All right, what is going on? We are live with the Payneless Flipping Podcast. I have an awesome guest with me today. Michael Guthrie, how’re you doing today?
Fantastic. How are you, Nathan?
Oh man, today’s been hectic has been a hectic day. You know, I was telling you before we got here, a charger went out on me. And I 3% left on the laptop. So I had to run and go grab it. But you know, things happen like that. No problem.
Absolutely. Like life sometimes gets in the way of progress.
It does. It does. But we got to keep going. So Michael, it’s a pleasure having you on here for brand new listeners that are on here. The goal of this podcast is so you can learn from other investors. So it doesn’t have to be a painful journey. This is Nathan Payne. We call it the Payneless Flipping Podcast where we want to take away the pain from you trying to figure out everything yourself. So we got Michael Guthrie. He has a bunch of experience in the real estate industry. And tell us a little bit right now. Michael, what what are you focusing right now on right now in the real estate industry?
Right now I’m focusing on multi multifamily investments for tax eradication. I’m also focused on Triple Net leasing. And I’m also doing some hard money lending. And I’m also investing in top line top line investing with an equity kicker kind of opportunities.
Dang, you know, a word that just caught me that you said is tax. Did you say eradication? Is that what you said eradication,
I haven’t paid federal income tax for the last three years based on my multifamily investing.
Oh, my dear, well, let’s talk about that. I think people that are brand new or experienced all want to know how you can not pay taxes has, how does that happen?
That’s Well, the interesting piece was is I was I actually owned and operated a huge ATM company across the United States. And we were getting beat down in taxes. And about four years ago, I went to a seminar I got introduced to multifamily and learned that the k one losses against multifamily would go against my active income. So I became a real estate professional. My wife took over ownership and operations of the ATM company. And all of my day one losses through cost sagging the properties allowed us to write right that those k one losses off against our active income, which reduced our taxes to less than 00.
My gosh, how would that feel when you didn’t have to pay taxes?
It was huge, because I was paying mid to high six figures for about the last 15 years.
Oh my gosh. Can you imagine if you had learned that strategy earlier? The cost?
Oh my gosh, the whole strategy to mitigate or eradicate the taxes? If I learned it earlier? How much further ahead? Would I be today? And so we’re actually making it’s actually been my mission to bring this to as many people as possible and how to eradicate taxes through investing in alternative investments like multifamily or triple net leasing.
Dang, why? Well, I guess how many people do you think are getting rocked right now with their taxes when they could just buy multifamily? Do you think there’s must be quite a few.
It’s, it’s huge. Typically, it is a majority of the audiences that I actually get in front of. And I’ve been asked to speak at a number of different events. I’ve speak at some family office events also. And it’s always interesting once you explain that you are paying mid mid to high six figures in taxes. And now you don’t pay anything you just get bombarded when you walk down off the stage from a 1520 minute talk on how they can apply that to their own life and their own strategy.
So tell me about that. You get bombarded? What are you able? Are you able to send them to like a website or send them to something where they can learn what’s the call to action right there, when they come to you?
Well, the call to action is I’m looking to collect their email and that will start showing with the different strategies and the different ways we invested to actually make that work for us. And if we have opportunities for them to invest in to get the same kind of a k one loss opportunity. That’s great. Otherwise, I’ll turn them over to other people that I know in the industry then trust that they’re going to do a good job with their they’ll be good stewards of the money and get them a decent k one loss for investing their capital.
Wow. So do you have to be at a certain like bracket of like, what you make earning potential like before you can get your taxes to zero or can anyone do it depending on what they invested.
It’s all about where you’re investing your dollars and how your how your tax CPA is helping you to offset your taxes with the k one losses.
And I bet there’s a lot of tax accountants and CPAs that don’t even know about like don’t well, I know I used to have a tax person. They never recommended that to me. So I’m sure that’s not a lot.
I did too. And the interesting part was he was my neighbor. He lived two doors down and then I got involved in this and I shared with him my first my first deal and he goes oh that’s been getting a lot of traction for the last 10 years. Wow. You got fired? Yeah. He used to bring me the ideas I shouldn’t be bringing him the ideas to save me taxes. That’s why I hired him.
Yeah, that’s why when you realize you have the wrong the wrong who right you have the wrong Yes. Well, that’s, that’s amazing. So you got you said you got into real estate four years ago. Is that Is that right?
Well, I had, I got into single families probably about 20 years ago, and then seven single family rentals for about 1012 years, then I turned 31 Those into five rentals. And then over the last four years, I eliminated all of those and put it all into multifamily. And when I learned multifamily, that’s how it’s not really worth doing cost segregation on one single family home. At a time, there’s the cost is just not the cost. It’s a cost advantageous to do it. So when I learned I learned about it in the multifamily side, I thought about going back and doing all my single families, but it just wasn’t cost effective. So you have to have a lot more gift, a few more doors to make it cost effective, like a four Plex or larger, you can actually make it worth your time to cost segue that out and take the depreciation
is what makes that the case. Why is that true? Is it the price point?
It’s the amount of things that you can actually write off immediately, one to 15 years? You can you can actually write that all off in year one.
