Podcast Summary
Focus on adding value to the world in real estate: Instead of waiting for opportunities, improve skills and create value to succeed in real estate. Listen to experts share insights and learn from their experiences.
Instead of waiting for the world to provide your dream or solution, focus on bringing value to the world by getting good at something and continuing to improve. This episode of the BiggerPockets Podcast features real estate investors sharing their experiences and insights on various topics, including investing in different markets, saving on taxes, and using strategies to succeed in multiple markets. A young real estate agent named Cade asked insightful questions and shared wisdom beyond his years, inspiring the host and listeners. The episode also includes a quick tip to check out the podcast on YouTube for added connection and a special offer from Rent to Retirement for investing with no money down. Overall, the episode emphasizes the importance of taking action and continuously learning to achieve success in real estate.
Navigating Economic Uncertainty with Real Estate Investment Firms: Partnering with a trusted real estate investment firm offers valuable returns and stability, strong track record in economic downturns, and tax deferral strategies for significant savings.
Partnering with a trusted real estate investment firm, like BAM Capital, can provide valuable returns and stability in uncertain economic times. With a strong track record of navigating through economic downturns and delivering high IRRs, BAM Capital offers accredited investors opportunities for generational wealth building or monthly income through their targeted investments in institutional quality assets. Additionally, utilizing tax deferral strategies, such as 1031 exchanges, can help investors save significantly on taxes when selling properties. The BiggerPockets podcast format, which encourages listeners to ask questions and seek answers, provides valuable insights and solutions for investors at all stages. For example, a young investor was able to purchase their first house hack through the information they found on BiggerPockets. These strategies, combined with honest and informative resources, can help investors make informed decisions and achieve their real estate investment goals.
Maximizing Tax Benefits in High-Tax Real Estate Markets: Depreciation and business structures can help minimize taxes when investing in real estate, especially in high-tax areas. Consult a tax professional for proper implementation.
Taxes are an important consideration when investing in real estate, especially in markets with high property taxes like Connecticut. However, despite the taxes, owning a property can still be more financially beneficial than renting over time, especially when house hacking. A key strategy for minimizing taxes is understanding the concept of depreciation, which allows investors to deduct a portion of their property's value each year as it wears out. It's important to consult with a tax professional to ensure proper implementation and maximization of tax benefits. Additionally, building an LLC or other business structure can provide additional tax advantages. Remember, every situation is unique, so it's essential to do thorough research and planning to make informed decisions.
Understanding Depreciation for Real Estate Investors: Real Estate investors can write off the cost of assets over their usable life to reduce taxable income, but must follow government limits. Failing to take advantage of depreciation write-offs could lead to missed tax savings opportunities.
Depreciation in accounting is not about the decrease in a property's market value, but rather an acknowledgment of the wear and tear on assets over time. Businesses, including real estate investors, can write off the cost of assets, such as a dishwasher in a restaurant or a house, over their usable life to reduce taxable income. However, to prevent businesses from continually buying new assets and not paying taxes, the government limits the amount of depreciation that can be claimed each year. As a real estate investor, understanding the concept of depreciation and how it applies to your business can help minimize your tax liability. To find this information, consider consulting with a tax professional or doing thorough research on real estate investing and tax laws. One common mistake for new investors is failing to take advantage of depreciation write-offs, which could lead to missed opportunities for tax savings.
Maximizing tax savings through real estate professional status: Real estate pros can use depreciation from properties against income from related sources, reducing taxes. Cost segregation studies can boost depreciation, potentially sheltering all income if property value is high.
Becoming a full-time real estate professional according to tax code can significantly reduce taxes for those earning income from real estate and related activities. This strategy allows depreciation from real estate to be used against income from other real estate-related sources, including commissions and property management. Accelerated depreciation through cost segregation studies can further increase the amount of depreciation, potentially sheltering all income if the value of real estate is high enough. However, it's important to note that this strategy requires significant time and effort in buying, managing, and operating real estate. It's not a free way to avoid paying taxes, but rather a strategy for those already invested in real estate and looking to increase future wealth while potentially reducing their tax burden.
The Sacrifice of Starting a Business or Pursuing Financial Freedom: Build up passive income or find a trusted partner before leaving a stable job, careful planning and resilience are key to financial freedom
Starting a business or pursuing financial freedom comes with the sacrifice of security and stability. This idea was illustrated through the analogy of Batman's rope in "The Dark Knight Rises." While leaving the 9-to-5 world offers benefits like freedom, lower expenses, and potential passive income, it also means letting go of a guaranteed paycheck. The key is to build up passive income before making the leap, or to find a partner who complements your skills and can help you navigate the challenges. Finding the right person or resources can be a struggle, but it's essential for success. As one interviewee shared, they left their job as a cop to become a real estate salesperson and started a company to help others do the same. They emphasized the importance of finding a trusted advisor, like a CPA, to guide you through the process. Overall, the journey to financial freedom requires careful planning, resilience, and the right support system.
