Discounted Roth Conversions feat. Keith Blackborg

Hello, future billionaires. Welcome back to another episode of the Invest Like a Billionaire podcast. Have a great show for you today. I think you're really going to enjoy this. I interviewed Keith Blackborg of a firm called Financial Journey. He's a CPA. He talks a lot about his journey in basically becoming work optional by 30 and now sharing the wealth of knowledge that he's gained of billionaire strategies for millionaires. And so obviously very relevant for our audience and a lot of similar values and great insights. He talks about viewing your wealth as a business. He talks about the 5 different strategies that billionaires are using that millionaires maybe aren't using. So it gets really particular. And then near the end of the show, he kind of blew my mind talking about a discounted rollover conversion for investors using IRAs or 401s. And so really, really cool. I didn't know you could do this. If you have any investments currently in your IRAs or 401s, you absolutely need to listen to this episode and hear about this thing that right now you can do that is probably a really good option in a lot of cases. Definitely check this out. I think you're going to enjoy it. And as As always, if you're enjoying the show, please leave a review, share with a friend, give us some feedback. We really appreciate that. And thanks so much for listening. This is the Invest Like a Billionaire podcast where we uncover the alternative investments and strategies that billionaires use to grow wealth. The tools and tactics you'll learn from this podcast will make you a better investor and help you build legacy wealth. Join us as we dive into the world of alternative investments, uncover strategies of the ultra-wealthy, discuss economics, and interview successful investors. Looking for passive investments done for you? With Aspen Funds, we help accredited investors that are looking for higher yields and diversification from the stock market. As a passive investor, We do all the work for you, making sure your money is working hard for you in alternative investments. In fact, our team invests alongside you in every deal, so our interests are aligned. We focus on macro-driven alternative investments, so your portfolio is best positioned for this economic environment. Get started and download your free economic report today. Welcome back to another episode of the Invest Like a Billionaire podcast. I am your host, Ben Fraser. Today we've got a really exciting guest, Keith Blackborg of Financial Journey, and he's coming on to talk about how billionaire strategies can be used for millionaires. And he's going to talk a lot about mindset, about actually tactical strategies. And he's also a CPA, so he comes with some real knowledge. Very excited to get into this discussion today. Keith, thanks for coming on the show.

Thank you. I'm happy to share my real knowledge. It's great to be here and I love what you guys do. It complements so many of the strategies that we're going to talk about here today.

Yeah, I love it. When I saw the tagline, when we were kind of presented you as an option for the podcast, The Billionaire Strategies for Millionaires, I was like, I mean, hey, we're already pretty locked in, right? Invest Like a Billionaire. Our whole goal is to help educate the everyday millionaires, as we call them, to implement the strategies that the ultra-wealthy are using, have been using for a long time. The mindsets, all these things. So super excited to kind of hear your perspectives on this and your journey as a CPA and someone that works with these types of clients. So start kind of a little bit, take a few steps back. How did you get into the position you're in and what was kind of the journey into your current practice? Right. Because it's not a standard practice where you're working with people, helping them in private alternatives, helping them in unique tax strategies. And that's not the standard role for a lot of investment advisors or those working with these kind of clients.

Correct. And if I were an investment advisor, I couldn't do a lot of what I do because I'd be handcuffed by certain compliance regulations. So my background, I started my career with Deloitte in San Francisco, moved to Dallas in 2010, and it happened to be a good time to get into real estate. So I'd like to think I was brilliant, But also some market timing helped. So my wife and I started doing some rentals, flips and stuff with houses. A few years later we got into commercial real estate, hotels and apartments. So my wife was running the real estate business. I had a tax practice focused on high net worth apartment syndicators and that really helped me grow and meet people really quickly. Fast forward to 2016, I thought Hillary Clinton was going to get elected and the market was going to crash because, you know, real estate only goes in 7-year cycles. I was wrong, but I ended up selling out of all our active projects. We had some success, sold the CPA firm. I could never quite get away from it, working long hours. And so my wife transitioned to where we had actually reached work optional, meaning We still like to work. We didn't have to work. We spent the next few years traveling around the world and got the best souvenir we could have gotten out of that. That was our firstborn son back in 2019. And we wanted to slow down for a little bit. So we prayed that we could slow down and then COVID happened. So everybody slowed down. Sorry if that was my prayer that triggered that. But along the way, I started Financial Journey because If I want to make as much money as possible, I'd go back to commercial real estate syndication. But I really like having this impact about showing business owners a better way, how you can optimize your wealth, your taxes, all your infrastructure, your wealth around your desired impact. So let's set your vision and reverse engineer the wealth you need so you're not overbuilding for years and years and missing out on, on what you really could be doing with your life.

