BiggerPockets Real Estate Podcast - 599: The Investing “Cheat Code” of Opportunity Zone Rentals

Episode Date: April 21, 2022

Opportunity zone investing hasn’t always been around for real estate investors to take advantage of. But as the government began upping the incentives around this type of real estate investing, more tax-savvy investors started to pay attention. You may have heard of opportunity zones before, but you probably don’t know how much of a heavy hitter they are in the realm of tax reduction. Someone who does know about opportunity zone investing is King Malaki Sims—CPA and avid real estate investor. He’s been buying and building homes in opportunity zones for years and makes the case that this type of investing truly is the best real estate “cheat code” out there. Through his simple strategy, Malaki has been able to not only defer taxes but in some cases, eliminate them entirely, just through simple, smart real estate investing. Malaki shares how even a novice real estate investor can find, fund, finish, and furnish an opportunity zone rental property all while keeping Uncle Sam away from their hard-earned profits. If you want to build wealth without having to worry about 1031-ing your properties, Malaki is the man to listen to. In This Episode We Cover: Opportunity zones explained and how new investors can start investing in them Where to find opportunity zones in your local area (no matter where you live!) Funding opportunity zone investments with little to no money down  The biggest opportunity zone myths that scare away investors far too early Depreciation, bonus depreciation, and tax-deferral strategies you can take advantage of How crypto, stock, and other investors can invest in real estate tax-free  And So Much More! Links from the Show: BiggerPockets Website BiggerPockets Bookstore BiggerPockets Forums BiggerPockets Podcast Episode 569: Rich Dad’s CPA Shares 5 Steps to Eliminate Income Taxes through Real Estate w/Tom Wheelwright Robert Kiyosaki's Official Website Donald Trump's Official Website California Opportunity Zone Website Cryptocurrency Rob’s TikTok Profile Rob’s Instagram Rob’s Youtube Channel David’s Instagram David’s Tiktok Profile Connect with King Malaki: King Malaki's Instagram King Malaki's Clubhouse Check the full show notes here: https://www.biggerpockets.com/blog/real-estate-599 Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets Podcast Show, 599. In my opinion, the opportunity zone law is the ultimate cheat code. It's the best piece of tax legislation that I've ever seen in my 20-year career in my life. I don't think you'll find anything better. Most tax benefits deal with the deferral of taxes. So, you know, 401Ks, you know, 1031 exchanges, IRAs, all of that stuff. They ultimately kick the can down the road. At some point, when you want to.

exit, you owe the government some money. The Opportunity Zone law is the only thing I've ever seen where at some point you don't have to pay capital gains and you can sell your property and walk away tax-free and also not pay depreciation recapture. All you have to do in exchange is build in the area, build a rehab in an area that the government wants you to invest in and hold it for 10 years. What's going on to everyone? It's David Green, your host of The Bigger Podcast. If you're here for the first time, first off, welcome, second off, you hit the jackpot because this is the best real estate podcast in the entire world. At Bigger Pockets, we believe in helping people achieve financial freedom through real estate.

This is a community of over two million people that are all taking that same journey of developing financial freedom and improving their position in life through owning, investing, and improving real estate. We help you to do the same thing by bringing in different guests that have done it for themselves. Experts in industry like today's guest, which is an expert in tax law that will help teach you how to save a ton of money in taxes by making money in real estate using specific niches and strategies, as well as providing a forum and blogs and an agent finder service and all kinds of things that you need if you want to invest in real estate. One not commonly known thing

the bigger pockets provides is rent estimator tool. So if you ever just looking up a property, you want to know what would this rent for? You can get on the website. You could find out very, very quickly. I'm joined today by my co-host Rob Abbasolo, who does a great job with our interview today with Malachi. Now, Malachi Sims is a CPA in the Houston area, which is also where Rob lives, and I believe that a budding bromance is forming between the two of them. I got to watch it with my own eyes. It was a beautiful thing. And they both invest in that area. And Malachi comes in to talk with us about opportunity zones and takes what could have been a complicated thing and really simplifies it. Rob, how are you today?

I'm doing good, man. I really wish that I would have just heard this podcast about one year ago. About a year ago, my income really, you know, you take bets on yourself and I quit my 9 to 5 job. And I was like, I'm going all in on real estate and content creation and all this stuff. And it worked out for me. But what didn't work out for me was that I did not start really examining the tax law and all that kind of stuff until October. So I was a little bit late on the tax planning stuff. So in this episode, we're going to teach you how. to take the taxes that you would ordinarily pay on capital gains and how to invest them in the

Opportunity Zone real estate class and shield your money and not pay your money to good old Uncle Sam. Yeah, that's exactly right. And there's actually several different strategies that we highlight out here that would work for many different kinds of people. This isn't a one-size-fits-all thing. There's a lot of different entries into the Opportunity Zone where you can save a lot in taxes. And what I found out on the show is that there are opportunity zones in some of the prime areas in California where I live. So we're talking like Silicon Valley has opportunity zones. This isn't just the undesirable places that nobody would want to invest. So before we bring in Malachi for an amazing show, we're going to get to today's quick tip, which is reexamine your relationship

with taxes. Are you someone who believes taxes are just a part of life similar to death, right? The two things that are guaranteed in life. Well, that's probably because you've been working a W-2 job your entire life just like I used to. And taxes come out before you ever see the money. So you just assume they're a part of life. Well, that's your money before it's given away. And there are actually many ways that you can save that money and not have to put it towards the government and instead reinvest it back into your business, into your portfolio, into your life, into a better future for yourself. So today's episode is just one example of ways that we help people to save in taxes. I genuinely believe that what sets apart smart real estate investors from brilliant

real estate investors are those that thoroughly soak up as much tax knowledge as possible. This episode, we're making taxes sexy for the first time ever. So, you know, if you're a crypto investor, Bitcoin investor, anything like that, you're going to want to listen up because we're going to we're going to show you how to legally shield your taxes. Yeah, that's a great point. We actually talk about how to take gains from crypto from stocks and avoid paying taxes on them by utilizing real estate. BiggerPockets has a lot of resources about this. It's out there. We interviewed Tom Wheelwright on the show.

We referenced that one today. He is the CPA for Robert Kiyosaki and Robert Kiyosaki's businesses. BiggerPockets also has several books that are written. You can find those at BiggerPonkets.com slash store by Amanda Hahn that helped teach you how to save money in taxes. So if you're somebody who makes money outside of just real estate, you're successful in business. You do well with with Forex training or cryptocurrencies or the stock market, all those kinds of things. You definitely want to listen all the way to the end of this show as we give you some really good strategies to shield that income. Rob, anything else before we get to it?

No, man. Let's dive into how to save money on taxes. I think that's why everybody came to listen to today. 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 country, without making real estate your second job. That's exactly what rent to retirement does. They're a full-service, turnkey investment company handling everything for you. In some cases, investors get 50 to 75% of their down payment back at closing, plus interest rates as low as 3.75%. They've partnered with Bigger Pockets for over a decade, helping thousands invest smarter.

