The Jon Sanchez Show

12/05-How to minimize taxes with your investment real estate

For many, investment real estate can offer both substantial tax benefits. However, if your planning is not done correctly, the opposite affect can happen….your taxes can dramatically increase. This afternoon on the Jon Sanchez Show at 3pm, we’ll discuss 7 real estate tax strategies you must be aware of if you are a real estate investor.

Duration:: 35m
Broadcast on:: 06 Dec 2024
Audio Format:: other

With the summer sizzle starting to fizzle, cooler heads are looking to lock in a wellness routine fit for the fall and beyond. Lucky for you, rituals high standards don't drop with the temperature. Fully committed to traceable science and sourcing, ritual is shaking up the supplement industry with high quality ingredients and scientifically developed formulas. With them, you know what you're taking, where it comes from, and why it's important. They've got every base covered from their clinically backed women's 18 plus multivitamin to groundbreaking options like stress relief and sleep melatonin. Which both use first of its kind bio series technology designed to optimize formula delivery and right now for a limited time. Get up to 40% off your first month at ritual.com/podcast. Good Thursday, afternoon, Chia. Welcome to the John Sanchez show on new stock 780 KOHs up whole leisure to be with you and a pole leisure to be with my co-host around the horn. We shall go. Corey edge of Ed Drility. How you doing, big C? I'm doing great. How are you doing? Good. Sorry for the fun tag yesterday. Let's try again, maybe tonight or tomorrow. Let's do it. I apologize as well. Don't worry. It's too busy guys, too busy guys. And every time you call, I gotta get off this call. I gotta take Corey's call. Oh my goodness. The times that we live in my friend, the times we live in. All right, sounds good. Let's go to the other one. Mr. Dwight Mallard, synergy one. Mortgage Lindy. I always take her now. I know you do. You're a little slow on the text messages. You're a little slow on the text messages that the older you get, I noticed. Yeah, but I've always been slow on the text messages. I'm a talker. I'm a talker. You are your old-fashioned guy. Communicate the old-fashioned way with a novel idea. I know. Do you guys have, well, not so much you, Corey, because your kids are still relatively young, but I know Dwight. Do you have said, you know, do you get tired of the text messages from your kids? It's like, yeah, my son takes after, and my son takes after me, my daughter. Really? Okay. Yeah, it'll be four days, you know, and so I, yeah, but yeah, I, I, I, I am not a big fan of, I, I'm a big fan for a quick, textless answer. Yeah. I mean, if there's, I just, I, I just like to talk on a phone. I, I could use a man line still, you know. The dial, the dial, the dial, the dial on there, the old push button phones. Yeah, got it all. I know, I know. I'm with you, man. One of the things I love about you, old-fashioned, old-fashioned. All right, boys, let's tell everybody what we've got lined up this afternoon. We will, of course, go through today's stock market activity. Little bit of a rough one today. Little bit of a rough one. I've warned you two days ago to be prepared, and low and behold, here it is. I'll tell you the reasons why the market sold off a bit today. Nothing major by any means, but definitely a tough one. And then, of course, we have non-farm payroll numbers tomorrow, which could turn things around or they can make things worse. It's going to be a crazy report. So we'll give you some details on that one to kind of lay out the, the playbook for tomorrow. But in the meantime, let's tell you what the real estate topic is for these wonderful gentlemen. You know, for many of you, of course, investing in real estate can give you a lot of advantages. Cashflow, someone, hopefully, if things go right, they're making your mortgage payment, plus a little bit more in your pocket. All kinds of great things. But tonight, we're going to be here this afternoon. We're going to be focusing on something much more important than cashflow, much more important than appreciation. And that is managing the tax side of your investment real estate, because if you're planning is not done correctly, if you are a real estate owner. You know, I'm talking the investment side, not the primary, but of course the investment side. If your planning is not done correctly, guess what? Just the opposite effect can happen. You're not going to get substantial tax benefits. You could see, as a matter of fact, your taxes dramatically increase. So what we're going to be doing this afternoon is we're going to discuss seven real estate tax strategies that you must. And I underlined the word must. You must be aware of if you are a real estate investor. Corey, this is something you and I have a lot of conversations, you know, off air even about as far as tax strategies are concerned with my