How to Make Your FIRE Portfolio Even MORE Passive (Finance Friday)

27:21What I'm hoping for from this exercise is more of like what's Bo's estimate for what future monthly cash flow will be from each of these properties. And if you were to redo that exercise, what would be the properties that you'd estimate will produce the least future cash flow for the foreseeable future? Yeah, that's a great exercise. And for me, it's easier for me to estimate the overall cash flow of the portfolio because I've found in my five years of owning real estate, five or six years, that it is very difficult to predict a property's true monthly performance. cash flow is not steady, which is one of the reasons that I'm trying to increase my cash flow because I do feel comfortable with my averages, my totals, but I still do see the volatility and have experienced how a property can be a heavy hitter for three or four years.

28:15And then you can have a tenant that runs into a bad situation or situations can change very quickly. And all of a sudden there goes the last three years or so of your cash flow. But to answer your question, Scott, yes. Unfortunately, some of the properties that probably I expect the cash flow the least on are also the properties that are the least amount of headache and have the highest potential for future growth in terms of values or being in a good area. So that's kind of one of the factors I try to consider when thinking about which properties I would keep for long term versus sell. But I do think that there are a few properties that stick out that have low cash flow that do have some good equity.

28:56So yeah, Mindy, your recommendation to look at just selling those properties and rolling that into private lending or some other type of investment is probably pretty good advice. I mean, one you've held since 2021, it makes$43 a month and you own it 100%. You're not in it with a partner, which makes it a lot easier to sell. Have you had any big expenses on this property? or is it just one of those that isn't the best property now that you've had a few years? Here's some more nuance for you. And this is an interesting story, but this property that you're talking about is one of 10 properties that I bought, seller financed from an individual.

29:32When I bought them, once they got stabilized, you know, I put some money into them and raised rents and things like that. The cashflow for each property was much higher. That was back in 2019, 2020. Those properties experienced some good appreciation. and as a kind of creative way to pull out some of that equity, I approached the seller that I'd sold these properties to. And I talked about this on the last episode a little bit. But I actually asked him if he would consider doing a seller finance to refinance on these properties. He was of means. He had money at his disposal and he felt comfortable with me and he felt comfortable with these properties.

30:10And there was about$300 ,000 or$400 ,000 in equity gain. So he did a$250 ,000 cash out refinance with me, which essentially looked like me increasing the debt load on these properties. And I also adjusted the interest rate to be more favorable for the seller. So my cash flow on all these properties went down. And this is one of them that you're talking about. Probably went down by about$150 per property. That's just an estimate. But it gave me$250 ,000 that I now, let's say I lend that$250 ,000. That turns into potentially around$25 ,000 a year from that interest income on lending that money out.

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34:00Let's jump back in. Thank you for sharing all this with us. This is so interesting because, you know, normally, you know, I'd say if you had a W-2 job, bring in$200 ,000 a year in. And that was your income statement, which is most of the people we talk to, by and large here at BP Money. You know, then I would say even that arbitrage, like I don't really love it. you probably make a little bit because you're borrowing at six and lending out at 10. I think what you use is your base assumption, even though I know you sometimes get more on there. But that's great, but you're going to pay taxes on all that incremental interest.

34:35And so your effective arbitrage is only a couple hundred, maybe 150 basis points once you factor in federal and state taxes. But in your situation, I believe after you talk to your accountant, you have multiple years are the option for multiple years of losses, you know, or very low federal income tax liability in your situation. So you truly are getting 400 to 800 basis points of arbitrage on this private loan that you borrowed against to lend out on the other side, and you can do it responsibly. So that really is an interesting situation. And I think one of the power of being retired, self-employed, whatever, you know, full-time real estate investor, part-time private lender.

35:19How do you describe yourself? What's the right adjective that we should use here? Really, you just described it probably better than I can. It's tough for me to do. So, you know, like that really is an advantage here. So I would kind of be like, oh, we should pay off the high interest rate debt. I don't know in this particular situation, when you start getting to some of these properties that have seven and three quarters or eight and three quarters percent interest rate debt on them. That makes me uncomfortable on there. You know, I'd rather be on the other side of that risk equation and be able to foreclose on somebody who's borrowing on that, I think, just at that high level of interest.

