WS1929 How To Be Faithful Steward | Eric Most

Welcome back to the daily real estate syndication show. I'm your host, Whitney Sewell, and today we're continuing our enlightening conversation with Eric Most, a stewardship and impact expert. We delve deeper into how to maximize exits, whether it's an asset or a business sale, and how to steward resources more faithfully.

Eric shares invaluable insights on how to leverage assets for generosity, emphasizing that most of our wealth is tied up in assets rather than cash. He introduces us to the concept that "friends don't let friends give cash," highlighting the potential of using non-cash assets for charitable giving.

We discuss the services provided by the National Christian Foundation (NCF), which helps individuals use complex assets like real estate, business interests, and intellectual property for charitable purposes. Eric explains how NCF manages around $7 billion in such assets, creating tax efficiencies and allowing for more charitable giving.

One example Eric provides is how real estate can be used as a charitable funding vehicle. By gifting a portion of a property to NCF, you can receive a fair market value deduction and avoid income taxes on the donated portion, while the proceeds can be directed to your charitable goals.

Eric also offers guidance on considering debt levels when gifting assets and suggests that assets with less than 40% debt are typically the best candidates for donation. He encourages listeners to consult with their advisors and an NCF representative to identify the most impactful assets for giving.

In closing, I remind listeners of the value of today's episode and encourage everyone to like, subscribe, and share the Real Estate Syndication Show with friends interested in making a difference through real estate.

Remember, stewardship and impact go hand-in-hand in real estate syndication, and with the right approach, your assets can create a lasting legacy of generosity.

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Transcript

Whitney Sewell: This is your daily real estate syndication show. I'm your host, Whitney Sewell. Thank you for joining us again today. I hope you listened to yesterday's show with Eric, and we're going to continue the conversation with Eric Most today, who is an expert in stewardship and impact. We're going to dive a little further into the conversation around stewardship and diving into, you know, you're about to exit or something, right? Maybe it's an asset, maybe it's a business that you're about to sell and you want to maximize that opportunity. We're diving into that today. Eric, how do I steward just these resources that have been entrusted to me more faithfully? And you know, how can you all help us with that?

Eric Most : It's such a great question. And I know that, I mean, so many of us ask those questions, especially, I mean, every business owner is going to ask these questions, right? Like, Hey, how do I steward these resources better? Folks that are believers, right? They feel this, this command to be wise stewards of all that's been entrusted to them. And so such a great, such a great question. You know, we, we talked about a little bit about earlier, like friends don't let friends give cash. And so when we look at our portfolio, we look at all that God's entrusted to us, 90% of our wealth is wrapped up in the things that we own, generally speaking, almost to a T across the country, and in other kind of Western cultures. And those of us that are generous. We do our giving and our living out of that 10% of cash that's available. And so it's the smallest percentage of our portfolio and so at NCF we love to come alongside and look at, hey, So how do we access and how do we, how do we start using that 90% of assets that God has entrusted to us that are that are complex their, their business their, their real estate their oil and gas their water rights, their intellectual property rights. These, though, can be incredible tools of generosity. At any one time, NCF owns somewhere around, or right now, somewhere around $7 billion worth of business, real estate, intellectual property rights. And through our ownership of that, we're able to provide greater tax efficiencies that then creates almost like an arbitrage in allowing more dollars to be given away. And so, so a way to think about this is, and maybe we just do a couple different examples. Let's say this is a real estate show. And so let's talk real estate. So let's say I own a commercial property. It's a income producing property. And it's just one of my pieces in my portfolio and say, Hey, I wanted to give away, you know, I wanted to give away, Pick a number. It doesn't even matter. Let's say I want to give $100,000 away. And that's what I'm already doing, but I'm doing it out of my cash, right? You know, bringing home a million dollars. I have a tithe mentality. I want to give away 10%. So $100,000, I'm giving away. Well, instead we can say, hey, let's look at the resources you have. And so let's take this real estate property you have. Maybe it's worth a million dollars, maybe it's worth 2 million, 5 million, it doesn't matter, even less. You could take that asset and gift it to NCF. or you could gift a portion of that asset to NCF. And so let's say it's a $2 million valued building and you want to take half of that building, 50% of that and gift that to NCF. By doing that, you're going to get a fair market value deduction for half a million, or I'm sorry, for half of that asset value. So it was a $2 million building, you'd get a million dollar deduction for your taxes that you can use this year. If you can't use all of that deduction this year, it has a five-year carry forward of that deduction. So using a complex asset, class, like real estate, the IRS will allow you to deduct up to 30% of your AGI in a single year. So if you use that up to 30%, and that's still more than you can carry that over for the next five years. Now, this property we talked about was an income producing property. And so after expenses, so after property management, after capital expenses, CapEx for the roof, the parking lot, yada, yada, profits that then flow into you, NCF would receive 50% of those profits. and we don't pay any taxes on it whatsoever. We pay no taxes on real estate income. And so you, as the property owner, have been able to avoid receiving that as income that you're now taxed on. And instead, those dollars are going into your charitable pocket bucket, and they're going to create a liquid form that you now can write those checks that you normally would be writing to charity. So we talked about giving to your church or nonprofit young life. It could also be American Heart Association or your, your alma mater, you're able to write those checks out. And now you're not using your cash, the least efficient way. And so that's one example of using real estate in an ongoing manner as a long-term hold. There is, we can hold that asset in perpetuity. So literally you can think about your portfolio and say, Hey, I want this, this, this one property here to be used as my charitable funding vehicle. And, and it's just an absolutely beautiful way to do things.