clients, i.e. your clients many times. This is, I think, you know, I find this really amazing that people that have been real estate investors for a million years, they still don't have an understanding of the basics of tax strategies when it comes to real estate. I just had a phone call. See, today's Thursday, I guess it was Monday. And, you know, a client ended up selling an investment piece of property. Even though I had recommended to him, you know, look at a 1031 exchange, which will be one of the topics we discuss and some other types of strategies to use. And to make matters worse, the rental property was held in California. So guess what? The state of California gets there. What is it now? Corey, 5, 10%, something like that? Of their capital of the estate. Yeah, you know, it's up there. So when it's all said and done, and then another tax that we'll talk about is this what I like to call the gotcha tax, which is what's called depreciation recapture that everybody forgets about. That's a nice little 25% tax on all the depreciation you've taken. Yeah, it all up. And it's really, really easy to lose anywhere between, depending upon what, you know, tax bracket you're in really easy to lose anywhere between 35 to even close to 50% of your hard-earned profits without proper tax planning. Do you find the same type of situation, Corey, with people that you talked to that they really don't understand all the rules and things when it comes to selling investment properties and the taxes related to that? Um, I do. I think most people don't understand the rules because that's the IRS dress and that way so that they're not easily understood. But some of the basic ones that 1031 exchange your property basis, I get a lot of clients that sell their property and I explain to him, "Okay, talk to your accountant. You're probably going to have a capital gain here. What'd you buy it for and what'd you put into it?" They just have not kept good records over the years and people need to understand that when you put money into these properties, that goes on to your basis that lowers your capital gains, you know, exposure if you've done it, right? And even on your primary, and even on your primary, right, Corey? I mean, that's something a lot of people forget because as we'll discuss, remember folks, you know, if you're single, you can make a $250,000 profit tax-free state and federal if you're in a state that's taxed like California and $500,000 if you are married. But again, with the way real estate is appreciated over the years, I say it with our clients, Corey, that many times they will exceed that $500,000. I say that exact same thing. Did you do any home improvements over the years? Oh, that's right. Well, do you have the receipts? Now, you know, yeah, we put a new rough on and we put a new garage door on and, you know, that was 10 years ago. I don't have any records of that. And it's like, yeah, there you go. All right, to your point, sorry to interrupt you. No, no, it's at that point, it's important to keep all the receipts. You got to remember it's someone who has been through an audit and it was incredibly fun. You remember you and I talked to you at that point. With the IRS, you are guilty until proven innocent. So if they audit you and you don't have a receipt, you don't get to bring them out and say, "Well, look at that garage. How do you think it got here? Like, you need the receipt. You need to show the proof. Otherwise, you're going to get things." The other big one too, John, that I get a lot is estates, people inherit properties, people become beneficiaries and trusts. They're like, "Oh, my uncle left me this house. It's worth $200,000. I just sold it and got the $200,000. I go, "Great." Well, now do you understand the taxes? Do you understand the step of basis? Do you, like you should have talked to a few people before you pulled that trigger because now you've just put yourself in a big hallway? That's right. Absolutely. Do you find that the depreciation recapture that we'll discuss? Do you find that a long forgotten issue? I know I do. I think people forget about it, but usually most of my clients have someone do their taxes. So it's one of those things that is, they forget about it, but you can catch it. Like the accountant's going to explain it that way. The bigger one I see is the one we're talking about where the accountant's like, "I know you've put $100,000 into the phone for your receipts, and you can't find them, and now that there's really nothing you can do about it." That's right. That's right. Exactly. Do I chime in real quick? I think the biggest takeaway that you guys are talking about is the receipt. Keep everything because I see the same thing. I mean, just get a shoebox or something, right? Anything you do, just put it in that box. You could have time to go through it year by year, but I see that exact same thing. And it's so important because an accountant's going to have a hard time. You're