Leveraging your taxes and real estate investments in smart ways can have huge benefits and result in fiscal autonomy on a whole new level! Joining us for MFM Live is Larry Pendleton Jr. He is a real estate investor and CPA with a passion for adding value to fellow Investors through tax consulting and accounting services. His mission is to help as many people achieve this independence through real estate investing and tax planning. Come and ask him for his expertise in the tax realm that will benefit you.
Co-piloting this journey will be Keisha L. Rondeno
Keisha L. Rondeno is a Real Estate CPA, Certified Tax Coach (CTC), and Wealth Strategist. She is the Managing Principal at Keisha L. Rondeno, CPA, PLLC firm. Being a Real Estate Investor herself, Keisha has a passion and personal interest in educating Real Estate Investors about finances and taxes. Her goal is to empower them with financial literacy, and tax guidance so they can set themselves up for financial success and build wealth while keeping more of the money they make.
VIDEO TRANSCRIPTION
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and we are recording we are multifamilymasters.com my name is garrison gilbert my two business
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partners mr palchi mr ferris musa is ferris on here yes i am hey what’s up
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ferris much what’s going on everybody the three of us own long story short a
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lot of apartments a lot of real estate we got a lot of experience probably
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30 years or so combined i’ve been doing this business full time since i was 21
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years old i’ve never had a w-2 job straight out of college couldn’t find a job started hustling real estate best thing
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that ever happened to me in my life even though it happened to be the worst thing back then when i was looking for this six-figure salary that i couldn’t get
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ah my name is garrison gilbert feel free to go ahead mr palchi and then let faris go
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ahead and take it into the uh intro okay sounds good sounds good so my name
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is powell chi i live in los angeles um been an investor uh my first i guess
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my my first uh apartment building was back in 2017 i bought my own and although i live in los
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angeles i bought it in indianapolis and that was one of the things that like i wanted to find other people that were
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buying apartment buildings but also buying apartment buildings in areas that they weren’t necessarily living in
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and so that all said that created um that was sort of the genesis of this group and then the group grew significantly from
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since then and we’ve um you know over that over time i’ve uh
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i’ve been involved in i would say i’m a gp on five different syndications i have seven
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different apartment buildings um and when covet came around i started to add
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a different asset class to my to my mix here and so i added self storage to it
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and recently i’ve i’ve been able to close on eight self storage properties so far so i just
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closed my last one last week and um hoping to get some more so i have a lot of big goals in terms of what i’m trying
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to acquire and um yeah and so i’m excited to hopefully share some of that you know knowledge
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and experience and hopefully shorten your path to to achieve your goals and happy to do so so i’ll pass it on to
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my business partner uh ferris musa all right thanks everybody hello everybody i’m ferris musso managing
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partner disrupt equity uh disrupt equity as a whole we basically buy and sell uh apartments throughout really the sun
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belt now we’ve kind of been diversifying so today we’ve done probably over 3000 units we have a lot in the pipeline
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right now that we’re working on and you know our main markets are atlanta houston san antonio austin and dallas uh
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we are vertically integrated over a management company and so i can talk to you guys about raising money about management about operations about asset
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management anything and everything but like powell and garrison said you know the it’s multi-family master as a whole
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is really about getting people together right i met my partner ben at a beat up that we still run to this date
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five years ago whenever i met him right four five years ago and so networking works right multifamily is absolutely a
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team sport and that’s really what it’s about so if you’re new here you know definitely get uncomfortable right talk to somebody learn what they’re doing
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tell them what you’re trying to do and that’s how opportunities happen so with that said you know getting on
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webinars like this is definitely a huge part of getting educated so thank you all for hopping on
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and anyone on this call real quick if you would like to share this amongst your friends on facebook i’d be more
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than happy uh and it is in the multi-family masters facebook group with that being said with tonight we have mr
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larry pendleton and one of his good friends and partners miss kisha radino i’m hoping i pronounce
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that kind of close uh if i butchered it i apologize but keisha feel free to go ahead introduce
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yourself first ladies first and then we’ll let larry good afternoon i guess i should say good
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evening everyone my name is tisha rondino and garrison you did it perfectly so thank you
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my name is keisha mondino i am a real estate cpa i am also an investor myself
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i have been investing for the past 14 years i’ve had properties in louisiana and in texas primarily focused on
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single-family um properties single-family rentals and so i i also
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work a lot with investors obviously being a real estate cpa help them as far as tax planning helping them generate
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additional wealth but also helping them keep more of the money that they make you know we’re always making money as
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investors and so we don’t want all of it to go to uncle sam so my goal is to always help you keep more of what you
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make while also being strategic and increasing the investments that you do um
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that you are involved in
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thank you keisha go ahead mr larry appreciate garrison appreciate you pal
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ferris always good to see y’all well some familiar faces up here um but good
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to see everybody uh larry pendleton uh senior partner of pc financial services
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uh where our mission is to help people reach financial freedom through real estate and taxes uh similar to keisha
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i’m also an investor as well um a little not as long as she has but i
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have a few free deals mainly in virginia georgia
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and then i mean i think a lot of people are in the south um in the build right now so it’s not
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surprising that affairs of his team is down there as well uh but been partnering with garrison on
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a few deals um also been like looking at partnering with uh affairs on deals as well or
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trying to buy deals from them so but uh i appreciate the opportunity to add value where i can um as garrison
