Brett:

Yeah, they might have been your number one realtor at that point and your last property manager at the end of the day, like they made a business decision. They were honest and open about what was going on transparent. And you fired them and you got a new one. But maybe you got a new realtor to find you some REO deals. So that makes sense. I like that it doesn’t have to be such hard feelings all the time. You don’t have to be married to your property management forever, because they helped you get off the ground. Sometimes the person is to help you meet that first million isn’t the best one to take you to that fire that 10.

Michael:

I would tell you to have the people that were like, my inner circle in my investment community the first 10 years, maybe the first eight years, eight years is probably fair. I think there’s only one that’s still in it today is people ebb and flow and grow. And some of the people don’t even live in Fresno anymore, life events and a boyfriend, the husband and wife whatever took him somewhere else. Life is life. As the owner of the portfolio, it’s my job to manage the network.

Brett:

Excellent. So let’s go to number four. Then we’re going to be touching on some 1031 Exchange stuff as well as hearing some capital gains tax strategies for listeners. So step number four, was it write the offer?

Michael:

At some point, you’re doing all of this work, you’re looking at your BuyBox, 20 minutes a day, 60, 90 months? At some point, you’re gonna say, Michael, I know the average is 10%. Well, great. Now that you can confidently tell everybody, it’s 10%, your job is to write offers at 12 or 13. I only want you to write great offers. A great offer means you’re higher than the average deal. But you got to write the offer. You have to have confidence in yourself. You got to put pen to paper and move forward. So yes, definitely got to move forward and write the offer at some point.

Brett:

Okay, good. Obviously, if you tie it up, make sure you close on the thing because you live it right for those realtors, you proxy those deals, so they can bring you more deals in the future. So, you’re writing it 12% to 13%. You’re giving yourself perhaps some cushion to negotiate. Are you going to take the 10 or where are you at today? What’s the marketplace like in Fresno? What are you seeing boots in the ground? What are the average returns? Give us a feel for that.

Michael:

I’ll give you the average amount because every market is every person will learn the average for the market. So my Buy Box today in Fresno, California is 6%. It’s a competitive market. Rents are going up. So there’s some future growth there. But today’s 6%, so what am I doing? I’m only doing deals at 8% or greater. I will write an offer and 8% to your question. But if something comes up during due diligence or make ready or something hurts my cash on cash return, I will either get a credit or back out of the deal, but I will close on every 8% deal in Fresno today.

Brett:

Excellent. Have you considered moving that to multifamily? And if not, why not?

Michael:

Absolutely. When I say 8%, my spreadsheet is everything. I compare 500 square foot homes with 20 unit apartments. I talk about those two as my extremes because I have owned both or actually owned them today. So I only talk about what I do. I have owned a one-bedroom, one house, one bath house, 500 square 12 square feet, and a 20 unit apartment building, I will buy whatever the highest yield is somewhat sometimes like in 2006 apartments far away from a better yield. Part of that was because houses were stupid price because of all the funny lending and others because multifamily was missing. I would tell you today in my market, multifamily is flat out overpriced cap rates have been compressed to a ridiculous level. Class C is selling at Class A prices. I’ve sold classy, reclass. A and moved into housing. So I will buy whatever the highest yield is.

Brett:

So let’s talk about that. So the 1031 exchange, one of the biggest frustrations with it is that you have to buy equal greater value. So you have a 20 unit apartment complex. That’s where three and a half million dollars, and you’re buying these houses may be between three and $600,000. Walk us through what’s the biggest frustration when it comes to the 1031 exchange and or the deferred end or capital gains tax deferral when you’re going to sell highly appreciated assets.

