Clint Coons is a founding partner of Anderson Business Advisors, lawyer, and avid real estate investor with over 200 properties. A successful attorney, real estate investor, and speaker, Clint has used his innovative and dynamic tax planning and asset protection strategies coupled with knowledge borne from experience to help thousands of investors save millions of dollars and build real wealth.
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Clint Coons: (00:00)
Figure all this stuff out. When do you use LLCs, corporations, land trust, things like that. You
Tony Javier: (00:04)
Teach people how to do this themselves so they can do it themselves.
Tony Javier: (00:08)
You, like I said, you can turn a lot of those so-called negatives and things positive.
Tony Javier: (00:15)
Hi everyone, welcome to the show. This show is created to help business owners start or grow the real estate investing business. By bringing you guests, they can share their journey with you. So you can learn not only from their successes, but more importantly potentially their failures. So I wanna encourage you guys that there’s unlimited potential and that you can get anywhere faster by working smarter. So hopefully this conversation will prove that to you and help you work smarter. Uh, so remember, when you want to get somewhere and get something done, don’t ask how can I get there? But more importantly, who can get me there? So I’m Tony Javier, your host, 20 year real estate investor, mostly known as the TV guy. So if you guys wanna dominate your market with TV commercials, go to 10 x tv.co. We have some joint venture partnerships and a lot of great stuff that we’re doing for real estate investors around the country. So love to talk to you about that. So super excited today to have on our show. Clint Koons, what’s going on
Clint Coons: (01:03)
Clint? Hey Tony, thanks for having me on.
Tony Javier: (01:05)
Absolutely good having you. So it’s been good chatting with you offline a little bit. You have a monster business. You probably have more employees than anybody that I can think of that’s been on our show, which is amazing. I’m sure it’s a little brain damage, but it probably worth it. You’ve got over close to 500, I think over 500, uh, employees now working with real estate investors on asset protection, tax planning, and your real estate investor yourself, which is super cool. So we have a lot to talk about. So I guess let’s rewind and kind of start where you, like how you started the real estate investing asset protection and tax planning game, how you got into real estate and just kind of give people a, an overview of, uh, of who you
Clint Coons: (01:42)
Are. Sure. So the real estate really began with my parents. My dad was a real estate investor and, and I got a taste for it, you know, uh, basically an indentured servant for 27 years working on his properties. He just did the single family route by a property rehab. It rented out. And so through that experience when I graduated law school, I realized, hey, there’s an opportunity here. Because so many investors, like my father, they own pretty much everything in their own name. And they had, uh, good advisors. My grandfather was an attorney, my dad’s dad. And he never once sat down with him and said, you know, you ought protect your stuff here because I mean, let’s face it, my brother and I, we were huge liabilities from my dad. I mean, we would do stupid stuff like go to his apartment building and have his apartment manager buy us beer and then bring our friends in.
Clint Coons: (02:24)
And so our friends would pay for the beer cuz now they had to connect and you know, if anything would’ve happened that would all roll back up on my father. And so when I graduated law school, one of the first things I started doing was protecting his assets. And then I realized, hey, there’s probably a lot of other people out there like him that own real estate in their own name and they don’t appreciate the liability. So I built this firm with my partner Toby Mathis, on the foundation of helping real estate investors figure all this stuff out. When do you use LLCs, corporations, land trust, things like that. And then along the way, I mean the reason we’re up to 500 employees is we realize, hey, there’s another side side of this, it’s the tax side and, and we create structures and then our client would take it to their CPA and their CPA didn’t understand it and he was typically down on it.
Clint Coons: (03:07)
So we decided to build out a tax practice inside of our firm. And so I had all this built out. Then along the way I started, you know, investing myself and I rapidly came to realize that I was doing it all wrong. That is, I was telling people, teaching people strategies on how to protect themselves and and address their taxes. But I didn’t realize that as an active investor that some of the things that I were teaching people was actually hurting them on their ability to acquire more property. I mean, if you say, Hey, you wanna reduce your taxes, everyone’s gonna say, yeah, I wanna reduce it down to zero. Sounds intriguing. But at the end of the day, does it help you get to where you want to go with your investing? So if you’re somebody who’s using qualified mortgage lenders to put all your deals together, you want your returns to look a certain way.
