Danny Saucedo and Daniel Thompson - Real Estate, Taxes & Financial Planning - Episode 116

Speaker A: Hello, everybody, and welcome to another episode of the Arizona Buzz on housing, the show where we talk about the latest trends in real estate and mortgage finance. Danny Salcedo with next, uh, home locations is here with us today, and we are your host.

Speaker B: Yes, thank you. Appreciate it. Again, this is another great episode and today we get to have one of our good colleagues here, uh, Josh Norris with arrive. He's going to talk about some financial planning and what, you know, what it intakes and how to use financial planning when, you know, dealing with real estate and all the aspects of real estate on the investor size, other retail side, obviously, if you're, you know, a buyer or seller, vice versa, but all the other, uh, ideas that we can utilize financial planning to in real estate. So, man, we appreciate you coming out to us.

Speaker C: Yeah, absolutely, man. I appreciate you guys having me on and I look forward to the conversation day. I think it's gonna be really good. Um, I'll just give people a quick background on who I am.

Speaker B: Ah, let us know. Let us know, man.

Speaker C: Yeah, yeah. So, um, I'm a managing partner at Arrive Financial. I'm a chartered financial consultant. So my job really is financial planning. It's helping, uh, people, whether it's somebody, uh, who's just a W2 employee looking to retire at 65 or somebody who's got a lot of real estate investments, a lot of investments in the market. Really take a look at everything and make sure that we're being friendly with, you know, the tax side of things. We're planning for their estate planning and, and we're looking at where they can invest so that they can have the future that they want, um, and not just looking at one element of it. So that's what we do at Arrive Financial. And I love it. It's very, very fun. I, uh, feel like we're always solving problems. I'm sure you guys feel the same way.

Speaker B: Yeah, I mean that's, that's 90% of real estate is finding solutions.

Speaker A: Right.

Speaker B: I mean, that's, that's the biggest battle that we got to do is having to deal with the solutions. Um, you know, they say real estate is a transactional stuff. It's really not, uh, it's a, ah, client base. It's a face to face kind of transaction similar to yours. Right.

Speaker C: Y.

Speaker B: You ask the, the client, you know, what, how can I help? What can I do to help? What, what can we solve for you?

Speaker A: Right, right.

Speaker B: That's basically what our business night, right? Him on the lending side, finding that, you know, buying products for Them solving problems, putting out fires and making sure that, you know, the house doesn't burn down.

Speaker A: Exactly.

Speaker B: Man, we appreciate you coming out and, uh, you know, in answering some questions for us. Daniel, drop them. A good question that we can ask.

Speaker A: Yeah, well, I know, you know, um, when somebody closes on a house, the worry doesn't end, right? They worry through the whole escrow process because something might break, something might fall out, whatever. There's all these things that pop up at the end. But you know what, in the end, they sign their documents, they get their keys, and now they're a homeowner. And after the thrill of that wears off, then they're still worry about the finances in the future. So I think that's where financial planning comes in, right?

Speaker C: No, it does. You know, with, with financial planning, one of the things that we do with almost every client is number one, we sit down with them and we do a needs analysis. Like we talk to them about, uh, you know, what they have as far as their assets, what kind of debt they have, Basically, you know, P and L and a balance sheet for an individual. And once we have an understanding of what their cash flow is on a monthly basis and then what their goals are, you know, we start talking about, okay, you know, what was your tax return last year? Go ahead and send that over to me. And we start looking for opportunities, uh, with. So we work with Mario over at Anila, uh, cpa and then we look for opportunities there that they may be missing if they have significant income and they've gotten outside of, uh, you know, the thresholds for like contributing to a traditional ira and they phased out or a Roth, and they're like, okay, well, what are some of the other, um, tax free avenues that you can invest in? So we just find out where they're at, what they're looking to do, and then from that aspect, you know, we start putting together a solution specific for them.

Speaker A: Got you. So what are the, what are some of the broad advantages for people to work with financial planners?

Speaker C: Well, I look at it like this. I, I used to play left tackle, right? That's what, what I did in football. And I still think they should have made me, um, a tight end. So my son actually is a, A, uh, tight end. You know, he's trying out right now Russian football, but, you know, that was my function, right? And then, you know, you, we had our running back, but you have a quarterback that is coordinating everything. And that quarterback is the one, uh, that has to look at everything and then execute the play well. That's the, the position that a financial planner is. Right. You have all these people, all these functions that you might be working with.

Speaker B: Right.

Speaker C: Uh, you might have your tax person, you might have an estate plan person, you might have somebody who's doing your wealth management, someone who's looking at your insurance. Well, I will look at all that stuff and say, okay, here's what you, you should talk to them about. Right. So I help basically be that, uh, quarterback looking at everything. The thing we found and what we liked to do different is that none of them usually talk. So you have one person, right, that's trying to win a game, but nobody's talking. They're not running the same play.

Speaker B: No communication play, right?

Speaker C: Yeah, we're running off tackle over here and, you know, we got xyz, uh, you know, Zebra or whatever's going on over here because nobody's talking. So we try to consolidate a plan to where every professional that's working with them, including when they're buying homes and investment, that we're all having a conversation so that I can help quarterback for them to execute their plan.

Speaker B: Yeah, that's got to be crucial because, I mean, if your CPA is saying one thing, but your wealth management guy is saying another thing, you're like, okay, well, this guy's telling me this and you're telling me this, and who. What's the correlation? Right, right. You're kind of the guy saying, okay, well, look, he's pointing it in this direction, but this is the reason why he's saying this. This is the reason why we're going to go this route. So you kind of click, you're the kind of, again, the quarterback clarifying why the CPA is saying this or why the wealth management guy is telling you so why the insurance guy is telling you to get this policy. Right?

Speaker C: Yep, exactly. And like, we'll use the CPA as an example. Um, there's. There. I'm, um. They're all usually in that business because they like numbers and they're, they're good at what they do. There are levels of CPA though, right? There's ones that are just, I'm going to run your numbers, I'm going to do your taxes. But they're not going to say, hey, maybe think about this. Maybe think about this. Well, let's say, for example, they're having a conversation with one of you guys because somebody's got, you know, let's say they got a million and a half bucks that they're not doing a lot with, maybe it's in the market. But like, you know, I've been hearing about this short term rentals and, and the cost segregation studies and how I can really help with my taxes by taking that bonus depreciation. Well, if they're talking over here and the CPA isn't part of that conversation, I think it's a disservice. He should be the one, he or she should be in that conversation. Oh yeah, here's what that's gonna look like for you. But here's also what to uh, look for as well. If you don't hold that property long enough, here's what the tax implication could be down the line just so they're making the right decision. So that's um, that's one of the, the coordinations that you want to make sure is just everybody's talking and that's what we try to do.

