Creating And Preserving Wealth Through Short Term Rentals With J. Massey

CGT Massey | Short Term Rentals

Building your short-term rental business without needing to buy or own any property is unique. Joining Brett Swarts is J. Massey, a full-time real estate investor, entrepreneur, popular podcast host, author, speaker, coach, and an all-around problem solver. He started Cashflow Diary, which is an amazing podcast, and the training park program for real estate investors. Having owned hundreds of units and raised tens of millions of dollars, Jay has a wealth of knowledge to share. Don’t miss this episode for the opportunity to learn more about how you can create and preserve more wealth through short-term rentals.

Watch the episode here:

Listen to the podcast here:

Creating And Preserving Wealth Through Short Term Rentals With J. Massey

This is the show where we believe most higher net worth individuals and those who help them struggle with clarifying their capital gains tax deferral options. Not having a clear plan is the enemy and using proven tax referral strategies such as the Deferred Sales Trust is the best way to grow your wealth. In each episode, I’m joined by some of the best financial independence and passive income wealth advisors in the world where they share their ideas, deal stories and inspiration so together, we can make complex tax referral strategies simple and passive income plans achievable. I’m excited about our guest.

Many short-term rental real estate owners or investors struggle with finding a training program with a proven long-term track record. Having the tactical knowledge on how to build their short-term rental business without needing to buy or own any property, which is unique so they can thrive financially and build their wealth. Our guest is a full-time real estate investor, entrepreneur, popular podcast host, author, speaker, coach and is an all-around problem solver. He has a wealth of knowledge to share. He has own hundreds of units and raised tens of millions of dollars. He started Cashflow Diary, which is not only an amazing podcast but also a training program for real estate investors. Please welcome to the show, J. Massey. Thank you for being here.

Thanks for making it possible and taking the time.

Can you tell our readers a little bit about your background and your focus?

What it comes down to is that real estate for me was a solution to a problem. A while ago, when my wife was pregnant, she has a condition known as hyperemesis. She couldn’t eat or drink. I had a punctured lung and I was born with asthma. I could not walk and talk simultaneously without fainting. At the time, I was a financial planner. The challenge was I could not go to work to earn income and neither could she. We needed a way to develop income without working. A friend said, “You should become a real estate investor.” It was very ironic at the time because we had a credit score of 398. We were squatting in a bank-owned property. We were making decisions like, “Do we buy electricity or do we pay for food?”

Long story short, I told them, “You’d have to teach me everything you know. I have to be able to do it with literally no money and no credit.” I started out as a wholesaler. We did about 200 of those transactions. I got introduced to taxes and started keeping the property. That’s how he got up to around a little more than 400 doors, as well as, owning mortgages, cell phone towers, commercial real estate, single-family houses and most notably apartment buildings. Through all of that, people started asking, “How did you learn to do all this?” I started teaching them. From there, one of my students said, “You should consider the idea of this short-term rental.” I was like, “What do you mean?” After looking at the numbers, it makes all kinds of sense. Years ago, we’ve switched to making sure that individuals understand and know about short-term rentals because I’ve never seen anything that allows a new person with no real estate experience to get started as fast as this does.

I heard a wise podcast host once ask about superpowers. Before your success as an educator, who was J. Massey growing up? What superpower were you given? In particular, we want to know how that shapes how you help others?

Most of us have not given ourselves enough opportunity or enough times to fail so that we can get it right. Click To Tweet

I was a military kid in Fort Bragg, North Carolina. There are lots of Army and Air Force in my background. I grew up technically in what was then West Germany. Anything from the 1980s inside of the USA, I cannot relate to because I was not physically here. Growing up overseas is a different culture. It gives one the ability to adapt to all kinds of situations because growing up military, every six months to three years, you’re in a new school, a new country sometimes, new languages and new everything, which is a great interesting little way to take on the world.

