Sharad Mehta Introduces Brandon Hall: Tax Strategies for Real Estate Investors

For a REsimpli Podcast episode on the complicated economics of real estate investing, Sharad Mehta welcomed tax and accounting whiz Brandon Hall. Brandon runs a Raleigh CPA office managing real estate investor taxes as well as accounting. Brandon knows the financial possibilities and issues faced by property investors because to his years of experience and growing clientele of 900 real estate agents.

Brandon said that depending on cost segregation and asset sales, real estate owners have to balance present cash flow with long-term equity growth and risk large tax benefits. Strategic planning helps to reduce the tax burden arising from missed possibilities. Sharad and Brandon look at several tax strategies meant for long-term investors and real estate flippers.

In the episode Brandon stresses time management and delegation for real estate investors. According to Brandon, good investors provide appropriate tasks. They focus on earning money and ensuring real estate instead of looking after everything. Outsourced accounting and asset management allow investors to concentrate on operations creating value and increasing returns.

Brandon stresses the need of timing the return on the assessment period. Top investors understand that tax savings plans might pay off even if they cost time and effort. Known as Henrys (High Earners, Not Rich Yet), less experienced investors might use more aggressive tax strategies without thinking through the long run. This short-term perspective might impede economic development. His simpler strategy entails preserving tax money while securing a favorable deal for flippers and developers. Investors may face unexpected tax obligations and have to reinvest their money in startup companies due to a lack of vision.

The difference between good to great if often the attention paid to little details. By being proactive about taxes, Sharad offers financial transparency and smarter business decisions, therefore offering peace of mind. Sharad and Brandon claim that proper tax preparation not only saves money but also enables a real estate company to grow. Real estate brokers still benefit from Sharad’s REsimpli system, and Brandon Hall’s research provides insightful guidance on growing income without compromising financial security.

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Transcript:

Sharad Mehta  0:06  

Hey, Brandon,

Brandon Hall  0:08  

Hey, how are you

Sharad Mehta  0:10  

doing really good. How are you doing good? Cool. All right, thank you for being a guest on the podcast. So I know you have an accounting practice, just kind of, what topics would you like to cover related to real estate?

Brandon Hall  0:31  

Man, that’s a broad, broad question. Who’s your typical listener?

Sharad Mehta  0:34  

I would say investors that are doing wholesaling primarily or fix and flip residential properties.

Brandon Hall  0:45  

Do you have any landlords?

Sharad Mehta  0:49  

We have some landlords. Yes, yeah, landlords. I mean, I own some rental properties and landlords, I mean, people that are doing wholesaling, fix and flip, eventually, they all want to get into being landlords and have passive income, okay?

Brandon Hall  1:02  

I think so. Trying to think like, are flippers typically, like, their biggest issue is, honestly just like, accounting, right? Even though that’s not fun to talk about. But what we could talk about is like, like, alright, you have profits from this flip. What do you do with those? And if you invested in a rental property, what would that do for you? Because a lot of our flippers, they can qualify as a real estate professional. And so we can, like, kind of talk about what that means and why it’s easier if you’re flipping versus not, and then how to use rentals to your advantage to offset your flipping income, essentially. Yeah, so if you want to go down that path, I’m happy to do that.

Sharad Mehta  1:50  

Yeah, absolutely. I mean, I used to be a CPA before I kind of left my job and started doing real estate full time, so I totally understand the importance of accounting and bookkeeping. So if you can start out with talking about the importance of that, you know, that’s something, in my opinion, it’s the boring stuff in the business that actually helps you make the most money if you’re consistently, you know, doing, keeping your books clean and following your accounting. So you can just talk about that a difference between kind of, what you mentioned, real estate professional versus, you know, an investor who’s working full time doing couple of deals on the site. What’s the difference? Like tax benefits for one or tax implication for one versus the other? That works. Cool, awesome. The call. I mean, the podcast should be about 3035 minutes. 45 minutes, max. Cool, perfect. All right, it is recording. All right, let’s start. Just make sure, 123, hey guys. This is Sharad with REsimpli, host of the REsimpli podcast, I have a very special guest on today’s podcast, Brandon Hall. Brandon, welcome to the show. How are you doing?