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mentioned in in the emails like like we’re here me and keisha are here and my two-year-old is here to help
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answer any questions why i have us up here and um looking forward to get rolling
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so with that being said if anyone does have any questions as we go through uh tonight’s talk feel free to drop those
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in the comments below and we’re gonna go through those in order um so go ahead uh
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ferris let’s go ahead and start the show man feel free to uh take it over
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hey i think uh powell i think your running point right sure sure so um
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you know what uh today’s today’s uh topic is really kind of just q a right q a with uh with everybody so i hope
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you’re writing down questions because we have some questions that were submitted earlier and we uh we’re we’re going to
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run through some of those questions but then after that it’s kind of like free-for-all and this is your time where hey
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i don’t know if you’re paying larry or keshia on the side but so far i don’t think they they’re charging you guys for
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any uh dollar per hour here so it’s your time to you know ask a question obviously you know
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they’re not necessarily your cpa so you would have to contact your own expert your own person uh that
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you’re gonna get advice from right so you’re just kind of talking about general knowledge here we’re not giving your specific um your
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specific case or anything so keep that in mind but really we’re here to
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open up this opportunity for you okay so and with that being said larry and keisha do you guys want to go ahead and
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put your contact information in the in the comments below so that way if anyone does want to hire you guys for uh uh cpa
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services or they want to hop on a confirmation call feel free to drop that below
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yeah and maybe just to kind of hash out people this is the chance you get to ask some free questions without having to pay trust me and i use this all the time
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even as a host i still use it as an opportunity to to help you know get get things figured out right
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as they will tell you everybody’s situation is a little different and so why not be the person to ask the
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questions about your situation specifically so they can answer the hard questions sure absolutely absolutely i got a couple questions off of off of
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uh social media here to begin with this one is directed towards larry
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what is the biggest benefit in regards to being hold on here what’s the biggest benefit in regards to
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being considered a real estate professional versus a w-2 employee the main the main thing with that is
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is that one there there’s certain there’s there’s two different ways how the irs is taxing
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income one being that are you making income via non-passive activities or passive
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activities non-passive activity is your w-2 you may be running a business
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so forth and so forth but real estate is considered per se passive
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um from the standpoint there so pursue so to be able to be a real estate professional you’re not limited to the
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the tax deductions that come with uh running a passive a passive business such as depreciation um if you if you
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are a w to employee you’re unable to um to really maximize if you did get a cost
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irrigation and get a bunch of losses from your from your rental properties you’re gonna depending on where your income is you will be capped on how much
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you can write off from that standpoint there so i know keisha probably has many clients who
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both both spouts are w2 they got a handful of rental properties or they got a whole bunch of losses from
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a syndication and they’re not able to use them um for that particular year because they’re not real estate
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professionals so it’s not about being a um like asian or broker just
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showing that you’re materially participating with the property as well and then be able to write off your
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losses against non uh get your passive income perfect so keisha i’ll let you answer
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the kind of the second part of that keisha what do i got to do if i want to become a real estate professional
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what do i got how do i qualify
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sorry about that so the irs does have guidelines on what qualifies you as a
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real estate professional you have to materially participate within the your
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real estate investment so of course if you have brittle properties that is considered to be passive income however
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you may not be materially participating in it in addition if you have w-2 just as larry said previously if you have w-2
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income you will be limited you will you you may not necessarily be considered a real estate
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professional because that is active income it is through w-2 but if most of your operations are in the real estate
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industry so you can even group them together if you are a real estate broker or you are a real estate agent and you
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also have rental properties and you also flip properties and you also may be a wholesaler you can group all of those
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real estate activities together to show that you materially but materially participate as a real estate
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professional in order to show that this is what you are doing and you are
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working an additional 750 hours of work at real estate a lot
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of times it is it is very difficult to show that you are working in real estate
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in any capacity as materially participating if you have a w-2 position if you work and not if you have a wc
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position and you’re only working a couple hours a week but if you are a full-time 40-hour a week w-2 employee it
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is difficult to show that you are also a bona fide real estate professional that is working
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let’s say roughly 750 hours in real estate across the board
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so if i can prove to you if i have a w-2 job i’m a doctor i do whatever i work 40 hours a week
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if i can prove to you that i work 750 hours a year that qualifies me as a real estate professional that would not be
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the only reason that is one of the ways so if you have it documented so you do have to show records and documentation
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that this is what you do but that is one of the ways that you can show that you are a real estate professional so
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overall you have to show that you materially participate over any other w-2 job that you do have and the and
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they add on to that the this is not the 750 hours that trip people’s up is that it’s the more than half your work time
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so they so you can you can 750 hours what’s that 16 hours a month something like that
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but if the average person who’s working 40 hours a week and that’s roughly 2018 hours a year and you’re