What I’ve discovered about myself is I’m autistic and I have ADHD. Those are my superpowers. They manifest themselves because my friends make fun of the fact that anytime I want to take on something new, it doesn’t take me long to get too far into it and be able to understand it in such a way that I get to feel like I’ve been doing it a long time. Most importantly, I’m able to connect the dots for other people to bring them along with me. Through real estate, financing and economics and all of those things that can appear to be complicated, I’ve learned that it’s a gift for me. It’s important to find out what you’re good at, but most importantly, it’s also been a gift to be able to share that information with others and watch them transform as well.

How did you transfer the idea of weakness into a strength? As the world sees it and I used to imagine growing up at a certain point, it was a weakness and it was a struggle for you. Maybe share the moment that it switched over to, “This is my superpower. This is something where I can help and inspire others and use it to focus on my strengths and add a lot of value.” Was there a moment or a season or an event that changed the way that you viewed some of those challenges you faced?

At first, it was something that I could or would only do or only benefited myself or my family. That has a certain degree of satisfaction. What happened for me is I found myself at 37, 38 and functionally retired with nothing to do and feeling alone because there was no one there to play with. A gentleman came to me and said, “Would you be willing to teach me everything you know?” You’ve got to understand that by this moment, I was getting fed up with people. I was like, “If I told them that it costs money, they’ll leave me alone and they won’t ask anymore.” This gentleman asked and I answered with what I thought was a ridiculous number at the time, that there’s no way on earth that he would pay this. If he did, it would be worth it, but there’s no way it’s going to happen. At least I didn’t have to feel like a jerk and say, “No,” and I’d be free.

Long story short, he said yes. Through that transformation process, we were both going through a transformation. Over the nine-month contract that I did with him, he was able to buy a sixteen-unit building. He’s since gone on and bought many other buildings. He learned how to use and raise capital and use none of his own money and credit. Watching that happen for someone else lit me up. It’s like, “There is a purpose to being able to consume all of this information beyond using it for myself. I can share it with people and they’ll do it. This is great.” That was clearly one of many moments, but definitely a moment for me because I wasn’t in a good spot. I don’t think it’s good to have a whole bunch of time on your hands at a very young age and know how to protect your own little kingdom. It didn’t work out too well for me in that regard.

We are born to work and serve others. Use those gifts to help more people. It is truly more blessed to give than receive. I can’t help but think about a little bit of our background. Some of you don’t know that I was on J. Massey’s show, Cashflow Diary. You can find that at CashflowDiary.com. He has an amazing podcast and I would highly encourage you. It is probably my favorite that I’ve ever been on the show, it is one of the best ones. That being said, during that show, we mentioned how you play basketball. I played basketball growing up. You played in college in the pros. I can’t help but think of the guy who sets the screens. Who does the box-outs? Who pass-first mentality, making sure that he’s playing his role in a way that helps the success of others. He thrives on doing all the dirty work, but all the things that need to be done for someone else to shine. I can’t help but think that that’s what you did on that first contract that you had. Any correlations there with your personal game and the way you play basketball?

Short Term Rentals: Entrepreneurs can be some of the most selfless individuals. In order for them to do well, they have to enable others to do better as well.

 

I judge my success by rebounds, blocks, shots, steals and overcharges. I do stuff that coaches want someone to do, but that doesn’t necessarily make ESPN highlights. That is satisfying to me to enable someone else to go out there and to be great. It’s fun. That is why I do what I do. We can keep going doing more transactions. I figured that out a long time ago. That’s great and all, but what difference does that make? What example does that set for my children? That’s what I think about a lot. We have things and stuff and that’s wonderful, but what about other people? Is this important? Is that an example that we’re setting? As entrepreneurs, we can be some of the most selfless individuals. In order for us to do well, we have to enable others with our product and our service to do better as well.

If we stay focused on that mission in leveraging our product and service, which in my world is short-term rentals, then as people have those great experiences, they’ll tell more people, “We do better as a result.” Because entrepreneurs are connected to many different people in order to deliver their product or service, we’re in a unique position to change our communities. You start receiving offers from people who keep wanting to do business with you over and over again to the point where you don’t have to go looking for opportunities anywhere near as much as you did when you first started out.