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Malachi Sims, welcome to the Bigger Pockets podcast. How are you today? I'm great, man. Thanks for having me on. You guys have a great show. I'm glad to be here and parts of knowledge. I learn from y'all all the time. Well, thank you for that.

You know, the first thing that I want to say is there's a saying about the Mullet business up front party in the back. That's hilarious. And I got to say that your hairstyle is a little bit of David on top and Brandon on the bottom. Well, you know, this is, this is my COVID beard. So once we got locked inside, working in corporate America, you don't always have a chance to get past their scraggly phase.

So once I got past the scraggly phase, I could let it grow out. I dubbed this the real estate mullet. That's funny, right? Yeah, David on top and Brendan on the bottom. Well, so Valika, in addition to your awesome look, can you tell us a little bit about your career and your experience with real estate investing? Sure, no problem. So I'm a CPA by trade. That's my day job. I've been doing public accounting and tax accounting for about 20 years or so. I got involved in real estate investing in around 2011 when my first

child was born. And I kind of let the tax go, let tax code be my guide to what we want to invest in once I saw all the awesome benefits that real estate had to offer. It was a no-brainer for us. Okay, so a little more specifically, tell me like what kind of properties do you have and what, what niche are they in? No problem. So we have a family portfolio, my wife and I. Our portfolio consists of primarily single family houses in the Houston area, most of them inside the inner city. We are buy and hold, now build and hold investors. And we specialize in a bill to rent model now specifically in opportunity zones. where we build the house. We hold it and rent it, some on long term, some on short term rental. So that's interesting. The build to rent, you know, I had no idea we were going to be getting into this. But this morning, as I was getting ready, I was thinking about the future of real estate and how the lack of supply is just causing most of the problems that investors are experiencing today.

You could trace it back to that. The high prices, the overbidding, the struggle to find cash selling properties. And I was actually thinking there might come a point where we're telling people how to buy land and then waiting for the right moment to build on it. And it looks like that's what you're doing. So maybe Providence has brought us to this place. When someone wants to do that model, do you recommend they buy the land first? Are they buying land and trying to build at the same time? What's the rhythm of that approach look like? I would always recommend buying the land first.

And it kind of gives you an advantage because you can kind of see, you know, follow the smart money. So you can follow where big money, big corporate America is going and try to get stuff that's kind of nearby what they're already building on because when you develop, you're going to need financing. But you need sales comps. If you have appropriate sales comps, it allows you to come in, you know, 75% of that and essentially build your asset for free at the end of the day. So if you buy the land first, you can roll that into a construction loan and then you can use the equity from that land. is your down payment. So just from a financing perspective, if you get the land first, it's easier to spend no money in your deal. Okay, so let me clarify a couple of things here. When you say build to rent, I mean, I assume that it's as straightforward as it sounds, right? You're building with the intent of renting it out to people long term?

Correct. We build houses to hold them. So instead of buying something and holding it, we're just going to find an empty piece of land and build a house and hold it with the purpose of renting it out. And you can raise on long term, short term, you know, any type of potential renter that's available. Now you speak in my language. I love a good short-term rental. So you think you can kind of shed a little bit of light here on the actual construction financing because I think that this is a really tough thing for people to grasp and really get started. You know, construction financing can be a bit of a bear, especially if you're getting started in this industry. So how does that work?

What are the typical terms look like for someone that are looking to get? in construction, how can they get connected with the lender in that capacity? Okay, well, so you'll need sources of money in various stages. So to acquire the land, you can either buy it outright. If you don't have the money to buy it outright, you can get a lot loan for it. A lot loans typically 20 to 25 percent down. It has a 15-year amortization with a five-year reset period. They expect you to build something within five years.

If you don't, then you can re-amortize it with the new interest rate or whatever it is at that time. But you can get a fixed rate on a lot loan. Then once you have your land, eventually you need to build. You can either have all the money up front or you can go to a bank, any major bank, and obtain a construction loan to build their product. Now, when you get the construction loan, in essence, you're trading in your lot, your property in exchange for their money. So they have to essentially buy your lot from you at fair value. So that's why I say you want have the land first so when you trade the land in, you can take advantage of the equity. If you have enough equity, you don't have to meet their 20% down payment for the construction loan. They have

some construction loan products that go construction to permanent with a permanent fixed loan at the end of the day or they just have some banks that just do construction loans and then you go somewhere else and get a permanent loan at the end of the day. Now, the most important thing is during the middle of construction loan, they give you money, but they don't pay you until after the work is done, they issued you draws. So you need bridge money in between each phase. You know, you start a project. You do your foundation. Somebody has to pay for that. The bank comes out, the appraiser comes out. They say, okay, we see a foundation. Now we're going to give you money for that. And then you can pay that money off. So you need bridge financing throughout the process as well.

So to get this correct here, you will go out and acquire the land in some capacity, whether you buy cash or you go and you finance it, you can go get a secondary construction loan in which the down payment of that construction loan is effectively the collateral that you're bringing, which is the land. Is that, is that right? Possibly. Oh, yeah, I guess that's one. If you, if you have enough equity in the land. Yeah. So you buy the land early enough or cheap enough, then you can use the equity in that land as your down payment and not have to bring money to the table for the construction loan. And I think the other thing that I wanted to clarify here, because I know a large part of our audience here, they're probably self-employed. Is this a tricky loan to go out and get if you don't?

have a W-2? Not if you don't have a W-2, but you'll still need two years of income from somewhere, pretty much. Now, you can get a hard money loan as well. They have construction loan products, too. It just depends on the lender. But it helps to have their two years of history to get the best debt, the best fixed rate that you want. Awesome. Thanks for clarifying that. So you've done this a few times in the Houston area. And as we talked about, you hold on to this. How has that really shaped your portfolio here in Houston? Are you mostly long-term rentals? You mentioned you can do short-term rentals. Is that something you do as well? I do short-term rentals as well. We just started doing STR, I'd say about nine months ago or so with one of the units that we constructed in an opportunity

zone. So five of our units are on long-term rental, and then we have three that are on short-term rental. But the three they're going short-term rental are killing the long-term rental ones. So where I'm filming it right now, this is a short-term rental in an opportunity zone. It's outproducing all five of my long-term rental on its own. Yeah, that tends to be the trend. So I guess I want to jump in a little bit here because I know one of your specialties are opportunity zones. Can walk us through? What is that?

because I know that probably in your CPA tax accounting background, there are some tax savings that can come along with that. So can you give us a brief overview of that niche? Sure. So in my opinion, the opportunity zone law is the ultimate cheat code. It's the best piece of tax legislation that I've ever seen in my 20-year career, in my life. I don't think you'll find anything better. Most tax benefits deal with the deferral of taxes.