going to go, "Well, I'm sure I spent 50." Well, I'm not willing to take that audit risk. You're not having it, and so that's huge. And I do see the same things you're talking about and that what we're going to go through because I look at their taxes and they get a big old hit. It's like, "What was that much?" It's true. It's real. It happens. It is. It is. And again, as prices continue to appreciate and gains become bigger, the situation from a tax liability standpoint is only going to get worse if you don't understand the rules. But sit back and relax because after tonight's show, you're going to understand the rules. I promise you that. At least about seven of them that we're able to get to. And again, a little disclaimer, none of us are CPAs, and we want you to always, as Corey mentioned, discuss before you sign any document to sell your home. I don't care if it's primary, investment, whatever it is, let your CPA know what you're doing because nothing is worse than, again, you sell something, let's say, in this month, November, December, and you sit down with your accountant, come March or so to do your taxes, and it's a big surprise to them that you sold something without consulting with them. So please, don't sign a selling agreement. Don't sign a purchase agreement. Don't sign anything real estate related until you run up past your accountant. Right, Corey? Absolutely. Agreed. Yeah, you got it. Okay. One more housekeeping note, and then we're going to get down to the stock market recap and then get into our topic because we had a lot to discuss. I want to remind everybody, next Wednesday, Jason and I are going to be holding our December webinar, the 2024 economic recap and 2025 investment outlook. It'll be on next Wednesday, December the 11th, starting time of the webinar is 6.30pm. No charge for it. All you got to do is go to our website at sanchezwealthmanagement.com. Click on the upcoming events and register. We're going to be covering a lot of things, you know, again, looking back of what happened this year, what a crazy, great year it has been. We'll keep our fingers crossed for another, you know, three weeks or so. But looking back, what did we learn from it and then how does it set the table going for for 2025? Because I think 2025 is going to be one heck of a great year in many, many aspects. And so we want to make sure that all of you are prepared for that. So again, next Wednesday, December the 11th, 6.30pm is the webinar to sanchezwealthmanagement.com upcoming events and register for it. All right, let's get down to the stock market side of things. So as I said at the beginning of the show, guys, it was a little bit of a tough day today. I mentioned again today's Thursday, so it was on Tuesday's show. If you guys remember, you know, don't get carried away. Don't get so giddy. Don't be on this sugar high that so many investors are on right now that this market is just going to keep going up and up and up. It cannot continue to set records day after day after day yesterday. Of course, we had a trifecta, right, a record setting day for the Dow, the NASDAQ and the S&P. Things like that can't continue. A pause is imminent. Well, we got a little bit of that pause today. One of the culprits of the 248 point decline of the Dow today was United Health Group. Now remember, this used to be the most heavily weighted stock in the Dow. It's I think number two now. Goldman has surpassed them. But yesterday, of course, we had that tragic event where the CEO of United Health got killed. I mean, that was a real blank. There's no way to sugarcoat this. He was getting out of his car to go to an investor day in New York City, got out of his car, was walking down the sidewalk. The security cameras have it. And this kid, which is still at large, hoodie on backpack on, and he walks right up to the CEO of United Health and kills him, shoots him right in the back multiple times. The guy falls to the ground. He ends up shooting him again as gun misfired, but he fixed it, shot him again. Evidently, according to his wife, he'd been receiving death threats, which seems kind of strange, of course, with an insurance executive receiving death threats. But who knows what's behind the scenes. But the stock didn't really react yesterday. As a matter of fact, if I remember, I think I actually finished with a small gain of like three bucks or something. But today, it did not do that. It sold off heavily down $29.79, about a 400.8% loss to 581. That was the primary problem of the Dow. Had about half up, half down, just off the top of my head in the low math here. But it was just kind of a sloppy day from that perspective. So I'll give you a few more details when we come back. Let's get some details on the highways, though, with Kristen Snow. How you doing, my dear? Welcome back to the John Sanchez Show and his talk, 780K OH with Dwight Mallard of Center Juhan Lending Coriage of Edge Realty. We finished down 248 on the Dow, 