Have you ever thought of ways to combine short and long term real estate investment strategies?
Transcript: Hi I’m Jeff Brown the “BawldGuy”. Today we’re going to talk about synergistic strategies and we’re going to be specific. Today, I talked to a bunch of flippers who do very well, some of them just got started, they might be doing one or two a year and they want to get started in a long-term investing. They may already have more than one long-term hold property. What I try to tell them is, you can do both. As a matter of fact, you can take those two strategies — total different ends of the spectrum — and you’ve got short-term, long-term… What you do is, you’re doing say, one a quarter: take the after tax profits and apply them to the pay down of the loan or loans of your existing long-term investments. Now if you’re doing a lot of profits in a quarter, it might make sense for you to not to pay down your holdings that are long-term and just quickly save up a down payment for the next one. But let’s just talk today about using the short-term profits, after tax, synergistically to pay down those loans on the long-term properties without affecting your ability to keep your short-term flipping profits rolling. So what happens is, you’ve got the guy that bought a couple of small properties; they’re income properties — he’s going to hold them for retirement — he may own them for five years, he may own them for thirty-five, but the bottom line is, he knows that the faster he gets them paid off the more options appear on his menu. So here’s the deal: have him take his profits periodically, that are after-tax from flipping, pay off those loans as fast as you can. As soon as he pays off those loans, and if he can do it predictably, chronologically, he can use other strategies — for instance, what we have talked about earlier, say cost segregation depreciation — which allows him to then treat the sale, not the exchange of his long-term holds such that no capital gains taxes are owed, no depreciation recapture tax is owed, and by the way, in case you didn’t know: the depreciation recapture tax is much higher than the capital gains tax. A lot of people are really shock by that, when it’s far too late to get prepared for it. Now, as we go along, the flipper gets better at flipping — that’s what happens — they either start making more profits on the same number of flips over any period of time; they make more flips in that same period of time; they end up making either more money for down payments or they pay off their long-term holds faster. The faster they’re paid off, the more they acquire, the faster they get to retirement and the sooner they can stop flipping and start enjoying their retirement. This is Jeff Brown the “BawldGuy”. Thanks for joining me today, we’ll hit something else next time. See you later.