Definition Of A Successful Retirement with Jonathan Heagle

October 06, 2022

Expert CRE Secrets Podcast

Jonathan founded Mountain Vista in 2017 with the objective of improving the access to quality financial advice for clients of varying asset levels. With 16 years of experience as a proprietary trader and portfolio manager at prestigious financial firms prior to founding Mountain Vista, Jonathan is uniquely positioned to help his clients develop and execute customized solutions to their financial needs.

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Definition Of A Successful Retirement with Jonathan Heagle

Brett:

I'm excited about our next guest. He's out of the Santa Barbara area, originally from the Northeast, kind of the New York, New Jersey area, he founded Mountain Vista in 2017, and Mountain Vista is a Wealth Management Company with the objective of improving the access to quality financial advice for clients of varying asset levels, with 16 plus years of experience as a, as a proprietary trader and portfolio manager at prestigious financial firms prior to founding mountain Mountain Vista, he is uniquely positioned to help his clients develop and execute customized solutions to their financial needs, and so much more. Please welcome the show with me, Jonathan Heagle. John, how are you doing?

Jonathan:

I'm doing great, Brett. How are you?

Brett:

Better than I deserve excited to have you on the show. For our listeners to get to know for the first time would you give us a little bit more about your story and your current focus?

Jonathan:

My background started in New York, really got into the mortgage space at an early age, started off as a subprime mortgage trader at Goldman Sachs, for a number of years kind of leading up through the crisis, and kind of the mania back in the day, live through the bust over there, and I had kind of a unique view as somebody who was involved in the creation a lot of the mortgage debt at that point in time, and basically switched from being the seat where we're creating the mortgage debt to actually actively trading that on the other side. Kind of rode the recovery back in the housing market, and really kind of reaped a lot of those, those rewards. That back in, 2016 2017, that recovery largely took place, and also professionally and personally, I was kind of reassessing my life and kind of what I wanted to do at that time. Part of the fact that out of such a bad experience, positively affected me, I had a desire to kind of give back and help other people achieve success.

The move over to Santa Barbara was It was a part of my lifestyle, but also gave me the chance to transition to focus on private wealth, rather than just serving institutions. What do I do now is I basically, try to help my clients, achieve their real financial objectives and financial dreams that can be through traditional investments, their stocks, and bonds, but also through private investments and in real estate, and really try to help people navigate some of the benefits of investing the different items, or managing their risk. I think there's a lot of people, especially in today's market, looking at where stocks are, and just uncomfortable with that level of volatility. Trying to come up with creative solutions to help people manage that.

Brett:

John, thanks for sharing that. I want to take one other step back. I believe we've all been given certain gifts in this life, and these gifts have been given to us to be a blessing and help to others. Before we dive into the definition of a successful retirement and talking some strategies along the lines of what you're seeing in the real estate market. I also want to touch on the correlation between the bust and where we're at now, and any kind of patterns you're seeing there. But before we go there, I want you to think about can be high school days, it could be, can be college days. Maybe there's a strength or some people call it a superpower. I believe we've been given these gifts to be a blessing and help to others. Other one may be one or two gifts that you can kind of think of that you think helps you to be a blessing and help to others.

Jonathan:

I think, one thing that I think I do pretty well is kind of sift through a lot of information that's out there that you see in the news media in the investment landscape and kind of help distill down to what's important, and that kind of helps me see-through, some of what could be kind of a first level, take on a situation and really kind of see a step or two further in order to make sure that you anticipating change and investing for the future, rather than just taking something at face value, because as we know, in the markets, by the time you're reading something on, the cover of the newspaper, your friend brings you a story, for the most part, that opportunities missed. I think that's kind of a unique talent that I have. Also, just I do care about people, and I want to see people do better, and I kind of bring that integrity and that empathy to my relationships with my clients. Where really, it's less about me and more about the kind of helping them out.

