WS1984 How To Design a Tax Efficient Investment Portfolio | Brian Boyd

Are you a real estate investor hesitant to tackle the complexities of taxes? You're not alone. Taxes can feel intimidating, but what if they were a powerful tool to accelerate your wealth building journey?

In this episode of the Real Estate Syndication Show, we explore this concept with expert real estate attorney Brian Boyd. With nearly 18 years of experience, Brian sheds light on the tax advantages often overlooked by real estate investors.


Key Takeaways:

• Taxes as a Tool, Not a Threat: Brian flips the script on taxes, urging listeners to view them as an opportunity, not a burden. Real estate offers a treasure trove of deductions and tax breaks waiting to be harnessed.
• Master the Tax Code: Understanding tax laws empowers you to make informed decisions. Brian emphasizes the importance of learning the code and using it to your advantage for wealth creation.
• Don't Fear Audits: Brian debunks the myth that claiming deductions triggers red flags. As long as you stay within legal boundaries, confidently claim what you deserve.
• Assemble Your Tax Dream Team: Brian highlights the importance of a skilled tax strategist on your side. Look for a real estate-focused lawyer or CPA who can provide year-round guidance and strategize with you.
• The Wealthy Mindset: Brian sheds light on the mindset of successful investors. They view money as a tool and prioritize assets that generate returns and tax benefits. Owning a home isn't always the best strategy! Consider Brian's anecdote about a wealthy friend who leverages rentals to free up capital for more lucrative investments.

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Transcript

Brian Boyd: Don't be afraid of taxes. Don't think of it as a four-letter word. I know it's not fun to pay them, but at the end of the day, if you take these deductions, it's not crazy.

Brian Boyd: You're not raising a red flag to anybody.

Whitney Sewell: This is your daily real estate syndication show. I'm your host, Whitney Sewell. Today, our guest is Brian Boyd. He's a tax attorney, his own firm focused on real estate construction and business. Nearly 18 years of experience. He has numerous degrees and he lives in Franklin, Tennessee. He's the author of Replace Your Income, A Lawyer's Guide to Finding Funding and Managing Real Estate Investments. And so he, And he lays out a number of things, a number of questions that I get all the time from investors. We go through whether that's how you find that tax strategist, and is that even a thing? Is that your CPA? Is it not? And then, you know, he lays out a number of ways that the wealthy use He used money to build wealth. And he talks about this fearful thing we talk about all the time called taxes and why we shouldn't be fearful of it, or taking deductions and those things. But how the wealthy use money as a tool, and they know and understand taxes and oftentimes we don't, right, know enough about taxes or we don't have that expert on the team like Brian that understands taxes or simple things, you know, like not doing a cost seg study and oftentimes you're talking to a say a mom-and-pop owner, and they don't have a clue what that even is. They've never thought about that. They've never been approached to even think about, you know, they should do this. You know, they've been using the same CPA for the last 30, 40 years, and that's never come up, you know, for some reason. But there's many ways like that that Brian is going to go through to help you to save on your taxes. Brian, welcome to the show. Honored to have you on. I get questions about this all the time, this thing that you're an expert in. And I don't even know too many people that consider themselves an expert in this field. So I'm grateful to have you on the show.

Brian Boyd: Well, thanks for having me, Whitney. I, I'm thrilled to be here. I'm happy to share my knowledge with people. I think there is a massive void in the real estate investing world for people to one, the tax strategists, and two, to explain how the tax system works and how they can utilize it in real estate investing. And I appreciate the opportunity to, you know, talk to your listeners today and explain some of these concepts.

Whitney Sewell: Yeah. Let's do it. Let's jump right in. Uh, you know, something about, uh, you know, taxes kind of scares people, right? You know, they hear that word you and I were talking about a little bit beforehand. It's like, Oh, it's a bad word. Don't even say that word. You know, that's right.

