How To Preserve Your Wealth and Plan For Retirement With Gaston Escudero III

Hey everybody, welcome back to the podcast, The New and Experienced Investor Podcast. Today we're talking about wealth building secrets. of high net worth individuals, and it's a show you do not want to miss. I'm one of your hosts. I'm Alex Barnett. I'm the new guy.

And I'm Joe Homs, and that makes me the experienced guy.

You got a lot of experience.

Just a little.

Just a little. Um, yeah, we have an amazing guest today. He's a wealth advisor. He has a ton of experience working with and educating high net worth individuals on how they can shelter taxes and, uh, generate Passive income for their retirement, everything that you should be striving for if you're an investor. So you're going to learn all the secrets today. It's going to be incredible. But before we bring him on, let's talk about our meetup really quick.

March 24th, and we will have a special guest, uh, Burton from PropStream. Uh, we'll be there at Hangar 24, 6 o'clock. Is it gonna rain?

No rain.

No rain?

No rain in the forecast.

Okay, I just want to make sure.

Yeah.

You're predicting—

I'm predicting no rain again.

So yeah, come join us and join Burton and PropStream. And they've got a lot of new things that they've added to PropStream, so you don't miss this one.

Don't miss it. I always like to remind you guys, this is a live show, so please share it far and wide. And you get the most out of it by joining in the chat, asking some questions. And you're gonna love it because at the— towards the end of the podcast, we're going to be dropping your questions live and giving it to our guest here. So it's one of the most requested parts of the show.

So it's— It is.

It's gonna be fun. It's gonna be a good time. So before we launch into our topic of wealth-building secrets, let's go over our 2 tips. I would say start learning about taxes now before you make your money. I never had that problem before 'cause I never made any money being in a band. But then once I started flipping properties, it was a complete shift. And then I kind of had to learn it on the fly, thanks to you. And so now it's just another hole to go down. So start learning now.

Now.

That's my tip.

Yeah.

Unless they're going to get rid of the IRS and then you'd have to worry about it.

Let's all pray on that.

Yeah. The tip and a suggestion and really what I'm going to love this speaker and this topic because I think it's very important for high net worth investors, Especially people that own properties. And I believe he's going to talk about statutory trusts, correct? Yes. Okay, good. Yeah. Learn about those as well.

Boom. All right. Let's go ahead and bring our guest in. Today we have Gaston Escudero III. What's up, Gaston? How's it going?

Hey, thanks, guys. Appreciate it.

Heck yeah. And you come from a long line of Gaston Escuderos.

Yes, I am, I am the third.

Okay.

And I was not named after Beauty and the Beast.

I know.

No Beauty and the Beast references.

No.

God, no. You're named after Grandpa.

Is there a fourth on the way? No.

Maybe we'll see.

Yeah.

No, I'm single.

Oh, you're single.

But the goal is to have a fourth eventually. Okay.

Amazing.

Nice.

Absolutely.

There you go.

Yeah.

Future wealth builder. Let's go ahead and jump right into it. Let people know kind of how you got into real estate, what you were doing before, and what led you into this space.

Yeah. Well, I've Really appreciate you guys having me on. My name again is Gaston, or Gaston, depending on your on how you want to pronounce it. So I'm a I'm a financial advisor, real estate wealth advisor, and you know my whole family are all advisors. My uncle, my dad, cousins, brother. So I'm wealth management's been in my DNA, you know. And you know when you when you see professional athletes, you know NFL players or Major League Baseball players, you see them playing you know catch with their kids on the field before the game starts, you know. That was me in my dad's office with like a suit on and with a fake calculator pretending like I was doing formulas at, you know, 8 years old. So the fact that I could, you know, do that today is, is a dream come true. But I started my career after, you know, I graduated Penn State 2014 and then I went to Wall Street and I worked on Wall Street for a company called Cantor Fitzgerald that's been around for about 85 years. They do trillions of dollars of transactions all over the world in various sectors and asset classes. And so I started my career there. And, and then I've worked for a couple hedge funds since then. I've, I've pretty much been raising capital for multi-billion dollar real estate companies for, for the last 10 years. And about 3 years ago, I had this itch to start my own company and become an advisor. You know, a lot of the things that I was doing on the, on the real estate side, I was, you know, going into financial advisor offices and, and sell 'em. on, on why they should be investing in the company's funds that I'm representing. And it came to a point where the actual investors participating realized that I had a little bit more knowledge than the actual advisors that were putting them into these funds. So that kind of happened over and over again. I realized it's time for me to, to kind of take a step back and do my own thing. So, you know, here I'm now 3 years into this, started this, you know, book of business as a financial advisor, you know, specifically dealing with High net worth real estate owners that own real estate, helping them understand various tax codes to help 'em shelter taxes when selling any real estate, 1031 exchange included, and a few others, which I'm sure we'll talk about. And today, you know, the business is growing, it's thriving, and, and we're helping a lot of people understand things that they didn't realize they, they understood, you know, didn't, didn't know about.

Yeah, absolutely. I mean, because the saying goes, it's not, it, it's not about making your money, it's about keeping it.

Yeah.

Yeah.

So what, when you're, when you're first meeting with someone, did, I'm assuming because they're high net worth individuals and because they own a ton of real estate that they would be knowledgeable on this stuff. Where is the drop-off in the education or why don't people know about, you know, a lot of these things already?

Yeah. I mean, so ultimately, you know, there are a handful of things that I do, but the biggest is, is Section 1031. And for those that don't know what a 1031 exchange is, It's been in the tax code for over 100 years, right? It's one of the longest-standing tax codes, and it was really created to help, you know, real estate sellers shelter their wealth, you know, without having to pay taxes so long as they reinvest what they sell into something else of equal or greater in value. And I mean, if you do that correctly, you can accumulate and build wealth over a lifetime and you never have to pay taxes. And people don't realize that when you sell rental property and you don't 1031 exchange, There are state and federal capital gains, but also depreciation recapture. So if someone that's been managing rental property for a couple decades, that's like 40% off the top if they don't 1031 exchange. And still some of my wealthiest clients, they don't know the rules. They, they don't know the rules. There's, there's, you know, you have to identify property in 45 days. You have to close it in 180 days. You can't touch the money when you sell it. There's gotta be a third party. Escrow company that facilitates the exchange. So there's a lot of rules and regulations around it. And some of my wealthiest clients that manage so much real estate, they have no idea. And they've made mistakes. They've made mistakes. They've waited to the last minute to figure it out and they have to start paying a bunch of taxes. So, you know, just education is the biggest thing. And then the second thing is CPAs, CPAs, trust attorneys, estate attorneys. They have an idea about what it is, but they don't really know the ins and outs. So that's kind of what I love doing more than anything is just educating people on the 1031.

Absolutely. Yeah. I'm reading Tax-Free Wealth right now. And basically in the first part of the book, he's like, the rules are right here. It's all written out. So go play the game that way. But if you're playing outside the rules, obviously you're going to be penalized by doing capital gains and everything like that. So I think you're doing the Lord's work. But let's get into it. I mean, what are some secrets? What are some things that people can start doing if they have rental properties or any sort of real estate to try and keep most of that money?

