BiggerPockets Real Estate Podcast - 196: LLCs, House Hacking, and Saving on Taxes with Brandon Hall

Episode Date: October 13, 2016

What has five letters but causes so much fear that millions of wannabe investors never get started? That’s right: TAXES. But taxes don’t need to be scary — and understanding and utilizing the tax system can actually help grow your business and help you build incredible wealth. That’s why we’re excited today to sit down with Brandon Hall, a CPA and real estate investor who works exclusively with real estate investors to help them strategize and organize their business in the most cost-saving way possible. We cover Brandon’s real estate journey, including house hacking, LLCs, S-Corps, bookkeeping, and so much more. You’ll love Brandon’s engaging and entertaining personality, and for once in your life, you might even enjoy learning about taxes! In This Episode We Cover: How Brandon realized the need for a CPA through the BP community How he grew his firm through the BiggerPockets Forums The importance of giving value to others The details on his three-unit property Tips for hiring a “leverage property manager” How to find investors in your community The details on his second triplex Why he focuses on multifamily How he funds his deals through FHA loans The way he looks at PMI A mistake he is guilty of when it comes to inherited tenants Training your tenants and other management hacks The tax benefits of house hacking Mistakes he’s made in his real estate investing Tips for finding a good CPA Advice for those deciding whether to use an LLC or not What you should know about LLCs Things to know about the “real estate professional” tax designation When to hire a bookkeeper Common mistakes investors make with taxes And SO much more! Links from the Show BiggerPockets Meet BiggerPockets Webinar BiggerPockets Forums (with new leader feature) BiggerPockets Bookstore BP Podcast 060: From 0 to 68 Rental Units in Just Four Years with Serge Shukhat Xero Quickbooks The Tax Implications You MUST Understand Before House Hacking (blog) Looking to Invest Out-of-State? Here’s How to Pick and Analyze a City (blog) The Importance of Reserve Accounts (Or What a Surprise Roof Replacement Taught Me) (blog) BP Podcast 004: Commercial Real Estate Investing With Frank Gallinelli BP Podcast 162: How to Pay Less to the IRS with Amanda Han, CPA BP Podcast 005: Dealing with Death – A Financial Discussion with CFP Neal Frankle Books Mentioned in this Show The Book on Tax Strategies for the Savvy Real Estate Investor by Amanda Han and Matthew MacFarland The Book on Managing Rental Properties by Brandon and Heather Turner What Every Real Estate Investor Needs to Know About Cash Flow… And 36 Other Key Financial Measures by Frank Gallinelli It’s Not Rocket Science by Dave Anderson Tweetable Topics: “Don’t try to sell yourself. Let your content sell yourself.” (Tweet This!) “You as the business owner should not be in the bookkeeping.” (Tweet This!) “The ongoing tax strategy throughout the year, that’s the time to save money.” (Tweet This!) Connect with Brandon Brandon’s BiggerPockets Profile Brandon’s Company Website Brandon’s LinkedIn Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast show 196. Pretty much used Bigger Pockets as my growth platform for my firm. Nice. And then, yeah, I mean, you guys have, yeah, you've taken me from zero to a lot. Wow. And what do I get for it? You're listening to Bigger Pockets Radio, simplifying real estate for investors large and small. If you're here looking to learn about real estate investing, without all the hype, you're in the right place.

Stay tuned and be sure to join the million. of others who have benefited from biggerpockets.com. Your home for real estate investing online. What's going on, everybody? This is Josh Dorkin host to the Bigger Pockets podcast here with my co-hosts of Mr. Brandon Turner. How you doing? Hi.

I'm good. How are you? What's new? Yeah. Are you been annoying? You're being annoying. You're like, I'm going to record this podcast with Brandon today. I want to see how annoying I can be.

Listen, it was hard enough. doing a podcast with Brandon Turner and our guest, Brandon Hall. I mean, like that, that really made it a lot of fun. Yeah, I can see that being really tough. I mean, I have a hard time just like talking to people and there's two different names. I don't have the mental capability to talk to me. I can't figure it out. I'm sorry.

I'm sorry. There's counselors for that. Yeah, some things are just difficult in life for some people. Well, you know, it is what it is, man. I'm good. Thank you for asking. You're excited. You know, I've been getting some stuff done on our new office.

Which I'm very, very excited about. Yeah, man, things are good. We just had a new employee start at BP today, our QA engineer. She's going to help us find all those little annoying bugs and resolve those things on bigger pockets. So, yeah, that's fun. That's cool. That's cool. I got a new employee that just started working here for Brandon Turner and family.

Oh, yeah. This here is Rosie Lou. That looks like Rosie Lou. Wow, she's slightly bigger than when I last saw. She is slightly big. Hi, how are you? This is my little girl. She's four months old now.

So for those people who are watching on YouTube, you can see how cute she looks in her little pink pajamas. Yeah. Hey, Rosie. I'm hanging out. I've introduced you to my wife, Heather, but Heather's not liking the video cameras. Yeah. Heather definitely doesn't ever show up on video.

She does not show up on video. We're going to have to remedy that situation. I know. We need to get her on the podcast someday. As Brandon looks at his wife in the eyes. She clearly is scalloped. back at hand. Yeah, I'm sleeping on the couch tonight. Uh-oh. Trouble, trouble. Cool, man. Now, everything's good over here. And as you mentioned to me, off the air, things are going well

there. So I'm happy. Things are good. So, well, today's show, today's show is a great show. Yeah, one of my favorites, which is weird because it's one that normal people would be like, oh, it's a show with a CPA, taxes. But I really, really like, I learned a ton, a ton of stuff that I never thought about it. And I do you too. I mean, like, you were like, I had never thought of that before. Yeah, he's great, he's smart, he's young, he's hungry, he's funny, he makes fun of Brandon. I think he makes fun of you more. What more do you want? I don't know what you're talking about. I might be in denial, but I don't remember that. No, you are in denial. That's all right. But before we get to that, yeah, well, let's kind of get to the orders of business that we usually take care of, like today's

quick, quick tip. All right. All right. Today's quick tip. If you are a member of Bigger Pockets, a great platform with hundreds of thousands of people, actually over 600,000 members. Whoa. You can get in there and do yourself a favor and start to network. That starts with building a great profile, filling your profile in. We talked about that last week. This week, we're going to chat for two seconds about searching and finding other people, which you can do through our forums, looking for people who are experts in different

topics. But you could also go to our meat page. It's biggerpockets.com slash meat. Or if you go... Is that like beef, like M-E-A-T? No, that would be M.E We should make a biggerpockets. Dot meet page and just have a bunch of stakes

on the page. That's a great idea. You guys should go to BiggerPockets.com. Bigger Pockets. Are we going to create our own failed stake line? We might. We might. Yes. Anyway, if you're looking for people, if you're like a newbie and you're trying to build your team

and you want to find an agent or you want to find a lender or you want to find an accountant. Hint. Hint. Hint. Or another attorney. Or another investor. Yeah. Somebody to take out of the company. a coffee. Go to biggerpockets.com slash meet. You could find people in your area. You could find people

with specific criteria. And if you are a pro user of Bigger Pockets, you can do a lot more digging in based upon all these crazy little criteria. And we're only going to make it better, only making it better. We're prioritizing our meat page right now and doing lots of improvements to it. So you'll be seeing those in the coming weeks. But that's it. Get in there and network and start connecting with people. Even if you've never done anything or you don't know where to get started by meeting other people and creating those relationships, you know, you're starting yourself on the path. There we go. I like it. I do too. There are two kinds of real estate investors, those who have reviewed their insurance, and those who think that they have. Most don't realize their coverage wasn't built

for how they actually invest. Vacancy periods, rehabs, short-term rentals, or LLC held properties. These gaps surface only when filing claims. That's why investors work with NREG. They specialize exclusively in real estate investors, understanding portfolios, risk at scale, and cash flow protection. One claim can erase years of returns. If you own a rental property, don't assume you're covered. Have NREG review your insurance with someone who gets investing at NRE.com slash BPPod. That's NREIG. com slash BP pod. Do you ever notice how every passive investment somehow turns into a very active lifestyle, active spreadsheets, active phone calls, active stress? Here's a better question. What if you could buy brand new construction homes, 10% below market value, and the best markets across the

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three numbers, occupancy, delinquency, and net promoter score. If those numbers slip, your income slips and your trust slips too. And most PMs don't hold themselves to performance standards. They focus on activity, not outcomes. Mind is different. They upset. They upset. over the metrics that actually grow your cash flow. Go to mine.co slash show me to see how mine performs and get a month of management for free. Because if you're going to hire a property manager, hire one that manages your investment like an investment. Guys, this is show 196 of the Bigger Pockets podcast.

You could check out the show notes of biggerpockets.com slash show 106. And, you know, go in there and we'll also have links to the video and all sorts of other stuff that we talk about during the show. And of course, if you have questions for our guests, you can ask there. But that's it. You guys leave us ratings reviews on Stitcher, iTunes, SoundCloud, anywhere else that you were listening to the show. We definitely appreciate it. That helps us. And subscribe if you are not currently a subscriber to the show through all those platforms. Again, that really does help us. With that, we ready to get into this thing? Oh, webinar. Oh, yeah. Yeah. Okay. So this week's webinar, we're going to talk about one of my

favorite strategies of all time. And in fact, it's something that Brandon Hall mentions today on the podcast. We'll get to that later. Or at least he sort of says his first deal is using the strategy. And that is the buy rehab, rent, refinance, repeat strategy, which is I call burr. So we're going to talk all about that, how to achieve success using the burr strategy. And in fact, very specifically, how a person could generate $100,000 in income every year, just doing a couple of these burr deals every year.