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going to turn around and tell the irs that you work 2019 hours in real estate
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guys having to sleep and you may have a family or you or vacation
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weekends it’s it’s tough it’s tough to prove that at that point um which is why
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i mean and i’m experiencing now where i’m having couples uh trying to decide whether or
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not if both should be working if they once just should be fully committed like quit their job commit to
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real estate so now they have their losses all said and they’re also the w-2 and somehow like make up for that for that
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loss of loss of income gotcha totally makes sense yeah can i
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since there’s a couple questions on this uh this topic of real estate professional i figure i’ll just um add
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to them here so if you are going to if you’re considering quitting your job it’s right
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your w-2 you say your w you have a w-2 and it is nothing to do with real estate
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and you’re considering quitting um then if you need to meet that fit over 50
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say hours you’re probably going to need to quit by july 1st
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would that was that am i assuming that right or is that not correct that’s a good estimate i mean also keep
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in mind that you have to be tracking your hours all year long um so if you’re
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tracking what you’re doing with your real estate and then at some particular point you drop off
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on the uh on the w-2 side you could possibly get into august september i
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mean once you’re in fourth quarter it’s gonna be even tougher at that point um and i know for a lot of people where
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it’s like it’s like people don’t think the real estate is passive and
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uh but like for from from first-hand experience like there’s nothing passive about this um at all so but yeah so like
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if you just talking about july if you quit me year and you continue on with the with the real estate stuff then yeah
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you have opportunity there to to have a full-time job part of the year all right yes earlier okay all right
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in essence you could um i guess you’re saying probably be
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non-recommended to try to do that in the fourth quarter right to say like hey it’s november and i’m going to try to
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quit my job and say that i’ve worked more hour i don’t know more more in real
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estate and then uh then in my w-2 it would be kind of like
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i don’t know maybe not recommended to do that it would be in my opinion it would be
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difficult to show not impossible i mean nothing’s ever impossible but it will be difficult the earlier that you can quit
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that job and go full time into real estate the absolute better the fourth quarter would absolutely in my opinion
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be pushing it what would you say larry yeah i think i think you’re still pushing it because you’re probably still at what
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hundred hours that you put into your job um like i said that’s that’s that’s a lot
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of time that you’re in unless your records are tight like airtight um with the with the irs because
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and i’m not sure i’m i’m pretty sure it teaches the same way but i i prepare my tax returns as if they’re going to be
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audited because we’re doing stuff that the average person isn’t doing and irs isn’t
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used to seeing that so a lot of a lot of people are taking advantage of this because how easily you can just dump hours into real estate stuff you have to
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make sure that the right hours are in place as well so um that that’s
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that’s that’s how i kind of view it from that standpoint okay maybe could could you
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either of you uh expand on like what type of activities would be considered part of the hours uh
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that would be kind of you know does going to networking events count does reading
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uh forums count does uh you know creating my bookkeeping you
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know what is it go ahead so it’s a combination um it’s a combination of activity and so
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they have to show that you are and again we say materially participate but what is that i guess that’s relative
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to the work that is being done so as you if you have a brutal property just merely saying that you are managing it
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is still considered to be passive so it’s more of the if you are looking for
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if you’re advertising and looking for um a tenant for it if you are researching background if you’re doing
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credit checks so as you are actively working within that real estate area
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that’s what it’s going to take now i’m i am not completely with necessarily okay reading and the education part of it now
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taking classes physically going and taking classes and showing that hey i am
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i’m studying for my brokerage license i’m already an agent and i’m taking classes for my brokerage license
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something of that you can absolutely show that you engage in this activity you can show that you put in a number of
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hours for participating in that activity um as far as the on your own type of
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research in your own your own type of of education um i would say that’s a little bit
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harder to prove but things such as if you are a wholesaler and you are driving for dollars you can justify that through
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mileage and showing different reports where you are actively working in that capacity
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so what would you say like how do you show if you’re not if you’re not actively working it how would you be able to show that with the
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irs because you have a point you have the and that’s all good stuff that you
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brought up because you have the the real estate professional status hours which are just in general in a real property
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trade or business and then you have material participation related to your own properties that that you own
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so the driving for dollars definitely helps for real estate professional staff but if you’re not owning those deals
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that you’re closing on is not really going to be helpful for material participation uh hours
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there and there’s multiple ways to prove material participation with the so the type of activities as you mentioned the
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details of property management um being like being an agent
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being a contractor uh a gco on many deals as well so
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you’re you’re able to kind of mix in multiple multiple stuff there but but then just doing acquisitions
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that becomes a bit of a gray area if you’re not closing on deals now i can’t obviously
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power you garrison ferris don’t really have that issue so we know that you can actually take the
