Tax Planning for Rental Property Investors

0:03Michael welcome to living off rentals thank you for having me Kirby yeah no it's great to have you here I appreciate you taking the time and I think the timing is actually perfect because we're recording this the week between Christmas and New Year's but it'll probably come out in you know several weeks here and it's you know we're just starting to get into the tax filing season I guess and so as this comes out I think it will hit people as they're really thinking about it so I mean hopefully people have been thinking about it all year but you know how that goes so just for by way of background so Michael owns Leonard and Associates CPAs and this is the firm that does my tax planning and tax filing and bookkeeping and he was referred over

0:51To me by another rental property investor a friend of mine Mark Wilton who's a great guy and I always tell people that referrals are the best way for to find professionals to work with you know whether it's contractors or attorneys or or CPAs you know if somebody has a great track record with other people I I tend to experience that they have the same effect with me and so that's definitely been the case with Michael so so yeah I'm excited to talk to you about this topic of taxes which impacts all of us but I think particularly rental property investors you know there's there's some maybe Nuance things that we can talk about so if you don't mind just starting off a little bit with your background and kind of talk about how you got to become a CPA and then what your firm specializes in all right

1:40Well excuse me my father started the company in 1971 and I had no interest of wanting to become an accountant since I was a little boy but I grew up in it and real estate has always been a part of it you know that was that was a thing I wanted to wanted to do so but I ended up going to school coming an accountants and joining my father and but I still wanted to focus on real estate so we had leing Associates CPAs but we also had leard and Associates real estate mortgage I am both licensed as a managing broker here in Illinois and I'm licensed as a mortgage broker so we started this company probably about I don't know 20 years ago and it was all started because I wanted to get in real estate and told my father and I was working with them and he said well go find some real estate so

2:30Being the ambitious young lad that I was I went here in my hometown here of Oak Park and I found a sixun building and I negotiated the price of $600,000 for the building I didn't have any money nothing to do I just wanted I knew I wanted to be in real estate so I told my dad I said I did it I got the contract it's a great price I did all you know my research I said great he goes you going to buy it I said I have no money goes here's a roll de now that was back in the day when the the Rolodex was like this you know yeah so I searched through the Rolodex and I found a real estate investor and I called her up she's still a friend of mine today her name is Angie and she wanted to buy the the contract so I sold it to her for $625,000 wow so

3:18I made $25,000 without doing anything and I said wait a second this is what I want to do and then I got into flipping and it was a real great pleasure to do that with my father because he also did that he had his real estate license and he he was a big entrepreneur we had MRI companies staffing companies mortgage companies real estate company so he was a big- time entrepreneur and we just we would we did the accounting and we' we would do the flips and rentals and it was it was just a lot of fun you I have let you know we would go in do it and then you know walking into a garbage dump of a house I just see potential everywhere I love that some people say how how do you see it I said because I can see where this is going to go we can blow out there have a bigger kitchen and then you know you just turn it and you flip it or you turn it into a

4:06Rental and have a income over the rest of the time that you're going to have it so that's that's really where it came from me and that I I really enjoyed working with small businesses and helping them along the path you know it's it's not a secret but the the answer to everything really is about planning if you want to get a piece of real estate plan it go out there and get it you might have to look at 100 pieces before you find that right one but then that's what you got to do right if that's if that's where you want to be it's it's as simple as that in accounting we plan throughout the whole year where you're going to be you don't just roll the dice and say am I going to owe this year am i g to get a refund it's ridiculous as you know we meet each quarter you meet with your bookkeeper then you meet with me and we figure out where you're going so by the time we get to the fourth quarter we' already planned 2021 is already

4:54Done now we're moving on to 2022 we already know what's going to happen in 2021 and that's it in every Arena whether it's real estate Plumbing construction I have handle all different types of business actors athletes it's all comes down to the same thing plan where you want to be and go for it that's awesome yeah and I want to talk about that planning because it's something I that that excites me when I understand it and and I understand a lot better now thanks thanks to you but before we get into that what so what made you switch over to to becoming a CPA as well didn't you just stick with investing fully full time you know here here's the deal ready my dad put businesses together 40 years ago that the grandchildren now running it and I grew up in there you know my dad