So if you want to learn more about that, go to biggerpockets.com. webinar and sign up. Perfect. Awesome. All right, well, let's get to this thing. Today's guest, as I mentioned before, is it Brandon Hall. Brandon is a real estate investor, you know, relatively new investor, but he's got a ton of insight. He is a CPA who's got his own firm focused on real estate investors. And his story's awesome. And I don't know, I learned something pretty amazing. And, you know, it's that bigger pockets really helped him build his business, which I always love those stories. So we hear about that in the very beginning of the show. Anyway, lots of great tips about the financial taxation part of your real estate business. This is a great show for anybody,

regardless of their experience. You know, we dig in on some cool stuff with his own properties as well. And the LLC stuff is going to blow people away. Like, I don't know, everyone has that question of LLC. I thought he gave one of the best answers I've ever heard on whether or not you should have an LLC. It's very thorough. Awesome. Let's bring him in. Mr. Hall. Welcome to the show. It's good to have you here. That was real. Come on. Stop screwing things up.

You're a professional. Brandon Hall. How are you? I'm doing well. Thanks for having me. Yeah, this should be fun. I mean, it's always a blast talking to CPAs, right? Everyone's favorite pastime.

Look forward to the show a lot, especially for so many reasons. Yeah, no. Today we're talking about both your, you know, your actual real estate journey because you are a real estate investment. and we're going to talk about some of the biggest tax questions that people have. I got kind of a list. I'm going to fire match a later. These are the biggest that people, I hear over and over and over and stuff like LLCs and corporations and all that good stuff.

People are going to want to know that stuff. So we're going to hit that later. But first, I want to talk about your actual real estate journey. Is that cool with you, Josh, and Brandon, Hall? Absolutely. I think it's fine. It's awkward. All right.

All right. B. Hall. Let's start at the beginning. You are a CPA. How did you go from CPA to, to wanting to get into real estate. So I graduated college in 2013 and pretty much immediately knew. You are like a 12-year-old.

I am. Fresh out. But a very smart one. Very smart one. Okay, good. Good. Confidence. It's a good thing.

Now, yeah, I graduated in 2013 and joined Pricewaterhouse Cooper's big four accounting firm. And probably within two months, realized that I did not want to be in the corporate world. So I immediately started trying to figure out how I can get out of the corporate world. Real estate investing kept popping up. I found bigger pockets, joined bigger pockets. Then as I was studying for my CPA, I kind of started answering tax questions. And then I was like on the forums. And then through that, realized that there were a lot of people asking tax questions and not a lot of people answering the tax questions.

And so I just kind of fell right into that niche, so to speak. People started asking me if I was taking on clients. And I was like, no, I don't want to start a professional services firm. It's extremely hard to scale. I want to be an entrepreneur, though, so let's connect anyway. But then in 2015, once I got the CPA, I decided to actually open up my doors and take on investors, take on clients. And yeah, started taking on clients. It's grown since.

I've pretty much used bigger pockets as my growth platform from my firm. Nice. And then, yeah, I mean, you guys have, yeah, you've taken me from zero to a lot. Wow. And what do I get for it? I'll give you a kickback if you want. I like this. I like this negotiation in front of 100,000 people.

Yeah, yeah. You guys charge way too little for your pro plan, I must admit. Oh, nice, nice. Well, I mean, before we get in further, I do want to say you're one of the guys that I have noticed who does it right. I mean, there's a lot of vendors listening to the show, right? We got a lot of real estate investors, but there's a lot of vendors as well, agents, CPAs, you know, attorneys, whatever, that are part of the bigger pockets community, but you've done it better almost than almost anybody I know in, and that you, like, pick this niche,

you jump in and answer questions about that name. You just dominate that niche. You write on the blog. You've got a blog in bigger pockets that you write on. You're here on the podcast. Ends your question. So like, you know, when people need a good CPA, they're in the forums. Thousands, I mean, millions of people are in the forums and they come across your name over and over and over and over and over and over. And that's what we recommend to people all the time who are vendors. Like just get in there and be helpful exactly like you're doing, provide value and it's going to pay back to you. Yeah, yeah. There was, and honestly, like, I can't take a lot of credit for it because it was purely to self-study for the CPA exam. Nice. And then, but like what I was doing is I would see a tax question and I would just research the heck out of it and provide a ton of examples. And then people would be like, oh, this is great. This is awesome. And you get kind of like high off of that.

Yeah. So you want to keep answering questions. Oh, yeah. And then it just kind of snowballed into this big thing. And then I kind of realized like, oh, I actually have something going on here. Like people actually want to use me as a service provider. And that's when I decided to open up my doors and start building out of business. Well, and really quick.

And then we're going to get back to the purpose of the show. I had no idea that all this was happening, and I think it's awesome. But as Brandon said, Turner said, serves as an example to those people who are listening that if you get in there and you offer tremendous amounts of value to people, I mean, you've got an entire business that you've built off of bigger pockets, and that's amazing, and that makes us very happy. We want more people doing that, and there's tons of opportunity to do that regardless of what your profession.

So if you're listening and you are some kind of professional, I'll get in there and start answering questions being helpful. No marketing. And you'll start to build a name or reputation and a brand. And actually, we're building some cool tools to do that. I'm going to just announce it now because I can. On the side of the forums, like under different categories, we're actually going to have the leaders of those categories based on our post score

algorithm. So it's vote to post ratios and some other stuff in there. So if you're the guy in the tax forum that's always answering questions, we're actually going to end up promoting you as well. Oh, fancy. I didn't even know about that. Man, I'm out of the way. What's that?

I don't have to pay for it. No. No, it's just put in, you know, you pay for it by offering tons of value on bigger pockets. So, you know, it's going to be a great opportunity for everybody who comes in and gives value. So anyway, on that point, on that point real quick, you know, I would say it's not just on the vendor side. It can also be on the investor side.

I mean, if you're looking for money, anybody, really anybody can really leverage bigger pockets in the forums. as long as you go into it and don't try to sell yourself, let your content sell yourself. I mean, it's amazing. I have a business coach, and she wants me to start different types of marketing, right? Like market on LinkedIn and all this other crazy stuff. And I'm like, yeah, but I just boast on bigger pockets. People read my stuff.

They call me and they're ready to open up their wallet. I don't have to do any selling. And it's targeted. Yeah, it's very targeted, very targeted. Yeah, that's awesome. I love it. Cool. Let's get back to you.

Well, thank you. I mean, that's awesome. I'm blown away. I love these stories. It makes me really happy. So you join Bigger Pockets. You were looking for something else. And obviously, you're not only answering questions, but you're now trying to figure out what's the right path for you, how you want to get started.

So how did you actually get started? Yeah. So simultaneous to building this business, I also bought A3 unit down in North Carolina. I've written about it on the blog, I think at least once. Great property. Cash was like a beast. I mean, extremely lucky first buy, too. I leveraged my parents' team.

I invested in the area that my parents live. So I'm in D.C. investing in North Carolina. That's a pretty long distance, which I also talk about on the blog every once in a while, is just how to go about investing at a distance without being scared. But, yeah, so I picked that up in, I think Q2, 2015, and then just recently picked up another three unit in Baltimore, Maryland, which I'm owner-occupying. That's awesome. So how's hacking that?

We'll get to that in a second. I want to talk about this three unit down in North Carolina. First of all, you said something that I harp on all the time, that if you're going to invest out of the area, like find, like make, like have boots on the ground there, have a connection there. Don't just pick a random market, right? You had your parents there. I love that idea.

I always say if I invested somewhere else, I'd probably invest in Minnesota. Why? My parents are there. It's like easy. So let's walk through that experience. I mean, so at the very beginning, how did you find... Didn't they kick you out, Brandon? That was a dark time of my life.

Yeah, the whole state put a ban against me, but, you know, I'll work with the governor. So, all right, so how did you find that first property down in North Carolina? Yeah, so it was actually really lucky. It dropped off market probably a month before I had connected with the agent that my parents used. And so he knew that this was coming back on market. And so we had pretty much drafted up an entire deal or entire agreement before it even hit market. And then within an hour of it hitting market, we had our offer in and it was accepted. That's awesome.

Yeah, seller was just one. wanting to get rid of it. So it was extremely lucky. I mean, it was just a pure lucky timing experience, at least for me. But yeah, I mean, my parents, they invest in the local area, and they've been building out a team, and I've leveraged their agent, their property manager, their repair guys, everybody. That's awesome. You say it's luck, but at the same time, like, you did do the work, you contacted an agent. You started having those conversations. You were ready to pounce. So when luck happened to upon you, what's that quote from, like, Jefferson, like the harder I work, the luckier I seem to get or something like that. Yeah. Yeah, it's, of course, it's luck.

everything that we do is luck in some way or another. But you just set yourself up right. As long as you position yourself for the luck. Yeah, position yourself for the luck and just take it when it gets there. Yeah, exactly. Well, so you said it was a cash cow beast, I think, was your term there. What does that mean? What does it look like?

So I bought it for 91. Okay. I put down 25% and it rents for 1650 a month and cash flows right around 800 a month. That's awesome. And are your parents helping to manage it? Do you have a property manager? How do you, or do you just take care of it all on the phone with, you know, from a distance? I have a property manager and she sends me a video walkthrough once a quarter.

It's kind of one of my little. I like that idea. Yeah. I was like, I don't want a property manager. I have a lot of clients that invest out in the Midwest, for instance, and they never get to see their properties year after year. And so I was like, hey, you're going to give me a video walk through once a quarter, aren't you? And she's like, yes. Totally something that I'm willing to pay extra for, you know?

It's worth it. But yeah, leverage property manager. She takes care of everything, makes sure rent is on time and paid, follows all the laws, gets people out when they need to. I love the idea of the walkthrough. We actually had somebody recently who was doing that for their contractors. But from a property manager perspective, I don't think we'd ever talk to anyone else who's doing that. And I think it's fantastic. I mean, it holds them accountable.