I love that. Such a cool story, and I think something that probably resonates with a lot of people, right? Where they, they wish they could be in that, that boat of work optional, and, you know, they're entrepreneur and a business owner and kind of in the grind, right? It's, it's hard to take a step back and, you know, one, work on your business versus just in your business, but then two, even have enough, um, vision and understanding of Where can I get to, to where this actually doesn't have to run my life, right? How do I create long-term value and maybe actually diversify some of my net worth and create that work, work optional status? So talk a little bit about, you know, mindset. Talk about, you know, how does someone who is a business owner, that's kind of your primary clientele. And a lot of people on our show are business owners, entrepreneurs, you know, they've had some success and, you know, they've figured it out by working hard, solving problems, and just making things happen. But at a certain point, you know, you can't just keep doing more. You need to transition and think smarter and talk about some of these things with mindset and how you kind of get to that stage.

So there's a key transition that most millionaires miss, and it's a transition most billionaires make. And it's if you are— if the primary reason you're in business is for financial reasons, then you should be taking a step back and be viewing your business within the overall aspect of your, your wealth. So your business, your active business, is simply a division of the worth— work that you do. And so as you transition along, when you first— you made your first $100,000, if you were to put a ton of time into managing it, you got a 20% return, you make $20,000. Great. You put a little time and effort into your business. You, you'd probably be going further faster by focusing on continuing to grow your business. But if you've got a million-dollar net worth or a $10 million worth net worth, and you can take your average rate of return from 8 to 10% to something higher, if you were to hit that same 20% by getting into some great investments and really actively managing your money by looking at what should be in and when and making wealth the business, then you're spending a little less time in your active business, but you're able to really juice your returns by becoming a great investor. And that's how you can overall propel the overall wealth forward by making that transition.

Yeah, I think that's such a great point and a really helpful mindset shift, right? And it's interesting, I love to hear maybe some specifics on how does someone make that transition? Because it's easy to say, and as I've talked with a lot of entrepreneurs and even being one, it's hard sometimes to take the skills that make you a successful entrepreneur, which is a lot of times taking, you know, inordinate amounts of risk and, you know, very, very focused on one thing versus diversified to transition into being a good investor, right? Sometimes there's a mismatch of characteristics or skills that get you to become a successful entrepreneur actually may not make you a great investor right off the bat. Right? And I, I've talked with a lot of people that have a difficulty making that transition. So talk a little bit about how, how does someone make that transition and what are the kind of steps and things you've seen with people in that position?

So you make a, a great point. There's often people that will come to me and they might have a $10 million net worth and they can almost be a little embarrassed because they don't feel like they're as financially sophisticated as they should be for somebody who, quote unquote, has a $10 million net worth. But the reality is they likely got to where they were because they focused on one thing and they did it really well. And so there was a, there was a quick visual I wanted to share about just your organizational chart, how you're new when wealth becomes your business. Your career, your work becomes a subset within that. And then you've got your investments. Investing Like a Billionaire, that's an aspect of your life. We've also got your finances, your lifestyle, your giving, that fund. Those are all elements of your, your wealth business. And so by making that transition and you thinking about how everything interrelates, there's a key mindset shift that allows you to put everything together and put a more synergistic strategic plan into place because your, your tax strategy, your investment strategy, your work strategy you're giving should all be these segmented things. But when you really put them together where it's a cohesive strategy, you get that much further faster.

Yeah, I love that concept of your wealth is your business, right? And so it's— you work so hard to make your money, right? To make the income and to build the net worth. But then I see so many people not spend the time necessary or the amount of time that it took them to gain the skills or build the business that they have that generates the income. They don't put the same amount of effort, not even close, not even a fraction of the amount into understanding how to make your money work for you, right? How to put it in investments, how to make good investments, how to do, you know, basic due diligence, how to create a strategy, right? And it's, if you view your wealth wealth as a business as one subset versus, you know, I have my work, whether that's a business or my career that is generating my income. That's only one component of what's driving my wealth. Now I actually have my investments that I'm using to work for me and put me into that next level I'm trying to get to. So talk a little bit about that mindset shift of wealth as a business and what that really means, you know, for you and the clients you work with.

