Real Estate, Startups, and Smart Strategies with Matt Paulson

I would say that it's when other people say something is impossible, like, just don't accept that for an answer. I feel like I've gotten a lot of done things done in my community that people say, oh, we've tried that. We couldn't do it. It's too hard. Like when somebody says something's too hard, that is your opportunity.

Hello, and welcome to another episode of multiple podcasts because we're shooting them all at once for certain guests like the guest we have today who is an expert in entrepreneurship and building businesses.

So.

So we're going to be streaming today on the Expert CRE Secrets podcast, Capital Gains Tax Solutions podcast, and also Build it to Billions podcast, all YouTube channels as well. And each and every episode, we're joined by some of the best real estate, financial wealth and business minds in the world where they share their ideas and deal stories. So together, we make complex tax referral strategies simple passive income plans achievable, and find ways to make an impact as we build wealth together. I'm excited about our next guest. He's out of the great state of South Dakota and. And he's on a mission to help people build highly profitable online businesses and resources to help others to do the same. And he's been fortunate in Forbes, Entrepreneur Magazine Inc. Barron's parent business, and so many other places. He's wrote multiple books. And we're going to be diving into Matt's story today and finding ways to build well together. Please welcome the show with me, Matt Paulson. Matt, how are we doing?

Good. Thanks for having me on, Brett.

Absolutely. And for our listeners getting to know you for the first time, would you give us a little bit more about your story and your current focus? Yeah.

So I've been an online entrepreneur basically since I was a kid. I had a website about SimCity 2000 and some different video games in high school, started personal finance blog in college. That turned into an investing blog, which turned into MarketBeat, which is now very sizable business. We're going to do probably 40 million in revenue this year with 16 people, which is pretty unusual things. So that's notable. So we publish news and information about stock market, have a newsletter, website app, YouTube channel, all the things. Our superpower is really in email marketing. We have about four and a half million subscribers right now and wrote a book about it, all the things. And, you know, that's kind of what I've become known for.

Amazing. And Matt, I believe you've all been given certain gifts in this life, and these gifts have been Given just be a blessing, help to others. What would you say was growing up was Matt's superpower that most. Now you just, wow, you're really naturally gifted at that. And how do you help. How do you use that to help and bless people today?

So when I, when I grew up, I kind of had some unusual things kind of going in my favor. So my parents got us a home computer in 1996. And not many people had home computers back then. Actually might have been before that. We were one of the first families that had cable Internet in our town. So back when everyone had dial up, I had a cable modem and I had unlimited free time as a kid. So those three things kind of conspired together to kind of give me just the opportunity to learn technology and how to like write HTML code and, you know, really become good at tech. And then those skills have helped me out my entire life.

Fantastic. I love that unlimited freedom of things. One that really stuck out for me. Sounds like your parents gave you an opportunity to grow up in a way to pursue your gifts and the things that you really had interest in. By the way, we're doing the same thing with our kids. We're homeschooling our kids. I don't know if that's what you did or not, but. But we call it unschooled. It's more than. It's not just like school from home, but it's just an opportunity for them pursue their passions and their gifts and their strengths and then to. To give them an environment in which they can thrive in. Talk about how you've taken the concepts of how you learned and grew up with your parents to the businesses you've built to empower your team members to. To grow successfully as well.

Okay. So I mean, one of the main thing is just having the opportunity to explore and try new things and be okay when something doesn't work. So at MarketBeat, we're trying new ideas and testing new things all the time. One of our core values is just to let data drive decisions. We are okay if something doesn't work, doesn't matter if it doesn't work because we know that one out of three or four things that we test will make a material positive impact on our business. So just giving our employees permission to fail has been a great thing for us.

So I imagine this is also part of a learned skill, right? Being okay with something that doesn't work out and then giving. Giving the permission to. Or you're letting the data drive the next decision. How do you Decipher all that. With so many businesses and things that are moving quickly in today's world, what's the best way to be able to decipher down and make these key decisions at the right time?

Yeah, I mean, there's no rocket science to us. So when we try something out, we won't know if it works right away. So we always just put a note on the calendar 30 days later to say, okay, did that work or not? And then if it did, we keep doing it. And if it didn't, we undo whatever the change was. But we'll always do like a split test too, where we can send half of our website traffic to kind of the original version and half of the website traffic to the new version, or really anything like that, where it's okay, what's your control? What's your test? And then does it work? The big unlock for us was like, I did that always. But when we kind of put the idea of just testing everything kind of into our core values and having other people say, well, that might work better, and then just trying it and finding out, because I mean, the reality is, like, say somebody wants to market me to advertise on their newsletter or whatever, we're not going to know ahead of time if it's going to work or not. So we just try it. We spend the $20,000 or whatever it is to test something, and then if it works, we just keep buying the ads. And if we, we just don't do it again and we're okay, you know, throwing whatever money away to identify new ad channels because we know that every now and then we're going to find something that works great and then we're going to run that same ad channel for years. So it's just the cost of discovery.

