November 6, 2023 • 18 mins
Ready to take your real estate investment strategies to the next level? We promise that by tuning in to our latest episode, you'll understand how to maximize your tax benefits before the year ends using cost segregation strategies and bonus depreciation. We dissect the inner workings of cost segregation, highlighting how bonus depreciation was at a staggering 100% from 2017 until 2022, before dropping to 80% in 2023, and then plummeting by 20% each year until it disappears. Discover what other investment avenues offer higher initial deductions than single-family homes and how you can deduct as much as 25-30% on an $800,000 structure.
Ever wondered why office buildings and car washes could be your ticket to significant tax savings? We take you through a journey revealing the tax boon these assets can offer. The power of cost segregation and its dwindling bonus depreciation period is explained, underlining the urgency to implement these strategies. We also delve into the essentiality of mastering the use of the tax code, which could be your secret weapon for wealth creation. Throughout the episode, we underline the discipline required for shrewd investing and the importance of leveraging government incentives. Get ready for real-world examples and insights that illuminate the potential tax deductions on structures like an $800,000 office property. This episode is a treasure trove for anyone looking to elevate their tax savings game and real estate investments.
Onward!
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
This is the Legacy Wealth Code podcast helping you
build long-term wealth andElastic legacy through real
estate investing, tax strategiesand motivational stories from
some of the most successful andinfluential people out there.
Here are your hosts real estateinvestor and entrepreneur
Michael not bomb, and realestate investor and attorney,
andrew Hook.
Michael Notbohm (00:23):
Hey guys, welcome back to another episode
of the Legacy Wealth Codepodcast.
My name is Michae, no \, herewith my partner in c.
rim , .
Andrew Hoek (00:30):
What's going on, guys?
Michael Notbohm (00:31):
good to be back so we are gonna do a little bit
of a Deep dive on costsegregation, right.
So something that you know, youand I are very passionate about
, I think it's definitelychanged the way that we invest,
the way that we teach otherpeople how to invest, but
there's also a phase out.
That has started, you know.
(00:51):
So this year is 80% and 60, 40,20, phasing it out On the bonus
depreciation portion of it.
Andrew Hoek (00:58):
Yes, correct.
Michael Notbohm (00:59):
And so I think it's important, you know, we
just want to kind of put thisepisode out there as a reminder
that, as we approach the end ofthe year, if you're interested
in doing some investments,taking advantage of the tax
strategies, this is the time todo it till it goes down to 60%.
But then also, what are some ofthe investment vehicles that
you might look at buying intothat give you a higher year one
(01:24):
deduction than like, say like asingle-family house?
sure and so I know that you andI.
Over the years, I've learnedabout a variety of different
investments that Qualify as that, so I wanted to do this episode
for that.
Andrew Hoek (01:36):
Yeah, and I think it's.
You know, we always get the endof the we're in Q4 now, so we
always get the end of the yeartax planning crunch, no matter
what.
But I think if you're, ifyou're one of those people that
is in that end of the year taxplanning crunch and you're
looking to, you know, hyperaccelerate your, your tax
(01:57):
savings and are going to costsegregate, you know, really,
getting it done between now andDecember 31st of 2023 is going
to become important to maximizethat, that acceleration well.
Michael Notbohm (02:10):
So let's just kind of put everything into
perspective.
So take it a step back the.
You know the.
The initial cost seg with bonusdepreciation, started at a
hundred percent.
Mm-hmm and then it phased out.
Last year it was still ahundred percent, this year it's
80.
I than 60, 40, and 20.
So people that don't know whatthat means explain that.
Andrew Hoek (02:34):
So it's a sunset of the law that was passed under
the Tax and Wages Act by Trumpin 2017.
But the overall act was thatbonus depreciation, which allows
you to accelerate all of yourdepreciation into year one,
would be phased out over a timeperiod.
(02:55):
So from 2017 to was thatthrough, 2022, was 100%, yeah,
2023, 80%, and then it drops 20%per year until it goes to zero.
And you know, as we've talkedabout a number of times, who
knows what happens with the taxcode as we get into the next
administration here in the 2024election cycle.
(03:16):
It very well could be somethingthat is revisited, revamped.
A lot of laws that are set tosunset over time typically get
picked up in Congress, and soyou know, this may be very well
be one of those, and so it'ssomething that we're going to
have to watch here, I think, inprobably the next you know 12
months as we get it.
(03:37):
Well, more than that, if it'sJanuary of 2024 or 2025, before
the before, either we have thesame administration or a new
administration takeover.