Michael:

It is absolutely the buy. You actually have to start working on the buy ahead of time. So my last 1031 exchange was selling an apartment building, an eight-unit building, and buying 14 units. How did that happen? It was two four-plexes, a triplex, and four homes. So the total portfolio was more than the 18 unit building because there are a lot of houses, which obviously have a higher sticker price. But the idea was I had a seller reach out to me saying, Michael, you bought one of my houses two years ago, I am now at the age that I want to sell everything, I’d rather maintain income. So they avoid the big, depreciation recapture and all that. So we structured a deal. I said, well, great, I want to buy it. I’m going to do a 1031 exchange. So we’re gonna have to delay this purchase agreement until I sell it happened to be a hot market. So we worked it out. So, I sold an 18 unit building that goes into the Intermediary, and then we close on the 14 unit. So for me, it’s always been about the buy. When I was selling houses, we went from eight to 80 units, six houses in one duplex to 80 units, a 5, a 13, 18, and 10. Whatever it is, it’s all in the book. And it was always the buy. That was the hardest part of it.

Brett:

Yeah, sometimes we call that the shotgun wedding. It looks like you got a pre-arranged marriage. You’re like, we have already known each other for a long time, family and friends. So rather than the shotgun wedding, which is getting gauged in 45 days getting married at 180. Well, sometimes I can create situations where people are overpaying, taking on too much debt, not enough diversification on liquidity, let the tax tail wag the investment dog, then they get hurt. That’s what I found in Sacramento and Fresno during the 2008 crash, people had overpaid for apartment complexes and properties and had too much debt and they were chasing deals, and ‘03, ‘04, ‘05, ‘06, ‘07, the music stops. Now the next three years some loss happened, the guy had $50 million of apartments and a lot of debt, mostly C class and we said hey, now’s not the time to hold on to these. This is 2006, he said, he doesn’t have 1031 lined up. So, he didn’t and he literally lost his $50 million worth of real estate, or the next three years lost, everything went bankrupt. And we looked at it we go if it wasn’t for the 1031 exchange, and we offer something called the Deferred Sales Trust, which is kind of unique. In that, you can sell, you can defer, the backup plan for a failed 1031. It creates an opportunity to develop real estate to go into hard money lending to go in the stock market if you want it to diversify a little bit to do a number of things that you don’t have to purchase when you feel like the timing isn’t right when you’re not seeing those averages right when the seller just says I mean, in fact, I got a call yesterday from a gentleman sold $11.3 million pieces of land that he bought for $140,000.99. This is in Southern California. He’s a huge home run. And he’s in 1031. And he found an $8.3 million deal, which was a good fit. And then he bought another house for 800,000. But then he had about 300,000 or so left or 3 million leftover and a bunch of molds a bunch of bad stuff and an apartment complex. He’s like, I don’t want to take this on. I don’t want this headache. And so he calls me says can you save my failed 1031? And the answer’s yes. Nice. So what that does for him is he doesn’t have to buy something he doesn’t want to feel great about right now. It gives him the chance to have that time back. So I’m curious about having an unlimited amount of time and unlimited amount of time to defer the tax To buy commercial real estate was a game-changer for me. But had you ever heard of that before? Or have you ever no more?

Michael:

So we’ve got to talk about this more because no, I’ve been in this game a long time, if not heard about that. I have heard more. In fact, I’ve heard more people get hurt by 1031 exchanges. That helped. Because once you have that shotgun wedding and the clock is started, oh, again, something I spent oodles of time on. I always had a line of sight to my next deal. So I knew where the money was going. And I’d worked with the seller to work about I’ve done a dozen maybe 1110 31 exchanges all kind of line of sight to what was going to be the end result ahead of time. Right. A pre-arranged marriage I think you said which is an accurate statement. I’ve seen more people hear about especially in today’s environment where everything is like a bubble. There are a lot of dumb 1031s being done today. I actually sold an apartment building last year, I paid the taxes. I’m like, I’m not doing a deal. I’m not gonna let taxes make me do a bad deal. I’ll gladly pay the big number. And I’ll just sit on the cash and wait for something. But I look forward to digging into this more.

