From Poverty to Millionaire and Mastering the Tax Code

0:00I had at 15 I left home like I said and then I actually went to work for a man named Wally Williams and Wall-E was a very successful serial entrepreneur and he owned a car wash and he owned a funeral home and so he hired me to wash his cars, mow his lawn, take the dirty laundry to the dry cleaner and just errands, random stuff. And it was supposed to be part-time. I was getting $3 I think and 35 cents an hour. That was minimum wage back in 1986. And one day after school, I, you know, I show up and he's like, "Come into my office and I thought I was getting fired." And he's like, "Come in the office, sit down." So I sit down and he's like, "How would you like $2,000 a month?" And now I'm making like 200 bucks a week.

0:48And I'm like, "Yes, please. Yes." And so we go through the whole thing and next thing I know I'm a licensed funeral director and inbomber apprentice. And now I'm inbombing bodies at 16 years old. I'm managing funerals. I'm dressing bodies. I'm helping the corner with autopsies. I'm driving a brand new truck. I have new clothes. It was the greatest thing ever. Kirby, yeah, I had to work with dead people, but it was awesome.

1:20Because I finally had respect. — Yeah. — You know, and I had a little bit of money, not a lot, but $2,000 in 1986 as a sophomore in high school. That was that was a chunk of change. And Wall-Ally taught me something I've never forgot. And I I I literally say this almost every single day. And that is how much money you make is not as important as how much money you keep. Mhm. — And it's your responsibility and only your responsibility to keep more.

1:55It's not your CPAs. It's not your attorneys. It's not your spouse. Nobody cares about your money as much as you do. You need to learn basic tax law and tax strategies to keep more. And so, at an early age, I was in the tax game. And I paid very, very little taxes my entire life. And that's given me such a huge advantage over my competitors because while the average business owner is paying 43% in taxes, I'm doing much lower volumes as far as business, but I'm making more money cash flow, more money.

2:32I'm taking home more money because I'm not paying the IRS and I'm not paying the state. And so that gave me that advantage where I could reinvest that back into the business. And then it just kind of grew from there, you know, in my early 20s. I left John Day, Oregon. I went to Denver, Colorado. I become a fireman. And now I'm working eight days a month making 60 $70,000 a year as a fireman with all the benefits. I got 20 days a month to run my construction company.

3:03And then I, you know, as a firefighter, you you're trusted. People trust you, — you know, and so it was real easy for me to start this business. And I've always wanted to do the best that I could possibly do, not be the cheapest. And so I started a a construction company building high-end custom decks. And when my competitors were charging like $10,000 for a deck, I charge $100,000. — Wow. — And there's a lot more profit in $100,000 deck. And you have to build a lot less of them — than the smaller ones.

3:37And so then after after I left the fire department, I had a a little brother. So I'm the oldest of 13 kids. And one of the kids that I left when I left at 15 was my brother Zeke. I think he at the time was maybe three years old. And when he turned 21, he lost his job. He was a fireman as well. At that time I was a firefighter. He lost his job, lost his girlfriend, and started getting hounded by collection companies — and ultimately got a gun and shot himself — over few thousand dollars worth of collections, killed himself.

4:21— And so that was 2006 and it really hit me hard because here I was thinking I was saving all these lives. I was on the busiest rescue in Denver and and I was saving lives. But when you do it over and over again, it just it starts becoming normal. And I was really upset because I felt like it was my fault. I let my brother down. He's 21 years old. He killed himself over a few thousand dollars of collection. So I started a credit repair company in 2007. I still have that company today.

4:54And we started it different than every other credit repair company out there that charges you to try to fix your credit. You know, 100 bucks a month and we'll try. I was like, you know what? I don't deserve to charge you anything unless I've performed. So, I'm going to turn the industry upside down. And so, I ran my ads and and my whole campaign was pay me nothing until I fix your credit. And then I learned really fast how dangerous that was because I had people that didn't pay their bills hire me to fix their credit so they could get a mortgage and then I'd send them a bill that they didn't pay.

5:35So I found out real fast why no one else did that. But the 50% of the people who did pay me, it worked out really well. So instead of me charging a hundred bucks a month and making $400 like the average credit repair company did, I charge $3,000. And so if 50% of the people didn't pay me, I still made $1,500, which was three and a half times more than my competitors. — And because I fixed everything up front instead of dragging it out for two years to make some money, — I made a lot more profit margins.

6:15M. — And then I learned how to look at someone's credit report and go from 50% non-payers to only about 10%. And I can look at I can literally look at someone's credit report and pretty accurately figure out if they're going to pay me or not. And so if they're in that demographic, they're not going to pay us. We just don't accept them as a client. And now 90% pay. — And then 10% sneak through and they end up not paying us. But they didn't pay American Express either for the big screen TV.

6:49They're not going to pay me for fixing their credit. So, and then from there, I went I started a radio show, started having tax people on, and it just kind of grew, you know. — Yeah. — Wallally's words still, how much money you make is not as important as how much money you keep. So, it was always behind the scenes like — you need to figure out how to reduce your taxes. And I, you know, I went through the whole Robert Kiasaki journey and I read all of the books and then Tom Wilright's book tax-free wealth and then opened my eyes like this is a whole world out here on just tax stuff.

7:23And I love it. And the reason I love it is because tax day is my Super Bowl. Last week I got to send a check to the IRS. And I love writing checks to the IRS. I love it. Last week, instead of sending seven figures, which is what would normally happen if I use a traditional CPA, I sent him a check for $71. — And it was awesome.

7:55— The year before it was 300 bucks, $316. So, — I just love it because it's our country was founded by entrepreneurs. Sam Adams started our country, the founder of our country, the father of the United States and Paul Rivere who was also an entrepreneur and u I forget the doctor's name right now but he was an entrepreneur but most of our founding fathers were business owners and they hated paying taxes and this was before there was even income tax.