Here is a saying by Zig Ziglar, “You help enough people get what they want, you can have everything you want.” It’s true. When you give and serve, especially if you’re using your strengths, it can’t help but attract people and help people because not everyone was born with the same strengths. We need each other as a community and as a way to complement one another. Will you give an example of how your service is? This is more of the tactical. Walk us through how your particular service or training, short-term rentals, help people create and preserve more wealth. I’m fascinated about without owning any real estate, although you mentioned the goal is to own the real estate and to have long-term ownership. When you started, you didn’t have that. You had to start out with it, perhaps. Walk us through the tactical part of what you do and helping people create and preserve more wealth.

To be clear from a timeline standpoint, when we started short-term rentals, we had a large portfolio. One of the things that people don’t tell you about from the stage that you don’t hear too commonly is that owning real estate long-term is a great way to build wealth, but a horrible way to build an income. If you’re trying to build an income, those are something that happens after the debt service has been retired. You’ve got to imagine at 450 units, that service wasn’t going away for a little while. It was still fine. It was a sustainable life, but there was always something to repair, always something going on that was to deal with and we were looking and seeking more active income at that particular time.

When it comes to short-term rentals, when you understand the use cases, it gets clear how we, as short-term rental entrepreneurs, have the ability to be able to serve and help other people. Most people will say, “We do Airbnb or vacation rentals.” The problem with saying that is it limits the scope and the possibilities of an impact that you can have. For example, children’s hospitals are always in need of additional housing nearby. Don’t get me wrong, I’m not excited that children get sick or have these extended procedures, but I am excited to know that if I happen to locate one of my short-term rental units in nearby a children’s hospital. Mom, dad, grandma, grandpa can all come and still be comfortable as opposed to trying to make a hotel or multiple hotel rooms fit at a significantly higher price.

I can take great pride in knowing that on a dollar per square foot level, they’ve got better value. I can take great pride in knowing that they have a kitchen and that’s able to control the diet that may be necessary. There may be a special diet required because of the procedure that is going on. Being able to provide that space at a price that is comparable to what they would have paid and definitely less than two hotel rooms, that feels great. When you teach other people to do that same thing and then you watch them go through it and how they respond and how they feel, it’s like, “Are you telling me that I get to earn money and my customers appreciate what I do and it feels good and it’s fun?” That’s what I’m saying but at the same time, don’t be shortsighted because that’s what we call phase 1, 2 and 3. Phase three is where you get into owning the real estate.

Walk us through that. What’s the best process to own your first deal after you’ve earned some cash on the short-term place or the business?

Step into your greatness. Give yourself the opportunity to become that superhero that's inside. Click To Tweet

Let me put it this way. I’ll give some basic numbers for the people so that they can have an understanding. For the sake of this argument, we’re going to assume two things. We can prove them, but let’s assume that each bedroom that you’re operating as a short-term rental across the year as an average will net you $800 per month. If it’s a studio or a one-bedroom, that’s $800 per month. If it’s a two-bedroom, I’m saying it’s $1,600. If it’s a three, it’s $2,400. Notice I didn’t say house or condo or any of those things because those are not relevant. What’s relevant is the number of bedrooms. You take the number of bedrooms right there. The other thing that we’re going to say is that in this example, let’s pretend that you’re in a situation in which you have a $250,000 of liquid investible cash. Maybe you’re looking and you’re going to go buy a house.

I know for some of you, you’re like, “What kind of house am I buying for $250,000?” I live in California. That’s what you’ve got to do. There are two different things. Remember that there is some relative nature to that. Let’s pretend for the sake of this conversation, it’s $250,000 that you’ve saved up. I don’t know how long it’s taking you to save it, but it’s what you’ve saved. On average, that $250,000 is going to be able to get you anywhere from ten to as many as possibly seventeen short-term rentals. I’m going to keep it simple and say that they’re all one-bedroom. When you do that and you do the math, you realize that in eighteen months or less, you end up with your $250,000 back.

