CREI Partners: Real Estate Tax Benefits for Passive Investors

Alright, well thanks everybody for joining. Tonight we have a great guest, a speaker to talk about the real estate tax benefits for passive investors. I'm going to go to the next slide and sort of introduce what CREI Partners does for our investors. So ultimately we grow and diversify wealth for investors by pulling money together, buying large real estate assets, executing strategic plans, then distributing those returns once we get the property stabilized. And then the last would be implementing our exit strategy and distributing profits. So we're super excited about this. We're growing our investor base and underwriting properties right now and looking forward to growing wealth again for our investors. So, a little bit about myself. My name is Wayne, I've been in commercial real estate for about 13 years. Grew up here in Austin, Texas. Was in Washington D.C. for a while, Houston and now back in my hometown. Here in Austin I've managed about 4 1/2 million square feet for institutional and non institutional clients, work very closely with the owners, tenants, over $60 million of repositioning strategic plans and just a real passion for commercial real estate. Anybody that knows me knows I could talk real estate all day long. A little education background there on my MBA and certified property manager. A couple things that I've launched this month that I hope that you go check out is One is a podcast started first week in June was the Untold Stories of Real Estate Investing. I wanted to start a podcast that really talked about the raw truths on the good and the bad of real estate investing. So if you're interested, please subscribe, you know, write a review, help us grow. You can also go to Creipartners.com podcast and be able to download or listen to it on the computer there. Again, both passive and active investors. It's good to know what is good about real estate, which we all hear a lot about, but also what's the not so good, the things that we need to ask questions on and really getting into that raw space that puts people a little vulnerable when they're sharing those type of experiences. The other thing is I wrote a book ebook on the top five tips on passively investing in multifamily real estate. Whether you invest with me or invest with others, it's just a good foundational starting point to learn as much as you can. So you're asking the right questions, you're feeling comfortable, whoever you're investing your money in. So that's check that out. Creipartners.com. I now want to go to the next slide here and let's introduce Nate Roberts. So I Met Nate through a similar webinar back in December and was just really impressed with his content and was excited to get him as a guest on our webinars to share value to others. He's the educational background, University of Texas Bachelor of Business Administration, Master in Professional Accounting, CPA designated in the Texas State Board of Public Accountancy. But then he just has, you know, real experience on day to day helping others, you know, shelter their taxes and grow wealth. You know, he began his career in Deloitte, we all know, as a big international accounting firm. He's joined other firms and now he is the advisor and consultant to businesses and individuals for Lifetime Tax Advisors. So with that, Nate, thank you so much for being on tonight and I'm gonna stop sharing my screen so you can share yours.