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time from the what you’re doing with the property on the front end and then make that into how you’re closing the property on the
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back end as well but if you’re just going on whatever website
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to just look at properties and not really doing anything those hours are not really going to be seen or not going
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to be strong enough to really hold up in tax court uh kind of same thing as uh keisha brought up about the brokerage
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training if you’re going to a specific training to better yourself in that field that’s going to help you with
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your properties then yes if you’re just going to a random networking event or just a just a meet up then is is it
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really adding any value to your portfolio that you currently have and most likely not other than just the
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possibility of adding more properties because anyone can just go to a networking event that doesn’t mean they’re a real estate professional
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i think that’s good that’s good examples of what could be considered uh in both of those buckets
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uh material participating as well as let’s say professional hours and also things that
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probably on the probably not so recommended side so um and for all of you that’s that’s something you should
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definitely discuss with people like kesha or larry um or your cpa so
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um on on the flip side of this real estate professional side um i just see a
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question that came through that i think was a good question right now say if you’re not a real estate professional
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and you’re a w-2 employee but you do have you know one two maybe five uh
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rentals that you that you uh that’s renting out and you’re managing those what type of tax benefit
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would you be able to get as a person that has a w-2 and
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is not considered a real estate professional and but still has real estate or is
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involved in some specifications and it’s getting some depreciation what type of tax benefit is uh available for somebody
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like that so do you mind if i take this one larry yep yeah sure
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so if so ultimately if you have a w-2 and you also are involved in real estate investing as far as having rental
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properties the losses that you take of the benefit of the losses is really going to depend
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on what your agi is because at some point there is there’s considered a phase-out on what you can take in losses
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and so if you’re if you’re in a w-2 position that you are generating and a
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high salary with chances are those losses are going to be disallowed for that particular year but they will be
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carried over to the next year because your rental property losses are considered to be passive and they cannot
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be directly offset against your active w-2 income if you are over a certain
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salary if your ag if your agi is over a certain amount then you would not be allowed to take those losses but they
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will carry over to the following year you can only be dumped on passive losses
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against passive income not against the active income so you know to answer the original question
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it really depends on what your agi is if your agi is less than what the threshold
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is then you will be able to take that loss up to a certain amount and if you
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are over that threshold it will be phased out and carried over to the following year
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okay great anything to add there larry yeah so to add on to that is that you
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still the the benefit with rental real estate as a whole that is still tax advantage
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um even if you can’t claim the losses against your w-2 income because you can claim depreciation and
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all the other losses so that more likely than not you’re um you’re not paying tax
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on on a little to none of the uh of the netting of the net income that you’re
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making from your property as well um also keep in mind that because it’s passive is not subject to
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self-employment taxes so for those people who are still running like have a w-2 and a side business they gotta deal
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with fica taxes on the back end where if you have your w-2 and a rental you
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don’t have to worry about that even if you’re showing income uh from there so though and then also the the
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potential losses that kesha mentioned if you say if your income is below a certain threshold and being able to
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maximize from there okay all right so that that’s good to know and that’s
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good that’s good information um so it depends on your agi which is your uh adjusted gross income is that right you
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should whatever say agi okay so depends on your adjusted gross income um depending on how much or
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of the um how much of the losses you’d be able to
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to take long story short it’s very beneficial to try to qualify as that real estate professional right larry
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right keisha yeah if you as soon as you can get to that i mean the you we don’t have to worry about caps
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and phase out and limitations over there so if you can get to that as soon as possible if you’re married if your spouse can get to that point
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and then great right
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but just to reiterate on what he said he’s absolutely i mean say a good point there as far as
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even though you are unable to maybe recognize the loss in that particular year you are still getting the benefit
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with the depreciation and the offsetting against the income that you are getting with the property so thank you for
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bringing that that point up larry because that is a very important part yeah and maybe you can expand on this
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larry because you just touched on this if your spouse is a real estate professional or if you’re a real estate professional your
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spouse is the w-2 employee what is that what’s that situation like what is
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how does that work yeah good point so i’m gonna revert back because i know we
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kind of floated both ways so we have real estate professional status as as a whole with the real estate uh trader
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business real property trader business you got mature participation related to your property now only one of you need
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to be or have to be real to professional status so once one of you qualifies the whole tax
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return is considered a real estate professional tax return from there but only your only your hours can fit into that
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that bucket your spouse can’t contribute to that bucket now we’re talking about material participation
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both spouses can contribute into that bucket there it’s not just a one individual so
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you may have one spouse who’s who has a w-2 and then can only support by doing