So often people are in their business, they're working on it, and they're focused on growing it, and they think someday I'm going to have a big exit. And we will help people have an exit structure and how to maximize sales price, structure the business for sale, and minimize the tax consequences. But in preparation for that, some of it is you need to become a better investor. And so I want people to take the time to learn how to invest when the numbers are small. So if you have $100,000, $500,000 to invest. Learn how to do due diligence when the numbers are smaller. Make the mistakes when the numbers are smaller. And that way, when you have a large exit, you have already learned how to manage your money, earn 8 to 12%, maybe more, because you've already developed the skills to be a great investor. And so some of that is learning how to do due diligence and realizing you can't be an expert on everything. And finding either a community of people that can, that can help you. I know you guys have some great funds, so that could be forming a relationship with you guys, putting some money in, in some deals, some smaller amounts. And then when you have that big exit and you've seen that you guys are delivering great results, up what you're investing with people and you've got the confidence to build on what you, you've done. And then as things come together over time, there's some, some big transitions we're making. So we're looking at what is your cash flow needs, what kind of investments provide consistent cash flow. If you need equity investments, what are the things that are going to grow your equity overall?

Talk a little bit about some of the, the actual strategies that billionaires are using that you say the billionaire strategies for millionaires. You talked about making that, that transition that, that a lot of millionaires miss, but what are some of the other things that they're, they're doing as well?

So there's also access to private vetted investments. So finding a team of people who can help you vet and find great deals. And then comparing notes with other, other like-minded peers who are also looking at those, having a team of synergistic professionals. So typically your typical millionaire is going out and say, I'm going to meet with my CPA, I'm going to meet with my lawyer, I'm going to meet with my investment advisor. And they're stuck in the middle of this hub trying to put all these different strategies together and they're— they don't often even have the technical expertise because no one person can know it all to be able to synergize all of these. And so they've gotten good at growing that business. So they can step back and find somebody that can help them synergize all those elements. That's where they can truly start making wealth a business and transition out of being in the center of that hub to more of a board-level role. And having those synergistic professionals that will just simply work with each other, meet on a monthly or quarterly basis. That's where you can start having a cohesive wealth strategy that fits your life, your business, your wealth.

Yeah, I mean, that sounds great, but how do you actually do that? I mean, it seems like it would be harder to do than, you know, in— I'm thinking my own personal situation, right? I've got, you know, different attorneys and accountants and, you know, how putting it all together can be hard. And you know, I have maybe a leg up over some others because I'm in the middle of, you know, running these investments. But it is still very hard, right? I'm not an expert in taxes. I'm not an expert in asset protection and, you know, how structuring the holdings of these investments. And so, I mean, is it— is that something that you help people with and kind of be the hub, or how does that kind of work and how do you kind of find the—

Correct. That is sometimes some— either something I will personally step into or I will help educate people on these elements. There are certain people that will provide virtual family office services. This is an element. So I've— I'm a CPA. I've syndicated stuff in the past, primarily just interested in finding great passive investors. Now pull the community together of investors to help vet the deal. So it's not just about me, it's about a community of successful people that are working on this stuff together. I officed with attorneys for 5 years, so I'm not a lawyer. but I've been around it enough to be dangerous. And so when you can start pulling these people together, I won't know, no single person can know the details of every strategy out there. But if you can have one person that kind of helps facilitate the conversation and you can start listening to everybody's at the table, your investment guy, your tax strategy guy, your lawyer, they're all together. You can hear the conversation back and forth and then start to, to, to give them some direction on where you want to head.

Makes sense. So you mentioned that, you know, access to private, you know, vetted investments is kind of a key part of getting this thing rolling, right? And so for those that are maybe running a business, they're not investors, they don't have a network, they don't have background in making these types of investments. They've just been sticking it in, you know, ETFs and the stock market, but they've heard, hey, real estate's a great place to be, other types of alternatives. You know, talk a little bit about what— how does someone get access, right? I mean, that's— you just go Google, you know, best alternative investments or what do you think is a good approach for people to, you know, find out more about this, do the education and to really, you know, choose the best ones? Yeah.

