five year timeframe. And ideally, if it's a good investment, and it's performing like you want it to, hopefully you hold it a lot longer.   Michael: But so as far as categorizing it, if we had to put investments on a spectrum, where would we categorize stocks, bonds, real estate, as far as risk is concerned?   Zac: Yeah, that's a tough one. Because obviously, there's lots of different real estate. As long as you have all these other components where you have plenty of cash built up. I think real estate is part of a portfolio could be a little bit under the stock market. But you have to make sure you have diversification. If you've got one property, quite frankly, it's probably a little bit higher than the stock market. Because if that tenant moves out, that's a high risk. So as you build out your real estate portfolio, naturally, the average risk goes down. I think a diversified real estate portfolio is more conservative a little bit than the stock market.   Michael: Yes. Great answer.   Zac: So did I pass?   Michael: Yeah you did. We'll send you a check in the mail.   Zac: Thanks.   Michael: I'm circling back and this is you tell me this splitting hairs. But in circling back to your car analogy, if you got to get a car in two years, does that mean that you're you know, you're investing in the stock market, whatever the equities market to generate some additional income to buy that car. Does that mean that you're pulling out of the market at one year, eight months to have that in cash? Because if you have a down cycle and that six month time window like you were talking about, that means you take your winnings and walk away and say, Okay, now I know I can buy the car, do you keep riding that train, hopefully upward and kind of gamble with it?   Zac: Yeah, I can tell you that financial advice from a financial advisor,   Michael: And then what you would do?   Zac: It depends on what you're comfortable with. Personally, if you say if you have a solid income, and you're not worried about making up any difference, sure, you can go and wait till take the money until you truly need it. But to be protective, to be a, what we call prudent investor, right? You would probably take the money out a few months in advance in preparation for buying the car.   Michael: That makes sense, right?   Zac: It that just depends on personal situation. But surely from a financial advice perspective, you'd want to take the money out and not risk it in the market.   Michael: Okay, good to know. All right, so let's shift gears again here. And I would love, love, love. So we were talking before we had you on the show and about the different ways that investors can get access to money for real estate investments that might be a little bit non traditional, or might not be so front of mind for folks. Because I think what a lot of people think about investing in real estate, they think, Okay, I got to bring 20% I'll go to a bank and get 80% or 75%, whatever it is. And that's that's all there is to it. And there's no other way. Can you shed light on some of the other options that might be available for folks?   Zac: Yeah, for sure. Our broad perspective, it's great to go out and get loan. But if you could bankroll yourself, that's even better, right. And there's pros and cons to it all course. But I think the couple ideas that I wanted to share today are really ways that you can at least partially bankroll yourself. So you don't need underwriting to prove you and all that. So,   Michael: Which is the worst for anybody who's ever gotten a loan will tell you?   Zac: Yeah, especially now with the refinance moving as crazy as in my…   Michael: Oh my gosh with COVID. Right. It's insane. And Tom what about you, you’ve been waiting, like four or five months. Right. Your refi?   Tom: Yeah, it’s been a while, I think just you know, the combination of COVID plus the interest rates being there at just like resulted in a slog fest of getting through. Literally just closed after, like you just like you said, Michael, I we do our like, you know, updates sometimes on the podcast. And it's like the same thing again, and again. I'm still waiting.   Michael: I'm still waiting, still waiting.   Tom: Anyways, yeah, closed? Yes.   Zac: Well, congratulations. That's a big deal these days.   Tom: Ugh, thanks.   Michael: It's a huge milestone.   Zac: Yeah, yeah. So if you're trying to figure out how you can get money on through your savings and other ways, you know, you can always look at your retirement accounts. And like I said, there's pros and cons to everything. But one of the ways that I think does work pretty well is looking at your 401k. So if you're working at an employer, you can been contributing to your 401k. And you've been contributing for a long time, hopefully, you've accrued a pretty good amount of money in there, and you can borrow from your 401k up to certain levels, I'll go through that in a second. And what you would do is, you actually pay yourself back at whatever that interest rate is that they are, that your employer tells you, the rate would be. So as an example, maybe you're borrowing and the company allows you to borrow four and a half percent. When you pay yourself back, you're saying essentially paying your 401k, the loan back with four and a half percent interest, right?   