Join host Steven Pesavento and tax strategist David A. Perez in this enlightening episode. Discover David's remarkable journey from adversity to financial independence and how he developed a mission to impact 1 million lives positively. Dive into the importance of clarity and knowledge in wealth-building and learn the distinction between tax preparers and tax strategists. Explore strategies for optimizing your tax situation and empowering your financial future. Gain insights into choosing the right advisors and making proactive financial decisions. Don't miss this episode packed with actionable advice to supercharge your wealth-building journey.
Key Takeaways
Resources Mentioned
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About our Guest:
David A. Perez is a renowned tax strategist and financial educator dedicated to helping individuals and businesses navigate the complex world of taxation while optimizing wealth-building opportunities. With a background in real estate and a passion for financial independence, David has made it his mission to impact 1 million lives through tax-smart strategies and financial education. His journey from a sheltered upbringing to entrepreneurial success serves as an inspiring example of resilience and empowerment. Join David and Steven as they delve into the strategies and mindset needed for financial independence in this insightful podcast episode.
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00;00;00;09 - 00;00;08;21
Steven Pesavento
Welcome back to the name of your number show presented by the Investor Mindset. I'm Steven,. I'm excited. I've got David Perez in the studio. How you doing today, David?
00;00;10;07 - 00;00;11;07
David A. Perez
Good man. How are you?
00;00;11;17 - 00;00;42;14
Steven Pesavento
I'm doing great. I'm doing great. I'm excited to get into it with you. I know you've helped a lot of people save a ton of money on taxes. You've built a heck of a life. And we're going to talk a lot about both of those things today. So if you're ready to get into it, I'd love to start off by talking a little bit about what was one of the first things that you named, one of the first targets that you went after when it came to kind of creating this life and going after doing something different than what most people are doing out in the world?
00;00;43;27 - 00;01;02;11
David A. Perez
Well, I think it all started back when I was a kid. And for the sake of the story is, you know, when I was born, I was born a little different. I was born to a mom who's 17 years old. And she had me. I was born a little different. Doctor said I was going to be different and he was right.
00;01;02;12 - 00;01;18;26
David A. Perez
So I was born to two Hispanic parents, but I obviously don't look Hispanic, and that's because I was born with a condition called albinism, which means I lack pigmentation in my eyes and my skin. And so the doctor really literally told my parents or my mom at the time, hey, this is going to be a special kid. And he meant it.
00;01;18;26 - 00;01;34;19
David A. Perez
And so they treated me special all my life. In fact, I was in special ed classes. I was right in the little bus. So I was the kid that that that was taken and given extra time. I didn't go out in the playground when I was a kid because I'd get sunburned. I didn't play any sports. I was very coddled and sheltered.
00;01;34;19 - 00;02;01;00
David A. Perez
I was made fun of by the kids. You know, it was a pretty sad, bad life. I would just say that I had a life that was very restricted and very coddled. And so, you know, growing up, I didn't necessarily know what I was going to do because I really didn't have a lot of aspirations because, you know, when you're really taken care of, if you will, you really don't think big because the truth is, is there no real reason if you know that you don't really have to worry about a lot of things?
00;02;01;09 - 00;02;24;24
David A. Perez
Life is not so hard. And even though my parents weren't rich, they couldn't give me everything. I didn't have a bad life, but I guess it was in my middle, my mid-teens. It was around 16 years old, actually. I come home from school one day and there is a two men sit down and sit at a table. Now, I didn't read four ounces, but my mom could not raise me.
00;02;24;24 - 00;02;38;22
David A. Perez
She was 17 years old, so she actually asked my grandparents, which are my parents, which I called my parents say, who raised me. And so they were sitting down with my parents, two two men in suits, and there's two men look over at me and they say, you know, my mom and dad say, sit down. And I sit down and they ask me a bunch of questions.
00;02;38;22 - 00;02;54;05
David A. Perez
And they were asking me a lot of questions as it relates to my my health and my medical condition and all these things. And so after they were done, I said, What's this all about? And they said, this is for life insurance. And so, you know, I didn't I at the time, at 16 years old, I'm like, what do I need life insurance for, Right?
00;02;54;07 - 00;03;06;05
David A. Perez
Like, am I going to die is what I thought. And, you know, so I just left it at that. I went to my bedroom. Later on I come out of the bedroom, really dinner. And I look at my mom and I said, Mom, what's going on here? And she says, Hey, son, I just want you to know me.
00;03;06;06 - 00;03;23;12
David A. Perez
Your dad want to make sure that if anything ever happened to us, that somebody would be able to take care of you and they would have something to rely on. And I you know, at that time, you know, I'm always trying to disrespect me. But what she was saying to me is that I was going to need somebody to take care of me all my life.
00;03;24;07 - 00;03;44;20
David A. Perez
And it was a it was an eye opener for me because I never felt that I was incapable or that I was disabled. I never felt that in my life. But at that moment when she was verifying for me is that maybe that's not how I was seen. And so from that moment forward, like literally that day forward, I said, That's not it.
00;03;44;20 - 00;04;04;02
David A. Perez
That's not going to be me. I'm going to have to be independent like that. Is that is my goal. Independence. Now, people may take it in so many ways, meaning independence can mean a lot of things to a lot of people. But for me it meant never having to rely on someone ever again. And ever since that day, all I've done is aspire to develop and build something that's my own.
