On this episode The Passive Income Attorney, Seth talks to Yonah Weiss. Seth and Yonah discuss the tax benefits of investing in real estate, both passively and actively, as well as how you can save thousands on your taxes, even while working a W2 job.

 

“Real estate is such a great investment vehicle. Anyone can really do it if you just set your focus to do it and learn the right ways, make the right partnerships.”

 

HIGHLIGHTS:

0:00 – Intro and background on Yonah
3:56 – Seth asks what the “aha” moment was that made Yonah switch to real estate
6:13 – Yonah explains how he can continue his passion of teaching through real estate
8:25 – Yonah explains what cost segregation is on a basic level
9:59 – Cost segregation requires an engineer to identify the different components and assign the values to them
10:29 – Seth asks whether cost segregation is appropriate for every real estate deal
11:39 – Yonah talks about how you can benefit from cost segregation as a passive investor
16:35 – Yonah explains what happens on the back end of the investment
18:44 – Seth asks what tips Yonah would give to people who want to use social media to bring in clients
23:54 – Your tag line is the most important thing about your social media profile
25:22 – It’s time for the Freedom 4 – In an alternative world where you weren’t involved in real estate, what would you be doing?
25:59 – What’s the best thing you do to keep your mind and body healthy?
26:47 – Where were you 5 years ago and where do you see yourself in 5 years?
28:20 – How do you see passive income changing your life for the better?

 

FIND | YONAH WEISS:

Website: yonahweiss.com
Weiss Advice Podcast: yonahweiss.com/podcast

 

FULL TRANSCRIPTION:

Seth: What’s up law nation. It’s time for another awesome episode. As high-income earning professionals, Uncle Sam certainly tends to get more than a fair share of our hard-earned cash. But what if I told you that by investing more money into real estate, that you’d actually be able to take home even more money from your W2 paycheck, which of course you could take that and invest more, create more passive income and by doing so create more time and more freedom. You’ll also learn how you can leverage LinkedIn to reach more clients, build your practice and take your business to the next level. Today’s expert guest is the cost segregation king, the LinkedIn master of masters. The one and only Yonah Weiss. Yonah is a powerhouse of property owners tax savings and has saved his clients tens of millions of dollars. He’s a cost segregation expert at Madison Specs, which has completed over 14,000 cost segregation studies in all 50 States. All right let’s go.

Seth: Yonah. Welcome to the show, man.

Yonah: Hey, what’s going on, Seth? Thanks for having me on the show.

Seth: Absolutely. It’s a pleasure to have you on, the cost segregation King himself

Yonah: In a flesh of blood on Zoom.

Seth: On Zoom, on Zoom. Yeah, man. So, let’s start out with, just tell us a little bit about yourself and man, just feel free to brag.

Yonah: Not much to brag about honestly, but I have, you know, what can we say? I mean, everyone knows me from social media. Everyone knows me from LinkedIn, especially with regards to cost segregation, but honestly, I’ve only been, you know, around in that industry for about a little more than three years. So, it’s relatively new to me. I actually went to school in San Diego, grew up in Southern California. So, I went to college in San Diego, loved that, but kind of found my journey doing other things. You know, I actually wound up moving to Israel early on, right after college actually in the middle of college, believe it or not. So that was really exciting time for me kind of rebellious because I just wanted to just leave everything behind and that’s a whole chapter in itself, but long story short, you know, got married, a bunch of kids, six kids, thank God. And just, you know, enjoy teaching, enjoyed living and learning study for many, many years until a certain point. It was like, okay, we need to do something else. Like there needs to be more income and you have a big family, etc. And it was like, okay, what about real estate? And I kind of stumbled upon real estate. Maybe this was leading into your next thing, but I mean, I had, it was the furthest thing from my mind for many years because I just loved living. I love teaching. I love being, living a very humble existence, to be honest. And I didn’t know anything about social media and not much about real estate, although my parents did have a few out of state single family rentals. So, I knew a little bit about it, but was never really involved in that. So that kind of took a whole new meaning to my life a few years back, about five years ago.