0.56% loss at a level of $44,765. Then as that gave up 34, the S&P lower by 11. As I said, the primary pressure point of the Dow was United Health with that loss of a little over $29 a share. Pretty light on the economic side of things. It was Thursday, so we always get our initial claims, up 9,000 filings for the week, the 224,000 individuals continuing claims, falling 25,000 to 1,871,000. Let's go to the commodity side and then we'll talk a little bit about tomorrow's big report, which is the non-farm payroll data. Let's go to the oil front, down 4/10 over percent, 68.30 a barrel, tough day for gold, $27.80 loss, $2,648.40. And Dwight, you've got to have a big smile, my friend, a big smile, and chains on the 10-year to yield a 4.18. I have a feeling we didn't move too much on the 30-year mortgage, am I right? You're absolutely correct. This has probably been one of the slowest moving weeks ever in the treasury market, so we'll take it. The old thing is if I can't have low rates, I'll take stable rates, right? I'll take it, but I'm getting a little nervous about tomorrow, I don't know if you want to validate that or I'm reading a lot of this stuff, I didn't get a chance to read it today. It's like, wow, here comes this job number. This could be a big hit to the bond market, I don't know. Yeah, that's the concern, and let's tell everybody why this is the case. So let's go back to the month of October's data, right? Month of October, we only had 12,000 jobs created, right? This number, again, it's all over the board as to where they are thinking it's going to come in. The latest figures that I'm seeing is somewhere around 220,000 jobs. I think that may be a little bit on the optimistic side. I've seen projections even as low as 140. So to your point, Dwight, the economists, their guesses are all over the board, but what can make this a muddy number tomorrow is this is the month where we had a couple of strikes going on, and also we had the hurricanes. And so that's where some economists are saying, okay, this could be a really goofy/bad number, but all three of us know that when that happens, Wall Street gives them a passcard. When we got the 12,000 jobs in October, like, okay, no big deal, the market really didn't have much of a reaction. So like I said, it's going to be interesting. That number will be out at 5.30 tomorrow, so I'll cover it on the 5.53 stock update with Ross tomorrow morning. But yeah, it could be somebody who waters there, guys. No doubt about it. Corey, anything you want to add? I was just curious if you think is a lower number bad or a higher number bad? I can see if they do a lower number than them. Yeah, well, they're all kind of cut right to a higher number to opposite. Yeah, that's a great question, Corey. I think right now the way we sit, I think a higher number would be bad, because like I said, if it's a lower number, they're going to brush it off and say it was due to those anomalies that I just mentioned. If it's a hotter number, then that comes back to your case, where when we get the Fed decision in a couple of weeks, that could be a tough case. But to be honest with you guys, I think you could see a hot number of three, 400,000, and I don't think it would change the Fed's trajectory as far as giving us a quarter percent cut next or later this month. I really don't. I think they're based upon Fed Chair Powell's comments yesterday at the conference back in New York. He's steadfast on the quarter percent cut, saying the economy can withstand it. Yeah, we know inflation is kind of hanging in there a little bit on the hot side, but he's given no indications, and again, just as frequently as yesterday, that they would not give a quarter percent cut. And I think the street would have a Tissy Fed if they did not do the quarter percent cut, still high probability, I think we're up to 70s, low 80% range right there as far as the probability. So, yeah, I think it can be a Goldilocks query to your point. I think it can be a low number. They're going to brush the side. If it's a hot number, they're going to go, that big deal. We know we've got a Fed cut in a couple of weeks. We're going to say what? I was just going to say, I'm surprised that Wall Street is that, you know, I don't know, passive, I guess, about it. They just give you passive, aggressive, any help, but you go from 12,000 to 220,000, and they're going to brush it off either way. You know, but I think to your point, I think to your point, the quarter is all baked in already. It's all baked in. Oh, yeah, absolutely. Yeah, so I think if he, like you always say, they will have a fit, Wall Street will have a tantrum if he doesn't do it. So, I mean, you know, we've seen that before. But you know, you bring up an interesting point that I wanted to mention, I was actually thinking about this yesterday, Dwight, and that is, you know, when we talk about, when we're less than 24 hours from a nonform payroll number, everybody is on