Tax Drag: The Silent Compounding Killer Costing You Millions | Ep. 8

0:00 – Most investors focus on how much they make, but very few focus on how much they keep $45 million.
0:07 – Just remember that number.
0:08 – I’ll revisit the significance of that number in a bit, but just bear with me here, bear with me.
0:12 – Taxes are the single largest, most predictable drag on long-term returns.
0:18 – But most investors, they treat them like a footnote.
0:20 – And this is a substantial differentiator in the wealth building equation.
0:23 – Every single dollar that is paid in taxes is a dollar that never compounds again.
0:28 – Today we’re talking about T, tax-efficient structure.
0:31 – We’re going to talk about why taxes quietly decide which investor keeps compounding and which one of them stalls out over time.
0:39 – And how the smartest investors, they structure their wealth so that time works with them, not against them.
0:45 – This is part five of the Sunrise Capital Strategy, and it’s where good investing ultimately becomes durable wealth.
0:52 – Taxes are one of the tools in the tool belt.
0:54 – There’s a lot of different ways you could ultimately maximize your returns over long periods of time.
0:58 – And minimizing your tax burdens is one of those ways.
1:01 – My business partner, Kevin Buppie, recently just interviewed Kim Lockridge on his podcast,
1:05 – Real Estate Investment for Cash Flow episode 974, where he goes super deep in terms of cost segregation,
1:11 – one of these really detailed tactics on minimizing your tax bill.
1:14 – So if you want to get super granular, you can go ahead and check that one out.
1:17 – Today we’re going to focus on the philosophy associated with creating a tax-efficient structure
1:22 – and investing all of your capital in such a way that you’re keeping more of your hard-earned money in your pocket over long periods of time.
1:28 – We’re going to dig into the math behind tax efficiency in just a bit, but I wanted to start off by just providing explicit clarity in terms of my worldview.
1:36 – Okay, my worldview, so that you understand and don’t misinterpret what we’re trying to achieve,
1:41 – or what I’m personally trying to achieve on behalf of my family and all the partners that ultimately join our team over here at Sunrise.
1:47 – I personally believe that you should keep more of your hard-earned money in your pocket, not because agreed,
1:53 – but because no massive centralized bureaucracy can possibly know more about what you and your family need better than you do yourself.
2:03 – Capital that is allocated closer to the family is almost always allocated more wisely than capital that’s ultimately routed through some massive bureaucratic organization.
2:14 – From my personal perspective, this country was founded on a principle of no taxation without representation.
2:21 – For most of the entire history of this country, income tax was not even a function of the country, truly.
2:27 – I mean, the Boston Tea Party, it was a part of the gigantic revolution that ultimately led to the founding of this phenomenal country.
2:34 – Income tax kind of slipped into our country back in like 1920, the early 1900s, and the idea was it was under the guise that the only individuals that were ultimately going to be taxed were going to be the most wealthy individuals in this country.
2:49 – A few short years, the government had the ability to go ahead and just tax everybody in that middle class and that eventually trickled down to every single individual in this country who now is susceptible to that income tax.
3:01 – Over time, it just quietly expanded to include everyone.
3:05 – And the sad state of affairs is, you know, most people don’t even realize that they don’t even feel it.
3:09 – Taxes are your largest single expense every single year, and most people will spend an inordinate amount of time, clipping coupons, trying to save 20 cents here and there at the grocery store, but never even contemplate tax strategy and minimizing their largest expense.
3:24 – And if you went around the street and you were serving a lot of different folks and asked them, hey, you know, how much in tax did you pay last year?
3:30 – I can promise you that a large percentage would say, I actually didn’t pay anything in tax last year.
3:35 – I received a refund, but that is false.
3:38 – You know, if people had to write a check and we were in a scenario where the government hadn’t been so sly in the way that they’ve structured taxes, people would feel it in a much more significant manner.
3:49 – If people had to write a check after the year, let’s say that they go to work in January, they work the entire year, they make $50,000.