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some of the labor or uh maybe some even um looking researching for tenants and then that
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goes into mature participation but it cannot go into uh real estate professional status um
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any anything added dedication no i think yeah i mean i think you touched on it perfectly
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i mean only one of you really needs to be considered a real estate professional at that point once one of you do the
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whole return is considered to be real estate professionally and so in that case the person who’s a
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real estate professional if they have losses that they’re showing on uh from their real estate
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professional activities those losses could
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somewhat uh you’d be used to offset the w-2 income or is that true or not
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yes yes so if they qualify real estate professional status and they have losses from their own rental properties and
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they qualify for military participation um then the losses then can now offset there’s no cap on
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the losses and if there’s some left over then it’s going to offset the w2 and the reason why i bring up the material
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participation part because and keisha probably in the same boat where i have a lot of clients who are
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real estate professionals because they’re real estate agents and but they do not have any properties or they they do not
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participate or actively involved with their own rental property so they can’t use those losses offset their
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their their commissions or their w-2 because they’re not actively involved or can prove material to the patient with
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their property they’re just serving other people as the agent or broker so you have to be kind of somewhat
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cognizant of that as well of how involved are you with your own property
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perfect you want to go down with another question here pal sure sure um sorry i was i was uh
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looking at the other list that i had from before but let me um here’s a good one uh from a good friend of mine west
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french larry or keisha what would your elevator pitch be to a high net wealth individual
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like a doctor on why they should invest in real estate as an lp specifically for the tax
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reasons is there something that would grab their attention what’s your elevator pitch larry
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all my liver pitch is always do you want to make income that’s least likely to be taxed
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that’s good keisha what’s yours that’s a very good elevator pitcher
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i would i would come through direction i would come to the direction of diversifying their investments because i
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assume that um and i know many physicians they are involved in a lot of
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activity when it comes to investing until my pitch should be more from the diversifying and it’s tax different and
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you can have greater benefit than the investments that you’re already investing in considering that it’s not
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already real estate if i’m a high net wealth doctor i make 500 600 grand a year
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um i’m looking to take advantage of real estate tax advantages what’s your what’s
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your what’s your three biggest advantages that you’re going to sell me on the main thing is
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it’s really not three hours it’s hover on the aspect of whoever your operator is or syndicate
29:03
they’re going to most likely even after the phase the the sunset of the of the
29:08
100 bonus depreciation that they’re still going to be able to make money on this the k-1 that’s most
29:15
likely going to break even or show a loss so even though they may not be able to take advantage of the losses on their
29:21
personal tax return those losses as kiechen mentioned before are suspended and rolled forward in
29:26
future years so that when the property does go full cycle they now have those losses built up to
29:33
help offset some of the gains on the back end so they’re able to make money least likely to be taxed along the way
29:40
and then have these losses that they weren’t able to use sitting in their back pocket to now all
29:45
set in the property three five year turn um to help offset those capital gains
29:54
perfect and i would piggyback off of what larry just said so you know when you’re dealing with real estate real estate is always going to appreciate
30:01
what a perfect world or theoretically real estate does appreciate so getting involved with
30:07
that early and as you hold on to it it will absolutely benefit you it may not immediately benefit you especially with
30:14
the income that a physician may make but to have that carry over for future years
30:19
would definitely be a benefit for them down the line good answer
30:25
i had i had two questions that kind of came up as well as in inside of the chat that you just touched upon was larry and
30:31
keisha um there’s two different topics here so one is the uh bonus depreciation that is supposed
30:38
to phase out starting next year right now bonus appreciation is 100
30:44
um and it’s supposed to face to 80 percent and then 60 the following year and 40 down to 20 and then zero
30:51
so could you tell us any updates as far as have you heard anything if that was
30:57
going to uh be extended or anything about bonus appreciation
31:03
updates or anything i am um in all honesty i have not i do
31:12
know when i say usually uh most of the time towards the end of the year is when we
31:17
get the final updates of what’s going to take place starting for the next year so we should have more definite answers or
31:24
something that’s more defined usually about the october or november time frame but a lot of times
31:30
it’s being proposed so when we hear of this this may possibly take place or there may be a change in 1031 exchanges
31:38
and um time frames a lot of that is more proposition and has not been put in you
31:43
know have not been put into tax law yet um so i have not heard anything as of
31:48
yet but i’m really sure we should be getting some guidance as the year progresses and as we get closer to the
31:54
new tax year what about you larry have you heard anything or any updates on it
31:59
i haven’t heard anything but i was i would suspect more of hearing something more concrete more likely um towards the
32:07
end of 2024 because we’ll be in the 60 phase out range at that point and then they’ll probably
32:14
be huger like more lobbyist push um for to get something in place before
32:20
it dips below um below 60 or below 50 from from that standpoint there so um
32:29
teachers write like most of the time this stuff comes out later in the year i’ll just double down and say i’ll i’m
32:34
probably expecting to hear something more of like hey they’re going to reform this um
32:40
uh in 2024 2025. all right good good good information
32:48
and another um topic that you you brought up a little bit here was
32:53
was on capital gains so if somebody sells a property and they
32:59
incur some uh capital gains so they sell the property they’ve made some money on the property um
33:05
if in that same year they invest that’s that
33:12
profit into something another property and they’re able to
33:17
maybe take bonus appreciation say it’s a syndication they take bonus depreciation in that same year
33:23
are they able to offset the capital gains that they had on that sale
33:28
and in the same year go into say another property an investment and take the depreciation and offset those capital
33:35
gains to an extent yes because the best way to think about it or how i like to describe it is you’re basically
33:42
creating your own 1031 um instead of having that 180-day window to work with if you sold a property a
33:49
rental property that’s been held for at least a year let’s just say first quarter and so and
33:55
then you with this market it’s tough to find almost of anything and you’ll be able to
34:01
buy something in the third quarter so then you call set the call say you
34:06
get the depreciation built up that that first rental property that was sold is was still considered passive so those
34:12
gains are still even though they’re they’ll be reflected as active they’ll still be offsetted by the passive losses
34:19
uh from the uh from the new property that was sold
34:25