00;04;04;02 - 00;04;28;05
David A. Perez
So it didn't matter in what way I, I kind of was a rebel after that. In some respects, I did what I wanted when I wanted my parents. I mean, I wasn't disrespectful to them, but I was just trying to become independent in every way I could. And that eventually translated into business and translated it into life. And today my goal is to to think independently, to be independent, to never rely on anyone else for for the sake of money or anything.
00;04;28;05 - 00;04;44;27
David A. Perez
I mean, obviously I rely on people by asking them to guide me in different directions, but I don't want to be independent of that. I want to be able to make decisions on my own and decide my own fate, my own, my own way. So that's really why I've got what I got today is because it stemmed from me not ever wanting to allow somebody to take care of me again.
00;04;45;17 - 00;05;07;08
Steven Pesavento
Well, it's amazing how like an experience like that you get this message and you receive that message and you could have easily received it and made a decision and a belief that you weren't enough. Nobody believed in you and you could have gone down that path and become a victim, but instead you looked at that and you said, Hey, well, I'm going to take this into my own hands.
00;05;07;08 - 00;05;30;03
Steven Pesavento
I'm going to find a way, a path towards becoming somebody that I'm proud of. And it's clear that that was a really powerful moment because I think a lot of people, they receive those kind of messages every day. And you have that moment to decide is this something that I'm going to use as an excuse or am I going to use this as the reason that I'm going to have the life that I want to have?
00;05;30;24 - 00;05;48;20
David A. Perez
Yeah, because of. Right. That's that's what I like to think of. Because of that, this is what I've decided to do. And I think that everybody, by the way, has those moments. And you're right, they have to make a decision and the difference between those who do make that decision to make change and those who don't, it's hard to define.
00;05;48;20 - 00;06;13;10
David A. Perez
I would just say that if you if and I know your listeners are all the people who take the action, I get that. But for those who don't take the action, I think it's it's just a lack of understanding that that every adversity comes with the seed of opportunity. And very few people get that right. They don't they think that the adversity is is the bad luck in life when when you just ask yourself, what can I learn from this?
00;06;13;29 - 00;06;35;04
David A. Perez
And like the whole frame of reference by which you take that adversity changes. And I've always found that seed, that little thing that comes out of this one bad tragedy, this one loss to change my whole life. Like I have so many moments of epiphany in my life of Tiffany's today because I've always tried to find the good and the bad.
00;06;36;25 - 00;07;04;07
Steven Pesavento
And I challenge anyone who's listening. Maybe you've already made that decision. You've gone and created the excuse of the reason you're not going to go and do the thing that you're capable of. I can't go and invest. I can't figure out my taxes. I can't be able to create this great life because of all of these reasons. Well, what's beautiful is you can essentially make a new decision right now, and you can use this as a great example of exactly why and why it's possible that you can do that.
00;07;04;26 - 00;07;26;04
Steven Pesavento
What I'm what I'm curious is, you know, you've you've gone down this path. You're an expert in tax. You save people millions of dollars. You start out doing real estate. You've done a variety of other things along the way. What are you looking to create in your life right now? You've made it by many people's accounts. And I we're going to get into exactly what that looks like.
00;07;26;04 - 00;07;31;04
Steven Pesavento
But what is it that you're trying to create and why is that so important for you to do?
00;07;32;25 - 00;08;00;23
David A. Perez
Well, you know, fostering this concept of independence kind of led me down to the to to a road of figuring it out, you know, a lot of things. So I've had to I've overcome so many things that we don't have to get into that. But there came a place in a time and place where I was challenged this was about for three and a half years ago, I was challenged by somebody I was looking for mentorship from, and the challenge was, Hey, it sounds like you have a story, right?
00;08;00;23 - 00;08;23;05
David A. Perez
You've got a story and you like everybody's got a, you know, a song to sing and a story to bring to the world, right? Like we all have something in our past that is could benefit the future people that you encounter. And so when I was challenged with that, it was like, what am I going to do? And so he he basically said, David, I think you should write a book and share your story, share the journey, have an impact on people.
00;08;23;05 - 00;08;42;29
David A. Perez
And I, I didn't really realize it because I didn't see myself in this way. I never did. And with that challenge in mind, I really took it personally to figure out a way to to, to impact people. And so that's that's kind of how I came to the first book, which is Building your own Economy, which was the concept of saying that I don't want to be impacted by anything outside of me.
00;08;42;29 - 00;08;58;29
David A. Perez
I want to be the person that impacts me, right? Like I want to be the guy that impacts myself. I want to take complete control, responsibility for whatever outcome comes my way. And I want to make sure that I take that responsibility to the highest levels and every form. Now, when I made that decision that I was going to write this book, I didn't know I had the book in me.
00;08;58;29 - 00;09;14;20
David A. Perez
I wrote the book. And then it came to me to say, Hey, what am I going to do with this book and this concept and the idea of building your own economy? And that's when I realized that my goal or my mission, which is getting clearer every day, is is I want to help and impact the world in a positive way.