Clint Coons: (03:49)
And so once I figured out that component, my own investing took off. And so it started with flipping real estate in the Las Vegas market back in 2009, 10 and 11. And then we started buying single families, multi-family properties, commercial properties, self storage, and you know, all other kinds of difference. Investments as well. Warehouses, mobile home parks. And through that process I’ve learned a lot along the way. And so at Anderson, you know, yeah we have 500 employees, but what makes us so unique is our approach. Our approach is about asset protection. It’s about tax planning, but it’s also about business planning. And that’s that third leg of the, the stools. I like to refer to it that a lot of people just don’t understand
Tony Javier: (04:26)
What I love about, I mean there’s so many things I love about real estate, but the ability to save money on taxes with having an asset you can depreciate properly, to me is a game changer. I mean, being able to make a lot of money in real estate and pay almost no money in taxes to me is, is a big thing. So you said something important, it was how do you show banks that you have money? Mm-hmm. so that, or that you’re making money rather so you’re able to get a loan, but then also pay as little in taxes as you possibly can. And I know for me, you know, I bought a commercial building a couple years ago, put, was supposed to only put 900,000 into it, but we end up putting like a million and a half into it. It was a crazy project but it, it turned out pretty well.
Tony Javier: (05:05)
So we’re able to take a lot of that million and a half and depreciate it and take it over a couple years of income. Right? And now we’re doing that with single family too, where we’re keeping a lot of properties, taking the renovations and using bonus depreciation on the components that we can in order to save money on taxes. So above and beyond that, and you can expand on that if you want to. Above and beyond that, how do you also advise your clients saving taxes? You know, just kind of from a high level view.
Clint Coons: (05:30)
Well, really what I wanna look at is, you know, the individual and, and what type of lenders are gonna be working with. And so what do you want your 10 40 to look like when you have to go in and apply for that loan? Cuz you got that debt to income ratio you’re gonna run up against. And what will lenders add back in to your income to bump it up? As you brought up, you know, depreciation, that’s always gonna get added back in. But you find a lot of investors I work with, they’re small business owners or they have some side gig going and there’s always, always this tug, Hey I can write off this, this, this and this and I can reduce my taxes down to zero. I get it. I used to do that. But the problem is when you go in to apply for a loan, they see the fact that you have zero income.
Clint Coons: (06:08)
You can sit there and argue all day long, Hey, I actually make money, just doesn’t show up in my taxes. And then they think you’re, you know, either you’re under prostitution or you’re a drug dealer doing something illicit activity. Cuz that’s what doesn’t show up on taxation, on taxes. So that is the problem that I see a lot of people fall into. It’s like selling a business. I was talking to this business owner the other day and a CPA told him to write off all this stuff and he said, that’s fine, you can do that, but you know, do you wanna sell this company in a few years? And he said, yeah, that’s my intention. I said, well you’re not gonna get there fallen his advice. Because by taking all those deductions, you’re gonna reduce your ebitda. And when you go to sell, most of the time it’s gonna be a multiple, which means your net income and if you expense everything out the way you’re planning to doing, it’s gonna hurt you long term when you’re trying to gross up the value of that company for sale.
Clint Coons: (06:53)
And it’s no different the way we approach taxation. So one of the things I tell people a lot of times is how does that income hit your 10 40 hold your property through an entity that’s treated as a partnership for federal tax purposes? And this one’s so simple. You see so many investors, they hold ’em through disregarded entities or in their own name shows up on their Schedule E or their 10 40 page one, you automatically get a 30% 25 to 30% haircut on your income if you’re using a qualified mortgage lender to do your next deal when your income shows up there. If you take all those same properties and you hold them through a partnership entity and that income shows up on page two as a line item and you don’t get a haircut. So a little move like that can bump your income by 25%. So as you’re growing and you run up against that debt time ratio, this is, these are the tricks that are gonna help you.
Tony Javier: (07:41)
Yeah. So explain that to people that didn’t understand that, cuz I understand it cuz I just did that recently where I was getting turned down for loans from banks and I, I have good income. When I wasn’t getting turned down, actually I was, they were asking me for taxes, insurance, and a principle and interest statement from the bank on every single property I own. And I didn’t want to do that for a hundred plus properties. So I did a partnership so that it would show up on the partnership return so that way I didn’t have to line item everything out. And I think there was an income component to it as well, cuz they weren’t adding back in the principle I was paying down because you’re getting income on that even though you’re paying it down and it’s not an expense. Is that what you’re referring to? And can you, can you expand on that a little bit to make sure people understand that? Yeah.