The interesting part is, so you can take up to 50,000, right, it's actually 50% of your account balance up to 50,000. So the most you can ever get as 100 is 50. Grand. So if you have, let's say you have 35,000, or say 30,000, just for easy numbers, 15,000, you could borrow from your 401k. If you have 100,000, you could borrow 50,000, from your 401k. Right. So it's an easy way to get money out of you're not exactly getting it out of your retirement accounts. But it's allowing yourself to borrow your retirement accounts to go and do other things, other investment options. Normally, the way that it works is. And so this is something you'd have to check with your employer, because everyone, every company is a little different. But they would just start taking the repayments directly out of your paycheck.   So just be prepared when you're obviously when you're going through this process, that your paycheck is going to go down a little bit because you are repaying that loan. And the one big risk that I'll have to point out is if you leave your company, whether it's by choice or not by choice, there is a possibility where they can actually put that out as a distribution, which is a that's the risk, the big risk here. Right? Because if it is turned into a distribution, you have taxes on that money, most likely, and it's very possible that you could be paying a penalty if you're under 59 and a half. So it is a great option. Just you got to be aware of the risks and leaving the employer that risk I'd say.   Tom: So I think I know the answer to this. What have you in a previous employer, you know, had saved up a bunch of money and what was 401k I'm guessing that kind of sweetheart lending where the lenders herself and is not necessarily available if you have some some older retirement accounts that from previous companies.   Zac: Yeah, so there's a couple things, the question is really about if you're still working, right, if you're still working and your new employer has a 401 K, you can and there's a lot of different options, but you could roll that account into your new 401k. And so now let's just say for example, you got 50 grand at the old 401k, and another, and you've been saving in the new one, and you got another 30 grand, well, most of the time, the employer says, Okay, you've got 80 grand, we're gonna allow you to borrow 50%, so 40 grand, you could borrow from that account, and then go ahead, and, of course, invested in any manner you'd like,   Tom: Man, this is like our, I think our like 60th or 70th episode, right? You know, and this is one of the coolest things like, I don't know, that like that I've learned. Like, this is magic. So you know, you're paying whatever interest rate, it's just going directly back in your pocket. It's like forced savings, and a forced loan at the same time. This is like, Yeah, I don't know, upside down. Awesome world. This is a   Zac: We could go down this rabbit hole. And these are all the ideas that are that allow us to do that. I mean, it is pretty cool. I have all these different options.   Michael: So Zac, just to summarize, because I remember when I learned about this a long time ago, and it blew my mind. Just Of course, I learned that a long time.I was doing 401k loans when you were in diapers.   Zac: Right, exactly.   Michael: Well, there was a point eventually got it. I'll get there in a minute. But so what you're saying is that you can take a loan from yourself, and it's not taxed as if you were to take it out when you're in retirement age.   Zac: Exactly. Yeah, it's since we're on a real estate podcast, I'm sure a lot of the listeners will will be able to do quarter coordinate, or at least think of refinances as exactly what this is. It's kind of like a cash out refinance in a way where you're taking the money out, you're really borrowing it from yourself. There's no tax consequences, just like when you refinance, you take that money out, and that, of course, you have to pay the bank money. In this case, you're paying yourself money,   Michael: Right? Yeah, no,   Zac: It's a different different source.   Michael: That's a great analogy. I actually did this for a property to get the downpayment, a while back, and it was an amazingly easy process. I just, I was through Fidelity at the time, and I just told them how much I needed. And it's a great exactly, you're saying that 50 grand or up to 50%. And then it happened to be four and a half percent interest. And so every two weeks, it just got deducted from my paycheck. And I could choose the repayment period, from one to five years. So I just chose the maximum five years because that made the paint the repayment as small as possible. But it was just I mean, I had the money in my account, like the next day or two days later, it's it's so easy to pay it back. Because I did a refi and paid it all back in one lump sum, and there was no penalties, it was just the easiest thing, probably the easiest money I've ever borrowed.   