Use Real Estate To Accelerate Wealth
Use Real Estate To Accelerate Wealth
How can business owners use cost segregation to minimize taxes in real estate?
I have a background in finance. I went to school for it and was a licensed financial advisor for a while before moving on to work with institutional trust funds. Numbers are my strength, and beyond pursuing financial independence, I wanted to minimize taxes. It's not about how much you make, but how much you keep.
This is relevant because when you buy expensive properties like apartment complexes, you can use cost segregation studies and bonus depreciation to show large losses. If you are in real estate full-time, you can use these losses to offset your active house-flipping income or even your spouse's W-2 income. This way, you could make seven figures net and pay zero taxes—all legally and ethically, following IRS incentives.
How can someone find the time to grow a business while working a regular job?
For me, it was easy because I truly loved what I was doing. If I were trying to achieve financial independence doing something I didn't love, I might have needed to force myself to stick to a schedule, grind through tasks, and be unhappy for a while. But since I loved what I was doing, it felt more like the thrill of the hunt—something primal.
I was also fortunate to have a flexible W-2 job at the time. I streamlined my work there and passed off daily tasks to newer employees. On average, I only worked eight to twelve hours a week, which gave me time to grow my real estate business during regular work hours.
My advice is to find time where you can. If you're lucky to have a flexible job like I did, great. If not, you may need to grind in the evenings or weekends. Especially if you're single or not married, now is the time to do it. Once you're married, your spouse likely won't appreciate you working evenings and weekends.
Set a clear path for what you need to do to achieve your goal, but if setting a deadline doesn’t work for you, avoid putting that pressure on yourself. Without a strict expectation, you can’t be disappointed.
What are some of the most common mistakes new real estate investors make?
The best example of a mistake I made was with the very first property I bought. I went into it without experience and didn't know enough to bring an experienced investor with me to walk through the property. The numbers looked great on paper—I had a finance background—but I had no construction knowledge. There was a lot wrong with that property. For instance, the kitchen cabinets looked fine on the outside, but I didn’t think to open them; they were moldy and rotting. The roof needed replacing, even though the seller claimed it was new. There were also termites eating the floor joists.
I thought I was covering my knowledge gap by hiring a home inspector, but I made another mistake by choosing the cheapest inspector I could find, who charged a flat fee of $300 per house, no matter the size. He missed all of these issues. The house was not even inhabitable, and he found almost nothing wrong with it.
Being cheap and not knowing how to assess a property were big problems. I was also too trusting with the first contractor I hired. That contractor came as a referral from another contractor I trusted, so I assumed he would be reliable. That was not the case.
What steps should someone new to the real estate industry take to get started successfully?
When you're starting out in anything, find a mentor experienced in your industry and ask for their help. If you need to provide value first, do it. Offer to find them a deal or bring them something valuable. If you ask them to look at a property with you, let them know that if it’s a good deal and you decide not to buy it, you'll assign it to them for free without an assignment fee. Some people will help without expecting anything in return, but others won’t. Either way, do whatever it takes to get help from someone experienced to avoid unnecessary headaches early on.
Why prioritize ethics and generosity in business?
One of the most important principles in business is to conduct ethical practices. There are opportunities to take advantage of people in any industry, including real estate, though it might not happen as often as people think. Sometimes, an investor or wholesaler might lie to an elderly homeowner about the value of their house, getting them to give up an unreasonable amount of equity. I don’t operate that way.
For example, I recently got a property under contract from a 68-year-old woman who had just inherited a house. I explained to her that if she put a little money into the house, it could be worth about $230,000. If she sold it as-is with a realtor, she could probably get at least $190,000. I told her, “I can only offer you $140,000 as it stands. Even after paying realtor commissions, you could still walk away with $30,000 to $40,000 more than selling it to me.” I made it clear that if she didn’t want the hassle of dealing with realtors, showings, and inspections, I could offer a guaranteed and easy option. She decided that avoiding the headache was worth more to her than the extra money, so she sold it to me for $140,000.
People who aren’t in this space are often surprised by stories like this. They might think I’m lying or taking advantage, but I'm offering a simple solution. It’s like selling a car to a dealership—you’ll get less money than selling it privately, but it’s fast and hassle-free. Most people sell their cars to dealerships for this reason.
Besides ethics, I also believe in generosity. I’m a man of faith, and one of my favorite Bible verses is 2 Corinthians 9:11: “You will be enriched in every way so that you can be generous on every occasion.” I strive daily to be generous, whether financially or by sharing knowledge. I constantly ask myself if I’ve been generous today. Did I tip the waitress extra? Did I give to every homeless person I passed? Sometimes I fall short, but I keep pushing myself to be more generous. The more generous I am, whether with money or knowledge, the more it comes back to me. It's undeniable.
*This interview has been edited and condensed for clarity.*