Seth: Yeah. So, what was that aha moment. I mean, what kind of turned you on to real estate, even though it was, you know, not necessarily part of your life you know, growing up or even later in life, you know, what was kind of that aha moment where you’re like, ah, man, maybe I can do something in real estate.

Yonah: You know, I think the aha moment really came after getting involved for a while. It was like, I made a simple calculation in my head. I went to school for quite a while. I did postgraduate stuff, did a lot of learning, studying, I loved what I was doing, but I’m like, okay, I need some more income. I need to have some sort of job. I don’t want to go back to school to get any sort of, you know, any type of formal education. I was like done plenty of that. So, I thought to myself, basically I need an equation. Two factors in this equation. Number one, what type of job can I find? What industry can I go into that does not require any more formal education? I’m a pretty smart person. I learn on the job I learn, you know, from apprenticing people hang around them. So, I was like, what type of thing? And then the second part of that equation was, what industry is there that has the maximum, you know, roof, right. Maximum potential income from that. So, it was like, okay, I’m not going to be a doctor, lawyer, etc. List all the things whatnot.

Seth: Process of elimination.

Yonah: Exactly. And then I, you know, I spoke to a few friends. I had a; it was kind of bouncing the idea. Real estate kept coming up in different, different ways. So, I had a friend right at the beginning, who’s a good friend of mine. He was in the commercial mortgage business for many years, doing financing, he is like, Hey, come hang out with me, come work with me. I’ll show you the ropes. I’ll teach you all about commercial real estate, all about financing. And that was really eye-opening to me for the whole industry and just through the networking and eventually, you know, social media and everything. That was really the aha moment where I kept interacting with people that were genuinely trying to grow, you know, growth oriented people and genuinely, you know, trying to make a difference in their lives and the lives of others. I was like, Oh, this is exactly the type of people I want to surround myself with. This is a type of environment that has all of those factors that I thought were necessary. And then I just kind of jumped, jumped in full force.

Seth: Yeah. Yeah. And I know you’re big on, you know, teaching and helping other people and you know, you have a passion for that. So how is, you know, how can you relate that to real estate or how’s real estate enabled you to do you know, to continue doing that?

Yonah: Well, I think a lot of people realize that the education platforms that are out there, bigger pockets and you know, all these podcasts like yours and many others, it’s an opportunity to teach people that have no idea certain basic things when it comes to real estate. What about investing? You know, you can invest your money outside of your retirement account right outside of the stock market, outside of wall street, there are ways to actually make money. There are ways to, you know, have partnerships. And a lot of these things are just, they’re not taught, basic finance is not taught. And so, what I’m doing now with the cost segregation is very tax related stuff. Also, people’s brains kind of shut off when they hear taxes and here’s a, it’s an opportunity to just educate people. So, I brought that side of me that background, which I’m passionate about, and it just kind of, you know, merged very well with you know, with the industry in general.

Seth: I mean, it seems like, it fits you perfectly, man. I mean, you can, I think that’s part of the, you know, you on LinkedIn and on social media, it’s like, people just see that you’re genuine and that, you know, you’re really, you, you know, you’re not trying to be somebody you’re not, and that’s really important, especially on social media. And I think that’s why you kind of have this massive, massive network because people can read that.

Yonah: Yeah, I agree. And what’s amazing to me is that how, how easy it is, you know, if you really genuine and you really out there, you know, consistently trying to help other people consistently not thinking of yourself first, but really thinking what can I do to help others? And it’s not, like I said, it’s very easy to do. It just takes effort. And it’s kind of a paradigm shift, you know, mindset shift in doing that. But I’ve found that has tremendous, you know, 10X return on your investment in the amount of time you spend in helping other people. You get back tenfold.

Seth: Gotcha. Gotcha. Well, let’s just jump right into the cost segregation piece then man. Like most of our listeners have no idea what that is. They may not have even heard the term before, because they might not even be real estate investors. So, what exactly is cost segregation at a basic level to start?