Those things will be importantto watch, I think, as we get
into that time period.
Michael Notbohm (03:53):
Yeah, so you know, along the lines of, like,
things getting phased out.
How long has it been?
Every time 1031 comes up, youknow, oh, they're going to phase
it out, it gets reviewed.
Now, granted, this is somewhatof a new strategy in terms of
the bonus depreciation elementof it, but, to kind of you know,
the 30,000 foot view of thisfor people who are unfamiliar
(04:14):
with our podcast or justunfamiliar with Causing in
general, is, essentially, youhave.
You know, a house is normallydepreciated single family home,
for example, if it'snon-commercial 27 and a half
years.
So the IRS is okay with you.
Taking the structure.
For easy math, a million dollarstructure, take out 20% for
(04:34):
land, you have an $800,000structure you depreciate over 27
and a half years.
Straight line.
Just divide 800,000 by 27 and ahalf.
Anybody who's owned real estateor is in the real estate
business knows that this carpetis not going to be here in 27
and a half years.
Andrew Hoek (04:51):
Hopefully not.
Michael Notbohm (04:52):
Yeah, plumbing electrical roof cabinets, blah,
blah, blah.
So there's a lifespan of thatasset that is then broken down
through a cost segregationreport, saying that the carpet
is a five-year asset andessentially, bonus depreciation
allows you to accelerate all ofthat to year one, and then the
(05:13):
step down or phase out sunsethowever you want to call it is
80% of that number is what youcan actually take this year.
So you know this is going torange, I think, based on the
property, but the overallaverage is somewhere between 25
and 30%.
Like, take this office, forexample.
Right, you did this office acouple of years ago and what was
(05:36):
the overall percentage?
About 30% somewhere in thatneighborhood.
Andrew Hoek (05:41):
Yes, yeah, it was right.
Michael Notbohm (05:43):
Just shy of 30% , yeah, so I think you know
you're safe to somewhere in 25to 30%.
So on an $800,000 structureyou're looking at, you know, for
around numbers $240,000 of year, one depreciation, and that 80%
of that that's a significanttax deduction.
Speaker 1 (06:00):
Sure.
Michael Notbohm (06:01):
And I think you know.
Part of this is really, I guess, hitting home the fact that if
you do qualify as a real estateprofessional and you can take
$180,000 off your income, that'sreal money back in your pocket.
Huge, you know that's like$65,000 plus in your pocket year
one real money that younormally be writing a check to
(06:24):
the IRS.
Now next year, when that goesdown to 60%, yeah, it's still
great, but that's a bigdifference.
Andrew Hoek (06:31):
So if you're on the fence about buying something,
Now I think that's what we weresaying at the beginning, opening
up it's.
You know, if you're a taxplanner in Q4, which a lot of
people are this year inparticular makes a big
difference.
And going ahead and doing thisnow because you're going to
start to lose 20% per year andit's funny mentally I have this
(06:55):
in my own head like man.
It's no longer 100%.
It seems like you're almostlike man.
I'm getting cheated, but thereality is that 80% is still
incredibly significant.
Even 20% is still significantwhen you start thinking about
the realm of what 20% takes offof something.
Michael Notbohm (07:16):
And what items are in that bucket?
Andrew Hoek (07:18):
Yeah, so it's still something that we'll be doing
over the next three years,without question, but I mean, I
think to your point, it startsto beg the question what are the
other strategies that we haveto start to employ and look at,
and do we become maybe a littlemore tactful about the type of
(07:40):
asset we're buying versus whatwe've been buying for the last
few years?
Michael Notbohm (07:44):
And I think, thinking back to when we started
the Legacy Wealth Code, it wasan easy sell to anyone that
invests in real estate.
All you have to do is justunderstand how this works.
And our biggest I think I wouldsay our biggest uphill battle
with trying to get this outthere was just actually telling
people your CPA, which is reallyjust a tax preparer, is not.
(08:08):
They're not in your corner interms of telling you all the
things available Once they findout about it and understand it.
Even our own CPA, like we'vediscussed many times, goes okay.
You guys were right.
I mean I wish I would haveknown about this before, but I
think that part of that is likethat was our biggest uphill
(08:28):
battle, and I think now, at thispoint it's, the battle is, you
know, if you understand how thisworks, you gotta take advantage
of what asset can I buy tomaximize it?
Andrew Hoek (08:39):
Yeah.