So there are endless provider options on the internet. Some will do great. Some will not do great. And so you're looking for a few things. One, you want to see people that have a track record and look at who they are, what they've done before, but then get into a deal. And often these same folks will either have investment clubs or will have meetups with their investors. Go to those groups and start investing in the community. Ask those, those kinds of investors who else they invest with. And by building up that community, you start getting real applicable knowledge about who the good providers are. So the big thing is get into a community, talk to other investors who aren't trying to sell you anything, find where their best results are, and then follow along with them. Have a little peer group. I believe you guys have an investor club where people can also meet other investors, right?

Yeah, yeah, we do. And part of the whole reason for the podcast is you know, to help bring education and, and community around. Yes. These types of things. 'Cause I 100% agree. I think building the network is the number one shortcut to saving a lot of money and a lot of stress and making the wrong choices. 'Cause what I, what I've seen so many times is as people get excited about the possibility of alternatives, right? When their kind of eyes are open, like, oh man, I can not only get good returns, good tax advantages, diversification, you know, not these huge volatility swings you see in the market. Like it gets pretty attractive, but then the first challenge they run into is, well, how do I find, how do I find good deals? And so they mostly will talk with their uncle, you know, Jerry, who's done some deals for a while and, you know, some other people that they might've just heard about but don't really know. And it's just kind of, they don't have the network that they've invested in or built out. And so it's just, you hope that you have some trustworthy people in your circle already, but that's a pretty big hit or miss. And so I 100% agree. And the cool thing is, as we've been doing this podcast, we've interviewed a lot of people that have communities like you that you're kind of building and doing events and other things that are trying to bring other passive investors together. Because the biggest challenge, like when you're trying to, you know, vet a deal and do the track record review and talk to the operator and understand the strategy, at a certain point you're just, you're having to trust, you have to send the money over. Yeah. And you've hopefully done enough that you hope you have a pretty good sense of how it's going to go. But even still, like it might not. And being able to have conversations with other people that have already invested with certain operators and have, you know, done it for longer than you have and have some takeaways and you know, that is so valuable because you can really shortcut the process by investing in that network. And there's so many communities popping up all over of people that are passive investors that are looking to deploy and sharing the things they're learning. And so I love that idea. And talk a little about it because you have done events in the past.

Yeah.

I don't know if you're still doing them, but I don't know if that's something that people can be aware of as well.

If they, Yeah, yeah. We'll likely be doing our passiveinvestorevent.com out in late October, October 28th and 27th in the Dallas area. But as you were saying about doing due diligence, it's about bringing that community together. And so we've got, when you're investing in oil and gas still, I know in Texas, I don't want to call them all scammers, but there are scammy-ish funds. In oil and gas in Texas. I live here, I see them. And so for our, our doctors and lawyers trying to vet them, they don't know anything about oil and gas. But we've got a— in our community, we've got somebody who's the chief drill officer of a publicly traded oil and gas company. He'll come in and do the technical analysis and evaluate those. That gives some confidence to the doctors and lawyers. Simultaneously, we had a medical practice buying fund come through a while back. And so our— that oil and gas engineer didn't know anything about that, but our doctors knew about medical practices. And so it's bringing that kind of diverse experience together and help— helping facilitate great events where people get to connect and grow organically together, along with a sprinkling of key insight and education like you guys are doing with this podcast, helps bring up the, the overall awareness and growth of everybody. And helps everybody become a stronger passive investor and really make wealth the business.

Yeah, I love that point because, you know, I come back to the mantra sometimes. I think it's Warren Buffett that says, you know, invest in what you know, right? And I think that's a good kind of idiom, but the limiting factor there is what you know, right? And the reality is we can't be experts in everything, and nor should we be. And if someone's an expert in the medical field, they, they spent over a decade, you know, in school trying to learn these different things. And then, you know, even the, the business side of the medical profession is a whole different animal than just the medical profession itself. And so being in a community where they're surrounded by other experts in different areas, you can leverage that knowledge to where you don't have to be an expert and you can know enough to be dangerous, know, know enough to ask the right questions. But now you're getting insight from people that don't have a dog in the fight or don't have a bias, right? That are trying to sell you something that can provide and share their expertise and help you, you know, make better decisions because of that. So I love that point that you brought up where it's when you're in these communities, you can pull from the expertise of other people in there and leverage that for your own benefit.