Yeah. I mean, again, the 1031 is you sell a piece of— you bought a property for half a million years ago, you sell it for 2, right? You've got a $1.5 million capital gain. And the reason why people sell rental property, When doing a 1031 exchange is to continue to accumulate wealth. You bought a property for half a million, you sell for 2, you sell for 2, and maybe you trade up and you buy a $3 million property or a $4 million property. And you can continue to do that over and over and over and over, over decades, over a lifetime, and you never have to pay taxes. So it's a beautiful tool to build wealth. It is the number one tool to build wealth in real estate. Whether you're Mr. Smith next door that's got a million-dollar rental or you're managing hundreds of millions of dollars or billions, billion, you know, billionaires are doing 1031 exchanges. And so it's, it's accessible to anybody. But the issue is if you're in your later 50s, 60s, 70s, and 80s, 90s, do you want to continue to manage property? Do you want to continue to have to be forced to find something in 45 days? Dealing with the tenants, the toilets, and the trash of, of being a landlord. Being a landlord is great, but there's also some horror stories of people dealing with landlord laws, especially in California. You can't raise rents. I have a lot of my clients that are older that, you know, they, they, they've got income in retirement and they've got fear of, of jacking up the rents when leases come due. So they don't raise rents. They haven't raised rents in 20 years and they've got $5 million of equity. And you strip out the expenses, my clients that's in their 70s are, are barely earning 2% on their equity, if that. That's not sufficient in retirement to keep up with inflation. And so as an advisor, I really help people understand, you know, pop the hood open and what's the health of your real estate, right? You go to the dentist, you go to the doctor every year, you get a, you know, a, a checkup. on your health? What's the overall health of your rental real estate portfolio? And so 20 years ago, the IRS and the SEC structured a passive legal trust called a DST, you know, Delaware Statutory Trust. And it was, you know, what is it? A DST is— it's a legal trust, and its sole purpose is to own and operate institutional income-producing real estate. And the operators of the trust and of the real estate are multi-billion-dollar real estate companies, the very same companies that I used to work for, some of the largest companies in the world managing hundreds of billions of dollars. They've been around for decades. And this DST is a passive 1031 exchange alternative. Ultimately, that's what it is in layman's terms. And so this DST was really created because, you know, in 2004 it was the, the first wave of baby boomers entering into retirement that wanted to do what? Continue to take advantage of 1031 exchange, build wealth, but they don't want to be involved anymore. They don't want to have just one tenant being their source of income. Right? And so the DST today is about a $9 to $10 billion annual business.

Wow.

That's $9, $10 billion of listings that commercial brokers are getting, residential agents are getting. And these are typically aging baby boomers that have made their money, they've accumulated wealth, and they're done. Now it's time to preserve wealth. Now it's time to increase cash flow. Now it's time to think about their estate planning, how to pass down their wealth when they die. And the DST today is, is the number one way to retire. From the landlord business. And as an advisor, I have access to 45 different DSTs across the country. You know, triple net lease commercial property, office buildings, hotels, apartment buildings, self-storage units, senior living, student housing, all sorts of sectors managed by some of the, the, the most prestigious real estate operators in the country. And so that is really what I, is what keeps me the most busy is educating these aging investors on ways that they can retire from the landlord business without paying And let me ask you maybe a little bit more details on the 1031 exchange.

So, uh, for those of you who don't know, 1031 exchange, you need to identify up to 3 properties, correct?

3 properties.

And it has to basically go into escrow before 45 days is up. So 46-day, your exchange, if you don't have something in escrow ready to go on the 46th day, you're toast. You're paying taxes.

So you just have to identify, okay, property in 45 days, either 3 properties, um, up to, up to the, the equal amount. Um, you can also— there's a 200% rule where you can actually buy more than 3 properties, identify more than 3 properties which is double the value and what you sold for, you don't have to close. You just have to identify.

You have to close within 180 days. You have to close on one of them.

Within 180 days.

Correct.

Yeah.

If not, you pay taxes.

Yeah, pay taxes.

So my question is, when do you identify the DST? Do you identify that as one of the properties?

So When, when selling a rental property, you, you, in your closing documents, right, because you can't have constructive receipt of the proceeds, right? When a buyer wants to give you a million bucks for your rental property, you can't just have them wire it to your checking account. It's got to go to your third-party exchange accommodator. It's what they call— it's called a qualified intermediary account. Once that cash is in your third-party 1031 account, you've got 45 calendar days to identify. 9 times out of 10, there's really 3 reasons why someone would want to do a DST. The main reason is, you know what, I've been educated about this for a couple months now, a year. I know exactly what I'm going to do when I sell it. So they already have, you know, a few DSTs in mind before they even sell their property that they're going to reinvest into. But ultimately, you would identify a DST property just like you would normally. You know, where ABC Apartment Complex in Dallas, Texas, that's, you know, $245 million cash flowing 5%. You literally would identify a 0.0085% equity interest in that building, and you would put that address on the exchange accommodator form, just like if you were to buy a single-family rental in Lake Forest. It's the exact same concept in this instance. You have 45 options. So you can identify multiple DSTs as a backup option. Maybe the DST is not the number one reason why you would want a 1031 exchange. Maybe you're in your 40s or 50s and the DST is not for you. Well, what if you sell a million-dollar property and you've got your eyes on something and your agent can only find you an $800,000 property? There's $200,000 of leftover equity that can be flipped into a DST to satisfy that equal or greater value requirement, which is great. That's very common. And it actually is really helpful for real estate agents to confidently take listings for 1031 clients knowing, hey, no matter what, I've got a backup option for you. No matter what, I'm not under the restriction of equal or greater in value because I've got a DST that I can identify and also as a backup option. I can't tell you how many times on day 44 I get calls. People are panicking because they've got hundreds of thousands of dollars of taxes at stake and they didn't do their homework. Their CPA didn't give them a heads up about the DST. Their agent didn't give them a heads up about the DST. So, you know, I educate real estate agents, hundreds of agents a year. No matter what, even if they don't want to do a DST, just identify it as a backup just in case.

And, and that's kind of the point that I'm getting at is, you know, instead of identifying 3 residential properties, you should identify a DST in case the 2 residential properties that you're going after, you know, blow up.

Yeah, absolutely. That's the smartest thing to do, especially if you're in your 70s or 80s and you can't afford a hit. You can't afford a tax hit like that, right? No way.

Yeah. Okay.

Are all your clients, uh, in the Orange County area?

Um, I would say 90% of my clients are in the Orange County area. You know, Newport Beach, Corona del Mar. I mean, all over. Um, I also have clients, um, on the East Coast because I lived in New York City, lived in Texas, and I covered the Northeast for a bunch of these companies. Lived in Maryland for 3 years. So I've got a lot of contacts back East, Midwest.

Mm-hmm.

But I would say 90% are Orange County. But I mean, I've got 20 state licenses, so I've got clients in 20 states.

Okay.

Yeah.

Excellent. Now, before we started recording, you mentioned you kind of break it down as 5 pillars of wealth building, or what would you call it?

I focus on really 5 pillars of wealth management.

Wealth management.

That's non-traditional. And it's funny, I do a lot of seminars, educating investors. And, um, you know, when they think of a financial advisor, they think of stocks, they think of bonds, they think of annuities. And that's not what I do.

Yeah.

At all.

And I don't really like doing those things.

Right.

If someone says, hey, I've got $1 million, can you invest in the stock market? I'll say, I'll have to refer you to someone else. You know, um, but, you know, I, I help people understand, um, the 1031 exchange.

Okay.

The DST. Um, there's also ways to 1031 exchange into private REITs. Real estate investment trusts. That's a whole other level of, of, you know, a lot of my clients that invest in DSTs, you know, they want liquidity. And typically when you're in a DST, you're in it for like 4 to 6 years at a time and you can't really get out of it. So you're just kind of rolling it every 4 to 6 years. But there's a way to 1031 exchange into a REIT, like a couple billion dollars of, of real estate value in a REIT. And you can pull money out after 4 years. So that's something, that's another area. We were talking about it before. You know, I know you flip houses and, you know, I have a lot of, you know, clients that flip houses and develop real estate or they're selling a primary residence or a secondary residence or they're selling a business or they're selling a bunch of stocks, all of which are non-1031 eligible. So what do you do with capital gains? Other than having some creative deductions from a CPA, there's not really many options. You know, 2017, the Trump administration created a tax code called Opportunity Zones. He even talked about it on his last— on his debate with Biden, he brought it up. And Opportunity Zones, really in layman's terms, and you can Google Opportunity Zones and you can YouTube, there's a bunch of information, but it's a tax code that is used specifically to help wealthy Sellers of any asset, anything. And once you receive your gain, that's taxable, you have 180 days to reinvest the taxable gain portion into certain zip codes across the US in these qualified opportunity zones. There's like 8,000+ zip codes all over the country. And these zip codes historically have been underperforming versus the national average in regards to poverty and household income, homeownership, things like that. And these zip codes were kind of grandfathered into this tax code using 2010 economic consensus. So 14 years ago, parts of California, San Clemente, San Juan Capistrano, New York City, Dallas, San Antonio. I mean, fast forward 14 years today, some of the best growth markets across the country are in these opportunity zones. And so you can reinvest and, and you have to develop real estate or redevelop real estate in these areas. And if you do it, you, you can shelter capital gains upfront. You have to be in these areas for 10 years and any appreciation over 10 years is tax-free. So you can either do it yourself or you can invest with someone like myself that has access to passively owned qualified opportunity zone funds. Where you've got multi-billion dollar developers developing hundreds, if not billions of dollars of real estate in these areas, then you can just park your money with them, shelter taxes, and then allow your wealth to build tax-free passively. So that's the another pillar I focus on. A little bit more complicated, more moving parts there. But I would say any agents that are that are listening, most of your clients are probably primary owners, principal you know real estate owners. They bought a property for half a million. They sell for 2. That's a $1.5 million capital gain. They're married, half a million dollar exclusion. So on that, on that transaction, that client walks away with $1 million tax-free. The remaining million, that's fully taxable. That's the reason why people don't sell. You multiply that by 10 with Newport Coast real estate, Corona del Mar, Laguna Beach, they will never sell. No matter how good of an agent you are, they'll never sell. So what I do is I meet with them and I, and I very, I lay it out very candidly. These are all your options that no one's ever laid out for you. Option number 1, you sell right now. These are your taxes, which freak, you know, kind of get freaked out, right?