Brett:

Your strategic thinker, you take the noise and the information that's been thrown at us from all the media outlets, and all the things that we're seeing here, and you distill it to what's actually important, and then you help your clients make good decisions based upon that. Is that a fair summary?

Jonathan:

That's a fair summary.

Brett:

Let's dive right in. What's the number one secret to the definition or building a successful retirement?

Jonathan:

I would say the first set up what your specific objective is. I think when a lot of people approach a financial advisor. A lot of times they're just thinking, I want the best investment return possible. But I think if you were to truly have somebody sit down and to try to say, let's think 15, 20 years in the future, how do you want your life to be. What do you do on a daily basis? Where do you live? Who do you see? What do you do? Nobody's going to be talking about the balance of their investment accounts. I think helping people reframe their focus and kind of figuring out how to get from today to that point that they envision in the future with some intention. I think that is kind of step one, kind of reframing the conversation. Short-term returns to what they want in the future.

Brett:

That makes perfect sense. Setting clear specific objectives. Like how do you want your life to be? Who do you see you? Where do you see you being, who do you see you being? What do you see yourself doing all of those kinds of those, those key factors, and I think more and more people are looking for time, energy, stress, and location freedom. We're both in California, you're in Santa Barbara, which is arguably one of the most expensive not, not top five in the state of California. It's beautiful. It's an amazing area, it's one of the kind. I'm in Northern California, also very expensive as well, and you see a lot of people who are looking for location, freedom, time, freedom, stress, freedom, some tax, maybe a little more Tax Freedom. What's been the biggest part of the definition of success for retirement as it pertains to some of these folks that you're seeing maybe downsizing or retiring, especially out of California, any kind of trends or things that you're noticing?

Jonathan:

I think, gonna answer the question slightly differently. But I think a trend that could be presenting itself, particularly for real estate investors and kind of lending itself directly to your businesses. For a long period of time, a lot of people that are real estate investors have focused on building their portfolio, their net worth through continually deferring, their gains through 1031 exchanges into bigger and bigger properties, and I think what we're seeing in DC right now, continually, you're seeing real estate is one of the items that has gotten away without being attacked from a tax perspective, but constantly into the discussion. I think coming up with strategies that go beyond just defer, defer then die and pass on all that wealth to your heirs. I think people are going to get a little bit more strategic about how they take those capital gains over time and potentially find different strategies to minimize the tax impact on those embedded gains that they have.

Brett:

I couldn't agree with you more. In fact, that's part of why 1031 is under fire. I have heard that they have taken it appears they have taken it off the chopping block. It's not finalized, but it was you know, a lot of talk about taking it away. But part of the challenge I think the government sees what the 1031 Echange is exactly. He said a lot of people, trade, trade, trade, trade, trade, defer, defer defer defer and then die and get a stepped-up basis and the IRS in some respects feels they're not getting their tax. What's owed to them, and the opposite is when 2008 crash it right count we're gonna kind of tail this into the to the mortgage crisis. There were a lot of people especially in Sacramento, I was at Marcus and Millichap how many people buy and sell multifamily properties? One in a particular deal the gentleman is in 2006, 07. We told him, we think something's going to change. We think it's a great time for you to get out of debt, to sell to diversify, and he didn't do it and he literally $50 million with an apartment complex. He lost everything. He went bankrupt, and part of that was because he was 1031 exchanging .n overpaying and chasing, the music kind of stopped, and you look at that, and the government doesn't win. Because the thing goes to zero, obviously the person doesn't win.