This is the magic that I got excited about because what happens is that money comes back. You’re in a situation eighteen months from now, where you have your $250,000 and you have a business that is fully functional and operating smoothly. You have both of those things, whereas before you had one big pile of cash. You’ve turned that pile of cash into a stream of income. What this enables is peace and calm, specifically at the closing table. When you saved up that first $250,000, I don’t know how many hours, blood, sweat and tears it represents, but it’s significant for most people. When it comes time to invest it, we’re human. This is our precious little $250,000 and we’ve got to take care of it. We’ve got to watch it. We’ve got to make sure it does right. Suddenly, we are making large financial commitments called the mortgage, yet we haven’t gained the necessary experience. You may have the knowledge, but you don’t yet have the experience behind tenant screening or property management in general.

Some of you will say, “I’ll hire a property manager.” Those of you who have the experience know that you can’t just hire any property manager. Not all property managers are created equal and you have to know how to supervise. It is the same as the property manager. You can’t just hire all the time. There’s an experiential component that is sorely lacking when we first go out into the real estate world. I’m saying this from the position of having helped many people. Thousands become real estate investors first and witness this problem. No matter how much training, it’s different when your money is on the line. When you’re the one staring the tenant in the face and trying to do the eviction or trying to do whatever else is going on.

Here’s what ends up happening by building the short-term rental business first, phase one and moving into phase two, which is multiple short-term rentals. You produce a business that keeps laying what I call down-payment eggs. It’s like the golden goose that keeps laying down payment eggs. What you do is now because you know, “My worst-case scenario is if I wait eighteen months, I’ll have another $250,000.” I promise you, you’ll negotiate differently. You’ll be way more relaxed at the closing table. All of those things are true.

What ends happening is you end up building a stronger, bigger and better real estate portfolio than you originally intended or ever could have with any other strategy. You have this thing that is giving you the experience at screening at tenant management and understanding how properties break, specifically plumbing and how that affects your tenants. You were able to get all of that earn along the way. Our most successful students are those that have jobs already. They’re able to do it on a part-time basis, grow it into something and then safely transition because they know what they’re doing and they have the income to back them up. It’s been an amazing thing to watch happen.

CGT Massey | Short Term Rentals

Short Term Rentals: Just because something is big, it doesn’t mean it can’t be broken down into smaller parts and made simpler.

 

That’s a phenomenal breakdown of how that works, especially with getting down to the granular with each bedroom down payment and save it up. It becomes a goose that lays the golden down payment egg of another $250,000, which can turn into another $250,000 over eighteen months. Maybe it’s a myth or it’s true, but what type of management are for short-term rentals? Is it that much harder than owning a regular rental? Is there a myth out there that, “This is going to be daunting, overwhelming, so much that you have to overcome or maybe it’s not there?” Talk about the difference between a long-term management, if there is such a thing versus, “I’m actively managing this business every day or every week.” Walk us through that.

This is the difference that we were able to make in the industry. This is the thing that has created the success that our students have seen. With our real estate portfolio, I’ve always lived in Southern California. Our properties were in Colorado, Georgia, Tennessee, Michigan, everywhere, but California. We ran and built it that way. We rehabbed unit, multifamily, apartment buildings that way. Many of the properties never sold, not even once. I want to drive that home. What that taught me how to build teams and systems even at a distance that could function. That’s what I learned and I brought that to the idea of short-term rentals. Everything that you’ve heard about how daunting and all this other stuff, that’s all true.

Here’s the difference. Just because it’s big, it doesn’t mean it can’t be broken down into smaller parts and made simpler. Remember what I said about the superpower? Applying my brain to that and then leveraging technology the way it is makes it so that I can run this and our students can run this. When they fully implement all the parts of our systems, none of our students work more than one hour per day managing their portfolio, regardless of size. They’ve built all of the pieces that allow them to do exactly that. Think about your 2019’s income, whatever that was, the whole year. You know how long it took and how much work that was or 2019’s revenue for those of you who are business owners. Imagine the revenue coming in one month. That’s number one. Imagine that taking you one hour per day. That’s literally how the system works.