Awesome. Well, thank you for first, thank you for having me here. I always enjoy getting a chance to kind of talk about taxes in general. I mean, that's what I deal with on a daily basis. But real estate taxes, even more specifically, it's, it's something that about 75% of our clients are, are invested in. So whether they are real estate professionals, whether they're getting started with a single family, whether they're, they're retired and just collecting checks from rental properties, however they're invested, it's, it's something that is deeply ingrained within the culture of our firm. And also personally, I'm invested in real estate too. So not only am I a spokesperson, but I also drink the Kool Aid. I like real estate and so I like being able to kind of explain to people what is it that works about real estate? How is it nice? Let me kind of go next and just say real quick, this for educational purposes only. So if you ever have an IRS agent show up on your front door, don't, don't repeat exactly what I said on these slides and just say, well, I heard Nate say it. So isn't this true? Everybody's situations can be a little bit different. Just like everybody's got a different fingerprint. Just like everybody has different experiences and has different circumstances and scenarios. This is just kind of give you, I mean, this is a 50,000 foot overview, lots of details, lots of things. But it's to just, it's to start getting you informed. So just keep in mind, educational purposes only. Also just kind of throw out here some of my usual disclaimers. I'm not a lawyer, so don't take anything I'm saying as legal advice. I'm not registered in security sales. Actually, that's gonna be our wealth management division. I'm not registered for insurance, all those sorts of things. I'm a cpa. I deal with taxes. If you got tax question, that's, that's where you come and talk to me. If you got some other questions. I mean, we've got a wealth management firm, we've got an insurance firm. We have, we have in house counsel. We've got relationships with lots and lots of different people in different specialties. And mine is tax. Also. We're not CPA firm. Before I forget that one. So this is one of my favorite quotes from Albert Einstein, the guy who came up with E equals MC squared, which is still beyond me. But he said that the hardest thing to understand in the world is the income tax. And frankly, if you start looking at it and how much info there is, it's understandable why he would say that. There's so many different things that, I mean, there's almost two levels of tax. There's a tax for the informed and there's a tax for the uninformed. And so in real estate, knowing what those things are and those benefits are things that help you, frankly, it's what got me into it. Like, I liked real estate. I always kind of wanted to get in there. Once I saw the benefits I could get from real estate and how I could pay less tax on it, I was in. Oops, went a little too fast on me. So real quick, income tax rates range from about 10 to 37%. If you're an individual. Not going to spend any time on that. Just it's. I'm just trying to set the stage. So the next part of the stage here is all those different categories we just saw. It's not. Things aren't applied equally. So you've got different types of income and you've got ordinary income, you've got investment income, you got passive income. And then kind of a something that kind of goes over a couple of these is the qualified business income. Tonight, the only thing I'm going to focus on is that passive income bucket. And you'll see why. You kind of see why I'm breaking these things out for you here in the next couple slides. But in general, all rental activities are going to be passive by definition by the irs. So the default is unless you meet some sort of exception, it falls in that passive bucket. We'll hit that here shortly. But the way this kind of works is you can have passive losses. And unless you meet certain criteria, the only time you can use them is when you have other passive income or you get out there is, there is no other, like passive income offset or anything to, oops, sorry to set these things off until property, until the property sold. But there are special exceptions for rental real estate. So if you're actively involved, you can, you can use some of this against some of your income. Active, active participation is things like locating the property, rehabbing the property, approving tenants lease terms, rent collection, kind of just being involved. But it gives you a little bit more where you can reach outside the box and get some benefits out of it. But it phases out when you get to 150,000 bucks in your overall income. Now here, this is kind of the real. This, the real estate professionals kind of this holy grail this. You're going to hear about this especially as you start talking, as you start learning about real estate and people start bringing up real estate professionals. So just to knock this part out of the ballpark and just kind of this way, you know, it's out there and it's something that's a much. It's a different topic for a different day. But as a real estate professional, if you're spending 750 hours and more than half your time, you can qualify as a real estate professional. And some of the benefits that I'm about to talk about are exponentially bigger for my real estate professional clients. So they can take that income or those taxable losses that they're getting off the real estate and they can use it to offset their taxable income from other things. So the people that really seem to like this the most are, say, for example, my doctors, my lawyers, my hedge fund managers, some of those people who are already making a lot of money and trying to figure out, well, how do I pay less tax? Well, this is one of the places where I've got a lot of room to play and I can help them bring down, legally bring down their tax bills. So everything that we do, we're only going to do it if it's legal. And I had a conversation with a client tonight. I said, look, he said, are you sure? You know, I don't want the IRS to hear this phone conversation. And I just had to tell them, look, you know what? I don't care if they listen. They could, they can have a recording of what I just said, because guess what? It's all legal. It's all in the tax code. There, there are tax court cases and other things that say that this is legal. They can't do any as long as we follow the rules. Everything I'M telling you about, they may not necessarily like it sometimes, but it, but I can take it to the Supreme Court and we're gonna win. So there's nothing shady about this. So that just to kind of help everybody