00;09;14;20 - 00;09;28;18
David A. Perez
Like I want to leave a mark on it. I don't want to leave this world and just people forget who I was. I want to say that I came into the world and I left it better than I found it and that God didn't decide to put me here for no reason. Right. So the goal today now is to have an impact.
00;09;28;18 - 00;09;48;03
David A. Perez
Like I have a goal, the impact 5 million people keep and grow their money, right? Keep and grow it. And that means really, how do I keep it from Uncle Sam, from taxes, from lawsuits, from litigations, from the bad people, the bad partnerships, the bad relationships, the bad businesses. How do we do that? And then how do we then use that money to grow it somehow?
00;09;48;03 - 00;10;12;24
David A. Perez
Right? Because the majority of people today are allow other people to invest their money. Right? They surrender their ability to actually build something for themselves to someone else. And by the way, that's not to say that we shouldn't have advisors or partners or people in our corner. However, I think that if you are going to give or surrender anything to anyone else, you should at least know what they're doing right.
00;10;12;24 - 00;10;33;15
David A. Perez
It's kind of like I like to analogize it this way, like I'm a big giver of of to charity and I believe in contribution, right? If I have the means, I should be able to do that. And so whenever I contribute to something, my only ask is always to say, I want to know where it goes, right? Because the point is, is I'm going to be a steward of my own money.
00;10;33;15 - 00;10;54;03
David A. Perez
I'm going to be a steward of my life and that steward, I've got to know you're going to be a good steward with my money. You know, you've got to show me in in expecting. So, like for an example, I know you do you do big deals, right? As an investor, if I was alongside you, I would say, hey, man, here's, you know, 500 K, but I'm going to expect some some reporting along the way.
00;10;54;03 - 00;11;07;05
David A. Perez
I'm going to expect some things which I know you do really well. And so I want to have an impact on people so that they can be that person and say, you know what, I want to give my money or invest alongside Stephen and I want him to be able to take care of me and help me get to the next level.
00;11;07;05 - 00;11;20;14
David A. Perez
But I have to understand it. So keeping that money from things that you don't want it to go to and then investing that money to something and that could be yourself as well. And so my goal is to impact 5 million people. That's my journey and I'm going to continue to do that till I die.
00;11;21;17 - 00;11;38;03
Steven Pesavento
There's three things that I think were really powerful. I want to underline here, and it's something that you talked about when it comes to your vision and your mission, and that is getting clear every single day, because I know a lot of people are kind of in the dark, they're in the haze. They're not exactly sure what they're going after.
00;11;38;03 - 00;11;58;00
Steven Pesavento
They're not sure what their purpose is. They're not sure how to get there. And they feel lost. And even people who are making a ton of money, like a lot of folks who are listening and our clients and that lack of clarity leads to even more fear. And when you have that fear, you end up surrendering your decision to somebody else.
00;11;58;18 - 00;12;27;21
Steven Pesavento
But as you mentioned, the process of getting clear is it's a journey and and it's every single day you're asking yourself a new set of questions to start becoming more clear on what it is that you're going after and then using strategies like investing, like investing in funds, like understanding how to save more money on your taxes. And as you gain more knowledge, you have less fear and you start being in a position to take control where you're not reliant on other people.
00;12;27;21 - 00;12;41;23
Steven Pesavento
Yes, you've got great advisors. It's critical. You have good people in your corner. But I think it's so it's so key to know how to get past that point of fear so that you know who to trust and you have enough knowledge to select the right people to have in your corner.
00;12;42;18 - 00;13;02;12
David A. Perez
That that's right, man. I think I think the the key indicator of someone's success is their willingness to understand what it is that they're going to do, not willing to have to always do the work that willing to always have to get your hands dirty. But you have to understand what's happening, right. Like I do real estate on on a single family level or a multifamily level.
00;13;02;12 - 00;13;17;26
David A. Perez
If I get into a fund, if I do a syndication, I'm not going to blindly do it. Like it does not make sense to me. I mean, I think we should all have some fundamental understanding of it. And that's what my goal is, to help people understand those things. Because if they understand them, then they make better decisions, they make more decisions.
00;13;17;26 - 00;13;26;14
David A. Perez
They a I can't guarantee success, but I can tell you that it's better than if you didn't know shit, right? So yeah, that's my goal every single day.
00;13;27;09 - 00;13;48;24
Steven Pesavento
It's so key. And, and it's surprising to me actually, how many people have invested with us who've invest with other people that I've met along the way, and they lack that knowledge and understanding, and they're really going on faith. And faith is a beautiful thing. As long as your faith is in the right people. And you know, we're holding a workshop shortly here in Denver, we're going to be kind of talking through some of this stuff.
00;13;48;24 - 00;14;06;23
Steven Pesavento
We do some training online, but the reason I took the time to put that information together is because so many people are lacking that knowledge. And once you have the knowledge, once you're clear on how these things work, you get so much more confidence. So I want to kind of do a little side quest here because we're talking about advisors.
00;14;06;23 - 00;14;27;22
Steven Pesavento
We're talking about having the right people in your corner. And obviously you're one of those right people when it comes to tax. How do people go about getting enough knowledge to go and actually select the right tax people? Because I'll give you an example. You know, I've been in business for over a decade. I've worked with some great CPAs, I've worked with some terrible ones.