When you hear those horror stories about cleaning, claims and guests being special with unique requests, animals, security and all of that stuff, that’s all real. We’ve developed systems to make that easy for anyone to be able to handle it because the technology is there. Here’s the big thing, many people have tried to get all of the technology pieces and go, “I got the same thing.” You can’t just hand a high dollar camera to anybody and expect to compete with a professional photographer in terms of the quality of the images that are created.

The camera knows what it’s doing and it is an expert tool, but you need an expert who knows how to use it expertly. That’s been our “secret sauce” is helping everyone learn how to use all of the tools that are available, which tools you should use, which one’s not and why. Most importantly, how to use them expertly so that you’re able to deliver a quality service at a price that people can afford and be able to make it as seamless as humanly possible. At the end of the day, what results is a way to systemize and communicate all of the teams such that it only takes you an hour a day. All of that stuff is there and I got stories.

I have two themes to touch on what you said. The first one is when the student is ready, the teacher will appear. It’s the idea that until you’re humble or coachable and have the margin in your life or made the sacrifices to save up that $250,000 or to say, “I’m going to commit to the cost of the training and the hours that it takes to get it going.” The one hour thereafter to manage and maintain this doesn’t matter. The students got to be ready for the teacher meeting, you and what you do to appear. The second thought I had was this is kryptonite. We talked about superpowers. What’s the entrepreneur or business owner’s kryptonite? I can’t think about is this. Maybe you can share your thoughts on this.

The entrepreneur thinks they can do all things better than everyone else, given if they have a little bit of time and energy. They don’t need to necessarily delegate. They know they need to but they’re like, “If I did it myself. I can do it better.” That’s part of their superpower that gives them the belief and the confidence to explore new worlds and create new things. It’s also their kryptonite when they don’t actually delegate and they don’t get the training. They think they can buy the Canon camera from Costco and take professional pictures. To be honest, I struggle with it every day of this idea of giving up control and being coachable and humble enough to get coaching and training and succeed in something in an efficient way.

Create opportunities for other people to also succeed; you don't succeed otherwise. Click To Tweet

I will be transparent and clear here. This business of being in short-term rentals will break you of that. You will not get to your first location without being broken. That it won’t happen because it requires so many different skillsets that are so far apart. When it comes to finding the piece of real estate, understanding our customer, looking at the economics of the situation and breaking down the numbers, that’s my wheelhouse all day long. Let me negotiate the real estate, the lease in the contracts all day long. Ask me what color does the place needs to be? What goes in the kitchen? What is on top of the bed? What are the components that make a perfectly styled bed? I had no clue. It’s not my skillset. I have a clue now, but I didn’t know that stuff. It would take too long to learn the concepts of color theory, design and understanding how the colors have an influence on a person’s experience inside your piece of real estate and being able to execute that so that you get better reviews. I wish I was making this stuff up, but it’s crazy, what’s true about all of those things is that I have no clue about.

You say you have the experience and you understand that, that’s great. Here’s what I need you to do. I need you to order all this stuff and assemble it physically yourself. That’s also not my skillset. Don’t forget that you’ve got to hang TVs on the wall. You’ve got to get all of the electrical and tech components to work together, your Wi-Fi networks and configuring all of that and making sure that works. That’s not my skillset. My point is it takes too many skillsets to come together, which is why it only works if you build a system and team. Otherwise, what ends up happening is there are many entrepreneurs, they’re typically the ones that have one, maybe two locations in what they’re doing. They’re often complaining about how they have to do their own laundry and how long it takes them to fold the sheets and buying all of this soap and lotion. What am I going to do?

