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Threatening New Taxes You Might Need to Pay. Tom Wheelwright Explains.
• 46 minTom Wheelwright is back by popular demand, our most recurring guest in GRE show history. He’s a CPA, an International Authority on Tax, and Best Selling Author of “Tax-Free Wealth” amongst many other titles. We focus on the potential unrealized capital gains tax, which would tax the increase in property value even before sale. Tom explains the implications of this proposal and the broader impact on tax policy. We cover the Democrats' proposal for capital gains tax at ordinary income rates, capital gains on gifts, and capital gains when you die. The proposal for a billionaires tax, which would tax unrealized gains at $100 million, could potentially extend to lower net worth individuals over time. Real estate income can result in a negative tax rate, increasing cash flow after taxes. Learn about the benefits of working with a knowledgeable tax advisor. Resources: GetRichEducation.com/tax Show Notes: GetRichEducation.com/519 For access to properties or free help with a GRE Investment Coach, start here: GREmarketplace.com Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE or e-mail: info@RidgeLendingGroup.com Invest with Freedom Family Investments. You get paid first: Text FAMILY to 66866 For advertising inquiries, visit: GetRichEducation.com/ad Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” GRE Free Investment Coaching: GREmarketplace.com/Coach Best Financial Education: GetRichEducation.com Get our wealth-building newsletter free— text ‘GRE’ to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: @getricheducation Complete episode transcript: Automatically Transcribed With Otter.ai Keith Weinhold 00:01 Welcome to GRE. I'm your host. Keith Weinhold, this week we're talking about the value of the raw land that comes along with your property, the importance of an as built survey in real estate. Then it's tax topics with pro Tom wheelwright, the specter of an unrealized capital gains tax, higher capital gains tax rates, how gambling is taxed, and how to permanently reduce your overall tax burden. Today on get rich education, 00:33 since 2014 the powerful get rich education podcast has created more passive income for people than nearly any other show in the world. This show teaches you how to earn strong returns from passive real estate investing in the best markets without losing your time being a flipper or landlord. Show Host Keith Weinhold writes for both Forbes and Rich Dad advisors, and delivers a new show every week since 2014 there's been millions of listener downloads of 188 world nations. He has a list show guests and key top selling personal finance author Robert Kiyosaki, get rich education can be heard on every podcast platform, plus it has its own dedicated Apple and Android listener phone apps build wealth on the go with the get rich education podcast. Sign up now for the get rich education podcast or visit get rich education.com Corey Coates 01:18 You're listening to the show that has created more financial freedom than nearly any show in the world. This is get rich education. Keith Weinhold 01:34 Welcome to GRE from Essex County England to Essex, Massachusetts and across 188 nations worldwide. I'm Keith Weinhold. You're listening to get rich education before we talk taxes, let's talk about the land, the raw land, the lot that comes along with your property. Investors don't spend much time thinking about it. Yet the land is sometimes worth more than the home or structure that's on it, per the FHFA, land constitutes 32.2% of the value of the average US single family property in a metro area. Now the inexpensive land prices nationally, they are predominantly in what I'm classifying it as three US areas, the Midwest, the southeast and Appalachia well, where you have inexpensive land. Oh, that also happens to be where the cash flow for long term rentals resides. Land costs more by the water because people want water activities, water proximity and water view. So the lower costs are inland, and land also costs more by the water, because coasts and shorelines constrain development, sprawl that limits supply and a limited supply of buoys up prices. Consequently, the highest land values are mostly in the Northeast Corridor, from Boston to DC, Miami, coastal California and Honolulu. Yes, Manhattan values are flat out extortionate for raw land now, Seattle, Madison, Wisconsin and Boulder, Colorado. They are three places with really high land values as well. Seattle and Madison are on geographic isthmus. And isthmus is a narrow strip of land with water on both sides. It's interesting how Nashville's nascent population influx made its land values surge inside a cheap sea of southeastern US land values now costly land areas like these ones that I've been talking about on the coasts, they could work well for short term vacation rentals like Airbnb and VRBO, your classic waterfront and beachfront weekly rentals, but they do not work for long term rental cash flow. Texas Land values are sort of low to medium. Land near the Mississippi River and its major tributaries have low costs because rivers are efficient transportation networks, prohibitively high land costs. That's one reason, actually, why alternative building methods just really aren't as cost effective as some people think. I'm talking about things like 3d printed homes, prefabbed homes, tiny homes and shipping container homes, well, all of them have got to sit on land, just like conventionally build homes do. And there is a land cost. Talk to a tear down specialist, and they'll tell you that in some older homes, 100% of the total value is in the l and. And in practicality, it's actually even more lopsided than that. The structure can have negative value because demolition is not free. So for you to get an idea yourself, your property tax bill, it's going to show you your split. That's where you'll see the assessed values broken out for both your structure and the land. So the bottom line here is that cash flowing properties have low land values, typically 25% or less of the total property value. That's generally what you want to look for. And I swear the only thing that's more barren than raw land is the creative naming process for new developments. There is such a lack of creativity in these development names. I'm talking about names like Willow Creek Estates, stone bridge crossing, or what else do they name a new housing development? How about VISTA, view heights? They all have these idyllic sounding names that somehow just all sound like each other. Well, we're talking about raw land when you get in contract to buy a property, the seller side is expected to provide you with an as built, it often still comes in the form of an old fashioned piece of paper and as built survey, what it is is a plan view, a bird's eye or aerial view of your property. It's not a photograph, but a drawing, and it shows you the dimensions and the placement of structures on your property, and it includes things like fences and other features like easements. Now, lenders don't always require an as built before granting a loan, but it's a good idea to ask to see one before you wrap up your next deal. If you want to in your offer, you can even require that a recent as built be done by a surveying company. All right. Well, what exactly do you look for on an as built once you have one in hand, first see that the house or apartment building that you're buying is properly set back from the property lines to meet zoning requirements. If the six foot side setback is only five feet 10 inches, then you'll have to address that before you buy even if it's five feet 11 inches. Now it's possible that the jurisdiction that you're buying in will grant a letter of non conforming status, but if not, the structure is going to have to be adjusted. Another item to look for on an as built are encroachments. This is where part of a neighbor structure protrudes over the lot line and onto your property. And encroachment is really only acceptable if you're willing to grant the neighbor an easement in perpetuity for their encroachment onto your land. But why would you want to do that? The third thing that I want to mention that you should look for an as built is the existence of easements. An easement that just means that another party has a legal right to come over onto your land and use it. Yeah, and easements are actually quite common. It's not as threatening as it might sound. A common one is that as your as built would show, say, a five foot wide by 60 foot long easement. Is there that a utility company has access to. Well, that's something that makes sense. It's for the common good, but just be mindful that an easement cannot have a structure with a permanent foundation built on top of it, alright, because an electric company or a water company might have to excavate there. Most people think of easements on the raw land, but there are also aerial easements, for example, an overhead power line where the roof eaves are not allowed to intrude on that airspace. So to review what you learned so far today, the best cash flow properties typically have low land values, often about 25% or less of the tolerable property value. And an as built survey is an aerial view drawing of your property and its dimensions on an as built look to see that it meets zoning requirements like setbacks and look for encroachments and easements. It is resale properties where it's more important to look at as builts than it is for new construction properties. As we're about to bring in tax pro Tom Wheelwright shortly, business owners and real estate investors really get so many of the best tax breaks in the US Code. But you've got to know. How to find them, or else work then with a CPA that does
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