Brandon Hall  3:00  

I’m doing great. Thanks for having me excited to be here. Absolutely, man.

Sharad Mehta  3:03  

Thank you so much for being a guest on the podcast. Tell us a little bit about yourself, a little background about who you are, kind of, where do you live and what do you do related to real estate?

Brandon Hall  3:13  

Sure. So my name is Brandon. I live in Raleigh, North Carolina. So if you’re in the Raleigh area, feel free to connect with me on Twitter these days at B Hall, CPA or LinkedIn. I’m happy to do lunch or dinner or breakfast even, but I run a CPA firm, so I am a tax pro and accounting Pro. I launched my firm technically back in 2015 I was Moonlighting, and I went full time into it. In 2016 I 100% niche in real estate investors, and have since day one. It’s actually kind of funny when, when I launched my firm, the reason for targeting real estate investors was because I wanted to invest in real estate myself, and so I was trying to figure out, like, Okay, if I, if I get real estate investor clients, then I can see their finances, and I can decide if real estate is truly the right path for me. But then it kind of snowballed into this whole like, oh, wow, there’s this big gap of tax knowledge and accounting knowledge, and I can fill that gap. So today, we have about 900 clients across the United States. I have a team of 52 in the US, and another 35 or so offshore. So it’s turned into a pretty large operation, or one of the fastest growing CPA firms in the United States. And very, very excited about that. And you know, we’ve, we’ve experienced a lot of pain, a lot of growing pains, but over the past few years, we’ve really figured out how to deliver a good tax preparation service, a good tax advisory service, and a good accounting service as well. So our clients are much happier these days than they were back in the 2018, 2019, days, as I was trying to figure out how to stack the bricks. But that’s kind of my story. I also have 25 of my own units. I’ve got a short term rental. I’ve got multi family property. Single family homes. And that’s kind of interesting about our firm, is that we have quite a few of our employees that invest in real estate. One of my one of my partners, has like 180 of his own units, and another one’s investing as an LP in a bunch of deals. And we’ve got a bunch of people in our firm that are house hacking. So it’s just kind of turned into this interesting dynamic where clients get to not only get tax advice, but also get real estate advice. Yeah,

Sharad Mehta  5:25  

awesome. Brandon, first of all, congratulations on all the success you’ve had. Ben, that’s that’s super impressive. So when you started looking at the books of real estate investors, they weren’t scary enough to turn you away from real estate investing, because you own some of your own properties. Once you started looking at the books for real estate investors, kind of what was the most interesting surprising thing you notice,

Brandon Hall  5:50  

probably the most surprising thing was that real estate, rental, real estate, doesn’t cash flow as much as the influencers and gurus make it out to seem. The other interesting thing that I’ve learned along the way is, you know, if you held rental real estate through 2020 2021, and 2022 and you look back on all of your holdings, you know, since 2010 2011 what you kind of realize is that in the last decade, I was optimizing for cash flow. But then in 2020 2021, 2022 the equity gains were so large that the prior decade of cash flow is totally irrelevant. And that was shocking to me. I had heard that before. I know that there’s a lot of investors that go in for the value add specifically, and I know that you’ve got a lot of flippers that listen to this. I don’t do flipping personally, so I’m buy and hold and and so getting these large equity gains just from the market alone. What I realized was that’s, that’s how you play the game of real estate cash flow, is to manage your debt, scrape a little bit off the top, reinvest into some capex, but at the end of the day, you’re trying to either force appreciation or wait around long enough to get that market appreciation. Because that was a total game changer. So that was probably the second most surprising thing. Interesting.

Sharad Mehta  7:12  

Yeah, I agree with that. I mean, people like, cash flow is there to cover your debt and other expenses, and a little bit of, you know, money to keep in your pocket. But it’s the appreciation, you know, five 10% every year that you get that’s where you see the big returns. Because you’re getting that on the value of the property. That’s where, like, you know, and it keeps accumulating. So who are your typical clients? So you said you have 900 clients across the country. Just tell us a little bit about your clients. I your clients. Are they residential, investor, multifamily, or mix of both?

