🔑 #1

Real estate provides some of the best tax-shielding opportunities for individuals.

If you’re thinking “it’s important to pay your fair share of taxes”. I agree.

But also, everyone should understand this: the US government tax code is a fairly evolved incentive machine. They want people to own real estate and businesses. They’ve decided these activities are good for the growth of the economy (which benefits everyone). So they create incentives to encourage those activities (some call these “tax loopholes”).

Historically to be able to use cost segregation and depreciation to offset your income taxes using real estate purchases you needed to be a real estate professional.

To be a real estate professional you need to log 750 hours of real estate work per year. That’s a high bar.

However, if you are renting your property short-term (eg: Airbnb), you don’t need to be a real estate professional. Now anyone can buy a house, rent it on Airbnb and depreciate a large part of the purchase from your income taxes.

Here’s the simple math:

House price: $500,000

Downpayment: $100,000

Your assumed tax as a percentage of income: 30%

Amount you may be able to write off from your income: $150,000 (this is an estimation, you need to do a Cost Segregation study)

Your tax savings on this purchase: $50,000

Effectively you spent $50,000 to buy a $500,000 house that now produces real income.

Please note, as always, this is not investment advice. There are a lot of mistakes you can make along the way. Make sure you do your research, and work with advisors and a CPA.

🔑 #2

There are opportunities to make money everywhere.

The US has 65,400 strip malls. If you assume 25% of those were built over 40 years ago then there are over 16,000 strip malls nationwide that are ready for an update.

The beauty of wealth building is you only need to succeed with 1 of those strip malls to make life-changing money.

If I wanted to invest in a strip mall (I may one day soon), this would be my process:

• Find people on Twitter who have written about strip malls and DM them (for example, StripMallGuy and Joe Speiser). Ask for a call, and offer to pay them for their time. You will need them later as advisors on your deal.
• Pick 3 territories I like. Start searching LoopNet for properties in those areas to get familiarized with opportunities.
• Make a spreadsheet for yourself where you record your top 20 favorite opportunities. Review these opportunities with your advisor and get feedback on each one to calibrate your understanding.
• Get on the phone with 10 brokers you meet on LoopNet to learn from them. Ask about any unlisted deals they have.
• Find forums where people talk about buying strip malls (examples for this include Bigger Pockets or Reddit)

To start, I’m looking to understand the following about the Strip Mall business:

• How should I think about price per Sq Ft in relation to rent collected?
• What are the current rates being paid by tenants?
• What rates can I expect to get once I’ve updated the property?
• What are the low-hanging fruit for remodeling strip malls, and what will it cost me? How long will it take?
• How can I finance the purchase and remodel?
• Ask my advisor/consultant if they can share a spreadsheet they’ve used in the past for their budgeting and forecasts. I’ll use this as a baseline for my own calculations.

🔑 #3

I’ve mentioned this before, there are two ways in the US to build wealth in a non-linear way.

1. buy real estate
2. buy a business

This tweet teaches you how to hack your way to buying a home for short-term rentals.

Summary of his playbook:

1. find a property that is overlooked because of its large size (6-9 bedrooms) and deteriorating condition in a strong second-tier Airbnb market
2. offer below market price
3. instead of going for a mortgage, ask the seller to hold a note on the property (this means the seller plays the “bank”, and you pay the debt payments to the seller)
4. remodel the home, then refinance and pay off your debt to the seller with a normal loan

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Reply to let me know if you liked Tweet 1, 2 or 3 most. 😊

Have a wonderful week!

~ Sieva

ps: have you invested in real estate projects? I want to hear about it!

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