Michael: I think that's the true value of it, quite frankly, as I look at that, they call it a bridge loan, right? Where you're borrowing money from one place. Normally, it would be from like a hard money lender or something like that. This case, it's just from your your self, quite frankly. And you take that money and you go and you rehab a house or you do something but that adds value to a property. And then you can refinance, get a more traditional mortgage, or you don't have to worry about it, and you pay that loan right back. I think that personally, I think that's where the real value of something like this comes in play.   Tom: And just the last kind of practical, tactical question is, is it all be managed through the company that manages your company's 401k? Is that Right?   Zac: Yeah, exactly. So all of this would happen through your employer's 401k. And it has to be your current employer, because like I said, If you leave, that's they're not going to let you borrow anymore, since they can't take from your paycheck anymore.   Michael: Awesome. And then I guess one of the other big downsides would be the opportunity cost of not being in the market. Yeah. Because those funds are actually out of the account. Now, raise your borrowing on margin or anything like that.   Zac Correct? Yeah, that's definitely one of the big potential downsides, right? So if you're an aggressive investor, and you're in 100%, of the stock market, you're missing out on whatever those stock market returns are. So you definitely have to make sure it's worthwhile and say, I get I'm getting that interest rate. I'm getting that. You know, you mentioned four and a half percent right on your loan, Michael?   Michael: Yeah.   Zac: You're getting four and a half percent, but could you be getting more money on that money by doing something else? Right, by leaving it in the stock market? And that's possible, right? It just depends on the timing. But you want to make sure if you're doing this, that that investments and awesome cash on cash return kind of investment.   Michael: We're gonna be digging in here. Just a minute about a couple of different retirement vehicles and retirement plans. Can you give everybody kind of a high level overview of what some of the different vehicles are, you know, 401k IRA, Roth IRAs, you know, what are those and who might have one?   Zac: Yeah. So I always think about as if there's three different buckets for that you can invest money in. So bucket one, number one is your taxable money that's like if you have a individual name, joint checking account that you want to move money into an investment account, or buy property or whatever the case may be, that's all non retirement related, right in the sense of, there's no tax benefits by using retirement accounts. So bucket number one, taxable accounts. That's, that's number one. Number two, would be traditional retirement accounts. And traditional retirement accounts are available to essentially whomever but there are limitations depending upon income, if the contributions are deductible, and there's some tax conversations that you want to have with either with your financial advisor or with your CPA.   But the traditional retirement accounts, the basic gist of them is, you can put money into this. Ideally, it is tax deductible, so it comes off your income. And then on the other side is once you turn 59 and a half or older, then you can take that money out penalty free, and you just pay taxes on those distributions. So where's the big benefit, there are one, it's on the contribution, right? You, you have the ability to deduct that contribution from your income. Assuming you fall within these guidelines, like I said that you can work with your CPA to narrow down. But the big benefit comes when the money's in the account itself. While your wallets going you don't have to worry about taxes at all. Right. So if you sell an investment, for a gain, you don't have to pay taxes on that gain. And so the money can compound a lot quicker over time.   So for younger investors, these are retirement accounts are really great opportunities to have quicker compound interest, because you're not paying taxes on those gains, you're just paying taxes when you take it out, hopefully in a really long time from now in retirement. So traditional IRAs. Now, traditional, I say traditional retirement accounts probably more broad. And that's because you can include a lot of different types of accounts. So you can have a traditional IRA, you can have a traditional 401k. If you're self employed, you can have what's called a SEP IRA account, or simple IRA account. These are all pre tax or traditional retirement accounts. So that would be the second bucket. The third bucket is Roth IRA accounts or Roth accounts in general Roth retirement accounts.   