They're the biggest thing that didn't have liquidity diversification and then tax deferral, and that's part of what we provide here at Capital Gains Tax Solutions as an alternative to 1031 Exchange. We just helped another client for an 18 unit, apartment complex sell. For him, it was just it was tax deferral. But it was also time and energy. He goes, Brett, I have $40 million worth of real estate, and he goes, most of them are the free and clear, very low basis, I just have so much stuff that I'm dealing with, with the government and changing the laws and rent control and managing the managers, and he just never stops. He goes, if I can just sell and he put it all into the stock market, and you guys just report and give me, give me the income, and let's put it in a diversified liquid portfolio. He was to him that was transformation. Now, does he have 95%? Of or 96% of his wealth in real estate still? So he's not like he's walking away from all of it. But that one property that was a super painful one, he moved it. Now he's probably gonna move other ones along the way as well. But could you just speak to diversification, liquidity, and the ability to be passive, and alternative investments for real estate and alternative means the stock market? But in big companies that are safe, and liquid? Can you talk a little about that?

Jonathan:

The way I think about it, right now, I think all the rage right now is meme stock trading and really aggressive kind of day trading type of behavior that we saw in the late 90s, and in reality, my core belief is that your asset allocation is going to dictate 90% of your returns. People want to be really active, and they think it's really exciting to try to find the next Tesla when it's a $1 stock, go for it. But I think most of your wealth is generated through asset allocation. The way I like to view it is really kind of like up like a pyramid. You have your core needs at the bottom, which are met through cash and short-term fixed income above that you have might have a little bit of corporate debt or higher-yielding fixed income, and you have your equity market exposure, some real estate exposure.

Then up top, you have your speculative investments, like your cryptocurrencies and things like that, and I really think, there's no reason why everybody couldn't have access to all that other than maybe their time and their education. But the benefit of having multiple different asset classes in your investment portfolio is not that you're going to have the top performance every single year. But you're going to be smoothing things out a little bit more. If you do have a correction in stocks, you think about stocks and real estate historically, the financial crisis of 2008 2009, that was unique in the sense that the crisis was basically brought on by bad mortgage debt. You saw home prices go way down at the same time you saw equities crash. But in reality, what typically happens during a recession is stocks, underperform, interest rates come down, real estate tends to be a positive performer, at least not correlated with equity. What that means is you have a more stable portfolio.

One of the things I try to do with my clients is to kind of set them up for success behaviorally. If you took somebody that had a mild risk tolerance, meaning they're able to take some volatility, said you should be 100% in stocks, and then the stock market goes down 20%, they're probably not going to stay with that strategy, and in investing, staying with the strategy is how you get the long term returns that we know are so attractive, over short periods of time, it's a coin flip. By having exposure to fixed income to real estate, potentially other private market investments, and then really high-quality stocks. You can smooth that ride out a little bit and ensure that that person can stick with that portfolio over time and ideally even be opportunistic. If you do have that correction, let's take some of the money from fixed income and reallocate it towards equity. A little bit more active. But what I try to do for my clients is be more strategic and tactical with their money.

Definition Of A Successful Retirement: “I do care about people, and I want to see people do better, and I kind of bring that integrity and that empathy to my relationships with my clients. Where really, it's less about me and more about the kind of helping them out.” – Jonathan Heagle

Brett:

I think that's super smart, and it's also what's cool about the Deferred Sales Trust is you can sell high diversify, get liquid hedge and protect a lot of strategies to not be so volatile to crash in the stock market to but then when the real estate market shifts, you can go back into real estate all tax-deferred without using a 1031 exchange which is really the Netflix light bulb that came on for me versus the blockbuster 1031. Because in 1031 you cannot trade like-kind investment real estate into stocks. I mean, you put into a Delaware Statutory Trust, which is just another form of 1031. But you give all liquidity, huge fees, no control. Whereas with the Deferred Sales Trust, you can go into real you can go into securities, but then the investments can be reallocated back into real estate investment at a later date, all tax-deferred with you, and so it's a really powerful strategy.

By the way, you can learn more about that at CapitalGainsTaxSolutions.com. That's CapitalGainsTaxSolutions.com. But I want to touch on now, Jonathan, any patterns that you're seeing? And you mentioned a little bit about the crash, and it was tied to mortgage-backed securities, and that ultimately, kind of almost, collapse the whole system, and but you're looking at anything that kind of correlates. What are you thinking about high valuations on real estate? Do you see a correction coming? Or what is the thing that no one's really looking at right now? Is it student debt? Is it something else there that you feel like we need to be watching out for that could be kind of like the mortgage-backed security of today?