Brett:

You can learn more about that on capitalgainstaxsolutions.com. For those who are wondering about capital gains taxes, we just did a deal near you in Mountain View in Palo Alto. Off a University Avenue right out of Dallas. That client of mine, he’s selling a primary home. He was actually the number one Keller Williams agent multiple years in Palo Alto. I’ve been there for 30 years. And he’s doing okay. He’s selling for 8.3 million. He has a huge game, but as of 1031 doesn’t qualify for high-end primary residences. The 121 exclusion, 250 for single, 500 If you’re married, but above me on that he was single, his five kids were gone, out of the house. He’s in a huge, beautiful house on University Avenue. “Brett, you’re telling me I’ve been in for 30 years, you can do this with the house?” I said yes. So he spent about a year and a half due diligence, CPAs all the questions you can imagine. But he’s a client of mine, and he moved to Nevada residency, but he deferred all the tax. But if it wasn’t for the Deferred Sales Trust, he wouldn’t have been able to sell his house. And that’s really the point here, as part of what we’re trying to do is provide freedom. And so as Michael right from the day job, from the stress of the stock market, from the stress of having to stay in your big home because of the tax. If you can find tools and ways in education, empower yourself with this education, you can unlock what you’re trying to do in that next chapter of your life. And that’s exactly what he did. And then we’ve just done it for three cryptocurrency owners. And I’m curious, so you’re in Silicon Valley. A lot of cryptocurrency owners. The 1031 exchange does not work for cryptocurrency or primary homes or businesses. But the Deferred Sales Trust does. So check this one out. We just sold a 5 million of our case that she bought it short for Google. And she bought Bitcoin for 50,000. And it literally went to 50 million. And now she deferred 5 million to the trust. And she’s building a business startup company with a college roommate. She retired from Google. She’s no longer building Google’s dream. She’s building her college, her college roommate stream online educational program, all tax-deferred. Now Hey, using the deferred sales trust, so if anyone wants to learn about that you can go to capital gains tax or SATCOM. All that being said, Michael, are you ready for the lightning round? I am. Alright. So knowing what you know, if you go back to your 25-year-old self, what’s the one golden nugget make sure to tell yourself to do?

Michael:

I was spending the money as soon as it came in. Again, in Silicon Valley, I was making six figures at 25. And spending six figures. I retired at 45. Because I started at 30. And I’d already allowed my life to expand. If I would have started at 25. I could have been done at 30. So I wasted 15 years, cut it.

Brett:

save, save and invest Don’t spend it all. Second question, what’s the number one book you’ve recommended or gifted the most in the past year? Rich Dad Poor Dad. Right. And as a part of that, we do have a segment where we talk about the best-kept secret Rich Dad Poor Dad, what’s the one thing that you try to practice every day and your wealth building with the Rich Dad Poor Dad strategy?

Michael:

Well, for me, the biggest eye-opening thing it’s often not talked about it was but it was simply the introduction of the rat race. It’s embarrassing. I have an advanced degree. I’m an accountant, an econ undergrad So money is comfortable for me. But the fact is that I didn’t get that I was living in the rat race. And I was constantly increasing the size of my wheel by expanding my lifestyle. I still feel stupid for not knowing that by the time I was 30. So the rat race was the biggest introduction for me.

Brett:

Which leads to CRAP. Yes, you could define that we did tease on that a little bit.

Michael:

CRAP was one of those things that came to me out of nowhere. When I had all these friends in the last stock, as the Great Recession, they were cast rich. Michael, I’m sitting on this. I’m out of the market, but they had no assets. So cash rich asset poor crap. And the reason that is as we’re seeing today, PPI came out today 9.6% CPI is running at 10%. If you do the actual rent calculation, inflation is real. So you’ve got to buy assets, being cast rich, it’s an asset poor is not good.