Mm-hmm.

I'm not gonna sell. Well, I figured option number 2, how about, how about we think about monetizing your real, your primary residence? Monetize.

Yeah.

How to allow your wealth to go to work for you. Finally, if you're in your 60s, 70s, and 80s and you got a big house with a lot of equity, that's great, but that's not doing anything for you in retirement. That's just kind of sitting there. What if we convert your primary residence into a rental, sell it in 2 years and 1031 exchange into a DST and get 5%, 6% on $5, $6 million of equity? How would that look like for you in retirement?

Right.

That could be an option. Or we could sell and reinvest some of the capital gain into opportunity zones. And depending on their net worth, the opportunity zones might be more attractive than converting into a rental. And you just kind of lay it out there for them and it really changes the conversation. So, you know, that's what I do with agents every day is just go with them to listing appointments and lay out these options for clients that have never heard about this at all.

Absolutely.

On the DST investments, are you— are they giving you an income every month just like you would have gotten if you were renting the property but without the headaches?

Absolutely.

Okay.

Every DST property is a— it's a stabilized, income-producing, blue-chip, you know, high-quality, more predictable, lower-risk type of property. All income producing. So you're participating in monthly income from the rents, typically between 4.5% to 6.5% annual cash flow. And I have clients that want more income that are willing to take a little bit more risk. And you can actually 1031 exchange into oil and gas mineral rights in the Permian Basin, cash flowing 12%. You know, so a lot of clients will diversify, right? Another, another important point is let's just say someone's selling, you know, a million-dollar property. and they want to do a DST, right? You don't have to choose just one. You can reinvest the million across 4, 5 different DSTs, right? As long as you're reinvesting into equal or greater in value, it's all that matters. So I've got clients that are saying, you know, I can put $250,000 in a senior living facility in Oregon and another $250,000 in an apartment complex off campus at University of Notre Dame. A triple net lease commercial property in Texas, right? And, and, you know, maybe a triple net lease retail shopping center or something in Ohio. And you can reinvest into multiple states, multiple sectors, and really diversify. And so, you know, a client that's got one rental property, you know, generating them 30 grand a year or something, if that tenant moves out, their income goes to zero overnight. If you reinvest that million across maybe multiple food groups of real estate, that could be thousands. potentially of income-producing tenants generating you that income every month rather than just one.

And what kind of tax form is generated to the investor?

Typically it's like a 1099. That's how it reads. Clients participate not only in the income and the appreciation, there's no guarantees, but, you know, if there's appreciation, they, you know, there will be gain. That they can then 1031 exchange again. But they also participate in the tax deductions. Depreciation gets passed through to investors as well as other sorts of operating expenses. And so every year there'll be like a 1099 that will get mailed to the investor in early March, mid-March. You hand it to your CPA and you file your Schedule E. Super easy. It's all laid out.

Tax laws and, I mean, even real estate markets are constantly shifting. How are you staying on top of all that?

Like the housing market?

Yeah, housing market or any of these vehicles.

Yeah. I mean, I'm not necessarily as in tuned with the local housing market like a real estate agent would, but given my background working for these multi-billion-dollar real estate companies, you know, I've always been a student of the business. Even, you know, if I'm representing, you know, an apartment operator, I just, you know, I worked for a company called NextPoint for a while and they specialize in multifamily. So for, so for a couple years, I was just talking about multifamily. You know, I've got a multifamily DST, Mr. Advisor. You know, how would you like to show your client this who might need a 1031? But I, I didn't just research multifamily, I researched my competitors. Who was I, who was I going up against for the business? Self-storage, hotels, office, shopping centers, senior living. And so that's just kind of part of like my analytical mindset. And so I'm constantly just reading, you know, quarterly reports from some of the largest brokerages that are selling hundreds of billions of dollars of real estate and seeing, okay, where are the mo— where are, are, are, is oversupply risk across the country? Where are cap rates at today? Where's the most risk? Where are vacancies? Office is, is an asset class you want to be a little bit careful with right now, especially, and also retail. A lot of people don't realize that multifamily has been the darling of the real estate market since 2008, 2009, but it got hit pretty hard the last couple years because there's this oversaturation of new supply in the Southeast. And so there's there's things to look into, and so I'm just constantly just making sure that I'm talking with the institutions. What are they looking for? What are they looking at? What's the downside risk for a lot of these? How are you buying them? What's the pricing? You know, and and if I don't feel comfortable, we're not going to do it at the end of the day because the DST is not a get rich investment. These are people that can't afford to. They're not trying to double their money. They they they don't want to take extra risk. They really just want to park their money. Really have more confidence on the downside, predictable cash flow, and just preservation of principles number one priority. So we just need to make sure we're checking off those boxes. And if a deal where it's just too much too much hair on it, we're just going to pass.

Mm-hmm.

Yeah. You're you're not a CPA, correct?

No.

Okay. There's a phrase in taxes that basically says. Um, if you're an owner of a property, that when you die, there's what's called a step-up in basis.

Have you heard of that? Yeah.

Okay, so does a step-up in basis go to these DSTs as well? So, you know, if I have an investment and then I exchange it to a DST and then I pass away, do all my tax Do you have any idea if my taxes go away to my heirs at that point?

Yeah, absolutely. So the, the step-up in basis is— it's not just a DST concept, it's a 1031 exchange, you know, universal aspect of the tax code. That is one of the main benefits of the 1031 exchange is when that owner dies that owned that rental, Most of them, especially in their later years, own their property in their living trust, right? When they die, all that state and federal capital gains tax, as well as depreciation recapture tax— a lot of people don't realize about depreciation recapture. That sneaks up on you. Whatever you depreciate, you owe that back at 25% if you choose not to 1031 exchange. So all that tax goes away. As soon as that owner dies, that tax goes away. There's a complete step-up in basis. And so the living trust, or whoever the heir is of that property, takes that property over, and they can choose to sell it or they can continue to manage it, right? The DST is the exact same law. Rather than taking over an actively managed property, you're taking over fractional interest In a $150, $200 million real estate DST or multiple DSTs. And one of the, the main reasons why aging investors will choose the DST, it's not just to be, you know, a passive investor and all the things that we talked about, but it's the estate planning. It's, I've got $10 million of rental property and I've got 6, 7, 8 people I want to pass my wealth to. It would be kind of a nightmare to pass hard, tangible real estate to my grandkids who know nothing about how to handle the property, or my kids who have no knowledge about the real estate. They don't even live in the same state the property's located, right? There, I mean, and, and it's been lifetime of wealth building that, you know, just like that, you're just going to hand the reins over, you know? And so the DST really has more of a methodical, intentional, plan where you can reinvest your money into DSTs. I mean, let's just say 10 DSTs someone owns, and you can literally parcel out fractional interest that little Johnny gets $300,000 of my million dollars in this DST, and $200,000 goes to Susie and Timmy, and parcel it out and fractionalize it in your living trust. And so now when you die, you get a complete step-up in basis, and now your, your estate now owns interest in multi-billion-dollar real estate. companies. And now they can decide, okay, is it in my best interest to continue to receive the income? Or do I cash out? And so that gives peace of mind, not only for the owners towards the end of their life, but even the heirs would prefer that route. The estate would prefer the DST route a lot of times than taking over real estate. I just helped an agent recently sell— she sold a $1.4 million rental that her mom owned. Her mom's 96. Mom's 96. Um, she's generating $30 grand a year net of expenses, and she just sold it, reinvested it into some DSTs. And the mom, the owner, said, whatever you guys— whatever the, the kids want to do, I'll do, because I want to pass down my $1.45 million easiest as possible to my kids. So the daughters voted We're going to sell it and do DSTs. We don't want to— we don't want to take this over when you die, Mom. So that's what they did.