35:52But you're still getting arbitrage every time you do this private lending. So I can see why you're attracted to it. It also probably feels good to be able to spend that simple interest that those loans generate on your lifestyle. I can see the problem here and why this is hard for you. Yes. Thank you. But yeah, Mandy, I think both of you, what you were just talking about with that specific property, even though I do have a backstory for why maybe a cash flow is less now, it really doesn't change the current situation, which is looking at its current cash flow versus its current equity. And you may have a point that these properties I should revisit, regardless of the history and make a decision about selling or keeping.

36:30If their owner financed, how easy is it for you to sell that property? Just as easy, if not easier, as any other property. When I say if not easier, there's the potential for me to sell some of these owner finance properties on wraps, meaning I would find a qualified buyer, accept a down payment from them. And essentially, it's kind of like a subject to purchase for them. You know, they'd be making a payment to me and I'd be making a payment to the previous seller. I'm not saying I'm going to do that, but it's just another kind of option to look at. But as far as just selling it on the market, it's no different.

37:05I do actually think that there's even the potential, if I did approach some of these sellers that sold these properties to me, that they may consider, if I were to sell a given property, may consider me not paying them off right then. And instead of giving them potentially new collateral on the outstanding loan so I could keep their loan and invest it elsewhere, as long as I can find equity or maybe another property that's paid off that I can give them as collateral, they may consider allowing me to do that. you know, that's another avenue to explore. Are any of these properties difficult properties?

37:39You know, every once in a while you buy a property like, wow, on paper, it's great, but I hate dealing with the tenants and it only seems to attract tenants that want to call me every day and complain, or it only seems to, you know, all the neighbors are like all up in my business calling me all the time. Do you have any difficulties with any of these properties? I do. Yeah. And some specific properties come to mind. And thankfully, I've handed those off to property management in the past couple of years. So that's certainly made it feel lighter on my shoulders, but it doesn't make it disappear in terms of kind of the high maintenance nature of those properties.

38:17And if mismanaged by property management or by me, it could end poorly. So yeah, I definitely have some of those properties and they probably should be some of the ones I consider first based off whether or not they have equity or not, if I'm going to sell any. Well, based on your goal of wanting to have a more passive life, any of the difficult properties, in my opinion, would move to the top of the sell list. Yeah, that's a great point. One other observation here is, or question, I guess, is what are the amortization schedules for all these loans? Are they essentially all 30-year loans? Yeah, almost every one of them, except for maybe one or two, are 30-year amortized loans.

38:54Okay. So I think that there's a very basic amortization exercise to do here because the most obvious answer that's coming out of this conversation so far is, yeah, we can sell property here or there. But really, by and large, we're going to end the conversation with you having still north of$4 million in rental real estate, most likely, levered with$2.5 million in debt. And that's just going to coast, I think is going to be something that's becoming apparent to me out of this conversation. and so over a seven to ten year period which i think is a good outlook to do things the reason i like seven years is because a a good investment averaging 10 a year will double every 7.2 years nominally this makes just for easy math there a leveraged portfolio like this should easily do that right that otherwise you know why why are we doing that instead of stocks so that's going to change the equity value in your portfolio hopefully by about that amount and that's going to be a combination of appreciation and loan amortization over that time period, and something's going to happen to your cash flow in that same time period.

39:55It should dramatically ramp in your model over those seven to 10 years because your rent and other expenses will increase with inflation, whatever you assume for your inflation, but your payments will stay static for the debt service. That should have a very large increase in your cash flow that just happens to you. And there's nothing to do. You already set it up. You knew that going in. That's probably why you got into real estate in the first place, and that's just going to happen. So how's that going to look? The next most important thing that we have to discuss, which is so secondary, right?