Brandon Hall  7:47  

So we have a we have a full spectrum. It’s actually pretty crazy. So we the one commonality between every single one of our clients is they are involved in real estate in some capacity. We work with developers, builders, flippers, wholesalers, agents, brokers and investors. On the investing side, we work with mom and pop investors. We work with it’s typically like higher higher income individuals, higher net worth individuals. They’re buying rental real estate because they want to reduce their tax bills over time, and they’re buying small real estate, short term rentals, single family homes, small multifamily we work with a lot of those investors. We also work with people that have super large portfolios in anywhere in everywhere in between. And we also work with general partners of syndicates and funds. We built out a specific the special team. We call them our private equity team, and they are partnership experts. Partnership tax is insane and and I realized a handful of years ago that I really needed to build a specialized team because we were starting to work with a lot more general partners in syndicates and funds. So we really have a full spectrum of investors. It’s pretty cool. Yeah,

Sharad Mehta  9:01  

so speaking to the investors that are smaller mom and pop investors doing wholesaling, fix and flip or own some rental properties, what do you see as the biggest tax cap that they have before they come to you? Are they missing on some, you know, tax benefits that they’re completely unaware of? Like, what is the most significant value that you add to them? Yeah, it’s

Brandon Hall  9:25  

typically just under optimized from a tax planning perspective. So, you know, we put out a lot of content. People might come to us and say, I know about real estate professional status. I know about the structured rental loophole. I know how depreciation and cost seg of bonus depreciation work. But then we really start digging into it, you realize, oh, there’s actually an opportunity to retroactively cost segregate a property, or we’re not going to qualify as real estate pro because you are logging the wrong type of hours, and that’s just you’re not spending enough time managing your rentals. So let’s plan to cost seg retroactively all of your properties at some. Later point when you do qualify, so it’s just it’s having those conversations like it’s a lot less these days, we spend a lot less time educating and a lot more time with the actual nuance of implementation and helping answering questions on timing. But I will also say almost every single person does not have partial asset dispositions optimized when they come to us. And what that means is, if you have a rental property, let’s say you spend, I don’t know, 100k on a rental property. I don’t know where you can buy a rental for 100k these days, but let’s just go with it. Spend 100k on a rental property. Let’s say that the roof is worth $7,000 well, if you replace the roof at some later point, let’s say you spend 12, 12k to replace the roof. The new roof, you would give this to your accountant, and most accountants would just put a new line item in your into your tax returns, say, roof, 27 and a half year depreciation schedule, $12,000 cost. So just 12k divided by 27 and a half, and that’s all they and that’s all they would do. What you’re supposed to do is you’re supposed to write off the cost of the roof that no longer exists, right? Because if you buy the property for 100k and like that, 100k is broken down between all the components that go into the property. And this is true whether or not you get a cost segregation study. All right, so that statement is still true. You don’t have to get a cost seg study. It’s you buy a property, 100k all the components have some value. The roof, in this case, is seven that came with the property. But if you replace that roof for a new 12k roof, and you don’t write off the $7,000 old roof that no longer exists. You are, in effect, depreciating now two roofs, even though you have one, and that is something that everybody misses.

Sharad Mehta  11:48  

So if you bought the property five years later, you need to replace the roof after five years, you need to write off the balance from the 7000

Brandon Hall  11:57  

so it’s not necessarily after so. So when you depreciate property, all the components of property have a depreciation schedule ranging from five to 27 and a half years. Or if you’re running like commercial property, it’s 39 years. A roof is depreciated over 27 and a half years. So that’s $7,000 that that originally came with the property. It’s just 7k divided by 27 and a half. That’s your annual deduction. But what I’m saying is, if I go and I put a new roof on my property, then the old roof no longer exists. So the $7,000 attributed to the old roof should disappear, right? I should be able to rip that out of my books. And nobody does that, but when I do that on my tax return, I get a deduction for the cost of the roof that hasn’t been depreciated yet, right? And so it’s a super valuable strategy to consistently optimize, and a lot of people miss it, okay,

Sharad Mehta  12:51  

no, that’s That’s great advice. And you mentioned real estate professional versus a non real estate professional, for those of us who don’t know what’s the difference between the two,