edge, right? Everyone's going, you know, for everything that we just said, that they're going to cut too much. You know, what's the number going to be? How's it going to relate to the next cut, so on and so forth? I got to be honest with you guys. I don't know if it's just my, you know, professional opinion on this or not. To be honest with you, I don't think anybody gives a damn. I really don't. I am sensing, and this is why I went on my soapbox a couple weeks ago, and I said, if you as a parent are not spending time with your children, your grandchildren, if you are a grandparent, and telling these young kids to start putting every dime they can into the stock market, as well as you yourself, I think you're going to be making a major mistake. I am sensing a wave of optimism because of Trump that, again, goes back to, you know, 2016. I remember standing, you know, at the, at the Peppermo, I did a seminar that morning after the election, and I said, buckle your seatbelt. This is going to be one hell of a ride, and sure enough, it was, but I'm sensing that times 10, guys, just to be real honest with you, and this is just my, again, my opinion, I am sensing it with our clients. I'm sensing it with people that I talked to, everybody from the business owner, whether they're a stock market investor or not, all the way, you know, across the board to our retirees, everybody is so optimistic, and we all know we can be hypochondriacs, right? We can talk ourselves into a market selloff, or we can talk ourselves into a very, very strong bull market, and I am adamant that I believe we are going into one of the most incredible bull markets over these next few years. Not that we're not going to have a little blips here and there, but overall, the trend is going to be extremely strong. We got interest rates are going to be coming down. Trump, I think, is not going to make the same mistakes that he made the first time around, meaning putting, you know, one person after the other in the wrong position. They can't get through confirmation. Wall Street loves his picks. I do not remember when he got elected before him being so forthcoming and really doing a great job on picks. I mean, again, Wall Street, you know, the chair that he picked yesterday for the SEC, you know, Wall Street guy, pro crypto. What happened yesterday? Crypto shot above, you know, $100,000. So he's doing things just with his cabinet picks alone that are exciting investors, and so my point of all that is, you know, I really don't think people really even care anymore, both professional and, you know, retail investors. I don't think they really care right now with the Fed does or, frankly, with the non-farm payroll numbers are because to me, it's like it went from number one on the list of worries. Now, it's probably down to maybe top five, top 10. I don't know. It's just, I don't hear anybody again professionally or on the retail side, even concerned about it, which good or bad. I just feel that that's the atmosphere that we have ourselves in right now. I think it's one of the most incredible times in my 35 plus year career that I've experienced. I really do. I can't tell you the last time I felt this optimism out there. I really haven't. Nice. Yeah. All right. With that said, let's, you're up to date on the stock market side on the interest rate, the mortgage side. When we come back, we're going to get into our topic, which is how to minimize taxes with your investment real estate. But first, Greg Neff has news traffic and weather. How you doing, Greg? Welcome back to the John Sanchez show on his talk. 780 KOH with Corey Edge of edge related to white molarity of synergy and lending. We've finished with the loss of 248 on the Dow, NASDAQ declined 34, the S&P down 11. All right. You real estate investors, listen up because you're in for a good teaching. I promise you that. We're going to go through about seven strategies. Again, just, just the tip of the iceberg of helping you minimize the taxes that you could potentially potentially find yourself and snarled in if you own investment properties and you don't do things correctly. So let's get started, guys. We got a lot to cover. All right, Corey, we're going to start with the first one. Utilizing the 1031 tax deferred exchange. Again, still amazed. A lot of people don't know about this. Take it away, my friend. So if you're selling an investment property, we'll just talk stick to real estate. You can exchange it. If your plan is, I'm going to sell this duplex because I really want to buy, you know, a floorplex. Well, if that's the idea, then you can sell the duplex. You can put the money with a 1031 exchange intermediary, which is a third party company that holds the funds. I won't get into all the nitty gritty, but they actually take title to the properties. They do all that stuff for you. And then you can buy the new property and there's no tax. So if you would have already capital gains tax, it's deferred. And