Yonah: Sure. So, on a basic level, it’s a really cool term really weird term really the IRS came up with. It’s an advanced form of depreciation. And so essentially what that allows you to do is to take faster depreciation deductions than you would normally, okay. So take a step back, depreciation is a cool tax deduction the IRS gives you if you buy a property and anything besides your personal residence, any type of property, investment property, business property, when you buy that, you’re now allowed to write off the entire value of that building on a five-year, on a 27 and a half year schedule. You’re allowed to write off the entire value of that property over the course of, however many years they interact. So that’s a little bit every single year. And you get a free tax deduction, which means you lower your income tax liability, straightforward that’s depreciation. However, cost segregation is a method of depreciating the property, meaning at different rates, meaning taking different components within the building and finding the values of them and then taking the tax deductions of those values at a faster rate.

Seth: Gotcha. So, I mean, it’s taken it like the name says, man, you just segregate different pieces of the property and depreciate it, you know, on the timeline of that particular piece.

Yonah: Exactly. And the IRS gives clear guidelines to what those pieces are and how can everything be done. So, but it requires where we come in is it requires an engineer to actually go and identify what those different components in the property are, assign the values to them. And then that allows you then to take those tax deductions at those faster rates.

Seth: Gotcha. Gotcha. Now is the cost segregation appropriate every real estate deal. I mean, why wouldn’t someone do this on their, you know, their own home or on, you know, just a single-family rental, you know, where is it appropriate to utilize something like this?

Yonah: Sure. So, first of all, it can be applied to your personal residence because it’s only for rental property income. So, depreciation is a tax deduction that offsets rental property income. If you live in the property, you don’t get that tax deduction. However, really any property can potentially benefit from this because every property gets that depreciation deduction. However, it’s really makes more sense on, because it’s a percentage and because it’s a proportion of the purchase price that you can now take at a faster rate, I typically like to look at properties over half a million dollar purchase price. So that can very well be single families, especially in California. However, it doesn’t, it can be anytime your property, whether it’s residential or commercial, retail, office, self-storage, you know, golf courses, you name it, any type of property that whatsoever can benefit from this.

Seth: Gotcha. Gotcha. Now it seems like a no brainer, you know, from the sponsor’s perspective, if we’re talking about a commercial property or syndication deal, but where does kind of the passive investor, where did they see this benefit? How does it trickle down to them?

Yonah: Absolutely. So as a passive investor, you get income, right return on your investment. You get a lot of times the preferred return, but you get a return on your investment, okay. Whether they’re monthly or quarterly or whatever distributions on that at the end of the year, you’ve made money from your property, from this investment and you get that money. You also get depreciation, you get a deduction according to your percentage of ownership, usually. So if you invest it passively and there were a hundred other investors with you in this deal and you all get a 1%, whatever of that ownership, just to keep it simple, you get those return on your investment and you also get the depreciation amount that is proportionate to your investment. Regular depreciation usually is not enough to offset your income from a property, which is why we have this cost segregation. So, it trickles down in that when we’re doing accelerated depreciation typically, and that’s what another name for conservation is accelerated depreciation. Typically, in the first year or even over the first five years, we’re seeing a complete wipe out or lowering of your taxable liability. So as investors, you’re not only getting your return on investment, but you’re getting that in the first years of that own of that investment, usually completely. Tax-Free where, you know, so think about it like this, any other type of investment that you would have, whether the stocks or in a business or anything like that, you make that money, even if you’re investing in loans and lending money, that money you’re making is taxed, right, taxed at a high rate. And if you’re investing in you know, other types of real estate like fix and flips, that’s also income is taxed at high rates. Depreciation is to offset that rental income. So, you can actually use the extra depreciation for one property to offset income from other rental properties as well. So those are the two main benefits of a passive investor. Is that not only you get, you know, your income from this property tax-free, but if you have other real estate investments, it can also help to offset the income from other properties as well.

Seth: Gotcha. So, you would see that, you know, quote unquote, big paper loss from the cost segregation on your K one, and then you’ll be able to take that loss. And it’s not an, you know, clarify that that’s not an actual loss, it’s not money out of your pocket. That’s a paper loss that you can use to offset against the cashflow forthcoming from that particular property, as well as any other rental property or passive income that you have.