I'm going to jump in the Wayback Machine here for a second.

Okay.

Sorry, I don't know where you were going, but—

That's—

yeah, do it. There used to be, let's call it a 1031 exchange for property that you owned as an individual. Are you aware of that? And do you remember when that was? So the rule was, if you owned a single-family residence, to avoid paying taxes, you had to buy another property and put all that money, just like you do on a 1031 exchange, put all that property in there and they wouldn't tax you. Do you remember who changed that?

I don't remember who changed it, but I think it was during the Obama administration, if I'm not mistaken.

No, farther back.

Farther back?

Farther back.

They, they changed something during his administration, some aspect of the 1031.

But no, no, it was, it was farther back. Um, that's when the law came in, $250,000 and $500,000.

Okay.

Okay. Now that was Bill Clinton that did that. Okay. Yeah.

Interesting.

Just Wayback Machine information.

Yeah, I was like in first grade. Yeah, that's what I said. What year was Bill Clinton?

Uh, '91 or something.

Yeah, right. Reagan was '80s. Yeah, around there. Late '80s. Late '80s. Yeah.

Yep, we were eating cereal back then. Um, I think that's a great way to pass down the wealth, the DST, because, I mean, we see all the time where, like you mentioned, it— someone spends their lifetime building wealth and they're thinking, I'm, I'm building Generational wealthier, then the second they're gone, it's just like boom. All, all the kids, they just sell everything off and they all, all that trip to Hawaii.

Yeah.

All that is just gone. Like a whole life's worth of planning and making the right choices is just gone.

I have a trivia question for you guys. Okay. How long does it take for the estate to blow through the inheritance? Oh God.

Like 12 hours.

A month?

No. 2 questions. How long does it take to blow through it? And what's the first thing that they buy?

Oh God. An RV and 3 weeks.

Uh, the car that they've always wanted. And I, I'm gonna give 'em a little bit longer. I'm gonna give 'em 6 months.

Okay. 2 years.

Okay. Thank God.

2 years.

Okay.

Um, the first thing they buy is a car.

Yes.

That's way nicer than mom and dad. Yes.

Yeah.

Yeah.

That car that you wanted when you were a teenager.

I never got this for Christmas, Mom.

Yeah.

Geez.

That's what you're gonna buy.

They blow through it.

Yeah.

With mom and dad's money.

It literally goes to zero.

Yeah.

Yeah.

Yeah.

Yeah.

Because you're gonna have 3 types of kids. You're gonna have the responsible kid that's gonna manage it and keep mom and dad's legacy. You're gonna have the other kid that's gonna want to have the cash.

Right.

To go and do whatever. And then the other kid's gonna wanna live in it. They're gonna wanna live in the house.

Right, yeah, yeah, yeah, yeah, yeah, yeah, exactly.

And they all have to vote on what to do. And that's not gonna fly.

Is that like the ages they were born? Like the oldest, the middle child is gonna blow through everything.

Oh yeah.

You know that.

Yeah.

And then the young child who can't afford anything wants to live in the house, right?

Rent-free.

Rent-free. Yeah, yeah, okay.

And then, and then, and then now they have an increase in basis, but guess what else increases? Property tax.

Yes.

Oh yeah.

So on a $10 million house, that's very expensive annual property tax for, you know, an heir that's in high school or college or something.

Right.

You know?

But it used to not be that way.

No.

And then Prop, I believe it's 19, came into play. And now you're correct that if you don't move into the property, they can raise the property taxes up.

You joked about in, in the beginning of, uh, you know, eliminating the IRS.

Yeah.

I wouldn't have a job if the IRS went away.

Really? You'd be doged?

I, I, I would probably, I, I would probably, but what would I be doing right now if, if not?

No, you'd be teaching people how to get even more wealth.

Yeah.

I think it's a skill that is gonna be needed whether the IRS is there or not.

Yeah, that's true. The IRS though.

Yeah.

I have to pay a bunch of taxes in a couple months, so I'm feeling on my end just, just from an income perspective. So.

Well, I was gonna say that. I mean, what are you investing in? You have all this knowledge.

Yeah.

You have the game in front of you. You know all the rules. So how are you navigating this personally?

Um, well, you know, I, I would say I really started, you know, making money and saving You know, the last couple years, you know, I, you know, I was pretty broke the first handful of years working on Wall Street and getting outta credit card debt and paying my parents back and, and, and just moving from company to company, getting promotions and things like that. So, and so I would say the last couple years I've been able to start investing, you know, for myself in, in, in bigger ways. And I don't have a lot of stocks. You know, I've got some dollar cost averaging I'm doing in my IRA, just S&P 500 index, just because I'm 33 years old and I don't really even, I'm not looking at the stock market. I just know over a long period of time, just keep dollar cost averaging is the smartest thing to do. But, you know, I own a lot of passive real estate investments. I own, you know, some, you know, there's a company that does multifamily flips and they're on their 13th fund averaging a 15% annualized return. So I've got some money with them. I just invested a bunch for myself and with, with a lot of my clients in a data center real estate fund, which is an asset class that is on fire right now.

Mm-hmm.

With data centers is the commercial real estate that, that owns the cloud.

Mm-hmm.

So when you think about every device that we use, every wireless device, server, you know, streaming, everything, all that storage, all that data is being stored in these huge commercial properties.

Mm-hmm.

So the cloud really, really drove demand for that like 10 years ago. Then you throw AI on that, the demand is insatiable for data centers, insatiable. And so I invested money in a data center fund that just closed. Um, oil and gas. I've been doing a lot of oil and gas personally, only be, you know, more so because of the tax deductions that oil and gas provides. But also I just— oil and gas, if done correctly with the right company, Because there's a lot of risk there, but if you do it correctly, it's one of the best inflation hedges. Commodities is one of the best inflation hedges. The last 2 years, oil and gas has been the best performing investment with all my client portfolios as well as myself, like 30% cash flow last year. So multifamily, data centers, oil and gas, and a few other things, smaller things, but I'm saving up to buy an investment property next year. So that's kind of like my— and then I'm also reinvesting a lot of my money into the business. You know, I want to hire another assistant this year and, uh, got some, some big plans. So kind of investing in myself right now too.

Let me stop you for a second because I heard something as a parent, and hopefully my 3 children are listening. You paid your parents back?

I did. I paid them back in 2019.

Wow. I never—

I owed them, uh, $15,000. No, no, they, they were paying— they were helping me pay rent in New York. I paid them back. Then when I was living in Texas in 2019, all my commission checks were just going towards paying off my, my, my mom's credit card because she let me use it for expenses. Like, like, like, I didn't even have enough credit to go take people out to dinner, you know, like take advisors out to dinner and travel and book hotel rooms and rental cars.

What a great mom.

So I paid her back and, um, and, uh, you know, that's— they've—

so it is possible.

It is possible. Wow. But I would be— I was very annoyed though. My mom was like, hey, don't forget about the credit card. I'm like, oh, I know, Mom.

Okay.

Yes, I know.

The sticky note up here. Hey, Mom.

Yeah.

So 2019, got out of debt officially. 2019.

Nice.

Congrats. There you go. Thank you.

That's good. That's great. Yeah. It's, yeah, it's like, it makes sense. You know, you're starting from the bottom when you go to Wall Street. Yeah. I'm imagining Wolf of Wall Street. So I'm like, I went to go work for some hedge funds. Boom. You're making like a million dollars a month in my mind. You know what I mean? So it's automatically you go to Wolf of Wall Street. What is that? What is that like? You're just at the start at the bottom and you're working your way up and it takes years and years and years.