I can’t imagine having five more of these. When I hear this, I cry inside because they say, “I got mine done.” “How many do you have?” They’ll tell me, “I’ve got 10 to 15.” “How long does it take you to bring a unit online?” “When we do that, it’s about three weeks.” I look at them and I was like, “You did pay expenses for three weeks before you go live?” Around that time, they’re looking at me like, “What do you mean? Don’t you do that?” I’m like, “No, it’s 72 hours.” You give me a blank space, 72 hours from right now, not only will that place be fully furnished and properly designed, we’ll have people arriving because we need to be that efficient. This business is like none other. That’s what’s been one of the other intangible benefits that I did not know.

From the beginning, my wife and I had to work together. For those of you who have always been the real estate charger and your spouse has been like, “That’s your thing.” I’ve never seen any other strategy where the significant other or the other person in the relationship goes, “I can do that part. Let me do that part. Is this something you want to do? You do that part and I’ll do that.” I’ve never seen that happen. It happens almost naturally because they want to participate. They wanted to help for a long time, but they couldn’t see themselves doing the parts that you’re excited about. My wife couldn’t see herself doing those parts, but when it came down to helping the designers pick colors and decorate, “What goes in a kitchen?” “I had no idea how much stuff goes in a kitchen.” When it came to that stuff, she was all over it and made it work. Without her, it wouldn’t have worked because I don’t know what I don’t know about what goes into the kitchen. You don’t want to find out in your review afterward. You have to be on point from the beginning.

I can’t help but think of the intangible benefits such as a marriage growing closer and the business thriving together and being able to work together with your significant other in ways that you didn’t think it was going to happen. It’s natural. If you think about it, like you’re saying, the Children’s Hospital or someone going on a vacation or somebody’s traveling for the first time, they want to feel hospitality when they walk in there. They want to feel welcomed. They want to feel at home as quickly as possible. Hard-driving entrepreneurs, at least for me, the empathy and the listening is not my strength. I have to work on that. My wife, it is her strength, hospitality, empathy and emotionally connecting with people in a way that makes them feel right at home.

We did our own Airbnb with our own house when we go on vacation. It took me a little while to talk her into it because she was nervous about our own place and this and that. Gradually, she did it. She made the place beautiful and welcoming with gift baskets. We don’t drink coffee but then all of a sudden she’s like, “We’ve got to get coffee because people want coffee.” I wouldn’t have thought that stuff. I’m the numbers guy. I’m the negotiations guy. I was like, “How much can we get? We can eat two more times on this vacation.” I can relate to that. It’s been a connecting way for us to work together.

CGT Massey | Short Term Rentals

Short Term Rentals: Real estate is the best place to put that taxable income.

 

That’s the part that I did not know going in. I discovered it and I’ve watched our students do this too. There are all kinds of reasons that people want to be in real estate and be involved. What we’ve needed is a way in because the hurdle to get in can feel so large and looming. What this has done is that it lowered the bar and the cost of entry. You don’t have to save up the $250,000. You don’t have to own the house. You lease the location. You need control over the location. You don’t need the entire ownership of the location. Always remember that your job is to continue to expand it so that you can get to the point where you can start buying properties because the bad side is, it produces a whole lot of taxable income. You’ve got to do something with that taxable income. We suggest and we think that real estate is the best place to put it, but you don’t do whatever you want to do. Maybe there’s a cause that you want to fund. Maybe there’s a nonprofit you’ve always wanted to start. It doesn’t matter.

What matters is that you’re out there providing clean, safe, affordable housing to people who need it in a way that they couldn’t get it otherwise. You enable travel to your area for a myriad of reasons and you make it more affordable. There are people who will decide, “Because we can stay at your location, we can finally visit New York, California, Florida or Texas. We can finally go see grandma. We can finally go to Thailand. We can finally go to wherever.” I say that because we have students in different countries. We’ve been able to help people literally all across the globe make this work for them. That’s what’s exciting about it is literally creating entrepreneurs and watching that transformation. Once they are different, their community is different. They’re reaching people I could never reach or get in front of and that’s amazing.

