Author: c c

How to Build a Recession Proof Portfolio

https://youtu.be/2yvR4h9thos

2020 has been a crazy year for the stock market with many companies going bankrupt. Well, the fangs, Facebook, Amazon, Apple, Netflix, and Google, all rising and value. Becoming very costly. You might be asking what makes the Fang stocks so POS and what is the key ratio? The PE ratio is the price to earnings ratio is the current stock offer cost divided by the profit per share.

For example, if company ABC. Has 1 million portions of stock currently priced at $20 and offering and offer earn $9 income or $2 per share. And the PE ratio would be $20. But if I can dollars, which gives a ratio of 10. Another way of looking at this example would be how long would it take to make money back?

If you purchase all the portions $20 million, assuming the company consistently earns $2 million per year, it would take 10 years to recoup your investment, which is a long term ROI of 7.2% per year. Not bad. At all, but what’s an acceptable

it’s the typical benchmark of a good PE ratio, but it depends on the industry. It’s difficult to compare tech companies like Apple with a retail company, like Costco. The lower the PE ratio, the less expensive stock and vice versa.

Currently the high work of stocks does not correlate the Dow, which is presently at around a P ratio of 29. And over. Nearly double the historic average of 15, which is why I don’t think this stock at the time of this video, the tank ratios are 34, 100 1934, 85, 34. Obvious that the stocks are overvalued and investors are seeking alternative investments.

Like gold, which doesn’t cash flow. And as pit all time highs after the big recession, it crashed to an all time low, shortly sophisticated investors should look into recession resistant investments. Cashflow stabilize apartment buildings with some value, add opportunities. Talk to, so we’re looking at, but strong, existing cashflow already in place. All time, low interest rate now is the time to take on good. Get ready for inflation because it’s comfortable.

How else are you? April? My stock portfolio can be compared to a person with an injection in suddenly struck in weekend.

My multifamily portfolio, access of vaccine, keeping my overall net worth intact, helping we stay afloat during downturns.

Over my 4,200 unit portfolio. We’re still well above 90, 95% of collections through this epidemic. When the government prohibited ports from evicting tenants, there weren’t no noticeable changes in rents and collections coming in.

The steady in my portfolio may have been because after all people need a place to live and they need good value base places to live between the $700 to $1,200. At the end, it comes down to supply and demand. This country needs more value-based options for regular people.

But speculating in the stock market and investing in real assets.

Announcing the 2021 Virtual Bubble Mastermind – January 16-17

https://youtu.be/0RIq0WOmOfs

We’re talking to Ryan, he’s one of my, accredited investors, been in a bunch of deals with me. he came down to the hui mastermind retreat in Honolulu, Hawaii last year. once you give us a little quick take on, what did you like about it? and then, , I’ll give you the big news man.

. So I loved it last year. I can’t wait to do it this year. So basically these people, I could relate to them a lot more. They were all hard workers. They understood the long-term play. , they had the capital to up, what they wanted to do. everyone in their group had their own little experiences and experiments going on.

So some people that are looking into tiny homes, some people are, looking maybe into, office space. Some people are doing, still single family homes and others are doing syndications. So you get a very broad range of what everyone’s doing. and it rarely intersects with, exactly what I’m doing.

I would be doing like for instance, of what I brought to the table, last year was I had just gotten into an Island syndication. so I wanted to bring details to everyone there and you can share your experiences and people can ask you questions that you may have not have thought of. And, because they have that experience as well.

Yeah. And that’s the thing, folks like our group is I think the only group out there that’s pure passive investor groups, most real estate. I actually, I stopped going to real estate conferences because I started to realize they’re all fake either. They’re trying to sell some gurus $30,000 course, or they’re just a bunch of newbie syndicators trying to get into game.

And, yeah, just. On some podcast or something like that. I noticed that this was an experienced group. a lot of them had already been in, some syndications. some were good, just getting started off, which is fine too. but. got help on both ends, so I could see what others were doing from the get-go.

And I realized that they had capital, they had, the desire to just be passive. and then I saw, obviously people ahead of me who had been doing it longer, who had been in more deals and I could peek around the corner and see what I should be looking out for what’s next. and that’s mainly what I like.

I like to get that notion of what’s next. and how to look ahead. I’ll be doing the same thing. We’ll be filtering investors. And only those who meet the certain criteria of your passive investors will be getting into this year’s event. But I got some bad news, man. What’s that? you’re not going to be able to, come to Hawaii this year because the, all that’s been going on, the whole pandemic thing.

So you just want me to come. no, not you and everybody else are going to need to stay at home and attend this thing virtually, but yeah. How is that going to work? , I’m in a bunch of other masterminds and we are all, things I paid 25 grand I’m in a few of these and I’m taking the best practices from those events.

the reason why I spend that much money to go to those types of events. And I’m sure why you came to Hawaii was so that you could build a relationship with other people. so I seen ways to do this virtually right, using a lot of zoom breakout rooms, but I have a lot of work that I have to do to bring the bright people in, ask people the right questions to curate the right speaking slots as we go around this event.

Okay. It will be virtual this year, Martha Luther King, January, , there’ll be probably a couple of days, no more than six hours a day, in the first half of the day, since I know how things are hard. And this is what’s nice about our in-person meeting, that we won’t be able to do.

As you get to detach and it’s, it’s, it was the time at the bar. It was the time hanging out. That was the cool time. But we’re going to try and mimic this as much as possible. And I would say like most online events search it like death by speakers, A bunch of power points, but the majority of the interaction is going to be, you guys are going to be talking to other members, either on a one-to-one basis like this, or in a small groups.

no more than 12 people in a group. So you’re going to really get to know each other personally. I like that, I think. Yeah. Okay. So you’re going to have breakout rooms with smaller groups of people. I think that’s going to increase the focus as well. I think it’s easy to get caught up in trying to talk to everyone when there is like a larger group at a big table.

I noticed that. So I think it is, that is going to be helpful. Yeah. And that’s the hard thing about even in-person events, right? Like when you. And most of us in our group are introverts. You’re at your ranch for right to, I want to be, yeah. Yeah. you’re an evolvement shiver. So what I noticed being an introvert too, is like, when you find somebody cool to talk with you just spend a lot of time with it.

And you don’t talk to everybody else. So these breakout rooms, common to , facilitate them is going to be cool because. going to give you enough time. You don’t have 10 minutes to interact with somebody, get a good vibe, see if you want to interact with them again in the future.

Take that content, but it’s also going to maximize your time so you can interact with as a lot of people in this that’s okay. That’s true. I think it’s gonna, it’s obviously I think it will be, so how will it be organic? Like I think, in person you It would just be like randomly, you would meet some people and see if you would connect with them.

how is it going to work here? Are there going to be like groups that you choose to be in or they’re going to be focus groups or, yeah. So I’m going to do a little bit of random, matchmaking for sure. But for the most part, I want to give people somewhat of a guideline of what to talk about instead of just pop you guys into a group, because that’s a little awkward, right?

here is the start of the, family office, Ohana virtual mastermind, the bubble of 2021. This is what I’m going to call it. I’ve got, I’m starting to build a list of different topics here. This list will obviously grow as the weeks go by as we get closer to the event. But there’s very common topics that I see coming up, right?

the guy who has a high net worth doesn’t have very much liquidity, but has a lot of money in their home equity or their 401k. Are they taking money out of their 401k slowly. So that unique it out. So their AGI doesn’t come up over $300,000. That was something we talked about this past year that I would say half of the people in the Roman, I’m sure half of the people in the virtual mastermind are having the same issues.

So getting those people together and for those people who don’t have those issues, we’ll put them in another group for general networking, Or infinite banking. I don’t know if you’ve set yours up yet, that was a big thing for a lot of people, hardly setting that up and everybody has a different situation in terms of net worth, how many kids they have, where they are with a career, what is their liquidity look like?

How much money do they net at the end of the year. And what do they want to deployment strategy for investments are going to be, so what I, when people sign up and they apply, one of the biggest thing is I’m going to have a long, pretty long intake form. So that I know where everybody’s net worth their liquidity, what problems they’re having.

So that when we go to the itinerary, I can match people up specifically in the right groups or with the right people. That makes sense to, yeah. That’s going to be really helpful. It’s going to take a lot of planning. Yeah. That’s a lot of work on your end. there’s a common amount of problems and issues people have.

And for example, infinite banking, there’s some experts in the crowd. There’s some people that have never heard of it. The experts I’m going to hook up with, I’m going to have some people at my current mastermind to play elders and bring up some people with that are in the middle.

But I’m going to jump to the breakout room with the complete newbies and teach it from the start. So this will this format will continued throughout the weekend. Okay. Yep. That we might even do a little bit of a Texas hold on. This is a fun game or something like that.

That’d be awesome. I think games are, I was going to say like the activities and the games, especially in person last year, that was, those were great. that really helped start talking to people and just. Feel people out at least, in terms of not just real estate, but just in what type of person they are.

Yeah. it’s going to be a super sleek use of Google documents. And because one thing I can do is you have your, you’re just totally random networking and you have these more specific itinerary based, topic discussions, but in the middle, you have this form of. maybe there’s different breakout rooms that people wanted learn about or talk to other peoples in the peers.

So I can build a Google document with the breakout room, breakout one and rename it to, 401ks breakout to rename it, to taking money out your retirement account, breakout three to, legacy planning. What are you doing in your ear? Revokable trust or trust? What kind of caveats that you’re putting in there?

Who wants to talk about oil and gas or land conservation Eastman’s right. And just a general hallway. Yeah. I think like that, to your previous point, that was important for me is like tax strategies. since, I’m single, I don’t, there’s no kids, so it’s, I don’t get a whole lot of tax help.

those were great strategies for me last year. And I’d really like to see and check in, what have people been doing or out about them? Did anyone go for it? I know that we were still researching oil and gas last year. and then obviously, yeah, the hallway too. I think it might be good to force people to rotate into the hallway every so often to just relax and take a break from learning and, absorbing information at least.

Yeah. and in the new version of zoom right now, you have the ability to navigate yourself through the breakout room. So if you’re not, if something’s not working for you, you can move around wherever you want or leave that option open for people. But, going back to the taxes, right? Like the using real estate professional status, 750 hours with active participation and using all these passive losses, you’re getting via costly innovations and bonus depreciation for this deals.

you understood it, right? you’re there in person, you got the concepts. So what we would probably do for you now is puts you in a group of the experts, That get it. And you guys have passive losses to use. and then, puts you in the people that are on the same level.

So you can guys can talk shop. I might stick with the new people and teach them this concept of this simple passive cashflow gravy train as I’ve trademarked it. Yeah, because that was me. that was me last year, actually. I had no idea about it. I’d never heard of these things. and so I was new and now that I know about it and I’ve actually been looking around, it’d be great to even get more information about people who’ve already done. we’ve got people in the group have gotten short-term rentals to let this, enact their real estate professional status.

They can offset their passive losses . to the ordinary income, you, my friend are single, so it’s going to be hard for you to do it, but we’ll connect you and maybe the other single people too. Even if they’re not single, it’s still, I think it’s still useful. I think, yeah, I can still find relatable people.

And again, the big part for me is probably, I guess the hallway, it might be helpful to have a room to just talk about. Like a general room. there’s no forced topic, but it’s also not like a hallway where you just kinda hang out and talk about like the weather. I don’t know, but really a big part, a big draw for me is, like hearing, like for instance, I think, one person was doing like Airbnb’s, with tiny homes and I was like, that’s awesome.

And he was just wrapping it up. So I’d love to connect with him again and say, Oh, how’d that go? how’s it looking now with COVID, things like that. Yeah, and I’m going to be going out to certain members on specific topics that they’re doing like that. And they can need a breakout room also.

that way they can work their membership or their admission rate, a little bit lower, on a scholarship. So that’s a big thing I’m doing in the family office. Ohana is I’m having people join up for another year or more senior kind of helping the event go. So it’s just not me doing it all.

we’re going to have definitely had helpers here, but like more facilitators too. I’m hoping to that also, we’re trying to build this community here of high net worth the credit investors to on the road to financial freedom. One thing I’d also like this year is, I’m not married, but I, I do have a girlfriend and she wants to get into real estate.

she likes the idea of like mailbox money, passive income. that’s why she has you, man. plenty right there. You just go to work every day.

yeah, maybe it is, but, she, that’s an ordinary, I am, it’s more passive on her part. but yeah, I, I think it’s beneficial here. do you think there would be. for people who do have spouses or significant others, are there going to be rooms for them or can they join?

that’s a great idea and what I know I’m going to do is we’re going to have a topic called reluctant spouse syndrome. where I’m going to give the high level very quick presentation. But again, the format of this thing is to break out into a room to talk story.

Get best practices from the other members. I’m going to pull people in and find those people in the group that have gotten their spouse over the hall. And from that means they maybe talk to them for 2000 hours and they finally get it. Or they found some kind of quick, medium, right?

Like me, I don’t have my spouse co-sign any of my documents because I don’t want to waste my time. Every single time I do this. So I found the happy medium, but it’s different for everybody. And I think in that situation, you’re going to be able to talk to people who have gotten over the situation, or you got in, going through that heart struggle with, your significant other going through it.

we’ll probably allow maybe that might be a good evening time event for. We have the spouses join us and they can interact with the other spouses too. when we did the in-person thing. There were a few couples that came, that brought their, a reluctant spouse along because it just happened to be in a boy and they got shipped people to Hawaii.

when they met a lot of the other investors such as yourself and they got it right, they saw how are very, High level group, did this, and it wasn’t just about making money. It was about from creating a legacy and wealth building audit.

And I think that to have the spouses come in and interact, mix it up with the other spouses and folks like yourself, I think that’s bold. And we’ll definitely try and do stuff like that. Great. Yeah. that’ll help because right now, she only hears me talk and so I think it’s.

It’s refreshing to maybe get her some more exposure in terms of more experienced people. Other people are also getting there. yeah. that’d probably be the good cocktail event for sure. Cool. . Any other questions, man? I think this can be a super fun event. Martin Luther King weekend. So you’ve got that Monday off. Okay. But we’ll probably do it on the Saturday and Sunday and the first half of the day. Awesome. Awesome. And then how are you going to, cause typically like when everyone was in Hawaii, you had, everyone was in the same time zone.

So how are you going to coordinate everyone to be together when they live. in different areas. I’m going to suck it up and try and wake up extra early and I’ll be started at like really early, just so that we can stay on that first half of the day for you, for yourself. I think most of us are in the mountain or Pacific time zone, centrally located.

So that kind of started in the morning and then go to a little bit after lunchtime. But so you have the time to do whatever you need to do for the rest of the day, but I think it is important to Break away from your normal day to day in immerse yourself. That’s the big thing is immersion.

yeah, I think it’s cool this time with that, you don’t have to get on a plane, and go, and what I’ll probably do also is build an itinerary of these different topics that we are talking about. so if something doesn’t pertain to you or you want to cherry pick, you got to go do the laundry or something.