So, you know, 401k's, you know, 1031 exchanges, IRAs, all of that stuff. They ultimately kick the can down the road. At some point, when you want to exit, you owe the government some money. The Opportunity Zone law is the only thing I've ever seen where at some point you don't have to pay capital gains. And you can sell your property and walk away tax-free and also not pay depreciation recapture. All you have to do in exchange is build in the area, build a rehab in an area that they, the government wants you to invest in and hold it for 10 years. Okay, so wheels are spinning here.

So just so I have this correct. Usually, you know, if you do a flip or anything like that, we're trying to find ways to mitigate paying taxes, right? We're trying to do 1031 exchanges, kick the can, as they call it. But because opportunity zones are something that the government wants you to invest in, it doesn't just defer it. It makes the taxes go away. What's the primary reason that the government favors an opportunity zone?

Certainly there must be some kind of justification why this legislation's in place is my guess. Well, tax law, when you think of it in general, it's the government essentially telling you this is what we want you to do, go do it in these areas. And so with the opportunities on law, the government is saying we want to see these areas be developed, but we don't want to spend our money to do it. So we want you to come spend your money to do it in exchange for that. we'll give you this crazy, I've never seen this before a tax break at the end of the day, but we also get to tap some of your capital gains now and get some of their revenue pulled out from 1031 exchanges in the like that we normally wouldn't get because investors keep kicking it down the road. Okay, so can you maybe sum up, well, maybe I'll start it off and all that

you finish it up. A typical 1031, like you mentioned, and I'm glad you mentioned that because it gets kind of left out of the equation a lot of the time is not escaping taxes. It is deferring taxes. Now, if you defer for your entire life, I suppose you can escape them, but whoever inherits that property is also going to be inheriting that tax burden, or does it reset when the property changes hands? No, they'll still be inheriting their tax burden and they'll still inherit the original basis that keeps carrying forward as well. Now, with the opportunity zone, you can ultimately, As long as you hold it for 10 years, you can ultimately sell it. Well, up until 2047 and get out tax free, completely tax free.

And you don't have to pay back all the depreciation that you do. Yeah. Now, when you're doing the traditional 1031 route, it's usually better than just paying capital gains. But you do have to understand you get yourself into a trap where you've had the property for more than 27 and a half years. Now you don't have any depreciation that you can take off of it anymore. If you want to sell it and buy a new property and reset that depreciation schedule, you're going to pay those capital gains taxes that have been deferred.

And though you probably will have built your wealth because you continue to reinvested that money not being tax, it's still a very hefty tax burden. And then if you pass it off to your children or someone else, you're passing off not as much as you think. There's a big chunk of that that they don't really own. The government owns it and they're going to have to pay. With this opportunity zone, you're getting rid of all of that. This is a true elimination of the capital gains taxes that would be owed,

which is probably how most people are. thinking at 1031 works. I think your casual investor thinks that 1031 means I don't have to pay taxes. They don't understand it's a deferral. But the opportunity zone is closer in line with how most people see. Is that what your experience has shown you, Maliki? Yes, very much so. It's a true tax escape. So as long as you hold your property for 10 years, you have until 2047, December of 2047 to sell it and not pay any capital gains on that asset. It's the best thing I've ever seen. little bit of the catch with this one is that you do have to hold it for 10 years. So if you go and you do like a rehab like you're talking about, it wouldn't be whove you to necessarily sell your

fix and flip that's in an opportunity zone like same year, right? Because is that just tax the typical way? So yes and no. So you don't get the 10 year benefit, but you still get to defer the gains as why you use that money and invest in something else. But it has to be capital gain. So in this instance, a fix and flip, depending on how long you've held the property, if you haven't held it for at least a year, then selling, it's not going to create a capital gain that would be ordinary income. So it has to be a capital gain. Okay, so sorry, I don't want to, I don't want to dive into this too much, but it's really interesting because you're right. I mean, it seems like there are a lot of, I don't want to say

legal loopholes. I guess we'll call it that. Double L, as we call it here on bigger pockets, just getting known never called it that. But so you, let's say you fix a rehab, a house and you sell it in year one and then you take those profits and you roll it into another opportunity zone house. Can you explain how that changes sort of the, and then if you hold that house for 10 years, are you saying it's gone at that point? Right. So I walk you through a scenario. So you're doing a fix and flip. You hold that fixing flip for at least a year so you can get a capital gain from it. You sell that fixing flip. You take those capital gains and invest it in a quality. Qualified Opportunity Zone Fund, you get a year to do it as opposed to a 1031 exchange where you only get six months.

So you get a full year to find another property that you want to invest in. If you hold debt property or properties, because you can split your gain multiple ways into multiple different projects. If you hold those for at least 10 years, when you sell those, the gain from those are tax-free. Now, the gain that you would have paid on the 10-30 from the fix and flip you made, you're ultimately going to have to pay that game back at the end of 2026. But there are different strategies to get around paying that two. But to keep it simple, if I sell something now, I don't have to pay tax on it now until 2026. And then whatever I use those proceeds and invest in, as long as I hold that asset for 10 years, I never have to pay tax on it. Well, not never, until 2047, long time.

So let's say somebody wants to try to figure out, hey, where are some locations where I can invest in? How would you recommend someone finds if they have an opportunity zone near them? Google Opportunity Zone maps and just look it up. You can search by area. You can type in the address and it's right there for you. Your city also likely has Opportunity Zone map designation on their page too that you can find. So it's really just Google. So I did that while the two of you were talking.

And I found opizones.ca.gov. So this would be a map of California Opportunity Zones. And I'm looking at this map, and this is some prime real estate that actually has opportunity zones in it. San Jose, Sunnyvale, this is like Silicon Valley area where real estate is incredibly expensive. There is nothing under a million dollars in these places. I'm seeing some opportunity zones. The Oakland San Leandro area, kind of between San Leandro at Fremont, which would be like, Haver.

this is a really, really expensive real estate places in San Francisco. It's not what I would have thought, which would have been sort of the undesirable areas really far away from anything useful where they're trying to trick investors into putting their money. Can you comment a little bit about your experience with what you've seen in Houston as far as where the opportunity zones are? Yeah. So I'll play it like this.

One third of inner city Houston is Opportunity Zone property. One third of the tracks. All of downtown Houston. with almost all of downtown Houston is opportunity zone property. Every major sports stadium that we have, where the Rockets, Astros, Texans, and the Dynamo play, the areas surrounding those neighborhoods are opportunities on property. It's a lot of great inner city property to invest in, and that's why I changed our entire strategy, and that's all we focus on.