3:56 – At the end of the year, they have to write a check for $10,000. I could promise you that they would feel it.
4:03 – Instead, the government has created a very sly way to ultimately peel that capital out of the individual’s accounts.
4:12 – Taxes are removed before the money ever hits their account through payroll taxes.
4:17 – So most people think, look, I didn’t pay any taxes. I got a refund without realizing they gave the government an interest-free loan every single year.
4:25 – So when we talk about tax efficiency, this is not a loophole conversation. It’s about stewardship. It’s about stewardship of your work, about your time, and your family’s future.
4:34 – I believe that nobody’s going to know more about your family than you, and you should do your best to keep more of your heart and money in your pocket so you could spend it on yourself and your family better than the government would if you provided that capital directly to them.
4:47 – So let’s just zoom out for a second and look at what is the overall objective of T tax efficient structure? What we’re trying to drive home in this respective episode is that taxes are a drag on compounding.
4:59 – The truth is you never let the tax consequences wag the investment dog. We’re on part five of the capital strategy.
5:05 – We’ve talked about cash flow first, add value, protect the downside, invest don’t speculate, but once you’ve done all those things, once you’ve found a great investment, a durably wonderful business that’s throwing off quality free cash flow, once you’ve done those things, you need to optimize for tax efficiency because taxes are a drag on compounding.
5:25 – Taxes compound in reverse every single dollar that you pay in taxes is dollar that never compounds again. Compounding is an after tax phenomenon. It’s not about what you make, it’s about what you keep, which is why I love this quote. The most powerful force in the universe is compound interest.
5:44 – And the second most powerful force is tax deferral. Tax deferral is a version of compound interest. You’re simply allowing a larger base of capital to compound for a longer period of time. Let me give you a simple example. Earlier I said $45 million.
6:00 – $1 million compounding at 10% for 40 years becomes roughly $45 million. But if taxes reduce that return to 8%, that same million dollars becomes about $21 million.
6:15 – Charlie Munger, one of the greatest investors of all time, said something that perfectly captures the essence of this idea. He said, we don’t pay taxes, we defer them indefinitely. And that sentence, it’s not about tax evasion, it’s about behavior.
6:31 – Charlie wasn’t talking about tricks, tips, tricks, right? He was talking about structure and patience. So you have low turnover of your investments, you have long holding periods, you have minimal forced selling. He understood something that most investors miss.
6:46 – The system rewards in activity. Fewer trades mean fewer taxes, fewer fees, fewer mistakes. And Charlie also said the most important thing is to keep the most important thing, the most important thing. And the most important thing is compounding, just continuing to keep that base of principle as large as possible so that compounding continue to affect over very long periods of time.
7:09 – Anything that leaks it, anything that minimizes that original principle base, including taxes, must be minimized legally. And Buffett makes the point even clearer, right? He says our favorite whole period is forever. And that’s not branding, that’s not tax strategy, it’s a behavioral strategy and how you need to manage money. And it’s a compounding strategy. Buffett has literally never sold his shares of Berkshire Hathaway.
7:32 – He has deferred capital gains on his unrealized gains for more than 60 years. And that deferral has functioned as an interest-free loan from the government.
7:44 – If he’d sold every single decade, right, like every 10 years, he sells a portion of his shares, his net worth would be a fraction of what it is today.
7:51 – A lot of the great fortunes in time, right, in history weren’t built by kind of clever tax tricks.
7:58 – They were built by owning really phenomenal engines, great, durably wonderful businesses that throw off exceptional amounts of cash flow and refusing to interrupt the compounding.
8:07 – Now let’s talk about why the fix and flip method of real estate investing breaks down over time. Over its sunrise were massive proponents of a buy and hold philosophy.
8:15 – And the reason is there’s really, I would say, four different friction costs that compound against you when you’re operating in a fix and flip business model.
8:24 – I don’t care if you’re doing a fix and flip on a single family home or a car wash or a multifamily property or a gigantic syndication doesn’t matter.