It makes sense. The cost of discovery and be willing to invest, be willing to take the action and try it out and then actually track the data. By the way, you can learn more about Matt Paulson by going to mattpulsen.com that's mattpulsen.com that'S P A U L Son. Matt, you also do private, you know, investments. Private equity investments. Tell us a little bit more about, about that and how that, that. What that looks like for you guys and, and. And how people might be able to be able to connect and, and work with you on those.

Yeah, so I run a venture capital fund that's kind of focused on the Great Plains region. So North Dakota, South Dakota, Minnesota, Iowa, Nebraska, Colorado, those kind of states. And we've Kind of identified that in our region there are more great startups than there are capital available to fund them. So we really have the opportunity to just identify great companies in the region and invest in them at fair prices and really hopefully get outsized returns. Because we're looking in places where most of the coastal VC firms aren't really looking. And that's allowed us to get into some companies that, you know, if they were based in San Francisco, you just never get into them. So that's been fun for us. We're about halfway deployed to our first fund. We already have one very clear winner in there and hopefully some others as well.

So, speaking of winners, Matt. Right. And capital gains tax, I'm wondering, as an entrepreneur like yourself who's been very successful in building businesses, what would you say is your biggest frustration when it comes to capital gains tax deferral or just flexibility with plans once you exit?

Yeah, I think the complexity is the main thing. I think I have between 100 and 110k1 forms that I've defined this year. That's obviously a big challenge. And really the only solution that I found is I created a holding company for some of these investments and then I pay somebody to manage that holding company. You know, like 10 years ago, the cool thing was to get on like AngelList and invest in AngelList syndicates. What they didn't tell you is that for every like $5,000 investment you made, you're going to get a K1 form and those K1 forms are going to follow you for years. So like every year I get like 40k1 forms just from AngelList and like, just the tax load of like getting all those and like dealing with them is just annoying. Like I'd rather just write them all down to zero and stop getting the K1 forms. So some of these private investments that like sound really cool and sexy, they come with costs that you don't always think about ahead of time and they just follow you forever.

Yeah, yeah. We call that the tax flow maze and the tax flow haze. Right. Where you're looking at ways to even the cash flow haze, right. Especially through passive investing. And it's figuring out a way to consolidate and simplify it. At a certain point, you know, the wealth has been built, but then the cost and you know, especially think about coastal states, right? You imagine doing business in Taxifornia or New York or New Jersey. I wonder, you can appreciate this is how much red tape and how much nonsense they bring in to just doing business. So interesting. And what has Been your main strategy for, for exiting, you know, with capital gains tax. Right. And, and even looking at debt tax and estate tax. Like what's kind of been your strategy, your number one go to?

Yeah, on the capital gain side, I invest in a ton of real estate as well. I'm a GP in a local real estate firm. So we do apartments, strip malls, standalone QSRs and you know, we do accelerated depreciation on all of those. So I've got a big pile of, you know, you know, passive losses that I can use against any capital gains income. So I don't really pay anything in terms of capital gains tax very often. I think I've got, you know, as like since MarketBeat is my day job, like I can't really claim to be a full time real estate professional unless my wife decides to become a realtor, which so far I haven't been able to convince her of that. So I've got like 3 or 4 million bucks in like unutilized, you know, real estate depreciation that I can't really use yet. So whenever something sells, you know, I've got, I think there's like a five year look back on that so I can, you know, write it off against that and tend not to pay very much or if anything on the estate side. Working on setting that up, that setting it up now. I know there's like a cliff coming, I think in 2026, where the exemption amount, like the lifetime exemption amount is going to drop. So I'm just trying to get everything set up before then. My wife and I are going to use what we call espousal lifetime access trusts. I'm not like an estate expert by any means, but I recognize it's time to time to do it and you can't trust Congress to keep the numbers where they are at now. So it's like people have kind of a two year window to get that stuff in order if you're kind of up anywhere close to the numbers in a state law. So I'm trying to get that all figured out now.