okay um from your perspective uh have you seen a lot of people kind of basically creating
34:30
their own 1031s with the especially 100 bones appreciation strategy so i have so i have seen a
34:37
couple of those i’ve also seen others that have just went through the 1031 exchange because it has allowed them to
34:43
invest in go from maybe a single family to a multi-family so it has allowed them to actually move
34:49
into a different type of um property that they are investing in but yes i have seen i guess the backdoor type of
34:58
exchange okay all right that’s good to know um so if any of you
35:05
thinking about selling something big right now that was a good time to sell something but you also got to get into something uh or or i guess you’re gonna
35:11
incur the capital gains right um okay i got one more question for everybody
35:17
go for it first you know since you guys you know you guys see obviously a lot of different things what’s something that
35:24
you know that i guess most of most investors don’t know about that you guys feel like they should know about
35:31
what you got that’s a very loaded question by design by design yeah ferris is known
35:39
as ultimately obviously being yeah you know maybe all positional different right being in the position you guys are in you see a lot you hear a
35:47
lot you know a lot right and you know most people obviously don’t and so what’s something that from time and
35:54
time again you’re like man you know people don’t realize they could do x and that they should right
36:00
so one of the things we just kind of touched on was exchanges so i do see a
36:05
lot of 1031 exchanges um or those that believe that they have done a 1031
36:11
exchange oh i just sold the property and i received x capital gains on it and so
36:16
i just went bought another property sometime down the line and did nothing nothing with they just purchased it and just operated and in that case it’s not
36:24
considered it’s really a 1031 exchange so they really are not able to offset a
36:29
lot of the game that has taken place there so they haven’t really planned to to do anything differently in order to
36:35
offset it um not really understanding the proper way in order to do in
36:40
exchange to get the best tax benefit from it maybe not maybe not having identifying properties timely enough not
36:46
purchasing a property timely enough carrying over to the following year maybe solar property um in july and a
36:54
year in this they’re still holding on to the money they have not invested in anything else so that’s one of the big
36:59
things that i see um under uh many investors hear about exchanges but uh
37:04
they’re not really sure of the proper way to put into effect to get the best tax benefit from it because there are
37:10
several different type of exchanges but none of them are really used by um by many investors they’re just not sure how
37:16
to utilize any of them awesome one one thing i’m seeing at
37:22
first and this is is not is not sexy at all is is really more in the in the book
37:27
keeping when it comes to rehab um and repairs the second you said not sexy at all i
37:34
thought you were going to say bookkeeping hey hey this bookkeeping sexy people
37:39
just just still just but um but
37:45
i’m sorry go ahead what about saying i don’t know i’ll i’ll comment on it once you’re done with it so what so where i’m
37:51
getting at is that a lot of people just just take all the rehab calls and just kind of dumping into just one account
37:57
and don’t really have a breakout of what it is and the problem is if you give that
38:03
number to akisha or myself like we have to we have to capitalize and depreciate that over
38:09
27.5 years the appreciation is great when it comes to
38:15
appreciation stuff um actual repairs and repairs and maintenance because that’s cash out of
38:21
pocket like that year and you want to try to make up that as much as possible so if you’re able to kind of
38:28
break that stuff out into proper category tonight everything is capex you may have painting
38:33
wrapped into your your renovations um but painting is not a it’s not a capital
38:40
expenditure you can just go ahead and expense that especially if it’s over a certain dollar threshold you can qualify
38:45
for certain things like the minimum safe harbor for example um so having an actual detailed breakout of the repairs
38:52
that are done actually allows for more expenses on the front end instead of having to
38:58
depreciate stuff and an additional benefit of that is that if okay once the property is sold you
39:05
don’t have to now pay back depreciation on those items because they were expense in that year that you
39:10
took the expense so that’s something i see a lot because i mean you all are all investors you’re
39:16
hustlers you all are entrepreneurs is go go go go and stuff like that this kind
39:22
gets put on the back end um but but it is it’s worth the time um especially on
39:28
the front end to get that stuff broken out so that okay we can actually have these uh these write-offs uh in um
39:35
on the tax return good good i absolutely agree with you
39:40
that larry and just to piggyback off of that i um recently over the um i guess
39:45
about four months ago i actually got my first client that is being audited for repairs versus improvements and so the
39:53
irs actually have they have very specific guidelines when it comes to what is considered a repair and what is
39:58
considered an improvement and if they are not reported correctly their irs will question you on it and
40:05
you there may be additional taxes that may be paid if they’re not classified correctly so this particular new client
40:13
excuse me this new client that came to me if they’re being audited because the irs is questioning okay
40:19
repairs you reported this amount show us where these are repaired because they it was suspected that much of it was
40:25
improvements and at the end of the day some of them really were considered to be improvements and so they were not
40:32
properly reported the correct way so unfortunately there was you know there was some taxes that had to be paid on it
40:38
but it was one of the first times that i did see the irs actually question
40:43
repairs versus improvements for a real estate professional and they were real estate professionals so just
40:50
to kind of keep that in mind so that was a very good point that you brought up in addition to the bookkeeping also just
40:56
mentioning that repairs versus improvements were different in many ambassadors are not very aware of that
41:03
yep good point keisha you know something else to answer ferris’s question i got a lot of coaching students in this
41:10
business in this industry one of the biggest mistakes that i see young people make is save every damn
41:17
receipt for anything business related if you think it’s any way related to real estate
41:24
business coaching conferences trips anything of that sort save it save it
41:29
document it and with that being said keisha what app should i use to save all of my receipts instead of the big drawer
41:36
that i have just piled up with stuff you know what i have been advising clients to do for whatever receipts that
41:42
they are going to save you can create um you can create an email address um
41:48
keisha’s receipts at gmail.com something as simple as that so each time you get a receipt take a picture of it and you can
41:55
email it to this one website yes i’m sorry this one email address so it is another email that you do have to
42:02
monitor but in essence it keeps all of your receipts together just in case you
42:08
may need them if you know receipts especially if you keep a hard copy of them after a while they fade so even if
42:15
you do have them it may not even show the amount or the particular store it’s from it may not show all the information
42:21
that’s necessary so that’s one way creating a totally separate email address that is specific just for
42:27
receipts um and if depending on which software you use i
42:32
know quickbooks there is an application where you can just upload receipts for different transactions now is it
42:38
completely it goes into another question is it completely necessary to save every single receipt so that that’s that could
42:46
be a whole nother question there but but for the receipts that you do intend to save and that you do want to keep
42:52
that is a good way you can create an email address or upload to your accounting system
42:59
larry what do you recommend that a new real estate investor what kind of system would they set up an email like what do
43:04
you what do you suggest the email is solid um and then most of the accounting software
43:10
software’s quickbooks that’s the appfolio a lot of them are implementing
43:16
um their receipt aspect to it plus they have apps so you can you can use the
43:21
software that you’re tracking your property in as a means to also um have your uh have
43:27
your receipts in there as well good point and another thing i use keisha’s specific email or receipt email
43:34
for and i have a garrison dot receipt email as well um every subscription i sign up for all
43:40
those things that you forget about i use a specific email address for those because number one if i cancel it i want
43:46
to be able to easily access it but number two you get that recurring bill every month you forget about it at the end of the year you got an extra couple
43:52
thousand dollars in in expenses that you might have forgot about or not realized and your receipts are neatly organized
