The College Funding Mistake Most Wealthy Families Make

Steven Weinstock (00:01) Hello and welcome back to another episode of The Wealth Clock with Steven Weinstock. I've been investing in real estate for almost 25 years. I started off with single family homes, multi-family, and now I am investing in private credit, firstly in positions. I like to speak to entrepreneurs, people who help entrepreneurs and add as much value to my audience as possible. This episode is sponsored by Cable NOI. Cable NOI, NOI stands for Net Operating Income, and they help owners of multifamily property increase their NOI by getting them money from the cable companies. If you own a property, it has 20 units plus, they will get you a payment from a Spectrum, Verizon, AT&T, who else is out there? Charter. And it doesn't cost anything. You don't have to pay a dollar. You don't have to get your tenants to order cable from you. You don't have to bill anybody. It is literally an easy, free way to find out if money is waiting for you from these companies. In order to see if your building qualifies, reach out to CableNOI.com. Just give them the address, tell them how many units, and they will get back to you with the potential payday that your building can get. Great way to raise revenue on your property. Today I have Lance Morgan. He is the founder of College Funding Secrets. Lance helps high income families reduce the cost of college by over $100,000 using a combination of financial aid planning, real estate strategies, and tax optimization. Lance, thank you very much. Lance Morgan (01:48) Thank you. Thanks for having me on. Steven Weinstock (01:50) Okay, so I see you are in your vehicle. Okay, that's great. I'm not sure if you're driving at the time, so I'm not going even ask because I don't want the answer. Lance Morgan (01:59) No, I'm safe. I was actually, I had to rush to the bank to wire some money for a couple of properties. So we're, I'm glad we're talking about real estate. Steven Weinstock (02:10) Okay, good, good, good. Lance, tell me about yourself. Now, before you go into the minutiae, I only care about certain parts of it. What was your first job and what did it teach you about money? Your first job ever. Lance Morgan (02:21) That's a good question. So my first job was when I was probably not even old enough to be working. I was gluing faceplates onto floppy drives, the old floppy drives for Amiga computers. And I was paid for every one that I glued on. So I was taught about the power of getting paid what you're worth and piece rate. So the more efficient I was and the faster I worked, the more money I could make. And so my first lesson I guess as a kid about money is the benefit of earning what you make. Steven Weinstock (03:08) Wow. Where was this job? Where are you from? What part of the world was this? Was this a sweatshop in Asia somewhere? Lance Morgan (03:11) It was in northern Utah, pretty close. Steven Weinstock (03:18) Tell me about College Funding Secrets. We all have, we all know somebody who has kids and needs to spend money on college. Most of the country, kids are in public school. They get a free ride. College comes, it hits them like a ton of bricks. They're thinking about it for years in advance. Tell me how you got into this business. Lance Morgan (03:40) Yeah, good question. So I have five kids. So I always tell everyone I learned all this out of desperation more than inspiration. But I, as my kids, so I was actually, I went, my first professional career was in the IT industry. And then I got into the financial industry and as a financial advisor, I was doing, and teaching the traditional ways of saving and paying for college. So I had a traditional college savings plan. I was teaching my clients to do the same. Like a 529 account. And then I learned that there were a number of problems with that. Number one, it was hurting financial aid to have that 529 account. And number two, you spend the money out of the account on college and it's gone. Versus taking that money or any of your college savings, putting it towards real estate, let the cashflow from the real estate pay for college. Which can also pay for your retirement. So you're having your cake and eating it too. You don't have to decide between saving for your kids college or saving for your retirement. It's one in the same. Steven Weinstock (04:41) Yeah, one of the biggest issues with 529s is exactly what you said. It limits you or hinders your ability to get financial aid. You use it up, I guess, on your first semester and now you're broke. Everything that you saved is gone and now you got to beg for financial aid. It's almost, you know, it almost doesn't pay to do it if you're going to be asking for financial aid. I fully agree with you on that. You moved into from IT into finance. What were you doing in finance? Lance Morgan (05:12) So I was a traditional fiduciary, fully licensed. I did everything from insurance to assets under management. All the traditional stuff. We would set up 401k plans for companies. We would help families individually. It was all very traditional before I got into real estate. Steven Weinstock (05:28) How did you get into real estate? What was the first aspect of real