It keeps you in the loop. And if they're not willing to do it, obviously time to find somebody else. Right. Yeah. Yeah, I love that. That's great. Hey, so, all right, so the numbers look good, cash flow is good, you got a property manager in there. I want to just jump back because you said that you got some of the vendors from your parents. Are they just getting started at the same time you are, or were they in the game prior to you? No, so my tax experience starts way back in college when I was even more of a baby or a child or whatever you were class. Now, the man child is my co-host. Yeah, so way back when I started college, I connected with one of my professors, and he was, I think he was Iranian. He was like American culture.

They don't talk about money, but in this class we're going to talk about money. And he just started talking about how he was like a multimillionaire, basically. And so I connected with the guy because I was like, hey, that sounds pretty cool. I want to be a multimillionaire too. And he owned like 50-some properties out in, I think he was Kentucky. But I told my parents about it. And I was like, hey, this real estate thing seems like it could potentially work. you guys should like, you know, buy real estate or something. And so they, uh, bought a foreclosure.

That was their property. That was their first property. Bought a foreclosure. Flipped it, rented it out, cashed out refinanced, then bought another one and slowly grew their portfolio. So by the time that I actually invested, they had about five years behind them and an apartment complex. Oh, wow. That's awesome. That's cool. And that's just one of those things, too, is like, you get to learn now from their experience a little bit. Like, I'm sure you've heard some of the mistakes they've made and you kind of harness off that. Now, whether or not people have parents or not, We all have people that we know who at least are real estate investors probably or they're in your community. So, yeah, latch on to that. That's awesome.

Yeah, it was a free case study. Yeah, exactly. I love that. Fantastic. So, cool. So you got this first triplex. Things are going well for you. And then you said you bought a second triplex. Where was that one at? And how did you find that deal? So that's in Mount Washington, Baltimore. Okay. bought it middle of this year, July.

That was also kind of just a random one. My girlfriend and I had actually gone out to brunch. I pulled up Realtor.com. and saw that there was a property nearby that was having an open house. I was like, hey, let's just go stop by, see what it's about. So we walked through and I was quizzing the selling agent on what the rents were in the area and he wasn't really sure. But anyway, I got back to my agent. I was like, hey, let's consider putting an offer in.

I'm not going to pay near what they're asking because I think that's way overpriced. But here's a low ball offer and put it in and we had it accepted within like three hours. Wow. That's awesome. That's cool. The three unit you said, right? That was a three unit, yes. That's funny, the agent that was selling, I didn't really know what market rents were in the area. Yeah, like, typical agents.

I was really, dude, for like an hour. I was like, you live in this area, you represent this area. How do you not know what rents are? That's funny. It's funny, but it's very common. I mean, agents just have no idea about, like a lot of agents have no idea about this business at all. Yeah. And if they did, they probably wouldn't be selling real estate as much.

It'd be buying it as, you know, more. So, yeah. It's an interesting property. It was only on market for 20 days. and I was blown away that they accepted my offer because it was way below asking, especially within like three hours. But when we were at the open house, it was all the local neighbors that were like walking through the house. The only one asking questions about the property. So I don't know if that's that's political.

That's why I generally just don't like open houses. It's on TV. Every flipping show in the world is like, we got to get the house ready for an open house. And that's like the end. That's such like a TV thing because open houses are just like ways for the agent to drum up business, you know, other clients, right? So all the neighbors can come to the house. You don't really sell a lot of houses through open houses. Yeah.

Yeah, I actually think that was the second one that I've ever gone to. The first one was a project in school. Nice. Yeah, I've never. Awesome. I generally don't go to those. Nice. So why triplexes?

Why not duplexes, single families? It's just been luck of the draw. I mean, I only want to do multifamily. I'm not really interested in single family at this point. Yeah, just so multifamily properties and just happens to be triplexes. Why not single family? Yeah, exactly. So because...

Why not? Yeah, come on, B-Hall. It's a matter with you. What's your problem? Hey, a lot of people like single family. Single family definitely has a good spot, but it's just not for me. I'm thinking long term, I want to build out a big portfolio, and single family is just harder to manage.

I mean, you know, I have clients, for instance, that will come to me and part of our initial onboarding process after we sign an engagement letter is, hey, let's talk about your goals. What are your goals? And they always have these big cash. flow goals, right? So they're like, I want to earn $10,000 a month or $15,000 a month cash flow after CAPEX, after repairs, after everything. And I'm like, okay, do you know what, you know, $10,000 a month looks like, though? Like, talk to me about your current property. It's a single-family property. You're cash flowing $200 a month, so you need like 50 properties

to get $10,000 a month. Or you can do multifamily and just get the economies of scale. So that's why I go multifamily. Yeah, smart. Yeah, it makes a lot of sense. Yeah, when I mean, you can buy 50 single-family houses or 150 unit apartment complex. Right. Suddenly, the apartment complex sounds very appealing. I mean, granted, single-family might appreciate better. Maybe, might, you know, the tenants usually a little bit more irritating to work with. But for me, the trade-off, yeah, I generally like multi-family.

Which ones are more irritating? I think the multifamily tennis are more irritating. Oh, it's probably more irritating. What? What happened? I don't know what you're talking about. So, no, I just find that, like, Like multifamily tenants tend to move more often.

They tend to not keep good, they don't care of the property. They don't, I mean, they'll let a toilet run for months because they don't care and whatever, you know, stuff like that. That's total broad generalization. Total, but it's totally true. All right. So funding this deal, how did you, you said earlier house hacking. That means you're living in one of the units, which is awesome. I love that.

How did you fund that deal then? Three and a half percent, FHA. Perfect. So those people who don't know what that is, yeah, explain what that is. So if you owner-occupied property, you have an opportunity to put 3.5% down using an FHA-backed loan. And that's what I did, rather than having to put 25% down. If I would have to put 25% down, I never would have been able to afford this place. Now, do you have to stay there forever, or can you move?

I think my specific document said six months. Okay. Yeah, I've always heard like a year, but I've never actually looked at the specific documents. So, yeah. So you don't have to stay there forever. And when you leave, the beauty is you don't have to, like, you don't have to refinance it. You just keep the property. And now you have this amazing, like, low-down payment on a rental property.

Yeah, yeah. Yeah. And on the FHA, everybody always complains about PMI. Yeah. But I just, it's a business expense. I mean, if you can get into a property, use massive leverage and it's a good deal, pay the PMI all day. Yeah. And those do you don't know, PMI is like a monthly extra charge that like the low-down payment loans have.

It just, you know, it might be a few hundred bucks a month depending on how big your loan is. But, yeah, if you just fact it into your numbers and it still works, well, then there you go. And someday you can get rid of the PMI. Well, what about the argument, though, Brandon, that, you know, you're just throwing money away. Which Brandon? Talking to you, man. We'll go up to you, Hall, B Hall. I don't give respect to that you go.

I'd be like, yo, sucka. Suck it? That's better. Well, suck a. I like that better. No, yeah. It's a good question. The way that I look at it is if I can use less cash and leverage myself more and the deal still

make sense, then I'm not throwing money away. The opportunity cost is better, is more in favor of. doing the 3.5% down than paying 20% locking up more capital and basically passing on future good deals because you've locked up that capital. Yeah, makes sense. Makes a lot of sense. And so why house hack? Well, my girlfriend lives in Baltimore. I was in D.C., so I was like, well, I'm going full-time in my business and I can work anywhere. So that was one reason. Then the other reason was just, you know, D.C.'s rents are just insane. So I wanted to get out of that. significantly lowered my monthly expenses, which was key to jumping into the business full-time.

Okay. So your other tenants, are you living, would you say you're living for free in that triplex or just cheaper than you would pay elsewhere? Much cheaper than I would pay elsewhere, much cheaper. I think I'm net out-of-pocket, $100 a month prior to utilities. Wow. Yeah, that's awesome. And you're learning how to be a landlord at the same time. Like you get in that kind of real-world experience, right? Do you have property? Really. Yeah, yeah, thrilling. But it is, like, I always say it's like, training wheels. It's like you're riding a bike with training wheels. Like house hacking's like training wheels. It's like, I don't know, you can't really fall too hard because you're there,

but. Yeah, I inherited one tenant. I inherited one tenant. It's been nothing but issue so far. Yeah, that's how it's always with inherited tenants for me. Yeah. So what are you doing to rectify that? And what's your plan to inherit? Yeah, how are you going to take care of that? Well, her lease is up in January. So I'm probably just going to raise rents to market rates. And if she wants to stay, then I'll, yeah, I mean, I'll probably keep her. I mean, she's not that bad. She just always pays rent late and it's always just trouble connecting with her, which is fine. But last month, I let it go way too long. People are going to cringe. I let it go 15 days. Oh. I charged the late fee. Bad example. Yeah. I've done it.

Yeah. Let it go 15 days. And then finally, I was like, look, I'm going to the courthouse and I'm going to file if you don't pay me and that you paid me. And so that's what I'm going to do for now. five days after rents to, I'm just going to file. So why, I mean, you listen to the podcast, you're a big BP guy, I'm going to put you on the spot. Why, you know, why let this go? Why, you know, why are you such a softy? Yeah, it's even worse because I have tons of clients that are like, what are you doing? Yeah, I don't know.

I mean, you know, I can't really explain it. I mean, like logically, like, I'm always like, dude, get them out, man, like file, get them out. They're not paying. I mean, I tell my parents that all the time. I'm like, hey, third-party advice here, get them out. But it's just really different, I guess, when you could potentially get rent tomorrow or you could turn a unit tomorrow and be vacant for a month, I guess. Let me ask you this.

I mean, so this is somebody who lives in your house hack, yeah? Yeah. So you're managing that property yourself. Yes. Well, that's why. I mean, if you had a proper property manager doing it, I mean, you'd give them the rules and you'd be like, hey, here's the deal. You live next to them.