Michael Notbohm (08:40):
Because that has definitely changed.
Andrew Hoek (08:41):
Well, and I think you know that's where having the
connections to be able to getcost segregation estimates done
pretty quickly really is a gamechanger and a due diligence
period.
I mean we were having thatconversation the other day with
a gentleman about you know ifyou're gonna square off two
(09:04):
properties that you'reconsidering against each other.
Michael Notbohm (09:08):
Right, similar cap rates, similar returns, etc.
Andrew Hoek (09:10):
Yeah, you know fire off that property to one of the
cost segregation companies andsay give me the analysis of what
this looks like.
You know, and in many instancesthey'll do that for you without
cost.
Michael Notbohm (09:25):
Well, I mean so and I'll drop in the show notes
below a link.
If any of you have propertiesthat you're interested in just
getting a free analysis, part ofthe legacy wealth code stuff
that we've negotiated with them,as they offer a free analysis
and I know that that's somethingthat you know to your point.
If you're comparing twoproperties, why not?
Why?
Speaker 1 (09:46):
would you not?
Michael Notbohm (09:46):
submit it.
Andrew Hoek (09:47):
Yeah.
Michael Notbohm (09:47):
It's free, and then the full report is.
Okay, this looks great.
Let's move forward.
Now you have the IRS compliantreport that you'll get in the
back end, but at least knowingahead of time.
What you're going into isextremely important, I think.
Andrew Hoek (10:00):
I agree, and I mean , if you're tasked with that
information or equipped withthat information, I should say
then, then you know you.
In many instances you may saywell, the asset that maybe was
didn't look quite as good onpaper before is the better buy.
Michael Notbohm (10:17):
Yeah, so Well, and so shifting gears or I guess
even expounding a little bit onwhat we're talking about, we
have this phase out period.
It is what it is 180, 20, 80,60, 40, 20, gone.
The caveat to that is there arecertain assets that you can buy
.
So, like when we talked aboutthis office, typically 25 to 30%
(10:38):
year one deduction.
There are certain assets thatyou can buy that are even up to
100%.
So you buy something for amillion dollars, You're getting
a million dollars bonusdepreciated at whatever the
current phase out percentages,Right?
So if you're buying the rightasset, technically speaking, you
(10:58):
could actually end up with morebonus depreciation next year or
this year.
Then if you were to buysomething like a single family
home when it was 100% you seewhat I'm saying, like say.
Say like, for example, a carwash.
You buy a car wash for amillion dollars.
Most of the time that's 100%depreciable.
So now, even next year, 60%,that's $600,000.
(11:23):
You buy a million dollar officebuilding at minus the land
value, 800,000 at 30%.
800,000 times 30% 240,000 at60%.
So that is a humongousdifference.
Just having that knowledgeright there.
Andrew Hoek (11:44):
Sure, Well, and again that goes.
And certainly there are some ofthose like to car wash some of
the mobile home parks that we'vetalked about with CPAs in the
past that have done that, doreally well on those.
But again, to me that's wherethat analysis comes in.
To say, like we were talkingthe other day, I got to figure
out a 1031 exit option off of aproperty that I'm selling now
(12:07):
and so I'm going to go look at avariety of things.
I'm not going to look at oneasset, but what was the very
first thing I texted you?
You said car washes, but time tobuy car wash.
Yeah, I'll add, like the thirdone in a row down the street.
That is absolutely somethingthat I'll do in that and that
due diligence is say, if I'vegot, I've got to go do my
(12:27):
identification anyways, but I'llidentify and then I'll, and
then I will take those and givethem to a cost side company and
say run this analysis for me,and that'll play a major part in
which one I actually moveforward on.
Michael Notbohm (12:39):
Yeah.
So I think it's just likeanything in life.
I was like think back to the.
I don't know if it was onInstagram or Facebook, but it
was like the ship that wasbroken down.
No one could figure out how tofix it.
And then they finally hiredthis one guy who came down and
he took a hammer and he hetapped one small part of the
ship.
Boom, the ship came back onright.
Obviously, this is a parody,but and the guy said how much do
(13:03):
I owe you?
And it was some astronomicalamount.
He said all you did is hit thatship with a hammer.
He said no, no, I just knewwhere to hit it.
And I think that there's somuch value in the fact that the
information information is power.
And we, we teach this and wepreach this over and over again.
Like the richest people in theworld, the Uber wealthy, the
(13:25):
Uber elite, have gotten in thatscenario, not taking nothing
away from the amazing businessesthat many of them have built,
but the tax strategies they'reimplementing are actually
available to everyone.