You gotta run Aaron. Right? Mr. Ordinary income, man, you gotta do something. I gotta go look at work stuff. Yeah. You gotta go do work stuff. You can cherry pick when you want to do that. So you don’t miss out something that you really want to learn about. And that’s huge. That is. Yeah. But I think when people realize that quality of people in this group.

if they haven’t already, they’re going to see they’re going to, their eyes are going to really open. Just like how yours when you came down? Yeah, that was huge for me. I think that’s when it became really evident that you’ve put a lot of work in, into creating a group and it’s yeah.

it’s, everyone wants you to win and everyone’s on a team together and everyone’s going to help you out. yeah, it’s a great group. , I’m going to do my best, trying to filter the right people into the group. There’s always a chance. Not many people make it, get past my filters, but I think this is where I’m going to go past you.

You’re going to make it in. You’ve been around a while. I know you personally, I think this is where I rely on like immediate, right? We all need to be watchdogs, potentially a bad actor or a shady character who could come in. Could infiltrate the group. But for the most part, everybody are pure passive investors.

They’re all working to build their own personal family office and it’s more of an abundance mindset. That’s what I found in competitive. Yeah. we’ll, send this out to folks and, hopefully they learned from your good questions. You gave me a good one. That was good.

But any last words, my friend, that’s all I got. Thanks a lot, Lane.

Should You Buy a Tenant Occupied Property?

https://youtu.be/QVI18k0phOM

Yeah, my question had to do with tenanted versus non tenanted properties. And this question is coming from a place of, with the government prohibiting evictions. If you will, what are your thoughts on purchasing a, like a tenanted property? Is it better to go to a property that is intended to, so then you can do a more, I suppose, thorough background check on income and things like that.

I’ll give you my thoughts, but everybody has different thoughts on it. If you have section eight and non section eight type of property, so that’s a class C or worse or B or better, I’d say it’s two different answers. So maybe I’ll break down the section eight on first on a lower class property, I would always recommend having section eight with it, guaranteed rent that clientele under 800, eight 50 a month rent, which I never recommend.

Yeah. I still see you guys looking at pieces of crap properties for $60,000. Stop doing that, please. These guys, they don’t have any money. They don’t have 500 bucks in their checking account. You need the government to be paying, hang their rent for you. And I think you’re pretty solid in terms of the government’s always going to be paying that, that program stock going to be going away.

I mean, a lot of the stimulus money is going to bolster those reserves that said if I were to be buying that lower class property, I would want a in place only problem with section eight there. I think they’re better tenants too. Because they want to stay on that coupon program. They don’t want to get kicked off and they’re screwed.

The only problem is like getting the people in there. Cause it’s a little bit more stringent regulations. So I’m getting them in there. I don’t know, I’m not a property manager. I’m a passive investor, but like things like the baseboards on the walls need to be a certain height. So the rats don’t get it like silly things like that.

Your product and your property managers should know all these. And when you interview them, you should check the box. Yeah. If that’s section eight, I know, I know the depths, the inspector comes in and inspects the house for these lists of things. Yeah, no problem. Then that should be the answer. If it’s a nicer class property, this is where, like in the beginning I would want to be cheap.

I would want to buy the property with a tenant in place. Cause I thought I was. Being super clever and saving 500 bucks, at least something fee often when you’re cheap, easy and free, you get burnt in the future. And I did because come to find out that seller just wants this stuff, any warm body in there.

And I had no recourse and I had no insight on what that tenant was. There are some ways you can mitigate that by saying, Hey, I want to see their credit report. I want to see the background check on this person and running yourself. Sometimes they’re not going to give that to you. And then I think the best practice is to get your property manager.

On board and have them tenant to house themselves that way it’s their fault. If they bring in a bad person, they don’t have that excuse of like, yeah, I was a stepchild. I just inherited it. There’s stability with a tenant. The tenant is like, what the heck? I just signed with this guy and I got this new dad.

It just makes that sweeter transition because you’re always going to have a changing of a sheriff. Type of situation and you want that more stability to me, I would just, when you tenant get a tenant in place, when you buy it, you’re saving two 5,500 bucks, like a half a month’s rent. I would just rather pay my new guy to do it.

This is getting a little advanced, but maybe I would tell the seller like, Hey, can you just drop the price by 500 bucks or 200 bucks? I’ll go get my own tenant. At risk. I’m cool with not having intentions and they might actually like that. Right. So it’s, again, it’s a conversation again, I wouldn’t be making decisions this decision on your own.

I would run it through your property manager and saying, Hey, here’s this dilemma I have, I can either get it tenanted, or I’m going to have you do it. What is your thoughts here? There’s risks, right? He could not tenant for you for like two, three months. That’s a risk that you have to take. Chad, Peter, you guys did it both ways, too.

What is your guys’ thoughts? Well, my case was kind of special because I bought my property at the start of COVID. So my property, when I first purchased, it was not tenanted. And then COVID happened, then everything was shut down. So I couldn’t get an inspection section eight inspection for a couple of months.

So that kind of slowed me down on getting my first tenant in the property. So mine’s a little bit special. I think for me, um, I don’t have any section eight. I try to stay away from it. If the purchase price or the deal makes sense, then maybe I would consider it. But I just can’t, I can’t really speak to the section eight itself, but then when I’m looking at new properties, although there’s, there’s a lot of, you’ll see on the MLS that has 10 occupied it.

And the least goes to whatever, if it’s a good deal, then maybe, but I consider it a risk just because I don’t know the tenant. And I don’t know how well the property management, the former property management company did things over there. So, you know, there could be issues that you’re not aware of, but especially.

From the tenant side. And you can ask like, you know, Hey, give me your rent roll and try to verify things like that. But it’s not a guarantee you might look good, but you don’t know anything about the person. So all the properties I bought there were, there was no tenants in there. So, I mean, that’s just my opinion.

One on a clean slate. Give me something that I can work. My property management teaming, like what lane said, put them on the hook. It’s not the former. People’s fault. It was just do it from the beginning and just start claim. But I expect a lot of deals out there in the future that will have tenant occupied until something.

And so that’s just something you need to consider, but work with your team and figure that out. If you find a good deal, then it’s worth exploring by. I try to avoid it. With the whole COVID element in play. You’re right. There is a little twist on occupancy is done by maybe a couple percentage points of guests.

But again, you’re trying to buy the best rental property on the block. That shouldn’t matter. You should transcend any big data. Anyway. And a lot of the people not paying rent are mostly people in the blue States, right? I’m telling you this from experience, I’ve got over 4,000 units. Now, people in red States, Midwest, South, Southeast, they just have a different work ethic.

They’re not this like socialists capital of California, kind of nonsense of hashtag free rent. They have a good work ethic. They understand it.

Borrow Against Your Home or 401(k)?

https://youtu.be/kPilGUnpAUE

Did this investor wanted to know, should they borrow or invest? So they’re looking at a hilar and he looked at 5.5 and a 50,000 loan out, or their 401k for four and a half percent. So I guess first thing, I mean, awesome, cool. You’re looking to borrow. Most people would think this is. Total sin by taking money away from your equity of your house or worse your retirement system, because we’re all trained in program that that is absolutely very nodded to do.

You shouldn’t do that. I think you’re looking at this the right way, right? Like, let’s look at this arbitrarily. We are going to take a loan or let’s compare interest rates. So five and a half percent on the hilar four and a half percent on the 401k loan of, from a tax perspective. If you play your cards right, you should.

Still be able to finagle to get that Wheelock as a deduction because you’re using it to further improve your business. And that’s the key word right there. So five and a half. And you should be able to deduct that might be less than 5% after it’s all said and done after taxes before one K loan is at four and a half percent, but I don’t think you can deduct that.

And that one, you’re kind of paying it back to yourself in a way. Depends what you want. I mean, I think you’re splitting hairs here and kind of wasting your time. Hopefully you don’t, you’re not sitting on this for more than a couple of days thinking about this. Like just do one, like. It basically comes down to which one would you rather put leverage on your home you live in or your retirement funds?

To me, I think that you can look at it from this perspective, which one of these assets is more at risk for you losing your money over night. And I think it’s the 401k then the value of your home. So I would go after the 401k loan first and exhaust that funds.

Dec 2020 Monthly Market Update

https://youtu.be/a1jxul2pPZw

All right. let’s get going here. so starting off with a few teaching points and I diving into the news to wrap out 2020.

So the teaching bike here is now, this is the time to invest is what this chart is showing because as investors we invest off of the spread between the interest rates. And the cap rates. So the cap rates is the light blue. The interest rates are the dark blue right now. The interest rates are so low. The cap rates have come down a little bit, but the interest rates have come way down as of the last couple orders and you know what everybody’s afraid and everything I’m like, this is the time to invest right now.

The spread between the interest rates and the cap rates is larger than what it normally is. see this kind of moving up and down, when it’s like this, when the spread is smaller, that’s when ideally you don’t want to be investing as investors. We make money off of the Delta between cap rates and interest rates.

And of course we apply a, usually a four to one, five to one leverage, and that’s how you make money as investors.

who are our renters? John Barnes broke it down and we’ll charge here. Most of which are 25 to 34 years old, broke down their house. So income over 50 and under 50 K I rent, I think it’s a good idea, especially if you live in a high priced area like California, Hawaii, Washington, New York.

Maybe, I don’t think it makes sense to buy. Of course the caveat is most, I guess most people fall into this caveat, like mostly bar irresponsible with their money. They can’t seem to save it effectively. So houses have forced savings account. but if you’re listening to this podcast, YouTube channel, you’re probably a little bit better than the average cat would saving their money.

These conscious of it. That’s why it’s a, just take the money and invest.

No, this is just a little diagram of which States are the most restrictive on the COVID

constraints. Not making any political statements here. But, Hawaii is down there. One of the most restrictive and on the other side is how much, is it working, right? , currently hospitalized per a hundred thousand? So if you want to see your state, you see where they fall.

so starting off with the news here, this is something that’s going to be slowly developing in 2021, but the library , which is what a lot of interest rates are governed offered. you might get a commercial loan based on, quarter point higher than lie bore, but they’re going to be changing it to Sofer, I think is what they’re called.

S O F R. And that transition is going to be happening throughout the year. The reason why they’re changing it is because , I think it has something to do with the library being so low or things are already so low. They need to fix it to something else. That’s a little lower. and supposedly the library is a little bit more erratic, but I don’t think it makes that much of a difference.

It is what it is. And it’s changing guys. That’s the takeaway, John Malone, reported by CNBC is, buying hard assets like housing to bet on currency, devaluation, or inflation, which is coming. yeah, this is why buy real estate. It’s fixed art assets like housing, and it’s a commodity.

We need more of it. And he sees substantial interest in multifamily housing. We’ll get into that a little bit here in this Alna article, where through the first 10 months of 2020, the only price class to lose ground in average occupancy among stabilized properties were class a. So those are the luxury type of properties that we stay away from.

these are like the build 19 or. Probably built after 2005, 2010, in my opinion, it’s hard to save by date, but that’s probably the best numerical differentiator of class. A, with a 1.3% decline to 92%, average occupancy. This is not an alarming little figure, but it is a few percentage points below the other three pricing classes, B, C and D, which all finished between 94% and 95%.

Class C actually went, improve. So a lot of the culprit was negative demand or, new properties coming online that Warren white absorbed, which makes sense. people are staying put through the first half of the year and even plead a second. So takeaways stick the class VC.

Out. This is, development that’s, the state of California, which you may or may not care, but I think it’s, sets precedence to what’s coming down the pipeline to California had these two big statutes, prop five and prop 19. The presidential race. Wasn’t the only thing here. It was like B that they had to, the state was split on

so California proposition 15 , which would raise taxes for commercial real estate failed. So top 15 would put further downward pressure in real estate during an already difficult time for real estate in that state. Contrary though prop 19 would allow former 55 and older, disabled or victims of natural disasters to transfer a portion of their property tax base when they sell their home and buy a new one.

And that looks like that will probably be passing at 51%. So very close, proposition would offset. By closing other people’s specifically, it eliminates unfair tax beholds used by East coast, investors, celebrities, wealthy non-California residents and trust fund hairs. yeah, I think it’s, it shows like what’s coming down the pipeline in there.

You just can’t inherit the lower tax spaces. a lot of people in California that have inherited houses in their family, the one to sell and yeah, they’re getting killed on taxes, but they might be sitting on a one to $5 million estate and a real estate, and they just don’t want to give up that good tax.

So prop 19. kind of gives up that incentive in a way. if anything’s, it takes a while for the California’s to go through it and then, think of like marijuana, right? So the rest of the country gets impacted by this, or we see it in our backyard, but it’s, coming down the pipeline.

Star Wars would read by $645 million of affordable housing. They are getting into the affordable housing workforce space and I think to get into alarm, but, I watch what the big guys are doing. Like the Blackstone’s. And I follow them closely. So 950 units in Jacksonville, Florida, and 28 communities with a total of 3,600 units, primarily in Virginia and North Carolina.

And they’re buying this stuff because it’s stable, occupancy and rents didn’t change too much of all things to a pandemic. John Burns came up with the chart, a us single family rent index. So they modeled and you can see the recession periods where it went through in 2007, eight, nine in the trough.

It’s peaked. but demand is still very strong for single family home rents based on this chart. Again, if you guys are checking this out on the YouTube or on the podcast channel, you can take it on the YouTube and all the nice graphs and graphics. Read this stuff for yourself that I put on the screen.

commercial property, executive reports that the pandemic accelerates rather than starts commercial real estate trends.

so one of the big trends is this live work play concept one question that came in, is there going to be a recession in 2021? I don’t think so. Madly, chillax, they’ve been S people say that every single six months doesn’t mean crazy

I think that you got to be careful people saying that because likely they’re trying to sell you both collect their commissions on that and you offer the gold salesman. It’s easier to sell doom and gloom than to prudently, be buying cashflow that’s for sure. so what are the trends live?

Work, play concept were, people want to be able to live in less central areas, more of the suburban areas. there’s a urban suburban divide , mostly gateway cities, high costs. Areas like New York, San Francisco, Chicago, any of these people have lost occupants during the pandemic, the evolution of cities.

So the inner ring suburbs have also grown a bit by the desire for people to work and live in places with city like features, but not in the urban core district. maybe like 20, 40 minutes outside of the downtown area. So the pandemic didn’t really start in trends, but just accelerated all of these trends, commercial property, executive reports that, construction has launched on a Houston Hyatt hotel that is associated with the Houston’s Texas medical center.

So it’s their first hospitality brand. Very interesting that a hospital that was getting involved with this type of housing, but I guess they’re seeing it as a lot of the people that come for their care, like cancer, Shimon, or whatnot, need to stay in a place. So why not, double dip.

Some trends that are coming, that I think are cool or a Chipotle like plans, their first digital restaurant, their online sales tripled in the third quarter. So they’re some of the are winners as reported by shopping center business. some of the losers are just the general shopping balls.