Speaker B: Yeah, that's smart because we've talked about cost segregation for investments and you know, offsetting taxes. Like that's a great, um, you know, asset to use when, when offsetting, you know, income versus, versus, uh, tax benefits. Because, you know, he's got a lot of great programs where, you know, you can, you can pick up assets for, with these unique programs that are starting to come into the marketplace. And we talk about how that could be a tax benefit, you know, toxication. But yeah, it's, it's, yeah, if you're CPA and your wealth management guy or you know, they're not communicating, then you're not seeing that then as an individual, you don't necessarily know these things. Right. So your CPA may not be giving you the insight. And if you don't got someone like yourself, you know, saying hey, did you, have you looked at this? Or like, hey, you're making a decent amount of income here. Like, have you thought about this? Right. Have you even talked to your CPA about this? Or is this an idea? I mean, have you talked to an agent, you know, about possibly doing this and with no one putting that in front of them? Because most people don't, you know, we're in the field on a daily basis. But they're not right consumers? Not.

Speaker C: No, they're not. And so I'll give you a current example right now I'm dealing with. So my father in law passed away two weeks ago actually. Thank you. It, you know, kind of struck us all really, uh, really sudden. Nobody expected he was in the hospital, but nobody expect him to pass away. He was going in for heart surgery. Um, so my mother in Law. They have a, they have a place in California, in Mojave Desert. They have a place in, in Flagstaff and they have a bunch of stuff on that property out there that now she's in the middle of like selling. And, and we're, we're trying to formulate a plan to help her, uh, from a financial standpoint. So she sends me a text earlier today and she's like, hey, um, this equipment that I'm selling, like is, am I going to be taxed on that? How does that work? And, and I said possibly.

Speaker A: Right.

Speaker C: Because we have to look at it. Maybe it's equipment, uh, that's older. Right. And the tax were already paid on that and the depreciation, passed the depreciation time. But that's what I said. I said I'm going to loop in Mario. You know, we're going to have a conversation. We're going to look at everything. We're also going to look for some opportunities for you too because you know, the life insurance is going to be tax free that she's going to receive.

Speaker A: Right.

Speaker C: But when she sells that home, you know, we want to make sure that if it's over the exemption and there's going to be a long term capital gain, well, how can we get, maybe even um, uh, coordinate it to where maybe there's an exchange that we put in place. So, you know, that's uh, an ongoing conversation that we're going to be having and I'm dealing with it right now.

Speaker B: So yeah, definitely. Obviously protecting her when. Yeah, like I said, if there is a capital gains that could be a substantial, I mean, depending on when she bought it. Right. Could have bought it, I don't know, 20 years ago where she paid less than 50k for it and now it's probably worth half a million, you know, depending on where or it isn't Flagstaff, because Flagstaff is, it's got a pretty high price point. So that could be a huge tax implementation. That hits her right off the bat. Right. Obviously it's sad that she's dealing with the loss. I'm sure the whole family is. But that with the loss comes all these questions that people don't have set up or don't kind of put in place. And now she's got to decide what does she do. Right. She's dealing with the pain.

Speaker C: Mhm.

Speaker B: And now she's got to deal with the financial aspect and a lot of times it's, it's hard to, it's hard to deal with that. So it is.

Speaker C: And she's in her mid-60s. And you know, the thing was, is they, she wants, I want to make sure she doesn't have to worry about money. So that's my job now, is to look at everything, pull in the right people, and then put together a plan and say, hey, this is what you have every month coming in. This is where some of your investment is. Here's free cash, you know, over here for you. Um, and, and it like, I love being able to do that for my mother in law. And that's the, that's the cool thing about our business, right? It's just giving them advice that they don't even know they need.

Speaker B: Yeah, I mean, that's, that's crucial that, that, that's one thing that people don't understand about our industry. People think that all we do is make money, right? Real estate agents sell real estate. They make these big checks lenders make, you know, they're closing deals and they make big checks. Everyone makes big checks. But it's like in reality, we, we really. It's not about the money. I always say it's not about the money. It's, it's about the, the, the solving a solution for a consumer. Right? Because they have a situation and we step up to the plate and we answer those questions, we sit down with them, we have an honest conversation with them, we find solutions for them, we make available, uh, things for them that they did not know, weren't aware of. And that's, that's what the industry doesn't see, right? They see the HGTV where 30 minutes, one agent's walking around, shows them three properties, makes $30,000 on this deal or $15,000 on this deal. And they walk away like, no. That is nothing compared to what real life industry is about, right? It's sitting down, having the conversation, asking the hard questions, saying yes or no. Sometimes you just got to say no, like, hey, we can't help you right now. And they don't ever show that on tv, Right. They don't show the downsides of the industry. They just talking about the supposedly big checks.

Speaker C: Yeah.

Speaker B: No.

Speaker C: Two baristas buying a $1.5 million, you know, home. And, you know, Malibu is like, okay, yeah, this, you know, know it's tv, right? And it's like on that same, uh, kind of same thought. It's like the TikTok, right? I, I love TikTok. Right. It's cool and it can be good for business. However, people can go down a rabbit hole and hear something that really doesn't apply to them at all. It might be a good solution for somebody. And then they're like, oh, I need to do this. And having that sounding board they can come to and be like, no, here's why. Probably for your situation, it won't work. Um, is, is something I, I battle with all the time. You know, people come in like on the, on the life insurance side, right. Iuls and infinite banking and all these things. It's like, yeah, there is a place for that, but it's not for everybody, right?

Speaker B: Not for you at the moment, or it's not going to work out for you because it's going to put you in a worse situation than. Right.

Speaker A: So.