out with this, if you follow the rules, you know, this stuff, the stuff I'm about to bring up is all in the tax code, it's all legal. And then you just want to make sure that you've got somebody who can kind of walk you through that knows the ins and outs. So let me kind of help out first with cash flow versus taxable income. Because this, this is where like people start hearing tax losses and they're thinking, wait, so I gotta lose money to be able to write this off. And I'm never gonna suggest that for anybody. I'm always gonna say if you tax is just a piece of the equation, never spend a dollar to save a quarter. But guess what? I can have cash flowing. Properties still have taxable losses. And this is going to kind of show you how. So let's just say, for example, if I'm being, if I'm bringing in a hundred thousand or a million dollars a year in rental income, in this case, I chose nice round numbers about a million bucks. Let's just say I've got expenses of $900,000. My net cash flow is $100,000. So million dollars of income, $900,000 expenses, $100,000 cash flow. Most people are thinking that's how much money I made, that's my profit. That's when I get taxed on, well, guess what? In real estate, I get to take advantage of something called depreciation. Depreciation is a non cash expense. What it is is it's pretty much kind of a wear and tear on things. So on the cash flow side, I got 100,000 bucks coming in. On the tax side, I got $100,000 coming in. But guess what, And I'm just gonna, I'm making this assumption here that I've got a 5.5 million dollar building depreciated over 27 half years. The reason I picked those numbers is because they're, they come out to a nice $200,000. But this is, I mean, this is, these are based on, you know, the same concepts. So that five and a half million dollar building, I get to take $200,000 of depreciation each year. So guess what? I get to apply that against my net cash flow. I don't have additional cash going out, but I got a tax loss. So not Only am I not paying tax on that $100,000 that did catch, that I did collect and went into my bank account. I'm getting to take the wear and the tear on that building and I'm getting to deduct it. So I'm not getting taxed on any of that $100,000 and get. In fact, I actually have $100,000 I get to use somewhere along the line here. And if my slide will work with me. Here we go. So what does that mean across all those different buckets I gave you? So the real estate professional, and this is that holy grail that if you're, if you're just now starting to listen in, this isn't going to apply to you right now. But just to kind of show you the power of it, let's just, let's just say I've got 10 equal partners. One of them is a real estate professional. If he qualifies as a real estate professional on that building, we get. He's got. He's going to pick up $100,000 of income. He's going to pick up $90,000 of expenses. It's going to be on his tax return, and then he's also going to get that $20,000 of depreciation. So he's getting a. He or she is getting a taxable loss of $10,000. That real estate professional is entitled to $10,000 of cash that's in the bank, but on the tax return has a $10,000 loss. And if that person's at the highest tax rate of 37%, we can take those losses and reduce the taxes by $3,700, $10,000, 37%. So that building that's putting money in that person's pocket is also saving that person tax money. Passive investors have got some other. So that's where they're in that ordinary bucket. We're able to take these things and push them over the ordinary bucket. They can use it against wages and, you know, other business income and that sort of thing. If I got a passive investor, let's say I got a passive investor who's invested, and this is typically going to be somebody who's been invested for a long, long time. They've got multiple properties. Some of them are making taxable income at this point. And because we've already used up more of the depreciation. But let's just say they've got some other income from other things, say 5,000 bucks of passive income. So as one property starts to get taxable, I Take the next property, use its losses, and keep kind of rolling that kicking that can down the road where I still am not paying taxes on it and maybe I still have. So If I got $10,000 of losses, $5,000 is suspended, but I get to use the other $5,000 to shelter and shield my taxes for now. So at some point, you know, typically you're gonna end up paying taxes on it. But, but you can kick it down the road for a long, long time. There are, there are ways and strategies to not pay any taxes, but that's a longer, complicated slide and beyond the scope of this. If you're a passive, if you're a passive investor. So let's just say this is your first time. You got that $10,000 of losses and it's suspended. So you don't lose it. You just don't get to use it right now like you would if you're a real estate professional or if you got some other properties and you're trying to offset some other income somewhere. So what is so just kind of in a nutshell, taking all this, a lot of times people get K1s, they're like, what does this mean? Well, this is exactly what I'm going to walk you through right here, just so that the numbers will start to make a little sense. So I've got my taxable income, $100,000 of income, expenses, depreciation, loss of $10,000. And let's just say that each of these partners put in about $250,000. I'm going to end up with contributions of 250. I'm going to have taxable losses of 10,000. I'm going to have distributions of, let's just say out of that $10,000, you're entitled to the partnership gives you 5. I still got ending capital, 235,000 bucks next year round, same sort of deal. Let's just say that we do a refi. I'm able to get out more cash. Guess What? I've got 10,000. You know, I've got another $10,000 loss. I got a distribution of 130,000. I still have positive end in capital, and so I got a good chunk of my money back. I still haven't paid a dollar in tax on this. There are some, There are additional rules as these. As that capital number starts to go lower and lower and lower. If it goes negative, that's a. Again, another conversation for another day. And so now I'm going to break this down and say if you've ever gotten a K1? This is kind of what it means. So those numbers I was just showing you, put together something just kind of for fun, because that's what I do. And let's just say I've got that capital basis. I'm still. I got $95,000 left in my capital account. I got that $10,000. And that's this part down here. Can y' all see. Can y' all see my. My. My mouse here moving, Wayne? Not sure if you. If you. If you're on mute or not.

