Ep 89 – 7 Investments The Government Will Pay You To Make with Rich Dad’s Tom Wheelwright

The tax code is written in a way that tells you what the government wants you to do. They reward some things, and punish others.

Figuring out which is which, however, can be an expensive thing to do.

Adam Schroeder and Zach Lemaster are joined by Rich Dad’s Tom Wheelwright to discuss ways you can be structuring your work and investing to take advantage of everything the government has given you access to.

Tom is CEO of WealthAbility, Rich Dad CPA, and #1 bestselling author of Tax-Free Wealth: How to Build Massive Wealth by Permanently Lowering Your Taxes and the new book The Win-Win Wealth Strategy: 7 Investments The Government Will Pay You To Make.


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Transcript:

Adam 

On All right, hey, Rent To Retires. It’s Adam Schroeder here once again joined by Zach Lemaster, the CEO of Rent To Retirement, and we are pleased to be joined by the CEO of WealthAbility, Rich Dad, CPA, and number one best-selling authors of books such as this one of my hand, the Tax-Free Wealth, and his new book, The Win-Win Wealth Strategy, seven investments the government will pay you to make and that is Tom wheelwright. Tom, thanks for joining us today.

Tom

Hey, thanks. Thanks for having me, Adam. Zach, always good to be with you guys.

Adam 

Yeah, well, it’s an absolute pleasure. So why don’t we start a little bit? Can you tell us a little bit of your backstory kind of who you are, what you do, but also how you got to connect with the rich dad people?

Tom

Sure. So, I grew up in Salt Lake City, Utah. So as a good Mormon boy, I spent two years in France getting rejected in French, so good. And it was just really great training to be an entrepreneur, frankly, learn how to handle rejection. I spent seven years with Ernst and Young, including three years in their national tax office, 14 years as an adjunct professor at Arizona State University in their masters of tax program. For years as the in-house tax advisor for a fortune 1000 company. For 25 years, I built bought sold CPA firms. last 15 years or so I’ve spent a lot of time on the road with Robert Kiyosaki teaching financial education around the world, six on six different continents. And now I run a network of CPA firms. We have 6060 some odd CPA firms and our network throughout the US and Canada.

Adam 

Now, one of the things that you touched on that I really like is you talk about the tax code favors, the employers and employees are just kind of left high and dry. Can you talk a little bit about how that is in in the tax code? Like what benefits even are there for individuals as compared to businesses?

Tom

Yeah, interestingly, didn’t used to always be that way used to be that employees weren’t taxed at all. Until 1944. They weren’t even allowed to be taxed in 1944. They said, well, we’re only going to tax you on the amount of money you earn over the average earnings. And that’s where we got the standard deductions. But starting in the 1960s, with President Kennedy, what we got was Kennedy looked at, if we incentivize businesses, to do certain things where they actually do those things. So you know, fast forward to today, businesses, now it’s completely flipped. So, where employees were never taxed now, employees are taxed the most, I mean, good example. Last two years, everybody’s been working from home. If you’re a business owner, you get to deduct that home office, if you’re an employee, you don’t. So employees are pretty much left. Unless you’re going to be an investor. Now, investor, anybody can be an investor. So and you don’t have to be a big investor, everybody can do that. And in my new book, wisdom and wealth strategy, actually look at seven different investments. Two of those that are most common for individual investors would be insurance and retirement plans. And those are two things that the government does favor that any individual can take on, you don’t have to be in real estate, you don’t have to be in business, you don’t have to do one of these other areas where the government really highly incentivizes. But the government pretty much has said, there are certain activities that we prefer, and if you do those activities, we’re going to give you tax benefit. There are certain activities that yeah, if you don’t, that’s fine, you just pay tax and one of those, the number one activity where you’re gonna get taxed as being an employee.

Zach 

I love that, Tom, and thank you so much for giving us a little bit of history, on taxes as well, because I think it’s very interesting. It’s important to know why we’re being taxed in the different capacity that we’re working and also why it’s important to operate since we’re talking about Kiyosaki and Cashflow Quadrant why it’s important to operate on the B in the eye side. Right is that’s where you have the most tax benefits. And it’s important for everyone to know that that is the government is incentivizing you to do certain things, they want economic growth, and they want investors to go out and be productive and build, you know, housing and things like this, especially in certain areas to allow you to take advantage of these tax codes. And this is where you really can catapult your investing to the next level is being a strategic investor to take advantage of these tax benefits to further your own portfolio. Since you talked about your new book, we’re very curious to hear about that. Do you mind just going through Can you list the seven ways or the seven key aspects?