8:31 – If you’re doing a fix and flip business model, you’re minimizing the amount of principle over time through a litany of friction cost.
8:37 – First is taxes. Most importantly, you’re going to get crushed by capital gains on the back end of that even if the fix and flip does well, right?
8:44 – You buy low, you sell high, you make a bunch of money. Congratulations. You’re going to get crushed by capital gains tax and depreciation recapture along the way.
8:52 – Second, every single time that you sell a deal, you’re going to have transaction costs. You’re going to get crushed by broker fees.
8:58 – You’re going to get crushed by legal costs. There’s loan fees, mortgage brokers. There’s a lot of different transaction costs on the way that ultimately minimize the amount of principle that would otherwise be put into your pocket.
9:09 – It’s not about what you make. It’s about what you keep. I can promise you that the disposition price is not the amount of capital that ultimately gets inserted in your bank account after the transaction occurs.
9:19 – The third friction cost that you’re going to experience when you do that by fixing cell model is cash drag between the time when you sell deal A and when you buy deal B, you’re going to experience cash drag.
9:30 – You’re going to have capital that’s sitting idle between deals. So you’re stopping the compounding and Charlie Munger would just absolutely crush you for stopping compound interest over long periods of time.
9:41 – But what I’d say is one of the most important aspects here is the fourth piece, the fourth friction cost, which is reinvestment risk.
9:49 – From my perspective, probably the most important. If you’re going to operate that by fixing cell model, when you sell it, you have to take those proceeds and do something else with it.
9:58 – And every time you’re making a new investment, you’re introducing an additional level of risk, right? You’re going to be forced to find the next deal. And sometimes you’re going to try to find it at the wrong time.
10:06 – The only time that you’re really going to sell a deal is when you’re getting a nice multiple on the back end, right? If you’ve done a great job, you’ve sold the deal.
10:12 – It’s a nice time in the market to ultimately sell and try to capture some of those games. Congratulations. But what do you do with that principle at that time? If you’re in a hot market, that’s a beautiful thing because you might be able to sell for a high price.
10:22 – But now you’re going to go buy in at a massive basis on your new property. That’s a very tough spot, right? Every time you sell, you don’t just reset taxes. You reset the momentum in the sad state of affairs is spreadsheets ignore friction.
10:37 – But in real life, we don’t we don’t live enough spreadsheet real life multiplies friction real life multiplies risk. You know, these are a lot of reasons why we despise that fix and flip philosophy. We’re obviously massive proponents of buying and holding over long periods of time.
10:50 – But the people that are on the other side of the debate that are going to argue in favor of the fix and flip are going to point out the idea in the concept that ultimately you can leverage the tax code and implement a 1031 strategy and be able to create quote unquote better returns over long periods of time.
11:07 – Why let’s walk through the logic associated with that when you buy a deal that is a quote value add transaction typically the most value that you’re going to create is during the first few years of ownership of that asset.
11:20 – Usually when you look at the pro forma and you’re implementing a value add plan from the moment that you buy that deal and you’re looking to stabilize that asset, there’s a higher internal rate of return because you’re adding the most amount of value during that period of time.
11:33 – Then oftentimes on the fix and flip business model, what you’re going to do is when you stabilize that transaction, the NOI incremental increases slowly dwindle off they slowly begin to plateau.
11:44 – So the acceleration of the growth dwindles after stabilization and it is at that point when when the fix and flipper would say this is when we should sell the asset you buy low you implement the fix and flip business model you add value and you sell it.
12:01 – You have quote unquote stabilize the transaction and the logic is that if I do that, I’m going to have a higher internal rate of return as opposed to watching the internal rate of return slow down over longer periods of time.
12:13 – We take that higher internal rate of return and then we sell it and we buy another deal, we roll the proceeds into a new transaction that is yet another value add deal and we retain that same higher internal rate of return which would over long periods of time
12:29 – accelerate your cumulative amount of compound interest that you create and I tell you what the logic behind that argument is absolutely iron clad 100%.