40:25It's literally 10 % of the story here, is the$50 ,000 a year in discretionary cashflow that you can begin reallocating, right? If we look at your whole financial position, you have this four and a half million, five million in real estate, including your house, and$3.2 million in debt against it. and then everything else in your portfolio is what another million four in there. So we can reality get some of that, but you're also, because you're not working, you're not going to accumulate a lot of cash. So usually when I talk to somebody about what should we do next, you know, the bigger story or one of the biggest pieces is all this incoming cashflow that we can begin allocating.

41:03Say I'm a hundred percent stocks and I want to be 30 % in real estate. Great. Let's just allocate all the new cash to that, and that will naturally take care of the problem. You will have to reallocate the rest of the portfolio, at least at some point over time, tax efficiently in order to get to a desired future estate. The most obvious answer we have here is do largely do nothing with your rental portfolio. Sell the ones with the highest PETA score. That's pain in the ass. That's another column in your spreadsheet for that. Can we say ass on the show, Mindy? Is that family friendly enough? I don't know.

41:32We don't want to lose our non-explicit license here, but I think there's a score there that you can put in that's subjective and we're there. That leaves us with the rest of the portfolio. And I hear private lending, you want that to be a big part of your portfolio. How big? I guess that's, I'm still wondering, what does that desired future portfolio look like, excluding the growth that we know is likely going to happen to us in the rental side? That's a question I'm trying to answer. I feel myself drawn to it, as in, I like how passive it is and I'm happy with the returns that I've gotten thus far.

42:08And I just enjoy getting to lend and help investors that I know, like, and trust and kind of can see what they're doing with it. But I feel that there's certainly a point of being overexposed to kind of these short-term deals, where let's say there's a large market downturn, which has happened in the past before. That's going to affect these short-term operators and could potentially affect a lot of my different loans, even as I try to spread them out across operators and deals all at the same time. So I'm kind of trying to balance those two ideas between really enjoying the passivity of it and the returns with not wanting too much money to be out on these short-term loans.

42:51So a work in progress for me to figure out that exact number. But I do think that by growing the percentage of private lending, if I ever choose to do it, it'll be through selling real estate that I currently own. So kind of a swap from real estate to real estate. So I'm not increasing my real estate exposure. And really the question for me is, and I do think there's probably some properties to consider selling. And the question for me is how much of that to allocate to private lending and how much of that to allocate towards like a taxable brokerage, putting money in the stock market and participating in some of that market upside.

43:23So looking at your income tab on your spreadsheet that you sent over, your income is$204 ,000 and your current expenses are$147 ,000. In that income, you've got$50 ,000 in interest from private lending. So that could go away completely and you still cover all of your expenses. And looking at your expenses, I don't think that expenses are something you should be focused on cutting, but there's certainly things you could cut if for some reason, several of your units stopped paying, or you had an extended period of vacancy, or you had to drop the rent to get somebody in there. So I love the private lending for you because you're so good at choosing.

44:05Like, have you ever had a default? I have one. I have one I'm working through right now, but I think they just, it was the one time that I broke my rules on lending in second position and lending on a big expensive property. And I've learned so much from this loan. but I do think that we've worked it out and we're about to be at the end of that. Well, fingers crossed for that. But one default is not bad. I have not done nearly as much private lending as you have. I have done some and I lent to somebody, had a great experience. I lent to him again, had a great experience. Then he's like, hey, I've got this friend.

44:40And I'm like, oh, how much different could a friend be? I only now lend to people that I know because your friends can be very different from you. So yeah, don't break your rules. Determine what it is you want to lend at and then don't deviate from that. I think here's what I'm struggling with. And I've been trying to articulate it for most of the conversation here. If the goal is I want to be a private lender, like you're certainly qualified to be a private lender. You can certainly free up cash from other parts of your portfolio to be a private lender. But that goal, and there's nothing wrong with that, right?