Clint Coons: (08:28)
You know, when you first start now, or maybe you just want that cheaper money, you’re gonna go the qualified mortgage route, which is the Freddie Fanny stuff that they underwrite. And when you go that route, then under those guidelines they look at your 10 40 and they see where the income comes in and they’re gonna say, all right, if the income’s coming in on Schedule E of your 10 40 on the first page where you have everything lined out, then they have to hold back 25% for vacancies. Mm-hmm. So if you choose to put your income there, they’re gonna take a 25% haircut. Now granted, if you take that same individual like yourself, not to mention all the, that the asks that you get from the, uh, broker, if you take that same income and you put it on the second page of that scheduling, it’s li there’s one line, you just put a number in there which consolidates all of that.
Clint Coons: (09:16)
You don’t take that same haircut because when they underwrite their guidelines, there’s a certain way they have to underwrite it. If it’s on page one versus the income that shows up on page two mm-hmm. . So to get yourself a greater boost, I like to see it on page two. But then as you ex, you know, as you grow, when you start looking at other deals, granted you’re gonna, if you’re not working with the qualified mortgage mortgages and you’re doing a non QM loan, which you know you’re gonna pay a little more, but those are gonna be those asset based experience based loans as I’m sure you’re doing, uh, just like I’m doing, when you, when you’re buying a package of properties or you’re doing a multi, you’re going in there and they’re going to evaluate that on a different basis. But for a lot of people who are investing in single families and you’re, and you’re going out there and obtaining a mortgage, this is important.
Clint Coons: (09:59)
Such as also another mistake I see people make, you know, you got this married couple, they’re applying for a loan to buy their fourth investment property. And I, and I look through their other deals and, and each and every deal, they put both of their names on there as if, well if I don’t go on then I won’t have any ownership interest if that person leaves me. You can take care of all that later on after the fact. But if you want to preserve your ability to each of you stack 10 of these qualified mortgages, which are the lower interest rates in your name, then you should only qualify one spouse on the loan if you can do it. If you have two working spouses just qualify one, you go one to one, one to one. So you can get 20 rather than 10 many times, which I’ve seen happen more often than not.
Tony Javier: (10:39)
Yeah, yeah. I mean I could see why you’re so busy because if you’re able to portray how much is needed in the asset protection, the tax planning, the as, I don’t even think we talked about estate planning yet. Nope. I had my estate plan done, gosh, what’s it been two years ago? Might have been closer to three years ago and had something happened to me before I had that plan together. I mean, my stuff would’ve been a mess and I still don’t know if I got everything in there that I needed to, but I was able to structure to where something happened to me. It goes seamless to me, to my wife. If something happens to me and my wife, it goes into a trust where my son is able to take advantage of it down the road and, and have those assets and it for and if and all of that to happen a little more seamlessly than if you don’t have an estate plan set up. So, so tell me, when you meet with most real estate investors, how many of them actually have an estate plan and kind of run, run us down the road of what that looks like?
Clint Coons: (11:33)
Yeah. You know, right? Most of the real estate investors I meet with, they maybe have one or two entities or they haven’t set up anything yet. And so what we’re always looking at is, okay, how can we protect you first, uh, asset protection? So that’s gonna typically be a combination of limited liability companies, a holding LLC that would own all the various LLCs where your assets are protected. And then we take that one limited liability company and we set up a living trust for our clients and we drop that one LLC into that living trust. And then when you’re drafting out your trust, you have to be conscious of, you know, if I’ve built up this portfolio, who’s gonna manage that when I’m gone do, am I just gonna allow someone to go in and sell it all and distribute out the cash? Maybe if that’s what your goals are or you don’t care.
Clint Coons: (12:14)
But most people I run into, they want to create a legacy of wealth. And you can do that effectively through your living trust where you can preserve and protect those LLCs that hold your rental real estate so they can continue to be that little at m that you’ve created for multiple generations. And to do that, you gotta have an estate plan in, in place that that recognizes, you know, the real estate needs to be treated different than my personal residents or my cash. So I’ll give you an example. So in my estate, we got a lot of properties as we were talking about. And the first thing I, you know, I made sure of is that our son and daughter, they’re not going to receive those properties. They’re gonna be held in trust for their benefit to produce income for them during their lifetime. Now at the same time, I don’t want ’em to become little bombs and say, all right, well dad’s real estate portfolio is gonna kick down to me this year, $700,000.