00;14;27;22 - 00;14;52;04
Steven Pesavento
And I've learned along the way that somebody preparing your tax form is very different than a tax strategist. And yet there is often a fear of taking advantage of this treasure map that the IRS and the Congress put together that indicates how you can actually do what the government wants you to do to save money on taxes. But there's a fear of following it because the consequences are so big.
00;14;52;15 - 00;15;09;13
Steven Pesavento
So, David, how do people go about knowing enough so they can select the right adviser when it comes to making these tax decisions so that they're not paying all the money, but they're also not in fear of what negative things could come from making a bad decision?
00;15;10;12 - 00;15;32;03
David A. Perez
Well, well, first, first and foremost, knowing that delineation is very important, which you articulated really well, which is a most people go to a tax preparer even though they may be designated a CPA or an enrolled agent or some sort of professional designation. The vast majority of tax professionals today are just data entry folks. By the way, there's there's nothing wrong with that.
00;15;32;12 - 00;15;49;17
David A. Perez
But most of them report history. Right? They get documents that it may be generated from a prior year. Right. You get a W-2, a 1089, ak1. These are forms that reported after a year as transpired. And they take that information and they put it into a software because they're trained to do that. Then they put out an outcome.
00;15;49;17 - 00;16;10;14
David A. Perez
Sometimes they can make adjustments along the way, but very seldom can they actually make impact. They could actually impact anything at that point because it's already history. And that's that's just the majority of I mean, typically when I look at somebody I'm trying to grade if they're a good strategist or a tax preparer or CPA, whatever they want to label themselves, it's typically somebody who's proactive in in measure.
00;16;10;14 - 00;16;23;28
David A. Perez
So if they ask them, like for an example, if you called and wanted to speak to me or somebody on my team and you're like, Hey, I want to know if we're a good fit, we would ask you a set of questions and determine right away if we could help you right? We would say things like, Tell me about the type of structure.
00;16;23;28 - 00;16;44;04
David A. Perez
Are you an LLC, single member, sole proprietorship or single member? So prop or a partnership or unit score or C Corp, what are you? And then we know what are your gross sales, what are your Internet net revenue? And then, you know, there's a there's a complex set of questions, but with those answers to those questions will illustrate to me if we can proactively help you or not.
00;16;45;07 - 00;17;00;22
David A. Perez
If you go to somebody and they don't ask you a set of questions, they could understand where you're currently at. And all they say is, Oh yeah, I can help you. That's probably somebody who's thinking for you. That's just somebody who does. I want to think for you because that's my role. It's to think ahead is to think and then ask you a set of questions.
00;17;00;22 - 00;17;22;27
David A. Perez
What's your goal? You know, how are you going to exit this company if you're going to exit? Right. These are questions. Do you have investments? Are you investing in things? See what I believe as a strategist wants to take a few and what I call a33 pillar approach. Number one, they should be thinking about how your LLC structure, which is entity structured and if they don't understand that honest truth, that's probably not strategies.
00;17;22;27 - 00;17;42;01
David A. Perez
That's probably somebody who just putting shit together, right? That's it. Number two, that they have strategies. Now what I find most common when I get on a new client is that they'll say, I was with a really good CPA. They were great, beautiful people, but I was always going to them with strategies. Hey, I heard about this. Let me can we do this?
00;17;42;11 - 00;18;04;15
David A. Perez
And then they would be like, Huh, let me look it up. And then, Oh, yeah, we could do that. Like, well, then you're you're being the person that's pushing the needle for it. That's not, you know, I had a, I had a client yesterday for an example, goes to his CPA and says, hey, I just, you know, I inherited this this person inherited over $2 million in an inheritance, which is, Oh, wow, that's great.
00;18;04;15 - 00;18;19;27
David A. Perez
What he was not expecting really wasn't expecting too many dollars. He goes to a CPA who he thinks can help him, and the CPA says, well, you know, I don't know, you inherited this, just pay the tax. And he's like, there's got to be a way, you know, and he's the CPA. Say this is just pay the tax.
00;18;20;14 - 00;18;40;21
David A. Perez
And so he's reaching out, looking to somebody like me. Because what I'm saying is there there may be a way. Let's try to find it. So somebody was thinking proactively in a tax strategy. And last thing is, somebody who wants to also look at your investments, because investing has a lot to do with how you avoid taxes and how you mitigate them in the future, like today and tomorrow.
00;18;41;04 - 00;19;15;04
David A. Perez
See if you're just going to be told to go make money that the CD financial advisor can do that for you, by the way. And I don't understand tax and most tax people don't understand financial advisors. So if you don't have somebody who understands both perspectives, the majority of the time you're going to be putting your money into a tax deferred vehicle so that one day when you're 60 something freakin years old and you take out all the money and who knows what the tax rate will be at that point, you'll pay all of those taxes or we can make investments now that may have tax benefits today.
00;19;15;09 - 00;19;38;25
David A. Perez
They could offset your taxes or at least eliminate cash flow from things like real estate. And we can be proactive in nature because the the time value of money is very important, as you know. Right. We don't want to in investing, maybe we could say we want the returns in 20 years. That's cute, right? And everything. But if I've got to invest money today, I have to make I have to make a decision that's going to impact my tax return today in most cases.
