Unlocking STR Success: Tax Strategies with Anne Gannon - REIA 501

You know, as a business owner, I think it's first just being aware of what you really pay in tax. I think if you're a W-2 employee, you're more aware of it because you have your gross amount, you see your withholdings every week. You know, you— it's all right in front of you when you look at your pay stub. So, you know, I'm paying state tax and I'm paying federal tax and I can figure out the rate pretty easily.

Welcome to Streams to Impact and be inspired to engage passionately in the work of your calling while achieving financial prosperity through multiple streams of high-yield returns on investment to bring dream of making a meaningful impact to reality. I'm your host, Dr. Allen, and I am delighted that you are joining us today. If you haven't yet, get a complimentary copy of our exclusive guide, High Yield Investment Blueprint: Secure 18%+ Returns in 60 Days. Go to our website, highyieldblueprint.com. That is www.highyieldblueprint.com. Just provide your email address and we'll send you a copy today. Hello, enlightened investors! Welcome back to Streams to Impact. I'm your host, Dr. Allen, and I'm so delighted you are with us today. And we have A very wonderful guest for you today. She is a remarkable woman whose journey is redefining the world of accounting for small businesses across America. Anne Gannon founded the Largo Group in 2016 with a mission to bring hands-on, proactive support to business owners. With over a decade of experience and a passion for empowering her clients, Anne has helped more than 500 businesses ranging from $5 to $50 million in revenues find clarity and growth. She understands the unique challenges and triumphs of business owners because she's been there with them every step of the way, from problem solving to planning for next— the next big expansion. So welcome, Anne. We're so glad that you are with us today because we all need help with accounting.

Yes.

So take us into the show and just share with us a memorable experience that was key to helping you be who you are today.

Yes. So before I became an accountant, I actually was a competitive golfer. And, you know, one of the great things about competitive golf is you get to travel all over the country and meet lots of, you know, individuals from all over the country. And so, you know, I really feel like what, you you know, formed my adult life really were all these experiences I had along the way of traveling different places. A lot of times as a golfer, you know, my parents didn't have a lot of money, so they would send me off to these, you know, strange places like Nebraska, you know, places I'd never been. And really, you know, kind of was fending for myself a little bit, but also had the opportunity to interact with people, you know, from the town and, you know, from the community. And I feel like in my adult life, it really enabled me to really understand people at a human level and know that, you know, it's not just, you know, someone I see on paper and I'm doing their tax return, but it's really this person. And, you know, I've, I've seen where they live. And so, you know, my goal in my adult life has always been to really try to meet them where they are, to understand people and, you know, what's driving them. And, and it's not just this transaction of I'm doing your tax return and we're done, but I'm really trying to, you know, engage with you for a long time and help, you know, be part of, you know, your future. So.

Well, interesting trajectory there. And I don't know, I think probably a lot of accountants are into golfing, but I don't know how many of them got their start from the golfing experiences there. But yes, staying in different people's homes who I guess initially were strangers, and after golf tournaments go on for a week or so at a time, And kind of like cricket, I guess, never-ending kind of thing.

Yes, exactly. You're there for a while. Yeah.

So you got to know these people. That's— and I think gives you a different perspective. Well, all businesses are going to have difficulties and challenges, but what is it that kind of separates a thriving and growing business from one that is just struggling?

So, I really believe that it's a lot to do with the owner's mindset or the management team's mindset. I learned this firsthand. I had a really interesting, you know, front row seat to COVID where all of a sudden, you know, things are really good. We deal— 90% of our clients are hospitality. So, going into 2020, hospitality was doing really well and people were expanding and, you know, things were— there was no reason to think that things weren't going to be great in And because '19 and '18, everyone was all about growth and market share and all of that. And so, all of a sudden in March 2020, you had 90% of our clients that had failed businesses, right? Nobody knew if they were going to open again. Nobody knew what was going to happen with, you know, a lot of these independent owners. And in hospitality, because things had been so great, most people didn't have a lot of cash reserves. They hadn't really been thinking that way because there was, again, no reason to think that things weren't going to be— continue to do well. So, you know, it was such a daunting time. People forget that, you know, the first government assistance didn't happen for 5 weeks. And so I remember I did a free webinar with, you know, someone else who was in the hospitality industry. And when we got to week 3, things got real because most restaurants at that time didn't have a cash reserve beyond 2 weeks. And so just to make it 5 weeks So you got the first government assistance. I mean, not everybody did. But what you could see in those really trying times was the impact of mindset that, you know, you had some owners who were saying, I'm going to make it. I'm going to figure out how I need to do it. I mean, my best, you know, comment I heard was we had a really fine dining, you know, high-end establishment in downtown Philly. And, you know, the manager just like threw up his pen and he's like, you know what? If they want chicken tenders and pretzels, I'm going to give them chicken tenders and pretzels. Like, He was not going to go down on the fine dining. He's like, if I have to redo it, I'll redo it. And he did. And he completely redid his menu. He served chicken tenders and pretzels to all the people in their high-rise buildings. But he just wasn't going to close as a result of waiting for the fine dining person to come back. But there was a similar person who was just like, no, I'm a fine dining restaurant, and couldn't see beyond what they were today to be what they needed to be in the future. And I think it was so eye-opening to this intangible of mindset and what it really does to your business on a day-to-day basis. Yeah.