Whitney Sewell: You know, Eric, if we have numerous properties that maybe we want to give some from, right? Are we going to have numerous accounts through NCF? Or is this one thing that we could attach numerous businesses or properties to?

Eric Most : What does that look like? Yeah, great question. One account, unless you want multiples. So you can do it.

Whitney Sewell: Don't need more accounts to keep up with.

Eric Most : Yep. But we have some, right? I mentioned Jack Kim with Core Real Estate, and he literally says, hey, we want to create a fund for every one of our portfolios. And so, because we have an investor class, invest in this one and different investor class in this one. And so he has multiple. It's very simple. We can link them all under one dropdown and things like that. But so you have options. You could have just one or you could have multiple. Um, we would generally also suggest as saying, Hey, instead of taking, you know, if we look at that, um, how do we be better stewards of all that's been entrusted to me? Um, you know, instead of saying, Hey, I'm going to take, uh, 15% of this asset and 10% of this asset and this asset, there is a gift. We talk about gift economics. Does it make sense to make this gift? And instead of doing a 15% here and a 10% here and a 15% here, we might say, hey, does it make sense to take one asset and gift just all of that one? Because there are appraisal costs that are incurred when you do these things. There are, as real estate, there are phase ones costs, which phase ones aren't that expensive. And real estate isn't that bad either. I'm sorry, appraisals on the real estate in the real estate world are not that big of a deal. And so maybe it'd make more sense to say, hey, let's just take this one really great asset and gift that. Another consideration is debt on assets. And so there are debts that factor into the economics. And so just a general rule of thumb, if somebody's for the, first time kind of hearing some of these ideas and their mind is being blown because this happens all the time in my conversations. People are like, I had no idea I could have done this. Nobody has ever told me these things. And they're now starting to run through in their mind, their different assets in their portfolio. Debt is something that can cause issue and it lowers your deduction amount. And so a general rule of thumb, and this is just kind of the big picture general rule of thumb. If you have more than 60% debt on an asset, it's usually not a great asset to gift. If you're in the 40 to 60% range, so we put that at a red light, that first one, that 40 to 60% range, we generally call that like a yellow light. That could be a good option. It's something to explore. If it's under 40% in debt, that would be a green light. That's usually in almost all occasions, like a great asset that you could gift.

Whitney Sewell: That's some great guidance there as well, as I know there's many that are listening that have assets that they're thinking about right now that maybe this would be a good option for. Anything else, Eric, on just helping us to be more faithful, right, with what we've been entrusted to before we move on?

Eric Most : Yeah, I mean, literally, It can be so valuable if you sit down and are willing to kind of open up your balance sheet and just say, Hey, these are the things that we have. And so we have folks that are like, Hey, I heard you talk about, you could give part of a business. And so we've been talking real estate, but someone's like, I heard you can give business. And, um, and, and so it's one of the things that. Yes, business, we do a lot of business asset gifts, both long term holds and short term sales. And we'll talk more in detail about some of this stuff. But it might not be the best asset class. And so one thing I would say is like, be willing to, you know, with your advisor team, sit down maybe with an NCF rep from across the country and say, hey, these are the assets that we have. And be willing to allow them to say, hey, what about this one might be your best asset class. And so, um, sometimes, you know, when I used to own my insurance agency, uh, we used to talk, uh, I had my team talk about life insurance. Um, but what I really didn't want them ever talking about was more than the general topic about life insurance. If they started talking about term life or whole life or universal life, all of a sudden the person on the other side of the line got zero focused in and like, Oh, Oh, that's the one I want to get in. That might not be the best thing for them. Same thing here, have an open mind, be willing to open up what the balance sheet looks like. And we can kind of walk through the different implications and the benefits of certain type of asset class that might have greater impact or better opportunities in future. Royalty income type of gifts, so mineral rights, water and gas rights. We see a lot of that out here in the West. incredible gifts where it's just a constant flow, literally constant flow of money going into that charitable checking account that you can grant those dollars out. And so that might be a better one for an individual. So have an open mind.

Whitney Sewell: Thank you for being with us again today. I hope that you have learned a lot from the show. Don't forget to like and subscribe. I hope you're telling your friends about the Real Estate Syndication Show and how they can also build wealth in real estate. You can also go to lifebridgecapital.com and start investing today.