Tom

I can actually right off top my head, believe it or not. So, number one is business and a good, a good portion. That’s the biggest chapter in the book, because business is always the most incentivized. And by the way, we looked at 15 different countries. And we looked at the incentives in 15 different countries, we literally have 150 End notes on 15 different countries. Because we wanted to see what do other countries do? Is this just a US phenomenon? Or is this something that is done worldwide? Business, it’s almost unanimous that business is favored and make sense. The government wants to create jobs. That’s the number one real reason for business. I mean, obviously, the economy is good, all that kind of stuff. But the number one reason is that they want to create jobs. And of course, if the business isn’t paying tax, the employees are because the people who have the jobs are paying the tax. So it’s not like no taxes being paid. It’s just been shifted from the employer to the employee. That’s pretty much what the government said. The second one would be real estate, real estate is a huge tax incentive, not just in the US, more so in the US than other countries. But pretty much pretty well incentivized in many, many countries. Pretty soon, actually, I was surprised by how many other countries had similar incentives to the US for real estate investment. Basically, the incentive is, if you buy a house for yourself, you may get a small incentive. But that’s pretty rare, actually, the US is one of the few countries that does that. If you buy housing, if you create housing for other people, then you get big incentives. Okay, so the idea is, we need more housing. So if you if you if, again, taxpayer, if you put your money into housing, we’re going to give you tax benefits to encourage that kind of behavior. Number three would be technology, technology is actually a hugely incentivized throughout the developed, developed world. Very big incentives, we see it. That’s why Tesla and Amazon didn’t pay taxes for so many years. Right? It’s because of those high incentives for technology. Another one is, energy. Energy is highly incentivized. This was another one that surprised me that how many countries incentivize energy, it’s not just the US, a lot of countries and of course, that’s for defense, that’s for economy. There’s a lot of reasons for incentivizing energy. Renewable energy is highly incentivized, but so is traditional energy, whether it’s natural resources, or whether it’s nuclear, which is not a renewable energy, it’s more in the traditional category. Another one, another big one is of course, agriculture. I, I’ve had a number of clients over the years that had farms or ranches, I’ve literally never seen somebody in agriculture pay tax, it is the highest, most highly incentivized activity. And the reason is pretty obvious. I mean, we need food, and we want food production, we want to we want food production to be in the US, we don’t want to have to rely on importing food. That’s a really dangerous place to be, as you can see, in Europe, and a lot of the undeveloped countries where a lot of food production, you know, a lot of wheat, for example, is coming out of the Ukraine. And you see that the downside to relying on that kind of food or energy production, right, we’re seeing the downside right now pretty heavily. And then, of course, there’s insurance, and there’s retirement plans. So those are basically the seven investments. And it’s just the great news is, is they’re available to everybody.

Zach 

I love that. And obviously, that goes back to our point of the government is providing these type of tax incentives and benefits to promote certain activities, that’s going to benefit our country in our economy as a whole. And I think the beautiful thing, you’d probably agree, Tom is when you can use multiple of these and intertwine them together, right? I mean, we’re real estate investors, that’s what we’re here for to talk about today. So, we’ll be specific about that. But you can be a real estate investor, you can couple that with being a business owner and do those combined together, possibly have some energy efficient, you know, solar panels or whatever. And you can do additional things on that for additional cost. So, you can do all these things kind of collectively. And why are we talking about these taxes are the number one expense we’re all going to pay? We spent so much time talking about taxes, because that’s the easiest way to give yourself a quick raise. Right, exactly. I’ve always got this they understand this. They’ve understood this for years and years and years. This is not a new thing for farmers.

Zach 

I come from a farming family. I’m from Wyoming and a lot of our friends and family-owned cattle and livestock. And that’s a huge, there’s huge tax incentives with that. A lot of them do organic farm too. There’s digital business for that type of food too. So yeah, they get it. And we work with a lot of those investors to put additional money into real estate and in grow their portfolio there. But let’s talk specifically about real estate. Tom, I mean, just for the average investor, someone that census is accessible to anyone. If you’re providing housing for other people, as an investor, what are some of the, in your mind some of the biggest tax benefits just off the cuff that that every investor gets access to and needs to be aware of?