So while owners see VL and associates falls for chapter 11, bankruptcy, does it mean that those. Shopping malls are going anywhere. Although I do think shopping malls are not as popular, especially like the not high-end ones or the middle range ones as popular multi-housing news reports at senior housing, occupancy drops, inventory increases.

So a lot of people, they all get excited and new investors get excited by like trends like the silver Wade, people are going. Need places to live when they’re gold. I want to invest in the city living developments. All right, buddy. I’ll tell you, I haven’t found a one really good reliable operator quite yet.

even though all the trends point that way, I wouldn’t be messing as a passive and I sure as heck, wouldn’t be investing as an operator in assisted living. That’s where you get these doctors or nurses. They think that they know medical stuff. Assisted living. It’s not really medical stuff. You just hire a doctor to do that stuff for you.

It’s more of a facility management and a marketing and sales thing than a technical medical thing.

so we take a break here. The Easter egg this month is. Check out the newly branded family office, Ohana mastermind. So this is the group with the, a credit investors in, or if you would like to be a credit investor, this is the way to get around. A lot of you guys are asking, how do I find syndication deals?

How do I find like good people to work with? you got to build your network with the right people. If you’re tired of screwing around at the local Rhea. Or going to the free Facebook groups or the other free forums out there with just a bunch of folks under a quarter million dollars net worth all day long.

now’s the time to step up, see what we have to offer simple passive castro.com/journey. And we are about ending our first incubator group, which is the little mini group coaching group, where we help people get their first remote investment. that one should be wrapping up this next couple of months.

And, we’ll be looking to do another one early in 2021. So if you guys are interested in that, please let me know. But, yeah, transitioning to some of my personal stuff that I’ve been working on. if you guys have any ideas, some things you’re working on. Let me know. My email isLane@civilpassivecashflow.com, but, first is growth.

So we changed the mastermind to a more of a virtual mastermind. last year we did it in Hawaii for a few days, but with everything that’s going on, I’m moving this virtually. So we’re calling this the bubble. If you going to get more details of this, go to simple, pass a castle.com/bubble, and it’s gonna be awesome.

it’s going to be primarily networking with other participants instead of just death by PowerPoint or death buys, random sweepers pitching their product. Yeah, trust me. If you’re not happy, I’ll refund your money. I’m super confident with this. Like I got some tricks up my sleeves. You guys will see those.

You guys do attend over the weekend. It’s going to be a half day on a Saturday and Sunday. Martin Luther King weekend in January of 2021, contribution, yeah, rebranding the family office , mastermind to be more of a collaborative thing. We’ve got some new initiatives there to keep older investors around.

they might’ve learned everything, but they just want to meet new people, grow their network with new high quality working professionals. and then this I added just a little while ago about. having some success for the shade line hackers. If you guys haven’t tried this, I’ve got a simple pass, a castle.com/ straight-line.

But yeah, we had an investor that tried it out since, began in may 15, 20, 20 great thing to do when you’re stuck at home, you get your credit cards together and start renting out authorized user slots. He made. $1,800 and just over a few months, and he’s got $750 left in pending commissions.

So it’s coming back to him. Awesome. significance, it makes me more proud of, what we’re doing as a group is that we are not letting fear get in a way, and we’re seeing the data for what it is. And this is what it is. I started at the talk with the teaching point. Of the same slide investors make their money on the Delta between the interest rates and the Tapper.

It’s simple as that. Of course there’s outliers, right? You want to pick up properties that are already under market that exceed the cap rate here and have multiple opportunities for value add. But yeah, if you’re picking up existing cashflow and even in tough times, you still cashflow. a lot of the deals, the stabilized assets, you can stay above 50, 60% occupancy are still in the black, a lot of the assets that we had through the pandemic for 200 units.

we’re still making money on all of those. none of them came down to the red level, out of probably like 25 projects, maybe one or two of them kinda got close, but. I think that’s pretty good. All things considered being a pandemic. some things I’m dealing with in terms of uncertainty because in search needs not necessarily a bad thing, but, yeah, just investing when everyone is waiting for COVID or the election to be over.

I get it from one perspective, but you got to keep moving forward at the tenants are cash flows, the cash flows, and you can do your sensitivity analysis, still cash flows through tough times then just to keep buying cashflow dollar cost average. and then a lot of the uncertainty is what’s going to happen next year.

I’m seeing it as I want to get traveling. I want to have some fun. when’s Pfizer going to come up with their vaccine, is it they’re saying it’s here, it’s 90% effective. Of course this is from the fires or websites that you can’t really believe, but they, it says, but, yeah, , hopefully this thing works right.

So we can get back out there. Let’s get stuck in our homes all day long. how did I, my creating certainty in my life while I’m creating another infinite banking policy for myself. I probably had four or five deals, went full circle and cashing out, and I’m going to take some of those profits, put it into an internet banking policy and pull it right on and start investing next year.

I like this because it adds life insurance, but that’s not the reason why I’m getting it, but it makes a nice little yield four or 5% tax-free because it’s life insurance and. Because it’s life insurance, it’s often table creditors or litigators. So that makes me feel a little bit better from an asset protection perspective.

if you guys, haven’t learned about this, go to simple, passive castle.com/banking and, on the last 10 years, love and connection, you know what things slowing down here in December and, things will definitely pick up in January. I, got an invitation out to your folks.

If we haven’t connected, let’s get on the phone. let’s do your onboarding call to the week club, put it simple past castro.com/gift. And for those of you guys who I have connected with and our current investors or of, in our deals, if you haven’t connected in the last year, let’s get on the phone.

let’s talk star, let’s see what’s going on and see how I can help, see what’s coming on the horizon. some of the resistance and verus distraction noise that I’ve been working with is pushing out larger projects in time. I got the syndication eCourse coming out soon. Hopefully it’ll be out during Christmas time.

I was trying to get you guys some kind of cool like promotion for black Friday instead. I didn’t get it done. So I think the, probably the next couple of weeks we’ll see the eCourse for the syndication and it’s going to be amazing. I’m still confident in this one, again, that. I got that money back guarantee on it.

the fun stuff here. So do dads, I bought two dishwashers cause I want to take all this stuff out of one. And when I make dirty dishes, I’ve put in the other, so they never have to put my dishes away. these things are big and they’re a little annoying, but that’s just an idea.

You guys to create your lifestyle. That’s it simple, passive cashflow is all about. Now. Let’s go to these questions. interest rates for the next two years at interest rates have popped up a little bit. I would say maybe a 10th of a point, but. I’ll ask the question to you.

Like, why do you care? what does it really matter if the cap rates are going to come back up and interest rates will go back up and again, as an investor, you’re just making money on the Delta work difference doesn’t matter. but, and I don’t know what interest rates are going to go, but if you were asking me everything I’m reading and everything I’m hearing, I think interest rates are going to be probably both for the next couple years.

It might come up. No slightly border point half a point during that time. But I don’t think they’re going to see interest rates on commercial debt in the five, 6% range for quite a while. But I do think inflation is coming. how else I’m going to pay for all this trillions of dollars stimulus and then the last stimulus plan is definitely coming.

Okay. It’s for sure. It’s coming. We need it. And I think for sure. It’s coming. Just like how you joke about the government shut down. I guess it’s not a joke that the government did shut down, but we all know it’s a joke because they’ll just create some kind of bill that extends the obligation.

Isn’t often rolling again. It’s just like the stimulus plan. it’ll come. and then when it is. Also as investors are going to be the ones who benefit the most on it. I guess what I’m seeing, I was reading an article yesterday about Fannie Mae and Freddie Mac on the commercial side for the large non-recourse the agency loans that we get.

They’re creating their quotas for next year and it looks good, man. they didn’t hit their quarters this year, obviously because volumes of sales transactions were down, which is why they did a lot of refinances. The refinances were awesome. They’re being very lenient on refinances. because they needed to have that quote, but yeah, next year is when things start to open up.

it’s probably going to, because a lot of that ending is it’s very free and flowing. when is a good time to buy REITs, never, it’s a good time to buy, reach beats, or retail investments you didn’t killed. And something I learned recently. we did a , three hour webinars and there was like the one tidbit in it that I learned was like REITs.

, they have a timeline where they have to crystallize, so return and exit and everybody else. So they don’t make good decisions. They don’t make long-term decisions and they have to pay 90% of their revenue or their income to investors, which sounds good. Wait, what if it wasn’t, it made more sense to put the money back into the assets so that the acid is more secure and so you can bump rents and do that type of stuff.

And that’s just the one way, like the reeds are confined there and read such as retail investments. You’ve got good stealing because the only and middlemen they’re not touching her, she feeds I’m not a retail investor. that’s for the average Joe out there by investments. All about share market performance.

I don’t understand that. Or shouldn’t be tied to that. any promising markets if 2021 when compared to 2020 and not really. there’s some places in Tennessee, like Chad and Duka the Carolinas always keep coming up. Florida, Jacksonville, but, I’m a little scared that I think Huntsville is finally coming on the map.

A lot of people are finding out about Alabama. but yeah, mostly it’s the stain big storylines, Texas. Everybody’s getting the heck out of California, Chicago, New York, all these high price, postal markets going to places that make more sense. this was always happening and again, had the pendant.

I did not create new trends that accelerated trends such as people getting the heck out of those overprice areas and into more like the secondary tertiary markets. but that’s, doesn’t mean that you can’t find a deal in Jackson, Mississippi. I don’t want to, not Jackson knows if he’s not a good bike and I don’t think it is, but that doesn’t mean that I wouldn’t invest there and deal with that undervalued breakfast is what I’m saying.

If you invest at Jackson, Mississippi, I’m sorry. , last question here. Can we expect a foreclosure due to vendor random thinks of anything silly? I’m sure. I just personally don’t buy. Unstabilized assets. So if a property is going through foreclosure apartment, then I wouldn’t be buying it in the first place.

So I don’t care. I’m sure it is, but it’s at one point it’s just Biden’s going to kill people. That’s making over $400,000 taxes, but I don’t care because I don’t, I’m not going to make my HCI that high. I’m going to put away lower. so it’s a moot point to me. I don’t care. that makes sense.

I don’t care if there’s foreclosures coming. I don’t really, I wouldn’t buy those properties. I don’t buy problem properties. I buy properties with sellers, we have problems. and maybe a foreclosure does expedite that, but yeah, the occupancy would probably did and I wouldn’t buy it, but if you’re a single family home investor, Number one.

And what the heck? Why are you doing that? yeah, if your net worth is under half a million, that’s fine. But you got to build your net worth and putting your sweat equity to doing that. But if you’re a credit investor, like most of us in our group, that’s just not a good use of your time, in my opinion.

but for some of the younger kids that are listening, yeah, I’m sure there’s going to be a lot of single family home foreclosures coming out. I’m sure. just. As there always is nothing new. I don’t think they’re sending any new, and like some kind of housing crisis. I think that’s just like people like celebrities trying to sell you two views and stuff like that.

I just don’t really see it happening. again, there’s always people trying to sell, like on fear, like the world is coming to the ad, these human forms, or, what’s worse is the people on Facebook. They always just relayed this. Long, like texts about the world is coming to an end. then you look back at that was from like 2012 or 2016, or whenever it had never happens.

I just buy for cash though, and just . Don’t get ahead of your skis and they’ll be all right. That makes sense. but yeah, if you’re house flipping, I don’t do that, but I would be afraid potentially. I don’t know. But hope that helps. thanks for, questions and, we will see you guys next time and check out the mastermind bubble@simplepassivecashflow.com slash bubble.

And thanks everybody. Bye.

Soft Skills and Spouse Advice for the Socially Awkward with Brady Helkenn

https://youtu.be/OBCC_EwR1bo

On today’s show, we’re going to be helping the socially awkward folks like myself, who are self-proclaimed introverts, try and be a little bit smoother and a little bit more effective in terms of networking. And just getting along with people at work. I am bringing on an it guy turned of social coach on today’s podcast to give us some pointers and some things to be aware of.

So if you guys, Hear me talking about a lot of being an accredited investor and finding deal flow is mostly about networking and getting to know other passive investors so that you can become a better past investor yourself. But to do that, you have to make relationships organic, real relationships with other high net worth of credit investors.

A lot of this, again, like I say, all the time, it’s not going to be at their local REIA or at the free, internet, Facebook groups or other forums out there because those groups are typically filled with, guys who are trying to make their first hundred, $200,000 network. but how do you, when you finally get in the right room, like maybe we do a simple passive cashflow outing.

Maybe I come to San Francisco or Seattle. When you finally get in a group with our tribe, how do you make the most of it? So we’re going to be a lot of the soft skills are going to talk about the survey and I hope you guys enjoy.

All right. Hey, simple passive cashflow listeners. Today. We are going to be talking to Brady Helton, who is a X I T professional, but he is focusing on teaching other it professionals and other smart guys, the soft skills, like clear communication, responsiveness empathy. And we’re going to be doing a deep dive with this.

So this is going to be a good one. For those of you guys who have day jobs, which is most of you. A lot of folks in the simple passive cash on nation are high-paid professionals. You guys realize that your time is better spent at your day job going after that next promotion. It ain’t going to be forever.

most of you guys I noticed can get financially free in five to 10 years, but it’s definitely a time better spent there than screwing around with some Burr property or, your fourth or fifth turn key rental that’s for sure. But, Brady, thanks for jumping on it. Of course. Yeah. So a lot of our groups, a lot of engineers in our investor club for some strange reason, maybe because I am, but, I guess w why don’t you take us through, what is like the biggest mistakes that you see other it professionals, or let’s just put in general, like smart people, right?

Dentists doctors, they need to have bedside manner. W what are the biggest mistakes that you see just as start us off and we can maybe isolate a few of these or within this next podcast? Yeah, I would say the biggest thing that tends to be the root problem here is when you get really good in any particular field, you start to learn the jargon and use the jargon, but you don’t necessarily keep a sense.

Of what the other person in a conversation knows and doesn’t know, and too often, particularly for, engineers and other, process oriented individuals, we tend to think in terms of the tasks that we have to do, we tend to think a little bit more in acronyms and other terminology and it’s comfortable for us.

And we don’t. Go through the effort to make ourselves uncomfortable enough to translate our jargon into something the other person can understand. And when we don’t do that, it tends to break rapport and make for rather stilted conversation, short conversations, not a lot of popularity within the workplace, et cetera.

Yeah. it just goes to show that you, the person you’re talking to on the other end, they are not an expert as you may be. And it comes across as number one, you don’t have empathy over the other person, their shoes. And number two, you could just be like you breaking, It’s the idea of almost like a lack of sensitivity. you could make an argument, in fact, that it is almost inconsiderate to spout jargon at another person who you didn’t check to see whether or not they would even understand the jargon. You’ve made an assumption about it. And then you launch in and you get a lot of hurt feelings that way you get a lot of ruffled feathers.