Jonathan:

I guess, let me first say that I'm generally optimistic, residential real estate, with kind of a five-year time horizon that's just driven by purely demographics. The millennials are the largest part of the population, and they're after deferring household formation and having babies and everything for a number of years, they're starting to hit the market in a big way. That being said, I think there are some things that get my risk antenna going, first and foremost, the amount of high appreciation that we've had. With mortgage rates, probably hitting the lower end of the range that we're going to be seeing over the short term. Finally, there's actually some pretty interesting news that came out recently, where Zillow pause their, their buying program and basically liquidated a bunch of their properties to institutional capital. The risks I see to the market, if we were to talk about just that, what could go wrong? I see the potential for overbuilding in certain areas where there's kind of high investor behavior, where if mortgage rates go higher, you end up in a situation where things become a little bit less affordable, and just kind of that price momentum goes away. At the same time, where you have additional demand coming online. In those areas, I can see a little bit of softness.

That being said, I think if it's a lot of people that are sitting there waiting for the market to adjust, I think the market should get that supply should get absorbed, with much more modest price declines, and we saw it in the past.it's really different this time than really back in 2006 2007 is the marginal buyers were all financed by really distressed debt, very aggressive debt. you didn't have to have your true income, you could basically just makeup whatever you want and get 100% financing second liens as a means of covering the down payment were prevalent. If you think about it, the subprime mortgage market was a trillion dollars in and of itself at its peak. Above that, you had what was called option arms, which basically allowed you to pay less than the payment, very low teaser rate, and be underwritten based upon that which was going to explode in the future when you had to make your full payment. There are all these different risk layers that were prevalent back then, and really what happened was once the borrower became insolvent, they couldn't afford the mortgage. They couldn't refinance because nobody was landing anymore, and they had to sell or get back the keys to the property.

I don't see that happening this time. While we might have kind of a flatlining or stagnation in prices over time, I don't see that forced liquidation coming, and unless the single-family rental companies decide that they're all going to become sellers. Your invitation homes, your American homes for rent, these large institutional blocks of capital that have come into the market, if for whatever reason they became a seller, that would be a huge problem, specifically in areas where they're concentrated. I don't see that happening in any reasonable scenarios. But, my risk antenna is up especially looking at what happened to Zillow, and could that affect some local geographies? Perhaps, but I'm still pretty bullish, and I think that the demographic trend is really what's going to push the market for the next five years.

Brett:

Fantastic analysis. You can learn more about Jonathan Heagle at MountainVistaWealth.com MountainVistaWealth.com, and if you're in the Santa Barbara area, look him up. He's by the beach and he's really To help you out with your wealth, management, and strategy, and I love how you broke that down, I love that you have the connection with real estate, there's not a lot of financial advisors that have that intimate knowledge of what you have with what happened in the subprime mortgage market, and that real estate trends, and also the security sides, sometimes it tends to be, one or the other. I really appreciate that perspective, and I like that I want to pull one little nugget out of there for our listeners, and remind myself as well, which is, are you over buying or a lot of people over buying that are investors and where you're buying. But if you're buying in a single-family, home community, with families, and of course, great schools and owners of these properties right there and their owner occupying these properties, I guess is a better way to put it with their families, they're less likely to see a huge drop in value in. Is that a fair summary versus investors that are buying? Like the movie The Big Short. John? Read that book. You go and you go down to Miami, and they're talking to somebody? And she says, I've got like, three or four rental properties, and they're like you do on that income? Is that a fair summary of what I just said about what you said before?