estate you got into? Lance Morgan (05:32) Good question. So my dad was actually an accountant for a property management company and his boss started out with nothing, ended up with billions of dollars in real estate and multifamily anywhere from Utah to Idaho to California and all over the place. My dad invested way later, because he was very conservative and he never made a lot of money. So investing in real estate wasn't easy, but he eventually took out a loan to invest in some of the real estate properties that they were buying as a company. And he ended up retiring at 57 with $50,000 in his retirement account, but enough cashflow from his real estate investments to help him retire at 57. And so I always loved real estate. I'm watching what he did. I always knew it was a good investment, but for me personally, I didn't, you know, same kind of excuse, I guess, not having enough money to get into on some of the deals that he was doing. Eventually I ended up, honestly, making enough money with my college funding business to need some tax benefits. And so I was looking for tax savings. I wasn't looking for real estate, but it led me down the short-term rental loophole. And I started learning about those tax savings. What I loved about it was that it helps to reduce your income, which can help some of these high income families get financial aid. And so it was a perfect fit for my business model because we can help these families buy these short-term rental properties for the tax benefits, also potentially financial aid and the cashflow can pay for college. So I completely shifted gears and I started doubling down on teaching families how to use real estate to pay for college and just bought my first two properties last year. We partnered with a real estate company that's been doing this 25 years to kind of help with all the short-term rental aspect of it. And we just grew like crazy. We have about 50 clients a month joining every month. Should run track to have about 150 clients a month in the next 90 days. And a lot of these families love this unique way of paying for college. Steven Weinstock (07:44) Wow, and does your company actually help them buy specific properties or is this more of a strategy and you're telling them what types of property, et cetera, but not necessarily telling them, oh, this property is good, that one's not. How does it play out? Lance Morgan (08:05) So we've networked with all the wholesalers in like a Pace Morby community. For example, we've networked with a lot of realtors that are in that short-term rental niche. And we've basically got a lot of people sending us deals. We have a private members portal where all of these deals are underwritten after they get submitted. So they get submitted by a realtor or a wholesaler. They get submitted on our platform. And then we have a team that does all the underwriting, all the analytics, and then they post the properties into our website where our community members, our clients, they can go in and buy these properties. And so they've already been underwritten. They've already been identified as a good investment, that kind of thing. And then we have designers to help them. So there's a lot of this white glove kind of done with you, but then we also have a done for you where we buy the properties, the ones that we like the most, we'll buy them and then we'll partner with a client. The client basically is responsible. Yeah, we do all the work. They're the financial partner. They get all the tax benefits. We take all of the risks on the, making sure the mortgage is paid. And then if we ever exit or sell the property, they get their initial investment back and we split the revenue. So we kind of have this done with you and kind of a done for you model. It depends on which direction the client wants to go. Some clients, they have more money than time. Other clients have more time than money. It just depends. Steven Weinstock (09:31) What part of the country are you guys buying real estate or is it all over? Lance Morgan (09:36) All over. We're all over from the Florida's to the Smokey Mountains to all these popular short-term middle markets as well as college towns, you know, things like that. Steven Weinstock (09:48) And for now, it's strictly short-term rentals. Lance Morgan (09:50) It is unless somebody is like a real estate professional, of course, they can buy these properties and they can do long term rentals if they want to do long term rentals. We don't specialize in multifamily or anything like that. Our bread and butter would be creating a turnkey business model for the short term rentals because we're helping with all of the design and management and all that kind of stuff. So we're trying to make owning a short term rental business easy. But we're also capitalizing on all the maximized revenue, maximization and things like that. So we have the economies of scale concept where we can manage and run all these properties for maximum profitability. Steven Weinstock (10:29) Do the clients at College Funding Secrets, are they buying these as a group sometimes, or is it one on, either they're buying it themselves, or sometimes they'll just partner with you guys direct? Lance Morgan (10:42) Yeah. It's either just a partner with us. We buy the house under an LLC. We each own half the LLC. We set up a bank account. We each have access to the bank account. So it's just a partnership just with that or they do it on their own. Steven Weinstock (10:57) That's so interesting. So I guess most of the people that you're dealing with are of a certain age where college is on the horizon. Lance Morgan (11:06) Yeah. So most of our clients are in that 40 to 60 age range. They've typically got high school kids and college is close. Or a lot of them even have college students. They might have a freshman in college or maybe they've got a college student that's going to go on and get a graduate degree. And so we actually help clients. Some of our clients have really young kids. From time to time we find clients who are still doing in vitro. They haven't even started. They're just thinking about kids. But most of them have high school students. Steven Weinstock (12:00) Let me ask you this question. Why do you think college is so expensive today compared to years ago? Lance Morgan (12:06) You know, college has gone up so much faster than wages. It's gone up faster than healthcare, cars, everything else. And honestly, I think it's because they can. I think it's because people are paying it and people don't like paying it, but they keep paying for it anyway. And so I think these colleges can pretty much charge whatever they want and people still pay it. But I do believe that we've probably hit a peak. I do believe that there are a lot of ways to get educated nowadays and more so every day. I think we're seeing, at least I know from my experience, I know a lot of clients are looking at the trades. I know a lot of clients are looking at maybe real estate or they're looking at the entrepreneur route or sales or whatever. I know that you've still got a lot of people going to college. But I think we're going to see a change in the industry. And I think that the prices will hopefully eventually slow down a little bit. I would never say they're going to come back, but I would say they'll at least slow down from the crazy growth that they've been all these years. Steven Weinstock (13:18) What are some mistakes that high-income families make when they're saving for college? Lance Morgan (13:23) So high income families don't think they're going to get any financial aid and most of them aren't. But with what we call financial positioning, you can position your assets in a way to actually qualify for financial aid. A lot of that's going to come down to tax strategies. For example, you buy a real estate property and take bonus depreciation. You can reduce your income and get into the financial aid category. So there are ways that you can get financial aid that most wealthy people don't understand. They just don't think they're going to get any free money. So they don't even fill out the financial aid forms. The other mistake they're making is that they don't fill out the financial aid forms. And even if they don't get any financial aid, if you fill out the financial aid forms, you're basically telling the schools that you're successful and that you have a lot of money. That means that you might get more scholarship money because they want your student to go to their school. In case he turns out to be like mom and dad, they might want to, it might increase the admissions opportunities because these kids, if their parents are going to pay more than the next person, voila, they might get accepted where the other student doesn't that's going to get a lot of free money or financial aid. So there's multiple reasons why everyone should fill out the financial aid forms, whether you think you're going to get free money or not. And then you should strategically plan your finances in a way that you could get financial aid or at least maximize the merit-based scholarships. Steven Weinstock (14:50) I once read an article that parents instinctively are sacrificing retirement savings for college savings. What kind of damage does that do long term? Lance Morgan (15:00) So in the very, very beginning of all of our webinars and trainings, we always talk about the three costs of college, which is the cost of attendance. That's room and board, books and supplies, everything that people would think about. There's the financing cost, which most people don't understand. When you have multiple kids and you're looking at a lot of the financing involved, these loans are not cheap because they're not secured. These are unsecured loans. So they're not the cheapest way to borrow money. But the third cost, call it the secret cost of college. The third cost is the opportunity cost or the cost of missing out of all that interest on the money that you spend on college. So the average family spends $200,000 on college, which for my clients, that's like one kid going to an out of state school. A lot of my clients, they're going to top tier private schools and they're paying double that for one kid. What people don't understand is they might think it's only costing $200,000. The reality, it's actually a million dollars out of their retirement. By the time you look at the opportunity cost of that $200,000, that $200,000 