45:15You assume that risk. there's not going to be like some historical body of research that we can give you that suggests you can spend at this rate you know you're good you're most of the time going to get your interest and occasionally going to have a default and lose some of your principal you know your principal balance is not going to grow relative to inflation so you have to have a spread a margin of safety in there and there's no academic theory i can point you to it's just going to be your practice your business of private lending um in a general sense now bringing that back into like the long-term goal of FIRE, right?

45:46Like you could, you could private lend for five years, 10 years, 20 years. I believe that private lending is going to be particularly advantageous to you, Bo, for a couple of years, because I believe that after you talk to your tax professional and begin cost-sagging these properties and understanding your losses on the depreciation side, you're going to have no taxable income. So while that Lowe's losses exist, while you're in this very low tax environment or a loss environment, right? Like let's arbitrage rates all day long. That makes a ton of sense on there. It's a good, it's a good skillset in there, you know, maybe don't put it, keep a reasonable balance in there, but it's just, there's some good math there that allows you to, with leverage, arbitrage these rates and these things and make some money.

46:32The question is, I think at some point in the future, and again, I keep using that seven year mark here, because I think that that certainly by then things will have played out. I would be surprised if you're going to want to continue to be doing private lending without making it into more of like a traditional hard money lending business, making some kind of fund out of it where there's real profit involved, you know, not that there's not real profit, but like where there's a big business potential. And then we have to get back to portfolio theory overall, which is like, what is actually going to be moving in the background to build my wealth and consistently make sure that there's always enough in a more traditional construct here to keep things going.

47:14And I'll give you an example. So let's say that in seven years, you run out of these big tax advantages. Things are going well, and your net worth has mushroomed to$5 to$6 million, which is not an unreasonable assumption, given that you're reasonably active with your portfolio here. At that point, you're in a higher income tax bracket. These loans are going to look less attractive to you because you're going to be paying 30-ish percent marginal taxes at that point. So you buy one of these rental properties and your portfolio today generates a 5.2 % cash flow yield on equity, right? That's what you're saying.

47:53When you say return on equity, you're not counting the appreciation or the principal amortization or tax advantages. You're just counting your 5.2 % cash flow across your portfolio. Well, that cash flow is adjusting for inflation each year by definition. Rent and housing costs are a third of the CPI. And that property is appreciating at two or 3 % a year. Hard money note looks a lot less attractive at that point in time than it does today. And so I think that's what I've been struggling with this whole time is like, you don't need our permission to go out and private money lend, that's going to work.

48:27But you just got to have in the back of your mind that that is working so well because of your tax situation right now, I think. And I think that will go away at some point, unless you figure out a way to keep the game going by 1031ing and buying new properties, or otherwise making enough income that there's something to offset with the purchase of additional rental properties and additional cost segregation. So I think that's going to be a challenge for you that I'm starting to come in here. I think that's too complicated. I think that will require detailed tax planning assessment where we really go out and say, here's the structural value of every one of these properties, how far it's been appreciated now, and what can be accelerated through a cost segregation analysis.

49:09What is your timing going to look like on new properties, assuming you do buy at least a few rentals over future years? It's just too complicated. So we can just round out some part of the future. So in that context, let's say that we set aside 800 ,000 for private lending, which you can easily do, right? Between selling a couple properties or selling your Bitcoin or whatever. We can talk to that later. But what else do you want the portfolio to look like? What are the other components of it that you, I think you had some questions around the rest of it that you wanted to talk through. Is that right?

49:37That's a great point. And you've given me a lot to think about. I think one of the other things that I'm trying to get after with kind of my portfolio allocation is not only diversification, meaning not being too much in real estate or too much in any given thing, but also kind of like diversification in access to liquidity. I really value optionality. I really value being able to make moves and be strategic. And the less liquid your investments are, for sure, the less options you have in the short term. So that's maybe part of the reason I'd value private lending over direct ownership real estate in some ways because it is more liquid than owning an individual property myself in some ways.