Now, a Roth has benefits as well, but they work in different ways. So there's, of course, the contribution, and there are limitations based on your income. So if you make too much money, you might not be able to contribute to a Roth IRA account, they have, they cut you off, essentially, the IRS cuts you off at some point. And so when you put money in there, if you can, you don't get any tax benefits for doing that. So first year, quite frankly, you're probably a little annoyed, you're like I'm putting this money into an account, I can't touch it till I'm 59 and a half or older. And then, you know, at the end after that, then I can finally start using this money. But the big benefit here is that even though you pay taxes, you put the money in this account, once it's in that account, it grows completely tax free. If you're a young investor as an example, or you you think you're not going to need this money at all, if you're already into or are close to retirement, this money is hugely important, because the money that grows tax free is about as good of money as it can get.   Right. So Roth retirement accounts are absolutely and considered the third bucket a really important part of a portfolio. And the the considerations there or I should say the different types of accounts, your traditional IRA. So in here you have a Roth IRA, and you can have a Roth 401 K, but depending upon your employer, some employers allow you to have a Roth 401 K, which is one quick note, regardless of what your income that you can contribute to a Roth 401k. There, like I said, there are limitations on Roth IRA accounts. So kind of weird that they forgot to include the Roth 401 k as part of that limitation.   Michael: But so Zack did, maybe I misunderstood you what you said in the traditional 401 K, the growth is also tax free. So why is one How is that different than a Roth 401k?   Zac: So officially, that would you would with a traditional retirement account, you would say that it's tax deferred, right? So you put money in there, it's all pre tax money, so you don't pay taxes until you take it out after 59 and a half. Like I said with the first time homebuyer, that, things like that there are a few ways where you can take some money out without paying a penalty before 59 and a half. But the way that we would always like to think about as these retirement accounts are for retirement. So you'd wait till after 50 and a half to start taking distributions and you don't have to pay penalties, but you do still have to pay taxes on this account.   Michael: Okay?   Zac: The Roth Ira in sorry, if I was confused in the first go around was really where you pay the taxes on the way in. You don't have to worry about taxes while it's in there. The benefit is afterward when you take those, those funds out after 15 and a half the money comes out tax free.   Michael: Perfect. All right, what else you got?   Zac: So the next one is actually if you've got IRA accounts. So and this actually applies to 401 K's also, but it's an borrowing from yourself. In this case, you actually can take money out of an IRA account. And this could be a for a Roth IRA, or traditional IRA, up to $10,000. And if you're married, it can be 10,000. For each of you, if you're buying a new property, essentially, it's a first time homebuyers. And so the rules around this are actually a little bit more flexible than I think a lot of people would imagine. Right? The the definition is that your first time homebuyer is just that you don't have ownership interest in your main home or primary home anytime within the last two years of the new purchase. So it does make it quite a bit more accessible to you than just saying first time homebuyer maybe you bought a house 10 years ago, and you've been renting for a few years or something like that, and you want to go back to buying this gives you a huge opportunity to get a little bit more cash.   So that's one ways you can do this first time homebuyer exception to take money out of retirement accounts before the age of 59 and a half. And for traditional IRA. Well, for both of them, you don't pay penalties for traditional IRAs, you just got to be careful because there are still taxes involved. Right, because all that money is still pre tax. With Roth, it's actually quite a bit easier. There's just they waive the penalty for first time homebuyers. And Roth is after tax money. So you're good there to like I was saying with both traditional IRA accounts and Roth IRA accounts and 401K's for that matter, you can do that $10,000 for each you and, and your spouse, if you're married, to take that money out and use it for the first time home purchase.   