Tom

Well, you know, there’s really four ways to make money in real estate, right? The first is depreciation. So, this is the big tax benefit. The cool thing about real estate is of all the asset classes and all the investments, it’s the easiest one to leverage. So, it’s easy one the easiest one to get debt, right, the banks are pretty will pretty readily lend money on real estate, because they see it as a hard asset, they see that the renters are going to repay those loans. So real estate combined with debt, that’s actually a combination that is almost a must, if you’re going to get the tax benefits. If you figure that you can buy five times as much real estate using debt than doing a person, you also get five times the tax benefits from the depreciation. So that that depreciation is the single biggest tax benefit. There are other tax benefits. For example, you can sell the property and not have to pay tax because you can do a like kind exchange a 1031 exchange. Right now, though, frankly, because of this bonus depreciation we have, which allows you to take anywhere from 20 to 30% of the purchase price as a deduction in the year one. So, you could literally put 20 $200,000 down on a million-dollar building and get a 250 or $300,000 deduction, so more of a deduction than you actually put money down. Because of the debt, you get the deduction the bank doesn’t. And so that depreciation just becomes really big. When you add in this bonus depreciation that we have specifically this year, it starts phasing out next year, but this year, it’s huge. And then when you add into that the appreciation, which you may never pay tax on, you can do 1031 exchanges, you can pull money out as debt, and never pay tax on the debt because debt is not taxable, because it’s not your money. So even if you’re just temporarily using it, you’re going to owe it back. But debts not taxable. So, you know, it’s that combination of debt not being taxable. So, you can pull out the appreciation down the road, in cash without being taxable simply by refinancing and borrowing the money. And then you do 1030 ones forever and ever. Of course, we call buy, borrow die so that you can actually hold it when you die and all your taxes just magically disappear, which is truly amazing. And real estate’s one of those areas where you can really do that where you can, you know, you buy the asset, you’re not paying tax, when you buy it. You can, when it appreciates, you’re not paying tax, when it depreciates and then if you hold it when you die, then those taxes just disappear.

Zach 

I mean, that’s beautiful. That’s, I mean, so many people are right now with where interest rates are at and things there’s a lot of uncertainty and people are wondering, do I still buy real estate right now? And of course, my kind of retort to that would be do you like saving money in taxes? You know, of course, if you’re a professional investor and doing some of these implementing some of these strategies, which we do, of course, Tom’s talking about cost segregation studies and do an accelerated depreciation. I mean, Adam, what’s the return on investment for that? If you’re putting $200,000 down getting three $300,000 in tax savings?

Adam 

That’s, you know, infinite, I believe, is the correct answer for that. Beautiful thing. That’s a that’s the whole point of this book, right?

Tom

And that’s why I say that, you know, in my new book, Win-Win Wealth Strategy, there are seven investments, the government will literally pay you to make the investment. So, the government is literally paying you to make the investment in real estate, they’re literally saying, We will pay you to make this investment. You’re willing to put some of your money, and we’re going to put in the rest. And it’s a pretty generous proportion. When you think about how much the government is putting in versus how much you’re putting in.

Zach 

Tom, would you say that this is following these types of strategies when we’re talking about building generational wealth. I mean, you work with a lot of wealthy people, Robert Kiyosaki included that have been extremely successful. And you see these families that continue this well. I mean, there’s a reason they’re making their money in these investments and maintaining these investments. Which, would you agree?

Tom

Sure. I mean, the challenge is, is that you really can’t get where you want to go. Financially, if you’re paying high taxes, it’s literally impossible. The numbers just don’t work. So, you know, the old idea of do a 401k invest in a well-diversified portfolio mutual funds. Well, 401k do work, tax wise. They don’t work as well. Okay. And certainly, you can do much better tax wise than a 401k. So, there’s a reason it was number seven and not number one, these are in order of importance to the taxpayer. And so, you know, that that the thing that people forget about is not only am I saving taxes now, but now I have that tax money to invest. So, you actually, not on top of having that tax money to invest, I can leverage that tax money with the bank. So, I’m not like if I save $20,000, I can buy $100,000 property by saving $20,000, because I put $20,000, down and by borrow $80,000 from the bank. So, the multiple, it’s literally exponential, when you look at how fast the wealth is built, when you’re able to borrow money.

Adam 

Now, when you talk about business being number one, is there a specific did they incentivize different business structures more than the other, that were they do how you structure your business is very important.