Yeah, yeah. So nobody should hire me as a property manager basically. It's not that. I mean, like this is your neighbor, right? I mean, there's a big difference between, you know, somebody who lives in the building next door or down the block or, you know, across town, then somebody who can literally turn their radio up all night and cause you hell until you get them evicted, you know, a month and a half later. Yeah, that's very true. I didn't think about that. That scares me, actually. I'm here for you, Brandon. This is good therapy. For that reason, I oftentimes tell people, like, if you're in a house hack, you don't have to even tell the tenant that you are the owner. I mean, like, you could just be a tenant that lives there, and you could even hire a property manager if you wanted to, or you could live there and you're just taking care of the place for... Resident manager.

Yeah, yeah, you're a resident manager, your family owns it, you know, like, or whatever, right? I mean, because I understand, like, I'm a nice guy, despite what Josh says, and you're a nice guy, despite what Josh says. So, like, it's hard when a tenant calls me directly, anytime they've ever called me directly and had a problem. Like, I want to help them. I want to get emotionally involved. I want to do all this. I had to hire somebody else to deal with all tenant interactions because I was too soft. And I recognize that weakness in me. And rather than try to fix all my weaknesses, I'm like, you know what? I just know that that's a weakness. I'm going to just make somebody else deal with that. and I'll work on what I'm good at.

And so, like, don't kick yourself too hard about, you know. Yeah. See, that's smart, though, and that's what I'll do in the future. But, like, with this one, I was like, oh, cool, I'm finally buying a property that I'm going to live in. I'm the owner. Nice to meet you. Yeah. Kind of threw that right out the window. Well, let me call you on it then.

I mean, so January's coming up. She's been an absolute pant as far as rent payments are concerned. It sounds like it's every month that she's late, but she does eventually pay you. So here's a question that I would pose. Like, one, you know, when the rents up, why not just kick her out? Or two, you know, could you, if you were to shift when she pays, would that mitigate the situation? So I've thought about that, that latter one actually. So I'm going to talk to her about that.

Yeah. Because I don't know when she gets paid or what her financial situation is, but shifting the due date might make a lot of sense. It won't. It won't. It won't. It won't. There's no way. When she's established a pattern, they've got you trained. Yeah, tenants don't pay late because they don't have the money. it's because you're a low priority to them. I'm fully convinced to that. Like, no matter what. I can see that. Yeah, it's purely priorities to them. I mean, there's been tenants we've had that.

I mean, we make an extra $200 a month every month off late fees. Like, it's just, oh, and like, after a while, we kick them out because we're just, like, feel bad that they're paying so much late fees. And it's like, it's just a hassle. It's a hassle every month, yeah. But what I'm going to do for October in November is I'm going to stick to the, hey, I'm filing on the fifth. late day. And so I'm going to see if that, if that helps correct it. And if that corrects it, I'll probably let her stay. But what I think I'm definitely going to do is at least six-month lease and get it into September or summer when the time comes to it. A lot easier to fill places around here in the summertime. Where are you, by the way? Baltimore, Maryland.

Oh, that's right. Sorry. You said that I just wasn't listening. I was going to say one more, more idea just throw at you. I was listening. I just forgot it because I'm old. I'll say one more idea to throw at you. And this is true for anybody listening who might have a tenant that's just like they've trained wrong or the inherited a tenant that was trained wrong, right? Like just come with like this, hey, I just had a conversation with my business partner. I just had a conversation with my lawyer, my attorney, you know, whatever. They said, I need to start being more strict on this. So here's what the rules going forward.

That way you're not, it's not you being mean. It's, hey, there's this other third party that says I need to start doing this. So now we're reestablishing rules from this moment forward and then stick to those. rules. That's how you kind of retrain, in my opinion. But if you want to know more about that. He's just trained, though, right? I mean, I got to tell you want to know more about that B-Hall. I wrote a book called the book on managing rental property. Well, my wife wrote most of it, but you can get a bigger pocket.com slash bookstore. Learn how to manage those tenants. I love it. I love it. No, no, but discount for plugging you guys earlier? Oh, yes. Oh, yes. Oh, yes.

No, but seriously, like, the, you know, I think we've done actually a couple shows on the topic of, quote, training your tenants, right? If you're a relatively new landlord, I mean, everything we just talked about is really, really important. You've got to train your tenants. You have to train them. You have to establish that you're the alpha dog. You have to set the rules. And no, I mean, you know, if you're not doing that, they're going to walk all over you. They're going to take advantage of you. They're going to do whatever the hell they want. Yep. You know, if you let them get away with an inch, they are going to take a mile. So, you know, you got to establish that up front. particularly new landlords.

And it doesn't mean being mean or a jerk. It just means like, here's how it works. Here's as a matter of fact, what we're going to do if you're, you know, rent is due on the first. If you're late on the fifth, we're going to file. And if it's not rectified, we're going to evict. That's it. Keep it simple, right? Here's how we deal with maintenance issues.

Here's how we deal with this, that, and the other, you know, treat us with respect. We're going to treat you with respect. We can take care of you and give you a great place to live. It's easy to say. but when you, you know, I mean, look, I wish I had a Bigger Pockets podcast. I wish Bigger Pockets existed when I started because if I knew that stuff, it would have changed a game for me. Then again, Bigger Pockets wouldn't be around if I knew that stuff. That's true.

I was literally about to say, though, you know, it is much easier to say than do. I mean, I, you know, I frequent Bigger Pockets all the time every single day. I know this stuff. It's just like, you know, second nature to me at this point. but then to actually practice it, completely different story. Outsource it, man. I've written books on this topic,

and I still have a tenant that pays 15 days late occasionally, and like we still drama, feel like, and I don't know why. It's just like I don't take it my own advice sometimes. And then like it always ends bad. Like, I feel like it always ends bad. Anyway, so, yeah, it definitely is easier. But let's go back to, I want to, because you're a CPA,

we're talking about house hacking. Let's talk about the tax benefits or implications or disadvantages. Like, how does house hacking, How does taxes play into house hacking? Do you have any thoughts on that? Another good question. Yeah, so it can be really interesting. And it does depend on the general situation and the facts and circumstances.

Oh, look, it's a disclaimer from a CPA. What is the price. So what I'm about to say might not apply to you. Thank you. Anyway, yeah, the house hacking, the way that it works is you have a couple of different things at play. One, you have a rental property, and then two, you have a primary residence. And those are tax completely separate. So we're talking about general expense items like mortgage interest, property taxes, insurance, roof

replacements, landscaping replacements. All of that needs to be divided up pro rata between the primary residence portion and then also the rental portion. So it can get kind of tricky. But then the other thing is that whenever you get to sell the property, you have depreciation recapture on the rental side. And on your side, you can do the Section 121 exclusion, which allows you to shelter up to 250K of capital gains or 500K of capital gains if you're married filing joint. So you get kind of like, like, you know, if it's 50-50 primary residence versus rental property and you sell it for a 500K gain, you can shelter 250K of the gains, 50% of the gains. But the additional 250, the additional 50% that would be attributed to the rental side is completely out there.

You've got to figure out a different way to shelter that. So it just house hacking, and I've written about this, but house hacking just makes it. it very convoluted. It makes it much more of a tricky situation from a tax perspective. Yeah. Yeah, it's definitely not as, I mean, like, I didn't even realize that the first, you know, I've known about house hacking, you know, I don't know, 10 years now since I first did my first one. But yeah, I didn't know any of this until I read your article on this like six months ago or a year ago. I was like, whoa, like, I never thought about any of the tax implications. So I will link to your article as well that you wrote about about that in the show notes at biggerpockets.com

slash show 196. But, I mean, bottom line, know that. It's a little more complicated than... Feels a little bit like home office deductions. Yeah, it kind of does. Yeah, well, and it's like for me, for instance, I've got a 33-66 split. So 33% is my primary residence, 66% or 66% is the rental, make the other two units. And in my primary residence, I also have a home office, which accounts for like 25% of the floor plan. Nice. Nice. That gets really fun.

Yeah, so got things going everywhere. Nice. That's great. By the way, you know, I, you are... a CPA and you you work all across the country, correct? Okay, just saying, it seemed like a smart guy, so I'm sure people, you know, who have questions might want to reach out to you.

All right, so the tax benefits of house hacking, what about any negatives? I mean, is there any downside to doing that from a tax financial standpoint? I guess it just kind of really depends on how you structs the sale. I mean, if you wanted to, I guess, do a

1031 exchange whenever you sold the property, say that you really crushed it on your property. And can you explain what that is, by the way? Yeah, sure. So at 1031 exchange, basically you take the gains in your property and in your rental property or investment property and then you roll them over into a similar property and you don't have to pay taxes on it. So you're deferring your capital gains. And there are 1031 exchange experts that are way more knowledgeable on this type of stuff than I am. I always loop them in whenever we're doing something like that. But yeah, with house hacking, you can't just 1031 exchange your primary residence, right? You can't, your primary portion, that's the Section 121 exclusion,

that 250K shelter. But if you're above, like, let's say you've earned 400K of capital gains, that's attributed to your primary residence portion of the entire property. So you've, like, really crushed it on this property. You know, you've, you've still got additional gains that you're not allowed. You can't shelter via 1031. So you're just going to pay whenever that comes due. Right on. Cool. That's great. All right. So before we get into more tax questions, I want to kind of circle back on your real estate journey so far. I mean, you're in a way just getting started the last couple of years, beginning to build it.

Have you made any mistakes in your journey so far that you were like, oh, I regret doing that, or has it been pretty smooth sailing? Mistakes related to the CPA business or to rentals? Rentals. We'll say rentals. Yeah, rentals. Yeah, I mean, not training the tenant. That would probably be a key mistake.

Another big mistake was probably not vetting my property manager on the North Carolina property as well as I should have or vetting anybody that I was picking. backing off my parents. I mean, I love my parents. They make smart decisions, but just because they choose to work with somebody doesn't mean that I'm also going to mesh well with them. So I kind of just took it for granted and jumped right in. That would probably be one of the biggest mistakes there. How would you have vetted? It sounds like there was something on the PM side, but how would you have vetted them differently than say your parents might have or what would you be looking for? We did a couple phone interviews.