12:41 – You could show me a spreadsheet that says when I buy low I stabilize the deal and I sell high I do a 1031 exchange I buy low again I sell high I do another 1031 exchange you could show me inside of a spreadsheet the math that would ultimately tell you that that strategy is going to outperform a long term buy and hold strategy.
13:03 – What I can promise you is that we don’t live in a spreadsheet we live in the real world and in the real world never ever is a single individual transaction going to perform exactly to perform.
13:15 – Even if the first one does pretty well at some point somebody somewhere they’re going to miss time the market because that strategy is inherently risky it is a game of hot potato and at some point somebody somewhere is going to miss time the market and they’re going to hurt investors dearly.
13:33 – I do not care how big that original principal base gifts let’s say you take one million dollars you implement that fix and flip you turn it into two million you do it again you roll the proceeds forward in a 1031 you take two million you turn it into four congratulations you keep going I can promise you no matter how big that dollar amount gets if you ever multiply that number by zero the cumulative number is zero and I’m unwilling to take that amount of risk with my family’s money.
14:00 – In addition to that people don’t realize that a 1031 doesn’t save you it will allow you to minimize the amount of capital gains that you’re going to have along the way but it does not save you from depreciation recapture tax so you are inevitably minimizing the amount of principle that you’re rolling into the next transaction regardless of whatever 1031
14:18 – tax code that you might have folks often don’t even realize that they’re not able to roll all of that principle forward into the next transaction so for all these reasons and more all these friction costs all the additional incremental risk associated with taking that next leap on the next deal.
14:32 – It is not a the most prudent long term strategy to maximize compound interest over exceedingly long periods of time history has proven over and over with the world’s greatest investors the world’s greatest
14:47 – businessmen who’ve created the best fortunes over time that deferring capital gains deferring taxes and holding assets over exceedingly long periods of time provides a significantly higher assurance of outcome than a very quick fix and flip philosophy we would much prefer to buy durably
15:04 – wonderful businesses that throw off exceptional cash flow and hold on to them forever it’s a much easier path to the promise land than the amount of additional incremental risk that you’re going to get by virtue of having that fix and flip model the reinvestment risk is massive in that respective model let me share an example of why we dislike the fix and flip business model I mean we’ve learned the hard way I’ve gone full cycle on 16 different mobile home parks over time to great effect average and turn a rate of return
15:33 – north of 40 on those respective transactions it’s kind of like been there done that got the t-shirt one of these transactions will talk about today we bought a deal in 2014 in North Carolina exceptional mobile home park by 130 spaces bought for a song off market direct to owner and with massive seller financing didn’t put much equity down in the deal ended up quadrupling the value of the mobile home park in a few short years this thing was thrown off
15:59 – business or been in amounts of cash flow every single month every single quarter every single year without fail we’ve been on an infinite cash on cash return for multiple years but when interest rates decreased we had massive private equity ultimately come in a lot of different people willing to pay absurd numbers compressed cap rates big numbers
16:19 – you can walk away with multiple seven figures felt pretty good about getting a nice big seven figure paycheck on disposing of that individual investment it’s difficult to say no when somebody floats a lot of cash in front of you but after we ultimately sold that
16:34 – investment we now regret it terribly why one we stopped the compounding this was a durably wonderful business durable and then it had safe predictable recurring income streams every single month every single quarter every single year like clockwork
16:49 – and wonderful and that the same store and a wide growth increase precipitously more than any other real estate sector that we could possibly fathom over time it was a compounding machine and we stopped the compounding we receive the principle back and it felt good to cash a check and put a big check in your bank account for about a month
17:08 – and then that that that feeling fades and what happens is you get a gigantic tax bill at the end of the year massive depreciation recapture tax hit and ultimately the capital had to be redeployed in a different investment and ultimately that investment didn’t perform as well as the one that we had previously been operating now if you fast forward a handful of years this is really where you insert the salty sword and twist it is exceedingly painful to admit that that property