I mean, I, I worked at, you know, Cantor Fitzgerald, a huge company, but I was entry-level position making $50,000 a year in New York City.

Yeah.

You know, and they didn't really have any investments, no products. So for a couple years, all I did was just read prospectuses and read reports, which is great. My learning curve went through the roof. Invaluable.

Right.

I mean, I wouldn't be where I'm at today if it weren't for Cantor Fitzgerald and being in New York.

Nice.

And then I moved back to California, worked for a, you know, a company called BlueRock, multi-billion dollar real estate mutual fund company, preferred stock. They do DSTs as well. Again, $60,000 salary with some commissions, maybe made $100,000 maybe the next year. And, uh, you know, and so it was just grinding, you know, grinding and learning and making mistakes and chipping away, chipping away. And, and, you know, even though I started making some money in 2019, um, you know, I, I, when I started this business in 2022, I was, I had, you know, no one's paying me money. It's, I'm not an employee. I Was living off of savings, so I had to dip into savings again in 2022. And so now it's 2025, almost three years into doing this, and and so I kind of had to start from scratch just a few years ago. I've got a full-time assistant now, right? And I'm reinvesting it in the business and growing it. And so it's just you know working on Wall Street though, it's a different animal. The people. I only lasted 2 years.

Sadness.

I'm humbled to admit I only— I can only last 2 years because it's a— it is a grind.

Yeah.

And it's—

it's—

you don't have a car. You're walking everywhere. You're taking the subway everywhere. The hours are longer. The intensity is longer. The personalities are stronger. The expectations are stronger. I mean, it's the epicenter of the financial services market.

Yeah.

And so even just your bosses and their bosses and their bosses that are worth a ton of money, they just think differently. And I think that's what has made me successful is I got my butt kicked to the point where working for Cantor Fitzgerald, we would have 3 products and I would have to record myself and I would have to send it to our sales manager and he would pick my sales pitches apart. And that is how I can kind of get straight to the point, you know, today, because I got picked apart.

Did they ever ask you to document 5 things that you've done during the week and email it to them?

Well, that's— if my old boss Kirby Knoll is listening to this, I love you, but I hated being managed. That's one of the reasons why I left. Is, uh, I don't want to be told what to do.

Yeah.

At the end of the day, that's why I work for myself. And, you know, if I want to make calls today, I'll make calls tomorrow. I don't want to do anything, I'm not going to do anything. You know, I just want that freedom. And, and I had to do that.

But the mindset changes when you're working for yourself. Then, then, you know, it's like, okay, I'm not making any money, so I better go out there and do the things that I was taught to do.

There is nothing greater I don't— it doesn't even have to be financial services. Just doing your own thing and, and being forced to bet on yourself. I'm a man of faith as well, and, um, I had no other option but to trust God, um, with starting this business. It was terrifying to do this because I was doing really well. I was making money, getting promotions, savings are growing, credit score is high. Like, why, why would you ever want to, you know? But something deep within me was like, you don't want to This, this is safe. You don't work for someone. You know what I mean? And and I think that fear—you have to bet on yourself, whether you're a flipper and real estate—all of us. You know, you got to bet on yourself, and not a lot of people do that. I think there's just a lot of fear around that, and I'm grateful that I had people that I could lean on to help me that did it before me because you learn a lot about yourself. When you've got no other option but to succeed at that point. Absolutely. Absolutely. I'm sure yourself too.

Yeah.

Over a long career, you know, months without earning income.

Yeah.

You know, deals falling through.

Yeah.

Recessions, right? All that.

I need to kick Alex in the butt a little bit more is what you're saying.

Joe's giving it to me. Joe's giving it to me real good. So, no, but I mean, that's, that's where you learn, you know, that's, that's really where you learn. And that's what being young is for too, you know, just getting your ass handed to you at freaking Wall Street. I was just like, why did I do this?

Can't tell you how many times I cry myself to sleep. What am I doing right now? Yeah, yeah, like, we don't care about your feelings. Oh yeah, but you know, God bless them. I, I know they, they gave me tough skin. Absolutely thickened my skin for sure.

Yeah, absolutely. And then now you mentioned, you know, you're, you're public speaking, you're giving these presentations on a, on a larger level. Yeah. And that's kind of where it, where it all started. And you Getting picked apart on your presentation back then, you know. Now, now you streamlined it.

And yeah, no, it's, um, I would not be where I'm at today if it weren't for all those experiences. And, and today, you know, I get to do what I love. I get— I, I'm educating some of the wealthiest real estate, you know, owners in, in Orange County about tax codes that can help 'em.

Right.

And, uh, and you're right, you know, if you're someone that's made a lot of money over your lifetime, You've done it. You've made the right decisions more times than not. You've been good stewards of your wealth. And to then turn that over to someone else, you pick it apart. You pick things apart. And so I've had to learn a lot. And now I get to have really cool conversations with clients given— and they respect my My past working with these companies before, you know, cuz I, I can speak to them a little bit differently than someone that maybe didn't do that.

Absolutely. All right. Do you see people that just got lucky? I mean, think about, they, they bought 5 houses on Lido Island in the '70s or something, and then now that's, that's their wealth. Or is everybody, it's, oh my, Just—

there's, there's 2 types of real estate owners that are clients. There's 2 types, and I don't really see that. It's, it's the type— and, and this is the thing, some of the— my best clients are, are so humble.

Mm-hmm.

They have a ton of money and they're just like, oh, so lucky. Good timing.

Right.

God's been good to us. They're good people.

Mm-hmm.

You know what I mean? Um, so yeah, maybe there's a little bit of luck. But, but you have to buy the piece of real estate to bet on yourself to begin with.

Yeah.

There's gotta be some action, right? Some faith action there. You know, if it goes up, great. If it doesn't, you know, I'm okay still.

Yeah.

You're not reliant on that, you know, making, you know, so to speak. Then I've got the other type where they're just, they are operators. They've got the math, the science. They've made mistakes. They grind. They've been managing and accumulating a vast amount of wealth for decades and decades. And they're smart and they're brilliant. I mean, managing real estate, I think, efficiently is, is, it's not just a science, but there's an art to it. You gotta trust your gut. You gotta make good decisions. You gotta negotiate. You have to, you have to know when to sell, when to buy, when to refi. I mean, there's an art form to it. And those are the, the types of people that I can connect with too. But I also see people that just got really lucky and they just, but they're also really good people too. Yeah. So I feel like luck tends to find people that work hard and do the right thing and just stay busy. I think too.

Yeah, absolutely. And then they give it to their kids and then it's all gone.

Yeah. In 2 years.

And network too, you know, your network and your friends. Sure. People just, we're just looking out for each other. Yeah.

Yeah. Yeah, absolutely. Um, what, uh, what's one piece of advice you can get, give someone who's kind of just starting out? They're thinking about wealth preservation and being tax efficient for retirement, but they're not quite a high net worth individual. What's some advice for them?

Well, I mean, really the minimum criteria for me to work with someone legally is they have to have a net worth of $1 million or income of $200,000, either or. For those though that don't meet that criteria, I mean, it would be buying a duplex or a triplex and living in one of those, one of the units, renting out the others, and just being really creative with financing and little down and just 1031 exchanging. And I think network, having a good community of people that Ultimately have what you want. Rubbing shoulders, you know, if you're in your 30s or 40s and you're still trying to figure it out, you got to find a mentor. You got to find men and women that have been doing this longer than you and just ask questions. That's what I did. I was obsessed with asking the number one sales guy at Cantor Fitzgerald questions. What are you reading? What articles are you reading? What do you do every day? What reports are you reading? Why did you say this? Why did you say that? What do you do with this objection? Right? I was just obsessed, and I just wanted to follow someone's lead that was the best in their field. And I think there's a lot of really wealthy, successful real estate investors that are more than happy to share their wisdom because they know how hard it is, and they probably had a mentor. So I think the number one thing is just get plugged into like a mastermind group, networking. Whether it's at church, you know, whatever it is, I think that's number one is being rub shoulders with like-minded people that have what you want. And then two, you gotta you gotta take some risks. You gotta bet on yourself. If you if you invest scared, almost like surfing, you know, if you if you're charging and all of a sudden you kind of hesitate at the last minute, that's when you wipe out. I think that's a lot of it with investing. If you hesitate and you are scared. And you invest with fear, you're manifesting something to go wrong. You're manifesting something to be fearful over. And I think that's with anything in life, not just investing, but mentorship, I think would be the— to help more than anything.