Jonathan:

I do think, one of the results of the financial crisis, too, was the institutionalization of the single-family rental market. Place where I own rental properties and kind of the Phoenix area. There are whole communities that are largely dominated by, some small investors, but also these larger companies. It is a big risk concentration, and really, for these guys, if there's ever a situation where they couldn't finance themselves, where they rely on securitization and another kind of complex in illiquid debt markets to finance themselves, if something changed there, maybe things don't look attractive to them. They step out of the market, or they start to sell. That could always happen, seems like the demographic and the trends, and the building trends aren't really leaning things in that direction, but you never know. It's always something to watch and pay attention to.

Brett:

John, with that being said, are you ready for the lightning round?

Jonathan:

Sure.

Brett:

All right, knowing what you know, now, if you go back to your 25-year-old self. What's the one golden nugget make sure to tell yourself to do?

Jonathan:

Buy Bitcoin.

Brett:

We just closed a Bitcoin case for a Google Executive or Google employee. At one point, she's retired now from Google, she checked this out John, she bought it for like 30,000 bucks, a bunch of Bitcoin a very long time ago, it went up to $50 million. She never sold 50 million. We just sold the first 5 million, put it into a Deferred Sales Trust to defer the tax was in California, and now funds are being used to help her in a startup company. Then also in the stock market, as well for some diversification, some liquidity, and so it's a really exciting part of this world that we're in right now with that. Next question, what's your favorite book that you've recommended or gifted the most in the past year?

Jonathan:

It's kind of a classic book, and it's a little bit of a cliche at this point. But I think going back even to your other question, but what I would tell my 25-year-old self is, I think, Rich Dad, Poor Dad is a fantastic book, not just to kind of help people understand the value of real estate investing, but to help them think like an entrepreneur. I think that's something great about the younger people we see now is, entrepreneurship seems to be on the uptick. When I was growing up, and when I went to school, I believe that you had to, get good grades, and work hard and go work for a company and somebody who's going to be reliant upon giving you a paycheck for the rest of your life, and it worked out for me, doesn't necessarily work out for everybody the same way. But I think entrepreneurship and really understanding the value of taking control of your finances and being more strategic. That's something I think more young people could benefit from.

Brett:

That warms my heart again, John, you can all most of our listeners are commercial real estate entrepreneurs, folks. That's fantastic, and that actually leads to the next question. We just entered this segment and John didn't know this. But as a part of our lightning round, we talked about the Rich Dad Poor Dad strategy, and we say like, what's your favorite, best-kept secret that either you're applying your clients or applying that really that you try to apply in your business and investment plan.

Jonathan:

I would say what I'm trying to do that's most strategic is really looking at the whole picture. If we go back to the kind of from a pure investment perspective, don't just look at the One Investment in it. isolation. Think about it in the context of other investments that you have. If you have a lot of exposure to technology, think about what could hurt that thesis, and then maybe try to buy something that benefits from that bad environment. An example would be if you wanted to own, a high growth stock, we know that higher interest rates could hurt that position. Well, what would benefit from that owning something like financials? which benefits from a steeper yield curve, and they'll have more income. Think about how things work together, rather than just in isolation. Should I buy Tesla, and then be very, not strategic about it. Think about the bigger picture.

Brett:

Excellent love that. Another little bonus one for our listeners. It's our listening to Robert Kiyosaki on a podcast like a month ago, and he said, “The purpose of a business is to purchase real estate.” The premise was, you got to think about tax flow, not just cash flow or appreciation, and using depreciation to increase your net cash flow by eliminating or reducing your taxes to be able to feed into either more businesses or more real estate and so anyways, I thought that was really unique way of thinking about that like a little extra golden nugget for you there. Next question, is this what are you most curious about right now, John?