Tom

Okay, it’s very, very important. You can get the same deductions, whether your schedule C and report it on your personal tax return, or whether you’re an S Corp, or a partnership or anything else. But there are some taxes that you can avoid. So, for example, you can avoid self-employment taxes, if you form properly, you can, there are things you can do, you know, you get into sophisticated tax planning, which is what wealthy people do, right, because they make so much money, they can’t just reduce their taxes. With the seven investments, they have to do more sophisticated planning. And there are things you can do with if you own it through your properties through a limited liability company or limited partnership that you can’t do if you own it directly. On top of that, you’ve got course asset protection, there’s estate planning you can do so that you can pass that on, you know that that legacy you’re talking about, there’s things you can do there with, if you hold it in it through an entity like an LLC, limited liability company, or limited partnership that you can’t do if you own it directly. So it what it does is it gives you a lot more flexibility, and a lot more options of what to do, and who owns it and who controls the assets.

Adam 

So, which one if you were going to kind of rank them in terms of, you know, which one the government you know, which investment of corporations the government will pay you to make? How would you kind of rank them?

Tom

But you mean, from an entity standpoint?

Adam 

Yeah, like, you know, S Corp,

Tom

Totally depends on what you’re doing. So, I would, I would rank them all equally. And they’re all equally bad. It depends on the situation. So, for example, I don’t want to be an S Corp holding rental real estate, that would be bad. But I do want to be an S Corp holding the business. There might be times when I want to be a C Corp holding the business. But I would never want to be a C Corp holding real estate. Because that’s really bad. I mean, S Corp or real estate’s bad enough. But a C Corp holding real estate, that’s like, super bad. I would not want my IRA owning real estate, personally, because I’m losing all my tax benefits that the IRA, it’s like putting a tax shelter inside another tax shelter. I’m going I’m losing some of the benefits. So, you really do want to be careful about which entity goes with which type of investing businesses, different types of entity than real estate, different type of entity than stocks, different type of entity? Do I want to be in a 401k? For stocks? Absolutely. I absolutely do. Might I want to have gold? In a 401k? Absolutely. It’s taxed at a 28% rate, no cashflow? Why not. So, you know, every entity has its uses. I’ll tell you the one entity that’s probably misused and underutilized the most is trusts. Trusts are not something we use in business, necessarily, but trusts are something we use in legacy planning, income tax planning, and asset protection. They’re the best for that kind of planning. So, they’re very important. They’re very important tools in your toolbox.

Zach 

I mean, can we dive into that a little bit, Tom, because, you know, we’ve heard different things about putting in into trust to you know, basically I guess my question is pertaining to legacy wealth and and passing on your portfolio to your next generation. So, you have the Step-Up basis, which I think is what you were referring to is you know, those taxes disappearing But you still have a state taxes potentially. Right? So, so yeah, get around that?

Tom

Well, you have to balance that out. So, we have right now about a 24 $25 million exemption from estate taxes. So up to that level, you would never, you’d never want to get that money out of your estate until you die, because you want that basis step up, and you’re paying real estate taxes. So, you get a you get to eliminate your income taxes on the appreciation and not paying the estate taxes at the same time. That’s a that now there’s a win-win, right? I mean, you get both sides of that. So, it’s when you get over that 24 $25 million. This is for a married couple, right? So, it’s half that for a single person. It’s when you get over those numbers that you need to start looking at using trusts for estate planning purposes. But trusts are important for other reasons than tax. Right? So, for example, the last thing you want when you die is for your heirs to have to go through probate, meaning that they have to actually go to court to get the title the assets in your name. You can avoid that with a simple family trust or living trusts. So, there are lots of uses. You know, I think it’s a mistake we make if we think about using trusts or using entities just for one purpose. This is what this kind of my point is, is that trust. And I’ve heard people try to use trusts for business purposes, they don’t work. I’ve heard you know, people use land trusts a couple of states they work, but in most states they don’t. So, you really do have to look at, okay, when am I using the goal is understand the basics, which is what I go through in tax free wealth, understand the basics of how taxes work, and how the different entities work, and then have a really good advisor that can advise you on the specifics of your situation, because there comes a point where your situation is unique. And while we’re going to use the tools, we’re going to use them in a way that best benefits you and what you want to have happen. Not it’s not a one size fits all by any by any means.