Yeah, Nate, we can see it.

Okay, perfect. So this is that capital account I was just talking about. Here's that $10,000 of loss that flows through to the investor's individual tax return. And here's. Here's those distributions. So people look at these K1s are like, I don't get what that means. Well, this is kind of a quick breakdown. That kind of help may just make those numbers make a little more sense. So I see it and I can point out numbers. I know exactly what it's supposed to do just because I see a lot. Most people, they see it once a year and they're like, I don't get it. So hopefully this helps a little. Now I'm also just going to say that real estate professional thing. Yeah. There's people who claim it don't qualify for it. And I think Will Rogers said it best. The income tax has made more. Has made liars out of more Americans than golf. Like, there's lots of great things you can do. Let's just, let's make sure we do them legally. It's not a whole lot. There's. There are. You don't want to have that conversation with an IRS agent if they decide to really, really ask you about it unless you know what you're doing. So now let's kind of take this thing through the full cycle. This. This is just in a real quick five year summary. Obviously, different apartment, because I'm talking about $30 million purchase price. I'm taking rehab costs of a million bucks. So let's just say if you're doing a B class property. And Wayne, I'm not sure if you've gotten that far in some of your other conversations, but let's just say you go in, you fix something up, you got some money in a property. So in this case, 31 million bucks, you allocate some of that to land, you got depreciable basis. So whatever you're able to depreciate. Notice I picked a nice round number $27,500,000. Because guess what makes my depreciation a million. And then in five over. So each year I'm getting 5 million, or each year I'm getting a million dollars of depreciation in five years, I've taken $5 million of depreciation to shelter all that cash I'm getting out. Well, if this is the end of the story, let's say I turn around, I sell this apartment for 40 million. I got some sales costs. I got $26 million left in my property basis because I've taken that $31 million property, taken out $5,000 of depreciation, and I got a gain of about 12 million bucks. I've got about a million 50,000. That's in capital gain. I got $7 million capital gain. If I've got that, and I don't. Don't remember the exact math on this, but I've got about a million dollars in tax owed, and then I've also got on that $7 million and on the $5 million, up to about a million two for some other. For some of that depreciation I got to use in the past. And Wayne, let me just ask. I guess the other thing I'm going to say is I know there's probably a lot of questions, and I think there's a chat board. So if you got any questions, and as I'm going through this, if you think of something you want to ask, go ahead and put it on that chat board. I'm not going to. I'm not going to stop in the middle of this so I can kind of move through it quickly. But when I get to the end, if there is anything that, you know, I see over there, we'll try and go through and address some of those questions at the end. So now that was. That was one scenario. Then there's some other tools we get to use. So say, for example, cost segregation. What is it? It's pretty much a way to take your building and it's a way to divide it up and say, you know what, on rental real estate, I could depreciate over 27 and a half years, but some of the stuff I just bought isn't gonna last 27 half years. So if you think about it almost like the way I like to explain it is thinking about like an apple. If I take an apple, and that's my building, I'm treating every piece as being the same. If I take a cost segregation, I'm kind of taking a slicer. Or a knife or something like that. And I'm dividing it out. I'm saying, you know what? I got a stem here. I'm not gonna eat. I got some seeds that I could plant. You know, they're different things. I got a core that I can't use. I got some skin. I've got the meat of the apple. I. And the cost segregation divides all those things up into their different parts and allows. Allows us to take faster advantage of that depreciation. So there are some things you depreciate over five years, seven years, 15 years, 27 and a half years. But instead of having to wait 27 and a half years to get all that, I can speed it up. And so now, kind of taking that same example of $100,000 a year, I actually got a little more technical because I ran this one through the actual tables. But let's just say, in general, you get about $100,000 a year. I can do a cost segregation. If I elect bonus, which right now is still at 100%, I might be able to take some of that, and I might get a million dollars in depreciation the first year. I'm giving up about $35,000 a year going forward based on that or if I elect out a bonus. But I just depreciate some of those things over there over their useful lives of five, seven, 15 years. I mean, I might take an additional 100,000 in year one and another $200,000 in year two, another $118,000 in year three. So depending on your scenario and what works best for you, there's ways to accelerate the benefits, and you'll just keep kicking that can down the road for years, And then. Okay, good. And then if I take all those things and kind of play them out in each of the different scenarios, here's the extra benefits. So not the exact same slide as earlier, but my real estate professional, let's just say $100,000, but I got $102,000 depreciation, and I bumped up my taxable loss to 92,000 bucks. I can knock off $34,000 off of my tax bill at 37%. For some of my passives, if they're kind of in that same arena, you get suspended. But I can still. I can still shelter a whole lot more income. And for my passives, I've just got $92,000. It's building up behind the dam. So in a couple years, when I. When some. When some big watershed moment comes, I got a whole lot of I got a whole lot of depreciation that I can use for something against something else and still pay less tax. So on a first deal, I don't tend to recommend this as much for some people, but especially if some, if I've got people who are seasoned in investing and if I've got real estate professionals, we'll start looking at this especially right now with some of the things that just came out with the CARES Act. We're looking at this a lot closer, you know, kind of depending on what, on what people's levels are in real estate investing. But there are some benefits. Lower taxable income, increased cash flow, items being written off. You know, this doesn't have to be done when you first buy the building. You can do this in year 2, 3, 10 of buying a building. You just get more benefits the earlier you do it. There are some caveats. Some things that were going to be capital gains may be taxed at a higher rate down the road. If it results in losses, you may have to wait. I mean some of these