I probably would have driven down and actually talk to them in person and just kind of see how they interact. What does their body language look like? Yeah, yeah. Why does that matter? Body language. Because especially on the property management side, I mean, you can be a brute or you cannot be a brute. And so, you know, it's just like you can kind of get that feel. Like when I met this person in person, it was more of a, whoa.

Now I see how you might be treating the tenant. So, yeah, so I couldn't pick up on that over the phone or Skype. That makes sense. Cool. All right. All right. So let's shift gears here. You know, it's not every day we get a CPA on the show.

And so, you know, we've had. Oh, my God. Yeah. Yeah. It's like, not every day we get a celebrity here on the Bigger Pockets podcast. You know, we're honored. Yeah. We've had Amanda Hahn a couple times who's gave a lot of good tax advice and also wrote

a book on tax strategies for the savvy real estate investor, which people can get at BiggerPockets.com slash bookstore. But we're going to ask you a bunch of tax questions. now. I got a whole list of them here. And again, these are, these are, these are a whole list. I got a whole list. Should I start charging? Yeah, you might have to start charging. Yeah, hold on the clock. Starting. Now multiply times 100,000 listeners. I'm rich. All right. Yeah. All right. So first question, again, these, a lot of these come, it's

something like this is a giant fire round in a way, because a lot of these come from the forums as we were putting these together. But first of all, one of the most common questions in the tax forum on bigger pockets over and over and over and over. Do you have a recommendation for a CPA? I'm looking for a CPA. I can't find a CPA. I need to find a CPA. And it's always like, you know, in Austin or in Denver or whatever. So what are your thoughts on finding a CPA? How does somebody go about getting a good CPA rather than just, you know, an average one or something? So without trying to sound too self-serving, really, it really depends on what your personality is. Do you envision yourself being able to work with somebody at a distance or do you have to have that? that personal interaction, that handshake. I mean, I can't shake hands with my clients in California, and they're fine with that. But if, like, I've had people call me up and they're like, you know, I really just appreciate the whole handshake. And that's fine. That's not a client that I'm going to

work well with. Even locally, I tell my local clients, like, hey, even though we're local, we're not meeting in an office. We're not doing any of that. All my processes are connected to my virtual firm. So everything's going to be virtual. If you want to meet up for lunch or beers or something like that, we can do that, but it's not going to be like an advisor to client relationship. So I'd say, you know, first figure out, do you want to work virtually or do you have to work locally? And if you're okay working virtually, it just opens you up to a much more expansive pool of experts. I mean, you could be, you know, and I know Josh like to rag on Detroit, so you could be in Detroit and there might not be any CPAs in Detroit that specialize in real estate.

So you're stuck. Do you go with a general real estate guy or do you look non-locally? I always say you should really find the experts. I mean, in any part of your business, find the expert, find the one that's doing it consistently. You know, 100% of my clients are in real estate. I don't take on anybody that's not in real estate. So that's a big competitive advantage compared to somebody that's like, yeah, 50% of my clients are in real estate. And then 50% I'm just doing general stuff. So it really just kind of depends on, you know, I guess, you know, local versus non-local and then finding an expert, but you should always be trying to find an expert. Yeah. And, and, you know, is there a, like a ratings platform or, or something like

that? You know, like, obviously CPA means you're licensed, right? So, like, you know, can I go and look somebody up to see if they've, you know, done bad things or, you know? You can. So each, each state has a CPA board. It's a CPA accounting society. And they're called different things in each state, but there's one main one in each state. And you can look up everybody's license numbers. So you could look me up. I'm a CPA in Virginia. And you could look me up and see if I have anything negative outstanding or anything like that. But yeah, I mean, probably the best way to go. I don't really know that there's a rating platform out there unless you were to go to like quickbooks or something like that. But the best way to go would definitely start with like local

referrals or jump on bigger pockets. You can ask for referrals there. People are always referring. Generally, if somebody has used somebody in the past and they're going to give you a referral, then that person at least has a general idea of what they're doing. Yeah, that makes sense. Now, what about state-specific stuff? I mean, you know, some states have state income tax, some don't. How important is getting somebody in your state? You know, like, let's say I live in a state that has an income tax.

Like, how are you going to know the rules in my state? That's a good question. So, first off, federal is definitely going to matter more than state just because there's a bigger difference there in the impact that we can make. Sure. I mean, you know, federal tax liabilities go up to 39.6 percent. State, not so much. So federal is the key.

But state specific, yeah, get this question all the time. It really just kind of depends. I mean, most states are relatively similar, but then you have states like California that, you know, you have an $800 franchise fee on the LLCs. You have states like Maryland where you have to file a personal property tax form, even if your LLC has done zero business. It's just like little things like that that the CPA needs to be aware of. But in general, all the states act relatively the same. Yeah. You used to love that California tax, 800 bucks.

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All right. So let's go to the big question here. I mean, you know, everybody asks this question. They've asked you this question a thousand times. You know it's coming. LLC, C Corp, S Corp. What do I do? Which one?

Why? And do you need one? I mean, really. Okay. So this is, yeah. do you need one let's tackle that first i used to tell people and that you can even find my previous forum post like from a year ago you don't need an LLC get insurance a big umbrella policy you'll be fine until i heard a story about this investor that did just that he built like a three million

dollar portfolio his teenage son was drunk driving got in a wreck the fan the victim's family sued uh the real estate investor and wrapped all three million dollars of his assets up so that was three decades worth of work that just goes down the drain due to something that he couldn't control theoretically so once i heard that it was definitely definitely definitely use some sort of entity when you get to a certain point or mitigate risk else wise so like me i don't have an entity on either one of my properties because i'm leveraged pretty extensively but i will get an entity probably on the next one what do you mean by that because i mean i love that point but can you explain that a little bit deeper. Because you're leveraged so heavily, that is a way to protect

yourself. How does that work? So you have to think in like how an attorney would think whenever they want to take on a case, right? So if an attorney, if somebody comes to an attorney and says, hey, I want to sue this investor, the attorney is going to say, okay, how much equity does this investor have? Because I need to get paid. And if that investor doesn't have equity, then the attorney is not going to take on the case. Even though there could be a legitimate reason to take it on, the attorney most likely won't take it on because there's just nothing there for them. It's the same way that like corporate takeover's work, you know, you'll have like one company will buy, we'll try to get a majority stake in a smaller company. And that smaller company just leverages to the teeth to make themselves

unattractive to the bigger company. It's kind of the same, same idea. That's some Gordon Gecko stuff. No, but it's interesting though, because I mean, a lot of investors are out there going so in my opinion, I've said this before, that a lot of people, investors out there use the LLC question as an excuse not to invest. Not to do anything. Yeah, because, oh, I want to invest, but I don't have an LLC. I can't figure it out, right? At the same time, like, what... That's exactly how they talk, by the way.

That's exactly how they talk, every one of them. It's like, they call it... Yeah, okay, you know what I'm talking about. So, like, they call it asset protection. If you don't have any assets to protect, like, again, I'm not a CPA either, but, well, I'm not a CPA, period. If you don't have any assets, though, to protect, how important is it to have all these fancy LLC that's wrapped inside another LLC?

I got all the gurus tell you to, you know, there's like 15 different things they tell you to do. I mean, how important is that really when you don't have any money or assets? I say throw it out the window. I'm very much a believer of get started then figured out. But, I mean, the thing is that LLCs can be set up relatively quickly so you could set them up a week before closing and then have everything in the LLC's name. Yeah, I mean, I've done the same thing. I get started and then just try to figure it out later.

Even with my own business, I started as a sole prop and then set up an LLC after I was making money. Because like you said, it is, it's an excuse. and a lot of people don't get started just because, you know, or even worse, they get an LLC and think they've gotten started. That's true. Yeah, that's the worst part. That is true. Hey, tell me about the LLC as it pertains to getting a loan, though. So are you, you're getting a loan on your person, especially getting started,

not on the LLC, correct? Theoretically, yeah. So a lot of banks, a lot of lenders won't just lend to an LLC. There's generally a seasoning period, meaning that the LLC has to show income for a period of like two years, something like that. I have seen cases where investors will plow a bunch of money into the LLC, just to kind of show that it has a lot of equity or has a lot of operating cash or working capital, whatever you want to call it. And then the companies will loan off of that and basically if they pledge the assets to them and things like that,

or they'll get a business line of credit. But it's extremely difficult. A lot of people will buy in their personal name and then transfer into an LLC, but then they have to worry about the do-on sale clause, which basically says, As, you know, whenever a bank gives you a loan, they're going to say, okay, if you transfer title, we can call the loan. It's just protecting them from additional risk. So if you transfer it to an LLC, they can call it a loan. I've never seen a case where they've actually called the loan. I've actually researched pretty extensively, haven't been able to find one. But what I tell my clients, I will totally leave it up to them. I also tell them to go talking an attorney. But what I tell my clients is, you know, we are in an extremely low interest rate environment. So if you do this now, if you transfer your property into an LLC, you violate the due on sale clause, you keep paying the note so it's performing, bank doesn't care. But in 15 years, if we're up to like 8% interest rates or 10% interest rates and I'm a bank manager and I want to reapply capital at a higher rate, I may go look for the easy loans that I can call. It's possible. Great point. I never really thought about that one.

Yeah, yeah. It is a good point. Smart guy. And I can tell you that, I mean, that's what I do. When people, like, I transfer it. I buy mine in my personal name because I can't buy them very well in an LLC. And then I transfer them later. And I know that I am risking that due on sale clause.