You get a lot of conflict in a workplace where you might come across as condescending or as an asshole or whatever. There’s any number of extra elements that come into play because. All the person on the receiving end has to go on is the words that you’re saying and the tone you’re using, and if you’re really short and succinct about it and almost impatient about it, because it seems obvious to you and you’re making all of these assumptions.

You can have a completely different reaction from them than what you would be expecting.

It’s just, what is the acronym? Picnic problem? Not you good Peter found in seed or something? Yeah, probably. Yeah, probably between a monitor and chair or something like that. Yeah. But yeah. what are things that have people to be on the lookout that they do? Cause there’s a lot of smart people that listen to this podcast.

And sometimes it can Def, a lot of introverts too, but I think sometimes the smarter you get the less self-aware you are at least some incense. Yeah. And I think about it as a lot of people will make the assumption that the go to the effort of translating for somebody else is something that somebody who’s more extroverted would go through.

the reason why, one of the reasons why I suspect the proportion of individuals that have trouble with clear communication with avoiding jargon tends to come from like engineers and it people and other really technical industries, or because there’s probably a somewhat higher proportion of introverts there than extroverts.

And a common misconception is that you’ve got to be extroverted in order to get along with other people and establish rapport. But interestingly, somebody who is an introvert actually has a lot more empathy for somebody else. They just don’t necessarily know how to tap into it. So the effort that you go through to translate for somebody else is actually easier on an introvert than for an extrovert in a way, because you can internalize the emotion of what the other person’s feeling.

You just don’t know how to do that. They’re just not an introvert. Just. Also just tends to be listing or not talking all the time. And then when you want to say something, oftentimes again, in technical fields, you want to be precise about what you’re saying, but there’s so much effort on being precise that you don’t necessarily keep in mind what they’re going to understand or not understand about your precision.

Oftentimes translating it in a way that loses a tiny bit of the meaning, but becomes much easier to understand is a lot better than giving the precise terminology or acronym to what is happening or what this thing is. And it goes over somebody’s head instead. So it’s the main thing that stops introverts, I think is the initial effort.

It takes to think not only about the other person, but then to go out of your way. To accommodate them because that in a way is what you’re doing. You’re accommodating somebody else explicitly to translate something that you take for granted into words or ideas that the other person will understand easily.

It’s well received when you do this, but it takes a lot of effort. There’s a hump to get past. And sometimes it’s just an ego thing. A good example of this is, I guess in art, our industry, we make a lot of fun about doctors because doctors in our realm are horrible investors. They’re really smart people, but they’re absolutely the worst investors.

They invest in some of the worst stuff. And. It’s funny when I get a doctor that is clued in on this true that you see some doctors who are very intelligent people and I’m just, I don’t really want to isolate the doctors completely. It’s, it’s every smart profession, You get a smart person and they come into a realm such as investing and they’re complete knew about it.

Newbie. And yet they believe that they can learn it like that, or they already know have a pretty good understanding. But part of it is Eagle and being able to start at the infancy stage, realize that you don’t know what you don’t know, just stage one, and then realize that there a whole bunch of other stuff you need to learn to even start to build an understanding.

it’d be talk to us. I’m sure you run a lot of bootcamps with folks. What can you say about people with that type of products that one’s a little bit harder to work around, right? It is more fundamental. I wouldn’t necessarily say that it’s harder because it sounds deceptively simple to avoid jargon, but in practice it’s so much harder because there is the value system that somebody holds internally that really ultimately dictates whether or not they go through the effort to avoid Charcot.

So it is deceptively simple, but quite difficult. To actually change in practice because they have to change themselves their values. And when we talk about something like ego, it’s much the same idea. There’s a fundamental way that we view ourselves that you can’t be on autopilot with you. Can’t just let that be and carry on with the day-to-day stuff and expect that not to influence everything you do.

And all of your results in your life. It all comes down to your value system, your viewpoint, and how willing you are to change that. And I cover a topic that I consider a difference. I did not create these concepts. These actually came from a book Carol Dweck mindset, that I would recommend would be good reading for people, but there’s this concept of growth versus fixed mindset that is.

The technical terminology, which is to basically say, when we talk about smart people, when we talk about educated people, when we talk about people that are really good at this, we are labeling them. We are labeling them though with fixed attributes. If you are not smart, then you must be dumb. So there’s a lot of those backhanded compliments that tend to start coming in, where you go, somebody gets a hundred percent score on a test and you go, congratulations.

You’re so you’re a genius. And then they don’t really feel great about that. They actually feel pressured now and nervous because if they don’t get a hundred on the next test, then what does that say about them? So that’s that idea of the fixed mindset. A growth is about the effort about the journey that we’re taking, about where we are trying to reach with our effort and our energy and our focus.

And that’s what I helped to craft. And it correlates with ego because. I put that on a spectrum between solution focused and ego focused as two ends of a spectrum. And the bootcamp that you mentioned briefly teaches throughout those six weeks of recurring theme of being solution-focused because you can enjoy praise.

You can enjoy the nice things that come from. No, it feels good to know that I have this PhD. It feels good to know that I hold this kind of salary, this kind of prestige. You can enjoy those pleasures, but don’t let them affect your decisions. The decision should be influenced by a solution approach. What is the solution that I want to do if you’re unhappy with something in your life right now, if you’re unhappy with something in your career, in the workplace that you want to change.

It is infinitely better to treat that as a problem that has a solution than to react from your ego, to react from your emotions, to react from how other people should treat you, because you have accomplished X, Y, Z. So you talked a lot about like handling rejection and confrontation. And that kind of reminds me about when you go into a confrontation or some kind of conflict that again, Like he mentioned, it’s all about the, what is the solution that you want them to be off the cuff?

Maybe you can go more into detail about that. When you focusing on a solution with a conflict, it tends to dampen down your emotional reactions from a place of ego. So if you’re giving, we can call it investment advice. If you’re giving investment advice to somebody and they’re not listening to you.

They’re not taking your advice. you’d alluded to, like doctors might be, proportionally higher, at being terrible investors kind of thing. And if there’s ego involved and they’re rejecting your advice and they don’t want to do the investments that are a good recommendation or coming up in group conversations, because they think this is going to work better, you’re in a conflict.

And as an expert in investment, or if we talked about the engineer, Or if we even talk about the doctor, imagine a doctor with a patient and the patient is going, yeah, I know I need to exercise or haha. And they’re brushing off the doctor’s advice. There’s that prick to our pride as an expert, that’s somebody is not taking our advice, but if we’ve maintained our focus on the solution, we will react and respond differently to that person in the room differently than if we reacted out of her pride, wounded pride.

Offense, et cetera. So that’s where that kind of ties in the main thing that we want to focus on from the solution is mastery over our own emotion, not letting our emotions rule us.

Yeah. I think the example that I see, I personally go through is I tell people, and if you do the math, Investing via a retirement fund, doesn’t make too much sense because you gotta wait till you’re seven years old to get the money you’re going to you’re in a lower tax bracket today, tax brackets are go down in the future.

And when you invest via retirement funds, you don’t get any of the passive losses to potentially offset your W2 income. when people, I guess they go the other way, I could probably be like, whatever, man, you’re the expert. You can do it. Do it. Do whatever you want.

That’s the prick, right? That you’re mentioning. So maybe walk me through it, how I should work through that solution or get to the solution because I guess the solution I want them to do, what’s what makes sense. I guess I think the, what this boils down to is that there’s a different concept that I can intermingle in here.

And that’s the idea of separating the two kinds of power, because when we think of power, we just think of one kind of power. Which is social power influence over another person. And if you look at your goal or your objective as trying to get somebody else to do something, then you’re already setting yourself up potentially for failure, because all you can do is influence them.

You can’t control them. But the thing that you can control is personal power. And that is your reactions to something that is your decisions on how you’re going to respond. How are you going to move forward? So you feel that prick of wounded pride, you exert personal power by choosing to adopt a solution approach rather than reacting from her pride.

That’s the first thing you can control your reaction. You can’t control what they decide to do though. So now we’re talking about social influence. What I would actually say to you in this situation and what I usually would say to somebody else in a similar situation of what do I do? I want them to do this reevaluate your true goal, your true objective, because your true goal and objective should be something you have control over.

Not something you can only influence your goal should be something you can actually reach and guarantee that you can reach. That’s where confidence comes from. That’s where that. Certainty in your path and what you’re going to do comes from, so your goal could be to exhaust all options. You can take to influence this person to take sound advice, and take a sound approach.

That could be the objective, because if they listen to you at some point, and then they follow your advice, that’s fantastic. That’s a great outcome, but you still win. Even if they don’t. Because you’ve taken all logical steps to try and coach them the right way to follow the right advice and the right steps.

So you will still win because you could control that. You can control all of the suggestions and pathways that you could eliminate for them. It’s up to them to use their personal power, to decide, to take your advice or not. So whether it’s. A doctor teaching about diet and exercise, getting them to make that path.

having somebody get their retirement funds out of the clutches of the government, it’s not about the other person. It’s about me, exhausting, all my options to get there. And if not be okay with it, is that kind of the answer? Yeah. Because if you think about it through to a logical conclusion, you can end up with doctors that become suicidal.

If you really think about it in a life and death struggle kind of situation, you’ve got somebody having diagnosed with cancer and they have to take certain medications or go through certain treatments, and then you have the patient refuse to take those treatments. And the doctor in that room is going to go, you are most likely going to die then.

And if you keep your focus on saving that life would, you can only influence you can’t control that you get somebody that now has a lot of baggage to take around and try and process. But if their goal actually is to make sure that they educate as much as they can to say, Hey, look, these are your risks though.

you’re an adult. You have to decide for yourself what you’re going to do, but I need you to know at least. What’s at stake. And if they keep their focus on that, they can control that they don’t have unresolved baggage to fight through. They knew they did everything they could to try and save this person.

Now it’s a life or death struggle situation that really exemplifies the emotion that we go through. But it really also illustrates the grounding we should pursue because you can’t borrow other people’s troubles. And here’s another example that comes up a lot. actually have a big article that I update from time to time about the reluctant spouse syndrome, where an investor has a spouse that is a partner in life that isn’t quite on board with getting off the beaten path of traditional investing and not buying a house to live in.

you guys can check this out@simplepassivecashflow.com slash spouse. But so let’s walk through this. somebody wants to go into an investment or maybe not buy a house to live in, Maybe rent for awhile and it clashes with the other person. And. To me, the worst case scenario is when I throw my hands up in the air.

And I say, sorry, man, that’s your problem? It’s the other, the spouses is on, is disinterested in a way, but holding to their truth, how would you navigate that specific scenario? In that case, I would say, hold to your truth. There’s a fine line. And here’s where a lot of people who are technical, but not necessarily empathetic or externally empathetic, I should say visibly empathetic will struggle because it is a fine line.

You can have the same content, but the message and the wording and the tone changes everything. We’re talking about establishing rapport. We’re talking about already. if the timing isn’t right, or if there’s a personal conflict, that’s preventing this person from moving forward with something you think is a good idea.

We’ve already covered what that looks like. It’s not a good fit. If you can’t prioritize this, then it’s. It’s not going to work out. You’re going to make a different decision. All I can do is give you an educated sense of what your options are. And if you don’t pick that up and run with it, I can only give you your options.

I can only educate you. I can’t force you to do something against your wishes, right? You can’t control them, but there’s a distinction between throwing up your hands and going, whatever, I can’t tell you what to do. There’s a dismissal to it. There is a reaction to the emotion that is coming into the tone and to the wording, because your emotions at that exact moment have the better of you rather than the other way around.

There’s no solution there because the solution is whether or not you’ve exhausted all options. And if you throw your hands up in the air before you’ve exhausted all options, then you have failed something that you actually have direct control over. You can exhaust those options. And what that ends up looking is just illuminating to them.

What would be a process that they can, should you change your mind or here’s an article you should read, or here’s a podcast episode you should listen to that really talks about this kind of concept and this kind of concern that you’re running into right now. And how do you reconcile it?

Like you can provide them options for them to come back later. It takes little effort on your part, but it’s a solution approach. It’s something that you can offer them that whether they take it or not, doesn’t matter, but the delivery is establishing that rapport. The delivery is making that ally on the other side of the communication, rather than using a rejection from emotion.

If you have mastery over your emotions, you can address that situation. A myriad number of ways. That gives them a good feeling at the end of the day. Even if it doesn’t financially work out for them to want to do the investment advice for them to purchase this, to do that, whatever. And this is true for doctors with advice.

It’s true for engineers with, unreasonable deadlines and I’ve managed her breathing down their neck. Like no matter what conflict you’re looking at, you can react emotionally, or you can feel the emotion. Recognize it for what it is, ask yourself, but what am I going to do about it? Because reacting just from the emotion you go, I can’t do anything about it.

And you just throw your hands up in the air, but you ask yourself after you recognize the emotion, what can I do about this? And you’ll have a couple of things usually that spring to mind and you can still do, and you can close the book too. You’re going to be like, Hey, if it doesn’t feel like it’s a good fit, I can’t change your mind on that.

Here’s some resources for you to check out. Or find me if continuing down this road is going to ruin the relationship even further. Maybe that’s a smart choice, that circumstance. and to that point, if you’re giving investment advice, you’re not a family therapist, You’re not a relationship therapist, a marriage counselor, or anything like that.

So also recognizing where our strengths are and where they’re not. I will say this is a common story is something like innate, like infinite banking using whole life insurance to bang from yourself. It’s a little complicated topic and some spouses would dig their feet in and say no.

And the, the kind of the more financially minded spouses. No sit I’m frustrated and I’m trying to China teach them about this. They want to listen. They don’t want to watch the damn webinar to learn about it. And they say no, and then they just let it cool down for a few days. And they said, yeah, they said just do it sometimes.

Sometimes that can be the path forward, but this is just me being an observer for other people to see how it works. and when we see situations like this, that we want to influence, there is a strategy we can still employ. If you see that as a recurring theme, And you can recognize you don’t have the control to change them or change their situation, but you do have networking partners, referral partners, individuals that specialize in, maybe.

persuasion and conversational therapy or whatever, right? Some kind of sense of you’re having a financial conflict. How do you resolve these kinds of financial conflicts with your spouse? Because if you’ve got somebody that really wants to do it, and then the spouse is in the way, then that person that really wants to do it is not going to go against their spouse, but they would love to figure out a way that they can communicate differently with their spouse to maybe persuade them.

That is certainly something they would be interested in that isn’t necessarily your strengths, but there are people that do that. And that’s where the, the idea of an understanding of what you can and cannot work. What’s your expertise in ledger and what isn’t, your expertise plays a crucial role.

And by offering, even if the connection doesn’t work out, just the offer of connecting them with that kind of resource to help them find a solution for themselves. When’s you that kind of rapport? I think the goal is the rapport, right? in going back into the example of an it solution where it’s very binary, you as the expert, know what the problem is, and it can be very frustrating, especially in that case.

switching gears here a little bit, I’m big on, building networks of other high net worth investors, getting in the room of the right people, which is usually not the vocal Rhea, the free, groups online. We’re just more about wholesaling and flipping in getting their first hundred, $500,000 net worth.