43:58
i like that idea that’s a very good idea as well so with that being said pal do we have
44:04
any other questions that you want to run through real quick before we open this up into or we break down into our
44:10
breakout sessions and uh get the networking aspect of the meetup going so we certainly did have a lot of
44:16
questions a lot of questions that people asked and so let’s try to uh we’ll ask these questions and if you
44:23
could just give like short answers i know some of them may not be a short answer kind of question
44:28
but um just give us as short as as you can and then we’ll try to hammer through as many as
44:33
as we can so one question came up uh from paula uh just kind of a question really more on self-directed iras and
44:41
although she has a specific case about self-directed iras versus say withdrawing all that capital and
44:47
taking the taking the 10 penalty just maybe quickly what are your thoughts on investing with self-directed ira or
44:54
withdrawing all that capital taking the 10 penalty and then and then investing outside of the self-directed ira why
45:01
don’t we start with you keisha now go to larry so if the self-directed ira i’m a fan of
45:07
self-directed iras and investing in real estate and i think it’s a great way to
45:12
build your portfolio to actually get involved in real estate and it helps
45:17
build your retirement so i think it’s a wonderful idea um i guess it depends on if you pull the money out what your
45:23
intention is if you’re gonna pull it out you will take um there will be a penalty depending on how old you are if you if
45:29
you’re not of age to where you can um you know take it out you’re not only going to be taxed on it but there’s also
45:35
going to be an additional 10 percent penalty on it so the question would be what else would you want to invest in do
45:42
you want to use it for a different source or would it also be used for real estate as well too but overall real um
45:48
self-directed iras with investing in real estate is great for building your
45:53
retirement great for also investing and being able to have that property for
45:59
later when you get into the retirement age okay larry your opinion on self-directed
46:06
iras versus um just taking them withdrawing the money and taking the 10 penalty and investing
46:13
it just on its own i think the individual has to know like
46:19
what is their investment strategy are they investing for cash flow or are they investing to build a portfolio or just
46:25
building for wealth um you can kind of dabble in the boat but you have to understand if you’re going to do this self-directed like you’re not getting
46:31
any cash flow uh from the property though you’re through your um your portfolio
46:37
your retirement account is growing which is still great so it’s really going back to okay
46:43
what is your goal what is your purpose you need cash flow no pull the money out and the returns make sense to offset
46:49
that 10 you now know going into eyes wide open um if you’re not trying to deal with
46:55
that and just want to build your portfolio then just keep it in the in your self-directed area
47:02
okay um great we had another question for you from omar i think this question was about
47:08
um qualifying as an accredited uh investor uh on certain properties and i was like how can you verify that your uh
47:15
entity your llc is an accredited investor um and can that be done even if there are
47:22
two owners like a husband and wife but only one is a
47:28
you know is let’s see makes over two hundred thousand dollars in income i guess that’s a scenario
47:36
so if it’s if it’s an llc with multiple people everyone in that llc has to be
47:42
has to qualify for accredited investors so they have to be careful if they’re going to go in as a as a multi-member
47:48
llc the single member llc then the llc piece doesn’t matter because it’s disregarded it’s based on an individual
47:55
uh uh from that from that point okay and along those same lines um
48:02
maybe kisha you can answer this uh when investing in a multi-family syndication
48:07
um can i invest under my personal name or my llc and what are the main differences
48:14
um so if you invest with your llc if it’s a single member llc it is still going to be associated with your social
48:21
security number and so even though you have an ein for the llc it is always
48:26
reverted back to your social so it will be identified with you as a as an individual
48:32
and what was the second question the second part of the question um it was just just the main benefits of
48:38
either one llc versus personal um and so when you have an llc from a tax standpoint there is there’s really
48:46
no difference llc is mainly for asset protection so it’s basically for at
48:51
before um for protecting your assets you will have the same type of tax activity
48:57
whether you are a single member llc or whether you’re operating with your name because then again it is considered a
49:02
pass-through entity is disregarded and so it’s always going to be associated with your social so there is no
49:08
additional benefit with investing through your llc versus through as an individual in your social security
49:15
number okay great and if you want to read anything i was going to explain if you want to add anything to that
49:22
no it’s a common question i tell people the same thing like i i even got this
49:27
like no it has no benefits at all just get straight to the point because i
49:32
think people just use that as a means to kind of prohibit moving forward because they don’t have llc in place like it it does
49:39
is there’s no tax benefits or or consequences for investing out of
49:45
either one okay all right great uh we had a question here can you be retired with a
49:51
pension and still be a real estate professional
49:56
yes it’s because it’s really based it’s not a title is based on what are your activities so you may be retired with a
50:03
pension but you still um are actively in real estate
50:08
now you’re just completely not doing anything and if that’s the question then
50:13
they know because you’re not really involved with anything but you can be retired from the w-2 world and then
50:20
um still be uh still act be actively involved in real
50:25
actually estate you in a very good position because you don’t have a w-2 so it puts you in extremely good position
50:30
to show that you you do qualify for a real estate professional okay i guess frankly as a real estate
50:37
professional here’s a question um uh let’s see if this one uh it says if i
50:44
live in one state and i own a single-family house rental in another state um that lost money in 2021
50:54
am i required to submit a tax estate tax return for 2021 in the state that i own
50:59
the rental and so if you are operating if so
51:05
they’re operating a rental property in this in a state outside of where they live at yes
51:11
okay so they should be reporting that again it depends it depends on whether
51:16
it’s held at but they should be reporting that income for the state that that property is
51:23
is in that that the property is in okay the property’s in
51:29
all right got one uh let’s see a question from mike here as a real estate professional
51:35
with no w-2 can can i group my lp syndication
51:42
investments with my material participation investments
51:48
my cpa is saying it stays separate passive versus non-passive
51:53
should i find a new cpa um
52:00
i’m sorry you can you can go around it sounds like it sounds like about that the person like is is a real estate
52:06
professional have some rental properties but they’re also our lp lp and very much
52:13
and they’re wondering if they can group all their activities into one yes
52:18
that’s what i mean that’s what i’m reading as well yeah okay um then yeah so because
52:26
i’m not really sure what his cpa is referring to is active and not because all of it is real estate so all of it is
52:32
packed so you can group so even though most of their activities is with let’s just say
52:38
they’re whatever number of properties able to do what’s called 469-9 election
52:45
to group all of their all of their passive activities together and then they’re going to net they’re going next
52:50
on one another anyway okay yeah i’m not sure why it would be well i
52:57
was going to say i’m not sure why one would be considered passive versus non-passive yeah that’s what i’m i was
53:03
trying to find a question to see if i if i read it it would make a little bit different since but i’m not i don’t
53:08
understand it should all still be the same it should all still be non-passive
53:13
all right mike it might be uh it’s definitely missed this perception of
53:19
them being actively properly managing one deal and then they just got money in another deal
53:24
like i i guess i can see it from that perspective but if it’s all considered rental real estate
53:30
yeah yeah yeah that’s that’s what i’m getting at so i’m not
53:36
okay um great yeah sounds good i got i think one last
53:44
question before we head out to our breakout rooms i mean we’ve had a ton of questions we haven’t even touched like i think like 25 of them so before we get
53:50
to the last question keisha how do i how do i reach you where where give me your website your email your phone number
53:56
whatever you want to throw out yeah i can put it in the chat oh sorry about that no you can do that you can put it
54:01
in the chat but i want to know what i want to hear oh okay my website is a real estate tax a
54:08