Yonah: That’s correct. And I will add one more thing, but although this is kind of parenthetical, but if you are a real estate professional, which is a status by the IRS, that they require anyone who is spending the majority of their time involved in the real estate trader business. So, if either you or your spouse fits that definition, you can now use any extra deductions from depreciation or cost segregation to offset your ordinary income as well from any other source. So that is an extra added benefit for a passive investor that if you are passive investor, but you also are a real estate professional and are involved in real estate full time, you just happen to be investing passively in other deals, you can use that extra depreciation to offset your ordinary income. So that’s probably the number one benefit. And I would, I would tell, and I tell this all the time to people who are like realtors and people who are involved in property management and those types of things where they’re involved in their own properties, guess what? Do the costume irrigation? Because now you can get more tax deductions, knock off your taxable liability.

Seth: Yeah. I mean, that could be potentially really powerful, especially for some of our listeners that are doctors or lawyers, right? So, you’re saying if you know, let’s say one of our listeners is a doctor and their significant other is qualified as a real estate professional. They’ll be able to offset these cost segregations, depreciation, as well as all those paper losses against their W2 income.

Yonah: Yeah. It’s huge. And you know, I talk to people more and more people are coming to me saying that they’re retiring because they’ve made the calculation, they see the benefits of having not to pay little to no taxes is far more than the income that they would’ve made from their W2 job that’s going to be taxed.

Seth: Right. Yeah. I mean, that’s incredibly powerful again, especially because a lot of these folks are high income earning professionals and they, you know, they’re getting taxed to death on their W2 jobs.

Yonah: A hundred percent. Yeah. So, this is a huge, huge opportunity that a lot of people don’t know about. And so, it’s you know, it’s important to learn these things and, and try to take advantage of them.

Seth: So, let’s explore a little bit further what, you know, what happens on the backend? So, you know, we’re trying to accelerate this depreciation because we’re probably only going to hold these syndication properties for 5, you know, 10 years at the most. So that’s why we’re trying to accelerate it, but what happens on the backend?

Yonah: On the back end, so you’re saying when you dispose of a property, when you sell a property, you have a tax that’s called depreciation recapture tax, which means that you are now subject to a tax, not only capital gains tax, which is you’re taxed on. If you made any money on the sale, you are also a tax on the amount of depreciation that you took. So, if you took $100,000 worth of depreciation over the course of ownership of those deductions, you now have to pay a tax at 25% tax on that amount that was taken. So just like, you know, regular income tax, it costs, you know, depreciation recapture tax is also there are ways to get around that as well. So, it’s important to note, right? I would definitely keep it in mind and put it in your business plan. However, there are many ways and strategies, at least as of now, we don’t know what’s going to be going forward with the, you know, potential tax changes of a, you know, a new administration. But as of now, there’s 1031 exchanges, which allow you to defer those capital gains also allows you to defer depreciation recapture tax upon the sale of a property and other things as well. So, we’ll see what happens, but it’s definitely something to keep your eyes out for.

Seth: So, you do have a little bit of tax on the back end there on the exit, but you know, there are ways around it and ways that you can mitigate those expenses.

Yonah: Yes, absolutely.

Seth: Gotcha. All right, man. Well, let’s switch gears a little bit and go back to LinkedIn. I mean, honestly, I’ve never seen anyone take over LinkedIn, like you have, I mean, as soon as you connect with Yonah on LinkedIn, you’re in Yonas world. I mean, you know, every post he puts out, you see it. I mean, it’s incredible how you’ve been able to utilize that platform you know, to magnify your business. And, you know, I just want to say, you know, with our listeners being doctors and lawyers and people like that, you know, maybe they don’t utilize social media, like they could, but you know, what are maybe some tips and tricks to, that they could use to, you know, bring in clients.