00;19;38;25 - 00;19;53;19
David A. Perez
Because if I could keep more of my money today, I can leverage that today as well versus leverage it in 20 years when we're taught that we're supposed to. That makes sense. So those are the pillars I'd be looking for, for somebody who is if I was trying to figure out if they're a good strategist for me.
00;19;54;04 - 00;20;20;18
Steven Pesavento
So what I heard from there is these are some key things that you should be looking for when you're talking to somebody about tax strategy. And yet a lot of people are really great at sales. So, David, how does somebody cut through the fluff to know that the strategies that are being suggested are going to get them to that outcome and that they're going to be protected in the end?
00;20;21;21 - 00;20;40;22
David A. Perez
Well, I think I think the first thing to know is that if you go to somebody and they don't have a team, that's probably a good sign that it's not that they don't know what they're doing, that the execution might not have happened, that that's the first thing. Because honest truth, I have never met a person in the tax industry that didn't want to help their client succeed.
00;20;40;22 - 00;21;01;14
David A. Perez
Right. Like, I really haven't. I mean, the predominantly everybody's a good person inherently. I believe that I think that the challenge that I see is if I were meeting somebody for the first time and I wanted to cut out all the fluff and see if they're just sales men, I'd be looking to they have a team to support the success of myself as the client because it's not going to be an individual that's going to solve all your problems.
00;21;01;14 - 00;21;19;01
David A. Perez
If you did find an individual who could solve all your problems, that is not a real business. And that means that you're putting your faith in one person's hand and God forbid that person gets hit by a bus or something, what are you going to do? Right. There has to be there has to be a group of people, a team of people to support your success, number one.
00;21;19;09 - 00;21;37;10
David A. Perez
Secondly, I would I would actually just check them out, look up credentials or ask for references that can always be a good thing to think about. Right. But to be truthful, you don't really see a lot of people bragging about their tax people so mean. It's kind of hard to say that, right? Nobody's writing big reviews and blogs about their tax people.
00;21;37;10 - 00;21;53;06
David A. Perez
But I would I would say you can tell. I mean, it's pretty easy in a, you know, like 4 hours for ourselves, right? Like, I'm very public, I'm very vocal. If you go look at anything we do, we don't have any negative anywhere because the truth is we stand behind what we're going to do. We do a good job.
00;21;53;06 - 00;22;13;24
David A. Perez
We have a whole team that supports it. We know what we're doing at all times. It's hard for me to to articulate what somebody wouldn't be doing right. I just know I see a lot of professionals out there claiming to be strategies, but they have no team. And that that scares me because knowing what I have to do for our clients every single day is not a single man job or a woman job.
00;22;13;24 - 00;22;14;20
David A. Perez
It's it's a whole team.
00;22;15;10 - 00;22;42;23
Steven Pesavento
Yeah, that is it's super, super key. You know, I've talked to folks on the investing side who are like, Hey, Steve, and I want to be able to reach you at any given time. And the answer is you can, right? Because we've got a team and the team is there to support and everybody has a role. And that way if I get hit by a bus or I happen to be on vacation or y or whatever it is that you know that there's not only one person, but there is a backup to that person and so on and so forth to make sure you're protected.
00;22;43;00 - 00;23;12;13
Steven Pesavento
So let's come off this adviser side quests and go into some specific examples. And of course, everything we're talking about is just based on past experience. Nothing here is tax advice. But when it comes to somebody who is making a couple hundred thousand dollars a year, they're on track towards making millions of dollars a year. Let's kind of give two different investment related examples of how people can make smart tax decisions to be able to save more and then how they can actually deploy that.
00;23;12;13 - 00;23;35;12
Steven Pesavento
And so I know everything is going to be very specific to each person's individual taxes. You can't take this information and run with it on your own. However, I think it's important that we get into some examples of what people could do and how they could be looking at this when they're making that decision of if I do this strategy and we will save this money and it's going to end up being able to grow for me somewhere else.
00;23;35;24 - 00;23;43;08
Steven Pesavento
So let's start with with one example, and you can start with either somebody who's got a couple hundred thousand dollars of income or a couple of million.
00;23;44;04 - 00;24;09;03
David A. Perez
Or well, let's first start by saying the path that we would choose for the strategy would be dependent on the type of income, not necessarily the amount. It's the type, right. So if you look at an individual who is maybe a high level C executive making $500,000 a year, the strategy for that particular person would come down to what is their level of opportunity to do anything outside of of war, which is rarely true or the case, right.
00;24;09;05 - 00;24;31;29
David A. Perez
Number one. And number two would seek liquid availability of cash because that makes a big difference. Right? So I have to ask them how much cash you got and what is your likelihood to do X? So let's say let's use real estate for an example. Now, if it's somebody who let's say has a quarter of $1,000,000 ready to go into some sort of investment strategy, but they want to make sure not only to get a return on their investment, but also to get some tax saving benefits.
00;24;32;07 - 00;24;47;15
David A. Perez
I would primarily say, okay, let's start with real estate. Are you interested in real estate? And if they say yes, then it's like, okay, this is where we start. Now, the next question I would ask that person is, Are you married? And they would say, Well, why? Why? Why does that really matter? Well, marital status gives me options.