And sometimes once you have a great deal, sometimes you're looking to how do I marry like investment, a tax strategy along with the investment strategy. And if you're willing, I wanted to just share this quick discount of rollover strategy that most people—

Yeah, that'd be great. Love that.

And really this is about how to move money from a traditional account to a Roth account at usually a 20 to 80% discount. So I'm sure you're familiar with apartments, multifamily investing. So let's say just for oversimplification, you buy in at an 80% occupancy with the apartment complex. There's a $300,000 net operating income, which is roughly what apartments are based, are valued off of.

Let's say 6 months in. Just to be clear here real quick, we're using deferred money in a 401 or an IRA and a traditional, not a Roth. And so you're investing into that apartment through a self-directed account and you're buying at 80% occupancy. So kind of, yeah, go from there.

Perfect. Yep. Pre-tax traditional funds. You're, you put $100,000 in, 6 months in, we've, the financials are low, we've kicked out the non-performing tenants, we've We've also got a lack of marketability, lack of control discount. For those familiar with valuations on family limited partnerships, we've had an independent valuation done and they've saying from an investor perspective, it's now worth $50,000. You do a rollover of that asset, not the cash at $50,000. You pay taxes on the $50,000, but then it's rolled over into a Roth and it's never taxed again. So you guys have that growth once it's converted. Yeah, we have an increase in the valuation. You guys are selling a few years later. Now you've got $200,000 all within a Roth account. And it's like I said, you're never paying taxes again.

Okay. So yeah, this is pretty crazy. So let's, let's, let's dive into this a little bit. So you're coming in, you're sending $100,000 into the apartment deal. And for those that are listening on Apple, Spotify, wherever, Keith is sharing a few slides here and we're going to link to that at our website, investlikeabillionairepodcast.com, and you can download these slides if you want to see the visual or go on YouTube. You can see this as well. But so basically you're investing $100,000 into an apartment syndication. It's a value-add deal. They're trying to bring up occupancy and you're doing that through a tax-deferred account. So you're saying 6 months from now they're kind of, you know, cleaning out the bad tenants or, you know, investing in a project, but it's still kind of at the lowest point of occupancy. It's, they haven't finished the renovation plan. So talk about this a little bit because I'm not familiar with, you said family limited partnership valuations, other things. So we work with a lot of IRA investors and we, I remember we, I know we have to give annual valuations. We generally just provide, here's the cost basis of, you know, what you've invested and we're in the middle of a renovation plan, so, you know, I'm not going to, you know, do it, but actually might be better to give a lower valuation. So how does that kind of work? Who's the one doing the valuation and how does this not kind of game the system to where you have liability down the road of IRS or, you know, someone coming back and say, oh, you just, manipulated the numbers. How does this actually technically work when you're doing this valuation rollover?

So it needs to be true. It needs to be real. We're not just, quote unquote, trying to game the system, but we are using the rules and tax strategy to our investment. Let's, let's use a slightly different scenario, a motel to apartment conversion. You buy an operating hotel and so you invest $100,000 in and then 6 months later we've shut it down after we've got the permitting through. What's a shutdown apartment worth? A whole lot less than what you paid for it. Somebody can come in and say, hey, risk is highest because it's shut down or the apartment has a bunch— has less occupancy. And so we're going to evaluate it from that perspective. And so the finances have likely taken a dip, which is a temporary part of the project, but they've truly taken a dip and the risk is higher. But we believe in the team, we believe in the guys that are doing it. And so when they reopen it as an apartment complex and they've converted from that motel apartment, there's a huge increase in value. But now it's all within the Roth.

Wow. So who is the one doing the valuation? Because from my standpoint as an operator, we're doing some of these value-add deals, I'm not thinking about my investor's conversion, right? I'm thinking about how do I make sure this, this project performs well. So is this, as an investor in the project, you need to be aware of this and kind of drive that process and, and who's the one doing the valuation? Is it the operator kind of provides that? Do you engage a third party? How much does that cost? Talk about the actual people involved in how—

You engage a third party.

Okay.