50:22There's other things that I also look at in terms of access to liquidity that I think fit well or kind of interact with other parts of my portfolio. And that can be money within a taxable brokerage. That can be money in Bitcoin, y 'all's favorite asset, money in whole life insurance, another one of y 'all's favorite investments or non-investments. One idea that I would offer if I'm not living off of the interest income from private lending, something that I'm actively kind of working towards. Currently, I have all my money within my Roth IRA. It's mostly in the total stock market indexes. I'm considering shifting my lending kind of to doing it within my Roth IRA so that it's sheltered and then shifting my stock ownership outside of my Roth IRA into a taxable brokerage.

51:12I see Scott shaking his head. So excited to hear your thoughts. I would love some chime in from our YouTube audience here. You guys are never, again, like I said, never shy about this, but my instincts are saying definitely not. Don't do that. And here's why. Again, the advantage in your situation is what I believe is likely to be a very low tax liability with a good tax strategist. So in this situation, I think the earned income is going to suit you better for your private lending business for the next few years, for the next couple of couple of years. You can have way less administrative burden on that.

51:47And I think that your Roth in this situation, which is where your money is, you want to invest it very aggressively. I think it's very unlikely you'll be touching that money for a long period of time. And I wouldn't even consider it highly liquid in your situation. in this in this setup unless things go very very poorly for you and i and i think you have other ways of mitigating that the driver of growth in this portfolio is going to be your leveraged traditional rental portfolio that we've got here like we can't forget that that is the beating heart of this portfolio the side project that is going to become more important is your private lending business which is extremely attractive for the next several years because of your tax situation, your ability to arbitrage rates and generate a lot of simple interest with very low tax liability for some period of time as a real estate professional.

52:36So the rest of the portfolio, I would imagine in that context, I would hypothesize for your consideration, ought to be a fairly conservative, maybe even more traditional retiree portfolio. And we did an example of this with Frank Vasquez not a few weeks ago with his golden ratio portfolio that has an allotment to stocks, an allotment to bonds, an allotment to managed futures, an allotment to gold, an allotment to international in there. That might be something for you to consider. And you would want to put the high growth components of that in your Roth IRA and have the more conservative components of that, I believe, in your taxable, given the rest of your situation because this is a hedge.

53:22This is a place to store liquidity, get better returns than what you can get from a money market or something like that, but have that diversified balance portfolio. And you can almost think of that as like a coast fire portfolio, probably won't have to touch it very much. You could withdraw from it at a few percentage points. There's ways to withdraw the contributions to that Roth, for example, or whatever, but I bet you're not going to ever touch it until traditional retirement age would be my guess. And you want all that growth happening in your Roth and you want the more conservative balance portions in there to not be in that Roth because one day the tax man will come for you in there and that can be a longer term investment.

54:02What do you think, Mindy? I'm struggling to articulate how I disagree with you, Scott. But if he wants to lend money in his Roth IRA, that's tax-free growth. That's just an investment. So what I want to know is, do you have any employees outside of your spouse, any full-time employees? Not currently. Okay. So what you could do if you have income and rental property is not income, I'm not sure if lending, private lending is income. It might not be. So this might not actually work. But let's say you had income, you could open up a self-directed solo 401k, make that a Roth option, transfer your current Roth IRA money into that Roth option, not a taxable event, lend that out.

54:52And the reason you do it in a 401k and not an IRA is because the 401k is not subject to UBIT or UDFI, whereas the IRA can be. And this is where my area of expertise ends. And I just get into the category of I know enough to be dangerous. So I'm going to send you down a rabbit hole. If you UDFI and UBIT are only, well, UDFI is when you've got a debt financed. So that's unrelated debt financed income. And I don't know if you are financing somebody else's property, then there's no debt in there. I'm going to send you to your CPA to have them give you the ins and outs of this. I have wanted to ask, though, do you have a real estate focused CPA or tax professional?