Brandon Hall  12:59  

yeah. So this is not a LinkedIn designation, right? This is a tax status and the IRS comes up or the Internal Revenue Code. Then Congress and Treasury come up with all sorts of weird names for things, but real estate professional status is one such example. So real estate professional status in the Internal Revenue Code says that if you spend 750 hours and more time in real estate than you do anywhere else. So 750 hours in real estate and more time in real estate than you do anywhere else. You are a real estate professional, and when you are a real estate professional and you also materially participate in your rentals, then your rental losses are non passive. So the big idea here, the big issue, I should say, is when I buy rental real estate, typically my rental real estate is going to produce a tax loss even when I’m producing positive cash flow, and this is thanks to something called depreciation. Depreciation is a non cash expense that tracks the deterioration of the components of my property over time. So every year I get to claim this, this expense, and I don’t pay for it. Every year I just bought the property up front, and it’s just a calculation. So I could cash flow $5,000 but my depreciation might be $7,000 and so I get to tell the IRS I lost $2,000 that’s a very simple example, but the idea is that I can still actually cash flow, but tell the IRS I lost money. And the question becomes, what do I do with that loss, that tax loss, I told the IRS I lost 2k but what do I do with that? And if, if I’m not a real estate professional, and if I don’t qualify for one of the other exceptions to these rules, then that $2,000 tax loss becomes suspended and carried forward because it’s a passive tax loss, and passive losses can only offset passive income, so I have to either figure out how to generate passive income, or I have to move this passive loss and recategorize it into. A non passive loss, because I have non passive income, such as my w2 income, my business income, that’s all non passive income. So if I can move this passive loss into this non passive income bucket, then I can use the tax loss to offset my w2 income and my business income. And so one of the ways to make that move is to qualify as a real estate professional. So that’s why you might see like, especially if you get involved in a bunch of like communities and groups and Facebook groups, everybody’s talking about, how do I qualify as a real estate professional? Because what they’re trying to do is, in a roundabout way, they’re trying to say, I have a tax loss in my rental and I don’t want it to be suspended and carried forward. I want to use it today, and qualifying as a real estate professional allows me to do that. But to qualify as a real estate professional, again, you have to spend 750 hours in real estate, and you have to spend more time in real estate than you do anywhere else. So

Sharad Mehta  15:54  

if I have a w2 job, non real estate related, doesn’t matter how many hours I spend, I’m not going to qualify for real estate

Brandon Hall  16:03  

professionals. A lot of people have tried. A lot of investors have tried, and not a single one that I’m aware of has won. There was actually a tax court case that just dropped last week, july 11, where a taxpayer built a carriage house in his backyard and he worked a full time job, and he tried to convince the IRS and the tax court that he outworked his full time job because he built this carriage house. He spent in a ton of time building this carriage house. Tax Court just didn’t buy it. They’re like, Wait, yeah, we believe that you spend a lot of time, but we don’t believe that you spent 48 hours a week building this carriage house. So yeah. So a lot of people have tried, but if you have a full time job, or if you run a business full time, like myself, we get blocked by that second test of spend more time in real estate than we do anywhere else. But if I’m like, a real estate flipper or a wholesaler or an agent, and that’s what I’m primarily doing for my income stream and for the time of like, you know, my week is primarily that then I’ve got a lot better chance of qualifying as real estate professional.

Sharad Mehta  17:09  

Are there any downsides to qualifying as a real estate professional?

Brandon Hall  17:14  

Not that I’m aware of.

Sharad Mehta  17:15  

No. Got it. Okay? So basically, someone who’s doing this on the side, there’s no chance for them to qualify as a real estate professional, this is, this needs to be their primary source of income that they’re generating revenue from. And it needs to be more hours than anything else. Yes,

Brandon Hall  17:31  

yeah, real real estate has to be the primary job. And it, actually, it doesn’t have to be the primary source of income. That’s, that’s where people get, not the source of income. Like primary Yeah. It’s like dying by if I look at Yeah, if I look at your month and I and you’ve worked 160 hours, 51% of that time has to be real estate, right?