could have grown for your retirement, but when you spend it on college, it's gone. And so that's the challenge. Steven Weinstock (16:16) If you have a parent that has enough money to pay for college for that kid, do you still recommend that the child take student loans, even if the parent's gonna pay for it? Because sometimes the interest rate is beneficial, sometimes it has deferred payments for a while. What's your opinion on that? Someone's rich enough or saved enough where they could pay for college. Should the child, should the students still get student loans under their own name and maybe the parents pay off over time? What's your opinion on that? Lance Morgan (16:49) Yeah, there's two angles, I guess two things to consider. Number one, the financial side. Believe it or not, and this is another mistake the wealthy families make is they pay cash for college. Believe it or not, paying cash for college hurts your retirement more than taking out the loans and paying the loans back slowly over time. Assuming you can keep your money working for you and having it be more effective than paying it towards college. But theoretically, most of the time, the families should take out loans, believe it or not, because mathematically it's going to help them from an opportunity cost in retirement. Yes, it's also true that student loans tend to be lower interest rate. The other benefits are that it does help to build the credit of the student. But ultimately it's more of an emotional kind of a decision where you're trying to help your kids to have some skin in the game. And we have some families that really want their kids having skin in the game. And we have some families that their kids already work hard enough. They don't have to worry about their kids partying or wasting all their money. Some of these kids are so dedicated and they work so hard that the parents aren't worried about it. And so a lot of our clients will just pay for all of college, but it's never a bad idea for the kids to take out some college loans for a number of financial reasons. Steven Weinstock (18:13) Outside of real estate investing and helping parents pay for college, what do you do for fun? Lance Morgan (18:19) I love anything outdoors. I love snow skiing. I love wake surfing behind our boat. I love anything to do with the mountains. Anything. I mean, we have five kids and so we're always very busy with the family, of course, but we love getting out. We have a cabin on the lake that we love going to and just spending quality time with family. Steven Weinstock (18:41) Okay, so I'm a New Yorker. I'm living here in New York City. I'm recording from the great borough of Brooklyn where we just elected a new mayor that apparently the whole country is talking about. So we don't get to do too much wakeboarding or whatever it is that you said something about outdoors. You ever watch any TV or movies? What are you watching? What's the best show you ever watched? Lance Morgan (19:05) I tell you, I've been to downtown New York once and I can check that off my list. Give me open spaces. I like my mountains. Yeah, I don't, the only time I'm watching TV is if it's something like Alex Hormozi or somebody that I'm going to learn something from. I don't spend a lot of downtime watching TV. Steven Weinstock (19:30) All right, that's a good answer and the right way to be thinking. I appreciate that. I had a good time talking to you. I know you're, I guess you're stuck in traffic and you're staring at your screen the whole time. But thank you for coming to us with your car. Most of the people listening to this will be audio listeners, not necessarily video listeners, but for everybody out there, he is sitting in his car. I guess it's the driver's seat. I'm not sure if I see police lights flashing behind him or not. Let's hope not. Thank you so much for coming, Lance. I'll put it in the show notes, but tell everybody here how they can reach you, email, phone numbers, fax numbers, whatever you got. Lance Morgan (20:10) So if you go to collegefundingsecrets.com, you can book a call with us. It's free. We'll hook you up with our free software to be able to run all your projections and show you how much free money we could get you. We have some really cool tools. We've got a lot of money invested in some cool tools that we give away for free. So just go to collegefundingsecrets.com. Steven Weinstock (20:31) Okay, Lance, thank you very much. I appreciate you coming on and to everybody else. Thank you for tuning in to another episode of the Wealth Clock podcast with Steven Weinstock. Please like, subscribe, share. Every time you like the episode on YouTube, from what I understand, it reinvigorates the algorithm. So supposedly every subscriber shows each video to another 20 people or so on their feed. So I encourage you to subscribe. And if you have anybody that you think would be a good fit for me to interview, please reach out, let me know. They can do it from their home office on Zoom or in their vehicle like Lance over here. Lance, thank you so much. I appreciate you coming out. Lance Morgan (21:15) My pleasure, thanks for having me on. Steven Weinstock (21:17) Speak to you later. Lance Morgan (21:18) Take care.