The one other way that you have the opportunity to, in a way borrow from yourself, it's a little different than the 401k loan option. But it's actually called the 60 day rollover. And so there are lots of different ways that you can roll your IRA account money to other IRA accounts, maybe at a different firm or move it from a 401k to an IRA, or whatever the case may be. There's lots of different considerations. So you want to understand all those different options. But one that's really interesting is called a 60 day rollover. And what that means is that you're going to take money out of your IRA account or out of your 401k account, borrowing, it's literally a distribution. But you have 60 days to get that money back into the account. And as long as that money's back in that account, within 60 days, you avoid taxes and penalties. And the the reason that is really helpful my opinion, is because let's say you do need to you maybe you want to pay cash for a house. And this kind of pushes you over the top to be able to pay cash, so you can get a better deal.   And then you can go and refinance and assuming it's not the middle of a pandemic, and rates are really low. And all those things that are causing mortgages to take forever to close, aren't around at that point. 60 days hopefully would be enough time for you to close and get that money back into the IRA before you have to pay taxes and penalties on it.   Tom: It's like a like a vacation. Just want to go out a little bit, see the world. You so you can do that with…     I was gonna say conjugal visit, that's not the right term. Wrong term. The opposite of that. Just so you can even do it. Even if you're moving to a different account. So it can be even be in that same account, jumped out of it and then put it right back into that same account.   Zac: Yeah, yeah, for sure. Mm hmm.   Michael: Like how stringent it is like the 60 day Really? 60, 61 62 days?   Zac: It depends on everyone. The IRS knocking on your door. You know, if you want the IRS knocking on your door, sure. Take it out for however long you want. No, I mean, that the reality is that, from what I understand, and this is where a CPA question because they're the ones that I get actually reported, of course, the IRS, it's 60 days. I wish I could say otherwise. It'd be awesome if you had more time, but I wouldn't push it.   Tom:  And this is all just in a similar question I had practical tactical, is your you would just manage this with your the company that is you know, what's the right word? The investments holder?   Zac: Exactly. That's holding that Yeah, yeah. So you can just work with your whatever investment firm you're with. They'll help you with the distribution. And as much as you know, I, you'd like to trust the person that you're working with, I would put a calendar reminder for, you know, 45 days out. And make sure that that money is kind of getting wrapped up with whatever refinance or whatever you're doing to make sure that money gets back in the account on time.   Tom: Incredible. I'm fired up about both of these magical money.   Michael: So Zack, what happens if you don't get it back in on time the bank takes too long to refinance done, you know, we can we can tell the IRS Oh, it's the bank's fault. My guess is they're not gonna buy that.     Zac: Yeah, they don't care at all.   Michael: If this happens how fingers do you lose?   Zac: I start with 10. And then each time it happens, I just lose one. So I'm down to four fingers? No, no, the reality of this is that if you don't put that money back in, and it's a it's a, it's a traditional IRA account your tax on it and if you're under 59 and a half, you could be penalized to right. So that penalty right now is that is 10%. So you could be paying depending on your incomes a lot in taxes on that distribution, which is why getting it back in 60 days, is really important. Nobody wants to pay the government any more taxes, and then the CPA tells you to do. And so you want to manage that as best you can.   Michael: Make total sense. And that's great. Okay, you must be out of ways to get money, or   Zac: Almost.   Michael: But wait, there's more?   Zac: When you get two options, we give you the third for free. Now they. So the cool part is actually with Roth IRA accounts, there's a lot of different options there to where you have, there's a lot that goes into it. So it is something that you really want to be careful. And you can look this up on, there's tons of websites that you can go to, to get the details in your own situation. But the basic idea is that if you have a Roth IRA account, you can actually take, potentially take money out of that account, your contributions specifically. And as long as you've had that account for more than five years, then it's potential where the the earnings would come out tax free as well. So you can get because you already paid taxes on your contribution, right? You don't have to worry about those taxes, but you could potentially take the earnings out on top of that.   