Sharad Mehta  17:49  

Okay, that makes sense. And what are some of the ways, like someone who’s wholesaling or flipping can save money on taxes by investing in rental properties?

Brandon Hall  17:59  

Yeah? So when you are a wholesaler or a flipper, you are generating ordinary income, and you the nice thing is, if you are running that business full time, or even part time again, like more of your hours go into that than than anything else, then you can qualify as a real estate professional. So we have a lot of flippers, developers, builders, wholesalers, agents that qualify as real estate professionals simply because they’re doing real estate as their main job. Now, if qualifying as real estate professional is step one, right, and that’s the big hurdle, so by flip, by running a flipping business, wholesale brokerage agent, you you meet that first hurdle of qualifying as a real estate pro pretty easily. You do still have to materially participate in your rentals, but if you self manage your rentals, you can achieve that relatively easily as well. So the nice thing for a flipper, wholesaler agent is, unlike like me or an attorney or a physician, where, if we invest in rentals on the side, that’s all passive losses for us, right? It gets locked up, suspended and carried forward. For a flipper or a wholesaler or an agent, you qualify as a real estate pro because it’s your main job already, and now your rentals, the losses that you generate, you’re gonna have a lot easier time taking those tax losses to offset your flipping income, your wholesale income, your agent income. So we at our firm get really excited whenever we’re onboarding clients that their main gig is real estate, because we know that the entire tax code just opens up for them.

Sharad Mehta  19:36  

Got it? Yeah, no, that makes sense. And looking at I mean, you guys have this great insight into you know, almost 1000 investors across the country that are you get to look at their finances. What are some of the things that you notice people that are investing in rental properties, the investors that are more successful than others, like, what do you notice them doing? Are they not. Just focusing on cash flow, or are they in certain parts of the country where they’re investing? Anything you guys have noticed?

Brandon Hall  20:07  

Yes, there are two things that I’ve noticed. So we work with extremely successful investors on, you know, if you if it’s a bell curve right, like we have the extremely successful investors, and when you look at them, they do a few things differently than everybody else. The first thing that they do is they delegate pretty much everything, okay, so they know what they’re good at. And typically it’s acquisitions, it’s underwriting deals. Because if you can, if you can get really good at underwriting deals and putting deals together, you will make more money just on the buy, you know, eventually, obviously, but you make your money on the buy, and you will make a significant amount of amount of money just by putting great deals together. So we are most successful investors. That’s pretty much all they do. They outsource their accounting, they outsource their admin, they outsource their tax, they outsource their legal, they outsource everything except for the acquisitions piece, the property management. They outsource or they build their own team to manage it, but they’re still delegating it. So that’s what our most successful investors do. The second thing that they do is they focus on the the pain or the hassle of implementing anything that we suggest and anything that anybody else suggests. So they’re, what they’re thinking about is, what is the return on my time to get this thing done right? Like, like, I’ve sat there and I’ve I’ve pitched somebody netting 10 million a year on real estate professional status. And they look at it and they’re like, Yeah, this is just too much of a deviation from the thing that’s netting me ten million a year. Not worth my time, right? And that was a big wake up call for me. It’s like, Oh, wow. Like these super successful people, they’re not just looking for, like, I want to pay them the smallest amount of tax as possible. They’re weighing that against how much time am I gonna have to put into this, and is this worth my time and attention? And I think that the most successful investors that we have in our in our investor base, and the most successful entrepreneurs that I’ve met just in my career, they’re very good at that. They’re very good at saying no to things that could be lucrative. But once you factor in how much time and effort and pain and admin costs and documentation management, once you factor all that in, it’s not worth it. Whereas we see, you know somebody, I think they’re called Henry’s, it’s high earners, not rich yet. Henry’s, yeah, high earners, not rich yet. So it’s like, your physician, your sales guys, your entrepreneurs, your engineers, software guys, they’re making 3456, $700,000, they’re like, I hate paying taxes, and I’m going to do anything in my power to not pay taxes. And they take some pretty insane tax positions. They’ll spin up a short term rental, and they’ll rent it one time to somebody, and that’s like, just super risky, right? But they’ll take these, they’ll they’ll spend all this time, they’ll invest all this time. They’ll take these wild positions, and they don’t have that concept of return on my time and effort and energy quite embedded into them yet. But that’s, that’s what our most successful clients do, is they’re just very aware of how much time and effort this is going to take me to pull off. Yeah,