So give me a, let me ask you this, can you give me a hypothetical scenario of how a, maybe an investor that owns a property, not somebody who's doing really big, things could start a search, find an area, and determine what type of property they would want to buy in an opportunity zone. And what maybe would motivate them to do it? So is this when they're selling a property? Does it make sense to do this before you've sold a property? It does and it does it. So the main thing is the government, they're saying we want you to come in and improve these areas. So to do that, you either have to build something new or do significant rehab or what's considered significant rehab depending on the purchase price that you purchased

the property for. So if you're not doing new construction, then whatever you bought the house for, say you bought a house for $100,000, then you have to put $100,000 into it. But say you only bought a house, you got it from wholesale or something. You only paid $20,000. And that's the basis. You only have to put $20,000 of improvements into it. So the first step would be to go look at the Opportunity Zone map and look at, you know, certain areas in your city and see if those, if they have houses that you want to invest in. That's step one. If they do, step two would be to set up your own qualified Opportunity Zone fund. So that's really just a company to invest under, which every real estate investor should be, should have one anyway, right? Just for liability

protection. Set up your own company. It can be a corporation or it can be a pass-through entity like a partnership or LLC. step three would be to sell something, anything that you can sell to create a capital game. So you can sell a house, you can sell crypto, stock, you can sell comic books, jewelry, anything you've had for over a year where you can create a capital gains, sell that. Invest those gains in your fund that you just set up. You have 180 days to move that money into that fund. And then you have another 180 days to move the money in that fund into an investment.

property. And then you just fill out your paperwork with the IRS, which is really simple. And that's pretty much it. So let me dive into that because that's definitely something I want to understand a little bit more. So if I'm an investor, let's just say I'm not doing opportunity funds yet. And let's say I have crypto and I sell and I have these massive gains. The strategy here is to then instead of just paying taxes on those gains, just dump them into an opportunity type of Opportunity Zone type of project and eliminate those capital gains that way. Like we can defer it or, you know, you know, escape the taxes via that way. Right.

So same scenario. You have all this crypto. You sell it. You take those gains and invest it in your qualified Opportunity Zone fund, your own fund. So we want to be clear that you don't have to invest in someone else's fund. It's very simple for you to sell up your own LLC, corporation, whatever. that's your fund, your company. Invest your gains in their company and then use that company to go out and buy real estate. Now, the money that you made from your crypto, you don't have to pay tax on those gains until 2026.

But the money you make from the investment that you invested those gains in, you don't have to pay tax on those gains ever, well, not ever, up until 2047 or depreciation recapture. So they're giving you two benefits. They're basically telling you that if you cash out now, you don't have to pay the tax on it now. And you can instead take that money and go invest in something else to create improvement in the areas that we want you to be in. And then that improvement, if you ever sell that up until 2047, you never have to pay tax on that. So it's a double benefit. So they are letting you defer taxes on your seed money, which I'll use for lack of a better phrase, that you're putting into your own qualified. opportunity zone fund to invest in real estate, then that investment in real estate should have

made you money, and that will be tax-free if you hold it for 10 years? Correct. Okay. What if you hold it for nine? Does it get taxed at a pro-rated amount, or is it at the full amount? It's at the full amount. However, there's no penalty. So if you get into it and suddenly change your mind, no problem.

Just pay the tax that you would have originally paid. Yeah. So there's no downside to it. You would have paid that tax anyways. There's literally no downside. And especially when you add in depreciation, there's really no downside because in theory, you can use financing and leveraging with this program. So if I buy a house for $100,000, I don't need the full $100,000. It's just like any other piece of real estate. I only need enough money to get the deal. So if I invest, you know, $20,000, $20,000 to get the deal, that's the only gains I've had to invest, but I still get the benefit of the full $100,000. And then I can take depreciation against that to get my $20,000 back initially. Now, you mentioned something a little while ago that there's a basis that you put into it. You have to match that with like an improvement. Can you

just clarify that a little more for me? Sure, no problem. So essentially the government again is telling you we're going to give you this big break if you improve these areas that we want improvement in. So there are two ways to do that. Two ways for the average investor. You can either build something brand new from ground up and obviously it's new, so that counts. Or if you're rehabbing something, you have to rehab it to the point to match what you pay for it. So if I buy a house for $50,000, essentially I back out the land cost because land doesn't count towards basis. So my land is, let's just say, $5,000, right? So my basis is now $45,000. I have to put $45,000 in one, of improvements into that project for it to qualify.

Okay, let me see if I got this right. If I sell crypto and I have a $100,000 capital gain and I go to Houston in an opportunity zone and I buy a $300,000 property putting my $100,000 as the down payment, we back out the land value of that property, which would say, what do you guys think? That's like maybe $100,000 out of the $300 would be for land or less? Less, probably like $50. Let's just say $50,000. So I have a $250,000 basis here that the improvement is worth.

I have put $100,000 of my gain as the down payment on this property. So that means that I have to put another $250,000 into that property to improve it? Yes. Okay. No, you bought the property for what again? I paid $300. You paid $300. You backed out the land of $50.

Yes, you have to put it in $250,000. Not $100 because that's what my down payment was. Right, correct. right so this is typically going to be if i'm buying a property that for 300 000 i'm going to put 250 000 additional dollars into it uh it's going to have to be probably a little more complicated of a deal this isn't just a single family house i'm going to go put paint and carpet and and call it so they're really incentivizing you to take on something that needs quite a bit of work because it's a blight in the community it's not being run well it's not generating property taxes it's not

providing housing like it should be. Is that the, am I understanding correctly what the government's trying to do with that? You're understanding correctly what they're trying to do, but the mechanics of it don't, don't have to be that high of an investment. So again, you just have to meet what the basis of what you invest. So again, if I, if I buy a house that needs work and I only spend $20,000 on the house, then I only have to invest $20,000. So it's also incentivizing me to get a good deal. Correct. Pay as little as possible, right?

Pay as little as possible. Yeah, I guess that's got to what I want to ask because how often in an opportunity zone can you buy, let's just say like the $250,000 example here, put $250,000 into it. And now we need to sell this house for more than $5.50. Is that correct? Right. That would be a higher price deal. Okay.

So to make any kind of profit on this, we would need to sell it for $600, $675, which if we're putting $250,000 into it. Deoretically, you do want a higher profit due to the risk. Right. How hard is it to make these deals pencil out? Very easy. Very easy. Just to give you an example, the deal, one of the deals that we just did, I put in $5,000

of my money. My purchase price, construction price is about 178. And you're the praise for $255. and I got pretty much all of my money back. And it rent's just fine. And if I were to sell it now, it's sell for 330. All right, we need to dig into this. How did you find this deal?

How did you negotiate that? I mean, give us an understanding of how you were able to do that. Okay, so I found this deal. I looked up areas in the opportunity zone that were in the inner city of Houston. They have a new 150 acre development coming up on the east side of town in the fifth ward area. So I look for land in that area. I found land on the MLS for $25,000 for $25,000 lot and I bought it to build on it. Subdivided that lot.

So at $25,000 lot, I had to put a, like I said, you get a lot loan, 20% lot loan. I had to put $5,000 down. I cashed out capital gains of $5,000 to get my lot loan. So now I'm in for $25,000. I subdivided that lot into three separate parcels. They cost $5,000. So now I'm in for $30,000, $10,000 per lot. Then I went and got a construction loan.