And someday, if rates go up, I may get called on them. But that's why every property I have, I try to have a good chunk of equity in it. And I try to buy in areas where I think five years from now have even more equity in it. So worst case scenario in that thing, if the bank got ticked off and they wouldn't just let me re, you know, transfer it back in, which I know some people have done as well. Like, oh, sorry, that was a mistake. Let me put it back on my personal day. And then the bank's like, oh, okay, don't worry about it. I got, I know Sir Chukot, when we had him on the show, he told that story that kind of happened to him. But anyway, that's, I just figure I've

equity, I've got options. That's how I manage that risk. Yeah, everyone's a little bit different. And as long as you manage the risk, you're okay, right? I mean, as long as you're continually building out a portfolio that you can potentially, I don't know, take a line of credit on or something, should this ever arise, then you're fine. But, but, you're fine. But what happens is people will buy four properties and just call it quits. And maybe four properties is big enough, I don't know. But 50 properties will definitely be able to handle any sort of due-on-sale clause risk. Yeah.

What about your personal house? Would you recommend people put their personal house in an LLC similar to their investment properties? No, no, not at all. If you put your personal house into an LLC, I just know that it messes up like everything. Yeah. So what does that mean? Like financing side, legal side, just everything gets convoluted and messed up. Banks get mad at you.

And then you've got the issue of who's paying the mortgage. Are you paying the mortgage? Is the LLC paying the LLC? Do you rent from the LLC, which is just a completely other huge mess that you should never get into. And besides rent, rent is not tax deductible, but interest on a mortgage is. Right. All of a sudden you're then paying taxes on something you wouldn't normally have to. Right.

Then the LLC is paying taxes on the money they're getting from the, yeah, it's just the whole thing can get weird. All right. So then the question of LLCs versus corporations, let's say somebody does want to get some asset protection. And they're thinking LLC, C Corp, S Corp, what are the differences between those and why might somebody choose one over another? Yeah, this is a great question that I do get all the time. So an LLC is a pass-through entity. It's a limited liability company. A lot of people think that the C stands for corporation, but it's not a corporation. The S corporation, so the S corporation is a tax election, meaning that you set up an LLC and then you file an election with the IRS to change your LLC to an S corporation. So legally, I'm pretty sure in most states legally it's still going to be litigated as an LLC,

but from a tax perspective, it will be treated as an S corp. But anyway, an S corporation is still passed through, meaning that if my, for instance, my own business. It's an S corporation. So if I earn $50,000, it passes through to my personal returns. I have to take a salary. I have to pay myself a certain salary out of that 50K. It doesn't have to be the full 50K. And there are tax reasons for that, which we can get into in a second. But yeah, so it still passes through to my personal return. And then you have a C corporation, which is completely different than an LSC and an S corporation. A C corporation is like a completely separate taxable person. So it's like I've, I'm Brandon Hall taxable person. And then my C corporation, is Brandon Hall 2, taxable person, files a completely separate return, does not pass through. So we use an S corporation if we're flipping properties, if we're developing, building, land flipping, anything like that, that's going to be generating self-employment income. So rental properties generate passive income. When you're more active in a business or you're running a business, that's going to generate

self-employment income. And we use an S corporation to reduce the amount of our income that is sub-rength. to self-employment taxes. So let's say that our business earns $100,000 during the year. We're in an LLC at this point, okay. Yeah, if we're in an LLC, that full 100K is subject to a 15.3% tax. So you're paying $15,300. If we're instead taxed as an S corporation, we can take that 100K and split it between salary and dividend distributions. And the salary portion is the only portion that's subject to self-employment. taxes. The dividend distributions are not. So we might determine that a fair salary for your S corporation is $50,000. So of the $100k, 50K is salary. 50K is coming to you as dividends.

But what we've done is only the 50K of salary is subject to the 15.3% tax. So we've reduced our tax, our self-employment tax, by $7,600. All right. So you said fair salary. Why couldn't I just say, oh, okay, well, $99,000 of my $100,000, that was all dividends, and my salary was $1,000. Like, why couldn't somebody, can they do that? And if not, why not? They can. The IRS is actively auditing those people. Okay. Okay. If you want to knock on your door. Yeah, bigger than a knock, probably just a big package. By the way, it's not a phone call from somebody overseas, because I get those probably three days

a week. You owe money from the IRS. We are going to put you in jail if you do not pay. Yeah, there's a lot of scammers out there scamming on the IRS right now. Yeah, I get this too. Actually, this morning, I got an alert from the IRS that was saying that there is now some entity in Texas that is mailing letters that look similar to IRS letters. I'm out loud. Mailing them to people and saying that it has to do with the Affordable Care Act. I didn't get to read the entire thing. But basically, if they request information for the affordable Care Act and they ask you to mail it to Austin, Texas. Don't do it. Good advice. That's a scam. Okay. So in other words, so who determines fair? Who determines how much of that S-Corp is an average

salary or fair salary? Yeah, so it's going to be based on salary data across the U.S. And what we do is we first say, okay, what is a person in your positions? What should you be earning if we look at national statistics? And then we drill down into your geographic location and try to make it better, meaning make your salary lower. So the whole idea of this, when we do salary research, for instance, the whole idea is to make your salary as low as possible, but be able to substantiate everything that we're saying. Obviously, you can't say a $1,000 salary if your profit is $100,000. Nobody in their right mind would pay somebody $1,000 to generate 100K. So that's the whole point is like, what would somebody else in that role be paid to generate that much money? And that's

kind of what we're going at there. But like, for instance, a really good example would be if you two, let's just call it Josh since he's the owner of Bigger Pockets. So Josh, with a clarity. Actually, I don't know if Brandon owns any shares out. Anyway, we'll give it to Josh. Yeah. He also founded it 12 years ago. I did. I found it when I was in middle school. That's great. I keep going. So Josh is the owner, CEO. We would look at everything that Josh actually does. So a CEO gets paid much different than like an office manager, right? But if Josh has just started Bigger Pockets, for instance, he's going to be acting as a CEO only a portion of the time. And he's going to be acting as an office manager, another portion of the time.

So we actually want to say, hey, Josh is working as an office manager like 20% of the time. And office managers get paid 100 bucks an hour less than CEOs. So that drives your salary down. So it's a bunch of different factors. I don't know if that's... Hey, what about the other half of the S-Corp? I mean, you're talking about, you know, the income, now the profits, those distributions, you're also getting taxed on that.

The distributions, yeah. So the, so if you have the full 100K, the 50K comes out of salary, that's a W2. So just like any day job. The additional 50K, though, you can draw that at any time. Now, you should be recording this as a dividend distribution, meaning that you should email your accountant saying, I am declaring a dividend of X dollars per share, and now I'm going to draw money out of my account. that helps substantiate that you are acting like a corporation because you are a corporation.

So anyway, you draw the 50K out of your account. It's not subject to the 15.3 self-employment tax, but it is subject to your marginal tax rate, whatever that is. Okay. So you're still paying tax. You're just not paying the self-employment tax. That's the key, is we're trying to eliminate that. Yeah. You know, what about the C-Corp is a whole different ball of wax?

C-corps is a completely different ballgame. We use C-Corps with strategic planning for people who are high-net worth or high-net income. So if you're earning over 500K or 500K would show up in your business on your 1040, let's back up. Say you have an S corporation. It's generated 500K of net income, not gross, net. Generally, that would flow through straight to your 1040. You'd be in an extremely high tax bracket.

You'd pay a lot of money. What we would do is we would set you up with an additional C corporation and then potentially your spouse with a C corporation, and they all provide services to each other. And what we're able to do is draw at least 50K out of your S corporation. sorry, at least 100K in this case, but the whole purpose of using the C corporations in this case is that up to 50K, the C corporation only has a tax of 15%. So what we're doing is we're trying to draw 50K out of your business and put it into a C corporation so that we're not subject to massively high tax rates and instead we're subject to that 15% tax rate. But we can do this because C corporations

don't pass through to your personal tax returns. They're completely separate entities. And the way to get the money out of that C-Corporation, so it's stuck there unless you pay yourself a salary or take a dividend. And if you take a dividend, it's subject to another 15% tax. That's just the capital gain tax. Okay. So you're actually talking about the C-Corp getting paid by the S-Corp, correct? Yeah, so that's just one of the planning strategies that we use is we like create this triangle. You got the S-Corp, spouse, C-Corp, and then they all provide services to each other. and through that we're able to draw 100K, 50K here, 50K here. I'm motioning for those who are listening on the podcast.

We're able to draw a full 100K out of the S corporation and subject it to a 15% tax rate. Wow. And what's the downside of doing that? You can get audited and you just have to have your ducks in a row. So don't try it at home. Yeah, yeah, yeah, for sure. Now, what about the C corp on its own? Why not just start a C corp versus an LLC or an S corp?

So it depends on what type of business you're running. I mean, if you're running rentals, if you put rentals into a C corporation, it could be beneficial, again, if you're in that high net income position. But generally, it's going to be, it's not going to be beneficial just because it's extremely difficult to pull rentals out of a C corporation should your position change. But yeah, and then the other big downside for C corporations is the double taxation. Like I said, you have a corporate tax rate. So 15% up to 50K, but then it jumps immediately up to, I think it's 25%. So if you go $50,000, $1, now it's $25. So that's an issue.

And then drawing the money out, you get taxed again. So you get taxed at the corporate level and then taxed again when you draw the money out. And you just have the plan for it. Generally, C corporations require a lot more administrative upkeep. And it's just a lot more than a lot of clients are willing to put in. So we typically opt for the LLC S corp route if we want to use the corporation. Okay. Sure.

So what about, let's say, kind of to wrap, maybe wrap up the LLC discussion. If I'm a new investor wanting to get started right now and I'm not sure whether I should be doing for tax reasons in LLC or an S-Corp and, you know, maybe I don't know if I'm going to make a hundred grand as a flipper this year. Talk to an accountant. Well, talk to an accountant, but look, is that something I can do? I can just go out and start flipping houses. And if it becomes a good problem to have, right, all of a sudden I'm really successful and

I made $100 grand, can I retroactively, as long as I do it before the end of the year, go back and fix everything with LLCs or do I need to do that up front? I'm actually glad you mentioned this. So something that I tell all of my developers and flippers who are starting their business is to always, always, always set it up in an LLC, even if it's your first deal, use an LLC. And the reason for it is that, okay, let me answer your question first. So you can't retroactively put a property in an LLC.