Yonah: It’s an incredible platform for branding okay. And for, you know, business to business, but branding more than anything else. And what I mean by branding is when people see you and as you know, not just having a profile, an updated profile, which is really, really important to have an updated profile and having, you know, not just a professional picture, but to have clearly in your bio or in about section in your tagline, that title underneath your, your name. It shows people who will click on your profile, who you are, what you do, and more importantly, how you can help them. This is huge for anyone who’s a doctor, anything what it is, people start to know. And guess what, if you go ahead and search your name in Google. And you have a LinkedIn profile, chances are, unless you have like an extremely common name, but if you put your name into Google right now, and anyone’s listening to this, you can stop, pull over the side of the road and put your name into Google and find out what comes up in the first page. Most likely is going to be, if not the first result in the first page, for sure is going to be your LinkedIn profile, which means anyone who’s going to search your name, that’s what they’re going to find. Guess what, when people want to find out about you, they’re going to click on the top result or the top results to learn more about you. And so, if your LinkedIn profile and especially even in that, on Google itself, a lot of times, it just, it doesn’t just have your name. It all will have your title, have a little bit about your bio in there as well. So, people can already, just from that first search, know about you and verify, Oh, this is the person I was thinking about, or I heard about, and now I can find more about them. So now your LinkedIn profile is a huge, huge opportunity to just brand yourself, get people to know who you are, what you do. But more importantly, I would say is the, like you mentioned, right? The involvement in using the platform as a networking place. And I do it every single day, right aside for, you know, weekends and holidays occasionally, but using it to create content and engage with other people’s content, because that gets you seen. And like you said, if you connect with me, right, send me a connection message if you’re hearing this right, that you heard this podcast and you’ll see the next time you log into LinkedIn, you will see my activity at the top of your feed guaranteed. It’s almost a 90% guaranteed and there’s a reason for that. And so, anyone by following certain principles and just being consistent, you can have that exposure as well.

Seth: Yeah. Yeah. I mean, I think there are a couple awesome takeaways there, especially, you know, focusing on the other people, you know, not necessarily always focusing on yourself. I mean, you need to humble brag a little bit, so people know what you’re about and what you do, but at the same time, the focus needs to be on the client and your avatar and whoever you’re trying to speak to. So, you know, your profile and things like that should be set up in that manner.

Yonah: Yeah, absolutely. And you know, if anybody wants to, I have a free just guideline, a one pager kind of guideline that I put on my website. Www.yonaweiss.com where you can download a free guide to just optimize your profile, to make it, you know, really just clear, clear as day that anyone who clicks on that will know who you are and what you do and how you can help them. And I think it’s really important for anyone who’s in the business world whatsoever to have that updated because LinkedIn is the number one business networking, professional networking platform in the world. And I look at it as like a 24/7 networking event. And so, you can meet people across the world in any industry, find about them, find about them. And also, you know, there’s quite a few people who are actually involved in post content. You can engage with that and you can actually get to know people through that.

Seth: Yeah. And another thing, and you mentioned it, another tip is, you know, you don’t necessarily, some people are nervous about creating content, but you know, if you’re nervous about doing that at first, you can really just interact with other people’s content. I mean, just like, and comment and message and do things like that. And that gets probably more attractive than even creating it yourself.

Yonah: Exactly, exactly. A hundred percent. And that’s, there’s so many layers to the truth of that statement that you just made, Seth that it’s so important just to, and you’re adding value to other people by engaging with their content, because the algorithms work in such a way that the more activity there is on a post, the more it’s seen and more it gets spread and seen by other people. So just by you commenting or liking other people’s posts, you actually help that person who posted a to get seen by more people.

Seth: Yeah. Yeah. For sure. So, what’s one actionable step that you could give to our listeners that they could do right now on their LinkedIn profile to make it more attractive to potential clients.

Yonah: The profile, like I said, you can go and check out that I have like a 10-step guide on my website. You are always welcome. But the one thing that’s probably the most important of the entire profile. I mean, besides for your picture. So, I’m saying too, but the most important thing is your tagline. So, what’s underneath your name. And that can be, you have about 200 characters or so to write something about what you do. A lot of people put like CEO of X company but doesn’t really tell people what you do. Like, I don’t know anything about X company. It doesn’t tell me anything. But if you tell people like someone you know, if you are a real estate investor, you’re a syndicator and you write something, your tagline like I help people invest in apartment buildings. Right. Or I help people create passive income.  That’s going to be intriguing. Like people will click on that and will want to learn more and want to read further on. So, it’s just trying to help people to, on the first, you know, first time they see you to recognize who you are, what you do.

Seth: Yeah. Again, it’s the focus on the other person and your avatar and what they need help with.