Speaker B: Yeah, yeah. I mean it's, it's uh, you know, we spend 90% of our life cycle in industry helping and providing solutions. And that's what people don't understand, that it is, it is a customer based service. Right. You as a financial planner, you're asking all the hard questions. Uh, you know, you're dealing with yourself. Like you have a personal life experience, you know, happen, father in law passes away and you're mourning, but at the same time you're still having to have the tough conversations with your mother in law and you know, and still working out the financial aspect. Like you have to turn, you know, you got to kind of put your head in that, hey, I'm, um, now I got to do my job, right? Even though I'm dealing with this loss, like I got to do my job and I got to help her to make sure she's taken care of. Right. And those are the things that we do on a daily basis. That's the thing that we do. Like we take the punches and we, we, we have to sit in front of the consumer and, and do the job.

Speaker C: Yeah, I mean we're, we're both in situations sometimes where we're getting way more information about people than I ever imagined before I got into this. I mean, you're hearing intimate details about how their family work, like on the estate planning side, who's fighting with who, who's disinherited. Um, you know, you, you get to know these people on a deep, you know, basis. And I know sometimes you guys can be more on a transactional here and there type. Um, but you also have those investors you're doing deals with all the time, right? Yeah, well, that's like the family, uh, the financial planning. If, if I'm doing a great job for them, like they're going to be with me for a long Time. So you're kind of seeing that. But it can be, it can be challenging sometimes. Like, I, I got a call. This is crazy. So, uh, this, this was a gentleman that was actually transferred to me for some policies that he had. Um, and I was just helping him out, you know, I don't, I don't even think I ever got paid on it because it didn't really matter. I'm like, I'll help him out because it was referred over. So he left me a voicemail. I was like, hey, you know, Josh, I wanted to talk to you about my life insurance policies. Can you give me a call back? I saw it. I'm like, cool. And I'm going to pick up Chick Fil A for my kids. So I call him back and as I'm in line, uh, he's like, yeah, I just wanted to give you a call. And, um, so I got diagnosed with terminal cancer and I was given two months to live.

Speaker B: Oh, wow.

Speaker C: And I want to make, uh, sure that my policies are active and that, uh, my wife knows what to do. I said, man, I'm so, so sorry to hear that. And I said, well, she, she calls me directly. I will take care of getting everything done and getting those policies and all that stuff, you know. But those are real moments that happen sometimes in life and estate planning. We've had several that have passed away that we've done their estate plan and working with the trustee and what they have to do. And so I think when people see, oh, yeah, they make all this money, the reality is sometimes you don't make money on any of the stuff that you're doing, but you're supporting them and in, you know, a big way. And that's what. You got to have the heart for it. You really do.

Speaker B: Yeah. No, I mean, it's like I said, it's, it's a, it's a personal level kind of industry, regardless of what it is. And that's, that's what frustrates me a lot is, uh, the negative media. Because, I mean, we all personally, you know, sit down with the person and ask the questions, like him on the lending side, asking financials and getting their life story on the background. Right. And, you know, and I got to kind of know their wants and, and needs in life and what they're looking to do. And then you're sitting, you know, the long haul and people don't understand that we really take this stuff into consideration, like we are working with the client and, you know. Yeah, I mean, there's times When I've done transactions where I've, uh, just helped people out just to help them, like, hey, I'm just going to help you out. Right, Right. Many times, you know, and I'm sure, you know, he's supporting people refinance and stuff like that. We're just like, look, I'm just going to help you because it's just the right thing to do. Right. Even though you're not making money on it. You know, that. Done, um, many things, it all comes back.

Speaker A: It all comes back full circle. You know, you take care of somebody, they tell their friends and their family members. And I've gotten a lot of referrals as. As of that. You know, you just have to do the right thing. I take that very seriously. You have to do the right thing by the client. And I think, you know, that's what makes this special, is like, we have to have the heart and the soul to be able to do it. Because if you don't care about people, you wouldn't be good in. In any of our jobs. It's all about that. I mean, I know there are people that sometimes I've worked with for 18 months to get them ready to buy a house. And, you know, I do it, I don't get paid for it until that loan closes. And it may never close. They may never get their ducks in a row. Some people are like two steps forward, five steps back, Right?

Speaker B: Yep.

Speaker A: And I've had a few of those that they made progress, and boom, something else happened that they weren't prepared for, and they got sent back another year. Okay. Someday they'll come through. But, you know, it's about putting people on the right. Right path.

Speaker C: Yeah. Ah. I always, uh, boil it down to something simple. It's like, how would I want somebody to treat my mother?

Speaker A: Yeah.

Speaker C: You know, if no matter what the transaction or what she needs help with, how would I want them to treat my mother? And that's how I want it to be for. For folks.

Speaker B: Yeah.

Speaker A: Yeah. Before we move on to the next thing you had brought up, the. One of you guys brought up the topic of, uh, bonus depreciation. And so I wanted to just talk about that for a second.

Speaker C: Yeah.

Speaker A: So there are people on the Internet, not necessarily realtors, but other people, people in sort of in the real estate realm, talking about that and telling people that, you know, they could go out and buy a house and the government's going to pay for it for them. And they're really talking about the bonus depreciation, which, you know, if you can take that full amount of depression in the first or, uh, depreciation in that very first year or in the first three years, even then you do get a big tax return. So in a sense, the government is not paying your, your down payment, but the government is refunding your money. And I'm a little uncomfortable about the way these people seem to be presenting this because it's getting a lot of calls, it's generating a lot of calls to me or people asking how to do that or how to get the government to buy their house for them. Like, it doesn't work like that. You know, you can't just write off depreciation on anything. You can only do it on rental properties. So, you know, I did a little deeper dive in a, you know, if someone buys a duplex, they can write off the depreciation on 50% of that building. Right. So there is a tax benefit. Um, if they buy a 4 unit, they can write off 3/4 or the depreciation and 3/4 of the value of that property. That's big. That's huge. But what they're missing is there's consequences to taking that depreciation early. And I was wondering if you could kind of shed some light on what that would look like if someone sold, let's say after two years after they took that depreciation upfront and they sold after two years or after five years. Yeah, those are consequences.

Speaker C: Yeah, recapture. I mean, that's, that's really the big consequence. You know, you have to, you really have to have a plan of how long you're going to hold something, if you're going to take that bonus depreciation. Because basically it was, I think it was 27 years, you know, that you would, you could take the depreciation. Right. And then they.

Speaker B: 27.5.