things are the pieces I was just talking about and they're just kind of bigger. And if you decide you want to get into a like an exchange, there's only some things may not be eligible for like an exchange. I think I've got, yeah, I've got a slide a little bit later about this. And real estate professionals use up all those losses up front and so additional tax plan may be needed for them down the road. So I have no, I have no issues with people paying taxes. I'm proud to pay them, I pay them myself, but I'm also happy to pay only what I legally have to. And that's what we try and do here at lifetime tax is only the amount that we have to not everything we possibly can. For first time investors. I'm just going to bring this up, just kind of gives you. There's a lot of calculations going this, guess what you can actually even use if you have a self directed ira, you can use retirement money to invest in real estate. Just know that there's a tax, it's a different form and you go through, you go up in the tax rates much faster. So in this case you can kind of have some of that same sort of thing, but you might be paying some tax at a high rate pretty quick. That 1031 exchange I was just talking about, let's just say you want to move on bigger and better. And I bought my first apartment complex at 5.5 million bucks. Now I see a 12 million dollar building I want to go get. Well, instead of selling it and paying the tax, if I sell it, give all my money to a qualified intermediary, and then I go buy that bigger building. I don't have to pay that. I don't have to pay that tax on that building now. I just rolled it into a new building and I've kicked that can down the road further, and then I can get some cash out some other way. So there's lots of ways to continue to not pay tax, just depending on how you want it structured. The bigger the partnership, the more partners. This can get more complicated. But in general, that's the theory. So I'm not this guy yet. But, you know, this is. This is almost kind of in my profession, if I can get something named after me, yeah, some people aren't gonna like me. But, you know, it's. It's kind of a fun place to be. It's like, hey, I found something that saves people a whole lot of money. My clients love it when I can tell them, you know, what, you were going to pay X number of dollars. But based on this planning that we've done and these things that we've discussed and these things that we changed up, you're paying 10, 20, 30% less than you would have in taxes. I mean, I've got clients who are much, much happier about their tax bill than they thought they'd be when we get through with some of these things. So as a tax guy, what I am going to say is when you get down, don't think about taxes as kind of the last minute, hey, I've just got to hand a whole bunch of stuff off to somebody and kind of see what I owe. Keep your stuff together, keep it organized. Look and make sure that when you're kind of getting ready for your tax returns, make sure you've got all of your items together. Because if I see something on a prior year return, like, so if I see your 2017 or 2018 return and I don't see the stuff for 2019, I'm going to ask and it's going to kind of slow down the process. So just kind of being organized, keeping your stuff together, checking and checking your bank accounts and credit cards for things that, you know, not only for income, but tax deductions and transactions, there's stuff that can be deducted that you may not even be aware of. That's one of the places where getting somebody who does this all the time is helpful because we can think of things that you may not even know exist. Start talking with us early. So it's, it's June 18th, and most of the time at this point, most people have already filed. Guess what? We got the coronavirus. Things got pushed back to July 15. I've got nobody's tax, Nobody's individual tax returns are even due until about four weeks from now, July 15, and they can still be extended. But as we're working through some of our returns with people, we're seeing some things where maybe we want to make some changes. And I got six months to help people make sure that they pay less taxes next year than they did this year. But the closer we get to the end of the year or after you get past the end of the year, the harder it is to come up with some of those planning ideas. And our arsenal is limited. So we can do the most when I have 12 months. So if we start talking about your taxes in January, I got 12 months to come up with ideas. We can kind of kick them back and forth. Somebody comes up to me on December 31st and says, Hey, I need some tax planning ideas. It's. Our arsenal is limited as far as, okay, well, if you got enough cash and you can go and do this right now, maybe we can do this today. And then after, after the end of the year, we kind of get into what I call post mortem planning. Most things are already written and there's only a small number of things we can do. But also when you're talking to your tax person, start your communications with them early. More we talk, the more we can help. If we know about something, we might be able to come up with some ideas of, well, if we do this differently, this will save you some money. If something doesn't make sense, ask questions. If you're getting into real estate and you don't understand how K1 works, ask your tax person. That's, I mean, that's part of what you're paying them for. They're going to charge you for it. But if you understand it, then those conversations are more productive and they can, and they can walk you through how this will benefit you. Take time to get it right and guess. And as I just mentioned, July 15th is the filing deadline. So you don't have, you don't even have to extend this year until at least July 15th. So you could still kick that can down the road to file by October 15th. But it only extends your time to get it right, not to pay the tax. So if you still owe money on, if you, if you owe Money On July 15th, you get past July. 15th, the IRS starts assessing interest and penalties. So you, if you don't like paying the IRS interest and penalties, then you want to still make sure you've got everything paid and then just go back and try and figure out if there's other deductions and things. But, you know, that's one of the things I think a lot of people tend to think, hey, if I get, if I go past or if I extend the. Is the IRS going to show up on my front door and start asking for money? No. When they do that is when you miss stuff, you don't put it in your return. The longer we have to kind of do do the job that we do best, the more we can find and hopefully the more we can save you, save you money. So don't rush. Just make sure you. You get the right questions out there, make sure you understand it and get with somebody that you're comfortable working with. So that's kind of, that's kind of the end of my presentation, Wayne. I haven't looked. I haven't been watching the chat. Do we have any questions or comments or anything yet?