Maximizing tax benefits through real estate investing: Calculated risks, passive income, following passion for specific property types, trusted advisors like CPAs and financing experts are crucial for successful real estate investing and tax savings.
Real estate investing can help individuals reduce their tax burden, but it requires taking calculated risks and building up passive income before making significant investments. Tony, a BiggerPockets member, shared his experience and encouraged following one's passion for specific property types to maximize potential benefits. He also emphasized the importance of seeking trusted advisors, like CPAs and financing experts, to help navigate the process. Overall, the conversation highlighted the potential of real estate investing for tax savings and wealth creation, but emphasized the importance of preparation and seeking knowledgeable guidance.
Two-market approach in real estate investing: Opportunities and challenges: While diversifying in two markets can increase potential returns, it also requires more resources, team management, and time commitment.
While a two-market approach in real estate investing as a newer investor can offer the potential to use different strategies and win in multiple ways, it also comes with significant challenges. These challenges include the need to analyze and commit to more properties, build and manage teams in multiple locations, and potentially spending more time on research and less time on actual buying and owning real estate. The upside is the ability to diversify and potentially increase returns, but the downside is the added workload and potential for distraction from making meaningful progress in real estate investing. It's important for new investors to carefully consider their resources, goals, and capabilities before deciding to pursue a two-market approach.
Diversify investments across markets with complementary strengths: Balance potential gains and mitigate risks by diversifying real estate investments across different markets and considering both cash flow and appreciation potential.
Successful real estate investing often involves diversifying your investments across different markets with complementary strengths. This strategy allows investors to balance potential gains and mitigate risks. The speaker emphasizes the importance of considering both cash flow and appreciation potential when choosing markets. Additionally, having the right mindset is crucial for long-term and generational wealth creation. The book "Good to Great" by Jim Collins is recommended for developing a successful mindset. It's important to remember that there's no easy way to become successful in real estate investing. Instead, focus on learning the necessary skills, being persistent, and staying committed to your goals.
Invest in yourself for long-term financial success: Focus on developing deep expertise, building relationships, and continuously improving to create value and maintain flexibility in the market.
Relying solely on technology or external factors for financial success can be risky and may leave individuals without essential skills or knowledge when the market shifts. Instead, focusing on developing deep expertise in a specific area and building valuable relationships can lead to long-term success and flexibility. The author emphasizes the importance of understanding macroeconomics, market trends, and the value of face-to-face interactions. Additionally, the idea of continuously improving and mastering a craft, rather than waiting for external opportunities, can lead to a competitive edge. As the speaker highlights, even seemingly insignificant skills or knowledge can set individuals apart and provide them with the ability to name their own price. Overall, the message is to invest in oneself and focus on creating value through hard work and dedication.
Importance of gaining experiential knowledge: Theoretical knowledge is important for understanding fundamentals, but experiential knowledge gained through practice and instinct is crucial for making informed decisions in real-life situations. Strive for practical experience to enhance skills, build confidence, and recognize opportunities.
There are two types of knowledge: the first is theoretical, which can be learned from books and lectures, and the second is experiential, gained through practice and instinct. While theoretical knowledge is essential for understanding the fundamentals, experiential knowledge is crucial for making informed decisions in real-life situations. The speaker emphasized the importance of gaining deep knowledge in a particular field, as this instinctive understanding can guide us in making good decisions and recognizing opportunities. He encouraged listeners to go beyond theoretical learning and strive for practical experience. This approach not only enhances our skills but also builds confidence and readiness for bigger opportunities. In summary, the goal is to acquire both types of knowledge, but with a focus on gaining practical experience and developing instinctive understanding.
Simplifying real estate investing and personal growth: DealMachine streamlines lead generation, BetterHelp offers online therapy, and Pine Financial Group's mortgage fund provides passive income opportunities. Continuous learning is essential for success.
DealMachine and BetterHelp offer valuable solutions for real estate investors and individuals seeking personal growth, respectively. DealMachine simplifies lead generation and deal making with unlimited access to contact information and phone numbers, while BetterHelp empowers individuals to discover their priorities and live a more fulfilling life through online therapy. For those interested in passive real estate income, Pine Financial Group's mortgage fund offers attractive returns and community revitalization opportunities. David Osborn, the podcast guest, encourages continuous learning and preparation, emphasizing that success is not limited to a select few.
The importance of balance and recognizing strengths: Striving for financial freedom can lead to pressure, but understanding balance and recognizing strengths can make the journey more enjoyable
Feeling a sense of responsibility and striving for financial freedom can lead to constant thinking and pressure. The speaker's experiences, from high school basketball to law enforcement, have prepared them for this role by instilling a strong work ethic, attention to detail, and the ability to think ahead. However, this intensity can make it difficult to engage in personal relationships and be fully present. Understanding the importance of balance and recognizing the strengths of those around us can help alleviate some of this pressure and make the journey to financial freedom more enjoyable.