It is life-changing and generational-changing. You can build a passive or active real estate wealth, which you can teach your kids and then you can give and save more. Hands down, in my belief, commercial real estate and investment real estate is the best risk-adjusted rate of return that you can have. Also, one of the most rewarding because you are helping people in their daily lives with travel or housing or any of those things. I want to shift a little bit to the capital gains tax portion because some of our readers are tuning in and I can’t help but think about what J. Massey does for those taxes? You’re getting the offset for the depreciation. When you’re owning a real estate, the income that’s coming in is going to offset. Maybe you can touch on that. Second, when you do sell, what kind of capital gains tax deferral strategies are you implementing? What’s your take on selling real estate in general?

I try to never sell. Let me define what I mean when I say the word, sell. That means any equity that’s created to where that is liquidated and used for something, it is often reinvested in some way, shape or form. In my world when it comes to selling, I always make sure that I have enough offsetting, credits and depreciation in order to deal with whatever that gain would be because 1031 doesn’t make sense to me. The concept in and of itself seems counterintuitive. The reason you’re selling is that the market is high. You’re forced to buy before you want to because of the time window and the market is probably still high. I don’t want to do that. I don’t want to be forced into that situation. What else can I do? That’s where I’ll take on projects that are larger or create more offsetting losses by doing larger rehabs of a larger apartment building or something of that nature.

That’s also why I was excited to hear about what you do because I’m like, “This is way better.” Anytime you take control of the situation or you give that to someone else, that becomes something that I get a little nervous, especially with time windows. The timing of when to buy and when to sell have no government statute that can tell me when that is. I don’t want to be forced into a bad deal or a deal I don’t want because I’m trying to avoid a tax. Let’s find another way to deal with that tax, which gives me back my time. That’s my answer because everything else in my opinion leads to bad judgment.

For the readers who are learning for the first time, a little bit of color on what J is talking about here is the 1031 exchange versus the deferred sales trust. At Capital Gains Tax Solutions, one of our passions is to provide clear tax referral strategies, whether it’s the 1031 Delaware Statutory Trusts, Deferred Sales Trust and Charitable Remainder. Our focus is the deferred sales trust, but we want to clarify the pros and cons of each. In 1031, too often you’re forced with what’s called 45 days to identify and 180 days to close. That time constraint creates this pressure situation where you often overpay for properties. You sell high and you buy higher 180 days later. Most markets in general, when you’re selling and most 1031 exchanges for the clients we’ve worked in the past, they’re selling one product in one location and one area and buying another product in the same location and area. Maybe a little bit bigger, which also has to do with equal or greater value and equal or greater debt.

When you combine all of those ingredients and you go, “Where are we at? Where are we at the end of 2019?” That might be one of the hottest real estate markets in the history that we know of. People are challenged with low inventory, high prices and that 1031 too often, created an environment where you’re making a poor decision to save the tax. If you can get another property and do maybe some accelerate depreciation or some major rehab, you can use those expenses to offset the gain as what J’s referring to. You can choose the deferred sales trust and move any excess or remainder into the deferred sales trust and slowly receive those funds to offset the gains. Do you have any thoughts on that?

Give yourself the freedom to fail. Understand that you don't have to win every day. Click To Tweet

One thing I want to say so that everybody knows, the only reason I haven’t used the deferred sales trust is that I didn’t know it existed. There would’ve been times that I would have because that would’ve made sense at the time and whatnot. I didn’t know that was a tool that was even available. I didn’t have a podcast that I was able to have access to or at ever heard of. In fact, you’re still one of the only persons that I’ve ever talked to that even knows what it is. For those of you reading, tell somebody because there are individuals who are likely in this situation basing a decision and maybe what you’re thinking is, “I wish I had real estate.” That’s good, but start thinking, “How can I help them? How can I serve them? How can I be a value to that person?” I promise you, if you help somebody avoid some tax issues, they won’t forget you.

After interviewing countless investors, entrepreneurs and helping people build real estate portfolios on your podcasts, what is the single best practice to implement to be successful in real estate investing and building wealth?