5:42Passed away in 2015 and I feel family in my business you know when I meet them they talk about you know you know at tax time here you should see it people are bringing me lasagnas put sells all these different cookies and stuff and it's just I I despise when I first I got to tell you the truth when I first became an accountant worked with my father and I wasn't didn't have the action with the client I was just doing the work I despised it I didn't like it and then all of a sudden I had a client and I had that interaction and you know I got to know them and it was their relationship and was the relationship I really gravitated towards you know anybody can put numbers together anybody can do what we do but in this life it's about relationships and that's what stuck with me me you know when I go and

6:31Visit some of these companies Kirby I I I feel like my Dad's here with me and it's just something that I will I mean I'm still going to always do real estate it's always a part of whether it's commercial residential whatever it is but bringing businesses together small businesses seeing them succeed seeing them go from a startup to making millions of dollars or just being able to say hey Todd I heard you had a new baby I just wanted to call and say congratulations on the new addition you know when clients come in and they sit down we talk for about 40 minutes about business and all that and then another 50 minutes about life and relationships and how their kids are doing and stuff and I just I can't give that up I love it yeah I think that's kind of lost that that aspect of business you know especially when we talk about

7:19Investing because it you know a lot of times it's just about dollars and cents but that's one of the aspects I think that has driven me to short-term rentals is that relationship that we just we just rented out our personal house on Airbnb for over the week of Christmas because we were spending time with family and so we're like might as well rent our our own house out and it was a great source of income and people that stayed here we were in the area so we got to meet them and they loved the place and we almost became friends with them you know they left presents for our kids when they left and and there's that whole relationship piece that we could have just like you know left the light on for him and never talked to him but I think that's one of the the the the draws to a lot of businesses is you know yeah you got to make money but also there's the relationship component of it that's great

8:08That's a big deal Derby I mean I remember I had this property and I had this renter in it and she was she became a friend of mine and after a while as a renter went on I showed her how to buy it from me and she she eventually did that and she just she still sends me a Christmas card to that this day I mean it's just you know as you know people when they think about buying a property or rental they think it's just too confusing that that's for smarter people that's for better people that's for educated people when you know it's easy if you just follow the steps absolutely yeah yeah most of this community is made up of of rental property investors or aspiring rental property investors and for me it's been super beneficial to have regular meetings with

8:57My bookkeeper and and also you know having the bookkeeper in your office has been super helpful I've had the opposite where it's been you know a separate bookkeeping service and I feel like you know you guys are in lock step which is a huge benefit but you know when people think about meeting with their bookkeeper I think a lot of times people don't understand what they should be looking at especially if they're not like a numbers person they're like you know they don't want to look stupid and ask the wrong questions so you know in your opinion what what are the things that are most important for a rental property investor I guess first off should should all rental property investors have a bookkeeper and if so how often should they be meeting

9:45With their bookkeeper and what questions do you think or or aspects of their books are most important to understand well as you know when we met I meet a lot of Real Estate Investors and some of them come in and they have a bookkeeping but they it's all into one so let's say they had 10 properties but we're showing the income from all 10 property expenses well as you know that's not the way we do it here we like to break down we want to know each property each property's expense so we know it's working right because there's sometime we can look over it we got to look over the cash flow we got to take into Equity that's being built because there's sometimes when our portfolio we need to sell some things and we can't understand what that is unless we are in the bookkeeping meaning with your bookkeeper you know how things are going

10:33You know the cash flow I mean it's simple thing as extra subscriptions being I mean Netflix Hulu all that stuff I know a lot of little things add up to a big number at the end of the year things aren't being used people don't know this they had I had this one client who had a subscription to Netflix for a property that he sold two years ago I mean these things need to be looked at but they're just not especially when you look at them as a whole I mean if you want if I was the captain of a ship I want to make sure my my I'm going to get to where I'm I'm going to go right if you don't follow that plan you'll end up somewhere but it might not be where you want to be in real estate what are you trying to accomplish and follow that plan if you're not looking at the financials if you're running a business and you're not understanding what's going on there then you shouldn't be in the game

11:23Yeah yeah absolutely yeah and and I think that one of the things that I've noticed with accountants a lot more than any other profession I've worked with is that you know they're working with the tax code which is like this massive Behemoth of all these rules and regulations and even and some of them are just like there's not even an answer it's like use your best judgment or industry standard or they don't even address it so it's very difficult for most to understand and so I think some of the more challenging accountants that I've worked with in the past are the ones who want to impress you with their you know big words and and try to make things seem very complex as as a way to maybe charge more or you know just to look smarter but working with you you kind of break things down more simply