I don't see any yet. Let me see. All right, I am allowing everybody to talk. Are there any questions from any of the attendees?

What is a typical cost for. For the segregation or cost of segregation? Depends on the firm. Depends on the firm that you get to do it. So to get a cost segregation, you actually have to. You have to hire an engineering firm. They go through, they do studies, they come up with, they got all sorts of formulas and things. They tend to be about 80 to 180 pages. But most of the time, when I see a cost segregation being done, it costs about anywhere from a couple thousand dollars to 10 or 15,000. Just depends. And there are reasons why sometimes you'll pay somebody more to do the more expensive return, the more expensive cost segregation. I've got a firm that I will recognize, I like because they give us so many data points that give us other options for down the road. Plus, like, we can, we can do some things for tax. We can use some things for property tax protests. We can, it can be used to lower insurance rates. But in general, typically, I mean, I would say it's usually most of the time, I see about five to eight thousand bucks. But I've seen it lower, I've seen it higher. Okay, thank you. I guess the other piece, I'll add to that in that slide. I think I said that I think I used like a 35% assumption. Most of the time, when somebody does a cost segregation, you're going to get about 20 to 40% of the building is depreciable faster than the typical life. So based on the size of the project, kind of. That kind of helps. So, like, normally you don't start doing these things until you're at least $750,000. There's actually a firm that I'm aware of now where I can get a cost segregation for about. It costs about 500 bucks, so it can even be done on a house. Granted, you're only going to do this on a rental property, but if you're investing and depending on the benefits, sometimes that cost might make sense. Are you able to recommend that firm? I won't do it on a live call, but I get with me offline and I'll. I'll go back, I'll look up who it was. I think I remember, but I don't remember off top of my head. Okay, thank you.

