Case Study – Video

Ever wanted to see a case study of real people, in real time? Here’s a case study summary.


Transcript:   Hi this is Jeff Brown the “BawldGuy”. What we’re going to talk about today is an actual case study. This case study is less than a year old and is ongoing. Let’s lay down what we started with and I’ll take you through the numbers. This is a couple in their late 30‘s, their household income is in excess of $150,000, it probably should hit $200,000 pretty soon. They both work, there are no children, and they’re both professionals. Now here’s their numbers: they own a fourplex that they bought to fix up. They moved into it so now they’ve got two animals in one. What I mean by that is they’re living in 25 percent of it so that’s a different section in the internal revenue code. That is residence, primary residence, the other three quarters of it is purely held for investment. Now here’s the deal… their fix-up was successful, they’ve got a ton of equity and they’ve got to know what to do. Oh, but wait; did I tell you about the cash they had to start with? They were able to invest $300,000 out of the more than $300,000 they had. That was able to buy them four properties in another state. They live in southern California and their properties averaged about $250,000 to $260,000, they all cash flow and it took about $295,000 to do. They then asked, “Okay, you’ve mentioned this before, Jeff. Does it make sense, really, to do a tax deferred exchange on our fourplex? We’re actually tired of living there.” “Yes, finish the fix-up, do the final touch up” which they did. It’s a case study on what to do right, because they did it right. Now, bottom line is they sold it in about six hours. They made a ton of money. I put it in an accommodator, which is where you put money from the sale of a property you’re going to use to tax defer, we’ll talk about that in another video, but the bottom line is they’re acquiring, with that equity tax deferred, another half a dozen properties very similar to the first four they bought with the cash they had. Now, that means they’re going to close with ten properties, but they’re not forty yet, they want to retire at or before fifty, that gives me about eleven or twelve years, ten years easy… they think they can do it in eight, I tell them ten, we’ll let the cards fall as they will. Now what’s going to happen is I’m going to use the synergy of cost segregation against two of their properties. Those properties are going to be paid off as fast as we can. We’re going to be like obsessed banshees. They’re going to add money like crazy. If they save and save and save they’ll be able to do this. I’ve done the calculations (my handy dandy 12C) and the bottom line is in less than sixty months, five years, they will have paid off two of these properties, which if they don’t appreciate at all, will yield them after cost of sales far in excess of $525,000 – that will all be tax free. They will then be given $100,000 because we know how it works with you guys; you want that bass killer, you want that new dually truck with the fifth wheel, whatever it is, here’s a $100,000 tax free… you’re buying lunch next time we meet. They’re going to take $400,000 and they’re going to put it with my buddy David Shafer, the EIUL expert. If you’ll remember that’s an investment grade insurance product that ends up giving you in retirement, tax free income for life. Bottom line is here’s what David said: In addition to the one they’re buying on a monthly premium basis that will come due and payable when they’re sixty-two, this one will be a one pay – actually five quick payments, but it’s going to be $400,000 in addition to what they’re doing monthly. Bottom line, what’s going to happen is, when they’re sixty-two they will have $163,000, this is not my number, the number came from the EIUL expert who did the numbers very conservatively with the real numbers of my clients, $163,000 from their sixty-second birthday until they die, tax free. Now what do they do if they retire at fifty? They’ve got twelve years to go. Well, they’ll have eight of those duplexes they bought remaining. They’ll be tax free and they’ll be generating, assuming no increase in value, no increase in net operating income during that decade and they will be generating a little over $12,000 a month, about 35, maybe 40 percent of that will be tax sheltered for another seventeen years. Now that means they’ll have to muddle along with five figures a month, most of it or a large minority of it tax sheltered until they hit sixty-two. Then they’ll have the $12,000 in change, plus $13,000 in change for the rest of their lives. This will not count what they’re doing in a third basket, which will be buying discounted notes, which we’ll talk about at another time. But the bottom line is they started with the fourplex they bought as a fixer. They saved a bunch of money that they had and they bought duplexes with that and in ten short years they created $12,000 plus in income and by adding their household income, because they could afford it, they’re frugal, they’re now going to retire from sixty-two forward with roughly $25,000 a month, the vast majority of which is either tax free by definition or tax sheltered. Works for me, does that work for you? This is Jeff Brown, the BawldGuy. Thanks for tuning in. We’ll catch you next time.

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