Speaker C: Yeah, 27.5. And they escalated that. Right. The bonus depreciation, where you could take that big write off, you know, right off the bat, but you sell it, two years later, there's going to be that recapture. And that recapture can be really hurtful financially for you, um, in that particular year because that money has got to come back into the deal, into the fold and you're going to be taxed heavily.

Speaker A: So it increases capital gains.

Speaker C: Yep, exactly. Yeah. So it's like you really have to have a plan of, of if you're going to buy a building and you're going to do, or a rental property, uh, when and if you should take that, because in some cases you shouldn't. If it's going to be a short term. You're looking to hold for two years and that's it. Um, you know, I wouldn't recommend it. And I don't think if we had a CPA here that they would be like, no, that's a terrible idea. And they could explain why, um, as well. But that recaptures really what people need to watch out for.

Speaker A: Yeah. And nobody's talking about that. That's the scary thing. People are out there preaching about this being like, the best thing since sliced bread. I'm like, doesn't work that way.

Speaker C: It's.

Speaker A: If it sounds too good to be true, it probably is. And really there's just. There's a downside to it. And I thought that all along it's like, if you hold it for a lot longer, the pain's less. Right. But. Right. It still comes back into the basis for calculation.

Speaker C: Exactly.

Speaker A: The capital gains tax. Yep.

Speaker C: Uh, it's like, you know, making the decision about today rather than a decision about what do I want my future to look like. And that's what a lot of people really need to bring in people like us to really have that conversation to understand what the repercussions are. And some people are still going to go forward with it knowing that they're only going to keep it because of, like, I'll deal with it in two or three years or it'll be fine. But it's, it's, um, it's a conversation that needs to be had. And in some cases it can really. It can be a great thing. Like, there are companies that are huge and investors that have, um, you know, big portfolios, some of them high eight figures, you know, some nine figures. And in those cases, yeah, they're buying up stuff like crazy and taken that because of tax purposes. And this isn't going to last forever. So it will sunset. At some point, some administration is going to come in and adjust this. Uh, it's here for now and they say forever. Or the, uh, current administration said that. But I'm always leery when I hear

Speaker B: that from the government. That's, that's what I, that's the way I look at it is right now. Like, we have it. So it's the, it's the thing right now. Right. So people are kind of jumping on it. Like you say the guys that have large portfolios are starting out. Investors are probably jumping on it just because they know that. Yeah. You know, another administration come in and say, well, yeah, we're going to take that back. And it's like, okay, then what do we do then? And it's just like, well, I'm just going to take it. Just to take it. Because it could go away tomorrow. Which it may or may not, right. We just, we never know because every new administration coming and starts making either pulling back on certain things that go into play or they, you know, they, they scale it back. Oh well, Whoever is getting 100 now, you're getting only 50% or whatever, right? Yeah. Or we're just going to scale it back to the original scenario. So um, I think that's a lot of things just, you know, because it's the thing right now and you can do it. They're pushing it. Um, a lot of people may jump on it just to jump on it because yeah, it could just go away.

Speaker C: Yeah. It's not just, it's not just real estate either, right. It's machines, it's vehicles, it's all these things. And like give you an example. So we all have seen uh, Tommy Mello, right? The guy who owns the um, A1 garage.

Speaker B: Oh yeah, yeah, yeah, yeah.

Speaker C: I mean you see me M, he advertised everywhere. Uh, seems like a cool guy. I've never, never met him in person, but I saw him talk and he was talking about his fleet and it was something like hundreds of trucks, right. And then he got bought up by pm. Um, and they had a special deal with Ford. Well, I would guess that his person people team that they're working with, they wrote off a ton of that appreciation because they knew that they were going to keep those trucks but long enough to where it would make sense in that time. Well, that's a uh, macro. You know, someone who's looking at the macro. And that's why it's just important for everybody to understand where they're at, what their situation is. Does this apply to me? Does it not? And yeah, uh, I'm glad you brought up the bonus depreciation and the recapture because that's something people aren't talking about.

Speaker A: Yeah, I've been getting a lot of questions from would be investors and existing investors. Like you should talk to your tax preparer. I don't know all of the scoop of this, but the is what I know and I'm like there's consequences, so just be aware.

Speaker C: Yep, absolutely.

Speaker B: Yeah. You gotta, you gotta understand the playbook in order to utilize it. Right. Like just cuz so and so says it doesn't mean that, you know, it's the real thing, but it is a real thing. Just you gotta understand like I said understand the playbook when you utilize.

Speaker C: Uh, that's exactly it. You know, some. I always say it's great to have all the tools you can in the toolbox. Some tools you only use once. Right. Like if you're on a, uh, you know, you're working on a Ferrari, there are some tools only made for that Ferrari that you'll only use that one time. But when you need it, it's there.

Speaker B: Right.

Speaker C: It's kind of like your loan products. Right. Or, you know, an investment property. Sometimes it makes sense to do a reverse mortgage. And I know, you know, we were going to talk a little bit about that. Sometimes it doesn't. And it's like understanding what tools work for the right time. And that's, uh, that's important.

Speaker A: Everybody's situation is different. So there's no canned answer to any of this stuff.

Speaker C: None.

Speaker A: So, uh, what are some ways that your clients can leverage the funds they have under management to buy either primary residence real estate or rental real estate? Yeah, some of the best strategies, you

Speaker C: know, it can be a few different ways. It depends on how it's invested. You know, if it's qualified, uh, money, meaning it's in like a 401k or, you know, traditional IRA or some, some sort of qualified money that we're managing or non qualified. So like, non qualified is a little easier because you can obviously sell off, you know, securities. Um, you can also get loans based on the assets that you have in the securities as well. That's a little bit more difficult, but it can definitely be done to where you're not actually taking, you know, those funds out. But when you're looking at that, it's like you got to be, you got to be careful on what you're selling off. You got to look at the tax implications, how long those, uh, securities been in there, what has been the appreciation. So understanding your taxes before you sell stuff like that off, um, with retirement accounts, not necessarily AUM, but like if you have a 401k that you're currently participating in at work, sometimes they'll allow you to take loans. A lot of times it will. And those can be great for investing in, uh, a property if you, if you plan on paying that back because it's seen as a loan, it's not seen as a withdrawal, and you can write off the interest. And there's some benefits from your 401k at work that people can tap into as well.

Speaker A: And technically you're paying yourself back.

Speaker C: Exactly.