Zach 

I love that you said that because it’s so vitally important. We always want to ensure both with ourselves included and to our general audience that you got to have the right people on your team. I mean, this is a perfect example. As you with Robert Kiyosaki, right? We had Garrett Sutton on our show not too long ago, as well, you need to have these advisors that are understand, first of all, what you’re trying to do understand your particular situation, the tax code at a high level involving business and real estate, and you need to work with them and build yourself you know, your team that’s going to help you be successful, even out of the out of the gates with just a couple of properties. For sure. Adam, I think is a team sport.

Zach 

100% I love that. Adam, I think your question on the LLC was like kind of kind of going towards the or which business structure for is like the average investor, like typically one of our investors maybe has a handful 1020 properties, probably an LLC, right would just be probably some kind of an LLC structure, but it depends on the state they’re in. So, for example, there, Tennessee, they’re going to pay this horrible tax rate on their LLC, because they’ve got the 6% tax on LLCs. California has a tax on LCS as well. So not every state most states, I would agree, a limited liability company for investment, real estate or some holding company structure. In other words, you have a holding company that all it owns is other LLCs. And those LLC is on the properties. So, for example, let’s say that you have property in Arizona, and Texas and Florida. Okay, well, you’re going to want an Arizona LLC, a Texas LLC and a Florida LLC. But they all flow up to, if you will, that holding company, which could be a Wyoming LLC, you know, so you do have to look at the states as well.

Zach 

I love that Tom Lesko talked about, I guess, transition a little bit to the current state of affairs, and kind of see, you know, what, what do you think is on the horizon legislation, we had this great 2017 Tax Act that just made real estate and investing phenomenal for many ways. We have a different political structure now kind of in place. I mean, what do you think as far as the future and also on your, when we talked about that $25 million step up? basis?

Tom

I mean, there is talk about lowering that significantly, I think, right, potentially or, one thing to remember is that a lot of these rules phase out, including the $25 million step up the $25 million rule. So, the bonus depreciation is fake, it goes down to 80% next year, 2023 60% and 2024 and 50% and 2025. Okay, and thereafter. Eventually, the same thing happens the estate tax exclusion is going to revert. And so, you do have a window of opportunity here. Will you know will current administration be able to change anything, we’ll see. Nothing significant. They don’t have the votes depends on what happens in November. You know, if somehow the Democrats were able to get a true majority in the Senate, and they were able to maintain the majority in the House some way, then we’d have massive changes to the tax law. If the Republicans win either the House or the Senate, then we’ll have very little happen over the next couple of years. So, a lot depends on I mean, people really should get out and vote, because a lot depends on your vote. And not just your final vote, but your primary vote. So, I would encourage people to get involved in the political process, if you care.

Adam 

You mentioned that during Kennedy, it switched from individuals to business, has there been any anything in your mind that you’ve seen that leads you to think that we’re at all in a situation where business is going to switch? It’s going to switch from business back to the individual? Are we pretty well entrenched in what we’re speaking here?

Tom

Here’s the challenge is that tack the power to tax is the most important and the biggest power that the government has. And unless you’ve met a politician that’s willing to give up that power, we’re going to continue to see it this way. Because they want there’s this exchange, right? I mean, first of all, if you read my book, the Win-Win Wealth Strategy, tax incentives work. I mean, they, they, it’s pretty obvious they actually work and the government actually makes more money than they would without the tax incentives. So, there’s not really a reason to go back. Okay, what, what would be the benefit? Now, if if Bernie Sanders were president? And would a change? Absolutely, Bernie Sanders does understand that he would, he would prefer a progressive rate, with no tax incentives, he would be willing to do that. Ted Cruz, on the other hand, would also prefer no tax, since he just wants a flat rate. So that’s something we’re probably the only place where Ted Cruz and Bernie Sanders agree. But when it comes to no tax incentives, they would both agree on that. You know, we saw a bit of a shift right last year with the child tax credit, and some other tax benefits. But you’re not I, it’s hard to see that the government really doesn’t have the money to do you know, unless they just blow up this deficit even more, it’s hard to see that they’re going to be able to get more benefits to the individuals, because by the way, all the monies with individuals, you want to raise taxes, you’ve got to raise taxes on individuals, businesses pay very little tax, I mean, as proportionately, there’s not as much tax there. So, investors? Yeah, you can, you can go after them, there is a new limitation on how much of your losses you can use against wage income, for example, we have this $500,000 rule, which just came into effect in 2021. So, they are putting some limitations on investors. And you’ll continue to see some tweaking there. But a wholesale change to individuals. I see. I just I until the government says we’re not we’re going to give up our power, I don’t see it.