Clint Coons: (13:03)
So I’ll tell you what, I’m gonna quit working, I’m gonna play PlayStation all day long cause I don’t have to work anymore. So in my estate plan says if you wanted to do that, not that our kids would, but just in case you don’t get paid anything. So it incentivizes them to keep working by saying, I’ll pay you out as much as you can generate on your own, but if you’re not working, you don’t get paid unless you know, you build other circumstances in, you know, if they wanted to be teach or be a policeman, fireman, military service, things like that, stay-at-home, mom got all that covered. And I have so many different managing that. The house, the vehicles, the brokerage account, the cash, they get that outright boom that goes to them. But I want to create a legacy so when they’re gone, that real estate that I’ve built worked so hard to build up that portfolio that’ll keep paying dividends to their children and their children’s children. And, and hopefully my kids will see the value in that and want to add to it as well. So thinking through that, I think it’s really important. Absolutely.
Tony Javier: (13:53)
I mean, most people don’t think that anything’s gonna ha I mean, don’t, don’t think it’s gonna happen to ’em many times soon, especially if they’re young. Mm-hmm and you just never know what’s gonna happen. I’ve just heard many stories where something happened to somebody and you know, their property was in their name and so they had to go through the probate process and then there’s money tied up in different places. And so, you know, you gotta hire attorneys. I mean, you know, something happens to somebody you’re already grieving as it is. So have to hire attorneys and, and you know, go through the process of trying to get assets and try and get money and then potentially have people come in and try and fight for it because they think they have the right to it if it’s not in your will or in your state. There’s just a lot that can be, you know, they could be cut upfront by thinking about the people that are potentially gonna inherit your assets. Right. So I think that’s another piece is not only setting up properly to where it it runs without you or you know, it kind of goes properly without you there, but also just the the, the mental in angst that it’s gonna create for the errors if it’s not set up properly. Right?
Clint Coons: (14:52)
That’s correct. Yeah.
Tony Javier: (14:53)
Yeah. What else? I mean you talked about asset protection, so you know, limited liability companies, you know, things of that nature, layering it if you will and then you have asset protection and then you have tax planning. Um, I think you also said something about business planning as well. So touch on that a little bit. Yeah,
Clint Coons: (15:08)
So the business planning side is understanding what the client wants to accomplish and then designing that plan to help them get there. You know, is it not putting us so much emphasis on taxation? Is it putting more of the emphasis on the asset protection side? And so the best example I can give you is a lot of our clients maybe have an existing business when they’re coming to us and, and they’re thinking about a certain strategy like this one client I’ve been working with where he thought about setting it up as an S corp cuz most people will set things up as s corporations for that flow through treatment. And I showed him and said, yeah, you could do that. But here’s the thing that with the type of income you’re making from that flipping activity that you’re engaging in right now, here’s what your overall tax liability’s gonna be.
Clint Coons: (15:51)
So if you wanna grow faster and you don’t want to keep using hard money to fund these deals and paying those higher interest rates, why don’t you fund more of ’em yourself? But the problem is, is that at the end of the day, uncle Sam takes so much outta your pocket, you’re still forced into using the hard money lenders. So by changing that and setting it up as a C corporation, you can effectively cut your tax rate by 16% on your income. That 16% you can turn around then and reinvest to continue to build the business at a faster clip cuz you’re no longer using the hard money lenders, you’re getting more money back in your pocket.
Tony Javier: (16:25)
So back up there, C corp. I’ve never heard, I don’t wanna say I’ve never, I think I’ve heard it a few times maybe using a C corp because if, you know, if I remember back in college the thing about C corp was double taxation, right? You get tax one s upfront and then you get taxed again at the, at at the year end or you know, however that is. So tell us why some people are set up or should be set up a C corporations again
Clint Coons: (16:46)
Because if you’re gonna flip wholesale any type of active business activity, this isn’t for the person that’s got a rental portfolio, this is for those investors who are engaging in an active business. So my client that I was just referring to, he’s doing really well for himself $800,000 a year from his flipping activity. That money’s flowing down to him. It’s getting tax at 37%, throwing another eight to 10% in state taxes on that. He’s losing close to 45% of his income. Right? So if you did that, if you made a say a million dollars to make it simple, you got six or five 50 left to invest under that scenario. Whereas if you set up a C corporation and you did the exact same activity through the C corporation, you’re gonna buy have about say $750,000 left to invest. So you’ll have an extra $200,000 just in tax savings.