But. And that’s a big part of it. I think, getting into the right network. And that’s why I’ve created the simple passive cashflow nation and the mastermind. But I guess Brady, once you are in the right room, I will some tips on someone who is a little socially awkward from a technical background to get all their comfort zone and intermingle and put their best face forward, My main advice is to play to your strengths, which might sound a little confusing perhaps to somebody who is very heavily introverted. But I had mentioned this earlier in the episode where we were talking about introverts, having particular empathy that even extroverts do not possess. Because an extrovert can be a social butterfly and foot around the room and chitchat with everybody.

And they look like the life of the party and somebody who’s heavily introverted, not only will feel envious, looking at that example, but feel lacking. Like they can’t do that. And that is doing an apples and oranges comparison. You look at somebody that’s social butterflying around the room and you go, I can’t do that.

And you start to shut yourself down and you don’t go up and talk to anybody. That is what we end up seeing in those kinds of situations, but that’s not your strength. Their strength is as an introvert, for example, is not your ability to flip between 20 different conversations. In 10 minutes, your strength is really deeply understanding one conversation, being able to really tap into another person.

And that is something the extrovert can’t pull off. The extrovert usually gets bored too easily and flips to the next conversation. You have a much. Stronger opportunity for connection rapport and building a strong ally in that room than even the extrovert can do. The extrovert could collect 15, 20 different business cards and not necessarily have any real follow through with any of them, but the introvert could get one card, maybe two, that actually goes somewhere because there was a deeper, meaningful connection that was happening.

It takes a courage to do that. You have to get up the nerve to come up and talk to somebody, but. Devote yourself to that realize that your strength is to be able to understand this other person and make an ally. And I think in our group, I would say 80% of the people are introverts. If let’s say at least you got a pretty good shot of talking to somebody who is glad that if you’re talking to them, you think the first move and then something else that of came to mind was in a.

I, when I go to, conferences, industry events, and I make a point to go more deep into one or a few people than to run around the room and wastes my business cards. and it’s funny cause everybody sees those people’s fluttering around the room and you also see this in the virtual setting today, or when there’s not as many in-person events.

I see it. I see it on my Facebook feed. I know you guys are out there. You guys are in every single Facebook group out there. I know cause I am too. And Facebook alerts me and I see those type of people that would skin that’s the cheap, easy, free folks who they flutter around to every single group. Ask the question.

You’re asked a question to ask a question in there. there are transitory to all these groups, but they’re not a resident of any one or two, and I think it’s different. I know the truth is those people. They never really get anywhere. Let’s say never reinvest their money into one group of people, time and money wise.

that’s, I think that’s how it recreates itself in the virtual world that we also unfortunately are living into. and there’s also a corollary, it’s a little bit of a cliche, but it’s an interesting mental trick that I would recommend to somebody, because. Whether it’s in a virtual, zoom call where there’s open breakout rooms and you have to pick a breakout room to go into or something like that.

Or, you get assigned to a breakout room. Or even if we think about an in-person thing and you’ve got 15 people lined up against the wall and nobody’s talking, cause everybody’s nervous. Just remember. And this is true. If you’re the one that has the courage to go up and actually initiate the conversation, you’re scared as all hell of how that’s going to go.

But in that instant that you’re doing the approaching to somebody else in that moment, they’re more afraid of you than you are of them. That’s the cliche. And by having that leap of faith, that courage to actually be the one to go up and initiate, you have now proven that you’re just ever so slightly less afraid of this conversation than the person who didn’t get that courage up to do it.

And as a result, You’re almost guaranteed to actually have a really good conversation because they’re just happy that you started it. Yeah. And I think a great opening pickup line is like, Hey, I’m new here. I’m still trying to learn. yeah. Tell me about yourself. And I’m interested in learning too.

it’s rare that you find people that. Don’t have that ego or the I’m all-knowing, I’m the best doctor on the best dentist and the best it guy. I know.

but yeah, let’s so Brady runs a pretty good boot camp specifically surrounding, progressing your career and all these little social tweaks. great. I really liked the group coaching setting that you do too. We can do this and they can keep beta group ourselves, but it’s probably the most, best way you’re going to be able to get some people around you and that as close to one-on-one coaching, without the price of that, you can get like insult virtual, right?

Say, no, you start it with pentatonic, but you guys, what’s the URL, right? If people want to get ahold of you or. Yeah, my website is infinitech.ninja. So I N F I N I T E C h.ninja. and , the name was created around the idea that we are helping texts, particularly whether we’re talking it or programmers and developers.

If you’re in the tech industry, And that we have infinite potential, but we just need to untap it. So Infinitech, and then I call our graduates from the bootcamp tech ninjas, because there’s a resiliency and a versatility and agility to the mindset that I coach on these concepts that really prepares people to face down just about anything, because really tapping into our personal power and not getting bogged down by what we can’t control.

And I’ve spoken about this before this concept of binary skillsets that are contrasting it’s like the seven foot or in basketball that can also dribble and shoot or the super strong guy. Who’s also fast. If there are an introvert out there and you shut up and actually listen to people, is there a normal tendency, but you’re also able to navigate social norms.

You become what you become one of these rock stars and guns Lakers in the world, and you just rise above everybody else in career and networking. And it’s because it’s rare that binary skill sets is rare. and it’s something that I’ve worked on myself. Cause I was, you ask anybody who knows me.

I’m one of the most socially awkward people in the world. but I kind of work on it. That’s really how I’ve been able to work on all these business development relationships and partnerships and find, and build the group. And, Brady will call me so that I’m confident. yeah, cause I put in the FM work.

And that’s what I encourage. Everybody else should be doing a jumped, do the bootcamp. I would definitely recommend it. And I liked something else that you mentioned in there, like the introvert who can start a conversation and actually communicate effectively with another person does so much more powerfully and meaningfully than the extrovert.

And part of that is because of what you had mentioned about listening. We tend to as introverts, I count myself among them shut up and listen more than we want to talk necessarily. But the extrovert by the opposite end of the spectrum, can’t wait to get in their piece. So they’re not necessarily actively listening.

So you get that game of telephone that happens almost in that social butterfly where they’re not even necessarily understanding what the other person just said because they were brushing up for their next statement. The introvert is actually paying attention and listening to the content and gets closer to the spirit of what was trying to be communicated.

So that’s how you establish those allies. I think it feels better than being listened to, and it makes you want to know this person somewhere. And if you’re doing that for business, you’re more likely to do business together.

All right. again, the URL infinitech.ninja and a bird and use these skills when you guys are in our mastermind groups and. we’re going to be doing the retreat this year. Virtually it’ll be the bubble, the virtual bubble this year, but, yeah. easily skills, bring your ego down, be open, be the first person to show weakness and you don’t know anything.

It’s what I’d say, but, thanks, Brady. Really appreciate that.

2020 Advanced Tax Saving Tips w/ Toby Mathis [Part 2 of 2]

https://youtu.be/FTj-nJEGi-4

So what if I have an asset, I did a cost segregation. I shipped that all the passive losses and I slide that asset into profit. Do I have to give up those passive losses personally or no? Passive loss is in the year that it’s earned. So the same way you can be a real estate professional in one year and a non real estate professional, just a regular passive investor.

 

Is the same way those losses get locked on your return. There is something called disposition of the asset where you can unlock those losses and they become ordinary losses. So the one thing we would look at is whether that disposition would qualify. If we transferred into a nonprofit, the other reason that deal might be slightly different.

 

Is that while there’s no issues with putting in straight line depreciation property into a nonprofit, as far as the value, when you put in property where you’ve accelerated the depreciation that accelerated depreciation, just the five, seven and 15 year property gets subtracted from the fair market value.

 

So if I bought a property for 500,000 and I wrote off a hundred thousand in year one, And then the property goes up to a million bucks and I transfer it into the nonprofit. I would take the a hundred thousand dollars of accelerated depreciation and I would subtract it from the million. So I’d get a $900,000 deduction.

 

And you’ve mentioned it earlier, but is it essentially you can load assets into the nonprofit just as long as it’s not luxury or what about like class, a office space that don’t work as long as it’s passive? What the nonprofit, the only thing the nonprofit worries about is when I have an asset, whether it’s used for my charitable purpose, for example, I don’t like private foundations where they’re not doing anything.

 

All they do is give money to other nonprofits. We’ve done them, but I much prefer things that are actually doing stuff. And people don’t realize how wide open that is. The example I give people that usually makes them go. Hunt is Ikea and Ikea is a nonprofit. Always has been. The majority owner, the majority control is actually two different charities.

 

And then the kids of Inbar the guides set it up for still control about a third of the board. So they, nobody can get rid of that company in it. He is very, almost no tax. I think it was about 4%. When you operate an ordinary business than a nonprofit, there’s something called UBIT that you have to be worried about unrelated business income tax.

 

And if you’re leveraging the asset, there’s always the possibility of unrelated debt financing, but it’s a misnomer. We don’t really worry about it because there’s still depreciation that we get to use against it. So even if it did make that. You’re probably going to be paying to somebody anyway, like you’re gonna be paying it out as a salary or another expense.

 

Like you’re not more than likely you’re not going to get hit by anything. If you did you pay a little tax on it, but the charity pays it. I must admit, like from an asset protection standpoint, you’re pretty solid there. Nobody could ever take it away. That’s the thing, things, nobody owns it. It’s for the public benefit, you control it.

 

So if you run over a bus load of nuns, you get sued, but lightening suit out of you, they can’t touch it. They could take your, if you start paying yourself out of salary, they can garnish some of those wages. But even that’s 25% of a wage. So it’s not like they could just. Go in there and they can’t touch the asset.

 

And then you control. Usually what people would do under that scenario is they’d pay somebody else, a spouse or a child, and they would take care of that individual, but it just takes the bowl, the bullseye off your forehead. When you have a lot of assets in your walk around with them in your name, I just say you’re attempting fate.

 

There somebody is good inside. They’re going to make their bones on trying to take your stuff. So you, do you like the strategy in new of, or it conjunction with something like a Nevada dynasty trust or like a domestic asset trust or irrevocable trusts? Like even though there’s, everybody’s got their different little, what they think is best, what is your kind of thoughts on how this all works and you use what’s appropriate at the time?

 

And you try not to overthink it. The, uh, Nevada asset protection trust. Yeah. All that is a trust that could last 365 years. Good to cans into another one and keep going on. It just means we’re getting it out of our estate. I don’t own any anymore when, while I’m alive, technically somebody can’t take it from me.

 

So they’re an asset protection tool and in all living trusts end up becoming. If you draft them right. Dynasty trust anyway, you know, unless you want to give all your stuff to your kids right away. So I would say don’t do that. My experience is that you’re better off having instead sit in trust for their benefit during their lifetime, and then going to another generation and you can have them go for a long period of time and you can pick whatever state you want.

 

So Nevada is the number one state for asset protection for us. The reason being is a, they last a long period of time, 365 years. You can make that go longer. But also if you have a creditor of a beneficiary, all creditors are protected. Whether it’s child support, alimony, personal injury, there’s no exceptions and most States have exceptions.

 

So Nevada does not. So we tend to. Put the Situs of our trust in Nevada for that reason. So that’s why you see you here in Nevada asset protection trusts. It’s a fancy way of saying credit shelter trust set up in Nevada. You know, it stuff, but stuff. I think we’ll talk about, bring you to the mastermind and cut Bobby, talk more specifics with the folks there at a future date, but let’s get back to the crystal ball here.

 

So the big thing is the $400,000 threshold. To me, if you’re able to lower your AGI below 400 grand or even less, does it not even matter still on 32% tax bracket, if you’re over 400,000, that 39.6 plus your state. So it’s going to be painful. If you’re below the 400,000, you’re going to get a deduction.

 

That’s going to come back. So that may help some people out. You’re a state and local taxes. You’d be at a write off right now. It’s capped at 10,000. So for some people it might actually be better. We always look at what’s bad about it, but what’s good about it is you make less than 400 grand. You’re going to protect protected class.

 

If you make over a million bucks, you’re completely you’re on the endangered species list. You got to do something, you got survive. Some, there are some ridiculous ways, by the way, to lower your income, you’re doing one late in your real estate professional. That’s not available to everybody. There are things called defined benefit plans that have become more and more powerful over the years with savvy.

 

Advisers where you’re able to put in some cases, upwards of a million dollars a year tax deferred, there’s other vehicles, if you want to get there. And it’s just recognizing that, which category you’re in, if you’re making 200 grand or in below you’re okay. There’s some things you can still do to lower your taxes.

 

Absolutely. There’s still some things you can do to make sure that you’re. Taking advantage of, of opportunities that are available to you to minimize your tax about you’re not, you don’t have the bullseye on your forehead. You’re making 1.5, 1.6 million a year. Got a goals eye on both were asset projection by the government.

 

They want to take a big chunk out of that. And there’s some things we can do to lower that so that you’re not sitting there feeling like you’re just opinion getting hit and all the canvas. So let’s talk about that a little bit. Maybe not for example, like land conservation, easements, not, let’s not really get into whether that’s.

 

It’s going away or right now it’s being fought around a little bit, but what’s what do you think with the new administration new things might be coming? I think that would actually be kind of a greater incentive lane. And I would, the only thing that I would say is the administration right now is looking at it saying that there’s been abuse in the conservation area where they’re overvaluing the conservation easement itself.

 

So it’s something called a listed transaction. If you go over 250% of your investment in an English, it means I give a doll. And I get a deduction of more than $5. They’re going to look at the transaction. That’s all. They’re going to make sure that it’s legitimate because there’s people out there pitching 15 and 20 times.

 

Yeah. Those are the boneheads, right. Taking advantage of it. There’s no way that the value holding up. So I got, we have one right now that we’ve been looking at and these are legitimate. So it’s a developer. Developer is developing a big chunk of Vail, Colorado. So they have an area that they’re willing to conserve.

 

What it does to their other developments is makes that land more valuable. So they’re willing to put restrictions on an area that’s already been approved for the development. All the plans are up like you literally, they built sections of it. And they said, this land is worth $40 million with the developments 42.9 or whatever, but we bought it for 9 million.

 

So we’ll give away all the development rights. And they get a deduction for it. And what is what it is. They say here’s an area that would be perfect if it was never altered. And it’s where two rivers come together. It’s about, that’s going to make everything else. The whole area is going to be better off.

 

So there’s about $30 million of deduction. So if you put in a dollar, let’s say you were one of the 9 million. Then you’re getting a deduction worth. In this particular case, it ends up being more as about $4.70 for every dollar. So you’re going to get to write off, you’re going to have a charitable deduction of $4.70 for every dollar you put in what’s that board at all at 4.7 words, it depends on your tax bracket.

 

If you’re in the 20% tax bracket, it’s going to be 20% of 4.7 is what it’s worth. And it’s what is that like a dollar for whatever it is. See if I can actually do math in my head, a dollar 40 or something around there, a buck it’s you paid a dollar to get just over a dollar. You’re probably not doing that for tax purposes.