cpa my email address is real estate tax cpa what dot com dot com i’m sorry real
54:15
estate tax cpa.com yes all right yes um my email address is keisha at kl rondino
54:23
cpa.com that’s great and i’m also going to put
54:28
in the chat up i’m also on social media um um instagram i am real estate cpa
54:36
perfect shoot all that in the comments below keisha before you larry what’s your info my man
54:42
yeah i’m happy uh if you got your phones out you can gladly scan this lovely qr
54:47
code there you go
54:52
my personal page there um i said my my email is info pcfsva.com
55:00
um you can also shoot me a text at um five three five eight five nine two
55:07
just give me give me a couple of days to respond blow his phone up he wakes up early he’s gonna reply say morning don’t
55:14
sweat it yeah make sure you uh put that info in there
55:20
too larry repeat it if you’ve already done it just repeat it put it put that info on there as well because people uh
55:25
should see you guys info yep last question and this is um
55:30
just on timing wise right a lot of people just say hey i talked to my cpa probably about march
55:37
and that’s it to file my taxes but in terms of being the most beneficial and what would you know what
55:44
type of schedule or what type of events would you say to somebody
55:49
if uh it would be a much more benefit for them if they reached out to you
55:54
at these particular times or are these particular events that happen as they’re you know buying and or
56:00
selling or anything involved with real estate i’m always going to say at least twice a year you should be consulting with your
56:06
tax advisor if you’re actively doing stuff if you need to meet more frequently then schedule that time
56:13
to to do so but if you’re just meeting with your person like a month or so right before
56:19
the deadline like there’s really isn’t much that’s going to be accomplished because
56:26
like even if it can be it’s going to take more time because now we gotta rustle through a whole bunch of old emails and
56:32
paperwork just to get that stuff in place um if you and as we discussed before we’re just kind of like the
56:38
backdoor 1031 uh strategy they’re like you have to really know okay here’s what you’re going to be your potential
56:44
capital gains are going to be for selling this property and here’s what this type of property that you need to need to buy to in order to get enough
56:51
enough losses to offset those gains from there so it should be at least twice a year you should be consulting
56:57
with your tax advisor you gotta make your event that’s coming up that came out of nowhere um just go ahead and try
57:04
to get on your calendar and um and and see where it goes from that so two times
57:10
what what periods of the year so you’re they’re not necessarily recommending coming to you at march because that’s
57:15
that’s pretty late so give me some rough times of the year just months that you would think that uh you would at
57:21
least you know always about about me a year so june july
57:27
being considered that your tax investment probably is just getting off of the
57:32
taxis in half from there and then i would say september
57:39
um october so like right before fourth quarter or early fourth quarter just
57:44
like hey let’s just take a look at the books let’s see where you went from there um just in case hey do we need to do some
57:50
type of like any additional purchases any type of uh exchanges from that standpoint before
57:57
the before the calendar hits because if you try to do it november december we’re talking about holidays
58:02
they’re not going to give you enough time so early early fourth quarter or if not if not late third quarter would be
58:08
probably the second time um if tougher personal experience okay okay i agree with larry on that um
58:17
no no one should be just meeting with their cpa or i guess just working with their cpa just for tax purposes if you
58:24
are just looking to get your tax returns filed you can guarantee that you’re going to be missing out on some benefits
58:30
on some strategies on tax savings um i always explain that tax savings does not
58:36
come at tax preparation time because at that time all everything has been done we can’t go back and create or do
58:42
something different later it just does not happen that way it has to be done at that time so if you’re looking for tax
58:49
savings or to get the most benefit from when your taxes are being prepared and submitted to the irs you want to meet
58:55
with your cpa prior to the prior to the end of the year so like larry say semi-annually is very good depending on
59:02
the activities you have and what strategies you may have in place you may you may want a quarterly conversation
59:10
either way whenever it’s determined what it is that you need there should not just be a once a year cup going to your
59:16
cpa saying i need for you to just prepare my tax filing because they have to understand what it is that you did
59:22
the previous year and it will just be reporting to the irs would take place
59:28
there would not be much tax savings that will be that will be able to be accomplished during that time
59:34
and um if i could just kind of really quickly i did right under my email i did see that
59:39
paula input something um she inputted a comment saying that um yes meeting with your bookkeeper if your books are not
59:46
clean at tax time as well too you can absolutely know that there’s going to be a delay in your tax filing because
59:52
during tax time that’s when most cpas are really preparing and filing taxes if
59:57
there’s bookkeeping that needs to be done with it there will probably most likely be a delay
1:00:03
okay great and so you guys both gave us a frequency of you know of timing wise
1:00:08
and it’s good you gave us some of the months are there any particular events that would warrant hey this is if you’re
1:00:14
gonna go through this event um buying selling a property or anything or
1:00:21
splitting up with partnership or something like that is are those type of events something that would also trigger a hey this is probably a time to have a
1:00:28
conversation if you’re considering doing the 1031 that’s definitely a time to have a
1:00:33
conversation because you may not even need it uh from from from that standpoint there
1:00:39
especially if just for the doctor example if you have a lot of passive losses built up you may
1:00:45
have enough losses to offset the gains from the property there so it’s a
1:00:51
situation like that okay you you want to sell this property the market’s high okay before you you pay for
1:00:58
a 1031 custodian let’s just see what what the uh what the losses are built up or looking like uh from there also
1:01:05
are you come like do you have a property in mind that you’re gonna have to buy because we have to didn’t have to calculate like how big of a purchase
1:01:12
because still you can do that as well but um you want to make sure you you have your reduction in order before
1:01:18
you even need to have to pay someone else to get involved with your books at that point
1:01:23
all right keisha anything for you as far as trigger events yes wanting to purchase more property
1:01:30
wanting to sell and sell a property that you have determining what your possible capital gains may be um before you do a
1:01:37
call segregation speak with your cpa to see if it’s even worth it at this particular time to get involved in
1:01:42
because with with cost segregation you have accelerated depreciation there and you may not need it i mean you may be in
1:01:48
a situation where it may not be necessary right now you may not get the best benefit for it so whenever you’re
1:01:54
making these major decisions you’re you’re partnering on a big deal what is that going to look like from you from a
1:01:59
tax standpoint anything that may affect your tax situation you may want to run it by your cpa to get their thoughts
1:02:05
before you actually engage in it because after the fact it’s not much that they can do for you
1:02:11
okay excellent well that’s it uh that’s it for the q and a i mean we could have went through
1:02:16
probably like uh three of these sessions and we’ve got so many questions so definitely want to thank you uh keisha
1:02:23
thank you very much for for joining and giving us all your information your advice uh larry thank you so much uh
1:02:30
it’s great to have you on here as well i think you guys both provided tremendous value for a lot of people and uh and certainly
1:02:37
people and we’re we’re happy that you’re here and and giving the advice to people so perfect
1:02:43
thank you for thank you for inviting me in and having me this thank you very much i do appreciate it thank you
1:02:49
much thanks to keisha and larry their contact information is in the comments below we are
1:02:56
multifamilymasters.com if you’re not a member of our facebook group multifamilymasters.com the facebook
1:03:02
group join it free content if you’re looking to learn share network and grow this business we have a mastermind feel
1:03:08
free to reach out to myself my email is gigi which stands for garrison gilbert gigi at multi-family
1:03:17
uh we do this once a month make sure you register for the next one we’re about to break out into breakout sessions for
1:03:24
about seven ten minutes or so share your contact information get to know the people in the group we’re going
1:03:31
to bring everybody back together i’m going to leave the channel open anyone who wants to hang out feel free i’m going to end the recording now