So if you flipped a property and you sold it back in February and then you create an LLC today, you can't say that that property was owned by the LLC because the LLC didn't exist. But what you could do is say you set up an LLC, you flip a couple properties into LLC, and it's just an LLC. What we like to do is then go back and retroactively elect the S Corporation tax status if your income is above a certain threshold. So my threshold, my net operating income threshold is about $40,000. The reason it's about $40,000 is because once we elect the S status, it costs money to, it costs your money and your time to, to, upkeep it and then also administer it. So I account for that in this 40K threshold. If you're above 40K, we want S Corporation. If you're below 40K, we don't want S corporation. So what I tell my clients to do

is set up an LLC, flip the properties in LLC. And then at the end of the year, if we're above 40K, we will retroactively elect the S corporation status. That's cool. Okay. That's exactly what else. By the way, I know you didn't do it up front, but I'm going to do it now. Everything we're talking about, do not go and do this stuff on your own guys. Like, go, go talk to a professional, hire a CPA. Like, you should not be screwing around with this stuff without having spoken to a pro. It's just, it's the cost of doing business. You want to be a real estate investor.

You're going to have some costs. One of those costs is hiring professionals to give you good advice. You know, you need a real estate attorney. You need a CPA. Yeah. Brandon is obviously doing a great job explaining specifics about specific examples as much as he can. But, you know, at the end of the day, like he can't answer everything. I mean, there's going to be a whole lot of it depends.

So, again, if you have your own questions, if you're thinking about doing these things, you know, go find a CPA. They're definitely going to be helpful. So, yeah. Was that good, Brandon? That's great. That's excellent. Very, very well said. Thank you.

All right. Next question. What is a real estate professional, quote unquote, as far as the IRS is concerned? Because I know that question comes up a lot. Yeah, I was waiting for that one. It's in the forums all the time. People are always asking about it. So a real estate professional is somebody that works in a real estate trader business,

which just means real estate, for 750 hours a year, and greater than half of their time dedicated to any business. So full-time employees, you can't be a real estate professional unless you work an additional 280 hours a year, which would make your total working time a lot. So we generally say, hey, if you're full-time professional, you can't be a real estate professional. But if your spouse is a stay-at-home spouse or whatever,

they can be a real-state professional, and then your passive losses can be written off against the other spouse's active income. And that's kind of what the real estate professional status does, is it allows you to activate passive losses against normal ordinary income. I don't even know what that means. What?

You guys look at me like that. I was falling asleep. I'm sorry. I was just lost. What are we talking about? What? Yeah, let's go into that. Let's go a little bit deeper there.

Really? So if you... Hold on. Let me get my pillow. This will put you to sleep. It's my voice, too. It's nice and deep. So if you earn over $150,000 and you have rental properties,

generally those rental properties are going to produce passive losses. If you earn above $150K, you cannot use the passive losses against your income. And that's kind of one of the big benefits. to investing in real estate. So one of the answers to activate those passive losses is to qualify as a real estate professional or have your spouse qualify as a real estate professional. And that's working 750 hours like on the rental portfolio and then spending greater than half of all their professional services time in real estate. And as long as one spouse has that, then both spouses can make the joint return can claim that, correct? Yes. So I could make,

I could make a million dollars a year, but as long as my wife is doing the over, you know, 750 hours per year and over half our time, then we should be cut. We can still claim the losses. That's what you're saying. Correct. Okay, that's cool. It's not about you, Brandon. This is all about me. I don't make a million dollars a year. But yeah, that's what all this, the podcast is, just free advice for me. So I want to talk to you about something that I've spent the last, like, the last two weeks of my life have been consumed with reorganizing how I do

bookkeeping. And there's a lot of questions about bookkeeping. And now, do you, do you, do do much with bookkeeping? I know some CPA is doing some don't. Are you a bookkeepery type of guy? So I have an arm that does that. I've hired a guy that takes care of all of that. But yes, that's actually kind of where my big four experience was, was with business process improvement. So I kind of come in and I say, hey, look, this is where you're really weak. This is what we need to improve. Generally, when I have a client that wants accounting support and bookkeeping support, I come in and I say, how can we remove you from this process? Because you, as the business owner or the real estate investor,

Flipper, whatever you are, should not be in the bookkeeping. You shouldn't even touch it. It's a very low value task for you. High value task for me, because I can do it efficiently and I know what I'm doing. But very low value task for you, you should be focused on raising funds or finding a new deal or networking with people.

So we try to come in and remove you from that. So I don't know if you had any examples from your bookkeeping solution, but I mean, maybe. What would you recommend? You're talking about software versus Excel versus a notebook, right? Yeah, what should people use? Do you have any recommendations on that?

Yeah, so I recommend that real estate investors use zero. It's X-E-R-O-O-com. The reason for that is a very simple platform, and it's a pretty powerful accounting solution. If you're flipping, developing, building, doing anything with an active business, you need to use QuickBooks. Use QuickBooks online.

I try to get all my clients on the QuickBooks Online. Listen at 100% online now? I mean, they don't even sell the software, do they? I think they still sell desktop. Do they? Some people still have that Windows 95 computer. We switch to zero because QuickBooks will expire their software like every year or two and make it completely useless.

And we're like, this is crazy. Screw this. Yeah, one to zero. Zero is nice. Yeah, like zero. But if you're developing or flipping, you have to use QuickBooks. You cannot use zero. Zero is not set up for somebody that's developing or flipping.

And the main reason is that we're classifying everything is inventory. And zero does not have a very powerful inventory system. QuickBooks does. Interesting. Interesting. So at what point should somebody hire a bookkeeper, in your opinion, their first flip, their first rental, wait until you have 20 of them, wait until you're pulling your hair out. It's time, Brandon.

Oh, I know it's time. Okay, so long story, very short. I hired a bookkeeper eight months ago now. It took them six months of worth, six or seven months of like asking us questions, trying to get set up, and they never actually got set up. Finally, I fired them last month. And I was like, this is stupid. So now I'm back.

It's mine again. And I'm like, yeah. So maybe me and you will talk later. Oh, my gosh. It's been really, like, my plan was I'm like, I'm going to have my assistant do all the bookkeeping. So I just need to create the system once it's created. She can go in and just every day, you know, she's working 40 hours a week.

She can handle bookkeeping. I'm not so sure that's the right answer because now yesterday we're sitting there working on bookkeeping together trying to get a system. And the thing you just said a minute ago, I said to her, I said, you know what, we haven't found a single deal in the last two weeks. We haven't sent out a direct mail letter. We haven't done anything. All we've been doing for two weeks is doing.

bookkeeping. And I'm like, how many deals have I missed out on? How many years of a bookkeeper's charge have I missed out on? Because I'm busy sitting there trying to fill out the stuff. You're in podunk. There's not a lot of deals. It's all good, man. You own all the crack houses in town. I own them all, everyone. No, but I would pose this question to you, right? So you're worried about the training, you're worried about the two weeks, the downtime and everything. But if this continues, how many more deals are you going to miss out on? So you need to set up your system so that you can focus solely on the deals and not ever have to worry about bookkeeping again ever yeah that's my resolve like this week I'm like this is it like I'm gonna have it this week it's done and if it's not done I'm

gonna bring it like somebody in the take you know another bookkeeper to take it I'll do it yeah Josh can do it you can do my bookkeeping I will see with your money I will say that the general setup time at least that I've experienced is about two three months it is a very it's a pretty heavy lift to get caught up and understand how the business flows but then after that it should be pretty automated. Like you should be out of that function. But yeah, I mean, at what point should you get a bookkeeper? It's different for everybody. Some people like doing the books. I personally am, I'm in the mindset that like once you realize that you should be focused on higher value tasks rather than bookkeeping, that's when you should get a bookkeeper. That can be one property.

That could be 10, whatever that number is for you. I generally have my clients on an Excel spreadsheet that I've created for them. And I say up to four properties, you can use the Excel spreadsheet. After that, you need to move to an automated system. Okay. Yeah. I actually, real quick, I have a really easy accounting system for anybody that's like a small landlord, like one or two properties. It's what I use personally. So I don't do any sort of bookkeeping for my own rentals until December every year.

What I do is I set up a separate checking account for each property and I make sure that all the income and all the expenses flow through that one checking account. Even if it means that I pay personally for something, I make a separate checking account. sure to reimburse myself and put a memo from that checking account so that I can reconcile it at year end. Man, so easy. December comes around. It takes me an hour to reconcile both of the properties because all of the transactions are

right there. And with rental properties, it's not like you have a ton of transactions month to month. It might be like two or three. So it's pretty easy to manage. Yeah, that's cool. Cool. That's cool. Before we get out of this little segment here and move on, I've got one last question.