00;24;47;23 - 00;25;02;12
David A. Perez
And I'm talking about in your strategist, I got to know if you're married, it gives me options. They're like, What do you mean? What does your spouse do? Do they make a bunch of money too? Yes or no? What my spouse, their stay at home mom or they work a lot. But it's not to make money. They take care of our family.
00;25;02;12 - 00;25;29;09
David A. Perez
Perfect. That is the perfect scenario for me because you got $250,000 in savings that you want to deploy. You can't do anything in real estate because you've got a full time job, but maybe your wife can't. And now, because we have a spouse who's available to be able to be what I would deem as a real estate professional, and that that we can go into a rabbit hole with there's some criteria that need to be met, but just know that real estate professionals get tax favored benefits when they invest in real estate.
00;25;29;09 - 00;25;55;00
David A. Perez
Typically, it means that they can offset income by losses generated from real estate, and those losses come from a few categories. Number one, from normal everyday expenses like taxes, insurance, maintenance, repairs, landscaping. But in addition to that, there's something called depreciation. Now, depreciation is a kind of a phantom or paper deduction that comes to someone for owning an asset that has a useful life.
00;25;55;11 - 00;26;12;12
David A. Perez
And typically, like you would normally see depreciation on things like a vehicle, like you buy a vehicle a beautiful, say, by a £6,000 or greater vehicle and you put it on your tax return, g-wagon or whatever. And that that what they do on the return is they put it on the return and then you appreciate that asset so that it gives you a deduction.
00;26;12;12 - 00;26;33;07
David A. Perez
Well we would just do that with real estate. Now is that 100% depreciable in year one, but typically it's 20 to 40% in a given year. So for an example, if we could get you a $100,000 asset and we can get it 24 or 20 to 40%, that could be possibly a 20000 to 40000. Our deduction on your tax return right now, that doesn't mean taxes.
00;26;33;07 - 00;26;54;09
David A. Perez
That means deduction in income. And you could do this for many assets, right? We could do it for $1,000,000 asset. 100,000 our assets, 500,000, our asset. But if I were talking to somebody who has a 500,000, our income has 250 in savings, has a spouse that isn't do it necessarily working in any business, particularly this is a strategy I'd be talking to them about now.
00;26;54;14 - 00;27;10;20
David A. Perez
Does it mean that's the only strategy? Right. But it means this is the main one because it gives me four things when I do this. It gives me number one. When I buy a piece of real estate, I'm going to acquire it. And that is going to build wealth because that is an asset that typically appreciates number two, it's going to give me equity.
00;27;10;20 - 00;27;26;12
David A. Perez
What I mean by equity is every time that tenant that I lease it to is going to pay the mortgage for me, it builds equity. Number three could possibly distribute cash flow based on the number of dollars that I receive in addition or in excess of what I would actually make from from mortgage payment and so on and so forth.
00;27;26;18 - 00;27;54;22
David A. Perez
And in five or number four, rather, is going to be the tax benefits, which is going to offset my taxes. Now, many people would say, well, David, I don't know if I want to do real estate. I understand that there's also retirement accounts or defined benefit plans. There's all these other things that you could do. I just love real estate because it's the coolest one to me, because you get the tax benefit, you get the appreciation, you get the tax deduction, you get the the appreciation, the equity, the tax benefit and the cash flow.
00;27;55;01 - 00;28;01;22
David A. Perez
So I think about this all the time when I talk to somebody. And if it was a business owner, by the way, well, does that make sense? First, before I continue.
00;28;01;22 - 00;28;23;14
Steven Pesavento
Yeah, let's let's pause there before we go to the business owner, because it's really important to understand that the way the tax code is written is is an incentive program. And business owners and investors, they receive the most incentives. W-2 employees receive the least, they pay the most taxes. There's the least of these stops along the treasure map to use when your W-2 employee.
00;28;23;14 - 00;28;49;22
Steven Pesavento
But one thing you outlined that was really beautiful there is the example of if you're married, your spouse can then go and follow some of these strategies that can allow you to take advantage of one of the greatest tax strategies becoming a real estate professional. And so you are a W-2, you've got that option. Now if you're a business owner or you have the ability to start a business, obviously that opens up the floor plan for us to work with a lot more options.
00;28;50;15 - 00;29;02;08
David A. Perez
Correct. Now, by the way, even if you weren't even if your spouse was working and you were both working, you're both high income earners there, there are still real estate investing strategies. Well, I guess first off, and just short.
00;29;02;08 - 00;29;04;09
Steven Pesavento
Term rental strategy and some of these.
00;29;05;11 - 00;29;28;09
David A. Perez
There's a short term. But also I think what most people neglect is even when you invest in real estate sometimes or actually every time you invest in real estate, there are tax benefits, You may just not see them immediately and maybe you may not even see them or miss them, because when do you even even with normal depreciation, without having to accelerate it, that typically is in a single family, 27 and a half.