I rolled the equity from the lot loan that I bought into the construction loan and used that as my down payment or the majority of my down payment. The rest of the down payment I use from a line of credit. I have personal lines of credit in the HELOC. So I use that as the rest of the money for my construction loan. And then throughout the construction process, I use those lines of credit. and the HELOC is my bridge money until the draws came back from the construction loan. Final cost was about $178,000. We rolled it in a permanent financing at the end and got mostly all of our money back

except for the $5,000 of capital gains that we readily invested. That needs to stay in the opportunity zone for at least two years. But the rest of it, we got back. Okay, so that $5,000 was purposeful, like you strategically left it in there? strategically left it in there. So the government doesn't want you essentially cashing out too early and making money off of your game. Like you can't take it. It's called it disguise sale essentially. You can't get that money back. But you can make money in two years. You just have to wait the two years. And when you say you can't get that money back, you're afraid to through a refinance.

Through a refinance. Yeah, through a cash out, refi. You can't take it out until two years later. So what I anticipate happening, again, the tax, the initial tax that you owe from what you originally cashed out as far as your capital gain is deferred until 2026. So I'm pretty sure in 2026 we'll see a lot of people doing cash, doing cash out refis and paying the taxes that they would have owed with the equity that they created from their new investment. That's just my guess. And that's when real estate works its best. Now, let me ask you this question about specific the refinance. So this is a, what you're kind of describing, a form of burr using an opportunity zone. Rob will probably call it a bros or something.

A braz. It's the burr method. You're just, you're just building or doing significant rehab instead of just buying something. It's the same thing. Yep. And that's another great thing about the program. You can use leverage. You can use all the other strategies within the program.

Now, as a CPA, can you give us any insight on, let's compare this to a traditional 1031. where I believe there are similar rules. So if I go 1031 into something and I have a ton of equity in it, I protected my capital gain. Like let's say that I take like $2 million out of the sale of several properties and I go buy one really big apartment complex. But there's a ton of equity in there because there was a lot of equity that I moved. So I'm not leveraged. Maybe I'm leveraged 20, 30% on this property. My gains are protected because I've done the 1031 correctly.

but then two weeks after closing, I just go refinance it and get all that capital out, which sort of goes against the spirit of the 1031. What's your understanding of the tax code as far as how long I have to wait before I can pull money out on a cash out refi on a traditional 1031? On a traditional 1031, it's just like you explain. It's just that that's kind of the loophole around it. So I had heard, and I may be wrong, I had heard people say that there's an ambiguous term of how long you have to wait for you can pull money.

You can't just like on the closing day, you can't go in there and pull money out. Is that different than your understanding? I'm not, I'm not sure. Exactly. Okay. That's something I could probably do a little bit of research in. But it sounds like for opportunity zones,

we know it's a two year wait before you can actually take out more money than what you put into the deal. Right. Correct. I got to say, and this has nothing to do with what we're talking about, this is just pure David Green's opinion. This seems like one of the best things the government has ever done as

far as getting something accomplished, right? Like, it seems like every time they step in and do it themselves, we get a DMV, which no one ever likes their experience at the DMV. That's always the example that I use, right? Like the best thing the government gets right is like a public library, which isn't really saying a whole lot. But at least it's like, oh, one really hates the library that much. But with this, they're like, all right, we're going to get people that are good at doing

something, incentivize them to do it, have them do it way better than we ever could. they probably weren't going to pay capital gains on this money anyways because they are smart investors. They know how to just 1031 for life and just defer until they kick the can. Is that what I'm trying to say? Kick it down the road. There you go. And now they've got this like perfect system where everybody's going to benefit. And the beauty of this is if we get investors in some of these areas, and this is a question I want to ask you Malachi, what you've seen in Houston, if you get some of those run down properties that are just no one's putting money into them at all because there's no reason to and now you're starting to fix those up maybe some multifamily properties are improving they're raising

rents now the people that own the real estate around that are seeing like well there's a really nice cop down the street i can justify putting money into this building that i own that's been running down and then they can raise the rents the building becomes worth more they collect property taxes are we sort of seeing in some of these areas this momentum catching on where they're revitalizing uh areas that at one point we're just being ignored. Yeah, that's exactly what we're saying. So, for example, that lot that I bought for $25,000 where I'm putting three units on, they now have a variance request for the lot across the street.

The community development corporation is building nine affordable homes there and a technical center right across the street. So, yeah, we're definitely seeing that here in Houston. Yeah. So in that example, as those properties become worth more and they probably change hands, the basis gets reset on those as far as what property taxes are collected. And the government's going to make their money that way, as opposed to just taking it out of the hands of the investor and stopping them from reinvesting it. Correct.

It's the perfect setup for them. But the true beauty of it is that this is something anybody can do. You know, anybody that does significant rehab, new construction, or plans to hold property for at least 10 years, your average buy and hold investor can take advantage of this. without doing anything extra, but a few forms of paperwork and just making sure that they're doing it in the specific areas that the government designates for them to do. Anybody can take advantage of it. It's that simple. Is there ever, like, a time where the Opportunity Zone label is removed, where it goes from

Opportunity Zone to Zone? Right. So, like I said, the regulation ends at the end of 2047. That's when the magic stops. So 2047 is just regular property after that point. if you sell after that date, you get taxed just like anybody else. But that's a long time away. Certainly.

But there's never a point where you can revitalize an opportunity zone so much that it's, it no longer falls within the realm of an opportunity zone. No, no, it doesn't work that way. Yes, it's, it's always going to be OZ property. So let's say you come in and make an improvement and you sell your property early. You don't wait 10 years. Whoever buys it from you is still going to be OZ property to them. they just have to follow the same rules to make, you know, some level of improvement.

Has anyone dubbed you the Wizard of Oz yet? Oh, not yet. I feel like you got to, that's a really good marketing play, especially with the beer that we talked about. Right. That should be your new Instagram handle. I might have to steal that. I love it, man. People love to call real estate passive income, which is interesting because most of the investors I know are very busy.

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So with great opportunities, there's a lot of information out there, a lot of misinformation and a lot of myths. And I know that you have a few, I guess a few myths around the niche of opportunity zones. Can you walk us through some of those? Sure. So the main myth is that to take advantage of this, you have to be some big-time real estate developer and investor or you have to be some major syndicator. Like usually when you hear people talk about opportunity zones, it's, hey, hey, Rob, why don't you, cash out your gains and come invested in my project, you know, put it in my syndication in my fund when this is something that anybody can set up their self. A fund, quote unquote, fund is

simply your own corporation, your own pass-through entity. So that's myth number one. Anybody can do this. You don't have to be on a big time level. Everything that we do, it's all, you know, single-family housing. That's how we take advantage of it. The second myth is that it's complicated to invest in these areas or to do this. And it's really not. So we keep mentioning the 1031 exchange. It's actually easier to do an Opportunity Zone investment than a 1031 investment as far as the paperwork goes. So when you do a 1031, you have to have an intermediary that you pay and run all your paperwork things through and things like that. With Opportunity Zone, you only have to fill out an additional two forms with the IRS. So the first form would be form 8949. You attach that to your

1040, and that's essentially you telling the government, I cashed out something. I took some capital gains from somewhere, but I'm not paying tax on it now because I'm putting that money in this opportunity zone. You designate the opportunity zone on the form 8949. Attached that with your 1040. And then that C corporate partnership that you started, you'll fill out a form 8996 with them to let the government know that this company is a quote unquote qualified opportunity fund. And that's all you have to do for the additional paperwork. You don't have to go through an intermediary or anyone else. You can have your CPA or, you know, do it or you can do it yourself.