I know Brandon's got one. So we're coming to the end of 2016. If you're listening in 2017, well, then, you know, use this information in six months. But, all right, so we're getting to the end here of 2016. What should real estate investors be doing to prepare for the end of the year? Prepare is an interesting word. Could be preparing the books, could be maximizing tax strategies. So what I have my clients do is make sure that we've basically got up-to-date income statements,

up-to-date reports as of the end of November. That way we can connect in December and see if we need to make any last-minute changes. And that could be something as simple as making repairs on the property this year versus waiting until January to make the repairs because it affects you differently tax-wise. Your 2016 taxes versus 2017 taxes. So, yeah, I mean, that would probably be the biggest key is to get all of your documents and your financial statements done by the end of November. that way, especially if you are using a CPA, you can go to that CPA and say, hey, here's

what we're doing or here's my basically expected income for the entire year. We still have 30 days. What should I do to minimize my tax liability? There you go. I love it. Very cool. Awesome. All right. My last question before we move on to the fire round is, what are some of the biggest mistakes you see investors making in regards to taxes? What are the most common mistakes? Most common mistakes in regards to taxes. I would say, it's probably a mixture of a couple things. I've seen people not depreciate properties for like 10 years, which is interesting, but I've seen people write everything off as repairs. And I've also seen people capitalize

everything as improvements. Both of those can be mistakes depending on your situation. I personally always try to write things off as repairs if we can substantiate it. Reason being that if you're capitalizing repairs, like capitalizing means that you're adding it to the basis and you're depreciating it over like 5, 15 or 27. and a half years, depending on what type of property it is. But a lot of people will think, like, oh, it's an improvement. I have to capitalize and depreciate it. The way that the tax code's written is that we can generally write it off as a repair, and we want to write it off as repair because, one, you get that deduction today. But then two, you don't have to pay depreciation

recapture tax on it later on. And that's a big key. A lot of, a lot of CPAs will say depreciation is the best thing for you, blah, blah, blah. It's not. I personally don't really like depreciation all that much because you have to pay a tax on it later. So yeah. So we try to write everything off today. But, you know, other tax mistakes that I've seen, people wait way too late in the year to contact CPAs. I mean, I've had people, you know, contact me in March, wanting April 15th taxes filed, and they want me to help them save money. And I tell people, like, tax preparation is not the time to save money. It's a compliance-based service. The ongoing tax strategy throughout the year, that's the time to save money. I can't go back and change your facts and your circumstances

from last year. Makes sense. Awesome. Cool. All right. Well, let's shift gears and head over to the official world famous fire round. Fire round. It's time for the fire round.

All right. This fire round today, these are questions directly out of the Bigger Pockets forums. Let's get into this fire round. Number one, for someone who's new to multifamily investing, how much cash do I need to put aside for taxes? And we can give maybe an example. If I bought a fourplex and I'm cash-fowing a few hundred bucks a month. So you bought it in Podunk, Washington. He paid like $8,000 for four units?

$4,000 for four units. That's the truth. And a pack of smokes. Come on. Baltimore has those, too. Yeah, Baltimore does. All right. So, like, let's say I'm just cash flowing a couple hundred bucks a month on my property.

Like, should I be taking half that away in the bank for taxes? Do you ever recommend, like, just a rule of thumb? Is there anything exists for that? Well, the nice thing about rental property is that even if you are cash flowing a couple hundred bucks a month due to depreciation likely none of that will be subject to taxes or not all of it will be subject to taxes so I generally have I mean I don't know if if I was working with somebody on this I would say five to 10 percent withhold back as taxes that's on your net operating income okay fair enough all right self-directed IRA or solo 4-1K do you have a recommendation were you

the one who asked that brand no no yeah that's a that's a good question they both have their pros and I prefer solo 401Ks just because you can take a loan of 50K or half the balance, whatever is great, less. Yeah, less. So yeah, self-directed IRA is a little bit easier to manage and they cost a little bit less, but I try to push my clients to Solo 401Ks. By the way, if you want to know what either of those are in any amount of detail, because obviously we don't have the time to cover it now, jump on the forums,

look up Solo 401K or self-directed IRA or just look them up in our blog or anywhere else. you'll find out. There you go. All right, question number three. I screwed up on my taxes last year. Can I redo them or should I just ignore it and hope the IRS doesn't catch it? I love that one. It's a good question. It does kind of depend on what the screw up was. Obviously, my CPA ethical answer is to go back and amend it, but the feasible answer is what is the cost to amend and doesn't make sense. Generally, when we have something like this, we'll try to project out penalties and, yeah, try to see if it is worth going back in amending or, you know, point client. in the right direction on how they can go back in amend turns. But you can amend returns up to three years. So if you found a mistake, I would say go back and amend it. There you go. Nicely done. All right.

Last question. For a new investor, can they just go ahead and use TurboTax instead of hiring a CPA to do their taxes as a small-time landlord? Or do you recommend go to a CPA? Or even like one of those chains. I'm not going to mention by name, but one of the tax chains. I know, yeah, don't use the tax change. I have had, the worst returns that I've had come to me were done by the big box chains.

But yeah, it depends. It depends on how savvy you are. I've had some really financially savvy people who are able to prepare their returns like up to four properties and they're pretty perfect. The difference, though, is that they're preparing their returns and they're not maximizing their tax situation. That's the difference. But if you're not financially savvy, if you don't have time to read the IRS code, then hire it out immediately. Don't do turbotax. TurboTax will lead you in the wrong direction quick. Well, the software won't. You just probably don't have the information to make those decisions, right?

Yeah. And I mean, the software is great. Like, I love TurboTax for smaller people. But if you answer a question wrong, yeah, that's exactly. It's a logic function, right? It's like in Excel, if A then B, but if you answer it wrong and you're supposed to go to A, but it sends you to B because of the way that you answered it, now the remaining part of your taxes are going to be messed up as well. Yeah. I used to use your turbo tax, and then they came a point where I was like, I don't know how to answer these questions. Like these complicated questions, I was like,

I don't even know where to begin. I agree. Yeah, that's when I... That's a good time to get a CPA. Yeah, that was a good time. Yeah, I should take away. So, all right, cool. Well, hey, let's wrap up this show with our world famous.

Famous for... All right, these are the same four questions we ask every guest every week. So let's see what you got, Brandon Hall, B. Hall. Number one, what is your face? favorite real estate related book? It is what every real estate investor needs to know about cash flow and 36 other key financial metrics. It's by Frank Galline.

Gallinelli. Gallinelli. I think we had him on show four. I think it was three, four, or five. Yeah, he was on here. That's a great show. Yeah, great book. Awesome.

What about favorite business book? It's not rocket science by Dave Anderson. Oh, I've not heard of that. Really? What's that all about really quick? It's not about rocket science. Yeah, he basically, he's under the impression that a lot of entrepreneurs are out in the clouds and kind of just dreaming big. And he's like, get back to the daily execution.

So he just makes general business process he's really simple to follow. It's the most value I've received of any book that I've read. Awesome. I'll check it out. Cool. All right, what are you doing for fun, man? What do you do outside of real estate and your business? I just do tax returns.

I knew this guy was fun. No, I kiteboard. So any big body of water. Yep, love kiteboarding. And then my girlfriend and I, we love trying new food and trying not to pack on pounds. But yeah, we always go out to new restaurants and see what's local and non-local and things like that. Awesome. Cool. Sounds good.

All right. Question number four. B-Hall, what do you believe sets apart successful real estate investors from all those who give up, fail, or never get started? It's going to be an internal drive to basically consistently learn and educate yourself. The people that I see that don't care, or like they'll get to a certain point and then they won't further their education. Those are the people that are subjecting themselves to the most risk in terms of a downturn, in terms of legal risk. You know, you got people even on the forums that are like, I have no money, credit, or experience, give me $100K. And it's like if you would have just researched for a little bit, you know, you would have figured out that that's probably not a good question to ask. You know, it's just things like that.

And I mentioned that, you know, there was a client that had 10 years of depreciation missing, right? And so if you got 10 years of depreciation missing, are your deals even good? Because depreciation is a really key topic in any sort of research. So yeah, definitely continue researching and continue educating. That's what separates the successful from the non-starters or the non-successful. I love it. That's great. That's great.

All right, man, before we let you go, where can people find out more about you? www. www.the real estate CPA.com. And then I'm also starting this LinkedIn thing. It's my business coach's idea so you can connect with me on LinkedIn. Nice. Yeah, not sure how it works yet, but figuring it out. Cool. And you're also on bigger pockets.

And I'm on bigger pockets all the time. Perfect, perfect. All right, Brandon. Well, thanks so much for coming on. Thanks for helping enter all of Brandon Turner's questions, you know, which he pretends or somebody else's. But, no, thanks, thanks for coming on. We appreciate it.

We appreciate you being a part of our world. and, you know, seriously, like, congrats on building an awesome business and congrats on using bigger pockets is a great way to build it up for freeze. I love it. I appreciate it. Thanks, guys.

Yeah, thank you. We'll see around. All right, guys, that was Brandon Hall. Big thanks to B. Hall. Be Hall. Definitely, B. Hall. Definitely a good show, man. That was awesome.

I always fear bringing in these accountants and these folks. And I don't know. I think we've been lucky. Amanda Hahn was amazing. Neil Frankel in the early shows dealing with death was awesome. By the way, I forgot to tell you, Neil Frankel told me to tell you hello. And he told me to give you a pen.

I don't know, there must be an inside joke there. That is really funny. Yeah, I ran into him at FinCon and he says hello. I know. The one year I didn't go to FinCon, I don't get to see my friend of many years. So that's great. But yeah, anyway, what a great personality from Brandon, a great guy, super smart, and doing amazing things. It was a lot of fun.

Yeah, it was. And I learned a lot. I mean, I feel like every time I talked to like CPAs, I learn more and more because you can get so deep with tax stuff. Yeah. These shows are cool, even for newbies or advanced people. Hopefully you guys all picked up some good tidbits. Yeah. Awesome.

Cool. Well, you guys, this is show 196 of the Bigger Pockets podcast. If you want to get in there, ask Brandon a few questions, feel free to jump on the show notes at BiggerPockets.com slash 106. Or just ask questions on the forums, biggerpockets.com slash forums. obviously he's active on there jumping in and being helpful so do that otherwise if you are a new listener and you have never been to bigger pockets i definitely encourage you to come and check out our site it's a great place to link up and meet other people and learn and get your business going

yeah that's it man life life is good life moves on let's get out of here let's get out of you this is josh dorkin signing off you're listening to bigger pockets radio simplifying real estate for investors large and small. If you're here looking to learn about real estate investing, without all the hype, you're in the right place. Be sure to join the millions of others who have benefited from biggerpockets.com. Your home for real estate investing online. Thank you all for listening to the Bigger Pockets Real Estate podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday, and I'm the host and executive producer of the show, Dave Meyer.

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