Speaker A: Uh, and we don't have to Count it as a debt. If they do that to raise funds for a down payment, we don't have to count it as a debt because it's secured against an asset that they own.

Speaker C: Yep. Yeah, that's a very good point. So you know, those are some ways, you know, with Aum, but you just have to really be careful. If you're like, let's say just for crazy numbers, say I need $50,000 for an uh, investment property and I've got, you know, $300,000. Well obviously we can look in there, we can do some um, loss harvesting. We can say, okay, well what's our taxes going to look like this year? Should we harvest some losses? So take those at a loss to where that's actually going to help on the tax side. We'll sell it off, we'll still have the 50,000. Like there's just a lot of different ways you look at it based on what the overall taxes are as well. Um, but then you know, you have that money, you invest it in the property and it's uh, it's, it's unique because everybody's gonna be a little bit different. And you need to understand if you're taking a loan, it's not considered a withdrawal. So it doesn't hit your income. But if you are selling, uh, off something, you make it real. Like that capital gain can be a lot.

Speaker A: Yeah. So you mentioned loss harvesting. So is that like, okay, you have a stock that lost money recently and now you sell it off, so you're selling it at a loss so there's no tax or there's a lesser tax burden because a loss was sustained from what you had paid for it. Right?

Speaker C: Yeah, if it's, if it's a loss, you're not paying taxes on it. It's only if it appreciates. Right. Um, but like that loss can be carried over. So for future sell offs and gains, it can actually offset those gains and it can have carry forward as well.

Speaker B: So in other words, if you bought SpaceX at the high point and it's tanky now, taking a loss.

Speaker A: Or Tesla.

Speaker B: Uh, right, or Tesla, Uh, yep.

Speaker C: And then, but like even all that stuff, you have to take into account the full portfolio because depending on how long the asset's been there, uh, it's either going to be if you, if you take the loss, I mean that doesn't matter as much. But if you take the gain, like if it's under two years, you're going to take a short term capital gain which is actually taxed at Ordinary income. So if you're an earner that's at the top 37% that's going to hurt. Whereas, yeah, whereas long term is typically 15 or 20% depending on where you're at from a tax perspective.

Speaker A: So is there any benefit like if someone has sufficient liquid assets for a down payment, but they also have substantially more under management, is there any benefit to using the funds under management to buy that property versus using their liquid funds that they have?

Speaker C: That. That becomes a really a tax question on, on the bigger macro, uh, for them. Again, if we're trying to offset, you know, a high tax bill potentially then yeah, selling off some securities. But if they have liquid cash for it, a lot of times that's going to be the first thing to look at because then there's not going to be any sort of tax implication whatsoever because it's already been taxed.

Speaker A: Right.

Speaker C: If it's just sitting in a checking or set a savings account, something like that. Um, so it really depends. And it's always comes back to taxes.

Speaker B: Yep. Basically just, you know, offsetting where it needs to or putting where it needs to. Right, right. It's kind of looking at the overall, I mean the consensus is you just got to look at the overall portfolio and like you say quarterback in it, you know, kind of seeing what the CPA is saying, what the portfolio is showing.

Speaker C: Right.

Speaker B: And what is needed. Right. Just find those solutions. I mean that's our industry is finding those solutions.

Speaker C: That's exactly it. So yeah, making sure that everything is tailored to that person and what they're trying to accomplish and then making sure Uncle Sam doesn't get any more than his fair share.

Speaker A: Seems like that's that, that is like the number one goal is like protecting your tax liability, minimizing it as much as possible.

Speaker B: And it's because. Not to interrupt but just, you know, it's funny, we have that discussion. We're having that discussion. Right. The idea is to pay less taxes, but yet politicians run on. The rich don't ever pay taxes. They should pay their fair share. Only the lower income or middle income people are the ones that pay taxes. And it's like here we're sitting at the table, we're discussing it and you're giving examples on how the everyday person, from lower income to middle class to higher uh, earners, whatever bracket you're in, there's ways to offset taxes or to shield yourself from having to pay Uncle Sam. And this is what the, the consumer doesn't understand. It's the rich don't it's not that they don't pay their fair share of taxes. They use the tax code and they use the tools that we're talking about to offset their incomes or their financial aspects so that they are not giving it all to Uncle Sam.

Speaker A: Right.

Speaker C: I mean, the big thing people need to think about is it's not that they're not paying taxes. They're just not paying taxes right now. They're kicking the can down the road. And that's the biggest thing, like we see within, like a 1031 exchange that I'm sure you guys have done a million of. It's not that the taxes won't be paid. It's just it doesn't need to be paid. If it's done right and it's a higher value property and it's rolled into that, but they sell that property down the line and they don't do an exchange, well, the taxes are still going to be paid.

Speaker B: Right?

Speaker C: Right. So it's not a matter of. And it's like when we sit there and we're looking at somebody's retirement account, it's not that they won't pay taxes. It's just they're going to delay it. If they're doing it in a traditional or a 401k or 403b, 401a, uh, whereas if they have it in Roth, they're taking the tax hit now, but it's also coming out tax free later. So that's the important part of planning as well, is like, um, are we trying to just minimize for today or are we looking out for tomorrow? And a lot of times, as you start getting closer to retirement, we're doing Roth conversions and we're saying, okay, you had a down year in your income this year, or maybe you had a big, uh, you know, something you sold, um, a home or sold something at a loss. Right. Let's just say you sold off some stuff at a loss and now you're looking at it like, okay, cool, this is a good year that we can move from my 401k over to a Roth. If you're over a certain age for 59 and a half in the 401k or my traditional area, I can convert that. Now I'm taking a small tax hit rather than in the future when I retire and I'm pulling that out and maybe I'm paying twice as much as a percentage because I didn't have that write off. So those are things that we, we look at too, is how do we get as Much over time, by the time they're ready to retire that they're not paying on taxes then.

Speaker B: So yeah, again, again, going back to. Here's the misconception that the rich don't pay taxes. Right?

Speaker C: Right.

Speaker B: No, at the end of the day they still do. They just use the tax code or the right tools to either take it up front or push it off on the back end. But at the end of the day they're still going to pay their fair share of taxes.