Brett:

Not good. It’s like burning money out the window You’re just throwing it out the window just burning as the six to 10% just keeps eaten up in inflation. So, thank you for sharing that. That’s definitely one that you want to focus on. Are you in the rat race? Are you building your business, your dream and you make your money working for you? Or are you on the other side to trading time for dollars and ever-increasing your spending and not doing things should be doing a constant reminder for all of us? Next question, what are you most curious about right now?

Michael:

The thing that I’m most curious about is affordable housing is an area of the market I’ve been playing in for 21 years. They have to solve it somehow. And I think the answer is out there. I just don’t know which is going to win. Is it going to be 3d printed homes? Is it going to be container homes? Is it going to be tiny homes? We can’t keep building mansions? We can’t keep taking care of the rich? We’ve got to take care of you know the middle class and below. So are we going to finally build smaller homes? Are we going to be able to really tackle affordable housing? I say this as someone who lived in California. I own a plot of land that could build eight homes. I was willing to build the homes on the lots, assuming a lot was free and it wasn’t free. I tried to do it. I tried to build eight 1000 square foot homes because those would be affordable. I can get them in. I could sell them for 100k under the median. I had an architect designer. I then went to the city and the city wants $250,000 Just to look at the paperwork. I’m like, Are you kidding me? This is why Newsom and his cronies won’t get any affordable housing in California. It just doesn’t make sense.

Brett:

Yeah, it’s sad. It’s a travesty. It’s so sad. And as a California myself growing up in the Bay Area, my dad built rentals and houses My dad says Brett 30 years ago when I started my business, and we were building houses and doing the things we’re doing. you do want to imagine the different seals of today in all the regulations and all the red tape and all that nonsense that stops housing from happening. He goes, I probably don’t have the stomach to do it. If I had to start over today He goes, it’s just such a to have such a cesspool of a mess. I think there was an affordable housing multifamily unit that was built, and it cost us something like $280,000 a unit, just to build the affordable housing of it. And you’re going, the numbers don’t make sense. You can’t give enough tax credit. Stephen makes this thing makes sense. Unless it’s going for 10 or 15, or 20 years of no taxes on property taxes. But it’s a mess. So okay, thank you for sharing that. And that’s encouraging. Hopefully, those that are listening, make changes, and we can vote for people that are going to actually get these things done instead of just talking about it. The last question, after all your success, after helping all the people you’ve helped, how do you stay encouraged every day to charge for new heights and stay encouraged to stick to your values?

Michael:

So it’s funny, you bring that up just the other day, probably less than two weeks ago, I finally got comfortable saying the following. One Rental At A Time is gonna help a million people close deals for the rest of my life. So I’m about 50 years old. So for the next 50 years, we’re going to try to help a million people. And how do I feel good about that? The fact is, we’ve helped 1000s of people over the last couple of years since the books were out. I get comments nearly every day, some private some public about, hey, you helped me this, you helped me do that. I’m helping roughly 200 to 300,000 people a week on YouTube, podcasts, books, all of that stuff. So really, for me, it’s the feedback loop. Why can I get excited about looking at my BuyBox? Why can I get excited every day about five more pieces of content are because the audience is involved, the audience is doing the work, and the audience taking selfies and writing nice emails and stuff? So really, it’s the entire audience that lets me know that one rental at a time is working. And because it is I’m going to keep going.

Brett:

Fantastic. Michael, for those who want to get in touch with you, would you remind him one last time what’s the best place for him to find you?

Michael:

I would go to youtube.com/onerentalatatime it is where I released five to six original pieces, pieces of content seven days a week.

Brett:

Michael, I want to thank you for being on the show. I want to thank you for using the gifts and talents you’ve been given and relentlessly focused on something that you really care about, which is helping people build wealth and buying rentals as well as being very excited to do it bring that enthusiasm to encourage people to compute it. I want to urge you to keep doing that change those lives make a difference in this world. Thank you so much for being on the show. I also want to thank our listeners for listening to this episode of the Capital Gains Tax Solutions Podcast.