Zach 

The only constant is, is change right in in the tax code. So that is true. And politically, can you elaborate on that aspect? That just what you mentioned in 2021, that changed?

Tom

this is a very, this a very important change that I don’t hear anybody talking about? So, prior to 2021, let’s say you had one spouse with, you know, a million dollars of wages, their surgeon or whatever, right, and that’s wage income because they work for the hospital. And then you have, the other spouse is a professional real estate investor. Prior to 2021. You could actually invest enough money to eliminate the taxes on the million dollars of wages. Beginning in 2021, you can no longer do that you can only offset up to $500,000 of those wages. So, if you have wages, interest, income, dividend, income, retirement income, those all add up together, you just can only offset 500,000. Now here’s what’s interesting. Speaking of business being the number one benefit, you can offset all your business income. So, if your income, so if your losses are all from real estate and your income is all from business, why are you paying tax? It’s just because you’re not investing enough or you don’t have the right tax advisor. But really, if that’s where your income and your investments are, you literally can pay zero tax It literally can be tax free wealth.

Adam 

I love that so much. That’s extreme right there.

Zach 

I mean, that’s in reality, though, that’s what we do we buy a lot of commercial retail centers enough every single year to offset our income. I mean, we’re in attack, I mean that we’re in the business, right? I mean, we are real estate professional. And that’s why we’re investing as why we make our money in real estate, and we buy real estate with the money that we make in it. I mean, we have more money to invest, and then that multiplies and get additional tax benefits, as Tom mentioned earlier, so I mean, this is something that’s applicable to everyone know.

Tom

I mean, you can invest in duplexes and end up with some amazing tax benefits, you do need, you know, if you’re going to be a casual investor, so you’re investing in, you know, one or two properties a year, you do need really good tax advice, because they do have limitations. If you’re not a professional like you are, like, for me, my wife, and I will never be real estate professionals ever. My wife has a she’s a CPA, she has her own CPA firm, I run my business full time, I’m never going to be a real estate professional, never going to get that unlimited deduction. But that doesn’t mean I can’t get the deduction, it just means it’s a lot more difficult, and requires a lot more tax planning. And that’s where, again, that’s where you have to get with really good tax advisers

Zach 

100%. Tom, can we talk a little bit about capital gains changes in possibly any 1030? I mean, that’s something we hear about like, oh, they’re going to change the 1031. And then that went away. And then 30

Tom

One’s never gone away. I think 10 three, one, save that. I think they proved it. It, you know, it even in that build back better plan last year, this time, last year, 1030 ones were kind of in there, and this, the thought was in there, but they actually never made the bill. So, they actually never got there. I think 1030 Once you would decimate the real estate market, you’d have a 1990 again, which most people don’t remember 1980, but I do where we had the RTC Resolution Trust Corp, where basically the government, the banks owned all this real estate, and you had a much bigger crashed in 2008 2009 you had in 1990. And so you know, where you could pick up a good, good commercial real estate for 50 cents foot. I mean, it was nothing. I had clients who made all their money. In fact, if even if you if you look at Robert and Kim Kiyosaki is history, they made all their money in 1990 91. That’s where they got free. That’s where they got out of the rat race was when they were buying properties back then, because it was so cheap. Real estate was so cheap and 9991 because of that huge, the whole savings and loan debacle. So, I am not too worried about the 1031 capital gains, could they raise the rates? They could, the challenge capital gains is that they don’t raising the capital gains rates doesn’t actually produce income for the Treasury. People just stop selling property. So could you get you’re more likely to get a transaction tax on the stock market that I could see. But in real estate, you know, real estate even avoided the carried interest rule, you know, the carried interest rule for developers. You know, it, you know, you got a three-year rule now for hedge funds, but you don’t have that three-year rule for real estate developer. So real estate’s been very favored over the years since 1981. So, Ronald Reagan was the first one. So, where JFK, he put in really the first big tax credit, which was for manufacturers. Ronald Reagan was the one who brought in really the first big tax benefits for real estate with that accelerated depreciation and 91. He did again, 82. Again, the 486 course they limited it back down, but they reduced the rates. So real estate’s had a pretty long history. But you never know. It’s like oil and gas, oil and gas have a really long history longer than real estate. And you know, they keep trying to, to put the kibosh on it and they keep losing. So, we’ll see.