Well, that just makes me think about the, you know, Western North Carolina was just hit with Helena. And That was almost 4 weeks ago, and the bulk of the restaurants, probably hotels as well, are still not opened.

Yeah.

Because the water supply is so contaminated, and, you know, they, they can't serve customers with contaminated water. That's such a long time to be totally and completely shut down. I know there will be flood or hurricane assistance coming, but I'm sure it's going to take a while to get distributed. So yeah, some real hard times for business owners here. Well, what is— first of all, what is STR and why is STR so popular?

So I think the— I think the other lesson of COVID really was that business owners need to diversify. That I think one of the other lessons was, you know, whether you own a piece of real estate or not, but just thinking about real estate, you know, in your portfolio. And what's interesting, what's happened, you know, in the last 5 years on the real estate side is this idea of having short-term rentals. And, you know, they are attractive from a tax standpoint because the short-term rental is considered a business. So there are some tax advantages to that. But a lot of what, you know, I try to do to a lot of our business owners is look at their personal investments, their personal, you know, financial position, not just the business. Because I think that's the other differentiator between, you know, a business owner who's successful and one that is struggling is it is your baby, right? Anyone who has a business, so it is your baby. You love it. You know, your business is incredibly important. You've devoted your time and energy, your life To this, but it doesn't have to be everything that you do. And that, you know, if you're able to separate you from the business and that this is one thing that you're doing today, but things evolve, right? Um, look at cell phones and look at, you know, internet. You know, life will always evolve. And if we as a business owner are able to say, you know, yes, I'm successful in this endeavor today because of the skills I have as a business owner, but I might be able to be successful other places. And I think that's where, you know, educating people on the benefits of short-term rentals and the benefits of real estate, on the idea of looking beyond where you are today into where do you want to be 5, 10 years from now. Because I think as business owners, you know, one of the great things that I read a few years ago, which is so true, is that for business owners, real estate is probably your best retirement investment because it will, it will grow with inflation. It's, you know, business owners don't have pensions, right? Like, you don't have anyone who's just going to write you a check when you retire. So it's really something that we all need to think about. And so as we've evolved in COVID, it's really to take a more holistic approach to our investment or, you know, our business clients and really look at, you know, educating them on some of the strategies that they need to employ today so they're in a good place, you know, 5, 10 years from now.

Yeah, I, you know, I talked to various different entrepreneurs and business owners, and one of their big concerns is, of course, taxes and and taxation. When I'm talking to real estate investors, that generally is not one of the top topics because real estate is such a wonderful asset for reducing taxes. So outside of real estate, are there other ways that we should— other things in what we should be looking at to reduce our taxes?

So I think, you know, as a business owner, I think it's first just being aware of what you really pay in tax. I think If you're a W-2 employee, you're more aware of it because you have your gross amount, you see your withholdings every week. You know, it's all right in front of you when you look at your pay stub. So, you know, I'm paying state tax and I'm paying federal tax and I can figure out the rate pretty easily. As a business owner, it's much more complicated. And I think a lot of times business owners get very intimidated by the tax code. You know, I file a business return. What does that mean for my personal return? So what I really try to do is You know, and whether you use us or not as a business owner, you really need to understand how you're taxed, right? So what's your setup? Is it an S corp? Is it a partnership? Is it a C corp? You know, what is your effective rate, which is as easy as taking your taxable income, you know, and your tax last year and coming up with that as a percentage. And that's your place to start, right? So whether you see a withholding every 2 weeks or not, you have an effective tax rate. And that, I think, can then you know, form some of your decisions. So if I know I'm in a 20% effective tax rate, then if I want to invest in a new patio before the end of the year, I'm going to save $0.20 on every dollar that I'm going to invest in that patio. So then I can at least say, well, is that a good investment? Right. I'm going to save $0.20 on the dollar. I'm not going to save $0.100. Right. So there's still some underlying— it needs to be a good investment, needs to be a good decision.

Mm-hmm.

And I think people understanding that tax is part of your decisions every day. If you hire a new employee before the end of the year, if you, you know, again, buy that extra order of paper towels before the end of the year, all of those are actually tax decisions if you know that effective rate. So that's where I think putting it back in your hands as the business owner, you have probably 100 decisions you're going to make before the end of the year that all have tax consequences if you're mindful of your effective rate and where you are year to date in 2024.

Sounds like good advice there that we could all benefit from. Well, what does it mean to be an accelerator?