Okay. Now that makes sense. Yeah, no, about that. So is it because there’s like more windows and multifamily more bathrooms, more more things that need to be repaired
more doors, more floors, more more sinks, more cabinets, you name it, there’s washers and dryers, there’s all sorts of more opportunities to write more things off,
what’s the downside to writing off everything in the first year with cost segregation, there’s, if you have to sell it, within five years, you get you get hit with those taxes, if you sell or something like that,
if you if you sell it too quickly, you have to recapture a portion of that. Or if you sell it, like in a year, you’re going to recapture most of it. So the longer the longer you hold it in the typical hold time for multifamily investment is three to five years, maybe seven, so then you’re not Recap, you won’t recapture as much because more of it will actually get written off over the time period. So it’s better to hold them a little bit longer. And I see people actually they they gotten into it, and they flipped them in 14 1819 months. But the profit was so high, that it made it worth the flip to return a huge returns to the investors and then they can also take those earnings, put them into another investment and keep kicking the can down the road. It’s similar to a 1031 exchange. But it’s a k one loss where you’re not actually you’re not defined by a timeline to find a new property. You have until the end of that calendar year to find a property.
Love it. Wow, this is amazing strategy. So for people that are brand new to investing, they’re like, Well, I’m just trying to get my first deal, or my first flip. But is there is there a time where you’re like, Hey, don’t wait, get started now is would you have any suggestions for new investors about this strategy,
the only thing that has made me so mad as I didn’t know about it, sooner or later it went bigger, faster. Okay. So as soon as the sooner you can get your dollars invested, making money while you’re doing your flip, or your whatever you’re doing to make money. That way your money over here is making money, you’re making money. So you have two sets of elevation in your net worth. So I say sooner rather than later to get your money working for you.
So for example, if you’re raising money, let’s say I you need a million dollars in 10 people give you 100,000 Right when you do the cost segregation in the first year, do those people that gave you their money, the private money? Do they get the the benefits of everybody
gets 100%? You’re absolutely right on that Nathan. Okay, everybody gets a pro rata share. So we have 10 people, we raised a million dollars, everybody put in 100 100 grand, everybody gets 10% of what the depreciation schedule is. And it’s typically between 70 to 90% of the cash you put in the deal you can take in your one wow.
So that’s that’s one of the plays you do correct like you raise money and then you you invest it people give it to you and you invest it in multi units right multifamily. Correct. Do you do anything other than multifamily do you do like assisted living or anything other than that
I have not gotten into assisted living storage or anything of that nature yet I have gotten into some triple net leasing. And with that, those are more cashflow plays, and we they’ve been great because we’re actually paying cash for the whole asset. Like we just bought a Starbucks three months ago, or $2.2 million. And that thing’s returning 5% cash on cash month over month and we’re gonna get about a 30% k one loss on that the loss is going to be less because we’re not leveraging the property. So we we’ve raised all the money so we’re only going to get a certain percentage of the of the down of the k one but it’s still it’s a that’s a cashflow play so your those are five you’re typically five to six year olds, because most of the time they’re on a 20 year triple net lease that increase 10% every five years. So buying now a little bit higher cap rate and you’re hoping the caps go down over the next five years with interest rates. So then when you go to sell it increases the value of your property. So you actually Get a great upside while you’ve gotten cash flow along the way.
So let me ask you a question. So when you said you bought a Starbucks, did you buy the building that houses the Starbucks? And they’re and they’re renting it out to Starbucks? Or did you get a franchise like, is it your
Starbucks doesn’t franchise Starbucks owns everything, all their own bill or other stores, but they own no land, and they have no property. So we bought the land and the building on it. And Starbucks is on the 20 year lease with us.
Okay, so they’re the I’m not sure if I understand triple net lease perfectly. So forgive me if I’m saying this wrong. But here basically leasing it to Starbucks, is that correct? That is correct.
And then less Starbucks corporate nationwide goes under, we get paid our rent every single month.
Wow, I don’t think they’re going under.
No, they’re, I don’t I don’t believe so. Starbucks is sexy, and we had no problems filling up that two and a half million, we just did another one. It’s called the learning experience, they have 450 stores. And it took us a little bit longer, but the return on your capital, instead of being like five percents, gonna be like six and a half percent took us a little bit longer, because nobody really knows what the learning experience is. It’s a parochial school for kids. And so we just finished a raise on that we raised a little over $6 million, we paid cash for that asset. And we closed on that one on the 16th or 17th of this month. And we’re actually doing distribution this week of almost $20,000 of the second half month’s worth of the rent that we just got paid. That’s amazing.
So with when you’re raising capital, do you have a cap on like, the lowest amount people are allowed to invest or like a cap and like highest amount? How does that work? In funds,
we try not to let anybody put in more than 10% of the overall raise. Okay, so then that that starts to swing the votes, if you will, or you want. And so we try to we try not to they may have more than 10% ownership, even as, as the general partners don’t have more than 10% ownership, that way, we can spread it around to the parties. And the typical Least amount in is between 25 and $50,000. So people who can actually get started and most of the raises, we do what’s called a 506 B, which means like you and I today having a conversation, I can send you my 506 B offerings, as opposed to a 506 C, which means you have to be an accredited investor, which means you have to have a higher net worth and whatnot. And you actually have to get verified by a third party. So I prefer the 506 B’s. I’ve done 1506 C and it was the hardest one and it’s the most costly to to actually manage.