Yep. This guy's available.

That's why I started my meetup 10 years ago. Yeah. There you go. To get like-minded people to come and Talk to each other and move forward.

Yeah, and you've seen people partner up there and you know become private money lenders or you know work on projects together. So yeah, absolutely.

That's when does that meet up? What's the meet up?

Every fourth Monday, Hangar 24 in Irvine or Orange County Real Estate Investors Network.

Oh, it's on Meetup. Wow. Meetup.com.

That's cool. I could probably learn a lot by just listening to you guys.

Yeah, yeah, yeah. No, we, we have speakers come in all the time, so it'd be cool to get you in there.

Yeah, whatever you guys need. That's cool.

Can you 1031 a mobile home?

Oh yeah.

Oh yeah.

That's a hot asset class right now.

Yeah. Not a park, just one mobile home.

Yeah.

And then end up owning $1 billion in real estate.

Is that possible? Manufactured housing. That's the— Manufactured housing is the sophisticated term, right?

Yeah. What did we call it the other day? It was like community.

We heard it in a show. It was something manufactured living.

Oh, manufactured living. Yeah, same thing.

Luxury portable portable living. That would sound like a porta potty. Never mind. Never mind. That's weird. I call it a trailer. We're rebranding trailer park. Yeah. You don't want to say trailer park. It's a trailer park.

We're rebranding.

But there's, there's, um, there's really good opportunities. I mean, I've, I've raised money in, uh, in something a few years ago, and they just bought a bunch of trailer, uh, um, manufactured homes in like Florida or something for like a couple hundred thousand, right? And the, and the yields on those are like 15, 16, 17%, and the demand is through the roof because of just how the cost of being a homeowner, right? You know, so it's just, there's the, the numbers work. Mm-hmm. If you know how to manage it correctly, the numbers work.

Right.

For sure. Especially like in that, that blue collar community.

Yeah.

You know, there's a, there's a, that's like a new thing now. People like, you, you don't just go to, you know, I feel like there's like a, you don't just live in a manufactured house because you can't afford anything else. I, I, people choose to do it. Mm-hmm. Over living in an apartment complex.

Sure. Yeah.

There's like, there's a choice there. Yeah. where there's just more flexibility, more freedom. I think too, it's not just because of for poor people like it used to be or something.

Right. Yeah. Yeah. 'Cause you can get it. I mean, even out here, out in like Perris, like Elsinore, you can get like an acre of land, you know, got your mobile on there.

Well, think about the manufactured housing in Newport Beach. There's that manufactured park. I mean, those things are probably worth like a million bucks at this point. Huntington Beach on the beach. Right. The stacks.

Yeah. The space rent in some of those beach communities is upwards of like $4,000 too.

Yeah.

That's pretty insane. Yeah.

It's pretty hefty. But yeah, whoever bought that made a good decision.

If you find a mobile home flip, let me know.

That's what we do.

I don't want to do the work, but maybe I'll invest.

Let's go. Awesome.

I don't want to do the work though.

Okay. No, that's—

I'm too busy.

That's literally what we do.

He doesn't do the work either.

I oversee the work.

Sean oversees the work. He's like the air traffic control. Like, oh, you go this way.

Yeah, that's all you gotta do. You go, yeah, that's literally all you do. And then work gets started.

Yeah, then he gets a nice cut on the equity. There we go.

Right, it's a very simple process.

Okay, cool.

Yeah, I like it.

Making deals happen. Yeah, that's great. Well, um, tell, tell us a little bit more about what are you doing when you're not working. You mentioned surfing, so is that—

Um, I'm really involved in, uh, in Mariners Church. So really involved there. I've got a lot of friends and family that go there. And I actually just led a men's group, co-led a men's group last night with just 15 guys, all business owners, entrepreneurs, talking about how to bring God into our daily lives and into the workplace. So faith is my number one, church. And then love working out. Shout out to my buddy Bobby. who owns— who, who's a co-owner of a gym in Costa Mesa called Moxie.

Okay.

One of the best gyms I've ever been to.

Oh.

And, uh, it's like a— it's like a HIIT workout class. They've got spin and they've got like this shred, uh, class, and you can do different types of classes. They've got hundreds and hundreds of people going in and out, in, in and out of that gym, and it's just amazing culture. So I do that every day. Golf. Love to golf. Cold plunge.

Okay.

Sauna.

Yeah.

Read. Hang out with my dog Rocky and, uh, and just chill out. I like to be a little bit quiet on the weekends because I'm on all, all week on the phone. So I like to shut it down on the weekends.

He's single, ladies.

I am single. I am single.

Are you kidding? Like, come on.

Yeah, yeah, yeah.

I don't believe it.

Board's lighting up as we speak. I don't believe it.

Yeah, that's, uh, you're living the dream, seems like.

You know, I, I need my mom. My mom, uh, Melanie, she, uh, she reminds me, she goes, everything you're doing right now, you've been dreaming about for your whole life. And sometimes I think, uh, I forget. I forget when you get part of the rat race and the calls and the deals, you forget. Like, if you take a step back and really take a step back and see what I'm doing right now, It's, it's pretty remarkable and it's not of my own making. There's a— I've had a lot of help. I've had a lot of help. Obviously I've worked hard, but I've had a lot of help. And, uh, that's the humbling part is I think the most successful people have had help. Like, you know, I don't think people can do it all, all on their own. So I gotta remember that. Listen, listen to mom. Listen to mom's advice.

Oh, always. Yeah, always. Mom knows.

Yes. Be grateful, sweetie. That's what she says. Well, there you go.

Mom did it right.

It's all gonna work out. Yeah. The deal's not gonna change your life. It's all good.

Oh gosh. Yeah. Yeah. Yeah. You can be there and this deal is not going through and that's all you can think about.

Some of the best, a lot of the deals that have not gone my way looking back, I actually, I'm actually grateful they didn't. A lot of the, a lot of the, the nos and the deals falling through, looking back, I'm like, you know what, I'm really glad that happened. But it's really hard to feel that weight while you're in it. Yeah, that's the hard part.

Yeah, that's, that's a good one right there. That's a nugget right there.

It all works out. Just do the right thing. Like-minded people, put your head down. It always works out.

Amen to that.

This is a part of the show. I have a few videos that I've curated, that we've curated. I'd like to get your reaction, your unadulterated, unfiltered reaction.

Yeah.

You got it.

It's going to be like South Park or something. And it's gone. Yeah, exactly.

What do we got, producer?

Okay. We got 3 tax strategies that feel illegal to know.

Here are 3 tax strategies that feel absolutely illegal to know. The number 1 tax strategy is the Augusta rule. The Augusta rule allows for you to rent out your home to your corporation for 14 days rent-free. Yeah, that's right. You get 14 days of tax-free rent from renting out your house. The number 2 tax strategy is the cost segregation study. Essentially what it allows for you to do is it allows for you to write off all the components inside of your investment property in as quickly as 1 year. This creates such a big loss on the tax return, and it can even offset your W-2 and 1099 taxes. The 3rd strategy that feels illegal to know, it's called the private family foundation strategy. You and your family members can be employees of the foundation, and you and your family members can donate to the foundation every single year. How this benefits you is only 5% of the money that you've donated to the foundation actually has to go out to another 501 of your choice. This allows for family members to control money and avoid taxes at the same time. Here are 3 tax—

That guy's got it tight. That guy's— that guy's good.

You got it down.

Yeah. I gotta call him. Get some advice. That was— that was good. So 2 out of the 3, I'm familiar with. The last one, I'm not that familiar with.

Sounds like the Clinton Foundation, something like that.

Yeah. Something scary. We were eating Froot Loops back then, so I don't really know. Right. Remember? Yes. Yes. The Augusta Rule obviously was the Augusta, you know, I think, I'm pretty sure it had a lot to do with the big homes surrounding the Masters. Correct. And, you know, you live there and you rent it out to some of the, you know, the guests there. For a couple of weeks, you know, that's tax-free income. So I think that's, that's— so I've never had a client do it, but I've had people ask me about it. But, you know, I'm familiar. And then the— what was the second one? Cost segregation. Cost segregation is brilliant.