Brian Boyd: You know, you know, in, in my experience, um, even growing up and before I went to tax school and started practicing in tax law, tax season was like April 15th or, you know, now that I'm a business owner, October 15th every year, because we file extensions year over year over year. And I don't think anybody needs to be concerned about filing extensions. But most people hear the word tax, and they treat it like a four letter word, there's a phobia around tax. And, you know, I'm trying to dispel that phobia, because, look, somebody wrote this code. That means you can understand it. There are many people out there like me, and I urge your listeners to look for them. But there is a public policy behind our tax code. And especially for real estate investors, that public policy is, hey, we want you to one develop, own and rent out real estate, because the government is not in the business of building real estate. That's not their goal. So You and I and other investors out there, the tax code is written in such a way that the public policy comes out in the form of deductions and certain tax breaks. everything from depreciation to bonus depreciation, to being able to do 1031 exchanges, 721 upreads, DSTs, everything to defer taxes. Now, you can get into estate planning and you take that 1031, 721 and DST and you can move it a little bit further down the road and even pass it on to your next generation. But the point remains, if real estate investors understood the public policy behind the tax code, They probably wouldn't be as scared as they are every year when it's like, oh, no, I don't think I can take that. Yeah, you can. If it's in the tax code, and you're not really pushing the envelope, I would say take it. For example, I was speaking to an investor the other day. I'm like, what deductions are you taking? Like, oh, no, no, we're trying to be very conservative on our deductions. And I was like, all right, well, let's talk about what you are taking, and then let's talk about what you're not taking. And they weren't taking the cost of their cell phone bill, and they were constantly on the phone. I saw them texting during our meeting. And we were talking about that, and I was like, who is that? Oh, and my real estate agent. I'm like, are you doing a deal? And he's like, yeah, we're in the middle of a deal right now. And I'm like, OK, well, you're using your phone. Why aren't you taking your phone as a deduction? It's like, well, you know, I don't want to raise any red flags, guys, you're not raising red flags, you're running a business. And most people don't understand that real estate is running a business. Let's just take somebody and let's make them up. Okay, let's say they have a duplex, a single family home, and maybe a condo at the beach. Every door they have is its own little business. And aggregately, it's a big business. So it's okay to take these deductions, as long as you're not abusing the tax code. Now, I'm not saying go to Disney World and write it off as a business expense. Don't do that. and try to justify it as, oh, I was doing research on the Orlando market. Don't call it that. That's a bad idea. Don't do that. But these things that everybody's upset about or concerned about, they're like, oh, my home office deduction. I'm going to raise the red flag. No. I'm at my house right now sitting at my kitchen counter, and I've got my laptop in front of me, and I'm working. So this computer is absolutely going to be a deduction this year. And the Wi-Fi that I'm using is going to be a deduction. And possibly part of the utility bills are going to be a deduction. That is not crazy. That is not outside the norm. That isn't going to raise a red flag. If you're doing it, take it. It's crazy to leave money on the table like that. Now, I'm not saying go hog wild and do crazy things. You know, don't go out and the 6000 gross vehicle weight deduction for a vehicle that can be bonus depreciated. You know, you know about this, right? It's you buy a vehicle, you use it for your work, you can depreciate it. And it's called bonus depreciation under Section 168k. Well, I'm not saying go buy a G wagon. Okay, don't do that. I drive a pickup truck because later today, I've got to go pick up a couch and move it into a short term rental I have. So it's things like that. It's justifiable. So if you're doing it, take it. But don't make stuff up. And I think most people out there aren't making things up. So if your listeners are concerned about taking these deductions, don't. Don't. There's public policy drafted by the Ways and Means Committee in Congress, passed by the Senate, and then signed into law by the president, and it becomes part of our tax code, and that is there. It is there to be used and used often.

Whitney Sewell: You're being incentivized to do those things.

Brian Boyd: There is an incentive to do it because they want you to keep doing it. Yeah. They want you to keep buying real estate and housing people. I know you're in an apartment syndication. And so quite frankly, I've lived in tons of apartments in my life. In college, after college, in law school, after law school, in tax school, after tax school. When I moved to Nashville, I lived in an apartment. You're providing housing to people. And why shouldn't you be rewarded for your investment that is providing a need or you're feeling a need for people like me and other people that can't afford yet to buy a home. So to your listeners out there, don't be afraid of taxes. Don't think of it as a four-letter word. I know it's not fun to pay them, but at the end of the day, if you take these deductions, it's not crazy.

Brian Boyd: You're not raising a red flag to anybody.

Whitney Sewell: Yeah, I appreciate the stress on that. You're not raising a red flag. You should take the deductions. I often find, though, there's deductions. Even you mentioned some that I bet people don't know about. But there's deductions you don't know about, right, that you should be doing, even, like you said, if you have a home office. Part of your electric bill or your phone or those things that you're not being detailed enough in doing. But one question, though, that I get often, you and I briefly talked about beforehand, is, finding that person that is a tax strategist, finding somebody, because it can seem overwhelming, right? Especially when you think it is, you know, this horrible thing, like you've talked about, that how do we find somebody that can help us? And what I like to think about is like a global tax strategy, right? This person that can say, okay, well, you have this business over here and this business over here, or where you're fixing to sell this thing, or you're fixing to do this. Like, well, maybe Whitney, you should, do this instead or no, hold that another year. Or like, I want somebody that can help think through those things like that, right? And I found a lot of other people that want to help, you know, like need that help as well. How do you find somebody like that? Or is it an attorney or is it a, I get that question too. Is it an attorney? Is it a CPA? Who knows that that can help me?