So I think that's really my biggest lesson when looking at what happened in the last 5 years. And again, I think it was eye-opening to me as a business owner and an owner of an accounting firm in that we changed our model as a result of COVID because people needed information right away, that too many people were sitting on the sidelines saying, well, you know, when my CPA calls me, I'll make those decisions. Well, it's not your CPA's business, right? It's your business. Like, you need the information. And so, you know, that's my goal is that you're not reliant on me as your provider, that it's, you know, it's collaborative, but ultimately you're in the driver's seat. And I think what an accelerator means is really Not being afraid of the big dream, but ultimately, you know, making sure that we're driving that dream forward every week and every month. Because I think the biggest thing that happens in life is that a week turns into a month, turns into a year, and we're just— we have this big idea, but we don't know how to get there. And, you know, my goal in our accelerator program is really taking the time to draw out what you ultimately want out of this. Because that's really what's important, right? That you as the owner, you have this dream of whether it's, you know, I'm retiring at 50 or I'm selling for X number of dollars, but that's all possible if we're open to building the path to get there.

Well, and tell us about the Largo Group. And we know you provide accounting and tax services. Just fill us in a little bit more about how we can take advantage of The offerings that you have.

Yes. So we are, you know, an accounting firm. We offer bookkeeping and tax services for businesses and individuals. But what sets us apart is we are a flat fee approach. So our goal is to interact with our clients throughout the year, that we are, you know, a resource for them because life happens, things change. And, you know, we want to be part of those decisions as they're happening because our goal is that, that And our belief is that leads to a much better result when we get to the tax return at the end of the year.

Yeah. Well, tell us about the Accelerator method and the STR Accelerator benefits that you have to offer.

Yes. So on the— so the Accelerator program is a program that really takes, you know, an entrepreneur and we build out our short-term, midterm, and long-term tax strategy. And so So, you know, looking at everything that you have going on today, again, focusing on that effective rate and then really dialing in some mid to long-term projections because whether it's an investment in a new business or it's an investment in real estate, you know, there's some things to consider when you get beyond what's happening today. And I think so much out there today, whether you're on Instagram or LinkedIn, is all about like, oh, I made X amount in the last 6 months or how to make, you know, X amount before the end of the year. And, and they forget that, that, you know, mid to long-term planning is as important. And I like to joke that my happiest retired clients have real estate and they had a plan, right? So we need to look at that plan now and not just for what's going to make me the most money today, but how do I set myself up for the future? So that's what we really try to do with our clients is just engage with them and collaborate with them, you know, usually quarterly to just really say, where are we with our, you know, mid to long-term plan? And is that meeting the needs that you have in the future?

It is so easy, and I certainly fell into that trap that, well, there's always tomorrow. I don't really have to worry about retirement today. And if I had really taken that seriously 30 years ago, I'd be in a totally different place today than what I am. And, you know, there's, you know, there is something to enjoy in life as you go through it, but there's also the aspect of planning for the future and taking part of today's enjoyment to prepare for that future.

Yeah.

And we all need to do that and do it better than what we currently do. So, Anne, tell us about one of your major setbacks in life, and how did you come through that time, and what were some of the major lessons learned from that experience?

I think, you know, probably the biggest setback of my life was I lost my dad suddenly when I was 20. So that was— I'm an only child, and so that was— probably the first time that you realize that the plan only gets you so far, right? It was, you know, he was— we were very close. And so for, you know, 6 months to a year, I was just lost and I really didn't know what I wanted to do. It changed the trajectory of college. It changed everything. But I think the biggest lesson that I learned from going through that was it gave me, you know, definitely a more mature perspective than my peers. I mean, I think, you know, just being 20, you kind of lost a lot of my friends because they had both their parents. And so I really didn't want to hear about, you know, your typical 20-year-old is mad at your parents. And I'm like, well, you have a parent, right? Like, that's—

Yeah.

But I think what I learned from it is it really made me much more driven to not take life for granted. And life is incredibly short and So to be committed every day to driving forward, um, definitely, I think, made me much better at golf. I was still in golf and I had a coach at the time and, you know, it really was my way of dealing with it was just like, I'm gonna commit myself to, to doing the best I can in golf. And, um, but even when I got out into the real world, I think it just this, I've always had this urgency, you know, which I think at times people are like, You don't need to move this fast. And I'm like, you know, I think that will always be with me is like, you don't know how much time we have. So like, we're doing this today. Like, we're not waiting 6 months or a year, or like, it's happening now. And I think that has probably been my biggest driving force in whether it's, you know, work or in life is just like, we have no idea how much time we have. So let's, let's do this right now. And, um, it's probably one of my biggest assets now is just not being complacent. You will never call me complacent because I just have this urgency, and I think that's something that anyone who's gone through that has— probably has that. Yeah.

Well, amazing story, and it's interesting how some of those traumatic times in our lives can be some of the best best lessons that we, that we gain from them. And just brings up that, that aspect of resilience that, you know, successful people are resilient people. And we get knocked down, we get back up. And that's just because nobody is going to be on their feet 100% of the time. We all have those challenges to go through.

Yeah.

Well, Anne, what a pleasure it has been to be with you. And, uh, Enlightened Investors, you can go to accelerator-method.com/str-accelerator-benefits to take advantage of all of the knowledge and expertise that Anne has to offer. Thanks for being with us, Anne. It has been a pleasure having you today.

No, thank you so much for having me. I really appreciate the opportunity.

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