Clint Coons: (17:37)
Now every time I have this conversation with someone who has an inexperienced cpa, they bring exactly up that same pushback. Hey, well it’s double taxation. It’s like great, let’s get the CPA on the line, run the the numbers with, and so we’ll go through and we’ll run the numbers and I know the way the numbers work out because I use a C corporation for my own flipping activity and to run my active business mm-hmm Anderson’s C corporation and you end up paying about a percent more when you eventually take out the money as a dividend outta your C corporation because you’re gonna pay tax at 20%.
Tony Javier: (18:10)
How much more did you say?
Clint Coons: (18:11)
About a percent. Percent and a half percent. Okay. So let me ask you this, would you like to have access in this case to an extra $200,000 a year for the next 10 years at 1% or one point a half percent? Where else are you gonna get that type of money? If it’s not from the irs, you’re not, you can’t go go out and borrow that at one point a half percent.
Tony Javier: (18:28)
So where does that 200,000 come from? It’s because you’re lending it to yourself and that’s,
Clint Coons: (18:33)
No, it’s because your corporation is generating that money and it’s taking, its the tax savings that would’ve been that you’re saving by not having that money come down to you and you’re reinvesting it in your corporation because most people, you know, as you’re building your business, it’s invest, invest, invest and keep growing. So when I make a million dollars, I end up paying tax a 250 state federal on that $250,000 in taxes. I have $750,000 left over. If I didn’t have that C corp, I’d be hit at about 45% in most cases on taxes. So I’d only have $550,000 left to reinvest.
Tony Javier: (19:10)
So where does that, I’m sorry, I’m losing it a little bit. Yeah. Where is the, where’s the $200,000 saved? Is it because tax rates okay, because it’s a corporate tax rate, the rates go are going down. Right. So as long as you’re not taking that money outta the business, right. As long as it stays in the business. Yes. Then the tax, a tax rate is lower and you don’t have to pay tax the higher taxes until you flow it through and actually pay yourself. Is that what I’m understanding?
Clint Coons: (19:37)
Correct. So what happens in this scenario, your C corporation would pay tax at a flat 21%. Okay?
Tony Javier: (19:44)
That’s all is, is that for any any income level?
Clint Coons: (19:47)
All income. Okay. 21%. Okay. When you take it out, you pay tax at 20%.
Tony Javier: (19:54)
Clint Coons: (19:54)
So what you’re taking advantage of then when you look at it, is for that income that I don’t need that I’m reinvesting, I’m paying a flat tax of 21%. And if I’m in a 37 plus your state, you know, like I said, 45, which you probably are in yourself, if I, if I compare those two, that’s a 50% tax saving on that money because I’m just gonna reinvest it anyways. So why pay it to the IRS if I can keep it my own business? Now a lot of people will say, well wait a minute, I need some of that money to go out and buy investment real estate. I just don’t flip or run an active business. That’s fine then loan it to yourself. A lot of our larger acquisitions that we ha have made over the past several years have been through loans from my existing business. So for example, I know there’re bigger numbers than a lot of people are used to possibly dealing with. I got 2 million in retained earnings sitting there. I’m not not using it in the business. I’ll loan it out to myself at the current AFR a plus one, take that money, go and buy real estate with it on the, on the personal side. So
Tony Javier: (20:56)
You’re getting, you’re still my mind’s blown right now cuz I I’ve never heard anybody talk about this before. And this could be, this could be a game changer for me cuz I’m in California, right? I mean the tax rates are, are, are not fun mm-hmm. . And so the reason that I buy so much real estate and keep it is because of the taxes. Because I want to be able to depreciate the renovations and I don’t want to pay taxes on the additional income. So I’m keeping, I’m keeping most of the properties I’m buying right now. And so you’re saying that again, the corporate tax rate is 21% mm-hmm. . So 20, at the end of the year you make a million dollars, 21%. Then when it is paid out to you, you pay the extra 20%. So there are, there, there’s gonna be some income you need to pay to yourself. I I imagine there’s some kind of rule that you need kinda like an S corp that you need to pay a certain wage or a fair wage. Is that correct? A fair wage?