Brian Boyd: Yeah, that's a great question. And when we were talking earlier, I said, there's a there's a massive void in this market for that. Now, I have seen these tech strategists online, and you know, they're on Instagram, they're on tik tok, they're on Facebook. Hey, look, if you're going to find a strategist, a good one, they're probably not promoting themselves on social media, okay? That's probably not what's going on. I would say find a lawyer, because with a lawyer, unlike a CPA, we do have the business background too, so we're looking at a holistic picture. And quite frankly, where we start is we start at a 30,000 foot view. Like, hey, give me a picture of what your life looks like. And then we start drilling down into the various silos to figure out, okay, how can we utilize this? And what are we moving around? You know, my biggest struggle, and this is my personal experience is with CPAs is finding CPAs that really understand real estate. And Yeah, I've gone through several, but when I tell the CPA, hey, we need to have a meeting at least once a quarter, so you know where I am in my year, and I know what's going on, and we can plan for this year. I find a lot of CPAs, they give a lot of lip service to that, but they won't do it. Now, there is a group out of North Carolina that I'm familiar with. They run the Real Estate Investing Podcast. It's like the Real Estate Investing CPAs. I listen to them every Tuesday. And they're phenomenal. And I think they're pretty good at walking you along that path. But if you're looking for somebody like me who invests in real estate, who teaches tax and real estate to people, and can effect the plan for you, then I think we're few and far between. Because I have no problems picking up the phone, calling a client and saying, hey, I haven't seen your P&Ls this month. Where are they? I need to know how that property is performing because if we're holding this property for a set amount of time, say three years, then we need to know where we are every month to figure out, okay, should we sell it or should we hold it? If we hold it, how much more depreciation are we going to get out of it? How much more is it in the cash flow? What are the costs of holding? So you have to run a lot of metrics, and I'm sure you're familiar with it. Whether it's CapEx, IRRs, ROIs, the NOI, you've got to know where the where the money is on that project at all times. Because quite frankly, you've got to know when to pull the trigger and offload it, perform a 1031 or a 721 or a DST, whatever you're moving into, and keep that train rolling. Because most attorneys and most accountants are singular focused. An accountant looks at Oh, they've given me their books, I need to prepare the return and I need to file it. The attorney is looking at it like, okay, they've hired me to set up this LLC. They've asked me for some time where I can talk to them about that LLC and about their investments. But when you hire a strategist, somebody like myself, we're talking a lot. We are talking once I'm asking a lot of questions, right? Asking a lot of questions. I am becoming part of your team. And we are planning out your one, three, five, seven year plan to get you to where you want to start. And a lot of the questions I ask people when we first meet is, what's your goal? Some people want to be the next Grant Cardone. Some people just want to take an extra vacation every year. Some people just want to put their kids through college. Some people want to buy that new car. What is your goal? Not everybody wants to be the next Grant Cardone or Bill Gates. Some people just want a little bit more cushion in life, and that's fine. I just need to know where your goal is, and if that goal changes, let's talk about it. Because if we're doing this plan and it's predicated upon okay, here's where we're working from. And this is what I'm working towards with you. And you decide, oh, I think I want to change my plan. I want to do this full time, then that's a very different conversation. And we need to start thinking about how do we transition you out of your full time job into doing this full time. So yeah, people like me, we're together for a long time as your lawyer and your strategist. So I'm really disappointed in what I've seen out there, but it's not that it doesn't exist. It's just that, you know, I don't really advertise. I do this social media stuff to provide education to people, because I do want them to not be afraid of taxes. I want them to understand it, or at least have a concept they can go talk to their person about. For example, you know, I was talking about something the other day on TikTok, like the mortgage interest deduction. And, you know, a lot of people, somebody at the gym this morning said, well, can I take it? I'm like, well, of course you can, your bank probably sent you a 1099. And that is your mortgage interest. That's deductions to you. That's a deduction to you. It's like, oh, okay, I just didn't know. I'm like, yeah, it's available to you. It's, it's available. And he's like, Oh, I'm gonna talk to my accountant about it. Okay, but I'm telling you, it's deductible and take that 1099 to your account. And they'll just plug it in. It's good. So I say all that to say this is that you're going to have to kiss a lot of frogs out there. You're just going to. People that do this kind of strategy work, they're probably practicing attorneys or CPAs that only focus on real estate. And quite frankly, those kind of people just don't really exist. Other than that group out of North Carolina that I know, that's who they focus on. They focus on these real estate investors. I think that's Brandon Hall, right? I think that's Brandon Hall. And I love that show. And I think they do a phenomenal job not only of explaining the issue. And let's just take an easy one short term rental loophole. You know, they'll do like 10 episodes on this. And I think it just fleshes it out very easily for people. So you have at least a working understanding of how it works. You know what you need to do. But he's not talking in such a way that it's unrelatable to you. And they will work with you. I just don't know how their program works. I don't know if you pay them a dollar amount every month and you get a little bit of time with them. I don't know what their program is. For somebody like me, it's like, hey, you're going to be a client of my firm. And we're going to talk. And these are the schedules we're talking on. And this is what I need from you. And this is how it works.