Jonathan:

I would say what I find really curious about what's going on in the world is changing so quickly, and I think I don't understand it. But I'm really intrigued by what's going on in the NFT world and a lot of the digitization of so many assets. I think about it in the context of real estate. It could be as simple as bringing title onto the blockchain and having you basically eliminate Title V for title insurance at that point. But really, could you even be tokenizing ownerships in real estate? And could I sell a fractional share of my house as a means of tightening or releasing some of the equity, rather than having to go the traditional finance route of getting a home equity loan or something like that? there are going to be so many changes that this technology is going to bring, and that by definition means there's an incredible opportunity. Right now in terms of new businesses, and new investments, and things to be made. What do you wish you could tell your 25-year-old self, I wish I could tell my 50-year-old self, how things are going to play out so I can best position my clients and myself to kind of take advantage of that. But I just think the next 10 years are going to, five backs what happened in the last 10 years.

Brett:

To that point, I have a friend and a gentleman that I've been mentoring, he's in his 20s. But he started to mentor me on cryptocurrency. He's 21, and he literally bought NFT about a month ago for about 14,000, and the value over a 30 day period went as high as a million dollars. Just an insane amount of rapid appreciation. He's looking at the Deferred Sales Trust, we're going through all this stuff now, and but it's really interesting to see the change, and that's happening in the cryptocurrency world Bitcoin, Etherium, hitting all-time highs, and it's happening fast. Last question, John, we're running out of time, after all your success, all the families you've helped, and the individuals you've helped your experience in real estate and securities and retirement planning? How do you stay centered in your values? How do you stay encouraged to charge forward to reach new heights?

Jonathan:

I'd say centered on my values in terms of, I've got two young daughters at home and with my wife. I see them on a daily basis, and I kind of think about what would I want to instill in my kids and how do I want them, to be when they grow up, and it kind of helps me be a little bit more self-reflective about, who I am as a person and kind of how I put myself out there to the world. I want to be a good example and a good father, and that kind of helps me stay motivated to kind of, improve myself in all aspects of my life.

Brett:

Beautiful, Jonathan Heagle for our listeners who want to get in touch with you, would you remind them one last time what's the best place for them to reach you?

Jonathan:

You can go to my website, MountainVistaWealth.com. Click the Start Here button to schedule a time for us to chat. I'm happy to speak to anyone. I'm also on LinkedIn, Jonathan Heagle. Again, pretty easy to find. Those are probably the two best ways to connect with me or John You're speaking to anyone in your audience.

Brett:

Thanks, John. Thanks for being on the show and encourage you to keep using the gifts and talents you've been given as far as taking the noise and information and distilling into what's important and being strategic about it and helping your clients create and preserve more wealth and real estate and securities and retirement planning. I also want to thank our listeners for listening to another episode of the capital gains tax solutions podcast, where we believe most high net worth individuals and those who helped them they struggled clarifying their capital gains tax deferral options not having a clear plan is the enemy using a proven tax procedure such as the Deferred Sales Trust is the best way for you to exit highly appreciated cryptocurrencies and NFTs, primary homes, businesses save a failed 1031 Exchange.

You can create and preserve more wealth you can go to CapitalGainsTaxSolutions.com right now, we have a free mastermind, by the way. I invite you and your friend and your CPA to whoever's out there that wants to learn about the Deferred Sales Trust. We call it the DST Cryptocurrency Mastermind every Friday. But we talk about the sale of businesses real estate we bring on past clients, frequently asked questions, there are no bad questions is totally open to everybody every Friday 10 am Pacific Standard Time 1 pm Eastern time. You can go to CapitalGainsTaxSolutions.com, there's a banner that says Register for the Mastermind, click on that. Join us come to learn about what we're doing. Also, you can check us out on YouTube and all of the other major iTunes and Spotify channels that you might be listening to this app. Lastly, eXp CRE Secrets if you're a Real Estate Professional M&A Advisor, business broker, you want to check that out by going to eXpertCRESecrets.com. Thanks, everyone for watching this show. Please rate review, subscribe, please share this with somebody.

The views and opinions expressed are Jonathan Heagle’s own and do not represent the views of Mountain Vista Wealth Management. The information presented is not tax, accounting, legal, or investment advice and you should seek the advice of a professional to determine the impact of any topics discussed before taking action.