And that's the thing that Idrive home.
I mean probably 10 times everyday.
Talking to people is like youknow, the tax code is a tax code
(13:46):
.
It's the same for me as it isfor Donald Trump, or sure.
Bill Gates or, you know, JeffBezos, et cetera.
They just know how to takeadvantage of it.
Andrew Hoek (13:55):
Yeah.
Michael Notbohm (13:55):
And they're using the incentives that are
there specifically to help,essentially, build wealth.
But really what it is is it'sabout the government doesn't
want to do certain things, andso they incentivize you to do
those things.
And so a lot of times I, youknow I have this conversation
where people like well, I'm nottrying to avoid paying taxes, I
(14:16):
would never tell someone not topay taxes.
Speaker 1 (14:19):
Right.
Michael Notbohm (14:20):
I'm just saying , if you have a choice to be an
active partner or a passivepartner with the government, I
would much rather do somethingthey're incentivizing me to do.
I get to choose where my moneyis going to go and in this case,
real estate.
I call it the golden trifecta.
You've got cash flow,appreciation and depreciation.
You can build wealth on thistax by paying taxes.
(14:42):
Essentially, you're buildingwealth and if you have that
mindset where you're realizing,like I'm writing that check for
the down payment, that's my taxbill.
Andrew Hoek (14:51):
Well and I think again it's a we always go back
to discipline, right, like ifyou're going to take advantage
of these things and you're goingto save on your taxes, that's
fantastic, but the wealthbuilding piece is really let's
be disciplined about taking thatand putting it back into
something else.
Michael Notbohm (15:10):
Yeah, it's not necessary.
Well, you said I got a 1031this.
Yeah, you're not going to Vegaswith that money?
Andrew Hoek (15:14):
I mean yeah, and it's funny because I have a
partner in that deal and hecan't wait to cash himself out
and I'm like what's that goingto get you?
You might be able to live offthat money for a few years and
then you're back to having to do, or.
Michael Notbohm (15:30):
Now I need to find another home run apartment
complex in South Carolina.
Andrew Hoek (15:33):
Yeah exactly, and so it's like you take, instead
of doing that, put it into anasset that's going to make money
while you sleep, and I meanthat's the piece that.
That's the part of the legacywealth code that I really love
is the how do you really notjust make money, but how do you
(15:54):
build long-term wealth?
Yeah, and I'm experiencing thisfirsthand, not only in what
we're doing for ourselves, butI've been working with this guy
as a state the last few monthsand it's been a crazy amount of
work, but I'm really seeing.
This man did exactly what wepreach all the time.
(16:15):
He made a lot of money, boughta ton of real estate, cash
flowed as real estate and nowit's a deal of like,
unfortunately passed away, butthere's this whole portfolio to
manage that is just crankingcash for his wife and kids and
yeah, people he cared about,yeah, and that's his legacy.
(16:38):
And that's what they're takingcare of, and it's fun to see
when you're like this is what wepreach on a large scale, yeah
Well and I think the.
Michael Notbohm (16:49):
So I was at the hockey game last night and the
guy I took to the game as afinancial planner and we were
talking about legacy wealth codeand all the tax stuff that we
teach because of course we're atodds right, it's almost like
two gangs.
You've got the stock trader guyand you've got the real estate
investor Like the bloods and thecrypts are going to the game
(17:09):
together.
It's crazy.
I had my red bandana and I wasready to go, but it was funny
talking to him and he's like man, that's such a great thing
you're teaching, I said.
The thing that's most mindblowing to me is it's so simple.
Anyone can do this.
You don't have to be from a tonof money.
(17:30):
You don't have to have a ton ofmoney to put down.
You can start with one property, or you can just be a hustler
and go identify properties andprove your value to people that
have the money, because there'speople that have the money that
don't want to put in the effortto go in and find the properties
.
And so there's so manydifferent angles with this that,
at the end of it, it all boilsdown to the fact that you can
(17:52):
easily create long termsustainable wealth through real
estate, and it's a proven model.
And you don't have to bereinventing some craze.
You don't have to come up withthe next Facebook or the next
Tesla.
You can literally just say well, this is what that guy did.
Speaker 1 (18:09):
And.
Michael Notbohm (18:09):
I'm going to follow the exact same strategy
and fast forward 10 or 15 years,and now you're a
multimillionaire with tons ofproperties in your portfolio and
I love that.