 

You’re in the highest tax bracket probably worth it. It’s probably going to be, Hey, you know what? I get a buck 60, a buck, 70. For every dollar I put in, I’m saving a dollar 70. Okay. That’s worth it. Saving an extra 60 cents and that’s conservation stuff. And Biden is showing that he wants more solar and he wants more conservation.

 

So I would say that the opposite is going to hold true on that area, that you could actually see more incentives and there’s a crazier one land. You and I have never spoken of, which is the solar credits that are still floating around out there for business use, for example. What’s going to become a big incentive.

 

And I can almost tell you that this is going to be a reality. So I’m going to get my crystal ball out and say, you’re going to watch this. And then we’re going to listen to this in three or four years and say we were predicting it right now. If I put a solar array on a building and let’s say it costs me a million dollars.

 

I get a tax credit of $260,000, 26%. Even if I finance the whole thing, that’s a credit. I get a credit. That’s not a deduction. That’s a dollar for dollar credit. So if I owe a hundred thousand dollars in taxes and I have a $270,000 tax credit, I don’t pay any tax that year. I use 100,000 of it and I carry it forward into future years.

 

But I also get to depreciate the solar and I depreciate 87% of it. So a million bucks, I’m going to get an $870,000 deduction in year one, plus a $260,000 tax credit. That’s not bad. So there’s, and I think they’re going to increase those incentives. It used to be 30, 30%. And then this year went down next year.

 

It goes to 22%. So that solar panel, you can deduct it all in that first year. You can deduct 87% of it and you get a tax credit for 26% of it. So maybe I actually go around Hawaii and find a contractor. It makes deals with some people, put some solar panels have to sell off the credits to invest in them a year.

 

Is that you’re already there. Yep. That’s exactly what they’re doing. So I have a client. That’s what he does. He, he installed solar, but it gets interesting. What he does. He goes to a utilities, public exempt organizations, five Oh one C3 churches. And he’ll go find a wealthy parishioner and say, Hey, would you, would you put the solar array on?

 

And then do it five-year contract on the energy because there’s going to be energy independent. And so they’ll sell it to the charity and say, Hey, after five years, the array is yours. And so he’s taken the big tax credit. They have a little tiny bit of income on the, on the revenue that’s coming in because they’re technically, they’re selling them the electricity.

 

Although, usually they just give it right to the charity. So that washes itself. There’s a deduction. And then, so you have a little bit of income with a deduction that equals it, but you get that first year. It’s a ridiculous deduction, but where that’s really going to be important later is next year, if the taxes do increase, guess who’s going to be really incentivized to do stuff like that.

 

Yeah, that’d be cool. Like investors bring in the capital, they get the tax incentives and the plan owner gets get some cheaper energy. Yeah, what they do is they lock it in and they’ll say your energy, won’t go up for five years and then you have the right to buy it at some peppercorn price. So you’ve already depreciated it.

 

So you don’t really care and you just don’t want to have a E you would recognize all the income as ordinary income. If you sold it for more, more than your basis. You have a really tiny basis. So that’s what you sell it to them for you like, Hey, 13% basis, whatever that is. So it’s, I just want to not pay anything.

 

Yeah. So during the, during those five years, I have a little bit of energy money coming in and I haven’t payments on the loan on the solar, but it’s basically washing itself. So I, again, I’m getting a huge tax credit. I get a huge deduction. I have very little income that’s coming in off of it. So I’m getting a big first-year benefit and yes, there’s a lot of people starting to do those now.

 

And I think that creative syndicators are going to get into that arena. I think going back to the land conservation easement, I think Democrats are typically more than farm mental sides. So I think that’ll continue to be a little bit, but I, what I’m looking for is then to create some kind of safe Harbor instead of us speculating backroom floor.

 

That they just make it more black and white. So mr. I need to file an April. Doesn’t get all for doubt, but they did, they did make a safe Harbor. It’s 250% and they made everybody list it so that, so the it’s the syndicator that gets audited in those situations, not the individual. So usually what they’re doing is they’re trying to figure out who these promoters are and whether they actually gave away the interest.

 

And so what oftentimes will happen is somebody thinking. I’ll pretend to give away something and we’ll revert back to me in 20 years. So I’ll get a deduction, but it has to be a complete gift and perpetuity. Somebody who, who doesn’t, obviously that’s a syndicator who’s running fast and loose and it’s not.

 

Doesn’t hire competent professionals to look at the situation and say, Hey, you actually have to get your way. And I’ll use the example of our president right now. Trump. Mar-a-Lago is a good example. I think it’s six parcels. Mar-a-Lago the golf course. And he gave away the development rights. I think it was on two or three of them, but also the clubhouse.

 

And so there’s a bunch of cultural antiques in the clubhouse. They have to have a non-profit gala every year, so people can see it. But on the parcels that had the golf course, you gave away the development rights to an outside the conservation RT. And the reason that you do that is so that nobody’s tempted to sell the golf course and build a bunch of houses.

 

It does a couple things, Hey, that will always be open space. It’ll never be developed. They’re not going to build buildings on it. They’re not going to put houses on it. Number two is if there are houses on a golf course, you want to know that they’re not going to sell the golf course. And all of a sudden your house it’s on the fairway on the ninth hole is.

 

All of a sudden in a very dense pack of houses that are on postage stamps, that just happened in a community. That’s literally about a mile away from me here called Queensbridge, where they saw the golf course and they’re going to develop it. And it’s a lawsuit in the making that’s where Snoop Dogg that, by the way, it was in Queens Queensbury, I think it was one of the condos that’s in there, but it was like a super high end area of Summerlin.

 

And yeah, the golf course wasn’t profitable. So the guy just let it go Brown and selling it to a developer. And so all these people that lived on the golf course, all of a sudden, they’re on a Brown golf course. That’s gonna, you know, they’re gonna have neighbors in their backyard. And they thought they were going to be living on a golf course.

 

So there is some benefit to it of saying, Hey, I have a golf course, worst case scenario. It’s going to be open area and you guys can decide, maybe it won’t be a golf course someday, but it’ll be open green area. Maybe it’ll be. Maybe we’ll plant a bunch of trees. And if you give it to like ducks unlimited, maybe there’ll be a wildlife habitat that’s in your backyard.

 

So that’s actually one that people give a lot of land to, but it’s, that’s that world, the people that live in that world land they’re true believers. Like these are the folks that are like, Hey, we need, we need these open spaces, please. Don’t. Put asphalt over everything, especially on why I’d imagine you guys would have an appetite for that.

 

So wrapping things up. The last thing I wanted to go over was the corporate tax rate going from 21 to more of a 28. Do you guys finally got me on a C Corp system after takes me a long time to figure these things out? I don’t have a home office. I have an administrative office because I have a SQL or now I’m getting it.

 

I’m practicing. I’m practicing for that audit, but I’ll probably have you guys talk, but the audit rate is they just came out with the audit rates from 2019, your little, uh, little companies, little S a little seeds, little partnerships were below 0.0, zero five. They didn’t even register. It’s first year, I’ve seen an asterix as the audit rate, as escorts were 0.01, a C Corp syrup when you’re small you’re minuscule, but the people that get audited or the individuals in big companies, companies, the, yeah, the LLC sole proprietors, they still there about it’s still, what would it be about a hundred 1500% more likely to get audited right now?

 

Yeah. It’s not even close. And so I always chocolate because we just don’t see audits here. We actually had seven years that we had zero audits of any of the companies that we set up and we do more than 6,000 returns a year. So like we should be seeing lots of audits because the audit rates traditionally around a percent it’s been dropping, the IRS is understaffed overworked, and they’re focusing on the people that are actually bad doers when you’re a small company.

 

Truly not much that they can get. If you have a lot of different options, you can’t take it one way. You could probably deduct it. And three other different ways as an individual, you have really no options. And so they, when they audit sole proprietors, they win 94 to 95% of the time. It’s a slam dunk. They went about 64% of the audits against companies, corporations.

 

It’s not even close, like when you actually start doing math on it. And you’re like, Oh man, who should I audit is audit sole proprietors all day long out of the modern pause. People are playing games when they’re sole proprietors, you know, they’re more apt to do stupid things. Like you’re not allowed to sell phone.

 

I can’t write off myself on it. And sole proprietorship. I can just go down the email lists and say, who has all the Yahoo or Gmail accounts that have skull audit those guys? They don’t know what they’re doing. If I was the IRS, I would just audit them all. They actually, they do have algorithms and they were auditing all the earned income tax credit.

 

So they were auditing all the poor people that were taking the earned income tax credit because none of them would respond and they’d win. Every audit was the most disgusting thing I ever met. I talked to the programmer who said, I felt dirty after writing the algorithm and it’s stupid stuff like that.

 

You’re just looking at it. And government going guys, I can tell you who the screwballs are. Like we already know who they are. They’re the ones doing everything cheap and fast. So that’s why I do the C Corp guys. But with the taxes going up, Toby is that we’re going to keep it C Corp or we’re going to change it.

 

S-corps what do we do? What’s the plan here calculation to see. So I can tell you the numbers. If you make over a million bucks and you have a C Corp and the C Corp makes its money, pays tax pays it out to you. You’re looking at an aggregate tax bracket of about 59%. That’s going to be painful. So if you’re a high income owner, it’s going to hurt for you lane.

 

If we paid out the profits of the seed Corp, you’re in the 0% tax bracket, your long-term capital gains is the dividend rate. Well, what about like a lot of my clients, like, Hey, The C Corp to them, or S are a little complicated to them. And th they just think of themselves as lowly little passive investor got a few deals that still makes sense.

 

You just do the math. And so I’ll use a stock trader. As an example, we don’t have a miscellaneous itemized deductions, stock traders. It’s really hard for them to qualify as a business or something called trader status, which is not even in the code. It’s just made up. It gets audited almost every time, or you just use a corporation and you haven’t managed a partnership that has the brokerage account and it sounds complicated, but what it does is it allows you to write off all your expenses that you otherwise wouldn’t get.

 

So you just get a pencil out and you say, all right, how much are those expenses? In my experience, the average expense of an individual who’s doing any sort of investing is between 20 and $25,000 a year. If I can write that off, I just look at your tax bracket and say, is it worth it? So if it’s somebody who’s in the 12% tax bracket and they don’t really care, I look at it and say, it’s going to put an extra, let’s say $2,500 in your pocket.

 

Is it worth it to do an extra tax return and deal with a little complexity? And their answer may be no for somebody else. They may be looking at it and they go, Whoa. Yeah, that’s going to save me about $10,000 a year. I need that extra money because it takes me from making 7% to making 13% a year. That’s a huge, like they’re in the 20 to 24% tax bracket.

 

Exactly. And they start all of a sudden it starts those deductions start to mean something. I don’t want to ever put my, my wallet in somebody else’s back pocket. So I just do the calculation and say, Here’s what it means to you. Is it worth it? Technically it’s the same bookkeeping, no matter what you do, you’re required to keep books and records.

 

So I always say that’s a misnomer. What it really comes down to is the little complexity of running a court. And yeah, maybe it’s an extra hour or two a year that you have to deal with it. It’s not, you do syndications. It’s not like it’s earth shattering. It’s not like it’s a ton of stuff. You just, you have to keep track of your books no matter what, that’s the hardest part for anything is keeping track of the books.

 

So all you’re doing is you’re still doing the bookkeeping. It’s just, I have one other mouse over here that has its own tax bracket. And I like to feed that mouse because unlike me it doesn’t have to pay tax on some of those things. Yeah. Okay. So yeah, wrapping up here will be any other thoughts and feelings or anything else in that crystal ball you don’t want to predict.

 

Yeah. Relax. I would say go slow. Don’t make wild moves. Don’t freak out. If we can’t do things one way, we’ll find some other way. It’s rare that you have catastrophic tax changes. Usually they give us things. And so even in the biggest tax changes that we’ve had, whether it be the 86, whether it be 2003, a tax cut and jobs act individually at axes, actually we’re not.

 

Business taxes went down no matter what those are, which by the way, one 99, eight is also on the chopping block. The 20% deduction, I would just look at it and say, talk to somebody who actually understands how these things work. What are the silver linings they’re giving us tax laws always have silver linings, and it’s just, let’s go find what they are and see if actually your situation benefit.

 

It’s weird, but like usually with a little bit of complexity, those that are willing to embrace it, do better almost all the time, because it’s not like Biden wants to hammer people. What he wants to do is he wants to hand hammer the people that are just doing thing mindlessly or don’t have advisers. And so he sets up traps and if he it’s like you’re catching, I don’t know.

 

Let’s say they’re putting a bunch of hooks in the water and they’re waiting to see who will come up and bite it. So don’t buy it. Yeah. It’s like the heads I win tails. I win complexity helps because in the complexity you can find a path forward and stop complaining, try and find those ways to get her up off.

 

I just wish that Trump hadn’t used the carryback and hadn’t used the accelerated depreciation and use the costs or the conservation easements. Because they used it. They hit him over the head. When really realistically they should have been saying here’s huge tax incentives that we want everybody to participate in.

 

We’d love to see more development. We’d love to see more conservation instead. They said, Oh, look at him. He’s not paying any taxes. Yeah. Like here’s the guy that. He saved billions of dollars on his taxes because there’s incentives to do X, Y, and Z. And he took advantage of those incentives kind of like shut up.

 

You emphasize it. Just why bring all this attention to this stuff, right? They didn’t do it say, Hey, and you saved tens of thousands of dollars a year running your business as an escort. You never heard him say there was one or two articles where they actually pointed out. Hey, you set up a structure where you’re able to reduce your own age disability and survivor’s benefits and Medicare payments.

 

You save yourself. I think it was like 150,000. It was a pretty large amount and yeah, they didn’t beat him over the head for it. Thank God, because we want these things. There’s incentives to do things the appropriate way. We want people to, we want charitable donations. We want conservations and it’s we want development.

 

We want people to. Want to build more housing cause God knows we’re going to need it. And the poor being left behind everywhere on your Island. I know that there’s people that could really use low income housing. Why are they making it so hard? Give us incentives to do it and we’ll take care of it. I actually think maybe with Biden and everything, maybe my taxes might go up 5% overall, but with all the money that they put into the economy and they spend money, like drunken sailors, especially on the low income housing stuff.

 

I think if you’re like before they would put a bunch of housing in projects, right? Like they, they would densify all the low income stuff. Now the push is to spread it out to more suburban apartments here and there amongst nice houses in these neighborhoods. I see that as opportunity for investors to go like apartments, or I know you guys see that stuff too.

 

It’s huge. It’s huge. I work with the United way Catholic charities and nonprofits that work with terminally ill, autistic adults. There’s no housing for these folks. And like, I don’t want to go down that path right now, but it’s. Serious as a millions of folks are going to be in a really bad situation.

