Don't pay a guru to teach basic investing stuff

Hey everyone, uh, today I wanted to share with you— I had an interaction with one of my clients. He sent me this email and it was about real estate, and he said, oh my gosh, what is this stuff? Should I be doing this? It sounds awesome. And, uh, it was a really well-written marketing piece, uh, the type that gets your intrigue up, the type that kind of intent, uh, entices you to want to sign up for whatever it is. So I looked into it, and, uh, the secret that this guru was going to share about real estate that you had to pay money to in order to get the information from him was depreciation, bonus depreciation, and, ooh, 1031 exchanges. So I want to talk about those, uh, because I think in the progression of being a gym owner It makes sense, I think, to eventually own the space that your gym is located in. You, you're going to have a physical space if you're a brick-and-mortar location. And so from a wealth creation standpoint, it's probably better if you own the space so that the money you're paying on your loan is giving you more and more equity versus just renting the space and you get no upside. Point in case, our lease is ending in a couple weeks for our current gym, and the landlord isn't going to extend to us because he found another tenant who's going to pay $3,000 more a month than what we're currently paying. That's what happens in 5 years, even with COVID apparently. So, um, I, I personally think it's a good potential investment for gym owners. And that's why I wanted to share these things with you, because depreciation, bonus depreciation, and then 1031 exchanges are related— can be related to your real estate. Depreciation and bonus depreciation are also related to your equipment. Um, but the main point I wanted to share is these are very basic concepts for even a mediocre accountant. If you're getting pitched by people saying they have this magic secret way to maximize the value of your real estate or to eliminate your taxable income or to make sure when you sell your property you don't have to pay any tax on the sale of the property, all of those things are related to these, are related to these 3 concepts: depreciation, bonus depreciation, or 1031 exchanges. It's not magic. You sure as crap don't need to pay anyone extra money for them to explain to you a concept that you could easily Google. See, they're just not telling you the name of what they're doing because they're just— these guys are bottom feeders, these people who set up these things trying to make something so basic and simple sound super sexy. And look, it is great and you are going to save a lot of taxes on it. But like I said, even a mediocre accountant is going to know these things. So let's talk about depreciation. It's a concept, it's a word that the IRS uses to basically say if you have something you bought that's an asset and that is going to have value over more than 1 year, they don't let you expense it. You capitalize it. you put it on your balance sheet and then you depreciate the value of the asset over the years in which it would have value. Now, in order to avoid confusion and complication with, well, this, I don't know, this rower is going to last me 9 years, or, well, based on the wear and tear and the amount of members, those rowers are only going to last me 6 years. The IRS simplified all that and just said, we have categories for those things. And again, this is super basic stuff. If your accountant doesn't know this, they're not even mediocre. Okay. But you classify these assets in specific years and then it just becomes a formula and that tells you how much of a tax deduction you can take for purchasing it. So if I bought a rower, let's pay— say I paid $2,000 for it. That obviously is going to have value over 9 years. So theoretically, um, if I depreciate it, I'm probably going to get about $1,000 of deductions in the first year, and then I'm maybe going to get $500 in the second year, then $250, and so on and so forth. That's kind of how the tax depreciation works. Now I can The tax code also allows me to bonus depreciate. Now, these bonus depreciation rules are generally temporary tax rules. In the tax world, unfortunately, really what we have is a bunch of adults battling with each other. And right now, the 2 teams are Republicans versus Democrats. And all of us human beings who are American citizens I actually feel like the majority of us are probably stuck somewhere in the middle at this point, based on what the media is reporting. The media— I'm just going on my soapbox here, and I apologize, but I feel like the media is trying to explain that there's this giant divide between the two parties. And social media certainly highlights that. I feel like the algorithms push the antagonistic comments and posts. But in my conversations with people, who are differing political beliefs than I am, we're about 80% in agreeance with most things. And so with that being said, they have these battles amongst each other about what tax rules are we gonna make permanent. So depreciation has been a permanent tax rule. And then when different political parties get in office, they say, well, right now, I would like to let people bonus depreciate, meaning let's let them take more of a normal deduction on these assets because the incentive then is that you go out and purchase more equipment. Purchasing more equipment adds velocity into the economy, money cycles, but the same money cycles, not inflation money cycles. No one has yet to make that permanent, so they kind of keep changing some of these temporary rules. The only reason I go into that very long explanation of bonus depreciation is just because it's not currently a permanent thing. And at any point, it's pretty easy for the current political group in power to change the bonus depreciation rules. As of right now, bonus— you can bonus depreciate 100%. In years past, it's been 50%. But right now, for all of our gym owner clients, because they're under this really large threshold of how much you can purchase in equipment, 100% bonus depreciation. So that means if I take— if I spend $2,000 on a Concept rower, I can bonus depreciate the full $2,000, which means I get the full $2,000 tax deduction this tax year. It's different than claiming it as an expense. That's why I'm using the words that I'm using. Um, but again, going back to the original point of this, it's not magic. It's not secret. No one needs to pay me extra money for me to send them off this very tantalizing emails like, oh my gosh, I have this biggest secret to share with you. Did you purchase equipment this year? Are you buying a property? Well, then you better pay me some more money so that I can tell you about all these magical things you can do to reduce the taxable income on that. Like, it's an automatic application. If you buy equipment, a mediocre accountant should automatically be applying these things for your benefit. And then the other— the last concept I want to talk about related to real estate is the 1031 exchange. This is where you can take a real estate-related property, and if you sell it and then use the proceeds from that sale, however much money you make from that sale, and you decide to put it into your next real estate project, you don't have to pay capital gains on the sale of the first building. That's a 1031 exchange. There's a lot of intricacies in it. You have to identify the property within like 45 or 90 days. There's some comp— I mean, there's more complicated stuff there, but understanding that you have that ability isn't something you should be paying a guru for. Don't fall for that crap. It's scammy. You don't, you don't need that. You would, you would definitely want to talk to a tax accountant if you are in that process or thinking about selling a current existing real estate property and you want to invest in other real estate things, then this is a great opportunity to save taxes and saving in the sense that you're kicking the tax consequence bucket down the road. You will eventually have to pay capital gains on it. The 1031 just allows you to defer it to a future year. But if you're selling a rental property and you're investing in something, anything else other than real estate, then the 1031 doesn't work. The 1031 official title is 1031 like-kind exchange, meaning that both properties have to be alike. They have to be like each other, like kind. Yeah, I don't know why they use the words that they do, but anyways, so there's that bonus depreciation, depreciation, 1031 exchanges. All of these relate to real estate properties. They will save you. They are great tax strategies. But again, depreciation, bonus depreciation should automatically be applied. Shouldn't be something that you have to think much about. Then 1031 exchanges, if you're choosing to invest in another real estate project, something worth looking into. But again, it's not magic. This is basic stuff. So don't fall for any of that, those things out there that make it seem too good to be true. It is great. It's not too good to be true, but you certainly don't have to pay some guru for them to tell you the words of those things, because then once you know what the words are, you can look up— I mean, there's so much free information out there on it. Anyways, that's my soapbox for today. Thanks for listening. Remember, profit is a choice. Have the courage and wisdom to choose it.