That's like.
I think the most rewardingthing for me is like I can
pretty much teach anyone how todo this.
Andrew Hoek (18:26):
Yeah, the blueprints there.
Michael Notbohm (18:28):
Yeah, so all right.
Well, that's all we got todayon the cost segregation step
down basis, but hopefully youguys got some value out of it
Until next time.
Legacy Wealth Code onward.
Speaker 1 (18:39):
Thank you for joining us for another episode of the
Legacy Wealth Code podcast.
If you enjoyed this episode,click subscribe now and never
miss an episode until next timeonward.
This is the Legacy Wealth Code podcast helping you
build long-term wealth andElastic legacy through real
estate investing, tax strategiesand motivational stories from
some of the most successful andinfluential people out there.
Here are your hosts real estateinvestor and entrepreneur
Michael not bomb, and realestate investor and attorney,
andrew Hook.
Michael Notbohm (00:23):
Hey guys, welcome back to another episode
of the Legacy Wealth Codepodcast.
My name is Michae, no \, herewith my partner in c.
rim , .
Andrew Hoek (00:30):
What's going on, guys?
Michael Notbohm (00:31):
good to be back so we are gonna do a little bit
of a Deep dive on costsegregation, right.
So something that you know, youand I are very passionate about
, I think it's definitelychanged the way that we invest,
the way that we teach otherpeople how to invest, but
there's also a phase out.
That has started, you know.
(00:51):
So this year is 80% and 60, 40,20, phasing it out On the bonus
depreciation portion of it.
Andrew Hoek (00:58):
Yes, correct.
Michael Notbohm (00:59):
And so I think it's important, you know, we
just want to kind of put thisepisode out there as a reminder
that, as we approach the end ofthe year, if you're interested
in doing some investments,taking advantage of the tax
strategies, this is the time todo it till it goes down to 60%.
But then also, what are some ofthe investment vehicles that
you might look at buying intothat give you a higher year one
(01:24):
deduction than like, say like asingle-family house?
sure and so I know that you andI.
Over the years, I've learnedabout a variety of different
investments that Qualify as that, so I wanted to do this episode
for that.
Andrew Hoek (01:36):
Yeah, and I think it's.
You know, we always get the endof the we're in Q4 now, so we
always get the end of the yeartax planning crunch, no matter
what.
But I think if you're, ifyou're one of those people that
is in that end of the year taxplanning crunch and you're
looking to, you know, hyperaccelerate your, your tax
(01:57):
savings and are going to costsegregate, you know, really,
getting it done between now andDecember 31st of 2023 is going
to become important to maximizethat, that acceleration well.
Michael Notbohm (02:10):
So let's just kind of put everything into
perspective.
So take it a step back the.
You know the.
The initial cost seg with bonusdepreciation, started at a
hundred percent.
Mm-hmm and then it phased out.
Last year it was still ahundred percent, this year it's
80.
I than 60, 40, and 20.
So people that don't know whatthat means explain that.
Andrew Hoek (02:34):
So it's a sunset of the law that was passed under
the Tax and Wages Act by Trumpin 2017.
But the overall act was thatbonus depreciation, which allows
you to accelerate all of yourdepreciation into year one,
would be phased out over a timeperiod.
(02:55):
So from 2017 to was thatthrough, 2022, was 100%, yeah,
2023, 80%, and then it drops 20%per year until it goes to zero.
And you know, as we've talkedabout a number of times, who
knows what happens with the taxcode as we get into the next
administration here in the 2024election cycle.
(03:16):
It very well could be somethingthat is revisited, revamped.
A lot of laws that are set tosunset over time typically get
picked up in Congress, and soyou know, this may be very well
be one of those, and so it'ssomething that we're going to
have to watch here, I think, inprobably the next you know 12
months as we get it.
(03:37):
Well, more than that, if it'sJanuary of 2024 or 2025, before
the before, either we have thesame administration or a new
administration takeover.
Those things will be importantto watch, I think, as we get
into that time period.
Michael Notbohm (03:53):
Yeah, so you know, along the lines of, like,
things getting phased out.
How long has it been?
Every time 1031 comes up, youknow, oh, they're going to phase
it out, it gets reviewed.
Now, granted, this is somewhatof a new strategy in terms of
the bonus depreciation elementof it, but, to kind of you know,
the 30,000 foot view of thisfor people who are unfamiliar
(04:14):
with our podcast or justunfamiliar with Causing in
general, is, essentially, youhave.