Hey, Nate. For the passive investors, once the property is stabilized and then we start paying distributions to them, do they have a choice to reduce their tax liability that tax year, or can they wait until they. Until we refinance or sell so they can shield a larger part of that future payout?

So there's really not a choice. I mean, the numbers really are where they are. But I mean, depending on how you structure other deals can impact that. But, I mean, give me an example of what you're thinking, and maybe we can kind of dissect it a little.

Yeah. So say year one passive is getting 10,000 on their distribution, and instead of that investor wanting to take the benefit of depreciation to reduce their liability for that year, they're kicking the bucket for say, year three, when we refinance. And so they just have a larger amount that they can depreciate from that payout at a later date, if that makes sense.

So instead of using the loss, kind of putting in the back pocket. So I'd rather pay the tax now and use. Use that loss down the road. Is that kind of what you're thinking? Yeah, I. I've never come across, to be frank. I've never seen a way to be able to do that. It's possible. There's a. There's a way to do it, but I really have. I really haven't had anybody that's really wanted to pay tax early anyhow. So at some point, I'll. I'm always looking for. For new things. Tax. Just the tax code alone is over. 2,600 pages. You get into case law and everything else you're talking, I can fill up the Library of Congress. But in general, nothing, nothing I've come across applies that allows that doesn't mean it doesn't exist.

And one thing you mentioned earlier on the call on the 1031, we're gonna have a webinar focused just on 1031 exchanges because it's its own subject. But when you mentioned the partnership. So everybody that all the investors that are investing in that deal. So say we have 20 investors as limited partners, say two on the general partnership side, all of them. Correct. Have to agree on taking that profit and putting it into a future entity. Right. Because that both the general partner and the limited partner are part of that one entity for that property. Is that right? It makes it easier if it's just one owner and they're taking the profit and going off. Whereas when you have, say, what we're doing at CREI is when we have multiple investors, everybody has to be on the same page about the future of what they're planning on doing.