Speaker C: Right. That it's, they certainly do. And I, you know, again, don't quote me, this is all for educational purposes, right. Have to say that, talk to uh,

Speaker B: your CPA or you know, all uh,

Speaker C: your people, your cpa. But like I think the stats something along the lines of 90% of the taxes are paid by the top 10% earners. Oh, like that's, I mean look it up, Google it. We should probably Google it. But it's something astounding like that. Right? So yeah, uh, they're paying their taxes. It's just they're not paying their taxes necessarily right now. They kick that can down the line and eventually like when you sell a company you're going to pay taxes. When you sell a company and you get that big exit, uh, I've seen it happen. I've been part of it. It's been, you know, it's great. But Uncle Sam always gets his money just trying to minimize it and try not to give them more than you should. And that's why it's real important. And this, this is advice I would recommend for everybody. Talk to your CPA and say, hey, is there anything I should be thinking about or doing, um, that could help alleviate taxes? Maybe something as simple as maxing out a contribution to your 401k, uh, which today is 24,500. It's a lot of money you can be putting or you can do a catch up contribution if you're over 50 of another $7,500. Well that might be just the simplest thing to where. Okay, cool. And that's going to bring the burden down this year. Those are questions your CPA will be able to answer. And you know, obviously as a financial planner I can help answer those. And we always loop them in to make sure that everything's above board and everybody is approving it. But that's a question everybody should be asking.

Speaker A: Is there some, a particular age at which someone approaching retirement should be thinking about converting like a traditional IRA or a 401k to a Roth? I mean, is that, yeah, there's some guidance on that.

Speaker C: Yeah, my guidance is once, once you're in your 50s. And really it kind of depends on your, um, retirement horizon because some people are like, I want to retire 60. Some people are like, I want to retire at 67. But depending on that horizon, uh, you want to give yourself a good 10 years, like good 10 years to be able to start. Okay. We need to start looking at converting some of that over, have a strategy behind it and you know, every year will look different, it'll fluctuate. But that 10 year window of ramp up when you want to retire is a good time to start thinking about that.

Speaker A: So would it make sense for someone in that boat to like, let's say they bought, um, let's say they have three rental properties and they write off normal depreciation, not the bonus. Well, I mean, maybe the bonus depreciation would, I suppose if they took that bonus depreciation in the same year that they did a Roth conversion, that could potentially offset the tax burden of, uh, the distribution from the traditional IRA that got taxed. And now those funds are in a Roth and distributions are tax free after that. Right? Yeah.

Speaker C: Ah, if done correctly, that can be a very good strategy for somebody that's taking that bonus depreciation for them to do those conversions in those years. So. Yes, absolutely.

Speaker A: Interesting. Well, that's a, that's a great benefit.

Speaker B: Mhm.

Speaker A: I don't want to talk about that in any of my like, promotional materials because I feel like you got to talk to your cpa. I don't want to be on the hook for that. But yes, it's good to know. That sounds like a very good strategy.

Speaker B: I mean, it's just, it's giving, giving the knowledge, you know, to the consumer, letting them know that there's options out there. But you got to reach out and you got to sit down with a licensed professional.

Speaker A: Right.

Speaker B: Someone that's in the profession, not just jumping on Tik Tok and hearing it from someone, you know, they're just putting it out as, as information.

Speaker C: Right.

Speaker B: Uh, but you know, that's why we always, when we do these podcasts, we say, look, talk to a professional. Have the conversation. Don't just look at it and think, oh, this is what I'm going to do. Right? Ask the questions, reach out to yourself. You know, you're a financial planner, that's, that's the goal. Or vice versa. But it's like, just sit down and have the conversation. That's one of the biggest struggles that I Deal with in my industry is like, people just don't want to have the talk. Right? They're, they're, you know, they're like, you know, I brought promotional information and they reach out and then it's like, okay, when can we meet? When can we talk? When can we start answering some questions for you? And then they disappear. M. Yep. It's like, we're not, we can't force you to do anything. Like, we can't make you do what you want to do. Like, we can provide the solution for you, but we can't make you physically do it. So it's like, why do people get so scared and you know, and they just don't. I mean, I don't know. Is that something that happens in your industry?

Speaker C: Oh, absolutely. You know, uh, so we, we offer a free, no cost consult to anybody. Like, I don't care if it's a, ah, 18 year old freshman girl in college that just wants to kind of have a plan. Right. Or it's somebody that's got a huge portfolio and, you know, isn't happy because their person never calls them back. But we, we sit down and we have that conversation. But, but it reminds me as far as like people waiting too long or not wanting to have those conversations of, you know, one of my old attorney buddies, you know, his name's, uh, Stephen. And Steven always said it's just like the Godfather. Why didn't you come to see me sooner? Right? You should be having these conversations now and not waiting for something to, you know, hit the fan.

Speaker A: Right.

Speaker C: And that's why having professionals like us. I don't charge anything to talk to. Me neither do we.

Speaker B: Like, there's no fees. Like that's what people like. Uh, we're not attorneys. No, we don't charge per hour, we don't charge per minute, or we don't charge you for the emails that you send over. Like that's another part of the industry that people don't understand. It's like we do this for free. We sit down and we take time out of our day, out of our lives to sit down, meet with you and say, okay, what are your wants? What are your goals? What are, what are your visions? What are you looking so that we can help you get there? And it's all free. It's a free consultation.

Speaker A: Yeah.

Speaker B: Uh, and it's like, you know, that's what, that's. We're having this talking. It's like, why do people get so scared? It's like, just get on the phone with Us, you know, meet with us. If at the end of the day you say no, then it's, it's a no. Like we, we still can't force you to move forward with anything.

Speaker C: Yeah, yeah. There is a misconception and it happens with estate plan too. Like I don't have enough money to talk to them. Well, no, that like you need to, to understand what you're trying to accomplish and have a plan to get where you want to going. So there isn't like a minimum amount of money to have a conversation with somebody. Maybe you don't right now, but maybe in five years you will. And because you talk to somebody now, you made five different decisions that lowered your taxes, helped you invest and you're in such a better place in five years when you have more cash flow coming in. But you wouldn't have even known to do it had you not sat down and had the initial cup of coffee and conversation. So that's, that's a misconception. And the same thing with estate planning.

Speaker B: Wow.