Um, and usually it's either a CPA, an attorney, or somebody else that certifies, that has a practice of, uh, valuing investments. And there are licenses you can get out there, and depends in some cases on what kind of asset it is. Apartments might be different than an oil and gas investment, etc. Where, for those of you that are familiar with estate planning, you might have heard of a family limited partnership. And so you can look it up. You invest— if you have $1 million cash in a family limited partnership, is it worth $1 million? Most people would think yes. But if I'm a creditor coming in and I don't have access to the cash, but I have the tax liability of getting a K-1 if I'm sued and then get a judgment, but I can't touch that cash for 10 years because of the structure, then maybe that $1 million is only worth $70,000, $700,000. Lack of marketability discount. Day 2, when I've invested with you, that money is in your pocket, not mine. What's worth more money? Money in my wallet or money in your wallet with an IOU? And so day 2, I can't go out and spend that money or liquefy funds. So there can be a discount associated with that. And so this is an independent person separate from the syndicator, separate from me and the investor, and who's coming in and saying, hey, based on these factors, I'm going to assign this valuation from an investor perspective, not the project itself is now going to be appraised differently for banking purposes. It's strictly from an investor perspective. And then they would be the one to represent that in front of the IRS if they were to question that valuation.

Very cool. So this is a third party. It's not the, not the operator, not, not you coming, making up a value of what your account is worth now. And it sounds like what you're saying is even aside from the project performance itself, the fact that now you have transferred the funds to a third party, i.e., the operator, that's not you, there's a lack of marketability discount that already reduces the value. And then you add on to that if you're kind of in the middle of a renovation project, there's a strong likelihood that as-is value right now is lower and you can make that conversion to the Roth. You're paying the taxes at a lower valuation, so you're paying less taxes than you theoretically would have once the project's complete. And if the project continues to perform well over time and now you have it in a Roth, now the gains that you get from that point on are all tax-free. Am I thinking about that right?

You're right on. You're right on. So part of what I'm doing is working with the syndicator to what are the financials going to look like, looking at it from an investor perspective and then seeing what's the best timing where we think there will be optimal discounts or a lot of apartment complexes. Right now, some of the guys I've invested with are going through capital calls. And so that shows financial distress in many cases that there's something that they need more capital. And so that could be a good opportunity for discounted rollovers.

Yeah, I think that's a great point is you kind of made the example of, you know, here's a value-add, a conversion from a hotel to an apartment. But even right now, I mean, we have way higher interest rates than we had a couple years ago when a lot of these deals were probably, when you invested in them a couple years ago, obviously higher interest rates impact values in a negative way. Does that come into the analysis? Like even if they're not, absolutely. Even if nothing's changed from an operational standpoint, values have come down because of higher interest rates, can that be a use case as well?

I feel like your light bulb has just gone off and it's a really bright light as you look at all the use cases. Absolutely. That's exactly how you can start to look at it. And all those different factors and cases factor into that valuation.

And you can even— okay, if you're listening to this episode, go talk to Keith right now and go have him look at your— because this is a real thing, right? If you invested in deals over the past couple years, it's a hard time right now and a lot of these deals are going to make it through and they're doing capital calls or they have other ways to do it. But just by nature of interest rates being higher, that puts a lot of pressure on cap rates and that is hurting values in the short term if they sold right now. But a lot of them aren't planning on selling right now, right? I'm not selling anything right now. I'm holding and I'm pushing through and this could be a great time you know, even aside from what status the business plan is in. So that's— this is really cool. I didn't know you could do this. So I don't have a whole lot of tax-deferred money. I just keep rolling it all in real estate. But if I did, I would be doing this.

Yeah.

One other kind of— you go ahead.

I was going to say this— these kinds of strategies is where I actually started investing in with retirement funds for a long time. I thought, I don't want the government telling me when I want to retire. And then I met somebody who had something like 50 rental houses in a Roth account. I'm like, oh, that's pretty cool. He's never paying taxes on that again. How do I do something similar but with passive investments? And so you can truly become an expert with some of these passive investments and really grow these large Roth accounts. I've seen people, there's several in my community that have multimillion-dollar Roth accounts that have really specialized in making the most of it, and they're, not paying much in taxes, especially on the Roth accounts.

So, so what kind of other nuance into the decision-making process here? Because the downside is you have to pay taxes now, right? So there is, there's a trade-off, but you're making the trade-off for a potentially, hopefully, you know, better outcome down the road. But I would imagine, you know, if you're looking at a deal and hey, they're doing a capital call, if it's, if it's kind of circling the toilet, you probably don't want to make the conversion, right? Or is there a case to where, because ultimately you want a higher valuation down the road that the gains are not, are tax-free, but is there a case to kind of take the risk either way and see if the deal performs or doesn't perform?