Sharad Mehta  23:29  

that’s very interesting. And then when you think about, like, there’s no if you think about reducing your expenses, there’s only so much you can reduce, but when you think about increasing your income, if you’re in the right profession, there’s like sky is the limit, you can exponentially increase your income rather than focusing on the expense number. Yes, you want to be mindful with the expense number, but at the same time, not just focus on that. Focus on what’s going to make you more money. So yeah, thank you for sharing that. Yeah. And then thank you for Henry’s high net worth. Individual, not rich yet. I love that high

Brandon Hall  24:02  

earner not Yeah, I think I saw that from, I don’t actually, don’t remember where I saw that from, yeah, maybe Peter Riley, he writes for Forbes. Maybe he was the guy that I first saw that from. But I was like, yeah, that’s, that’s smart. High earner, not rich yet, tend to take positions and do things that don’t quite align. Like, if they had $2 million more net worth, they would say, this is just totally not worth it. And you know, like when you’re when you’re on the up and up, you’re you have to do some of those things to accelerate your growth, right? But what we see is people taking just very risky tax positions and being sold tax products that you know that the IRS comes, comes bringing the hammer down at some later point on.

Sharad Mehta  24:49  

Yeah, thank you for sharing that. One question I have is, I hear a lot of investors. I don’t know how familiar you are with the Profit First accounting for. Yeah, real estate. Like, what’s your stand on that?

Brandon Hall  25:03  

Great in theory, terrible to implement

Sharad Mehta  25:08  

for any kind of real estate investor or, like, I

Brandon Hall  25:11  

would say everybody, yeah, I steer everybody away from it. I think that it’s a great theoretical exercise. And I think that you, I think that you can think like that, without necessarily having to execute all of that, but managing all those bank accounts, it’s not scalable, and you will find that you spend more money and or time because you always, you always pay for stuff in time or money always right? So it’s either your time or it’s your money to execute something, the more as you scale, managing all those bank accounts will be insanity, and then you’ll end up collapsing it into a real accounting system. So if you need help budgeting, I would just say, go learn how to budget, and you can read profit first. It’s a good kind of framework and methodology, but where we see clients implement it, as soon as they start scaling, they collapse it, and they just move to a real accounting system, and they call it a

Sharad Mehta  26:05  

day. All right, yeah, no. I also agree with that. I come from an accounting background. Used to be a CPA. It sounds great in theory, but super hard to implement, especially people that are flipping like, imagine managing all those cash flows. Like, if it takes you two months where you’re buying houses but you haven’t sold anything, which is kind of what’s going on with us. I mean, like, you cannot stick to Profit First, you have to start moving money, you know, and that’s the issue that we’re running into. Is there any other budgeting method or system that you, suggest real estate investors to follow.

Brandon Hall  26:45  

So the flippers that we’ve worked with over the years, and the developers, for that matter, everybody seems to struggle with this, to some degree, is estimating the taxes on the sale of your property. So my suggestion this is typically the first thing that we do with anybody that’s flipping property that needs accounting help. We are going to create a savings account or something, so that you move, every time you make a sale, you’re moving a percentage of the profits into this account where it’s trapped, and then ideally, we’re pushing it right out to the IRS in the state. So we’re just getting rid of that money, and we’re gonna pay estimated taxes. And frankly, like, I’m a very big fan of hanging on to every single dollar until the very last second. But from what I’ve seen with flippers and developers, you know, you guys love to take any dollar available and deploy it into the next project. So yeah. And so what I what I try to get everybody to do is is at least take that tax portion out of the profits and put that somewhere safe where you won’t touch it, so that you do have the money to pay taxes when it comes due. Because we have seen situations where where developers and flippers have all their money tied up in real estate, and they’ve got this massive tax bill, and they have to sell property to pay the taxes, and sometimes they’re selling at, you know, way less than the value that they could have actually sold for had they not had this tax pressure. So we just want to make sure that we’re planning ahead for that. But aside from that, it’s really, I mean, you can just use QuickBooks Online. It doesn’t have to be complicated, right? It’s, it’s, I’ve got, I’ve got cost of goods sold. I’ve got inventory. So everything that I put into my flip goes into inventory, and then when I sell it, I’ve got revenue, minus cost goods sold. And that’s my profit. And I’m going to take a percentage that profit and put it into some safe account where I’m not going to touch it. I’m going to be really diligent about diligent about that, because the worst thing that can happen is I put everything in the new project. New project fails, and I put all my tax money into that project, and now it’s all gone, and the IRS is still going to come knocking for their tax money, even though I don’t have any tax money. And that happens. We’ve seen that happen, and it’s very sad, because it essentially bankrupts you, but you didn’t have to get there if you just manage that tax liability more effectively. Yeah,