And then the major myth is what we covered earlier where people assume that, you know, these are bad areas that the government really wants to improve. But, David, like you just looked up your area, you saw all the great real estate that will qualify for it. I mean, I think that's right. Walking into this, that wasn't necessarily my assumption that they're, quote, unquote, bad areas. But, you know, areas that do need some level of development. And so kind of seems like, you know, at the end of the day here by 2047, a lot of these opportunity zones will be completely different than they were, you know, today, right?

Right, right, right. But so, for example, you've been in Houston. How long now? Well, I grew up here. So I've only really been here a couple months. But, you know, I grew up here from, yeah, I was here for the first 18 years of my life. Okay. So in a couple of months since you've been back, how much development do you see that's

needed in downtown Houston. I mean, look, from when I was living here already, like it's been 12 years since I, or like 13 years since I moved from Houston. And yeah, it's a completely different city. I think this is now the first time where I can drive on a highway and there isn't construction, you know, happening on the highway every part of the city. So, yeah, I guess I see a point already in just 13 years. It's really not the same city.

Right, right. And so downtown Houston is, I'm saying as you look at it, you go. down there, you're not like, oh, man, this is an area that really needs improvement. Like, it's already a great area. But yet, there's opportunities on property. It's great real estate. 100%, man. When I was, I mean, I was just looking at land in downtown, kind of the U of H area, I want to say, like three, four years ago. And I remember at that point, you know, it didn't feel like it was too early, but it was like, okay, this is, you know, it felt like I was biting off more than I could chew. and now just kind of driving around that area. It's, you know, it's just not the same place.

It's actually really nice to see. Right. And that's the opportunity zone area too, actually. I think something super interesting about this in general is the synergy that it has with other forms of wealth building. So when I first heard about opportunity zones, my understanding was like, well, if you happen to know that area, have connections in that area,

maybe know a wholesaler who can get you the deal at the right price, you could make it work. But now I'm starting to see, it's no surprise. We've had a lot of inflation, especially, and that's showing itself in income-producing assets. And where I live, crypto was all the rage. I think probably a lot of people listening to this are dabbling in crypto. And they're watching as tons of people are making a lot of money.

And it's very volatile. Your assets go up a ton in value. They could go down. So now you, because of the volatility, you start to get the day trading element where people want to jump in, jump out, jump in. jump out. But every time you jump out and make money, that's a capital event. You're going to be taxed. And that is not common knowledge. I think this may be a bit of a stereotype, but a lot of people make money in crypto have not made money in other things. Not for everyone, of course, but a lot of them,

this is their first time actually doing really well financially in something. And so they're just not exposed to the tax law. The taxes were taken out of their W-2 check. That's as much as they ever knew. So it's now hitting a lot of people where they don't realize I didn't actually make $100,000. I made less than that because of capital gains taxes. So when you compare this to the people that are making money in crypto, the stock market doing really, really well and people are exiting the stock market, there's capital gains popping up all over the place that a lot of these investors were not prepared for. And if you're listening to a podcast like this, you are interested in real estate.

So there's a synergy between different ways you're making money and able to now put it into real estate to shelter those taxes while doing something good. And that's just, I want to kind of highlight this is not just for a. traditional real estate investor. If you're someone who's been wanting to get into real estate and you've made money in other areas, this might be like the, you could not design a better way to make your entry into real estate. Are you seeing Malachi other people that are sort of getting into this world that we live in through untraditional means because they, they had capital gains in different areas of finance? I am, but, but they typically fall under one of the myths we

just covered. They don't know how simple it is to do this. They don't know. I just simply have to start my own company and put my money there and then use that company to go buy and hold stuff. That's the main problem. It's just they just think it's more complex. I was surprised to hear that. Yeah, they're around shopping, looking for someone to park those games. And then they have syndicators and other big developers tell them, well, hey, come invest with me. Come give me your money.

You can do that. That's fine. But you can also, it's also simple enough where you can do it yourself. So they could just contact a CPA and say, hey, I would like to. to start. What was the phrase that you used an opportunity zone fund? Yeah. And they'll just, okay, a couple hundred bucks. They can make that up for you. You start an account. You transfer money from your account to that account. Boom. You put your money in the fund. Put your money in the fund and you get six months to do that. And then you get

another six months to go out and buy some property. Hold it. And then you can get all the tax benefits from it. Not to mention again, so I keep coming back to the depreciation. That's really the cheat code for me is that you get the depreciation because the 2017 Tax Act really gave us like the Holy Trinity of tax breaks. In my opinion, they gave us 100% bonus depreciation, which is crazy. And that, you know, the 100% ends this year, but you still, it didn't go down to 80, then 60, 40, and 20. But you still get to do a cost seg on something you buy and get all that bonus depreciation to offset the income that you're going to make from renting something while you rent the, asset, you know, to wipe all your income away or a good majority of it. And then if you can't wipe

all your income away, they gave us the QBI deduction, which gives you another 20% off. And then they gave us the opportunity zone. So it's, it's the best time ever. So I want to quickly just ask, because a lot of the times, it looks like these opportunity zones, just if you're a smart investor and you're looking for areas to flip a house that need development, you might already be investing in opportunity zones and you don't know. And so I'm kind of curious, do you think it's possible that a lot of people have invested and flipped and rehabbed and, you know, buy and hold whatever in opportunity zones and never fully realize the tax benefits of it, just not knowing about this, about opportunity zones in general? Yes, I hear it all the time from even friends of mine, I know that have invested that way. And I tell them like, dang, if you just would have structured it this way and bought it under this company and sold something to buy it, then you can.

could have gotten all these breaks at the end and had that exit strategy as an avenue. So that's why I keep going back to the mis-education, the myths around it, they just don't know how simple it is. But I know tons of investors that have bought opportunities on property for significant rehab and new development, and they didn't know that it was there. So in your personal dealings, Malachi, have you had an opportunity to buy something where you utilize the depreciation that you mentioned? You've said that the trifecta.

The first was a bonus depreciation, meaning you could take it all in year one, right? Right. What were the other two? Yeah, bonus depreciation, the qualified business income deduction, where it's basically giving you a 20% deduction on your income if it's in a pass-through entity, and then the opportunity is on law. Okay. I've utilized all three.