Clint Coons: (21:47)
Yeah. Well the, yeah, the salary that you take, that’s gonna be subject to ordinary income taxes that’s subject to, you know, your, your partners FICA and futa, the W2 stuff, the money that I was referring to is what we, your, uh, dividend that you pay yourself out of the company, you know, the owner’s draws another way maybe to, to think about it. Yeah. Like in your business right now, you’re, you’re probably working, you take a W2 and then you’ve got $300,000 left over at the end of the year and if it’s an S corp, you make a distribution of that 300 grand, you pay tax on that money. Or even if you don’t make the distribution, you still pay tax on that money. Yep. At your ordinary income tax bracket. Right? Well the C corp that doesn’t happen. You still, you take your W two whatever you lead cuz the, the salary is an expense to the corp. So what I’m referring to is the earnings, net earnings after all expenses, that’s gonna be, you’re gonna pay tax there at 21%. And then if you turn around the very next day and say, well, I’m gonna distribute it to myself, then you’re gonna pay tax on that distribution at 20%.
Tony Javier: (22:46)
And the way to get around that, like you said, is just loaning that money to yourself. So it’s not an actual income you’re taking, it’s a loan that you’re taking just, you gotta make sure you’re paying the interest on it, right?
Clint Coons: (22:56)
Correct. So take someone like yourself, one of the, this is that business planning side, I would ask you, okay, how long do you plan to live in California? Think you might move. Because if you start accumulating that money inside of a C corporation and you say, yeah, an eight or 10 years, my wife and I were outta here. Cool. So we’ll make sure we preserve as much as we can inside of your C corporation. You won’t take anything out now because we know it’ll be subject to taxation in California and said, well hold onto it. You move to a lower tax state, then you start taking that money out. Yeah.
Tony Javier: (23:23)
Now is that 20%, is that based on where you’re located? No,
Clint Coons: (23:27)
That’s federal. But what you would be concerned about as well is
Tony Javier: (23:31)
State. State, okay. So the 20% does not include state tax?
Clint Coons: (23:35)
No it does not.
Tony Javier: (23:36)
Okay, I gotcha. So that would be 20% federal regardless because you’re a C corporation.
Clint Coons: (23:41)
Well it’s dividend income, that’s why. Right.
Tony Javier: (23:43)
So so does it, does that 21 per uh, excuse me, 20% go up and down based on your income level?
Clint Coons: (23:49)
It yeah, it could go lower based upon your income level, but you know, most of the people that are gonna be pulling that money out, they’re gonna be paying tax at 20%.
Tony Javier: (23:56)
Right. I gotcha. Okay. So federal and then let’s say state taxes, 10% you’re paying give or take about 51% if you take it all out. Or 20, just the 21% if you only take out the corporate tax.
Clint Coons: (24:07)
Tony Javier: (24:08)
I love this. I love these conversations. thinking you’re saving a lot of money here.
Clint Coons: (24:13)
Well see, then you just borrow the money. So in your business, you know, I don’t know the numbers, but I would say, you know, run, run an analysis. Say if I keep it as a C corp versus an corp, where am I sitting at the end of the year cash wise? And then that cash, what are you doing with your money if you’re taking it to buy residential property, loan the money out to yourself rather than take a a dividend, you may be, uh, dollars ahead and be able to pick up one or two more deals.
Tony Javier: (24:36)
A hundred percent. I love it. I love it. Good stuff. Good stuff. All right. Where do we go from here? My mine’s blown. So I’m kind of like, man, and what, what have I been missing here? Uh, so I have have, have talk, have a talk with my CPA and potentially reach out to you guys as well. Yeah. Um, to help plan that a little bit better. So let’s back up. So real estate investors, not all of ’em make a lot of money, right? I mean, some of them make a decent living. So some of them might be thinking, listening to this, well, you know, the income tax planning, I don’t quite make enough asset protection. I only have so many properties. You know, there’s a lot of, you know, a lot of things that people are probably thinking unless they’re just, you know, at a certain level. Mm-hmm. , is there something in particular that you would say is something that’d be universal for anybody? Whether they’re doing a few deals a year or doing 300 deals a year?