Sharad Mehta  29:11  

absolutely. I honestly like, that’s the biggest thing that I have personally struggled with is, you know, set this money aside, then a project comes up, you’re like, Oh, this is going to be a quick flip. It’s going to take me. Going to take me three, four months. You put your money into it. It takes longer your tax bill is to you and you hadn’t paid any estimated taxes. And I’m like, holy crap. You know, I had all this money in my other bank account for my investment and stuff. Now I have to withdraw from that, and all of a sudden, it’s not a good feeling. So this is like, literally, the first year where I’m making my estimated tax, quarterly, estimated tax payment, just to make sure that, you know, I’m just ahead of my tax bill. So

Brandon Hall  29:50  

I think that’s smart. The interest rate for late payments now is 8%

Sharad Mehta  29:56  

wow, I was gonna ask you that was gonna be expensive now.

Brandon Hall  29:59  

To not pay in those estimated taxes. But the other thing too, that that we have seen, so we we’ve seen a few flippers get into this mess where, where they do? They take the they had a really great flip. They’ve got a lot of profit, and that becomes profit they got to put on the on their tax returns, and now it’s taxable, right? But that’s eight months away. So you know, I’ll do exactly what you did. I’ll take all that tax money and I’ll just plow into the next deal. I’ll be done in eight months. Totally fine. Next deal, maybe you are done in eight months, but it doesn’t quite go as planned. Now all your profit is the question is, do I pay? Do I just put all of this into taxes now, because I still owe this huge tax bill. So now I put it all in tag, but now I’ve got extra profit that is also taxable, and so you end up getting on this hamster wheel that becomes really hard to step off. And we’ve seen this happen to a few folks where it’s just stressful, man, year after year. Yeah, they can’t. You can’t. The only way to get off is just crush it on a deal that gets all of your tax money back, plus a little bit of profit so you can live but then you’ve got the next problem of, how do I invest in the next deal? So you get that, you get on this hamster wheel you can’t get off. So that’s the number one thing that I tell flippers and developers is, okay, we’re gonna protect the tax money here, because you’re not allowed to touch it. We’re gonna you make 100k on profit. Cool, we’re stripping 40k down. We’re going to put some into some to state, some into fed. Whether or not we cut the check today is one, one thing, depending on how well you can manage your money. But we’re going to put it into the savings accounts, and they’re going to sit there, and you’re not going to touch them, because you have to protect that. Otherwise you’ll you’ll get stuck.

Sharad Mehta  31:40  

And then, you know, there’s one other thing you cannot put, I mean, it’s the feeling that I have. You cannot put a price on the peace of mind that you have knowing that that takes liability that you’ve already, you know, paid. It’s otherwise. You know, I’ve been in situations where I make great money on this flip, and then I’m thinking, all right, I can pay, you know, I’m not going to pay my stability taxes, just like you mentioned, I’m going to put this money into another flip. But you always have this nagging feeling the back of my mind, and you’re not able to focus 100% on the task at hand, but you’re thinking, oh my god, I just have to make sure it sells on time, that I’m able to take my money out, pay taxes. It’s not a good place to be in, so it’s just it’s been such a great relief just to be able to pay my estimated taxes, and knowing, okay, whatever it comes it’ll be a very small amount, if anything, that I can just take care of at the end of the year. So yeah,