So if you think that the investment's truly going to sink, so if you invested $100,000, the valuation comes back at $50,000, and then it goes bankrupt down to zero, that's, that's a terrible deal because you still had to pay $50,000 on the taxable conversion. But if you know the team, you feel confident in the team. One of the deals I'm in right now, they have— they're getting hit with interest rate caps. The banks want more cash reserves and the syndicator is like, hey guys, I've got a large net worth. I've been writing 8-figure checks for a while, but at some point, 8-figure checks become very expensive, and they needed help. And so I understood. I believe in the team. Uh, I believe they're going to turn around. It's just a thing of their market environment. They've had a great track record. And so that's a case where I would actually do the conversion. If I'm concerned about it going bankrupt, I'm not going to do that.

You don't want to do it. Yeah, because you basically lock yourself in paying taxes and then you would have actually not had to pay taxes if it goes to zero because you now have a loss. So there's, there's that tradeoff. So it's, you want it to go deal by deal, right? If you have an existing portfolio that you're evaluating. So this is, this is really, really interesting. It's very, very interesting.

But, but to your point, when does it make sense? Typically doing traditional Roth conversions don't make sense past like in your 50s or more. In your 30s, you're more like you almost always want to do Roth. In your 40s, it's kind of a toss-up. But there's a brief visual I wanted to just show about how if you are putting money into a traditional account, you, let's say over a few years, you're putting in $100,000 into your 401, you're getting that deduction against your W-2 income or your business income, and it comes off. So you get that $100,000 tax deduction. And then you do the $50,000 rollover where you now you have to recapture some of that previous deduction. You're paying taxes on that $50,000, but you're still $50,000 net ahead in this scenario. And then once it goes into Roth and you've got all this future growth that's never taxed, like it's the, the tax benefits just go up exponentially from there.

Right, right. That's a screaming. You made a little point on, you know, once you get past your 50s, it might not make sense to convert, but you know, it also depends what you think future tax rates are going to be too, right? If you think they're going to be higher later on, you know, maybe it's even still worth it to do this. You got to kind of make that analysis. But yeah, I know this is great. What other things are you seeing right now with, you know, just strategies and things that people can do just to continue to level up and, kind of making their, their wealth a business?

So I mentioned earlier there's the synergistic professionals. I think getting people, bringing people together and really coordinating all of that. There is your access to your private investments. There's your due diligence, looking at your advanced tax strategy overall, what you're giving going to be. You can be investing through donor-advised funds. There's so much you can do to structure. It really starts with, with you kind of taking that step back of where am I at? Where do I want to go? How much money do I need to live the lifestyle I want and give the money I want? And then reverse engineer the wealth I need. So if I know I can earn a certain percentage in one of your funds and I can spread it across a few of your funds, and I've got $1 million and I can earn— I'm making up numbers— 10% across multiple different funds with you, then I know 10% off that million dollars, I can now afford at least $100,000 a year. If I've got $2 million, I now can afford a $2 million lifestyle. I think it really starts with taking a step back, looking at where you are, where you want that wealth business to grow. And then once you've reached that number where you're work optional, you don't need to do anymore. Then it's just about playing the game. It's about wealth optimization and letting it grow as much as you want and continuing to enjoy life and enjoy the journey.

Love it. Well, Keith, this has been really, really insightful and really love some of the things you brought today. What's the best way for folks to kind of get ahold of you? I know you have some resources they can download, you know, some presentation. You have a little, I think, workbook or some other things to talk about. Resources you have and then best places for, for people to find you. And we'll put all these links in the show notes.

Perfect. Yeah, you guys are welcome. I'm at financialjourney.life. Welcome to learn about me, what we're doing, and hopefully we get to work on something together here in the near future, do it, maybe doing an event or something together. I love you guys. I love what you guys are doing. And several of our community members have invested with you. I like showing you guys as an option. So if anybody has any questions, happy to connect. And with the link you'll see I've got a discounted rollover guide. It's a technical guide that you can bring to your professionals. They can help you validate the strategy, take action on it. But if you want help taking action on it, I'm also happy to help.

Awesome. I'm assuming you have some of these resources of the valuation firms and that can, you can point in the right direction to help get this done. So yeah, absolutely. Awesome. Well, Keith, thanks so much. This is really insightful and Appreciate you coming on the show.

Thanks for having me.