so you sell the property that you just acquired and that could be years down the road or never. It's a little more complicated than that, John. You have to get with the 1031 exchange intermediary intermediary. You want to pick someone who's been a business for quite a while, who is insured. I have seen multiple times, these companies, the small ones, they're holding all these exchange funds. The next thing you know, the accounts empty and they're in, you know, police. So just make sure you're working with the bigger companies that have their funds insured. Let's go through a quick example for everybody, because this is probably one of the most common tax deferral strategies that you will find that people will do. So let's go back to Corey's example. Let's put some dollars and cents on this. You buy a condo for 300. Again, folks, this is all investment. You buy a condo for 300,000. A couple years later, you sell it for 400,000. You go, man, I don't want to pay the capital gains tax, which we'll go through in a moment of how those numbers are calculated. So $100,000, let's say your capital gains rate is 20%. Oh, I'm going to lose $20,000 to the Fed. Again, if you're in California or another taxable state, you most likely know California does. I'm not going to say other states, but most states have a capital gains tax on the state level. So let's just say that's 5%. Let's say it's a property you own down in Sacramento, right? So now you owe $20,000 in capital gains tax and $5,000 in state capital gains tax. So there goes $25,000 or 25% of your profit, right? Just out the door. Just out the door. So what Corey said is, look it, you can do a 1031 tax deferred exchange, which means you have to buy a property of equal or greater value. So if you sell it for 300, you got to buy something at least 300,000 and 99 cents, and that would qualify. It's got to be equal or greater value. Like kind, Corey, I know, and again, we can spend hours on this, that's kind of up to the accountant. Some accountants will say, if you're selling duplex, you better go into duplex. Others will say, no, as long as it's an investment-related item, you're fine. So, you know, like you said, duplex into a fourplex condo into a single family rental, whatever it is. Again, that's why you want to get your accountant involved. You sell the property, Corey, I want to make sure this point is very important. I see people making this mistake a lot. I don't know if it's still this way, but I know in years past, there were some real estate contracts that did not have the provision, or it did have the provision in the broker or real estate agent did not check the box saying, "Mr. seller or Mr. buyer, guess what? I want this ability to do a 1031 tax deferred exchange." They didn't check the box. It wasn't in there, and therefore problems arise. Is that still an issue? It's not an issue. So, our current contracts now have it as a standard language that the buyer will work with the seller for these forms. It doesn't cost the buyer anything. It's like two or three extra pieces of paper. And so, most of it's pretty standard. I've never come across a buyer that says, "Absolutely not. I will not find those documents because I have nothing to do with the buyer, effectively." Right. All right, exactly. And some really key points, because I'm sure you see this too. You cannot sell the property with the money in your account and then decide to do a 1031 exchange. The minute you touch the money, it's taxable. You're done. It's over. If you only touch a certain amount of the money, that portion is going to be taxable. It's called boot. So, you need to get with your accountant to understand all that stuff. You want to know the whole game plan before you even list the property you're selling. Do not enter into a contract. Do anything if you're going to do a 1031 exchange until you've talked to the intermediary. Again, I won't get into all the nitty-gritty, but they're actually going to take title to that property. They're going to buy the new property under that new title. Then they're going to transfer it to you. It's more complicated than it sounds, but they will take care of all those things. The other thing too, John, that people don't realize is they're, well, that's getting to the dates, right? So let's say you sell the property now from the day it closes. The day you sold it, you have 45 days to identify what's called the replacement property. So that's the new property you're going to purchase. You can identify up to three of them, and you only have to close on one of them. If you identify more than three, you got to close on everything you identified. So don't get stuck in that. Ooh, I didn't know that. Is that a new one? Yeah, I'm not aware of that. I've always been there, and we've... Interesting. Yeah, I won't tell you why, but we know that you're stuck in it. And then you have 180 days from the day you sell the property to close on the new property. And when