Zach 

What I really enjoy that you’ve made very clear, which we’ve never had anyone elaborate on is just the simple fact of the government is incentivized to do to do these sorts of things.

Tom

And so, you just got to look at what really makes sense. And a lot of us just don’t understand what does make sense. I mean, we’re fearful of those potential changes, but that’s why you should read this book, the Win-Win Wealth Strategy, because I literally go through and do I don’t just look at the taxpayer side of thing. I look at the government side, what does the government get out of it? Okay, financially, interestingly enough, the one where the government does not really do well is in pension plans in and 401 K’s that’s a pretty much a break even for them. But all these others incentives, they do really well. So, so well, that Literally, there’s a chapter on how to get the government to pay for your Ferrari. And they literally will do that. If you if you do enough investing, you could literally buy a Ferrari with the government’s tax savings.

Zach 

I love it. And is it does that include driving your Ferrari to work at 200 miles per hour?

Tom

Well, you don’t pay your ticket, they won’t pay your ticket and that’s nondeductible by the way, your ticket is nondeductible because it’s a it’s a fine

Zach 

Interesting. Tom a lot of our listeners and investors are either just getting started they’re in their newest agent, we have some people that are pretty high level, but a lot of them I would say would classify as 10 properties or under just getting their feet wet in the investing world. Do you have any advice from them as far as just like, philosophically even just to think about real estate from a tax perspective and in any advice on path forward for him?

Tom

Yeah, I just a few things. First of all, specialize. Okay, get really good at one type of real estate. So if you’re going to do duplexes, if you’re going to do multifamily do multifamily if you’re going to do industrial do industrial Don’t, don’t spread yourself too thin, because it’s really hot, real estate’s difficult. I mean, it’s, it’s, it’s something you can get caught with your pants down pretty bad. Which is why some people say don’t use debt because they got caught with their pants down. Okay, but, and that’s debts. Really, another thing to be thinking about is real estate. Debt makes most sense when you’re willing to use debt. It’s okay as investment if you don’t use debt. But it’s really good when you use debt, because you’re leveraging, I mean, think about right now we have eight to 9% inflation rate, and we have a 6% interest rate. That’s not very common, that you actually have inflation running ahead of interest rates. So that actually makes it real estate even better. As an investment, and you got to consider the only debt. Now here’s the thing, I would tell people, a lot of people are afraid of debt. And what I always tell people is if you’re afraid of debt, because you don’t trust the asset, that the debt paid for, okay? If you don’t, if you if you’re not comfortable with the debt, because you don’t trust the asset. So again, I would get the education, what you guys are doing is so important because you’re educating people on Okay, here’s how to do the real estate, here’s what you need to do in real estate, don’t just think real estate’s not a panacea. Like any other business, it’s hard work, it takes a lot of education takes a lot of knowledge, and it takes a good team around you. And, you know, once you start getting that team around, once you start getting that education, you know, eventually, I mean, taxes, for me are pretty simple. You know, I can, I can look at somebody’s tax return in about five minutes and tell you what you need to do. Well, that’s because I’ve got 40 years of experience doing it. Right. Most people can’t do that, because they don’t have that kind of experience. So I would say get absolutely specialize. A rich, we’ll make a niche will make you rich. So make sure that you specialize, don’t don’t scatter yourself. Make sure that you learn how to use debt and use it properly. And and get a good team around you.

Adam 

Beautiful. Fantastic. Well, Tom, thank you so much for joining us today. Really appreciate it and all the advice, everybody, you can check him out at wealth ability.com Or at Tom wheelwright.com. That’s wealth ability. Or Tom wheelwright.com. His new book is out there the winwin wealth strategy, seven investments that government will pay you to make. So go and check that out. I’m sure you can buy it from one of those two sites. If you head on over there.

Tom

Well, you can always go to Amazon

Adam 

Amazon yeah, they always have it but you know, if you want to go direct, you know.

Tom

I’m, you know, I’m good with it, go to Amazon. Win-Win Wealth Strategy.com is another place that we sell it. But certainly, Amazon is pretty quick and easy. And they do discount the box. So, it’s a good place to go.

Adam 

All right. Well, thank you again, everybody else, you can check us out at rent to retirement.com. That’s rent to retirement.com you can see all of our inventory there. You can schedule a call with one of our investment strategists to talk about how you can move forward on your path to financial freedom through real estate. If you have any questions email us podcast at rent to retirement.com That’s podcast at rent to retirement.com and we’ll talk to you on the next episode.

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