Why Oil & Gas Is the Ultimate Hack for Real Estate Investors

Why Oil and Gas Is the Ultimate Hack for Real Estate Investors what's up guys? In this video, we're going to dive into how real estate investors can use oil and gas investments to save massive amounts on taxes and accelerate their portfolios. If you've ever felt stuck waiting for your real estate investments to compound, this is the video you need to watch. We're going to cover why real estate investors should care about oil and gas investments, how oil and gas can help you write off more earned income than real estate ever could, and how you you can use what I like to call capital stacking to grow your wealth faster. Why Real Estate Investors should look at Oil and Gas do you want to legally pay less in taxes? Here's how oil and gas investors do it. If you're already in real estate, you know it can take years for returns to snowball. What if you could speed that process up? Oil and gas investments offer something very unique. The ability to write off huge amounts of earned income in the first year. Unlike real estate, which only offsets passive income. Here's the key difference. Real estate relies on depreciation and long term growth. Oil and gas gives you upfront tax deductions that can free up more cash to reinvest in your portfolio. Then, as those monthly payments start coming in, you can put that money to work while it builds. And usually you can get your initial invested capital back in a relatively short time frame, like one to two years. So why does this matter? Because it feeds directly into the velocity of money. The faster you can reinvest your capital, the quicker your wealth grows. And gas lets you do that by putting real dollars back in your pocket up front. I like to invest in an oil and gas deal, get the money back, and then reinvest it in real estate. So now I've gotten great tax benefits and I've funded two assets with the same capital in a pretty short time frame. How can oil and gas help you write off more taxes? Let's break this down in real estate. Depreciation is a great tax tool, but it only works on passive income, like rental income. Unless you're a professional, oil and gas is very, very different. With oil and investments, you can write off almost all of your investment in the first year against your active income, like W2 income, your wages, business income. It can even offset passive income and capital gains. Here's an example. Let's say you invest $100,000 into an oil and gas working interest opportunity. You might get 75,000 to $90,000 in first year tax deductions. Every single project is going to be different. That's money that you don't have to pay taxes on, which means more cash to reinves your real estate deals. Because depending on your tax bracket, that translates into just over 30 grand that you aren't paying the IRS. And it doesn't stop there, guys. Oil and gas also offers a 15% depletion allowance, meaning a portion of the revenue from these wells is tax free for the life of the well, 15% of it. This is why savvy investors use oil and gas to stack capital faster than real estate alone. Let's dig into the concept of capital stacking with oil and gas and and why it's a game changer. If you're serious about growing your investment portfolio, you need to understand one thing. The velocity of money. Here's the idea. The faster you can make money from one investment, reinvest it and make it grow again, the faster your wealth multiplies. Oil and gas investments boost your velocity of money by freeing up cash through tax deductions in year one, providing monthly cash flow from oil production. Because you get paid every month when oil and gas is sold, and because wells produce so much when they first come online, you can potentially get your initial investment back in 12 to 24 months, depending on the price of oil and how well the wells actually produce. Let's compare this to real estate. Real estate cash flow is slower and requires tenant management. The tax benefits are stretched out over years and you're susceptible to recapture. With oil and gas, you're stacking cash faster, which means you can reinvest in your next real estate deal much sooner than waiting years for equity to build. Let's translate this. You invest $100,000 into a new drilling project with 85% depreciation. Depending on your tax bracket, that's just over $31,000 that you're not having to pay the IRS. You can deploy that capital into another asset or throw it into a high yield savings account while you keep adding to it, which should yield you at least another five to ten grand while your wells are paying out. You can also supercharge that 31k by funding some short term private loans, which can get you upwards of another 30% on your money in that first year. Let's say the well return your initial 100k in the first two years. Now you can redeploy that capital as well. So with that 100k investment, you've now been able to fund somewhere in the range of 235,000 to $300,000 worth of investments in about a two year time period. Wow. Oil and gas and real estate. Why they are the perfect pair. It's like peanut butter and jelly. Let's do a quick side by side. Let's look at real estate. Real estate offers long term appreciation and stability. I love that it requires property management, tenants and upke. And the tax deductions are really limited to passive income unless you're a real estate professional. Now let's look at oil and gas. It provides upfront tax savings and monthly cash flow. You don't have any tenants or property maintenance. There's really not a whole bunch of headaches. And this can offset any kind of income, active income, which is a game changer for high income earners. So which one's better? It's really not about choosing one over the other. I actually invest in both personally. Real estate gives you stability and appreciation, while oil and gas supercharges your cash flow and gives you great tax savings, allowing you to grow your portfolio faster. I actually find that most of the time, while oil is thriving, my real estate assets are taking a hit and vice versa. So I like to have plenty of both because all of these assets have their ups and downs, they're cyclical. And when oil's taking a hit, real estate picks up the slack. I've got a healthy amount of cash flow and assets divesting at regular intervals. And so I'm not dependent on one either way. How to get started with oil and gas as a real estate investor. STEP 1. What are your investment goals? Are you looking for monthly income? Do you need to offset some active income? These are the kinds of questions that are going to help you determine if you should invest in royalties or working interests. If you just want monthly income and you don't care about the tax benefits, royalties may be the right fit for you. But if you want monthly income and those amazing tax benefits, working interests are where you want to be. Step 2 Understanding accreditation requirements. Most oil and gas investments are limited to accredited investors. These are individuals with $200,000 a year in annual income or 300,000 for couples. Or you've got 1 million in net worth if you fall into that category. Step 3 Finding the right opportunity. In my opinion, the two most important things to look for is who and where. Look for companies with a lot of experience and a really strong track record. And then look for proven areas. You want to drill in areas that have already proven to have oil reserves. No wildcatting. And some of the top proven areas in the United States are the Permian Basin, Eagle Ford, Anadarko, Niobrara and Bakken areas. We've drilled in all of them. I definitely don't want to be drilling up in New York or Florida or somewhere where we know oil isn't happening. Evaluate the opportunity is your next step. There are a ton of things to take into consideration like where are they at in the drilling process? What's the cost to drill? What's the expected production, what are the returns at different oil prices, what's the break even price of oil for the project and do they have contingency money set aside for additional costs? And so many more things to look at. For a copy of my due diligence checklist and everything I evaluate on every deal I do, you can get it in the link in the show notes. Your fifth and final step is to invest. You found the right deal and the next thing you know you have this amazing K1 loss that really did reduce your taxable income and this monthly income is hitting your bank account. It's a really good feeling. If you are ready to supercharge your real estate portfolio, oil and gas might be that missing piece. It's about saving on taxes and really accelerating your wealth. I'm Courtney Moeller. Make sure you follow me for more expert tips and education on oil and gas investing.