8:28You know Ben Franklin says nothing is certain in life except for death and taxes. Yeah, — that was a hundred years before the founding of the Internal Revenue Service. And what's crazy is when I do my workshop and I share with people what president created the Internal Revenue Bureau at the time, they're shocked. Do you have any idea who created what is now known as the Internal Revenue Service? — yeah. As you said that, I was trying to think who it might be.

8:59Around that time frame. Man, — he was responsible for freeing the slaves, but then he made us all slaves. — Really? Abe Lincoln, huh? — Abe Lincoln created the Internal Revenue. — 1860sish. — 1862. — Okay. Wow. — Yep. And it started out like everything starts with politicians. Just a little. — Just the tip. That's all it is. Just the tip. Just a little bit. — It was 1%. — Mhm. In 1940s, our tax rate was 94% for the top 1%.

9:3894%. So when Bernie Sanders was on Joe Rogan's podcast last year and he said, "Yeah, I want to have tax at 90%." He was serious. They've done it before. — Wow. And they peeled that back, huh? — And they peeled it back. And they peeled it back multiple times back and forth. And then — Yeah. With the big beautiful bill is the largest tax cut we've ever received and yet every single Democrat voted against it. Not trying to get political here, but you should know who's in office because it's politicians who create tax law.

10:10It's Congress that creates the tax law. And 100% of the Democrats voted against the American people getting the largest tax cut in history. — Wow. And my question to people all the time when they talk about 401ks and IRA and Roths and all that stuff's great if you know how to use them. My question is this. Do you think taxes will be higher, lower, or the same in the future? So I'll ask you that Kirby. Do you think taxes are going to be lower, the same, or higher in the future? — Well, you just said they re peel them back, which I I wasn't aware they that's ever happened.

10:44So I would always assume that they're going to go up. So that's my assumption is that it would go up. — So if if tax and everybody says that, they all say they're going to go up. So my question is then then why are you putting money in a 401k? Why are you deducting it at a lower rate today knowing that it's going to be higher in 40 years from now? Why would you do that? And it's because people don't understand how 401ks work. You know, people think that you get to pull the money out of your 401k taxfree. — Oh, really?

11:15Wow. — Oh, yeah. It doesn't work like that. — You are paying full pain and at that time you won't have all the deductions to offset it. So — long answer to your short question on how did I get into the game? — No, that's I I appreciate that background. It's super interesting. So this audience then like just to kind of focus in on this audience, it's it's primarily rental property investors obviously as the name implies. Where do you recommend somebody who's just getting started with rental property investing start when it comes to all of these different components that you talk about because I do want to get into like the right entity structure and that sort of thing but what's what's the best thing to think about as you're getting started that you would say — you know Robert

12:04Kiyosaki's the rich dad poor dad series has got some great books in there real estate investing real estate riches and then Tom will taxfree wealth just so you can kind of understand the basics of it. As far as the entity structure, here's something that people need to know is there's no reason to set up an LLC because if it's just you or if it's you and your wife, not one single state, not one recognizes soul member LLC's as an LLC.

12:36They treat it the same way the IRS treats it, which is a disregarded entity. — Unless you have three members in there and it's not you, your wife, and your kid. — Yeah. — Three individuals, every single court in America will treat it as a sole proprietorship business, as a disregarded entity. So there is zero asset protection in soul member LLC's and there are zero tax benefits of an LLC.

13:08There's zero income tax benefits of an SC corporation. And CPAs love getting you to convert to an S corp. And they do that because now they get to charge you for two tax returns instead of just the one. — But there's no asset protection. So, what I recommend is if you are going to do an entity that you should never put more than one property in an LLC. Each property should have its own LLC. That LLC should be in the state where the real estate is located.

13:45The owner of that LLC needs to be a Wyoming LLC — with you also as a member and another adult. And now you have a three member non-related partner. When you bring in the other LLC that owns it, now the courts will treat it like a real LLC. Now you get the asset protection. And then one of the things that we teach is you set up the LLC in the state where the propertyy's located. You have your Wyoming LLC that owns it and then you merge them together.

14:19And when you merge them together, your house LLC goes into the Wyoming LLC with all the rest of your houses. You have a third LLC you bring in that's a property management company. So, your tenants actually pay the property management LLC, not the LLC that owns the house and not the LLC that it got merged with. We never want tenants paying the LLC that has the property. We only want them paying the property management company that has no assets.

14:53— So now if they go to sue, they're suing a Wyoming company that has no assets. There's nothing there. — And the reason that we like Wyoming is there's a couple reasons, three actually. It's the only state in the union that does it this way. Non-reporting, which means they will not tell anyone who's inside the LLC. So if you go to the Secretary of State's website, you don't know who owns it. And unless you get a federal warrant for fraud, the state of Wyoming is not going to release the information. Period. Number two, there's no state income tax whatsoever.

15:24In Florida, Texas, South Dakota, Washington, all the states that are no tax states, well, that's individual W2. But if you are a business, there is income tax in those states. And then third, which is equally as important, there's no charging order in Wyoming, which means if you get sued, if your LLC gets sued and you lose, the court cannot take charge of your LLC, which means they can't liquidate or levy the bank account, they can't sell your assets, they can't sell the company, they can't take charge of it.

15:58Or if you live in California and your LLC gets sued and you lose, the court can take charge of everything inside that LLC, liquidate it, and there's nothing you can do about it. — So, I recommend that you use a series of LLC's. You have an LLC the property's put in. You have a business hub that owns that LLC. Then those two get merged into one. And then you have an LLC that we pay, the tenants pay. So that's kind of a sacrificial LLC.