Speaker C: I don't know if I have enough money to do a trust or if my assets like, well, let's talk about it. But the reality is, yeah, I promise you it's going to make your life, your family's life easier when you pass. If it's done correctly and your trust is funded and you have all your power of attorney documents and you have your living will and trust, your advanced health directives. Like it's not easy at all, but it makes it easier than like my, my mother in law. Thank God I did their estate plan. But uh, there's some things that she, she is non and we're able to move into the trust. But that wasn't the case. Probate court would be pretty fast because she's a spouse. But it doesn't automatically just happen like that.

Speaker A: Right.

Speaker C: It's just always try to think about the future and have conversations with people now because I mean we're good friends to have when. And, and I have a lot of friends. Like you guys have a lot of attorney friends. My attorney friends. Fortunately they don't charge me every, you know, time I pick up the phone, but man, they're great. When I have somebody who has got a real estate problem, um, and it's like outside of anything I can help with or a real estate person, they need a tax, hey, talk to him. Somebody going through the tough thing of bankruptcy, hey, I got somebody for you. Put as many people in your corner as you can because it doesn't cost to be A friend, right?

Speaker B: Yeah. I mean, like I said, that's. That's, you know, the biggest thing we harp on that, that's why we do this podcast, is like, tell people, like, look, just reach out to us. It doesn't cost you anything. And there's. There's no. There's, you know, we're not going to bombard you with phone calls every five minutes trying to say, hey, you ready to move forward? You ready? No, it's like, have those conversations. I mean, we deal with buyers, you know, trying to get themselves. It's like, you know, talk to us six months prior to you buying. Because usually they're calling like, oh, I saw this house on Zillow. Let's go look at it. Well, have you even talked to a lender? Oh, no, I want to see the house first. And then they go to the house, they fall in love, and then they talk to the lender, and it's like, dude, not ready. You're not ready. Like, you have credit problems. Your credit m. You know, this or

Speaker A: no money in the bank for, uh, the down payment.

Speaker B: I mean, you know, they're. They're running out to the, to the property, and they have no idea what, what to look for, what, you know, and it's like, why wouldn't you just call us four hours ago? Oh, well, I wasn't ready then. You're not ready today either, so, like, what's the difference? And I always tell people, like, you know, four to six months in advance is the best time to reach out to someone, a professional, anything, any industry, because it gives them time to adjust any, Any scenarios that we need to look at. Right? Show, uh, yourself on a financial standpoint of, like, if you're looking for the future, you need to start now to be able to prep you for the example you're talking about. Here's five things you can do. Even though you don't work with me here, I'm just going to give you five things you can start today so that in five years when you call me back, you're ready. Right? But it's given that. That prior assistance, uh, or solution, same thing with us. Like, you know, hey, okay, well, you need to do this right? You need to work on your credit. Here's some credit ideas that you could do, or here's where, you know, maybe you need to make a little more money. Okay, well, you know, hey, can you pick up overtime? Let's get you into overtime. Three, you know, three or four months or whatever. Here's what you can do. To get you there, to get you ready so that we can go look at that house or, you know, uh, you can start building that wealth. Right?

Speaker C: Yeah, it's a great point. And it correlates to business people. Right. I've own a lot of, I don't know, five or six companies at this point. Um, I have a lot of business friends. And one of the things that I, I had to learn the hard way is go get money and access to money before you need it.

Speaker A: Right?

Speaker C: Go get a credit line before you need it. Don't rely on credit cards. Have your financials in place, because when you need it isn't the time you apply for it. So it's the same thing when buying a home. Like, if you are, uh, wanting to buy a home in six months, you know, talk to Daniel, be like, hey, this is what I have. Here's where I'm at. Would I be. How much would I qualify for based on this? Okay, if I need to qualify for X more, what would I have to do with my debt to income? And Daniel can walk you through it. No charge there. And then in six months, Danny's showing you homes. Like, I know exactly how much I can qualify for, and I've got my situation in place. I've gotten pre approval. Like, those are the types of things. So, so an adage I guess applies to everything is go get access to money before you need it.

Speaker B: It's a good slogan. That is a good slogan. Go get access for money before you need.

Speaker A: Be ready. Before you need to be ready.

Speaker B: Yeah, yeah. I mean, that's. I, I push that all the time. Like, get the answers before you. You start asking the questions, right? Like, get those questions answered before you can get there. The minute you start thinking about it, start asking the questions.

Speaker C: That's it.

Speaker B: To get yourself prepped and ready. Because it is, it is a process. It is definitely a process. And it happens a lot where, you know, they're just calling that day of. And it's like, I want to do this. It's like, great, we're excited. And then, then you got to give them the hard news, like, okay, well, we can't do that, you know, because so and so. Well, that sucks. Then they get mad at you, right? Yeah, well, it's, it's. It's your problem. It's not my problem. I'm just bringing it to light that we should have addressed this a while ago. You know, you should have had those conversations before so we can address this. So now you're ready to roll Right,

Speaker C: Yep, that's exactly it. So I think it's, these are all great things that people are listening if they just, if they're not doing it already, like number one, like we talked about, have, ah, professionals, uh, you know, make sure you're getting money before you need it. Talk to professionals before you need that to come down. Like, these are just all things we can all do better. And I'll be honest, I mean, some of the stuff I made, I made all these mistakes in my 20s and 30s, uh, you know, early 30s, and then I figured out, oh, okay, and thank God I'm 43, uh, and you know, things have gone a lot better since. But, you know, I made all these mistakes. So if you've made these mistakes, there's still time as well.

Speaker B: Oh, yeah. I mean, far from not making any mistakes. And again, you know, making those mistakes, obviously myself. But now that I see it so prevalent, I'm like trying to help people, like not to make those mistakes. Right. And get them prepped and ready because it is, it is tough, you know, and, and we talk about affordability. Affordability is tough right now, you know, and it's, it's a lot more hurdles that people got to jump over nowadays. Guidelines change, things change, programs change. A lot of the industry continually is shifting left and right. And I'm sure in your industry as well, I mean, one product could be available, you know, two years, like we talk about, right? Uh, cost segregation. Right now it's available. We have no clue if it'll be available in the next two, three years.

Speaker C: Right.

Speaker B: So it's like you got to consistently be asking and making those questions prior to you doing something because you just don't know where things are at. Things consistently change.