17:37 – is now worth double what we sold it for yet again multiple millions of dollars over and above that which we sold the property for and how much incremental work would have been necessary to benefit and take advantage of that massive compound interest it would have been negligible how much more risk would we have had to take to receive all those additional millions of dollars from the compound interest it would have been negligible
18:03 – that asset is worth far more today than it was when we sold it it’s still throwing off unbelievably predictable income we didn’t lose money per se but we lost the future massive amounts of free cash flow over many decades into the future a sure thing great businesses should be held not harvested and that’s why we’ve evolved our investment philosophy over time
18:26 – we’ve done a lot of fixing field deals over time we’ve gone full cycle on 16 different individual mobile home parks over time with an average internal rate of return north of 40 but this lived experience of understanding the benefit of buying and holding assets durably wonderful businesses over exceedingly long periods of time
18:44 – I now know deep in my bone marrow that that is a better way to ultimately manage my family’s money over very long periods of time to generate the best risk of just returns for my family at the end of the day that’s what we’re looking to do generate cash flow and build legacy wealth in a tax efficient manner and we’re going to help as many people as possible do that as we can along the way
19:04 – so if the fix and flip model isn’t the best strategy how do you actually structure your business and your real estate investments in the most tax efficient manner to optimize after tax returns again you don’t let the tax consequences wag the investment dog but once you find an amazing asset an amazing investment that is durably wonderful then you optimize for tax efficiency every step of the way and you start when you first buy the transaction the very first year that you buy the transaction you have the luxury given the tax
19:34 – cuts and jobs act of 2017 and now the big beautiful bill the big beautiful bill of 2025 you have the luxury of leveraging accelerated bonus depreciation we just happen to be involved in one of the most tax efficient real estate sectors on the planet commercial real estate has a depreciation schedule of 39 years residential real estate like multifamily has a depreciation schedule of 27 and a half years but many different types of investments are known as capital improvements of which a mobile
20:04 – home park the vast majority of a mobile home park is known as a capital improvement and that’s depreciated over the course of 15 years and with the advent of the tax cuts and jobs act of 2017 which was then permanently instituted into the code in 2025 anything that is depreciated on a 20 year horizon or shorter can be accelerated through accelerated bonus
20:25 – depreciation and accelerated into the very first year of ownership what does this mean it means that you’re taking advantage of the time value of money I’ll give you real cold hard math and what that means from a from a perspective of a mobile home park let’s say you buy a mobile home park it’s worth 10 million dollars about 20% of that mobile home park is land so you can’t
20:44 – depreciate the land but the other eight million dollars what are you buying when you buy a mobile home park we don’t like to buy the actual homes in and of
20:51 – themselves we like to have the residents own their units we like to operate the mobile home park like a parking lot so when you buy a
20:58 – mobile home park what are you actually buying you’re buying the underground infrastructure you’re buying the roads the
21:02 – curbs the gutters the utility lines the water lines the sewer lines all of those are known as capital
21:07 – improvements and the vast majority of that eight million dollar depreciable basis is allocated to capital improvements which given the
21:15 – tax code can be accelerated into a passive loss in year one that means by way of example if you buy a 10 million dollar mobile
21:24 – home park and you put down four million dollars i.e. a 40% down payment and you have an eight million dollar passive
21:31 – loss it means that you’re writing off twice the amount of your original investment in the very first year it
21:39 – means that when you get a K one back at the end of the tax year if you invested four million dollars you’re
21:45 – actually reporting to the government that you lost eight million dollars on that respective investment this is a
21:52 – massive passive loss and a phantom loss that allows you to keep more of your hard earned money in your
21:56 – pocket that allows you to offset other areas of income that you might have inside of your portfolio it allows you
22:02 – to offset other passive income that you might have inside of your portfolio so on the front end of the