00;29;28;09 - 00;29;51;20
David A. Perez
That includes multifamily and 39 on commercial. So what you do is you get the purchase price of the property that you purchased it at, subtract the land value and either if it's commercial divided by 39, if it's residential, eight divided by 27 and a half, and that could be for multifamily even if it's 150 units. So you just divide it by 27 and a half, you that becomes a deduction every year if you just normally depreciate an asset like real estate.
00;29;51;20 - 00;30;14;12
David A. Perez
So if that number that you get to depreciate just normally plus everyday expenses exceeds the cash flow from the property, do the payments, then there is tax free cash flow. You don't pay taxes on the income from the property. It may not impact your return, meaning you may normally just pay what you always paid. You may maybe even less.
00;30;14;12 - 00;30;40;25
David A. Perez
Who knows? But the point being is that cash flow that came from there is tax free, which is a tax savings strategy, because I don't have to pay taxes on the cash flow. Many people miss that. So when an example for you, for you, Stephen, is that the the investors that may join into a fund, they sometimes or almost always go into a limited capacity which means they are just generally coming in to the fund to get a return.
00;30;41;08 - 00;31;01;20
David A. Perez
And if the asset that they're investing in, primarily if the fund's goal is to invest in real estate, there may be some tax favored benefits that come and apply to them because they're members of this fund. Now, those tax benefits may not offset any income for them. They actually probably wouldn't, meaning they're going to get $200,000 lost on a K-1 They're like, Yeah, I'm going to go put it on my tax return.
00;31;01;21 - 00;31;25;11
David A. Perez
They put it on the return and nothing happens. Like what? That that happens all the time. That makes me a pissed some people are, but when the fund or the investment the syndications start spitting out you know let's call it six 8% annualized returns let's call it that or when the investment is sold. And then there's an exit for everybody in the in the transaction.
00;31;25;19 - 00;31;48;01
David A. Perez
The gain from that transaction can be offset by the depreciation. The profits from the cash flow get offset by depreciation. So you don't actually pay any freaking taxes on the money you make. So even if you don't see the immediate tax benefits, there are still benefits that various people will talk about because they're like, Oh, I didn't get to lose all my money this year in taxes.
00;31;48;01 - 00;31;57;11
David A. Perez
Well, you know, not everybody gets to do that. And you can always live with the tax free cash flow, which you'll never really think about unless you're really intentional about it. Does that make sense?
00;31;58;06 - 00;32;18;04
Steven Pesavento
Yeah, it makes a lot of sense. And just as we we kind of wrap up on this concept for the business owner who's making million bucks a year, they're not a real estate professional. They don't have the ability to be one. What kind of strategies could they look at that would allow them to pay less in taxes and be able to make some more of those kind of investment decisions?
00;32;18;27 - 00;32;35;19
David A. Perez
Correct. So first things first, if they were if they wanted to get in real estate, there's always a short term rental loophole, which you can look up very common buying a short term rental, using it for the year that we're in 2023. Then having a change of opinion in 2024 and converting it into a long term or mid-term rental.
00;32;35;19 - 00;33;01;12
David A. Perez
That could happen and accelerate the depreciation just as if you were a real estate professional. But other than that, there are other strategies. Now I'd like to I can illustrate a few, but just so you all know, in strategy in itself, we're not trying to to knock it out of the park with every strategy. The point is to have a bunch of base hits that would allow us to get on the field, to get on to the to a base to eventually score.
00;33;01;26 - 00;33;22;04
David A. Perez
The problem that most people face is that they want to knock it out of the park with one strategy. It's a lot of little strategies, it's a lot of little things. It's forming an escort so that you can avoid the self-employment tax and then get ordinary tax. By the way, when you do that, you have to be careful because when you're an escort, then there's other things that are consequential, right?
00;33;22;05 - 00;33;36;14
David A. Perez
You've got to get on payroll and then you've got to make sure that you have annual filings. And then there's a few things. But as corp's a great way to start, start right then when you're an escort, you need to realize, Do I have children? Sure. Okay. Then we start a family management company, and now you have children.
00;33;36;14 - 00;33;55;02
David A. Perez
How old are they? Let's pay those children through your family marriage recovery. Let's have a board of directors so that we can actually get compensated for our Disney trips by our company. Right then, if I have a partnership for an example with another company, I just state true partnership and I pass the savings by giving ownership of my new partnership for my heirs Corp.
00;33;55;02 - 00;34;15;20
David A. Perez
So all my, all my profits from my partnership flow to my s corp. But in addition to that, there's all the things that people talk about, right? The Agusta rule of your house, the home office deduction and accountable reimbursed the plan HSA in a phrase and all these little things that equal 5000 here, 3000 there, 7000 here, 10,000 there.
00;34;15;29 - 00;34;38;18
David A. Perez
So, yes, these things may be little to some people. If you're Bill, if you're a millionaire, right, you're making $2 million a year and your tax liability $700,000, I may not be able to chop it down to zero, but what if I could chop it down to 500 versus 700? It may still sound like a lot of money, but 200 K is a good amount of money to save, and it comes from a lot of little things contributing to some retirement accounts, which I believe.
00;34;38;26 - 00;34;55;07
David A. Perez
And by the way, very, very few people talk about it because most entrepreneurs don't want to be in retirement accounts. But when you can actually fund those things at a maximum level and after one or two years have enough money in there to self direct, if you're not familiar with that term, self directing is a great way to get into real estate.