55:43Or are you just does your tax professional say, oh, yeah, I could do real estate, too? No, I do. I do. He's they're very real estate focused and they're real real estate investors themselves. OK, good, because those are the types of people you want giving you the tax planning advice for all of this because there's a lot of moving parts. And if somebody has the level of understanding that I do, they might send you down a rabbit hole that gets you a nice big tax bill. But I would talk to them about cost segregation. I think that's a great point. Because you have real estate professional status, which is an IRS designation, you can write off all of your losses, their losses on paper.

56:23So then you might want to keep those real estate properties that aren't necessarily bringing in a lot of cash flow. If you can cost seg and throw that against your income this year, and those cost segregations carry over, they carry forward. And I can't remember how long they carry forward. But you could effectively have$0 in income, taxable income, for a really long time. I would not necessarily do the cost segregations all at once. Maybe do them one or two, depending on how much you're going to be able to write off. I think that is the place to start. And can you get reps status, Scott? Can you be a real estate professional with private lending?

57:05Or do you have to continue to have all of these real estate properties? I believe you can get it with private lending. Okay. That's another question for your CPA. Can you get a real estate professional status with being a private lender? Well, I don't see a world where I don't qualify for real estate professional in the next decade, as long as I hold on to my real estate and maintain an active involvement in it. If you're operating as a mortgage broker, hard money lender, or in a loan origination business where you actively manage and source deals, then those activities might count towards reps because you are in the business of brokering or financing real estate.

57:38So I would talk to your, like this is where the advanced tax components are. All of this is based on how your tax treatment is going to be, right? So that's where Mindy and I are having the disagreement here, if you will. And so depending on what's going to shake out for your short, medium, and long-term tax situation, that's where you want the various components of the portfolio in there. My guess, before you talk to your CPA or your tax strategist, is that you're going to have, again, large losses for the foreseeable future that you can, at your option, declare. I believe that you will qualify as a real estate professional.

58:17I believe that because of that dynamic, much of your income from hard money lending, a real estate activity, and your active involvement in that business will be taxed either at not at all or in a very low income tax bracket. And therefore, I would bias for the next several years to doing that after tax because there is no tax benefit and to having principal growth that will be taxed one day happen in your Roth IRA. If for some reason that is not true, then that would change how I would be thinking about things. But it doesn't change the fact that I believe that outside of your lending and your rental property, the point of the rest of your portfolio, in my view, is I bias towards being a relatively stable, well-rounded, not heavy growthy portfolio.

59:09Because that growth is going to be generated from much higher risk lending and levered real estate investments over the next couple of years. And that would call for something that is more conservative, like a 60-40 stock bond portfolio or a DeFranc Vasquez golden ratio portfolio. And then from there, we would allocate in the right places. So if my guess is correct, then I would put the growth stuff in the Roth and I declare income outside of it until your losses. I might flip them at that point in the future whenever you start paying a higher marginal income tax rate. Thank you. Yeah, I know.

59:45That makes sense to me. I agree with you that I value kind of outside of my real estate, my levered real estate portfolio and other things. I appreciate something that's lower risk and kind of just helps me write it out for as long as I can. I think a good next step here would be once you talk to your tax planner, you say, what's that going to look like? You model out where your portfolio is going to be in seven years and say, here's my rental portfolio. It's going to be worth this much. it's likely going to be with this level of loan amortization and it's likely going to be reducing this much cash flow at that point in the future.

1:00:24You assume you're going to double over at some point in the future the amount you have allocated to private lending and you assume the rest of your portfolio is going to be this conservative-ish portfolio with allocations to a well-diversified portfolio there. That would be where I'd bias the start of the next steps of a homework and that would that would give you something tangible to work around that seems to fit the goals that you stated here awesome thank you what do you think randy i think you have a number of uh homework assignments and dpa conversations to to have a chat with them i do and not that much work though right like it's like that conversation maybe selling a handful of properties and repositioning a few assets and like it's probably really not that much to do here i mean you're so strong already.