Yeah, we geek out about tax flow, cash flow and debt flow and ways to do planning. Right, because you could be built, you can build, you know, an empire of wealth and businesses and if you don't build a capital gains tax and estate tax plan, the government will crush you with a big hammer on certain exits. And so yeah, I like accelerated depreciation. I think that's great. And I love that you're a GP in multiple, you know, real estate holdings, especially apartments let's talk about that for a second. You know, investing in communities that are growing. Right. And so what does that look like for you as a GP and what you guys are doing and, and in commercial real estate as a whole, given 20, 24 where we're at right now?

Yeah. So Sioux Falls, like many kind of midwestern Great Plains cities, is growing pretty quickly, 3 to 5% of your growth. So whenever we build apartments, we've had no trouble filling them, and we're continuing to build even as rates have gone up. So we're here, we're out in Rapid City, South Dakota, on the west side of the state. We've looked at Des Moines, we've looked at Fargo. We have a few QSRs kind of all over the place. But, you know, we're primarily concentrated in Sioux Falls, South Dakota. Our group has about 2,000 units and then probably another like 20 commercial kind of region, you know, strip mall type buildings. So we scale pretty significantly. Had a good time doing that. My partner, Kevin, kind of and his team runs the day to day. I just bring a boatload of money at the table, so I get to be a gp and that's been, that's been great.

Yeah. Excellent. Yeah, I, I, I'm liking more and more. I just. We did our first deal in North Dakota. We're talking before the show here. And but you're at. We've done deals in Colorado, haven't done anything in South Dakota yet. But like South Dakota, I feel like a lot. I think it seems, it's, I'm hearing it more and more, and it seems to be that consistent, durable type of market. Right. That's not overbuilt, that's not too expensive to build in. You mentioned you're still building despite the cost of debt. Talk about what your average size deal is and what kind of the return expectations or goals that you're shooting for.

Yeah, we're definitely taking a long view with rates right now. So, you know, typically we'll do 20 to $30 million projects on multifamily construction. Cost tends to be 150 to 175 a unit to build them. We just bought another 15 acres of land to start a new project later in the year. The big challenge that we've had is kind of with the construction companies. We don't run our own construction company. Right now we're thinking about starting one and there's just not enough labor for the amount of building that needs to happen in Sioux Falls. So that's been a challenge for sure. Right now we're just doing local bank financing. Rates are probably in the sixes sevens short term. The longer term play, assuming rates don't come down, is to refinance them into like a Fannie Mae loan over time. Yeah, obviously you got to put more equity down. We're looking at 35 to 40% down on new projects right now. So you can't build as quickly as we could have before. But you know, it's, we're really doing a long term bet on the two falls market. Like, I know that like no projects really have started in 2023 and 2024 outside of ours. Like not many. So two, two to three years from now when our projects are done, there's going to be not a lot else coming onto the market which will allow us to, you know, grab some renters that other people are missing out on. So, you know, right now, like cash flow is not going to be awesome and that's okay. But what we do do, we always do like a three year interest only period on our properties. And you know, they're done before three years typically. So we can always get about half of our money out just because we're getting rent in and only paying interest for the first, you know, three years. So that always helps. But you know, 10, 20 years from now, Sioux Falls is going to be a bigger community than it is today. You know, our city grows 3 or 4% a year like clockwork. So it's just hard to see where it goes wrong.

Yeah, no, I think it's a good summer, I think it's a good strategy. And I'm curious when, if and when you do go to sell those assets are using 1031 exchanges? If so what, what do you like, what don't you like about the 1031 exchange and how does that work with your investors?

Yeah, we've actually never sold anything, so that's a little bit unusual. My partner and I are both kind of in our peak income years, so we're kind of in the acquisition mode. We're not in the sales mode right now.

Excellent. And how about bringing in capital like for people who are selling assets like cryptocurrency or businesses, real estate, and they want to come in with you guys when you're raising the capital, what does that look like if they want to get into a deal with you guys and they have huge capital gains tax that are holding them back?

Yeah, so we have a very, very small investor group. Probably there's about 10 of us and they tend to all be Business owners in our community that we know like and trust. We're all gps. There's no GPLP structure. So we've had a couple guys have sold businesses and, you know, they want to put money into real estate for cash flow. And, you know, that's always worked out pretty well, but I like it.

Matt, it seems like you. You distilled what your business plan is really well and everything that you're doing, and you stick to that template, right? What, What. How do you. How have you developed that? I guess I would call it always improving mindset. And, and. And where. Where you. Where is it? Collecting all of the clues over the time and then distilling it down. Or how do you, when you're going into something new, either be real estate or a business venture, a new vertical, how are you distilling it down to its essence? And that's the template.