So I'm asking if you can give us an example maybe of how that worked out in practical terms because people that have heard of the term depreciation might have a loose understanding of it, and they probably heard the phrase, bonus depreciation, but they don't know, at least I didn't know until maybe two years ago, what that looks like in practical terms when it's actually applied. No problem. So depreciation is the original ultimate cheat code as far as real estate investing. It's essentially the government is telling you, and it's not like this with any other investment you can make, hey, whatever you spend on this, on this investment, I'm going to give you

your money back. It's going to take 27 and a half years, but whatever you spend, I'm going to give it all back to you. So that's about 3% a year the government is going to give you your money back. And if you die and you pass that property on to someone else, then they start the clock all over again for that person as well. So it's essentially the government giving you free money, giving you back the basis of your investment over time. So in the 2017 Act, they gave us bonus depreciation. So they said anything that has a useful life of less than 20 years, you can take, instead of spreading this over 27 and a half years, you can get 100% of it right now. And so essentially, if you build a new house, so walking back through that example, the house that our construction cost was about $178,000.

I took, I ran a cost-sac study on that house and took bonus depreciation from all the stuff that had a useful life of 20 years or less, and they gave me $22,000 of bonus depreciation instantly. plus the normal depreciation on top of that that you normally get to take over 27 and a half years. So I walked out of that deal in year one with $28,000 of depreciation. So you multiply that by a normal tax rate, that $5,000 that I originally invested of my capital gains, the government essentially gave it right back to me via depreciation. So I'm in for pretty much, I'm in for nothing. Yes, that's the thing is if you do this right, the down payment you put in the property basically is the same,

or less than what you would have paid in taxes, your tax savings, so you end up getting properties for free or sometimes that a reduced rate. Right. And on top of that, again, that bonus depreciation, typically when you sell it, you have to pay that depreciation back. But not with the opportunity zone. You can sell it and never pay it back. So you can get 100% of your bonus depreciation now with current dollars, you know, let inflation happen and then never have to worry about paying it back.

in the future. Well, not never, but up until 2047. Yeah. So when you hear people like Robert Kiyosaki and Donald Trump, they often make these like kind of bombacious claims of, I don't pay taxes, real estate, debt. They kind of give you like a little teaser understanding of how it works, but not enough that it clicks in your mind. But what you're describing is the actual brass tax of how this goes down.

This is why I don't have to pay taxes anymore. Now, it's not like there's no risk to it or there's no work to it. It's not just, I don't pay taxes because I just choose not to. I'm not going to be going to jail. But it's the way you make your money, the way you structure it, the areas you're investing in the strategies that you're using, especially if you're an entrepreneur. This is much harder to do if you're just making W-2 income. But when you get in the point that you're making money through businesses, like you're

describing all of these opportunities come alive and you grow your wealth a lot faster when you're not having to cut off 20, 30, 40, 50%, percent that hand it over to the government who isn't going to invest it as well as well as, we would. Right. Exactly. And then the other thing with that depreciation, you know, taking the bonus amount, the banks, if you're going to get financing, they add that money back into your DTI cap when you go for your financing. So they don't consider it an expense and counted against you. They give it right back to you. So it's very true. It's a paper loss, but the banks don't look at it as it's actually a loss. So yeah, it's all the upside and end of the downside. I don't have to pay taxes

on it, but it doesn't get used against me when they're trying to run by debt to income ratio. Right. And the same thing with your, we were talking about STRs earlier, why I put some of these units on STR. All that furniture that you have to put in your unit and all that stuff, you just take 100% bonus depreciation against it and then add it back for the banks. Yeah, I actually wanted to clarify on that because you're saying, well, and I knew this, but 80% will now be kind of the bonus depreciation and then eventually 60 and 40. Is that for specifically, will that also count towards like cost segregations? So, two years or three years from now, the amount that you can depreciate from a cost segregation, you will now only be able to use 80% of that? You can only use, after this year, you can only use 80% for a bonus depreciation. You can still take your normal 27 and a half years. But now they're just giving us the ultimate hookup and saying you can have 100% of it now.

Up until this year, this year the 100% ends. And then they gave us a, when the CARES Act passed for the coronavirus, they actually let you take that bonus depreciation and take it back three years and go get all the income from the taxes that you paid and get a refund. But that stopped last year. This is why you want a good CPA on your team because you wouldn't even know this existed if you didn't have the right people. I've been talking about it more and more of what I'm doing. If people want to reach out, I can connect them with somebody. But this is huge, huge stuff. And this is one of the reasons that H&R Block is not always in your best interest. Because when you try to save money and get the cheapest

service that you possibly can. You don't realize ways you could have been making money. And at minimum, even if you're not able to save in taxes right now, knowing how this works means you will make money in the future in a different way. Because you realize that you're going to make it more efficiently. You're not going to have as much taxes. I love what you're saying, Malachi. You're kind of sounding the alarm. For the last three, four years, interest rates have been incredibly low. And we've been telling people these are like record low rates, like in the twos, right? You need to take advantage of it. And I think people just get used to seeing it there and they assume it will always be there. So they don't act with urgency. And now that rates are going up, there's a lot of wailing and

mourning in the streets. It's too late. Real estate is over. Right. Rates are in the fives and the sixes. Like, it's hopeless. Why do it at all? And they're all wishing they could go back in time. Well, you're letting people know these amazing tax benefits probably aren't going to be there forever. this was a stimulus that they're trying to get to get investors pouring more money into the economy. Right. And at some point, the tax code will go back to what it was like before. So don't assume this will always be there. I would strongly encourage people to act.

It'll be there. This specific law ends in 2047. You have June 30 to 2047 to get your money invested in an opportunity zone. Yes. And then you have up until December of 2047 to sell tax free. But bonus depreciation. segregation studies, even the 1031 itself, there was talk when President Biden was running for office that he was saying, we need to get rid of the 1031 exchange.

Like, none of this stuff is guaranteed to be there forever. And that's what I just want people that, just like low rates, where we got that false sense of security that they're always going to be there. Now that they're not, we wish we had them again. Same thing goes with real estate investing. So this has been an awesome talk. I mean, we don't get this type of information very often. So thank you very much, Malachi.

We're running a little long. so we're going to jump into the next segment of our show. The fire round. It's time for the fire round. This segment of the show, Rob and I are going to fire questions at you, and you are going to fire your answers back. These questions come directly from the Bigger Pockets Forum. So if you'd like to step up your own real estate investing game,

I highly encourage you to head to the Bigger Pockets Forum, read some of the content that's there, and ask your questions and see just how crazy cool it is to get free answers to your questions incredibly quick. All right. Question number one, I am intrigued about investing in opportunity zones. How long do I have to get my money in one before it's too late? June 28th of 2027, because you have to essentially think you have to hold this property for

at least 10 years. So June 28, 2027 is the last day. You can get your money in a property. Great. Question number two, does your LLC have to have any members? other than you to participate in an Opportunity Zone fund? Yes, because it can't be, it has to be a pass-through entity. So if you're a single member LLC, then it's not a pass-through entity.