1:01:10Like that's the headline is everything's good. The vast majority of this just needs to sit. I've heard of a lot of people, you know, just from stories and books and lessons learned of people who didn't take a knee when they probably should have taken a knee and they wish they would have. So I'm trying to learn from other people's lessons there. Well, learn from your own lesson and don't deviate from your rules when lending to someone, especially someone you don't know. Bill, was this helpful? Was this what you're looking for today? This was extremely helpful. Yeah, I really, really value getting to hear y 'all's advice relative to my portfolio.

1:01:43I'll just say, I bet you that we're going to talk to you in a couple of years and you'll be like, yeah, I started a hard money lending business. That's my guess on it. Like, why not? You'll seem to like doing it and it will make a lot more money on there and obviate some of these other problems and you'll just be able to throw cash at more of those issues. So it's not really that hard to do a lot more loans if you truly get good at it on there and you don't ever get over your skis too levered, but we'll see. We'll see. We'll see. We'll see. All right, Beau, thank you so much for sharing your numbers with us.

1:02:12And thank you for bringing a really, really organized spreadsheet. For anybody listening, if you would like to be a guest on the Finance Friday episodes, please reach out to Blake at BiggerPocketsMoney.com. All right, Scott, that was a whole lot of numbers and a whole lot of higher level strategies that are specific to Beau's experience. but I don't think that they're specific to our audience. What did you think of the show? I know you got really into it. I think this is the kind of the most fun side of finance, right? And this is where I'm, you know, correct me if I'm wrong, folks, but I'm not aware of folks who you even hire beyond a tax professional, of course, to help out with navigating the complexities of like, what do I really want now that I've got a sprawling rental property portfolio?

1:03:03and how do I consider the tax ramifications of those moves in the context of what I want in the future? And how is that going to impact my ability to contribute to solo 401ks? Am I self-employed? Do those things count? I mean, there's a whole bunch there that I think is really, really complex and important and I would love to learn more about. So if anyone has any suggestions for where to go for learning more about those intricacies of those details, I'd love to learn them. And if any tax professionals have any suggestions, those would be most welcome. Scott at BiggerPocketsMoney.com. Yeah, I think that anybody in a similar position or wanting to be in a similar position really needs to make sure that their tax planning professional is real estate focused, meaning that is the bulk of what they're doing.

1:03:50Any tax professional can do your real estate taxes, but if they're not really focused on all the ins and outs, you could be missing some big things. I have several real estate focused tax professional friends and they say, oh, I'll get a new tax return from a new client. I'll get a return from last year. And I'll be like, whoa, they missed this. They missed this. They missed this. You don't want to miss these things. You don't want your real estate professional to miss these things. You're hiring them on purpose. So make sure they are real estate focused. Yeah. And you can find these tax professionals over at BiggerPockets, biggerpockets.com slash tax pros.

1:04:25That's a great place to go check them out. What I'm particularly fascinated in is that cross-section between once you know what the tax situation is like, how do you also, in real time, brainstorm the bridge between a real estate-heavy portfolio, maybe something that's different than real estate, over the next couple of years tax efficiently? That's really fascinating stuff, too. And some tax pros are able to do that, and some focus on really just saying, here's where the reality of the situation is, and here's some options for the near-term future. So I find this stuff fascinating. And I think there's a lot of options here that are very exciting and very fun, but also required to be very careful because there's hundreds of thousands of dollars in a situation, maybe millions in long-term wealth that are at stake based on those choices.

1:05:04Yes. And I think that he is going to do his due diligence and he already has a real estate focused CPA and he's going to do it right. I just want to make sure all of our listeners are also doing it right. All right, Scott, should we get out of here? Let's do it. That wraps up this episode of the BiggerPocketsMoney podcast. I am Indy Jensen. He is Scott Trench saying, see you later, alligator. Rinse takes your laundry and hand delivers it to your door, expertly cleaned and folded. So you could take the time once spent folding and sorting and waiting to finally pursue a whole new version of you.

1:05:36Like tea time you. Mmm. Or this tea time you. Or even this tea time you. So did you hear about Dave? Or even tea time, tea time, tea time you. Mmm. So update on Dave. It's up to you. We'll take the laundry. Rinse. It's time to be great.