Yeah, so when I try to find something new that I want to get into, I just go on a learning binge. So I will go find 10 podcasts about the topic and, like, listen to all the episodes and, like, spend a stupid amount of time doing that. I'll go find, like, the top 10 books, read all there is to learn about it, and, like, just try to pull out the themes that come up over and over again. And then I'll go find the people that are the experts, talk to them and say, hey, this is how I think it works. Am I right? Am I wrong? Tell me what I don't know here, and then just really try to give myself an education. Before I got into real estate with my buddy Kevin, I listened to all the podcasts, I read all the books, I learned what there was to learn and realized, okay, my options are, one, start my own firm and try to get into this and spend a bunch of time on it. Two, be an LP in other people's deals and pay them a decent fee to do that. Could three, do commercial REITs. Boring. Not very fun. Maybe not the same tax benefits. So I did a ton of research before getting in bed with my partner, Kevin, and, you know, I knew what I was getting into. And that's always the key is, like, I don't do something unless, like, I know what I'm signing up for, and if I don't know, I just don't do it.

Yeah, I think that's really well said. And I also want to catch out that you mentioned. Sounds like you always went to the full GP model, right? And you have 10 families or 10 groups that you mainly work with. You know, 10 individuals or whatever. And, and they're prominent business owners that are local to you guys. So you guys simplified that. And you said we're all going to be GPS and we're not actively raising capital for others. And, and you said we're just going to buy it and we're typically. And our long term horror is just to hold it and to use cost seg offset, you know, as much, you know, tax as we can legally do it. And. But you shifted to helping other people build wealth. Right. So walk through when that happened and how that, how that's playing out as well.

Yeah, these things have certainly happened in parallel. So over the years I've just felt like a heart to teach what I've learned to other people. And it happens in a variety of ways. I've written some books, had podcasts for a little while. I helped start a startup ecosystem organization in my city to help people start businesses, put a bunch of money into that started five years ago. It's still going strong. So it looks a lot of different ways but I feel like the way that I can give back uniquely in the world and try to do that where I can.

Yeah, I love it. By the way, here's some of the books. For Matt, it's email demystified. He also has online business from scratch as well as automatic income. Pretty cool business growth day by day. Matt, what's the 10 year turnaround and 40 rules for Internet business success? What is out of all the books you have right now, what do you feel like is the one that's like, wow, someone picked up today is going to have the biggest impact given what 2024 is with AI. 2024 is with the changing environment, with, you know, interest rates going higher with just a lot of change going on. Right. What do you feel like the number one book people should get right now?

So my book that's really stood the test of time is email marketing Demystified. And I think as kind of, you know, social media is kind of a mess right now. Search engines are a mess. Google can't figure out who is going to rank for what. A lot of the marketing channels that people rely on are just less reliable than they used to be and are going to continue in that direction. So I think you really got to build your audience in such a way where you actually own it. And the way to do that is to build your audience on federated platforms. Things like podcasting where people can subscribe through many different apps or an email list where if I, if you're on my email list. Like, I can always email you. Like, Google can't change the algorithm on email because they don't control it. Or sms, like that's a federated kind of thing where not one company controls it. So like we try to get people to sign up for email SMS. Like, yeah, we still do YouTube and Twitter and Facebook and Instagram, all those things. But like, you can't build your business on it because you're building your business on quicksand. You can't control it. So the email book is just a great resource for people that like, recognize the need to build an email list because really that's where the value in a lot of businesses is. So if that's you, go check that book out.

Amazing. Hey, Matt Paulson. Matt Paulson.com to check out all of his books. Matt, we're running out of time. You ready for lightning round?

Absolutely.

All right. Knowing what you know now, if you go back to your 25 year old self, what's the one golden nugget make sure to tell yourself to do?

Quit your day job sooner. I held on for way too long. I should quit when I first had the chance to.

What was the day job? Just curious.

I was a web programmer for a local agency. Cool.

Awesome. Question number two, what's the number one book you've recommended or gifted most in the past year?

Ooh, book called Business Brilliant by Louis Schiff. It is a business book, but it really, it just says different things than most business books do. So it's definitely worth checking out.

Excellent. Question number three, what are you most curious about right now?