 

There’s almost a million autistic adults that are living with their parents. What happens when the parents pass away, these folks can not live on their own. They’re going to need some sort of assistance. So there’s going to be that the elder population is, but we’re living longer in our older population is growing about 25% faster than every, than any other demographic.

 

We’re going to need to house people, but they’re not going to be able to live on their own where we’re going to just put them in nursing homes. That would be horrible. So we’re going to have living arrangements that work there. And then there’s the last 10 years of all the housing that’s been built about 75% has gone to people making more than $75,000 a year.

 

So you have a section of society, especially the millennials that are being underserved. So, uh, what they ought to do is create incentives for folks like you. Folks like me, who love real estate, like to develop and give incentives to solve that problem. And the accelerated depreciation is one fixing the voucher system right now.

 

Not everybody wants to do HUD housing. But there’s other systems for people, whether it be veterans, whether it be somebody who’s got a short-term need or has a certain type of disease, or again, autistic or whatnot, where there’s groups that, that give incentives to people like you and I to help solve that issue.

 

By giving us tax incentives to do it. And that’s the best thing they could do because the government sucks. That feels strange. It really bad. Anything else going on in Anderson, you want to give a shout out to, you know, what we’ve been going gangbusters. We love working in the tax and asset protection and the estate planning.

 

What I would say if you’ve been part of our infinity group for anybody, we’re going to make that free now. The basic infinity that used to be a hundred dollars a month is going down to free. We lowered it $10 last year. And now down to, to free. If you want people to learn how to invest, I love getting young people into it and they actually learned the principles of money.

 

That’s actually really fun. I’m always doing, am I doing one tomorrow? All day long, but we teach a workshop and then there’s, they can come in and trade in the stock market with, with a fiduciary, like a professional every Wednesday. We just train people on how to be good investors and there’s not a dollar to be had.

 

And if they can just go do it, I spoke to some of your mastermind folks in an infinity group, and it’s kind of cool guys. Like it’s, it’s, I’m not a big fan of the stock market. Sure. But the way they teach it as like more, it’s like cashflow investing, but like investing in dividend type of stocks. So they teach you how to do that.

 

It’s great for like younger guys who. Need to save up some money to go buy a rental property and get started. Or some of you older guys, just looking for that hobby to do it too. It’s casual. We call it being a stock market landlord. Everybody forgot that the stock market used to be a place where you got paid to invest.

 

Then it became, Oh, the is going to go up. No. If I gave lane money and said, Hey, open up a restaurant, I’d expect him to pay me something for it. I wouldn’t wait 10 years and say, Hey, if you ever sell that restaurant, I hope we make some money. That’s stupid. So we cashed, or there’s only about 60 companies that give you good cashflow.

 

And then we show you how to rent the stock. So you could make a good 10, 12% a year, pretty consistently out of the stock market. Just picking those companies and renting them out is a fancy way of saying covered calls. It’s actually fun. And, uh, we do it because if younger people start doing that, they won’t be afraid of it and they won’t get taken advantage of by all these knuckleheads out there in their suits, trying to take your money and put it in an account mutual fund and rip you off.

 

I shouldn’t say rip you off. I always get in trouble. Somebody yells at me for saying that mutual funds have really high fees. ETFs are really cheap. Just take 30% of all your gains, right? 70%, 70% is the average what their fee will end up taking away. 70% of all the growth. You’re a hundred percent at risk.

 

You get less than a third of the benefit. Once people realize that’s how wall street makes its money. If you guys want, because I go to the Anderson advisors.com or Mickey mouse and your lane. Good stuff going over. Toby. Appreciate your time. Hey, it’s always fun. Thanks. Thanks for having me.

New Tax Implications from the 2020 Election w/ Toby Mathis [Part 1 of 2]

https://youtu.be/aqPWoki-MP8

Hey, simple passive cashflow listeners. Today. We have Toby Mathis here, a partner at Anderson advisors, the guys who got me to pay no taxes. Thanks again, Toby for that. although I was the one putting in a whole bunch of money into deals, par in economy through the pandemic. So I can say I earned it.

We didn’t do anything. We just point you to where they incentivize you to invest in real estate. Exactly. So today we are coming to you post election and things are pretty early still, but we’re going to be looking into the crystal ball here and make some speculations on where some of the tax laws are going.

And maybe what strategies you guys can be looking towards to maybe even we’ve got to pull the trigger before the end of the year, right? Possibly. the presidential election is looking like it’s going to be Biden. but tell us what really matters here. Is it the president or is it the Senate or the house? Yeah, Congress writes the laws, but the Senate, but the president can always, veto. So you have to be able to get over you basically, you have to have a certain alignment. Otherwise it’s going to keep you from being able to pass certain laws.

The house right now is going to stay Democrat. The Senate is a little bit up, we’re going to be at a deadlock. I think you’re putting it up right now. There’s two more runoffs. I believe in Georgia that might impact things, but it’s either going to be a standstill. if you end up with 50 50, then the vice-president decide.

So if the Biden inheritance are in the white house, then, Harris could pass a deciding vote and you could have changes if there’s not that scenario, it’s really difficult to pass anything without you’re gonna have to get the Senate on board, which means it’s gonna be hard to. Move really dramatically in any one direction.

What we know is what Biden has said he’d like to accomplish. So PRI prior to 2020, this a little bit of a history lesson for folks. so bill gets passed or tax law gets changed. it is. Birthed here in the house, primarily Democrats. So this is where, like the stimulus bill comes out, what is it like 10 million?

And then it goes to the Senate, they chop it down. prior to this, the Republicans had the edge, but it looks like it’s going to be more of a gridlock more than yeah. They both put out their own bills and then they decide that kind of goes through a committee and they decide which pieces they’re going to.

Are going to get an app. That’s where they all negotiated. So that’s why you never really know what’s going to be done until they actually pass it. Holy moly. What did you guys do? What’s the old famous one, you’ll know what’s in it when, after we pass it. So it’s kinda, or sometimes like they’ll write a bill, a Republican bill, and then all the Democrats will veto it, but then they write the same exact bill.

And then they’ll pass it. But it’d be originated from the Democrat side. Yeah. Always they call it the pork, this is what I want in order to allow you to get what you want, man. It’s usually not so good for the taxpayer. Yeah. so let’s just kinda, from what we know of the Biden, what Byron was saying prior to the election and campaigning, where are things heading in terms of taxes?

What do people need to be aware of? So the first thing to know is that the tax cut and jobs act, which they called the Trump tax cuts. A lot of it phases out in 2025 and there’s portions of it that start to phase out even now. there’s a little bits and pieces of things that are set to slowly go away like accelerated depreciation.

After next year will start to drip down. You have other things like your solar credits that are already going down, you have things like. the estate tax exclusion, that’s sitting over $11 million right now. And that’ll revert back to the pre tax cut and jobs act, level, which should somewhere in the five, five to $6 million range, depending on inflation.

So there’s things that no matter what, they’re still going to move, then you have the, Hey, these are the things I want to change. comments from the Biden team and the big one was anybody making over $400,000. They want you to be in the highest tax bracket and they want to move that highest tax bracket to 39.6.

Then they also say, Hey, if you make over a million dollars in capital gains or dividends or the combination of those two, then we want you to pay 39.6 on your capital gains, which would be almost a doubling of the capital gains rates. They also say, Hey, we don’t like this 21% tax rate on C corporations.

We want to make it a flat 28%. And if you remember prior to the tax cut and jobs act, it was graduated. it would be as low as 15. And then it would go up to 39 and back down to 35. It was this bizarre, and they’d just put flat 21%. So for a really small C Corp, it was a little bit worse, but for big companies, it was better.

That was the sort of pre page tries the big guys, right to come back. that was the push for it. There was that what they want to be is more competitive on the international, attracting companies, but their headquarters in the United States, as opposed to incentivizing them to go elsewhere.

We were not competitive as a taxi. They also had the, Hey, we’re going to cut the repatriation of your profits down significantly. I think it was 15%. I don’t know the number off the top of my head, but I know that. They reduced it, so that companies like Apple or Amazon, or some of these companies that have a lot of earnings off shore would bring them back in the United States and perhaps do local investment.

So let’s go back through these and I’m going to ask it from my own selfish perspective, which I hope that listeners are in that same situation too. But like the 2018. Jobs tax and jobs ag, I don’t know what that’s called, but it allowed for a bonus depreciation and whole bunch of passive losses that you could extract from deals that do cost segregations.

Right? That’s the one, whatever that one is. actually you don’t have to worry about the, real estate professional that was actually changed back in. I think it was 90. it’s four 69 seats. Seven, if I’m not mistaken, but that’s carved into the code already. That’s you don’t have to worry about that.

The bonus depreciation was, Hey, if you have five, seven, 15 year property, anything less than 20 years, you could choose to accelerate the depreciation. assume that you have, let’s say you have a carpeting and you put a hundred thousand dollars of carpeting into an apartment building. Normally you’d get to write off $20,000 a year as a deduction because the whole carpet will last five years.

So you’d take $20,000 each year. What accelerated depreciation allows you to do is just boom, taking them one year in order to know what portion of your property is carpet versus cabinets versus fencing versus driveway, all these different, Lifetime, of those particular assets you have to do.

What’s called a cost segregation. There’s always been cost segregation. You’ve always been able to do that, but now all of a sudden we have this huge incentive because about 30% of most buildings are five, seven, 15 year property. So all of a sudden you can accelerate your depreciation at any particular time.

You can just, you can choose five years after owning a building. Boom, I’m going to take it. And you have this acceleration, where you can really accelerate what you’re able to do. Sometimes it’s 50. Sometimes it’s a hundred percent. It depends on when you put the building into service, but you can do the acceleration and all you’re doing.

there’s nothing crazy about it. You’re just writing it off early. You’re still going to write it off over time, but it’s almost like getting a loan from uncle Sam for no interest saying, Hey, I know I’m going to get the tax benefit. Over the next 20 years. How about you? Just give it to me now, early Christmas present.

So if you guys miss it, the rule of thumb is about a third of the building gets written off in the first year, but to simplify it even more, a lot of these deals, you’re trying to max out the leverage 70, 80% loan to value. So what I’ve seen is, passive investors that put in a hundred grand, they’re getting anywhere from 60 cents to almost a dollar.

Back in that first year bonus appreciation, 60 grand or 80 grand back. depending on the deal and yeah, and it offsets not to interrupt you, but it offsets passive income. Unless you qualify as a real estate professional, there is one other one active real estate, but most people make too much. that’s the one that I’m really worried about, right? Like these, the passive loss gravy chain. Getting these super just mean that ain’t going away, that ain’t going away, what you might see as the accelerated depreciation. I think in 2023. So in three years, two years really, will start to go down to 80% and I’ll drop to 60% and then, go down from there.

I’m not certain, but I may, I haven’t looked at it so long lane. It’s probably. If it goes away completely, I’d be shocked. But sometimes it goes down to 50%, which is still pretty good. not w we do a lot of cost segregations where clients, where we will direct them to have them done. Not always do we accelerate the depreciation, especially not on the five-year property.

Sometimes you just let it spread because unlike you like, w you’re a real estate professional, you had massive amounts of deduction. But it doesn’t help you to get really dizzy zero because the lower tax rates are pretty low. Like I’m okay. Paying 12%. I’m okay. Paying 22%. What? I’m not. Okay.

Is paying 39.6% on rents. I’m not okay. Paying 37%. I’m not okay. Paying 32%. Like it’s getting too high plus by state. So sometimes it’s just about making sure that you’re hitting that number. So I tend to look at 200,000, And say, if I can keep people around $200,000 a year, that tax, it’s not going to be so extreme, you get up into the half, a million, 600,000 range, every dollar.

So much of it is being taken away from you. for every dollar you make, let’s say we had the Biden one. For every dollar you made after a million bucks, if somebody was taking 60% of it and that’s really what it gets up to, if somebody is taking that much away from you, you’re probably don’t have much incentive to make money and it’s hurting.

Cause it’s not always cash that you’re receiving. Sometimes it’s profit, that’s blowing down via K one or your investment. You don’t have the cash. Now you have to liquidate assets to pay the tax bill. And that’s what we want to make sure that you’re never in that situation. Yeah. so sometimes I think just to summarize what Toby saying, you have to be strategic on how you use those passive losses.

You don’t want to burry burn your AGI down to zero. Sometimes it’s good to pay a little bit taxes. you can’t help it because you’re the sponsor and you have, you’re leveraging up. So you’re going to get these massive. Deductions, not everybody gets that. A lot of folks that are just, they’re not going to pay any tax on rents the next 10 years, because they got a huge deduction and they may be making, $50,000 a year with rental that they’re putting in their pocket, but they don’t have to pay any tax on it.

Yeah. so like I talked to my tax guy and he burned up all my passive losses and I asked, he told me, he said, I should pay some taxes. But the conversation that we had that I got on board on was like, he was like, you’re probably better off paying no taxes and investing the money and just kick it forward.

But it depends on your situation, right? if you have a W2 job, you’re going to be okay. and if you need loans on a home or something, you need to have some income. If you don’t need that, like you’re leveraging on the asset, you don’t need the income. So you may as well not pay it, use that money to continue to invest.

Yeah. so the tax cut jobs act tax that’s phasing out the pass of losses, the accelerated bonus depreciation in the year 20, 22 and beyond. So yeah, look at that, I think 20, 22 years safe, I think it’s after 2020, I think you’re right. It, we’ve probably got a couple more years of where the getting’s good.

And that’s plenty of time for me, but what is, what are you thinking it’s coming up in the future is like the Biden clan going to be putting, getting rid of that, or I’m thinking that hopefully they can just focus on that 10 31 exchange and leave me alone and they want to get rid of the 10 31 exchange.

They want to get rid of step up in basis and that’s going to affect all of us. that’s huge. That’s huge for anybody who has substantial amount of real estate, that could be really painful. It’s going to force you to have to get rid of your real estate during your lifetime, because it’s not going to step up, which means if you’ve depreciated it accelerated the depreciation, then, you’re going to have some substantial recapture when somebody, if somebody sells it after you’ve passed.

so I’m not too pleased about that. that one, that all, isn’t the game plan. They’re like, all right, the Democrats have it. Now, if you’re a 40 years old, surely in the next 30 years, some more tax friendly leadership will get in there and swing the state taxes the other way. And that’s what you do.

Yeah. that’s the ideas right now. The law is what it is and I tell people don’t make dramatic switches until the law actually looks inevitably going to be changed. Cause even when you think, somebody gets in as president and they said, this is what I’m going to do. good luck.

Getting that through. Especially if you don’t have the, the, the house and Senate. Good luck. if you have the house and Senate fantastic. They might be able to get some things through, but even then, it’s not used to be, you can filibuster in towns, but the, It’s still not a, it’s not a guaranteed and people oftentimes campaign on things and then do something else as well.

So I tend not to make dramatic switches until I actually see laws being drafted or changed and they have support. and even if we, Biden’s Binance has won now, he’s even in the first hundred days, it’s going to take what another year, 18 months for that law to go into effect for the previous tax year, too.