all this is happening, the intermediary is sold in your funds. You're shopping just like you normally would. You write the offer under the name the intermediary tells you to, they'll purchase it under the LLC they've created, and you're good. The big one that people don't get this time of year, John, a lot of people don't understand, the 180 days is an on or before. So there's two timelines, 180 days or if you get this time of year, it'll be when the tax return is due for the taxable year you sold the property. So if you and I sold the property right now and said, "May we get 180 days?" We would be incorrect because our replacement would have to be purchased by the time we have to file our federal tax return on April 15th of 25th. So get with your accountant to understand those rules because it's not always 180 days. It depends on the time of year that you sell the property. Yeah, I'm glad you brought the time period. Those are excellent points, Corey. You even taught me something on that last point you just mentioned as well as the previous one. So excellent job, excellent job on that one. I want to go with intermediary very quickly because this is really one of the most key important things. You will still use a normal escrow company just like normal, but to Corey's point, I want to just let you hear it out of a second mouth here. Do not touch the money, right? So when you sell it and it goes to ABC escrow company, they will be the ones that move the money over to the intermediary, right? Which in layman's terms, the intermediary is kind of like a mini escrow company. I know Corey can't say that, but I can say that for simplicity's sake. They will be the ones again that then move the money into the new property you're going to purchase. Do not, to Corey's point, do not do not do not touch the money. Because again, he brought up the absolutely perfect term boot, which becomes a taxable event and it can just screw everything up. Even if you take 10,000 of the 100,000 proceeds, it can just really turn into a mess. So again, back to our point, make sure your accountants involve. Make sure your real estate professional knows how to do 1031s. Make sure your escrow company knows how to do it. And again, to Corey's excellent point, stick with a well-known, well-capitalized third part or intermediary exactly. I've seen the same thing as Corey has. There's some, you know, mama-pop-little operations and guess what? Not only did they run away with your money, but what happens on the tax side of things, Corey? Do you think the IRS is going to go, "Hey, sorry, Fred. I'm sorry, you know, that, you know, $100,000 capital gain you're trying to defer. Sorry, that money's all gone." Or are they going to go, "Hey, guess what, Fred? You get to pay the tax bill. That's your problem." You pay the tax and the penalties and everything else. The IRS can. The tireless. The tireless. That's exactly right. That's exactly right. So this is, again, one of the most common things you will do, again, to have a very, very significant tax strategy. All right. Dwight, we'll come back with number two with you, converting to a primary residence. This is a strategy a lot of people love to use. Dwight will explain how that one works. Let's wrap it up with Kristen Snow in the right now, traffic center. Hi, Kristen. Welcome back to the John Sanchez Show on Newstalk 780KOH. It's Coriage of Israel at a year. Phone number, sir. 673-6700. Dwight, my large center, join lending. Phone number, sir. 240-2022. Thank you, fellas. All right. Our topic's been how to minimize taxes with your investment real estate. Unfortunately, we've got, we're only on point number two, and we had seven to get through. If you guys are good with it, let's just talk publicly here. Let's continue this on on Tuesday because I think, again, coming into the end of the year, taxes are starting to get on the forefront of everybody's mind. I think this is important stuff we need to get at. You guys good with that? Absolutely. Oh, absolutely. John, I wanted to add two to the first point on the 1031. If you're buying something that's, you know, the money that you get out of the 1031 and you still have additional funds, it's so easy to do financing. It's easy to document that as your down payment. So, I mean, to obtain a loan for a new investment property is, I mean, it's simple. You mean because it's in with the Accommodator? Is that your point? Well, no, because it's easy to document the source of funds and how it works. Oh, the source of funds. Yeah. So, it's super easy. People get a little that they think they got to come up with the additional money cash. No, I mean, we do loans all day long on 1031. Yeah. Yeah. And that's one of the challenges always fine with clients. And, you know, we do have, I can't go into it for compliance reasons. We do have package products that qualify under the DTC, or excuse me, under the 1031 exchange. Um, without physically having to go out and buy