Yonah: Absolutely. Exactly.

Seth: Well, awesome man, well, let’s just jump straight into the freedom four, man. So, in an alternative universe where you weren’t involved in real estate, what would you be doing and feel free to be as creative as you’d like?

Yonah: Yeah, I’ll be really creative because it’s probably what I was really doing. You know, beforehand, which might be creative to a lot of people, but I was literally spending my entire days just immersed in ancient Jewish texts. So literally like 16 to 18 hours a day, just totally immersed in studying and praying. And I mean, that’s really my passion. That’s my love besides for real estate and my family, I could do, literally I could do that all day long every day.

Seth: Yeah. This probably leads right into the next question. You know, what’s the best thing you do to keep your mind and your body healthy?

Yonah: Joy, you know, happiness, smiling. It really brings, I truly believe the psychological effects of that just trickled down to your entire, you know, mental and physical health. So, you know, not being angry, not worrying, not having any of these kinds of negative and it’s difficult to do, but because they are emotions and, but it’s using your mind to kind of focus your energies and your emotions to direct them in what you know, you know logically and, you know to be the best for you. So, I think that’s probably the most important thing. I mean, there’s so much more, but that’s the number one thing.

Seth: Awesome, man. Love that. Love that. So where were you at five years ago? And where do you see yourself and your business five years from now?

Yonah: So, five years ago, I was just literally getting started in real estate. I mean, I got that first job with a friend of mine, just kind of apprenticing him in commercial financing, just cold calling and meeting vendors, you know, cold calling banks and lenders all across the country, trying to find different relationships through that. And you know, learned a tremendous amount. And I kind of learned, that was the beginning of everything. Big shout out over here to the founder and CEO of one of the biggest you know, mortgage companies in the country that he wrote a book. And that was the first book I ever read on real estate. It was just really like a pamphlet, called The Eastern Way. I think you can download it for free on his website. It just basically went through all the, like the glossary of everything. You know, what’s a cap rate, what’s IRR, what’s you know, tenant improvements, you know, all these different things in real estate definitions. And so that was huge for me. That’s where I was five years ago, five years from now. I’d like to, you know, have hopefully grown the portfolio to now I am starting my first deal, but hopefully, you know, five years from now, it can be up to, you know, have enough cashflow to not have to worry about doing anything else.

Seth: Yeah, for sure, man. And that’s a perfect segue to the next question, man. So how do you see, I know you’re getting started being on the sponsorship side of these bigger commercial deals, and I know you’re going to be awesome at it, man. You know, how do you see passive income kind of changing your life for the better?

Yonah: I mean, it’s a no-brainer. It just, you have to have multiple streams of income, you know, you can’t worry about having everything from one source and real estate is such a great investment vehicle. There’s so many different opportunities within that and having enough, I’ve seen enough people do it, you know, from my clients and the people that I’m around all day, every day, that it’s not so far, you know, you’re not so far off that anyone can really do it. If you just set your focus to do it and learn the right ways, make the right partnerships. So, I think it’s definitely something my goal is going to be to move down that path more actively.

Seth: Yeah. I agree a thousand percent man. That’s what changed it for me. I started feeling like I needed to be on the other side of the table.

Yonah: A hundred percent.

Seth: All right, Yona, I really appreciate you coming on today, man. Where can our listeners learn more about you or get in contact with you?

Yonah: Like I said, you find me on LinkedIn. You definitely should go and do that. The best place to find me also www.yonaweiss.com. You can check that out. You can also get a free estimate for cost segregation there on my website. And yeah, those are the two best places.

Seth: That’s awesome, man. It won’t be hard to find you on LinkedIn and Yonah has got a podcast out right now as well. It’s just dominating. So, thanks again for coming on. Really appreciate it, brother.

Yonah: Awesome. Thank you, Seth. It’s been a lot of fun.

Seth: Unreal. Yonah Weiss in the virtual flesh showing us how we cannot just earn more but keep more. to learn more about keeping more, check out our free passive investing guide at www.passiveincomeattorney.com, which is a guide to help you get started in investing in an alternative asset, such as real estate. until next time guys enjoy the journey.