00;34;55;28 - 00;35;11;01
David A. Perez
It's a no brainer. You get the tax benefits you get the cash into a savings account, you get to use the cash from the savings account to buy real estate. These are great benefit. Very few people talk about that. But so I can't illustrate one strategy to knock it apart, but there's a lot of them that would work for somebody who makes a ton of money.
00;35;12;07 - 00;35;32;07
Steven Pesavento
Well, I think the key thing to understand and to really underline what you're talking about is that it's these little small wins that add up to big wins. And I think the other important thing to recognize is that it's not a January 1st decision. All of these tax strategy things, majority of them, they need to be done in advance.
00;35;32;24 - 00;35;50;13
Steven Pesavento
You need to be making these strategic decisions on your entity structure up from any of you working with the right type of experts to be able to do that. So we've got one last question to wrap up on here, David. How can people get in touch with you or or follow along with some of the lessons that you're sharing?
00;35;51;07 - 00;36;08;04
David A. Perez
Awesome. Well, first off, I give a lot of free coupons in a way. You can follow me on any social media channel. I am. So I am David A don't forget the A Perez so you can find me on any social media channel. I give away a lot of content, even on YouTube or tech talks, all those things.
00;36;08;04 - 00;36;38;23
David A. Perez
So I really I'll be honest it's completely free. You'll notice that I'm probably one of the only persons out there that doesn't say, Hey, call me, get my DM, get on my calendar. I don't do any of that. To be truthful, my goal is to impact 5 million people. However, if you do feel like maybe we could work together and you feel like there's something here to be talked about, you can schedule a free discovery call by visiting our website Tax plan experts dot com tax plan experts dot com and you can schedule a free discovery call with somebody on my team or and determine if we're a good fit to work together.
00;36;38;23 - 00;36;53;24
David A. Perez
We are still taking clients. We won't be taking them very much longer because as we get closer to the end of the year, I mean it's harder to help somebody. People think I'm you know that I can, you know, I'm some sort of magician when it comes to December 25th, you know, But I just can't help you at that point.
00;36;53;24 - 00;37;08;26
David A. Perez
So you hit something very, very spot on. Tax planning is not a it's not a one time occurrence. It is an annual monthly recurring opportunity to find ways to mitigate your taxes.
00;37;09;22 - 00;37;29;00
Steven Pesavento
Yeah. So powerful. And I, I couldn't recommend enough that you go out and find a tax strategist. If David sounds like the kind of guy you want to work with, I definitely believe that he's got strategies that can help you make a big difference in your life, in your business, and on your path towards financial freedom. So as we wrap up on this, it was great talking with you, David.
00;37;29;00 - 00;37;49;17
Steven Pesavento
We're going to have to have you back to dive into some more specifics on a future episode. But what advice would you give to those folks who are on that path towards financial freedom? They're working towards creating their dream life. They've got the vision. They know they want to be living that quality of life that they believe is possible, but yet they have this hesitation, this fear.
00;37;49;22 - 00;37;52;03
Steven Pesavento
What advice would you give to those folks as we wrap up?
00;37;53;02 - 00;38;14;15
David A. Perez
Well, of fear, to be truthful, the fear most people fear things that they don't know or understand. That's the biggest challenge, right? We fear what we don't know because if we knew what the outcome would be, then we wouldn't have any fear to the majority of times when I meet somebody who's fearful of taking action or moving forward, it's typically a lack of understanding that ties in couples with a lack of confidence.
00;38;14;27 - 00;38;36;16
David A. Perez
Confidence comes from your ability to to reproduce, to know the outcome from your consistency. There's a lot of ways to build confidence. But here's the number one way to build it is doing what say you're going to do? And anybody who's on the fence. The only way that I can share with somebody like today, if you just said if you said, David, how do I get that confidence to go and take on the world would do it.
00;38;36;27 - 00;38;48;21
David A. Perez
I mean, that's how you get confidence. You do what you say you're going to do. Most people won't, and that's why they carry their head down. That's why they sit in the back office. This is why they don't show up, because they're not to just put the step forward towards whatever it is that they said they're going to do.
00;38;48;29 - 00;39;08;28
David A. Perez
And the more that you just do it, the more you step up, the more you put your foot forward and you say, I'm just going to commit, the less fearful anything becomes, right? I mean, we all hit a level, don't get me wrong. It's not like I'm never scared. I would just tell you the only way to overcome that is by continuing to work on that confidence muscle that we got to work every single freaking day.
00;39;09;07 - 00;39;16;10
David A. Perez
If you do that, I promise you, you could do anything you want. You can build anything you want, you can have anything you want. You can go go That your own economy. Thanks, man.
00;39;16;27 - 00;39;36;25
Steven Pesavento
Show me what what a beautiful way to wrap up a great episode. There's nothing more powerful than honoring yourself and showing yourself that you're worth that commitment. So go out there, decide you're going to do something, show up every single day and make that progress. Thanks so much, David, for joining us. Really appreciate it. Thank you all for listening.
00;39;37;00 - 00;39;38;05
Steven Pesavento
And we'll see you on the next show.