No No I’ve heard about this. I got a couple people that do that those those type with accredited investors. Awesome. Well, let me ask you I see on for the people that are watching the podcast and won’t see this on on video on YouTube, they won’t see your your background, but it looks like you got a ton of like name badges back there are those like from going to seminars and stuff,
they are 100% from going to education, this is like my college degree if you might get my masters as amazing. Absolutely. And I’m all I’m all about personal development and increasing my my knowledge base so that when I bring an investment to a pool of investors that they understand that I know what I’m talking about when I bring it to them, and that I personally have my own skin in the game before actually bringing investment to anybody.
My goodness, that’s how many that looks like about 100. Plus, it looks like there’s probably
about 70 there that probably represents almost, I want to say half a million or something
probably closer to a million dollar investment. The Tony The Tony Robbins, there’s three of those that $85,000 A crack plus, then you traveled all the events. So those are that was the most expensive, the least expensive is like 3030 grand for a mastermind. So they’re pricey, but you know what you’re paying for specialized education in your niche so that you can, and I do this more for education and relationships, not necessarily to find investors.
so anyone that you have on that wall that you regret paying for, or going to No, they’re all good.
Then if you see multiples, that’s because they were really good. If you if you see them once there was enough education, there’s there was worth it to try it once just to get the another perspective. And not all of them or none of them need renewing, because some of them have different flavors, if you will.
yeah, not at all. Not all are created equal. You know, there’s way better ones in the way. let the audience know where they can reach out to you if they got 20 got money, they want to invest, they’re not sure where to put it. They can trust that you spent the time and the effort to vet these deals before you even bring it to him is that kind of the game plan that you would want people to go through spring come to you if they they want to invest
100% they can reach out and there’s a number of ways and I’m gonna I’m gonna give you my cell phone number then I’ll give you my email and my word, my word for the year for 2023 and 2024 is be available because I want to be available to people that are looking to expand because If I didn’t have this, I’m 55 years old, and I’ve only been in the multifamily game for about three years I wished I’d known at 51 what I know now at 35, I would we probably wouldn’t be here today or I’d be out on a beach someplace for the rest of my life. So, my cell phone 509-270-6701 shoot me a text, let’s jump on a call, or reach out to me directly on my email at Mike. Michael. Excuse me, Michael mi ch AE L at Pacific Capital llc.com. That’s Michael at Pacific Capital llc.com. and my website is Pacific Capital llc.com. So reach out or check out my website to see what we’ve been up to what we’re up to, and happy to connect at any point in time.
That is very generous of you to be available, because a lot of people aren’t available. So that’s amazing. Yeah. How’s that been? Have you been? I bet you’ve been pretty busy.
I’ve been super busy. I have a really good friend, you may know who it is. And you don’t have to polish this part. But his name is Brandon Turner, bigger pockets. And we’re in a mastermind together. And when I told him my word was be available, he goes, I haven’t answered my phone personally for over four years. If you call his number you get all this assistance of how do you how do you get he goes I just advertise on Facebook and Instagram for my races and unwell myself 506 C and spends a truckload of money on ads. And that’s how he raises money. Yeah, and that’s not the way I do it. I like the more interaction what people don’t know if something’s going wrong, the buck stops here. You can reach out to me at any point in time and get a hold of me and I’m here to answer for you for what I’m investing in.
And I’m sure that’s going to attract the right people that you want to work with because I’m that would be type I am. I want to talk to who you know who the guy I don’t want to just give money and just pray and hope it works out. You know? Hope is not a strategy. Yes, yes. Well, hey, Michael, it’s been a pleasure having you on here. Payneless Flipping Investor drives my company so investors Live Nation, please reach out to Michael, if you have any needs for investing your money. I know you do. I know a lot of people that listen have, you want to get into real estate and you don’t have to be a wholesaler fix and flip to get in real estate you can invest it with other people that know what they’re doing. So go check them out. And Michael, anything else you want to leave with? Before we head out.
One thing I did learn a bit from some other wholesalers and flippers is they flip for investing when and when they when they said investment when they either keep one of that they flip that they’re gonna flip and put renters in it or take the money from that one and invest it in in an alternative and asset ie multifamily big duplexes or stuff of that nature so that they’re actually growing their cash
a great if you get in the hamster wheel of just wholesaling everything. You’re just crazy. And I’ve been there, you’re just creating a monster that at the end of the day, anything at the end of it all, you won’t have any wealth built you just have a ton of money that cycled through. So definitely, you want to build wealth. So thank you, Michael, and we’ll catch you next time.
a great if you get in the hamster wheel of just wholesaling everything. You’re just crazy. And I’ve been there, you’re just creating a monster that at the end of the day, anything at the end of it all, you won’t have any wealth built you just have a ton of money that cycled through. So definitely, you want to build wealth. So thank you, Michael, and we’ll catch you next time.
Thank you so much