And it really just comes down to making sure you have the account for a long enough period of time. And making sure you're not taking too much money out, you're still limited to the reason why you're taking money out in the first place. So first time homebuyer ideas and things like that. So but after 59 and a half, then this matters, right? As long as the money's been in there for more than five years. You're not paying taxes, you're not paying penalties. And you can take as much as you want out. Before that there's a couple complications that that you just want to be careful. But there's definitely ways to access money from your Roth IRA accounts and not have a huge tax bill, at the end of the day.   Mihcael: So what are some of the other reasons that you could take out the earnings on the Roth IRA?   Zac: Good question. So there's quite a few. So you could take it out for qualified education expenses, you could take it out for a disability or a death in the family. I believe it's for a family I know, if you pass or as an example, God forbid, then your beneficiaries could take it out at that point, regardless of age. So there's a handful of other factors that can come into play to allow you to take the money out without paying taxes or penalties on that money. You just want to I know it sounds boring, but you just want to check with your CPA. I mean, that's the big thing. These are the CPA is gonna be the one to make that final call, because that's, that's the world they live in.   Michael: Fortunately, and fortunately for us, unfortunately for them, I don't know how you want to look at it.   Zac: Yeah. faxes and dealing with the IRS does not sound like the greatest job to me, but there's probably people who hate the idea of being a financial advisor too.   Michael: So that’s why I leave it to the big dogs.   Zac: That's right.   Michael: Perfect. Okay, Tom, any other questions?   Tom: No questions, just comments. I'm just tickled pink with what I have learned today. I'm like, immediately gonna, like round up me and my wife's retirements house and then go, go make some more. Make some more money with some more money. Anyways, yeah. Incredible, incredible content. This is this is great, Zachary.   Zac: Yeah. Now, I'm glad that this is helpful. And yeah, I think that big thing is just creating, making sure that everybody has a team around them. Like just like as a real estate investor, you want to have your property manager, you want to have, you know, your contractors or, you know, whoever creates that full team around you. The same idea for financial planning and financial advising specifically, it's like, you want to have your financial advisor, want to have your CPA, you want to have your state attorney kind of get make sure everything's in line. I think after that, ever, collectively, everybody can help make sure that you're successful in your investments.   Michael: Right on and speaking of Zach if people have other questions, questions about financial planning or financial advising would love to utilize you for your services? How what's the best way folks get in touch with you?   Zac: Yeah, they can send me an email the email for long one but it's we can maybe post it in description or something like that for here totally. But it's Zachary.Breverman@duncannewman.com.   Michael: Right on. And Zac, when the world opens back up, the pandemic is over. We can go eat at restaurants again. Where's the first place you're headed to?   Zac: That's a tough question. Good. Potsie fancy. Yeah, this is oily water. Honestly, this is the most nervous I've been. Quite honestly, I've actually been okay with eating takeout more often.   Michael: Okay.   Zac: It's just easy. You know, you don't have to get all dressed up and do anything fancy.   Michael: Well, that's not a fun answer tells me to go sit down and eat.   Zac: Quite honestly the one thing that I right now I really miss is having a really good steak, like from a high end steak restaurant.   Tom: So hard to do that at home. It hard to have that same experience.   Zac: It is tough. It is tough. And I can try and make a steak as much as I can. And it just don't ever come out. Not like Michaels the least.   Michael: Yeah, it’s because you use a microwave. Of course it doesn't.   Zac: Yeah. Well, you know, I always mess up the timing. So it’s problematic.   Michael: Right on. Well, Zac, thank you so much for hanging out with us. This was super super insightful, as all of our conversations are. I really appreciate you taking the time today.   Zac: Thanks for having me. I appreciate it's been fun.     Michael: Okay, everybody that was our episode a big big, big thank you to Zac Breverman for coming on the show was such a pleasure to have you, looking forward to doing it again in the future. We talked about a lot of things in that episode. So go back and give it another listen if you didn't get all of it. Use it as a jumping off point to go research and have additional conversations with financial advisors in your world. Looking forward to seeing you on the next one. Happy investing.