So you have to have somebody else on board. It has to be another separate entity to qualify as a separate fund to hold your assets. Awesome. Question number three, has anyone purchased outside of an Opportunity Zone Fund and then been able to transfer ownership into one? I recently purchased a property in an opportunity zone. My broker told me that there would be no capital gains tax on the property if I hold it for 10 years. Now I'm seeing that for the capital gains tax be waived, the property must be held in a qualified opportunity zone fund, which I didn't set up to purchase the property. I feel a little stupid in having taken her comments at face value and not doing my homework on OZs prior to purchase.

Unfortunately, the answer is no. So one of the caveats to the program is the purchase that you, you make it can't be from a related party and in that instance you're a related party so you can't sell it to yourself it has to be an original purchase from someone else i'm sorry this reminds me of in a traditional 1031 the constructive receipt rule where people think that they can sell a property put the money in their bank account identify a property within 45 days closed within 180 days and avoid the capital gains but they're not actually supposed to have touched the money right and it's one of those where they listen to us talk about it.

And they're like, oh, I know what to do. And they go do it. And then they go to their accountant afterwards and say, hey, here's what I did. And they go, you did it the wrong way. And it sucks. So this is one of the reasons why you want to talk to these experts before you do it. And your broker is not an expert in tax code. So I say this as a real estate broker myself, they can turn you on to an idea,

but you need to talk to the professional. So that sucks. Yeah, I'm sorry. All right. Thanks for keeping a real with us, Malachi. that's going to wrap up our fire round, and we're going to move on to the next segment of our show, the world famous. Famous for. In this segment of the show, we ask every guest the same poor questions every single time, and we are going to dive into your mind now.

Malachi, question number one, what is your favorite real estate book? Tax-free wealth. By time, we all right. Shocking. Yeah. It's a great piece. He does a really good job of kind of what we're trying to do. do today, just kind of letting you know this is what the government wants you to do. Just follow these

simple rules and take advantage like anybody else would. So it's a great piece. Question number two, favorite business book? Never split the difference by Chris Voss. So it kind of goes over the art of negotiating. And I think that applies to business. It applies to practically anything in your life. So when I built our apartment, yep, there we go. That's the magic book right there. Yeah, I built my house. You know, and I wanted a game room. I had to negotiate with my wife for how big it would be. So it's a great book. Little tip, you always want to lose the negotiation against your wife.

Question number three, hobbies. What do you like to do outside of developing opportunity zones? I like fantasy sports. That's how I became an accountant in the first place. And then I also like attending major sporting events and, of course, hanging out with my two boys and my wife. That's awesome. If anybody wants to check out more about Tom Real Right, you can see him on episode 569 where we interviewed him on this very same podcast. So my last question for you, what sets apart successful investors from those who give up, fail, or never get started? I would say finding the lane that kind of corresponds with what your interests are and what you like to do. There are many things you can do in real estate investing, many strategies

and avenues you can pursue, just kind of find something that tailors in with your personality and go for that. So I'm a developer now, mainly because I have a career in accounting and audit and tax. So I know process as well. So it's not hard for me to understand the process of building a home. But would I ever, you know, put a nail and hammer myself and go do fixing flips and some of these other things that require more manual labor? No, I wouldn't because I kind to stick with the lane that I'm comfortable with. So if you do that, there's many avenues of real estate you can find to be successful. Awesome, man. Couldn't have said it better myself, and I've tried. Last thing here, Malachi, can you tell us where people can find out more about

you? Where we're on the internebs, the internetbs and the interwebs. Can people learn more about you? Yeah, sure. They can catch me on IG or Clubhouse under the King Malachi, M-A-L-K-I. But, you know, I might have to take Davis advice and change my IG handle for now. That's a tough call. King Malachi sounds really good too. That is pretty cool, man. Well, that's actually my name. King's my first name.

Really? Oh my gosh. Wow, you got set up by your parents nice right there. I know, King Malachi. Yeah, they love me. I have five sisters. I was the first boy, so. Oh, yeah.

So your handle is, uh, yeah, I mean, they have to make it up here. So your handle is, uh, the King Malachi? Yeah. D-H-E-K-I-M-A-L-A-K-I. Awesome, man. What about you, Dave? Where can people find you on the inner nebs and the inner webs? I wish I had a cooler screen name after hearing Malakaz.

I'm feeling a little insecure. It's David Green 24. There's an E at the end of green. Luckily, there's consistency everywhere except for the one jerk that took David Green 24 on TikTok before I could get there. So I think we're still trying to figure out. Now you're David Green 25 on TikTok. That's exactly right.

The only place is going to be on TikTok where I'm not David Green 24. So someone stole yours too? They stole mine too. I still can't figure it out. There's a king Malachi out there and the page is empty and they're married to someone who has the same name as my wife. So I would joke with my wife. You wanted me off the internet. I know you set up this fake dummy account, but I got one anyway.

You know, David, actually a great username for you would be the king of green. The King of Green. If you want. It does sound good. It also sounds a little slimy, scammie. That's the weird thing about green, right? It can be good because it can talk about wealth and health, but it can also be used sort of as a like the Lamborghini flossing type of a thing.

So we're still working on that. I think Rob's yours was perfect, right? Like tell people what your handles are online and then what your TikTok one is specifically. My handles are the jester of. green. No, I'm just kidding. You can find me on YouTube at Rob Built. You can find me on Instagram at Rob Built. And then you can find me on TikTok at Rob Bill Toe. Makes me laugh every time because someone took Robill-Bilt-Toh. No E at the end. Not Toe like the toe on your feet. But yeah. Robill Toe because yeah, someone snagged Rob-built. And then someone, hey, also just so I can

get this out there, I will never contact you all on Telegram. There's a guy who took my handle and he's scamming all my audience, and it makes me very sad. So we'll never ask you to send us Bitcoin or Forex or whatever it is. Yeah, please. When you see those pages, report them. There's a bunch of, I probably have six or seven fake ones right now, and there's nothing I can do about it. Unfortunately, until Instagram gives us that blue checkmark.

Well, thank you very much, Malachi, for your time. Thank you for sharing the information that you did and kind of shining light on something that many investors just don't think about because it's not as exciting, right? It's always fun to take down the deal and plan. the rehab and share your numbers with your friends, but taxes get kind of boring and annoying. And so I think people don't pay attention to them. But saving in taxes is probably a higher ROI than you're going to get on any deal that you ever do on the front end. So thanks for

sharing that. I'm going to leave you with the last word, anything you want to share with our audience. Thanks for having me on. So we could talk about this. So we can spread the education around it. Like you said, saving on taxes is the main thing. And I have never seen anything in my life. and probably never will again, where the savings is tax-free. Well, thank you, Malacak. This is David Green for Rob Internebz Abasolo. Signing off. Do you ever notice how every passive investment

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