You know, a house is normallydepreciated single family home,
for example, if it'snon-commercial 27 and a half
years.
So the IRS is okay with you.
Taking the structure.
For easy math, a million dollarstructure, take out 20% for
(04:34):
land, you have an $800,000structure you depreciate over 27
and a half years.
Straight line.
Just divide 800,000 by 27 and ahalf.
Anybody who's owned real estateor is in the real estate
business knows that this carpetis not going to be here in 27
and a half years.
Andrew Hoek (04:51):
Hopefully not.
Michael Notbohm (04:52):
Yeah, plumbing electrical roof cabinets, blah,
blah, blah.
So there's a lifespan of thatasset that is then broken down
through a cost segregationreport, saying that the carpet
is a five-year asset andessentially, bonus depreciation
allows you to accelerate all ofthat to year one, and then the
(05:13):
step down or phase out sunsethowever you want to call it is
80% of that number is what youcan actually take this year.
So you know this is going torange, I think, based on the
property, but the overallaverage is somewhere between 25
and 30%.
Like, take this office, forexample.
Right, you did this office acouple of years ago and what was
(05:36):
the overall percentage?
About 30% somewhere in thatneighborhood.
Andrew Hoek (05:41):
Yes, yeah, it was right.
Michael Notbohm (05:43):
Just shy of 30% , yeah, so I think you know
you're safe to somewhere in 25to 30%.
So on an $800,000 structureyou're looking at, you know, for
around numbers $240,000 of year, one depreciation, and that 80%
of that that's a significanttax deduction.
Speaker 1 (06:00):
Sure.
Michael Notbohm (06:01):
And I think you know.
Part of this is really, I guess, hitting home the fact that if
you do qualify as a real estateprofessional and you can take
$180,000 off your income, that'sreal money back in your pocket.
Huge, you know that's like$65,000 plus in your pocket year
one real money that younormally be writing a check to
(06:24):
the IRS.
Now next year, when that goesdown to 60%, yeah, it's still
great, but that's a bigdifference.
Andrew Hoek (06:31):
So if you're on the fence about buying something,
Now I think that's what we weresaying at the beginning, opening
up it's.
You know, if you're a taxplanner in Q4, which a lot of
people are this year inparticular makes a big
difference.
And going ahead and doing thisnow because you're going to
start to lose 20% per year andit's funny mentally I have this
(06:55):
in my own head like man.
It's no longer 100%.
It seems like you're almostlike man.
I'm getting cheated, but thereality is that 80% is still
incredibly significant.
Even 20% is still significantwhen you start thinking about
the realm of what 20% takes offof something.
Michael Notbohm (07:16):
And what items are in that bucket?
Andrew Hoek (07:18):
Yeah, so it's still something that we'll be doing
over the next three years,without question, but I mean, I
think to your point, it startsto beg the question what are the
other strategies that we haveto start to employ and look at,
and do we become maybe a littlemore tactful about the type of
(07:40):
asset we're buying versus whatwe've been buying for the last
few years?
Michael Notbohm (07:44):
And I think, thinking back to when we started
the Legacy Wealth Code, it wasan easy sell to anyone that
invests in real estate.
All you have to do is justunderstand how this works.
And our biggest I think I wouldsay our biggest uphill battle
with trying to get this outthere was just actually telling
people your CPA, which is reallyjust a tax preparer, is not.
(08:08):
They're not in your corner interms of telling you all the
things available Once they findout about it and understand it.
Even our own CPA, like we'vediscussed many times, goes okay.
You guys were right.
I mean I wish I would haveknown about this before, but I
think that part of that is likethat was our biggest uphill
(08:28):
battle, and I think now, at thispoint it's, the battle is, you
know, if you understand how thisworks, you gotta take advantage
of what asset can I buy tomaximize it?
Andrew Hoek (08:39):
Yeah.
Michael Notbohm (08:40):
Because that has definitely changed.
Andrew Hoek (08:41):
Well, and I think you know that's where having the
connections to be able to getcost segregation estimates done
pretty quickly really is a gamechanger and a due diligence
period.
I mean we were having thatconversation the other day with
a gentleman about you know ifyou're gonna square off two
(09:04):
properties that you'reconsidering against each other.
Michael Notbohm (09:08):
Right, similar cap rates, similar returns, etc.
Andrew Hoek (09:10):
Yeah, you know fire off that property to one of the
cost segregation companies andsay give me the analysis of what
this looks like.