12:12And I think taking complex terms and breaking them down to even where someone like me can understand them which is a challenge is I think one of the most important aspects to look for when working with an accountant so that it can you know you can have a system that you can actually use as opposed to this this complex thing that you're you dread even looking at so when it comes to simplifying or handling taxes in the most efficient way are there any like best practices you recommend or can point to for clients that maybe have more success than some of your other clients who who tend to struggle the way I like you said it perfectly breaking it down so that you understand what's going on because if you can understand it you're going to be better running your business with this real estate and if

13:00I should make it over if it's it's more complex then you're not going to know what's going on you're not going to be able to because what is it I'm not running your ship we're in a relationship right so we need to work together if I'm just yelling things at you to do things I'm not being very helpful for you because I need to know more I mean there's things I can pull out of you that we can use for taxes that you might have never thought that we can just by having a conversation or just by saying you know what I heard about 179 that'd be really good for me and well you know if you're at a loss you can't use that well that's too bad but what about this bonus depreciation well you can use that and still go into a negative and when you start to operate you say well maybe I should buy this then or I should do this for my property because that'll help me with my tax liability at the end of the year and if we don't have these conversations that's

13:49Why I'm saying we when I as you know I need to meet with my clients at least once a quarter to have these conversations during the year I mean after the 31st there's nothing much we can do I mean I'm just a monkey putting in numbers but talking throughout the year that's when we're building where we're going to go it's the planning like I said from the beginning that that gets you there because okay maybe I will do this for my building and then I'll just write the whole thing off because I'm going to have a gain at the end of the year I mean these need to be addressed I mean people that dropped their stuff really up up at the end of the year and I I that just blows my mind why somebody would do that it's the conversations and letting the client understand what's going on with taxes and how they can use it to better themselves because it's con right it's constantly changing everything's changing I learn a whole I spend you know two weeks in continuing education

14:38And then goes then that doesn't even pass everything I learned is out the door it's crazy I mean this last week this last month I spent probably over 80 hours in continu education and who knows if that's going to come into it with the the Biden's plan and all that it may go through it may not go through we don't see but we talk about things you know even the politics that comes into real estate should we take advantage now of this or are things going to be harder down the line and let's wait to take that depreciation you know next year because it's going to be harder because all these things are passing so I mean it it it's you're not just one thing but also in real estate just like you have other businesses right like me I own real estate I own this accounting firm I have a tax resolution company that I own all of that and my wife does things so all

15:27Of these pieces are in the puzzle for my grand tax return right so not only am I tax planning you for your real estate I got to know what else is going on hey he's got a podcast he has all this other stuff all of this is going to go into your tax plan got it yeah so so biggest thing is is communication which I think a lot of people don't think they can have I think a lot of people think well my accountants there at the end of the year to send all my my documents and receipts to and then file the taxes but it's really you should have the conversation right now about 2022 not 2021 here's all the receipts it's like we already we already had at least four conversations quarterly about everything and one thing that you mentioned to me too early on when we were first talking about working together you said before you you

16:15Buy or sell assets to reach out as well especially if they're kind of complex or outside the norm of of what you're doing and that's something that I I don't think a lot of Real Estate Investors do they don't think about know is is reaching out to their accountant prior to you know to to signing for a deal to see how is this going to impact me from a tax standpoint which which is Big so you meent yeah yeah so you mentioned bonus depreciation there which I think is a huge benefit or can be a big benefit for rental property investors particularly can you kind of expound on that and explain how how that works and maybe a strategy that that how people can take advantage of the strategy sure I mean just like Section

17:04179 I was talking before Section 1 179 basically is you buy a piece of property you can take the whole thing in that year but you can't go into a negative right bonus depreciation says you can take the whole thing and go into a negative and be have a loss for the year but doesn't when you say sorry when you say take the whole thing what do you mean by that so let's say that you have bonus appreciation for a there was construction for at least hold let's say you had a commercial property and you had the whole buildout and it was $100,000 and you were going to go into a loss by taking the whole depreciation of that $100,000 you can still do that where Section 179 you cannot do that used to be only they changed it you can only take 50% of B appreciation