Okay.

Absolutely. And a lot of the— every— most of the DSTs that we do business with do cost segregation where it's like depreciation on steroids. That's what it is. That is the easiest way. It's depreciation on steroids. Rather than, you know, depreciation is, is, is an assumption that when you own real estate, it's gonna go down in value over 27 years, the wear and tear, things like that. The cost segregation is you're writing off, you're writing off carpets and roofing and lighting and fixtures. I mean, you're almost like you're gutting the whole thing for losses. And you can do it on a commercial property scale. It's expensive to do. That's why I think a lot of people don't know about it or aren't willing to do it. But if you do it correctly, it's very beautiful and it's very efficient. So I think of the 3, that one is the most powerful in my opinion for real estate owners. Okay. For sure.

I've heard, or people have been talking about the short-term rental Tax thing. I don't, do you know anything about that? It's like return one of your rentals into a short-term rental for 6 months, then you can write off a bunch of stuff. I don't know.

Well, there's, there's, I've got clients that, you know, they own a vacation rental or a secondary home, and as long as they rent it out for a couple weeks out of the year and file it as an investment property, you can 1031 exchange a secondary home.

Right.

So that I have a lot of wealthy clients that, um, own like 3 homes and they're like, you know, they have one of them they live in and they're at the desert like maybe a month out of the year and it's just sitting there empty.

Yeah.

And it's been appreciating for decades. So it's like, dude, just rent it out. Like you don't even have to even just rent it out to someone local, like, you know, or whatever. File it as an investment property. Now you've got the 1031 exchange light on it. It's only been a couple, weeks worth of income over 2 years. That right there is a no-brainer. If you own a secondary home and you're there only a couple months out of the year and it's just sitting there empty, you're doing yourself and your family a disservice by not having a, um, filing that as an investment property with your CPA. Just file a Schedule E. That is, that is a hidden gem there people don't know about.

That's like all those houses, um, Off, you know, strands by strands. There, it's like $20 million houses. All of 'em are empty.

Yep.

I'm like, what's going on?

That's the target audience for me is I'm, this is what I'm, this is, these are the kinds of conversations I'm having with people every day. We're going back to the beginning. When's the last time you've had a checkup on your real estate portfolio? Like you go to the doctors, you go to the dentist, right? Hey doc, you know what's going on? Gimme, give, give it to me straight. An objective checkup, a physical.

Right.

When's the last time you had a physical on your real estate wealth? And you have a traditional advisor for your stocks and for your bonds, but when's the last time you've had a physical, a checkup on your overall real estate wealth? You know, tax liability, what are you earning on equity, all that. And that's ultimately what I, I do in the beginning with people, build that rapport. And they're like, oh, okay, so what are strategies that can help me with this, this, and this? You know, then you got them, and then that agent gets the gets the listing. Hey, here we go, commish. Yeah, love that.

That's what agents are all about.

That's all we want. Yes, and to help people.

I love the quotation.

It's like okay, all right. Yeah, I get it. That's really helping.

There's a lot of good agents. No, no, I know. I know. I'm just kidding.

I'm just kidding, you guys. There's a handful.

Yeah. But there's also ones where you're like, I know. Geez.

All right.

All right. Ready for the next video? Yeah. Okay. How to invest in real estate like a high net worth individual.

Okay.

High net worth individuals are buying more in cash right now, potentially to take a page out of their book. So why are they doing it? Because with 7.5%, 8% interest rates, great return on your money. Instead of having to pay, they're just paying it all in cash. and letting the house appreciate and they're letting their cash do the work for them. You know, we've been playing with $500,000 to $800,000. Not all of us have that kind of cash in the bank. How do you feel about increasing? You know, if you were planning on putting 10% down, that's an additional 90% that you're going to be paying 7.5% on. What about bumping that up to 20% or 30% so your interest expense comes down?

Yeah, I think that's smart as well. But again, it's going to depend on that specific financial situation. If you're putting yourself in a bad spot where you're going to have no money and no nest egg, no cushion, don't do it. But I think that if you have the extra cash, It's just sitting in a savings account and you're not investing it or doing anything with it, then yeah, I think you should put it towards your house. High net worth individuals. Hmm. Is that what high net worth individuals are doing?

In the beginning, I think everyone starts off with trying to put as little down as possible for sure. Because, you know, when you're doing it at first, you're— most people aren't really necessarily doing it for immediate income. You're doing it just to start owning real estate. And have debt service that's covering the rent or the rent that's covering the debt service. And then you have, and then you can buy more. But I think where rates are, where cap rates are, yeah, I just, I think it might make more sense. You know, I have a lot of people that don't even want to buy in California because of that. So they're buying in the Midwest. You know, they're buying in the Midwest where you can get a cap rate at 10, 11, 12%. I've got a client right now. That's got $14 million of single-family rentals. He's got probably 40 single-family rentals, $14 million worth, and they're all like a couple hundred thousand dollars apiece. Bought 'em for like 30 grand decades ago. They're worth a couple hundred thousand now. And that's what he did in the beginning, you know? But the margins make sense. Even today, it still makes sense. You know, you get a loan for 6%, 7%, cap rate's 12, 13. You put a little down and then you just flip. You know, flip, flip more cash into something else. So it just depends on what your price point is. But locally though, that would be difficult to do for sure. But if you've got a long time horizon, it depends on what your goals are. You know, if you've got a 20-year time horizon, then whatever.

Go for the appreciation play.

Yeah.

But if you're looking for cash flow and compounding quickly, that's, that's tougher to do, I think, with bigger price points. Yeah, I'm sure. You probably have some insight on that.

I totally disagree with what, uh, this guy on YouTube said. Okay, you don't earn any interest on the equity in your home. I, you know, why leave it in there with, with— you really, you're not doing anything, right? You're better off buying 10 properties, uh, mortgaging to the point where, like you said, there's still a cash flow Letting your tenants pay that off over time, and you'd be 10 properties ahead of what this guy's trying to do.

I think that's— I mean, I, I think every client of mine that's been doing it for a while, that's how they started.

That's good to know.

You just got to cover— you got to cover your debt service, right? Cover your debt service and then go buy something else.

Simple enough. What are you waiting for?

And then you cash out refi, you know, eventually. Right. And then you can take, pull some money out and go do it again. Mm-hmm. I gotta take my own advice. That's what I'm doing next year. There we go. 2026. Nice. I'm buying my first, uh, in Dana Point. I think I wanna do Dana Point.

What are you getting? Yeah. What are you gonna go for?

There's, I mean, if like the hills in Dana Point, if you, yeah. If you take a picture of like a block in Dana Point, right. And you don't know that the ocean's behind you, you go, oh yeah. Where the heck am I? Yep. Oh, I know. Right. Like, I'm gonna feel like I'm like in downtown LA or something.

Yeah. Yeah. Yeah.

No, we were, uh, we were driving by there the other day and like we had, it was like your sister's friend or something. She's like, this is the ghetto of Dana Point. And we're like, yeah. What street was that? What is, what are you talking about? Is there? And then we drove down it and we're like, oh shoot. Okay.

Kind of. I think that there's some sneaky good deals there. There are. Yeah. But there's a little bit of work though.

Oh yeah, yeah, yeah. We looked at one where they, they were saying, okay, it makes sense if you build a second story. I mean, that's out of our purview right now. And then they're like, and the foundation's all messed up because the hill is like sliding a little bit. So they're like, You got to do the foundation, add the second story.

Moving target. Moving target.

Yeah. I was like, okay, we're not ready to take that on yet. But you're absolutely right. There's some fixers over there.

And the beach towns have a lot of multifamily, like duplexes, triplexes that you don't really see out of the coast too often.

Right. Yeah. That's probably the next bigger thing is to buy an investment property for sure. Let's do it. Dana Point. We'll see. I know a lot of agents, so if you're out there and you find a good, good deal, let me know.

There you go. Heck yeah.

I can finally say I'm a landlord. Yeah. Then I'll do a DST in 3 years. No, I'm just kidding. Yeah.