So depending on the, depending on the like on exchange, there are, there's, there's lots and there's millions of flavors of like an exchanges and ways I've seen it structured just the, the more you get away from plain vanilla, the more chance you have that it's going to be challenged by the irs. And if it's not done done right, it. You got a higher likelihood the exchange might not work. That said, I've seen it and I like I prepared returns where say 51% of the partners wanted to stick around and 49 wanted out. And we, you know, we, we worked with the exchange company. We were able to make it happen where. But there's a lot of additional rules, a lot more things, and it just becomes more complicated. So the more people you have involved, the harder it become, the more costly it becomes. So you don't have to have 100% agreement, but the fewer people and the fewer people you have and the more agreement you have, the easier it is.

That makes sense. Nate, thank you. And that was all the questions for me. Were there any other questions before we end the recording?

For a small, I would say investors with less than, let's say, five properties. Would you recommend doing your own taxes or using some of the, you know, shelf software? Depends on how comfortable you are with real estate. So if you, if you feel like you've got a pretty good handle of all about all the real estate tax laws and you Feel comfortable doing it. Have at it. I. I would say that there's a lot of things about real estate, like each area is a specific niche. But. So, for example, real estate, there's a lot of things that are available, and you can do your own taxes. You might get them right, but you also may miss things that you don't even know exist. I mean, the reason why we do this as a profession is because we spend a lot of time on it, and we build up that expertise to be able to say, you know, what, if we do this, this will save you X number of dollars. And the more zeros you add after, the more value that's there. So you got five properties. You're able to do it pretty well yourself. I mean, it just kind of depends on what value you see. Yeah, so when I say. Yeah, when I say do my own taxes, I mean, use software that incorporates the. You know, the tax code, like Intuit. Yeah, TurboTax. I correct a lot of stuff from TurboTax, but I'm sure there's some people get it right. Okay. That answer said.

Thank you. Hey, Nate.

Okay, I was just gonna say, even though. Even though stuff goes into TurboTax sometimes when I've, like. I've gotten on the phone with, like, I had a client that was coming over to us, but the prior year came to me on October 12, asked if I could help out. I ran through it, and I said, this is how it's supposed to work. Save. Save your money for this year. Because I really can't add much value, but it really should go like this and even turn. Even when we got TurboTax in the line, they said, look, he's right. Software is not doing it right, but we don't do it enough. We really don't care. Okay, so TurboTax is really meant. If you have a W2, maybe. Maybe an investment account like, it's. And you get, you know, broker statement. So if you got a Vanguard Fidelity account, that's all you got. I'm probably. You're probably better off with them. As you start to add complexity, that's where hope. If somebody's looking for value, that's where I try and compete. All right. Thank you. The more. The more zeros you got, the more hopefully we can help. Makes sense.

Any other questions for Nate? Hey, Nate, how can they reach out to you to follow up for future discussions?

Let me go back and add my stuff there. Screen sharing. So you can reach out to us@lifetimeta.com. that's our website. Thanks. Screen two here. So there's a couple ways. Lifetimeta.com you can email us@accessifetimeta.com call. You can call us up and ask for Tracy. She's our practice manager. 972-771-6707. Smoke signals, LinkedIn, Facebook. I don't think we have Twitter yet, but we have lots of different ways you can get in contact with us. So if there's anything you're interested in finding out about, if you just go and search for Lifetime Tax Advisors, you can find us. There's lots of different ways to get a hold of us.

Well, Nate, thank you for your time. Thank you for the listeners time and future listeners as we post the recording. Hopefully everybody can say this was added value and obviously the huge real estate tax benefits for all investors, both active and passive. So everybody have a great night and day and we'll, we'll catch up soon.

Thanks, Wayne. Thanks for, thanks again for having me.

Yeah, absolutely. Thank you for your time.

Thanks, Wayne.