Clint Coons: (25:25)
Yeah, so first off, we already talked about the tax returns. That’s the simple one. Hold your stuff through a partnership, your real estate, so you get a boost when it comes to borrowing. Mm-hmm . The second thing I say is that, you know, right now we have cost seg of course with bonus depreciation, which has been the hot ticket for everyone as far as generating tax deductions. So let’s say I was, I’m working with a new investor, they’ve got one or two properties they’ve acquired and they’re wondering what should I do to reduce my taxes? Well, it depends on where we start working with them. But if you just recently acquired a property and you’re still pulling a W2 40 hours a week, you’re never gonna qualify as a real estate professional. Just won’t happen. And real estate professional means that you could take any real estate losses and apply those to your W two income.
Clint Coons: (26:13)
So if I was pulling down 90 K from pg and e and I had a property that I ran a cost segregation with bonus depreciation, which is mean that I’m accelerating the depreciation on the property and I’m able to take a, a, maybe a third of that value all upfront. So let’s say that was $35,000 on this property, I could take that $35,000 loss and offset it against the 90 K income I’m pulling in from pg and e, that would be great. But the problem is you have section 4 69 of, of the tax code that states you can’t do that unless you’re a real estate professional and you can’t be a real estate professional if you’re working a full-time job, right? So for most investors, it’s nice to do what you’re talking about. Hey, yeah, let’s go out there. We’ll, we’ll take the depreciation, we’ll offset all of our real estate income and we’ll carry the losses forward.
Clint Coons: (27:01)
What I’ll typically do is look at the, the situation and ask the investor, do you think you a, are you gonna self-manage? Are you willing to commit to self-manage the property for this year for a while? And if they say yes, and I say, I, is that property eligible to be a short-term rental? Do you think you could turn it into a short-term rental? And if the answer to that is, okay, we’re into it. They, they’re willing to do it, then I would suggest that you use that property as a short-term rental and as long as you self-manage that property and you spend a hundred hours a year and that’s more than anyone else. So you, you gotta go in there. You should probably do the turns when, when the people are leaving or get somebody in there that can get in and out within an hour and a half or two hours on a turn.
Clint Coons: (27:42)
So it’s less than seven days. The average rental is less than seven days. You spend a hundred hours more than anybody else in the, that that’s worked on your properties, then you can free up those deductions at $35,000 that I just said, or 30,000 whatever I said. Now you’re in a different category. You can take those losses and applying against your PG and income. You no longer have to be a real estate professional. Some people call it the short-term rental loophole. And it’s one that when I’m working with an investor, they really see the benefits there and like, oh yeah, I can do that. And if they’re willing to commit, I mean as long as you place a property and service, you don’t have to do it for the entire year. You just have to do it from whenever you start through the end of the year you qualified.
Clint Coons: (28:21)
And if you wanna turn it back into a long-term rental later, go right ahead. But that year you ran as a short-term rental. That’s how you cover it. And then even more so let’s say you bought a property and you decide, well I have to rehab it. Great, well here’s what I want to do. I wanna first do a cost seg before you do the rehab. So we can get what’s called a partial asset disposition. That means if you’re gonna rip off the roof, you’re gonna replace the bathroom, kitchen, whatever it is, I can get you full deduction for the value of those components plus the cost to removal. Mm-hmm. . So let’s assume that the cost to re to pull out my kitchen, um, and the roof and, and the value of CP or the appraiser determines is 40 grand. You get a $40,000 tax deduction, then you come in, you remodel it and you spend 80,000 on the remodel.
Clint Coons: (29:05)
Well, we’ll come in, we’ll run a second cost seg on the remodel and get you another deduction for $80,000. So you basically double up your deduction in one year by taking what you ripped out of the property and deducting it and then taking what you put on the property and deduct it. So there’s a lot you can do. So those first time investors that are just getting started, they don’t even know about this other side of it. Uh, I was told you, I was teaching the convention, uh, in Vegas this past weekend. About 500 people showed up and they started, you know, just going down that road. I said, now how many of you in here have done this? Bought a property, decided you wanted to rehab it and missed this opportunity. The people that raise their that, that have done that, about 70, 80% of them never even heard about it and lost out on that tax deduction right there.
Clint Coons: (29:48)
So it’s just, you know, you got an issue spot, you gotta know where the, where the opportunities are and work with people who are investors like myself, my partners, and a lot of people that work in my firm. We invest in real estate. And so what I’m telling you, the same thing I’m doing, you know, my own properties, I I I got this 165 unit in Winston-Salem right now I’m going through and rehabbing. But before I did that, I ran a cost, I got it so I could pick up the partial asset disposition cause I don’t qualify as a real estate professional. So you do it that way, you can, uh, generate more tax deductions. That just means more money back in your pocket. Yeah.