You better do everything you've been telling your clients to do. No.

We got a couple questions.

Okay.

Do you want to go to those real quick? Yeah. Let's do it. Okay. We've got Liz in the chat. She says passes Passive income is a hot topic. What are some common mistakes you see investors making when trying to generate passive income through real estate?

Mistakes?

I mean, I mean, I think the— I mean, you can buy in the wrong area, right? I mean, there's, there's— I mean, there's the risk of just buying in the wrong area. But I think I would say the biggest mistake is Trying to do it by yourself. Doing it by yourself. Not running, not running what you think you're gonna do by someone else.

Mm.

That's the biggest mistake. Trying to do it by yourself. Um, there's so many podcasts, there's so much information out there. Um, you know, there's just so much data where you can just have a group of people that you can run things by. Hey, You know, I'm thinking about doing this and this. This is the math that I'm, that I'm coming up with. Does this check out? Right. What do you think? Yeah. And maybe actually going in it with someone else. Mm-hmm. Going 50/50 on the down payment. And then maybe someone is good at fixing things up because they've got experience and maybe you've got the money. Like I see my, I envision myself, I have no idea what tile. I don't, I would be like more like the investor. Mm-hmm. And then partner up with someone actually doing the work and we would split the profits.

Right.

I would never buy something on my own. Yeah. Because I wouldn't, I wouldn't do, I don't know what I'm doing. Mm-hmm. Mm-hmm. And I don't have the time to YouTube that cuz I'm just, I'm running a business.

Yeah.

Um, so I'm not, so that would be a mistake for me to buy something and try to do it myself. That, that would be a mistake for me. Yeah. Um, so that, that would be the first thing is just trying to do it by yourself, especially in the beginning. Yeah, absolutely. Yeah.

All right, we got one more from Chad. He asks, what's your advice for someone who flips active income and wants to avoid as much tax liability as possible, but at the same time doesn't want to park it somewhere long-term?

Flipping active income. Not really sure what I would— I'm going to guess flipping active income.

Well, he's flipping.

Flipping.

As active income. So that's—

Oh, so it's taxable.

Yeah, you can't do a 1031.

Okay, so he's flipping and it's taxed as active income. Yes. So opportunity zones, there's, there's really 2 things that you could do. Opportunity zones, which is, you can look it up. There's opportunity zones locally. There's opportunity zones all over the country. There's also opportunity zone funds that I do, but you can shelter gains from any sale with opportunity zones. Oil and gas. Oil and gas is a beautiful asset class. that has really high tax deductions, 90% tax deductions that can offset W-2 income, active income. It can help with capital gains as well. And the best part is there's actually oil and gas in opportunity zones.

Ooh.

It's a supercharged, like Roth IRA kind of concept that I've got. That's probably my favorite strategy is opportunity zones.

With oil and gas. If I do that, I'm buying the biggest cowboy hat. Oh yeah. Once I start investing in that, have you seen Landman?

Oh yeah.

Yeah. Yeah. Landman. Landman. I'm all about it. Yeah. Jon Hamm in Landman suit, cowboy hat.

Everyone will know. But you also need the guy who, what's the actor's name that actually does a little bit?

Billy Bob. Yeah. Billy Bob.

Dude, that, that, that is gnarly. Yeah. I mean, what phenomenal acting. But I mean, that's, I think that is pretty much what goes on. Yeah.

They're like fighting off the cartel every day.

Dude, it's not, no, seriously, it's crazy. Like I, I, I invest with a company called US Energy and they manage billions of dollars. Been doing this for 40 years and they, and they're in the Permian Basin, which is Midland, Texas. That's where Landman. Mm-hmm. Permian Basin is like the number one area in the world for daily output, more than Russia and Saudi Arabia.

Yeah.

I mean, this one area in West Texas, I mean, it's insane. And, uh, I just can't— I just forget how dangerous it is to drill oil, right? I invest in it. I trust them to do it, but I don't really realize the people, boots on the ground, risking their lives. Yeah. One wrong mistake, it's a finger, it's an arm, it's a shoulder. I mean, it's, it's pretty crazy. Yeah. You know, it's all natural too. It's just in the ground. I know, for hundreds and hundreds of years just sitting there.

Drill, baby, drill. That's what we're supposed to be doing. That's what we're supposed to be doing. Yeah, and they want to stop it for some reason.

But yeah, yeah, we'll, we'll see. I know, I know Trump loves oil. What does he call it again? What's his tagline? Oh, he calls it liquid gold. Oh yeah, that's right, liquid. My cousin Tyler, um, Does the best Trump impression. Nice. And yeah, we went out on New Year's Eve, um, and all he did was just walk around Laguna Beach for 4 hours just doing Trump impressions. He literally just did that for 4 hours. I was crying the whole time. Every person was just dying laughing. It was amazing. That's awesome.

Yeah, life of the party right there.

Yeah, just liquid gold. Yeah, yeah. You can't spell terrific without tariffs, you know, just things like that, you know. Anyways, that's great.

Um, so how can people get in touch with you if they want to, you know, use your services or ask any questions or—

Uh, you can, you can, um, email me. Okay. Um, my email's up there. Um, you know, you can text me, you know, my cell and, and, uh, my assistant, Kira Parker. Mm-hmm. Shout out to her. Shout out. She is like my, my chief operating officer. She's the backbone of everything that I'm doing right now. I would not be where I'm at today with my, without my assistant Kira, who's been with me for a little over a year.

Nice.

And, uh, and so she's a— she handles my schedule, she handles everything, pretty much kind of controls my, you know, manages my life for me, um, especially professionally. So contacting her and— okay. And, uh, if you can't get a hold of me, her information's, uh, on my voicemail.

Okay. Yeah. And we'll, we'll put it in the description and everything.

Yeah. Yeah. My office is in Newport Beach. I live in Newport Beach.

Okay. And, um, you do Do you host meetups regularly or how, how can people see, like—

If you're, if you're, if you're a real estate agent, I do a lot of educational events with agents. Like last year I did, I had like 55 agents at the winery in Newport Beach, educated them just on all these tax codes and how it can help their clients. I do a lot of educational events at Fleming's in Newport Beach. I'm doing one in Dove Canyon and then I'm doing another one at Salt Creek Grill. So I'm just constantly just doing educational events. So if you're, if you're, if you're a higher net worth investor that just wants to learn at a group level, a lot of people are intimidated, you know, meeting with someone one-on-one. Yeah, I don't bite, but some people, they just, you know, would prefer a group level education. So I do a lot of those. So if you're an investor that's over a million in net worth, you're more than welcome. Just contact me. Legally, I'm not, I'm not able to educate people that are not at least, you know, a million in net worth. If you're an agent and you want to grow your business and you want to make an impact in people's lives right away, you can come to these as well and learn. And some of the top agents—I won't name their names—for you know, I don't want to give them you know blow their name out or anything. But some of the best, the top agents in Orange County, in Newport Beach, Corona del Mar, Laguna, people that are doing a ton of business. They're they're they're they're partnering up with me on this stuff because they see the writing on the wall. Their wealthiest clients need help with this stuff, and when they realize what I do, that leads to properties moving. You know it does. You know so if you're an agent and you want to learn how to add more value, let me know and love to help.

When's the Salt Creek Grill one? I'll ask.

I couldn't I couldn't even begin to guess.

Hit up the assistant.

We already went over this.

It might be full. Okay, I gotta like— right, it's the, uh, it's full to add. Yeah, yeah, that's right.

I know people. Yeah, um, it's all good. Amazing. Thank you so much, man. This is, this is really cool that you came down here and, yeah, you know, dropping all this knowledge. And it was great meeting you in person, and, uh, hopefully we can hang out again soon.

Yeah, thank you. Appreciate it.

All right, not at Salt Creek Grill.

I'll be at Salt Creek Grill. You'll see me at Salt Creek Grill.

So yeah, yeah, they have great burgers. Great burgers. Good view. Yeah, exactly.

Yeah. All right, you guys, thank you so much for jumping in the chat and hanging with us today. We will be here next week, and we also have our meetup on March 24th, so we'll see you there as well in person. All right, take care. See ya.

If you want some more advice on real estate investing, reach out to us one-on-one.