the real estate, all the same rules and tax advantages apply. So, if anybody's ever, you know, wants to learn more about that, give me a call. Um, but yeah, that's a, that's an excellent point you bring up to white. But what I was going to say is a lot of times people are, you know, when I bring up a 1031 to them to a client, they're like, you know, I, yeah, I don't want to pay the taxes, but, you know, I don't want to be a real estate investor again. And nor do I want to go get another mortgage, right? My house is, or my rental is paid, I'm selling it. Uh, I don't want to go into something else where, you know, selling it for 300 and I got to buy something for, you know, over 300,000 and get another loan. Yeah. So to each his own. And that's why, you know, you have a team to, you know, go through it all. On the, uh, if we're going to stick on this one since we'll do the rest on Tuesday, the other big thing I see a lot, John, is you have to acquire the new property in the same name as the one you're growing. Yes. That's right. I do, I do want to invest here sometimes we've had it happen to us before where you have an LLC and you're like, yeah, let's sell this and let's go on to the next one. But one partner wants to take some money. The other one wants to 10 30 one exchange. The LLC has to be the new purchaser. And so again, talk to your accountant, talk to your tax attorney. If you have one, this is big. When you get into multiple person partnerships and half of them want their cash, half of them want to exchange. There's ways to do it. It gets really complicated. There's also another one, again, not to keep harping on it. You can do it. It's called a reverse exchange. Yeah. Yeah. So if you want to go buy the property, if you found the best property you've ever seen and you want to buy it, but you don't have time to sell the first one first, but you have cash, you can have the intermediary. It's more expensive because they have to set up the LLC and the stuff. You can, they can use your cash to buy that property. You have the same timeframes to sell the relinquished one and replenish your funds. But you can't do it on your own. The intermediary has to take care of all those details for you. Yes. Oh, man. I'm glad you brought that up. I completely forgot about that one. Yeah. That one, that one is a very complicated one. Yeah. Yeah. It's expensive. Yeah. It's more expensive. But just the expense, Corey, as you and I both know, it's a drop in the bucket compared to paying the capital gains tax and depreciation recapture and so on and so forth. Yeah. All right. So again, I apologize, you know, but this requires in-depth discussions and explanations on things. So again, we will continue this discussion on Tuesday. We'll get into talking about using the primary residence and offsetting gains and opportunity zones and so on and so forth. So yeah, we will get through it on Tuesday. But man, what a great topic. Guys, we need to do it. I really mean this. I want to do a webinar with you guys on this topic and we'll get down to the details. Have a great evening, everybody. God bless. This program was sponsored by Sanchez Wealth Management. The material in this program was intended as general information only and should not be taken to specific investment tax or legal advice. None of the information on this broadcast was intended to be a solicitation for the purchase or sale of any security. Further information is available by contacting John at Sanchez Wealth Management.com or 775-801-01. John Sanchez offers securities and advisory services through Independent Financial Group LLC, a registered dealer and investment advisor. Member FINRA SIPC. Securities only offered in states John Sanchez is registered in. Sanchez Wealth Management LLC and Independent Financial Group LLC are unaffiliated entities. Synergy One Lending Equal Housing Opportunity. NMLS #1907235. Dwight Millard. NMLS #24129. Phone number 775240222. The information provided today is for educational purposes only. The position strategies or opinions of the show do not necessarily represent the position strategies or opinions of Synergy One Lending or its affiliates. All information loan programs, interest rates, terms and conditions are subject to change without notice. Synergy One Lending offers home loan financing only. Synergy One Lending is not affiliated with the John Sanchez Show. Any speakers, companies or institutions feature. This is a paid advertisement. As the summer sizzle fades, it's time to establish a wellness routine that's here to stay. Ritual is shaking up the supplement industry with their focus on traceable science and high-quality ingredients. They've got every base covered from their clinically-backed women's 18-plus multivitamin to their stress relief and sleep melatonin, both using first-of-its-kind bio-series technology designed to optimize formula delivery. For a limited time, get up to 40% off your first month at ritual.com/podcast.