So there’s. Probably about a couple of years of, turnover time I’m thinking. Yeah, good. If they could get something through in the first year. And again, the way that, the way it works is they can’t go back and change something, but they can say going forward. So if you pass away or if you remember this, but I think it was, the owner of the gang.

He was passed away during a year where there was no estate tax at all. We didn’t even have the $11 million cap Steinbrenner. This is not that long ago. Yeah. So he avoided billions of dollars. Like he, he, the joke we all had was people are going to snuff out their parents, like on December 31st, if they’re on their death, there’ll be like, let me help you along here because the, the taxes can be so extreme the following day.

it’s we’re going to have a new year’s Eve party with a bunch of pillows. It’s horrible. But that we were there was actually concerned about that and Oh boy, if somebody is on life support, they’re going to have a real incentive to pull the plug. It’s morbid, but it actually was discussed in the tax world.

There were many discussions on it. what would you do? And, So it’s not always, we think like these things have been debated for years. I remember when I first became an attorney, the estate tax exclusion was 600,000 wasn’t, was not very high in a lot of people got hit by it. And then it went up to a million and then it would defy a million.

Now it’s over 11 million and then they said, portability, most spouses can use it. It used to be way to have a, we had to use a trust to double it up. But that’s still on the table and Biden is shown all indications that he wants that to go back to the way it was before the tax cut and jobs act.

But he also wants to eliminate that step up in basis. And the step up in basis in English just means if I have a building that I’ve depreciated or a piece of real estate or stock say I’ve owned stock for 20 years. And it’s gone up in value. The day I pass my, the value steps up, or the basis steps up to the fair market value on the date that I pass.

So if I have a building that I’ve depreciated in my basis might be a little bit of land, maybe it’s a hundred thousand it’s million dollar building. Right now, if I pass the base, that steps up to a million dollars, I live in a community property state. So even my spouse could sell it the day after I die and pay zero tax, no recapture.

If that goes away, then assuming that, somebody had to sell an asset after somebody passes or wants to cause they don’t want to manage it and they sell it. no they’re going to pay recapture in capital gains. On that. So they’re going to pay up to 25% on the recapture and up to a underbite and it could be 39.6% on the capital gains.

So it’s a pretty big hit. Now the other side to that is if it’s real estate, not only does the patient have stepped up, but you can read deep, read deep, appreciate it. You know you, so you can go back and write it off again, and you lose that. So that’s flying under the radar. And that’s the one that I focus on saying that’s the one that’s going to have the biggest impact on our clients is people who aren’t investors are going to get punished.

And under that plan, and I don’t like it because before the strategy was just die and pass it off. And then your kids get the step up basis and you go wash the asset strategy was accumulate real estate and stock in capital assets. 10 31 exchange you’re real estate into more real estate leverage. Use those, use the proceeds, if you need to, for other things, and then pass away and you don’t have to worry about any tax that you could either.

depreciate it. So they’re not going to pay any tax on it in the wrench for a long time. so you’re going to have to appreciate it again after they’ve passed at that higher amount. And all of a sudden they’re getting huge tax benefits. or they sell it and they pay no tax. And so there was always that kind of, the silver lining, especially in community property States where the first spouse, everything steps up.

dad passes and mom can sell the stock and not have to worry about getting hit with capital gains. Now mom could be getting hit with as much as 39.6% federal plus the net investment income tax, which is 3.8. Plus their state taxes, which can be as high as 13%. So you could be in a scenario where you’re paying, 50, some odd percent it get, it gets a little ridiculous.

So is the solution either to wait until a different party is in there and changes the login or some kind of dynasty trust or a trust irrevocable trust that owns the assets. So it never. Ever does a step up. Yeah, it’s, that’s a tough one because yeah, because no matter what if I put it into trust, the basis is the basis I’m done.

So when they there’s really not much of a strategy on the step-up you can do, what’s called a deferred sales trust on substantial assets, or you’re spread it out over time and you allow a installment sale essentially. and then step up the basis and you sell it and avoid the tax immediately, but you spread it out over, let’s say 20 or 30 years.

So there’s still some strategies that you can do to lessen it. realistically, under those circumstances, it’s just, you’re sitting down going option a, B, C at the time. I’ve seen people make changes where they were scared to death. So I’ll give you a good example. I had a client, it was siblings.

So there was five siblings and the dad had a office building and this particular office building was in Ohio, but it has substantial value. So they were worried about the estate tax. So he started giving away interest and that building wasn’t eliminated partnership. So this is back in the day when limited partnerships ruled the world and not LLCs.

And he would give his kids these interest. So he transferred the entire building to his children before he passed. he’d own that building for going on 40 years, the basis was tiny. And then when he passed, it was in the year that they had unlimited, the unlimited, the state tax exclusion. So there wouldn’t have been an estate tax at all.

And he would’ve still been underneath the threshold. it was multimillion dollar building, but he’d given it all onto his kids. So his kids said, Hey, we’re going to sell it now. their basis was his basis, which was almost zero. So they got hit with this huge tax bill that would have been avoided, completely had he just done nothing.

And so I tend to look at attorneys that are, pushing people to do huge gifts. make big changes and I’d say, don’t do that. You don’t know what the future is going to be. You could make, you could really hurt yourself. And those kids that hurt them. They were like, there was a little bit of a dispute over whether they wanted to keep it and operate it, but it was like they didn’t have the depreciation.

So they actually had income coming in off this thing. And they were like, Oh my gosh, they had to do some fix up on it. There was some capital call issues. And so they decided they wanted to sell it. And instead of getting a dollar, they were getting, 60 cents. And, because it’s not cheap to sell a building, you’re paying the commission, you’re paying the real estate tax, the closing costs and all these things that eats away.

Plus you’re paying long-term capital gains on that thing. and you have a lot of recapture on the original building and in the improvements that they had done thereafter. it ended up really hurting and it was shocking to look at it. And, and I’m talking to the accountant who advised him the whole time.

And I could tell, he was like, Oh, that was what the dad wanted to do. And they overreacted to. Yes. Long changes, similar. you never know, right? Like a lot of this is the art form. You never know what’s going to happen. You got to play you to stand there and play goalie and you don’t know which way they’re going to kick it.

in this situation, it’s makes sense to procrastinate. And it reminds me of one of my biggest pet peeves is like my clients. They always want to file their taxes in April. what are you doing? Just wait until October. That’s when it’s really due. Sit back and wait, as long as you can.

I had a guy yell at me. He wanted one of us to file the S-corp in March and he goes, I’ve never been late. And I said, you’re not late. You’re entitled to an automatic extension. That’ll take us out to September. And he goes, I’ve never used that. I’ve never been late. And I kept saying, look, your tax payment is due on April 15th.

You had probably some quarterly taxes due, like as long as you pay in that. We’re not worried about penalties or interest, right? Their tax return itself has an initial due date of March 15th that you can automatically extend. You don’t have to ask for permission. You just say, I’m going to use my extension.

he forced us to do it. And then it goes close to September and he had made more than he realized. And he had a 401k and he had taken a really substantial salary. And I said, The sad part is we could make a pretty sizable contribution to your 401k for last year, but we can’t do that. Now. He goes, why can’t we do that now?

Because you’ve forced me, this idiot came in and told us to do this, from that point forward, we didn’t have to have that conversation anymore. Yeah. Fishy the eighth students that then thank you on it. Do that. There’s a few that sometimes you beat your head against the wall. The other one was, they’ll change K ones.

So you know, your syndicator, sometimes things change during the summer. You start finding out are their expenses and you’re going through your books and you’re sitting there and you’re like, you have a couple of choices. Like I can either fix the K one and give everybody a new K one. The problem is if they filed their taxes off the first K one that came out now they’re going to have to amend.

And so I always tell people like, wait till the last minute, so that your investments have a chance to make any changes. th the fun one was, the year that the, option reporting or the basis reporting, in brokerage houses came out and then they all use the same software and it was all incorrect.

So they sent out all these tax forms to their clients who ran out and filed their taxes. And then they corrected them about a month later after the tax deadline. And it’s you can either get audited or you can fix it. And now you’re gonna have to amend your return and you’re gonna pay to basically do your return again.

I always, I, we always try and get it out and March before the April the deadline, but I always feel like at least half the little. Probably less than half, still file it in April anyway, but there’s no reason. There’s no reason to file just, even if your return is done, just don’t file it.

Just file the extension, pay the taxes and you don’t have to worry about anything. And it gives them the opportunity to go back and revisit issues because you do have until the tax deadline. To make contribution, company contributions to retirement plans. So you never want to take that off the table.

You also have, you could be doing a cost segregation election all the way up until October 15th. So you don’t want to, that one, we could actually go back and amend, but why, like, why would you put yourself in a situation where you’re paying twice for something when you could just wait and do it once?

So going back to the whole, simple basis might be going away. And this is a bigger strategy that I’ve always said, it’s like, why would you want to own your own properties? That issue, especially if you’re not a professional operator, be a passive investor, split your net stake up into 50, a hundred thousand dollars increments and just bankroll a big Bon of passive losses and gains, never have to worry about any of these types of things one way or the other.

Yeah. th there’s something that you can do no matter what they do, because you still have exempt entities and exempt entities are like your 401k, your IRA, your Roth, IRA, Roth, 401k, but also five Oh one C3. And, Len you’ve known me enough that this comes up quite often with anybody who has substantial wealth.

That five Oh one C3 is your best friend because it gets it out of your estate when you get a tax deduction. Now. So worst case scenario, let’s just say that by, in the Senate and the house conspired to take away 10 30, one exchanges and the step-up in basis, they, increased capital gains rates.

They, they create a 39.6% top tax bracket that your dividends and capital gains can be taxed at. If you make over a million bucks, itemized deductions already gone, but w they were talking about bringing it in, but having a it’s basically, it’s only for people making less than 400,000, they have a kind of a funky calculation.

If you make over 400,000 where it goes away, I can still give things away. I can still take a charitable deduction for it, even if it’s a capital asset. And I can write a lot of that stuff off at my fair market value. Once it’s in a five Oh one C3, I’m not worried about step up or estate tax or anything again, because it’s not mine and my heirs still have access to it.

So those types of strategies will become even more important. which just means. There’s only so much stuff I need to own personally and have access to personally. Sometimes it’s better to get it into a vehicle where we never have to have these conversations ever again, the vehicle doesn’t pay tax.

And I love those because the only conversation I have with people then is how much do you want your kids to be able to take out of the business? And we know it has to be a reasonable amount, so nobody’s going to be buying Lamborghini’s off of your estate. nobody’s going to be able to go in there and just rape and pillage your estate.

The best scenario is they’re operating something that’s in your, that you created, and they’re able to take a salary for the rest of their lives. And then that can go to the next generation. So what Sylvia is talking about is creating a nonprofit. Creating that estate and being able to, what if the guy wants maybe not elaborate beanie, but he wants to take a $200,000 salary for his kids buy a Camry in the process, does that now you have to pay taxes on that.

Yeah. They pay taxes. It comes out. and I’m not talking about private foundations either here guys. there’s a lot of things that qualify as real estate, excuse me, as a charitable activity in real estate. Veterans housing, low income housing, HUD housing, moderate income, housing, housing for, you fill in the blank.

If it’s a disadvantaged group, single moms, we’ve seen it all residential assisted living. you can own a substantial amount of real estate, or if you’re actually operating a charity, doing something else it’s allowed to own passive real estate. So like the California teachers’ union owns a ton of like lots of buildings.

That’s their problem. Like they have a lot of investments and things, but what is it? Therefore, it is a retirement plan for teachers. It’s an exempt organization. So there’s lots of those. And there’s a misnomer that somehow that money is never for your benefit. Now you can take a salary, you just can’t take the profit out.

there’s a, it’s called private a newer minute. Can’t go to the benefit of any private individual, the profits. So I can’t just take it. What I can do is continue to operate it for what I set it up for. And it can, it’s going to grow and it’s going to grow extensively. And then you pay people, a reasonable salary is very subjective, depending on how much you want to do.

Yeah. Then they pay taxes. They take that out. But if they don’t need the money, which is what I see, I’ll tell you, because we’ve done over 4,000 of these it’s a one-way road. People tend to put money into the charities. They take very little out. and most of the kids that I’ve seen as we transition, because I’ve been doing this, over two decades, you start seeing a situation where the kids actually get behind it, and then they’re using it to lower their tax brackets as well.

I haven’t seen it where people are taking ridiculous amounts of money or trying to get access to money because they’re investing through that vehicle. And I like it because all of these conversations become moot. As I say, how much tax am I going to be paying none. You want to give it a house?

You’re going to write off the value of the house against your gesture, gross income. What? I’ve owned this house for 20 years and I only paid a hundred thousand for it. Now it’s worth half a million. Yeah. You get to write off the half a million. There’s an adjusted gross income limit of 30%. So maybe you’re gonna write it off over three or four years, but you’re still going to get a pretty sizable deduction.

People have a hard time getting their head around that. And then that asset is in there and it never pays tax. You don’t have to worry about who dies or any of that stuff. I just find it for again, for the affluent people that have a lot of money, that is something that they definitely should be looking at.

when you’re in real estate, like the type of real estate you do lane, the tax benefits are so ridiculously good right now. You don’t need to. But after you’ve, after you used a lot of the tax benefits for you, if they take them away, then you still have an alternative without doing anything crazy.

Is Now a Good Time to Invest?

https://youtu.be/xOXUo3KoZ4c

I am curious on your positions now, given the uncertainty of future economic conditions, I am feeling like, know when to hold them is a smart idea for a few months. What are your thoughts? So I used to think this back in 2012 and then 2015. And then 2016 and then 2018 and 19 as I was buying properties that cashflow, as we said on the last slide, you only buy properties that are positive cashflow and can pay professionals to run it for you.

If you don’t have enough money for vacancy repairs, cap, ex professional property managers and the occasional oops. You should have bought the property. You’re not cashflow positive in the true sense of the word, just because you’re renting a property out for $2,000 and your mortgage is 1500. Doesn’t mean you’re cash flowing 500 bucks.

That is absolutely wrong. In fact, in that kind of situation, probably negative cashflow when you’re accounting for real repairs, expenses, maintenance cap, ex vacancy, and property management. So if the way I see it, like most people don’t invest like this, right? They don’t invest for cashflow, which don’t found this me.

But when you’re investing for cashflow, I don’t see any reason why the economy is going up and down. I mean, you’re just kind of dollar cost averaging. You’re just picking up more and more assets that make money on a monthly basis. Most cashflow investors are pretty immune to the economy and after going through a pandemic and seeing my collections.

Pretty much across 3,500 units stay above 90% where breakeven point is in the low fifties and sixties. I mean, I’m pretty confident that this workforce housing investing for cashflow is the way to do it a lot better than investing in something silly, like Airbnb short-term rentals or something like commercial storefronts, where the restaurants go out of business.

I think we’ve seen the strength of workforce housing. People need a place to live.