Tony Javier: (30:18)
So many loopholes. So many loopholes. I mean we could go, we could go round and round about, you know, all the tax savings, but what it comes down to it is, is finding something that works because I’ve, I actually have someone that comes to our events and teaches and coaches and things of that nature and they’re gonna make, I think she said like 3 million this year. And she’s like, I hate writing a seven figure check. And I’m like, why are you writing a seven figure check? You should have figured this out a long time ago. And so she’s kind of backpedaling trying to figure out tax deductions and, and all of that. So getting it planned up front to make sure that when you do have substantial income, or even just income in general, cuz I’ve been doing this for 20 years now, I’ve barely ever pay taxes.
Tony Javier: (30:57)
There’s like one or two years where I wasn’t able to, uh, to get it to where I needed to be. And I, I paid a decent amount of taxes and it was still only, you know, less than six figures. But I mean today, I mean the income that I have is almost none of it’s taxable and it, it’s sizable. And so getting that set up and getting that set up right and getting with someone like Clint that can help you plan that is gonna save you so much time, energy and imagine getting in the game looking back 10, 15, 20, 30 years down the road, how much money you’re saving every year. If you can take that money and compound it over and over and over. Cuz you’re saving the money, you’re taking it and reinvesting it. It’s substantial if you run the numbers on it. Right. So good stuff Clint. So we’re gonna start wrapping it up here. I kind of wanna get into your business and how you run 500 employees. So I’ll just just gimme a high level overview of that. How do you go from being a loan attorney to 500 employees and manage all of that? Because some people, when they have five employees, they can’t manage it. So high level overview of how you manage, manage your business.
Clint Coons: (32:02)
You hire people that are smarter than you. That’s it. And you know, I realized that about eight years ago that as it was growing, my skillset is speaking, working with investors, and I like to invest myself. It’s not managing people. And so as the business started to grow, I, I realized I needed a whole new skillset. Something that has that experience that can come in and put the systems and processes in place that would allow us to grow. So just started hiring people that were smarter than me in those areas. And then it’s the mental side where you have to step back and realize, you know, you can’t be involved in the, the day-to-day like you used to. And that’s the most difficult part. When you hear about stuff that’s going on inside of the company that you don’t necessarily agree with and you’re like, fire ’em, I want them gone.
Clint Coons: (32:48)
And they’ll say, no, no, no, Clint, you understand we have to do this, this and this and this and this. Well, when I was small I could do that. But now when you’re bigger, things change. You just gotta step back and say, Hey, the business is doing what it is today. Not so much because of what you’ve done, but it’s because of what these other people are doing for you to help you continue to grow. And it’s stressful at times, but it’s also, once you recognize that, it’s also a relief, you know, to, to be there. I used to know everyone’s, everyone by name in their face. And now when I come to our, our, we have quarterly meetings or our annual meetings and then you see 450 people, 500 people there. You’re like, I don’t know, 90% of ’em
Tony Javier: (33:22)
Now. Right, right. Which is a good thing, right? Yeah. I mean o overall, overall. Well fantastic. Well congrats on the business you built. How can people get ahold of you if they want to talk about tax planning, estate planning, asset protection? How do they get ahold of you and your team? Well,
Clint Coons: (33:37)
We’ll put a link in the show notes. All they have to do is go there and they can just click on that link and it’ll bring him to page to set up a strategy session and then they can, uh, set up a strategy session. Or if you want, you can join me. I, I teach Saturday events on livestream, so you can come there via Zoom and they’re typically every two to three weeks and you’ll learn about all these strategies in more depth.
Tony Javier: (34:00)
Awesome. Fantastic. Well congrats on the success and the growth. What you’re doing is definitely needed. A lot of people don’t think about what you do because they’re so busy doing deals. But you know, it only takes one thing to happen for the asset protection, you know, for the people to be like, man, I wish I would’ve protected my assets. And then obviously just, you know, getting the tax bills each year, people need to really think about that and how they can get that reduced or even eliminated through some strategies that we talked about. So thanks again for being on Clint, and I appreciate it and we’ll, uh, we’ll touch base soon and um, hopefully we’ll collaborate in the future.
Clint Coons: (34:30)
Likewise, thanks. All
Tony Javier: (34:31)
Right, we’ll talk soon.