Brandon Hall  32:30  

and that’s a really good story, because, and I think I think anybody listening to this that’s potentially struggling with the with financial management should take that to heart and get some help. Because I promise you, you know, the one thing that I’ve seen super successful people make that talked about the bell curve. Well, on the on the other end of the bell curve is, is people that do not are not successful and do not run successful businesses. And I would say the one commonality between all of them is that they are stressed out financially, either they mismanage the money in this way, right? So I’ve got tax payments that I just rolled into the next deal, and I’ll figure it out later, and then, oh crap, something bad happens, or life creep just way accelerated their ability to generate profits. Anybody that’s stressed out financially, any business owner that’s stressed out financially, does not make good business decisions. You just can’t you might hustle a little bit harder, but hustle is not always the right answer to scaling a business. Sometimes it is, but not always, and I’ve seen that happen a lot too, where otherwise good business owner gets stressed out financially and is now making very short term focused gut decision making to generate an extra dollar so that they can get out of their financial hole, which just spirals and makes it even worse.

Sharad Mehta  33:44  

Yeah, absolutely. Brandon, it’s it’s such great advice, and the decisions, like the clarity that you have about making decisions, it just goes through the roof. You’re able to make better decisions. You’re not stressed out, and then you kind of know where your business stands financially. So thank you for sharing that. Brandon. All right, we want to pivot to the next segment of our show. Ask you a couple of final questions. What do you do for fun, other than growing an incredible accounting fun?

Brandon Hall  34:15  

Other than incredible accounting for fun, I don’t know if that’s you got out of this space. You know what it’s like? No, what do I do for fun? So I’ve got, I’ve got a couple kids. We go hiking on the weekends. I’ve got a road bike. Love riding that. What’s that? I’ve got a four and a half and two and a half year old, awesome. So like hiking and on long walks and sports and stuff like that. So, yeah, revolves around the kids these days.

Sharad Mehta  34:42  

Oh, it does? It does? I have a seven year old, and my daughter just turned four on Saturday, yeah, like the entire fun weekend stuff, like, people that you hanging out with, they, you gotta make sure they have kids around the same age, otherwise, you know, they could be the funnest people, but if they don’t have kids around the same age, and all. I go, you know, what am I going to do with you? Yeah, right. I see some books in the background. What’s the one book that you would say has had the biggest impact on your life? Business Book, personal book, or one of each? Yeah,

Brandon Hall  35:13  

that’s a really good question. I’d say personal book would be How to Win Friends and Influence People. I guess it’s also kind of kind of business as well. And then the another business book is traction by Gina Wickman, very good book. And if any of this conversation has resonated with you in terms of just how to make better decisions as a business owner, pick up that book, because it gives you it’s like, literally, a playbook on how to run your business more effectively.

Sharad Mehta  35:40  

Cool final question, if you could spend a day with anyone, dead or alive, who would you want to spend that day with, and why

Brandon Hall  35:54  

I would say, I would say, Richard Branson. Richard Branson, yeah, yeah, very successful business owner, but figured out how to have fun along the way. Seemingly treated people really well along the way, and and he, I know that he built businesses with friends, which is kind of unheard of, so that I probably want to spend a day with him, just to, just to learn how he did it.

Sharad Mehta  36:21  

I’ve read stuff. Yeah. Great answer, yeah. He seems like a super cool, fun guy, right? Knows, and super smart also. Hi Brandon, if someone listening to this podcast wants to connect with you, learn more about your firm and what do you you do? What’s the best way for them to do that?

Brandon Hall  36:39  

Uh, three ways to do it. One, you can hit me up on YouTube. I just launched a new channel. It’s just at B Hall CPA. I think the other way is Twitter. That is definitely at B Hall CPA. And then if you want to connect with my firm and you’re interested in scheduling a discovery call or just want to check out all the content that we have, we’ve got a ton of content that’s at the realestate cpa.com So www dot the realestate cpa.com

Sharad Mehta  37:06  

Cool, awesome. We’ll make sure we put links to all of those in the show notes. Brandon, thanks so much for coming on the podcast. It was absolutely incredible. Thank you. Thanks

Brandon Hall  37:15  

for having me. Thanks. Applause.