You know, and in many instancesthey'll do that for you without
cost.
Michael Notbohm (09:25):
Well, I mean so and I'll drop in the show notes
below a link.
If any of you have propertiesthat you're interested in just
getting a free analysis, part ofthe legacy wealth code stuff
that we've negotiated with them,as they offer a free analysis
and I know that that's somethingthat you know to your point.
If you're comparing twoproperties, why not?
Why?
Speaker 1 (09:46):
would you not?
Michael Notbohm (09:46):
submit it.
Andrew Hoek (09:47):
Yeah.
Michael Notbohm (09:47):
It's free, and then the full report is.
Okay, this looks great.
Let's move forward.
Now you have the IRS compliantreport that you'll get in the
back end, but at least knowingahead of time.
What you're going into isextremely important, I think.
Andrew Hoek (10:00):
I agree, and I mean , if you're tasked with that
information or equipped withthat information, I should say
then, then you know you.
In many instances you may saywell, the asset that maybe was
didn't look quite as good onpaper before is the better buy.
Michael Notbohm (10:17):
Yeah, so Well, and so shifting gears or I guess
even expounding a little bit onwhat we're talking about, we
have this phase out period.
It is what it is 180, 20, 80,60, 40, 20, gone.
The caveat to that is there arecertain assets that you can buy
.
So, like when we talked aboutthis office, typically 25 to 30%
(10:38):
year one deduction.
There are certain assets thatyou can buy that are even up to
100%.
So you buy something for amillion dollars, You're getting
a million dollars bonusdepreciated at whatever the
current phase out percentages,Right?
So if you're buying the rightasset, technically speaking, you
(10:58):
could actually end up with morebonus depreciation next year or
this year.
Then if you were to buysomething like a single family
home when it was 100% you seewhat I'm saying, like say.
Say like, for example, a carwash.
You buy a car wash for amillion dollars.
Most of the time that's 100%depreciable.
So now, even next year, 60%,that's $600,000.
(11:23):
You buy a million dollar officebuilding at minus the land
value, 800,000 at 30%.
800,000 times 30% 240,000 at60%.
So that is a humongousdifference.
Just having that knowledgeright there.
Andrew Hoek (11:44):
Sure, Well, and again that goes.
And certainly there are some ofthose like to car wash some of
the mobile home parks that we'vetalked about with CPAs in the
past that have done that, doreally well on those.
But again, to me that's wherethat analysis comes in.
To say, like we were talkingthe other day, I got to figure
out a 1031 exit option off of aproperty that I'm selling now
(12:07):
and so I'm going to go look at avariety of things.
I'm not going to look at oneasset, but what was the very
first thing I texted you?
You said car washes, but time tobuy car wash.
Yeah, I'll add, like the thirdone in a row down the street.
That is absolutely somethingthat I'll do in that and that
due diligence is say, if I'vegot, I've got to go do my
(12:27):
identification anyways, but I'llidentify and then I'll, and
then I will take those and givethem to a cost side company and
say run this analysis for me,and that'll play a major part in
which one I actually moveforward on.
Michael Notbohm (12:39):
Yeah.
So I think it's just likeanything in life.
I was like think back to the.
I don't know if it was onInstagram or Facebook, but it
was like the ship that wasbroken down.
No one could figure out how tofix it.
And then they finally hiredthis one guy who came down and
he took a hammer and he hetapped one small part of the
ship.
Boom, the ship came back onright.
Obviously, this is a parody,but and the guy said how much do
(13:03):
I owe you?
And it was some astronomicalamount.
He said all you did is hit thatship with a hammer.
He said no, no, I just knewwhere to hit it.
And I think that there's somuch value in the fact that the
information information is power.
And we, we teach this and wepreach this over and over again.
Like the richest people in theworld, the Uber wealthy, the
(13:25):
Uber elite, have gotten in thatscenario, not taking nothing
away from the amazing businessesthat many of them have built,
but the tax strategies they'reimplementing are actually
available to everyone.
And that's the thing that Idrive home.
I mean probably 10 times everyday.
Talking to people is like youknow, the tax code is a tax code
(13:46):
.
It's the same for me as it isfor Donald Trump, or sure.
Bill Gates or, you know, JeffBezos, et cetera.
They just know how to takeadvantage of it.
Andrew Hoek (13:55):
Yeah.
Michael Notbohm (13:55):
And they're using the incentives that are
there specifically to help,essentially, build wealth.