Speaker C: Yeah, absolutely. You know, and, and like, one last point to drive in on like, being prepared before you need it. Um, well, two actually. So, uh, people don't know my story on this, but. So I had a heart transplant at 40 years old. I was in the hospital, uh, coded out and died for 15 minutes, uh, before the transplant. So that's what I really went through. I didn't get my estate plan done until I was in the hospital because I kept kicking that down the road. Now, thank God I lived through it. And, uh, my, uh, now partners came to the hospital to do that and to create that. But also life insurance. I'm uninsurable now. But you know what? Thank God somebody sold me a policy when I was 27 years old. That's something you got to prepare for for your family. So get those things in place as a foundation because, you know, God forbid something happens and you just bought a new house and, you know, you're the breadwinner and your spouse is depending on that and there's nothing in place to help. I mean, how, how bad would that have to be for them to have to sell the house right after buying it? And going through that emotional time, uh, just because there was no preparation, it's adding insult to injury. So, yeah, I just can't stress enough. Like, try to prepare for the worst before it happens.

Speaker B: Yeah, no, yeah, I mean, that's, that's again, you know, getting those, those getting in front of things before you make the moves.

Speaker A: Right.

Speaker B: Getting ahead and asking the right questions.

Speaker A: So, yeah, I always try to, like, you know, when I'm taking an application, I try to question people before I even take the application. I question the borrower about all kinds of things to get a sense of where they're really at so that we don't have any big surprises. Like, if you're applying for down payment assistance, you need to tell me all your sources of income because those assistance programs come from the government and they're going to look at stuff I'm not going to look at. So if you're hiding income to try to qualify, um, you're not going to be able to get away with it because they're going to get your tax returns and they're going to pull the transcripts. So we have to be upfront about everything. And if we have credit issues, I need to know what they are so I can help you, put you on the right path.

Speaker C: Yeah, that's it. That's it too. It's like, just be honest with me. Like, I'm not going to judge you, but I need to know everything. So if there is a potential problem, certainly qualifying for a loan, whatever, well, we can fix it. But if you don't tell me about it and then you try to apply and then you get denied, it's like,

Speaker B: well, or you get into it and then it just blows up in your face because you, you're like, okay, what about this? We didn't say nothing about this. And it's like, well, I didn't really think. And it's like, well, I mean, it's. Everything's going south now. Right. And, uh, there's no way out of it because just I needed to know this prior to.

Speaker C: Yeah. And I, I think that's something that's important for people to realize too, is like, don't, don't be ashamed that you, maybe you haven't gotten everything together, you know, or you've made mistakes or maybe your finances aren't where you want. Like, that's why professionals like us are important to talk to. Like, we don't judge people. So just have the conversations fully so that you can actually get a plan to get out to buy that first home or you know, to, to keep from going bankrupt or you know what, whatever the case is. But it's just super important that they know that, like when they're talking to us professionals. Number one, I'm a fiduciary, so I can't, you know, I'm not judging them and I have to act in their best interest.

Speaker A: Right.

Speaker B: I mean, that's, we all live by that. Like, that's, that's in our, in our bread and butter. Like, that's that we all live that way. I'm a fiduciary myself.

Speaker A: I mean that's, it's in the language, in the language of the loan officer definition, uh, of the Arizona licensing. It's like basically Arizona requires all loan originators to be fiduciaries and do what's in the best interest of the client.

Speaker C: Yep.

Speaker B: Yeah, I mean we, I mean, yeah, I'm governed by the state laws, you know, Arizona Board of Real Estate Department. Like it's in there.

Speaker C: Yeah.

Speaker B: We have fiduciary to the client.

Speaker C: Y. And people need to realize too, like, no matter what's going on with their situation, we've seen worse. I mean, uh, trust me, you know, there ain't much that you're going to show me that I'm like, oh my gosh, you know, so. But since we've seen it, guess what? We also know how to solve those problems. Right.

Speaker A: And it's a common goal, getting people where they want to be.

Speaker C: Mhm.

Speaker A: And you know, not everybody's starting at the same time, at the same point, at the same basis. But if, if their goal is this, this or this, then it's our job to, you know, create a path for them to get there. And sometimes it takes a little longer than does for other people, but that's okay. Yep, that's why we're here. Well, thank you so much, Josh. This has been a really great conversation. Uh, learning about financial planning is something that I personally wanted to, to get more information about. I think, um, our listeners are going to be really, um, thankful that they had the opportunity to hear your input and your thoughts on some of these things. Um, I look forward to having further conversations about you Know some more specifics in financial planning and how they relate to real estate and how we can help, you know, people who have funds under management become even wealthier with access to real estate.

Speaker C: Absolutely. No, I appreciate you guys having me on today and great, uh, conversation. This a lot of fun and yeah, just reach out if you need me. Um, uh, we'll put my stuff below, but yeah, yeah, we'll Financial services dot com.

Speaker B: But no, yeah, we definitely appreciate you, man, because I mean that information is key, knowledge is key. Um, you know, we, we love to try to debunk all the tiktokers out there and the Instagram influencers stating stuff that could be obvious and a lot of times is not, um, getting it from professional, you know, that's doing it on a daily basis and then just bringing ideas to light. Right. Because I mean, one of the things we continue to harp on is like, here's your chance to talk to three licensed professionals who have fiduciary to the client, to the customer to do what's in best interest for the customer and the consumer. And it's like we're here to provide solutions and not just to make the big checks. And it's like, I mean, I know myself and I'm sure you guys as well, like, we truly do what's best for the customer. Where we truly like to be in this industry, you have to care about the consumer for sure. It's. I mean, I know there's bad apples in any industry, but it's just gonna try to take advantage of you. But majority of the people are always going to do the right thing.

Speaker C: That's it. Yep.

Speaker A: It's all about relationships. You know, your reputation speaks for you.

Speaker B: Yep, yep. So we thank you guys. Uh, you know, again, man, we appreciate you coming out. Uh, would definitely love to get some more topics. We'll figure out some more stuff to talk about because we'd love to have you on again, man.

Speaker C: Sounds good, man.

Speaker A: Sure.

Speaker B: There's so much we could talk about.

Speaker C: Yeah, there's a lot of rabbit holes we can go down for sure.

Speaker B: So we'll have all your info on there and then if you need anything, we're here for you. Cool.

Speaker A: All right, until next time, I'm Daniel Thompson with rate.

Speaker B: Danny Salsolo Next home location and Josh

Speaker C: Norris with Arrive Financial Solutions.

Speaker B: Thank you guys.

Speaker A: Have a great afternoon.