22:06 – investment you want to leverage accelerated bonus depreciation take advantage of the time value of
22:11 – money and you want to continue to optimize tax efficiency throughout the entirety of the holding
22:15 – period and what that means for us is we operate a light value add business model where we buy an asset we
22:20 – want we need to be able to materially impact the NOI of the investment in the first few years of ownership
22:26 – so we buy an asset we increase the NOI’s over time we actually add value in the first few years we
22:31 – control the outcome of that respective investment and then when you do that you have the luxury after
22:36 – you stabilize that asset let’s say in year three you stabilize that asset at that point a lot of
22:41 – different individuals sell from our perspective that is now foolhardy we’ve seen further than others
22:45 – we’ve been there we’ve done that we’ve got the t-shirt and we’ve got crushed on the back end I’ve
22:49 – got the scar tissue to prove it and we know that the better option is not to sell because at that time
22:54 – you’d pay massive capital gains you’d pay depreciation recapture 1031 doesn’t save you
22:59 – and you have massive reinvestment risk if you’re going to use 1031 exchanges instead of doing all
23:03 – that dealing with all the friction costs we would rather simply do a cash out refinance because a cash
23:09 – out refinance you take all of that retained earnings that you have on the balance sheet the value
23:14 – of the property has increased you now have retained earnings on the balance sheet how do you tap
23:18 – into that you do a cash out refinance and you send that capital back in a non-taxable event
23:24 – why because what you’re doing is you’re adding debt to the balance sheet and debt is not something
23:30 – that is taxed so you’re borrowing against the value of that respective asset and that is non-taxable
23:37 – in this manner in the first numerous years of the ownership of this respective property the vast
23:43 – majority of income that you’re receiving distributions cash flow that the deal’s throwing off
23:48 – is non-taxable it’s shielded by the depreciation and the cash out refinance proceeds are non-taxable
23:54 – along the way it is not about what you make it is about what you keep and at the end of the day
23:59 – maximizing the after tax cash on cash return along the way is the best way to ultimately generate
24:06 – the best compound interest and create the best risk adjusted returns in an investment period end
24:10 – of story and if you do that not only do you have the ability to extract that retained earnings all
24:15 – that additional equity through a cash out refinance you are able to continue to own that asset a
24:23 – durably wonderful business that you know that you like that you trust this thrown off exceptional
24:27 – cash flow and what we’ve now come to realize is it provides the opportunity for you to have multiple
24:33 – bites at the apple we’ve got numerous deals where we’ve ultimately gotten all the chips off the
24:37 – table where we do a cash out refinance send that capital back to investors in a non-taxable event
24:41 – they now have an infinite cash on cash return but still own the original asset and if you fast
24:46 – forward another three years four years five years what happens high quality same store and a
24:51 – wide growth increases durably wonderful businesses and a wide increases the value of the properties
24:56 – continue to go up and you get an opportunity years down the road to take yet another bite at the
25:00 – apple you have another cash out refinance where you take more equity out of that respective property
25:05 – send it back yet again in another non taxable event everybody’s tax situation is unique and I’m
25:10 – not going to get into super granular nature associated with having a negative tax basis etc but
25:14 – the point is this buy and hold strategy is by far the best way to generate the highest quality
25:21 – aftertask risk adjuster returns period end of story at the end of the day you want to buy
25:26 – wonderful businesses that throw off exceptional free cash flow and optimize for tax efficiency along
25:31 – the way and this is the most optimal way to ultimately do that so obviously we prefer the buy
25:35 – and hold structure I’m not saying we’re never going to sell right I’m stating that our favorite
25:40 – hold period is forever there are a few times when it might be prudent to what we would consider
25:47 – prune the portfolio sell and asset there’s a few reasons why we might do it we don’t have time
25:52 – to dig into that today we’ll do so in a future episode but generally speaking our favorite hold
25:57 – is forever so how does this strategy actually play out in the real world when we’re investing in
26:01 – this manner in our fund structure how do how do our investors that join our team actually feel the
26:06 – impact of this tax efficient structure I’ll give you an example you know everybody’s individual
26:10 – tax situation is different and unique and there are different tools that you have in your tool