Whitney Sewell: Yeah, I've known, I haven't talked to him for a good while, but I've known them for a long time. They do seem to really serve a lot of investors in a good way, real estate investors. Well, Brian, you know, what about, you know, what would you say is like some of the number one things, or the number one thing, just that the wealthy do that it's not talked about right often?

Brian Boyd: Yeah, there are a couple of things the wealthy do. And I'm fortunate to know a few of them that most people just don't do they it's a mindset switch. And so once you get that mindset switch, you start understanding that money is really just a tool. And a lot of people, you know, in the early part of their lives, they're in that that struggle period that they're just trying to pay the rent and pay their student loans and pay their mortgage and take care of their kids and things like that. The wealthy treat money like a tool. No different than a deer hunter uses a rifle or a ditch digger uses a shovel. It's part of your system. And money for wealthy people comes very naturally because they don't think, oh, I need more money. They think, oh, I need less money because I need to deploy it. I need to put it out into the market to make me more money. And once you get around the idea of, oh, I need to save, save, save, save, save, then you get into a mindset, I need to deploy my money into an asset that's gonna pay me back, it's gonna grow, and it's gonna provide me tax advantages. So the wealthy have a pretty good understanding of taxes as a public policy initiative, and they also understand that money begets money. And what do I mean by that? I mean that They're not gonna go out, they're gonna get a payday somewhere and they're not gonna just go blow it. They're going to go buy assets with it. They're not gonna buy silly things like Porsches and a new Rolex or a fur coat or a trip to the Bahamas. They're not doing that kind of stuff. They're still living you know, basically their normal life living, not extravagantly at all. And they're creating wealth because for rich people, they don't think in terms of what do I have in the bank? They think of how bankable am I? That's different. And that distinction is really important. And here's a good example of that. I have this friend who is phenomenal. And he's up in Connecticut. He's a private banker in Manhattan. And he won't buy a house. He rents his house. And I'm like, why haven't you bought a house?

Whitney Sewell: That's what Grant Cardone preaches all the time. He's like, don't own the place you live.

Brian Boyd: He's like, why? Why would I buy my house? I'm like, well, I mean, OK, tell me why. And he was like, because it's wasted money, I can pay a certain dollar amount every year, and I can walk away from it if I want to. Whereas we're in an interesting time right now in the real estate market, because we saw the spikes during COVID. Now things are kind of evening out again, but interest rates have spiked. So if you're going to buy a house, and that's your mindset to buy, or to sell this house, buy another house, well, you're, you're trading from a low interest rate to a high interest rate. So the cost of money, that delta between the two has gotten pretty big. And he's like, I don't want to do that. I would rather do this. I would rather go buy self storage units and have them kick out a certain dollar amount to me every year. And I can appreciate that. But I can live anywhere. I can do what I do from anywhere. Why would I be tied down? Why would I pay property taxes? Why would I do all the things necessary, the upkeep of the house, if I can just rent it and I can take the remainder of my money and deploy it into investments? I was like, I see that point. I mean, I still want to own my house. But long story short for him, it's like he just doesn't think it's a good economic move for him. And I get it. I understand. Is he single? No, he's married with quite a few kids. He's a great guy. His name is John. I'm gonna shout out to John. Love that guy. But he doesn't want to buy a house. He just doesn't want to. And I'm like, all right, I get it. And so in the last few years when I visited him, he's had a house on the beach. He has this lovely house on a big lake. And I don't know where he's going to be next year. It's going to be in the same area, I'm sure. But he just kind of moves and different views every year. So I'm like, OK, whatever. So he doesn't want to spend the money on it. I get it. No problem.

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.