Learning to handle pressure effectively leads to personal growth: Pressure is a constant in life, but learning to compartmentalize and improve situations can lead to personal growth and success
Pressure is a constant in life, no matter what you're doing. For some, like the speaker, who have faced significant challenges and learned to compartmentalize and handle pressure effectively, it can lead to personal growth and success. The speaker, a business owner and podcast host, emphasizes the importance of not quitting and facing difficulties head-on. Even as a 20-year-old real estate agent, there will be pressure when selling high-value properties, but it's essential to learn how to deal with it by compartmentalizing and improving the situation. Compartmentalizing is not about numbing yourself to pressure but understanding that the pressure remains, and when you return to the situation, it will be there, either better or worse depending on your actions. Pressure is a part of life, and learning to handle it effectively is crucial for personal and professional growth.
Embrace the pressure to achieve goals: Pressure can be overwhelming, but remembering why we want certain experiences can help us stay motivated and focused, despite the challenges
Pressure and fear are constant in life, and it's essential to remember why we signed up for the challenges we face. The speaker shared a personal experience from the police academy, where he wanted to quit due to the intense pressure and hardships. However, he realized that if he were to quit, he would regret it and miss out on the opportunity to achieve his goals. Instead, he embraced the pressure and stayed committed. Similarly, if you're feeling overwhelmed with the pressure of selling a house or starting a new job, remind yourself of the reasons why you wanted that experience in the first place. The pressure may not go away, but your perception of it can change, allowing you to stay motivated and focused on your goals. Additionally, be cautious of what or who you wish for, as the associated pressures and challenges may not be something you're prepared for.
Growing in Real Estate: Adding Weight to the Bench Press: To succeed in real estate investing, gradually build up your ability to handle financial responsibilities, understand lender perspectives, and approach it as a long-term commitment.
Handling wealth, especially in real estate, requires gradual growth and the ability to manage increasing responsibilities. Cade's analogy of adding weight to a bench press illustrates this concept. When acquiring properties, it's essential to build up your ability to handle the financial weight rather than trying to manage too many at once. Hard money loans can be an option for those without traditional income, but they come with higher rates and shorter terms. Lenders primarily focus on ensuring they'll get their money back, so it's crucial to understand their perspective. By considering these factors and approaching real estate investing as a long-term commitment, individuals can increase their chances of success.
Hard money lenders prioritize reducing risk: Focus on building a strong financial position before applying for a hard money loan to increase chances of approval
When applying for a loan from a hard money lender, they prioritize reducing risk for themselves. They consider factors such as your experience level, down payment size, and ability to repay the loan. To increase your chances of getting approved, focus on building a strong financial position before applying. This can include making a larger down payment, demonstrating a solid track record of income, and preparing necessary documentation. Additionally, consider alternative loan sources if you're unable to secure a hard money loan. Remember, the more prepared you are financially, the more likely you are to be approved for a loan and successfully invest in real estate.
Accelerated depreciation benefits self-employed real estate investors: Accelerated depreciation helps self-employed investors borrow more easily by offsetting investment costs, while business write-offs can lower reported income and make loan approval harder.
Using accelerated depreciation in real estate investing can help self-employed individuals borrow money more easily, despite not paying taxes on the sheltered income. This is because the bank recognizes that the depreciation is not a loss, but rather an offset to the cost of the investment. On the other hand, taking business write-offs, such as car expenses or travel, can make it difficult to secure loans due to low reported income. The host encourages listeners to submit their questions to gain practical advice and insights on various real estate topics, which can be shared on the "Seeing Green" episodes or coaching calls.
Find an investor-friendly agent for long-term success: Connect with local market experts for potential deals analysis, neighborhood navigation, and confident action. Remember, the time spent in the market matters more than perfect timing.
Navigating the real estate market can be challenging, but focusing on being in the market for the long term is key to achieving financial freedom. To make the most of your real estate investing journey, finding an investor-friendly agent is crucial. With BiggerPockets Agent Finder, you can easily connect with local market experts who can help you analyze potential deals, navigate neighborhoods, and take confident action. Remember, it's not about timing the market perfectly; it's about the time you spend in the market. This free resource is available at biggerpockets.com/deals. However, it's essential to remember that investing in real estate, or any asset, involves risk. Always consult with qualified advisors before making any investment decisions and only risk capital you can afford to lose. The information provided in this podcast is for informational purposes only, and past performance is not indicative of future results. BiggerPockets LLC disclaims all liability for any damages arising from reliance upon this information. So, take the next step towards financial freedom by finding your investor-friendly agent at biggerpockets.com/deals.