17:52Now it's at 100% And that's going to go all the way till 2022 and then it's going to go down 20 % each year I see okay so so depreciating all the so basically if somebody say is a high income earner and they want to offset some of their their income they buy a property this year and they can write off the entire amount or is it just the entire rehab amount or what what's right well we're going a little bit too far there okay as you might know if you're a high earner let's say if you're married by joint it starts to phase out after1 $150,000 you can only take a loss up to 25,000 right because what the IRS says is this let's say you make $250,000 at your at your job and you have your real estate that's

18:41At a loss right now they're saying listen you obviously that $250,000 is your real job this is not your this is passive income so that will go to the next year if it's a loss until you either make less money or you sell the property and take advantage of all that however if you are a real estate professional in the eyes of the IRS you can take 100% of all the losses that you might have through your real estate and to be you don't have to have a license like I have a license that doesn't mean I'm in the eyes of the IRS if you are working 750 hours a year doing real estate that is considered a real estate professional in the IRS size and then you can qualify as you do as a real estate professional on your taxes and be able to take advantage of all these different things even you go into a loss

19:30Now if you have income it's going to you're going to pay on the income but if you want to take advantage of the bonus depreciation and going and and reduce your income because hey I have a guy on a W2 he makes a million dollars right he's got about 10 properties he just came to me maybe like three years ago and you know he spend he's traveling all looking for Real Estate everywhere constantly doing this and I added up he does he qualifies for a real estate professional so we were able to take all of those those losses from all those properties and actually bring his income from a million dollar down to about $750,000 saved him a ton of money because he didn't understand being a real estate professional so before we get into should they take bonus depreciation if they're a high earner we have to find out you know can they qualify for a real estate professional

20:19To be able to take any of this that's number one so just to recap a real estate professional is what are the rules around it so you can look there's the main rule is se you have to spend at least 750 hours a year in the real estate that could be managing your properties that could be talking to your accountant about real estate that could be talking to a realtor About Properties looking yourself on realtor.com going through it all but you just have to keep a journal and kind of like U what the IRS says about taking your mileage supposed you have your car the book in your in your car and then you write each mileage that you go that was a I would say maybe 05% of my clients did that we talked about at the end of the year but yeah you just keep a journal and that makes sure it's a very powerful tool with the IRS if people don't know about especially when you get into it when you get into real estate you

21:07Have all this because people think okay I and it happens so much Kirby and somebody told I get a new client and they say you know they told me to get into real estate so I can finally have some deductions and I say great let me take a look you got a lot of deductions and I look to see how much money they made well you and your wife Together made 550,000 last year you can't take a dollar of any of these expenses like but my friend told me that I can finally get deductions if I get piece of real estate I said well your friend should have been your accountant because you have to understand what you're getting into and follow that plan if that's where you want to go in real estate there are a direction to go there and that's a real estate professional helps out a lot got it yeah and it doesn't from what I understand it doesn't have to be you correct it can be a spouse who can meet that threshold of 750 if let say you're working an 80 hour a week job that's

21:55All consuming but your spouse has time and can meet that 750 hour threshold if you're married fing jointly jointly in there yeah got it so then all the the real estate assets then all the depreciation from those can offset the income from the high income W2 earner then as long as you guys own the property together got it okay okay when it comes to entity selection this is another question that I get a lot from rental property investors you know should buy it my personal name should I buy it in an LLC should I buy it in a corporation what is your I know it can be situational dependent but generally what what is your your advice when it comes to this don't want it in your name you want to put it you know every time I buy a piece of property I bought a property three

22:44Months ago I just put it in an LLC and then what what you can do is when you have multiple pieces of real estate you can get what they call a series LLC and keep adding each property into it what you want to do is you want to get all the properties you don't want it to be in your personal name you don't want let's say one of your renters falls down cracks their head open and stuff like that you don't want to open that up to anything of you personal you want to keep it within that own LLC and it's good to do that I mean just like businesses I mean I don't want my business I don't want that to affect if I my business went down I don't want that to affect me personally so we have a separate entity just like we have a social we have an EIN number for all of our entities like that you want to keep those separate okay yeah and I think one of the big arguments people have to keep it in their personal name is when it comes to financing you know

23:32So do you see that people own multiple like rentals in their personal name because they have to to get that really low conventional financing or what do you recommend there I mean you can personally gear like for example they ran my credit when I bought this property but it went into my LLC so it's being reported against my LLC I I guaranteed it now it can get to a point where your LLC or your business will be have its own credit rating and if you do it on its own but when you're starting a new LLC and putting a rental in there typically that's not going to be it you're just going to personal guarantee it got it yeah yeah okay sounds good yeah and I know there's there's so many lenders out there that are asset-based lenders now that don't care if it's in an LLC or your personal name and really the rat's

