We’re not breaking any news here, but we’ll share it, anyway.
Goes without saying, real estate is one of the top asset classes for the wealthiest people in the world, with 10% of all billionaires fortunes were built in real estate, according to Forbes.
And while real estate remains a valuable wealth hacking tool, many Americans fail to take advantage of a trick that could dramatically lower their tax bills on real estate profits.
So one of the secrets to real estate investment is a little-known trick (outside real estate) known as the “1031 exchange,” allowing you to defer all your capital gains taxes on your recent real estate score.
“Surprisingly, many investors are not aware of this,” EVP of Madison 1031 Michael Brady told me back in 2015.
(This is when I first got introduced to it.)
“Even real estate lawyers are asking us about it,” he said.
These exchanges are named after section §1031 of the Internal Revenue Code. By taking advantage of this loophole, investors can reap big breaks on appreciated real estate assets.
“Astute investors use 1031 exchanges to diversify their portfolios, exchanging one high priced property for several smaller properties,” Brady told me, “or investing their money in regions where bargains are easier to find.”
Use of these exchanges has been increasing among professional real estate buyers. According to an early 2014 report (yes, it’s old) by universal REIT authority NAREIT, the overall 1031 exchange activity level among REITs was up.
In fact, one REIT back then did around $85 billion in 1031 transactions. Mind you, that’s a professional real estate operator that knows every trick in the book.
How they do it…
Here’s how the 1031 works in practice:
You sell a property at a profit. Within 45 days, you find one or more replacement properties — worth the same or more — that you want to defer the money to.
From there, the taxes from the profits made from the first property can be “deferred” and used for your next real estate deal.
Internet influencer Grant Cardone breaks it down here. According to himself, he says he’s never “paid any taxes.” (With the 1031, that is.)
Here’s the cool thing: This process can be repeated as much as you want, as many times as you want, until you either die, or decide you don’t want to invest anymore.
So there you have it, you too could avoid paying taxes, billionaire-style!
If there’s anything the pandemic taught us, it’s that the paradigm of “office” and “workspace” has been shaken to its CORE.
Universities are teaching via Zoom, court dates are done virtually, FULLY REMOTE businesses are valued at $1B+, and legitimate Inc. 5000 startups are run from…wherever. 📲
This is my office for the day…
I am actually running our business from the beach, typing this from here.
It’s 4:28 pm CET, which means it’s 10:28 am EST and I am CRUSHING my to-do list.
(And the team will continue to crush it while I’m asleep. That’s the 🗝)
Having team members in all the main time zones gives us a 24-hour work cycle vs. 9-5/eight-hour on-the-clock performance.
This means we get 3x the productivity of a similar company. 🔥
Let me repeat that…3x PRODUCTIVITY vs. our competitors.
Meanwhile our project management software grants us 24-hour TEAM-WIDE connectivity that tracks all tasks and lets us know if productivity dips even a little bit.
There is ALWAYS someone senior awake. It could be Martin in Barcelona…Nat in New York…Vineet & Arif in New Delhi.
Well, the first step is to have an actual side hustle you’re launching. Not just an idea, a validated business.
MAJOR KEY: Do NOT spend money until you’ve made your FIRST DOLLAR! 🗝🗝🗝🗝
(You can catch a replay Business Launch masterclass here and see TRIBE member Nessa launched her business on the spot and got her first $45K client shortly after.)
One of the easiest ways to start is with Airbnb—you can start that in 10 minutes. Literally. (Here’s a guide if you need it.)
Once you have your business, you build a virtual infrastructure (you really just need two softwares, which are FREE), manage the team accordingly and run the business from there.
I’m gonna put together a step-by-step video breakdown this weekend inside the new TRIBE U on the FIVE key things you need to do this for YOURSELF. 💵 💎
From what software to use, how to build a team, how to keep.
In the meantime, drop a comment if you’re ready to build some wealth and any questions if you want more…
Let’s get to work. 🙌
PS: If you can’t be bothered with video and just wanna get to work, we’re hosting a TRIBE U workshopthat will help you get this process started on the spot. It’s $479 $49. 🔥
Senator Sharif Street and Temple University are bringing community wealth-building to North Philadelphia with a big conference.
Co-hosted by fintech NYCE, the Senator’s office announced its inaugural WealthCon event July 23, 2022, at Temple University’s main campus.
Closing the racial wealth gap is a major challenge we face in creating a fair and inclusive society,” said Street, who represents the Third Senatorial District of Philadelphia, one of the poorest communities in America, “Investing in people is how we elevate communities with a history of divestment and educating folks on financial literacy is a critical step toward that goal.”
WealthCon is a community-first experience dedicated to providing direct access to wealth-building programs across Pennsylvania.“
We’re a big advocate of NYCE’s mission of wealth equality and are excited to help address some of the grave issues that have impacted the communities for decades,” Street said.
More than 1000 Pennsylvanians, including officials from state, local, and federal governments, will attend WealthCon, including leaders in housing, lending, education, and community development.
The conference will offer panels and keynote conversations, covering the latest opportunities in real estate investing, financial literacy (including stocks, NFTs, cryptocurrency), retirement planning, public safety, entrepreneurship, and more.
“Financial literacy is critical to long-term community building,” NYCE CEO Philip Michael said. “We’re excited to make that available to everyone.”
The evening will conclude with cocktails and networking at the invite-only VIP dinner honoring WealthCon’s Innovators of 2022.
Innovators are recognized for their commitment to closing the wealth gap in America, both within their communities and beyond. (To submit your candidate for this year’s Innovators Award, please email nat@nycegroup.co.)
Tickets are free for members of the community. All ages are welcome.
Goes without saying, if you’re a new landlord, there are some metrics you just have to know. And if this is the most important metric to master, this one may be the most important, period…
(Pause for dramatic effect…)
The NOI.
Whether it’s vetting, buying or managing real estate, NOI—short for Net Operating Income—is arguably the most crucial metric for real estate investors. NOI is simply your net profits from rental income, after your expenses are paid. Here’s why it matters and why it’s more important than you think.
Your bottom line
When you have a rental property, your end game is to make a profit. You get your rental income. Deduct your operating expenses like maintenance, repairs and so on. Now you have your net operating income, which is your bottom line.
NOI = all revenue from the property – all operating expenses
It’s a simple enough formula, but there are ways you can manage it.
Managing OPEX
In business, there are two ways to increase profits. 1) Increase revenue. 2) Decrease expenses.
Simple enough, right? With rental income, there’s only so much you can do to increase revenue. So managing your OPEX is abasic but extremely important metric to monitor — and very often the hack for value-add investors to unlock crazy profits.
Valuation
Here’s the real beauty of NOI. Unlike single-family properties, the value of income-producing real estate (using the cap rate formula) is derived directly from the net income you can squeeze from it. Not supply and demand. Not the market. Not the S&P. Not bubbles. None of that.
To know more about real estate hack, money tips, and building generational wealth, subscribe to wealth lab and learn how to bust through the barriers preventing you from becoming a millionaire.
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