Oh, good question. Coffee. I'm really trying to build, like, make the best espresso possible and have tried all sorts of different beans, all sorts of different equipment and just really trying to build, like, create the best, you know, latte that I can at my house. So I'm at like 10, I'm probably like 10 grand deep into equipment and just having a lot of fun with that.

That's fun. Geeking out on coffee. I love it. Next question. What's your number one leadership quote or theme that you strive to live by?

I would say that it's when other people say something is impossible, like, just don't accept that for an answer. I feel like I've gotten a lot of done things done in my community that people say, oh, we've tried that. We couldn't do it. It's too hard. Like when somebody says something's too hard, that is your opportunity.

Love it. Number one, way you're using ChatGPT.

The main way we use it is to generate alternatives for like, marketing copy. So when we send out an email, we'll use ChatGPT to generate five different subject lines for an email. We'll test all those five subject lines against 20% of the list, and then whichever one performs better, we'll send to the remaining 80% of the list.

That's brilliant right there. I think that could be. Imagine that's probably part of your book of demystifying the email, right?

Yeah.

So it sounds like you're testing out five different subject lines on 20% before you send it all out to make sure that you're maximizing the open rates and you're not over oversaturating people with emails that they may not open. Is that a fair summary on that one?

Yes.

Yeah. Second to last question, is this the. If there's one thing that you could, you could the big domino for the year, right, that you can knock over in the next, you know, six months for your business, for your, for your investors, for your partners, what's that domino when it comes to business that you're like, wow, if I can just get this one thing done, or maybe it's not just one thing, but something that kind of comes to mind is a big one.

You know, the main thing that I'm working on for MarketBeat this year is growing our advertising spend. So a year ago we were spending about 300,000amonth. And I realized that, like, if every dollar we spend, we make it, break it, make it back in about 90 days. So it's like, how big can we get our advertising spend number to be? Recognizing that our break even is 90 days. So we've got it up to about a million a month right now, and that's blowing up our revenue as a result. So if I can get up to like a million five or a million two or two million by the end of the year, that'd be fantastic.

Fantastic. Yeah. And that 40 million of revenue only just gets bigger, right? I guess you just look at the data and you can make those decisions. Love that last question. Matt, after all your success helping all the people you helped and building the business you've built, what's the number one way that you best stay centered in your values but also stay encouraged to charge for, to reach even higher heights?

You know, the way I stay centered is, you know, I've got two young kids, 11 and 7, wife, been married for 13 years now almost. And by giving my kids a pretty regular home Life for, like, where we're at in life. Like, you know, we could have second homes, we could be jet setting anywhere we want, right? But we live in a regular neighborhood next to a school. And I think by kind of creating that normal family environment for our kids as to not screw them up, that's really helped me stay centered in ways that, you know, a lot of people in my situation, you know, might mess up. Because I think the biggest regret that, like, billionaires have, and this is from a guy named Noah Kagan who's got a podcast is he says, like, they all probably work too hard and they didn't spend enough time with their families and then, you know, they end up divorced or the kids don't talk to them and like, there's just no way to undo that down the line. So the main thing I'm trying to not screw up is to not get divorced and to not lose my relationship with my kids. So I figure if I do that, that'll help me stay centered.

Matt. Love it. You know, I heard the quote like this, don't trade what's unique to you for something someone else can do, right? And there's only a few things that's truly unique to each of us in this life. And you know, speaking as a father and husband myself, close to, married 15 years, I'm the only dad those five kids are ever going to have, right? You know, earthly dad. And number two, you know, hopefully I'm the only husband my wife's ever going to have to, right? So don't trade what's unique to you for something think someone else can do. That being said, man, I want to thank you for on the show and thank you for sharing tons of wisdom. I feel like there's like two or three more books that you could probably write just on what you talked about here today. I want to encourage you to keep being okay with testing things out, having data drive it and, and make a big impact for, for yourself, for your, your team members, for the investors you're working with, and for the people that you serve. For our listeners who want to get in touch with you, would you remind them one last time what's the best place for them to find you?

Yeah, two places. If you just want to read my quarterly Updates, that's Matt Paulson.com M A T T P A U L S O N dot com. I'm also very active on Twitter, so my username is Matt Paulson SD There. Give me a follow and tweet at me.

Awesome. Thanks, Matt. And thanks everyone for listening. And if if you want to take action on building a capital gains tax and plan, go to capital gainstacksolutions.com as well. If you are interested in eliminating the need for the 1031 exchange, you can go to expert taxsecrets.com appreciate everyone watching and listening out there and we will talk to you again real soon. Bye everybody.