But really what it is is it'sabout the government doesn't
want to do certain things, andso they incentivize you to do
those things.
And so a lot of times I, youknow I have this conversation
where people like well, I'm nottrying to avoid paying taxes, I
(14:16):
would never tell someone not topay taxes.
Speaker 1 (14:19):
Right.
Michael Notbohm (14:20):
I'm just saying , if you have a choice to be an
active partner or a passivepartner with the government, I
would much rather do somethingthey're incentivizing me to do.
I get to choose where my moneyis going to go and in this case,
real estate.
I call it the golden trifecta.
You've got cash flow,appreciation and depreciation.
You can build wealth on thistax by paying taxes.
(14:42):
Essentially, you're buildingwealth and if you have that
mindset where you're realizing,like I'm writing that check for
the down payment, that's my taxbill.
Andrew Hoek (14:51):
Well and I think again it's a we always go back
to discipline, right, like ifyou're going to take advantage
of these things and you're goingto save on your taxes, that's
fantastic, but the wealthbuilding piece is really let's
be disciplined about taking thatand putting it back into
something else.
Michael Notbohm (15:10):
Yeah, it's not necessary.
Well, you said I got a 1031this.
Yeah, you're not going to Vegaswith that money?
Andrew Hoek (15:14):
I mean yeah, and it's funny because I have a
partner in that deal and hecan't wait to cash himself out
and I'm like what's that goingto get you?
You might be able to live offthat money for a few years and
then you're back to having to do, or.
Michael Notbohm (15:30):
Now I need to find another home run apartment
complex in South Carolina.
Andrew Hoek (15:33):
Yeah exactly, and so it's like you take, instead
of doing that, put it into anasset that's going to make money
while you sleep, and I meanthat's the piece that.
That's the part of the legacywealth code that I really love
is the how do you really notjust make money, but how do you
(15:54):
build long-term wealth?
Yeah, and I'm experiencing thisfirsthand, not only in what
we're doing for ourselves, butI've been working with this guy
as a state the last few monthsand it's been a crazy amount of
work, but I'm really seeing.
This man did exactly what wepreach all the time.
(16:15):
He made a lot of money, boughta ton of real estate, cash
flowed as real estate and nowit's a deal of like,
unfortunately passed away, butthere's this whole portfolio to
manage that is just crankingcash for his wife and kids and
yeah, people he cared about,yeah, and that's his legacy.
(16:38):
And that's what they're takingcare of, and it's fun to see
when you're like this is what wepreach on a large scale, yeah
Well and I think the.
Michael Notbohm (16:49):
So I was at the hockey game last night and the
guy I took to the game as afinancial planner and we were
talking about legacy wealth codeand all the tax stuff that we
teach because of course we're atodds right, it's almost like
two gangs.
You've got the stock trader guyand you've got the real estate
investor Like the bloods and thecrypts are going to the game
(17:09):
together.
It's crazy.
I had my red bandana and I wasready to go, but it was funny
talking to him and he's like man, that's such a great thing
you're teaching, I said.
The thing that's most mindblowing to me is it's so simple.
Anyone can do this.
You don't have to be from a tonof money.
(17:30):
You don't have to have a ton ofmoney to put down.
You can start with one property, or you can just be a hustler
and go identify properties andprove your value to people that
have the money, because there'speople that have the money that
don't want to put in the effortto go in and find the properties
.
And so there's so manydifferent angles with this that,
at the end of it, it all boilsdown to the fact that you can
(17:52):
easily create long termsustainable wealth through real
estate, and it's a proven model.
And you don't have to bereinventing some craze.
You don't have to come up withthe next Facebook or the next
Tesla.
You can literally just say well, this is what that guy did.
Speaker 1 (18:09):
And.
Michael Notbohm (18:09):
I'm going to follow the exact same strategy
and fast forward 10 or 15 years,and now you're a
multimillionaire with tons ofproperties in your portfolio and
I love that.
That's like.
I think the most rewardingthing for me is like I can
pretty much teach anyone how todo this.
Andrew Hoek (18:26):
Yeah, the blueprints there.
Michael Notbohm (18:28):
Yeah, so all right.
Well, that's all we got todayon the cost segregation step
down basis, but hopefully youguys got some value out of it
Until next time.
Legacy Wealth Code onward.
Speaker 1 (18:39):
Thank you for joining us for another episode of the
Legacy Wealth Code podcast.
If you enjoyed this episode,click subscribe now and never
miss an episode until next timeonward.
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