24:20Not much higher than a typical you know mortgage that you would get in your personal name so I think that's the route that I see a lot of people going these days to to be able to keep it in their LLC and not have to worry about it in their personal name so when one one thing that I see a lot with people especially when they're first starting out is that they serve their business as opposed to their business serving them which I think is the whole reason we start businesses and it's such a foreign concept to a lot of new business owners are like pouring everything back into reinvesting in the business and and they they never think about paying themselves or they pay themselves wrong I think because they don't understand how they're supposed to pay themselves so how how do you recommend like when somebody has

25:09A real estate investing business should they just take draws should they set up a payroll how do how do you approach paying yourself as the business owner well it really depends first of all on the amount of income that's going in the property and if there's multiple like if you own it yourself you know you have your bank account that set up just for that LLC just for that property and you just take money at will I mean as long as there's enough in the in the agreement there to be able to pay the bills and just take take it as you will just I mean you know what the costs are each month you can figure out what you could take I mean if you're going to have another renovation or do something it's not going to be okay I'm going to take $10,000 a month that's going to be it for the rest of the year you can't think like that because things are constantly changing just like I tell you what we plan for today might not be three months from now because that's could be a whole different thing could be another tax loophole or whatnot I

25:58Mean it's something that you're going to take what I would as you know what I do is I look at it as a quarter how much is in there and I I take whatever I think is NE I could take out of there without hurting the company and when it comes to taxes on that amount then do they have to pay a chunk say they draw $100,000 throughout the year is that what's taxed or how how does the tax work on that so they know like how much to expect exactly so when you're involved in that you have to understand there's a lot of other things that are because you might take $50,000 out of there and then have no tax consequence why well you have your regular depreciation you have section you there's many things that you can do there so let's say you brought in $150,000 and you only had $50,000 in expenses and you made a 100 well you still got to add in

26:46All the depreciation that you're doing all there so that $100,000 is now $50,000 so even though you took a 100 you're only taxed on 50 because of all the extra stuff so that's something you need to go over with your with your client now that sounds all great and everything as you know but what happens when you sell the property well you've taken this depreciation all that everyone's like yeah let's take as much as we can yes yes yes and then it comes time to sell in it and you're like wait a second I didn't make that much I I put this much into it yeah but we took the depreciation and now you got to pay the capital gains so you have to you know I've seen it happen so many times where people I mean I just had a woman she sold her apartment building for $3 million she bought it in 1976 for 200,000 now she's 80 and it's 3 million so

27:35Before she sold it what did she do she came to see me we went over it and it was fully depreciated right there was nothing there was nothing left there so I mean she had to pay a lot of money in taxes you know under a million but she got 2 million in cash now there was a talk with that I said listen if you sell this this is the amount of tax you're going to have to pay if you don't sell it and hold on to it and you were to pass away and your children were to inherit that they would get what's called Step Up basis and pay zero tax so I mean there's a lot of things that go on when you're going to sell something especially when you're older in age and you have this huge tax game that's going to come there so I had to have that talk with her before I did you know said okay this is what this is going to be because she needs to know that right it's a huge tax game that is available right

28:23Now and a lot of people don't know that you can do that I I had this one client she came to me it was a brand new client I felt my heart went out to her her mother was dying and she wanted to make sure that her daughter got her house so before she died she quick claimed her house over to her daughter and what in fact she did is she just gave her daughter her original basis so she bought the house for $100,000 and now it was worth a half a million dollars so she just gave her daughter a $400,000 tax liability oh because people just don't know right yeah I mean it's just like anything Kirby I think I've told you this a billion times outside of finance and real EST State like this I don't function in the world I don't know how to do anything this is what I know how to do so the things I don't know how to do

29:11When I want want talk about my car or my health I go to a doctor I go to a mechanic because these people know what they're doing I do that in my life if you're going to do these things you need to find an accountant I mean if you are in business for yourself right now and you do not have a relationship with an accountant you should not be in business I'm not saying come see me I'm saying you need to be with an accountant if you don't I don't know what you're doing yeah yeah so it goes back to having that conversation before you you take action on these things and setting it up in the right way what about you know we we were talking about taking pay from your your business what about payroll taxes because I I've heard about that I I kind of understand it but where does that play into it when you take draws from your business draws is isn't payroll so