26:15 – belt that you can leverage to optimize tax efficiency but I’m going to give you an example
26:18 – of the real estate professional status if you’ve not been able to to dig into that please do
26:23 – not going to go into the definition and what it means today but please do dig into the idea
26:27 – and the concept of the real estate professional status it’s one of the best tools in the entire
26:32 – tax code that you could do to leverage your family situation to minimize your tax burden over time
26:37 – and I’ll give you a real cold hard example of how several of our partners are leveraging this
26:42 – to great effect over time we’ve got a phenomenal partner that is in Indiana the great guy is a
26:48 – physician in Indiana he actually owns multiple practices in Indiana and is very successful makes
26:54 – multiple seven figures in W2 income on an annual basis as you can imagine he’s got an enormous
27:00 – tax bill he sends a huge amount of money to the government every single year and he’s trying to
27:03 – find ways to minimize his tax burden one way that he’s found to be exceptionally successful is the
27:10 – fact that he’s got a beautiful wife that has become the individual who is the real estate professional
27:15 – inside of their home she manages the family’s finances in the real estate investments inside of
27:21 – the house and for this reason when she makes investments any of the passive losses deriving from
27:27 – those investments can actually offset the earned income that he has on an annual basis so when you
27:34 – pair her real estate professional status with investing in funds like ours the results are extremely
27:41 – powerful this individual basically invest let’s say roughly a million dollars inside of our fund
27:46 – every single year now on average over the last seven years an investment of a million dollars inside
27:51 – of one of our funds has received on average a passive loss on their K one of nine hundred thousand
27:58 – dollars again on average over the course of the last seven years this is a phantom loss because
28:02 – of the accelerated bonus depreciation due to the tax cuts and jobs act of 2017 now what does this
28:07 – mean it means when he invests a million dollars in the very first year he gets to report to the
28:11 – government that he is losing nine hundred thousand dollars so if you take his income tax bracket he’s
28:18 – basically paying 50% of his income directly to the government and if I’m able to write off a nine
28:25 – hundred thousand dollar passive loss for an individual that makes multiple seven figures annually
28:29 – that means we’re saving him the equivalent of four hundred and fifty thousand dollar
28:34 – after tax cash on cash return immediately out of the gate in year one and we haven’t even begun
28:41 – to send him outbound distributions from cash flow we haven’t even begun to increase the value
28:46 – of the properties over long periods of time as you can imagine this is exceptionally powerful
28:52 – you have the ability to help him retain more of his principle keep more of his heart and money
28:56 – in his pocket so they can reinvest it into high quality durably wonderful business and continue
29:02 – to compound his wealth over exceedingly long periods of time so tax efficiency it’s not just
29:07 – about assets it’s a philosophy it’s about how your family is organized too many people focus on
29:15 – trying to save a buck or two here or there you know focusing on coupon clipping but very few folks
29:21 – ultimately end up hiring a tax strategist to oversee the entirety of their family situation
29:27 – and focus on forward looking financial planning and analysis tech strategy as opposed to simply
29:32 – going to a CPA which is basically at the end of the year going to the CPA and saying how much
29:36 – tax do I owe that’s not tax strategy that’s looking out of the rear view mirror and there’s nothing
29:41 – that that CPA can do to help you moving forward you have to find a tax strategist who can help you
29:47 – structure your family’s affairs for the betterment of the future so you’re looking through the
29:53 – windshield as opposed to the rear view mirror it’s about how your family is organized optimized
29:58 – for tax efficiency so as we close out part five which is tea tax efficient structure just remember
30:04 – this taxes are not just a cost of doing business they’re a design constraint if you ignore them
30:11 – they quietly drain momentum you design around them and they become part of the compounding engine
30:17 – in the next episode we move to A the second A which is assurance of outcome we’re going to talk
30:23 – about how disciplined investors they think about risk they think about probability they think
30:27 – about predictability and why great outcomes are rarely accidental if you’re finding value in the
30:34 – series make sure you end up following the show so you don’t miss out on what’s coming next guys
30:38 – as always we appreciate you being here but until next time you’d be great