30:00I mean when as you know your your personal property that you buy and that you rent it goes on your personal taxes Schedule E Schedule E don't need for payroll it's just income minus expenses go there however if we have these companies like an escort that you have as well you bu we talk about the profit that your company's going to have and then taking a reasonable salary because if you are an escort the IRS says that you must take a reasonable salary so basic basically we talk if your company is going to make $100,000 and we would probably give you a third of that as payroll and if we didn't and that just went on your personal taxes then Not only would you pay tax on that but you pay self-employment tax which is 6.2 to Social Security and 1.45 to Medicare however when you do that on your personal taxes you pay as

30:48The employer and the employee so that's an extra 15.3% of tax on top of the regular tax that you're going double taxation that's why people opt to be an escort but then what happens then what happens is you're not paying that much into Social Security a lot of people don't put a lot of faith in the social security so I say the money that you save put into a set or put into a 401k for yourself you know I tell people all the time you know old kiry's counting on you he wants to be able to retire he wants to be able to relax sell his portfolio and just sit and drink my ti so you got to plan for that right now because he's counting on you a lot of people just goes by you know they they keep ing when I'm helping somebody let's say not pay self-employment tax and their life is going on and they're not paying into an IRA or nothing like that I mean life goes by like this I've

31:37Seen it happen with my dad's clients all of a sudden they're getting close to retirement and they have nothing in Social Security and they have no retirement it's something that has to be planned for because life happens like this I mean that's why we have so much Insurance life insurance carent insurance all these things if I was to go my dad if I was to go like this my clients would go that's too bad he really was a nice guy but in the back of their hi they're thinking who's going to take care of my taxes where am I going to go you have to have succession plans from that you have there's so many things that you have to plan for because you don't know what's going to happen I mean we all have families and things like that we have real estate we have businesses if something was to happen to us we have to have a plan for them or it just falters just like anything in life yeah yeah I appreciate that clarification around

32:26The difference between an escorp or being taxed you know pass through as an LLC because either one could be an LLC correct I mean you get to elect how you're taxed as an LLC I think a lot of people don't understand the implications of that when they're electing that they set up an LLC and they're like oh I'll just pick escorp here and they don't understand well well now you know you're double tax or you're taxed first as a corporation and then you have to pay you know your own personal income taxes and and do the set up the payroll and all that so so it's important to understand that I think as a a rental property investor and typically it makes more sense to to set it up as a pass through entity so that I appreciate that so at this point in 2021

33:15Almost into 2022 is there anything that you would recommend looking at for somebody who might wish they would have done some more planning at the beginning of 2021 and are in a situation where they're like dang it you know I I am left with what I've got but is there any like last minute tax tips or things people could look at to reduce their tax burden at this point well I mean everyone is is completely different I you got commercial property got residential property first of all you got to know where your business is going how much money are you going to make this year how much money is it going to show on your tax return what do you have that's available to appreciate is there something that you could buy right now do you need equipment do you need computers do you need whatever 20 remember this for special a bonus depreciation all it to qualify for it

34:03Is say 20 years or less of useful life so anything under that you can take I mean that that's that's a ton of stuff that you can do there with equipment and things of that nature and now is the time if you buy it you can have that special appreciation what you were talking about before is okay say you have a property that's closing well guess what if it closes this week that's 2021 if it closes next week that's 2022 so that's a conversation you should be having should we push it in 2022 or do we take it in 2021 I got to look at your portfolio but again if I look at John Smith and John Smith has this and his wife's got another escorp and they have another business here I got to bring it all together I might push that out and say you know what let's not close this let's close it next week those are the conversations I mean those are that's a huge thing closing right now or

34:53Or next week I have a client that needs to pull money out of his retirement okay he just needs to do it he needs to take $200,000 out of his retirement now he was going to pull it all out right now okay that's great I just said one simple thing let's just run a plan what if you just took $100,000 this week and take $100,000 next week well that means we just split 100,000 into 2021 100,000 into 2022 we just brought down his liability there but he was just going to come grab it a conversation that he needed to have with his accountant he just took that he just made another 200 $1,000 for the year so that's it's very strategic how you do these things yeah yeah yeah I I've also in the past I I had quite a few long-term rentals and I would prepay half

35:41Of the years's property taxes because they would release those bills for for the first half of the year before the year ended and so I could prepay those in 2021 even though they weren't due till March or April of 2022 and when you own a whole bunch of them in Illinois which is one of the highest taxes in the whole nation it makes a big difference so so that's something people could think about as well so great advice awesome so taxing note a lot of people did I mean because with the great changes of taxes that happened these past few years the salt taxes you know we're only can take $10,000 you know as you know for our real estate taxes now and all that a lot of people getting into real estate they don't realize it doesn't work for rentals for rentals and things like

36:29That guys we take 100% that's not capped at 10,000 so getting into real estate remember you can take 100% of the taxes whether they're 10,000 40,000 or 50,000 you can write it all off I see a lot of people they don't realize like oh it's got all $30,000 worth of taxes I don't want to buy that can only use 10,000 and it's just a simple thing that's doesn't equate to investment property it's just for your personal residence for your personal residence yeah got it so one question that I've had come up several times from from short-term rental investors and and this might not be something that you look into a whole lot but there seems to be a big mystery around different municipality taxes when it comes to short-term rentals because it seems like some treat it as you

37:18Know a hotel or or you know there's there's separate lodging expenses and then there's city taxes and County taxes and state taxes but some states don't have you know taxes on this and so what do you recommend in terms of you know demystifying this for people to get the right information so they can know they're not guessing and at the end of the year they're going to you know have this big tax liability well just as you said right there I mean if you buy a piece of property here in Illinois that's different than buying in Florida or if you bought a piece property in Florida and you have a rental and then you move here to Illinois guess what when you sell that property in Florida you're going to pay tax here in Illinois I mean there's all these things that come into it so what I suggest is discover the portfolio and where you're going to go after the properties

38:07As you know there's certain properties that you want certain States you want to work work with and certain ones you don't want to work with so figure out where you want to be and then have a a sit down with your accountant and then we can go over each rules for each St so that you understand it because if I describe one it's not describing the other everyone's different in the in the whole mechanics the way it works so the best way I can explain it to you Kirby is that find out where you want to be and make sure your accountant explains to you the different rules and what is best for you and the way you want to work with it or you might want to go the opposite way and say you know what this is the this is the range I want to work with real estate property then we say you know what okay you're going to work within Texas and Utah and Indiana you know those are the best ones for you to work with I think going after it that way is probably a better way to answer that question got it got it awesome

38:57This has been really really great information I appreciate you know you clarifying A lot of this stuff if somebody is interested in working with you or your firm what what is the best way to find out more information they can go to my website at you're trying to accomplish because you want to know something it I set a relationship you know it's me working with you we there's there's that Synergy there that I that we work together it's not like that with everybody else there's sometimes where I'll send someone to somewhere else because we just don't have the right say chemistry I mean there's certain things that I want and there's certain things that other people are

39:45Like no this is the way I want to work if this is what you want to do then I that's just not me but there's other people that will do that I just need to I guess I'm more of a I'm more of a a husband than a boyfriend I I get involved in these relationships and I want to see it succeed and I I need to have a big hold in the relationship to make sure that we get to where we want to be and some people you know that doesn't work out for but if you have a goal and you want to get into real estate or whatever business you're in and you need guidance I'd be happy to sit down with anybody out there right now and you know one of the real cool things I mean thank God something cool happened out this pmic because the way are right now on Zoom right so people in Texas or wherever they they want to find somebody local usually but

40:33I have clients that I have helped that have they wanted to get out of Illinois and start a business elsewhere and I've helped transition them there they've talked to other business owners and they referred me so now I'm in multiple States I mean I got businesses in Texas California New York Nevada everywhere and it's because of this because now wherever you are you can be on your boat and we can be talking about your real estate portfolio right now so wherever you are if you're thinking about starting a business or you're thinking about where you want your business to grow please give me a call Michael Leonard here at Leonard associate CPA folks yeah yeah and that the relationship with the bookkeeper too is is so key because Holly I gotta get a shout out to Holly who I work with you know I meet with her monthly at a minimum and and she

41:22Knows the way I do things she knows what my goals are and like how I operate and how my expenses flow through and all that stuff so you know you develop that over time too and it just makes things flow so much smoother so that's awesome well I really appreciate that and if people are interested definitely reach out to to Michael and I appreciate all the information yeah