There are two that are close together. Here’s the good thing. They’re all skills, which means they can be learned. I don’t care who or where you are, you can learn them. The first is simply fail fast, fail forward, fail frequently. As a child, you learned how to fail and keep going. If you have the physical ability to walk or ever had the physical ability to walk, you learned how to fail and keep moving forward. You did not accept the fact and you didn’t care that your legs weren’t fully ready yet. You kept trying. You walk and you take it for granted, but the valuable lesson along the way was I learned to walk even though I fail and bruised my knee or hit my elbow. You don’t even remember how many times it was. There are many skills like that. You don’t remember how many times you failed at it before you remembered that now, you’re already good at it, you can tie your shoe, you know how to type, you know how to drive and you can cook. Understanding the real estate business is the same way it will help you to go out there and get stuff done. When I first started, I did a lot of small-dollar transactions in a short period of time.

Nowadays, I have a lot of experience. Some have said that I’ve got many decades worth because comparatively speaking, I bought and sold and transacted more real estate than most, even full-time realtors. It’s simply because I fell fast, forward and frequently. It’s important. Those of you who are artists and athletes, musicians, you know this. You practice, drill and rehearse every day and you don’t get every play. You hit the wrong notes all the time, but yet, you get back in the ring. You get back on the court. You pick up that violin one more time and you play the scales. This is what you do because you know, on the other end, on performance day, recital day or during the playoffs, that’s when all of that practice shows up to expect more from yourself. Without having done that in business, that doesn’t make any sense to me. Most of us have not given ourselves enough opportunity, enough times to fail so that we can get it right.

Once you’ve gotten past that, it’s never going to be perfect ever. Let’s pretend that you’re hungry and you want to eat. You say to yourself, “I’m going to the grocery store. I’ll pick up some food and that’s it.” You can say, “I’m not going to get into the car. I’m not going to call Uber. I’m not going to go anywhere. I’m not going to leave my house until all the lights from my house to the grocery store are green.” Would you ever get out of the house and go to eat? You’d starve. In fact, you already practice this all the time. You’ve made the decision, “This is my destination.” When you encounter that construction worker who’s working in the middle of the street and you’re like, “Why are they repairing the street?” Do you turn around and go home and go, “I can’t make it to the grocery store?” When you hit the red light, do you say, “A red light, grocery stores don’t work?” No, you wait for the red light to turn green. You go around the construction in the detour because you’ve made the decision to get to the destination. If we could apply that to who we are as humans, who we are as business people, entrepreneurs, we’d experienced something completely different for ourselves.

If we were surrounded by people who were applying that on a daily basis, we’d have the continual encouragement and a reminder that this is who we are. We wouldn’t have to wait for the bottoms of our life to fall out for us to step into the greatness that we were born to be. That’s what happened to me. You got to understand that I wanted to eat. I didn’t know how we were going to feed me. I didn’t know where we were going to stay. I don’t know if you’ve ever looked your kids in the eye or had them ask you, “What’s for dinner?” and you’re legitimately not having an answer, not because you couldn’t figure out what choice to make, but because you didn’t have the capacity to make a choice and give them an answer. It’s something completely different. When we step into that greatness that I believe is inside every one of us, something happens that you’re not expecting. Give yourself an opportunity to become that superhero that’s inside.

That’s worth more than the value of a mission to read this blog. I want to touch on two themes and to finish out with our final question. I can’t help but think of a quote by Jim Rohn. He says, “How long should you give your average baby a time to walk?” The answer is until he walks. It’s going to happen. We’re going to have that resolve to help him walk and we’re going to give him that time to walk. Failing fast, failing forward and failing frequently and giving ourselves the grace to say, “I’m going to have a resolve until this works. I’m going to fail fast. I’m going to fail forward. I’m going to fail frequently until I figured this out. Hopefully, the ‘why’ is big enough.” You touched on your kids, your family, and having some margin and the ability to provide for them. What is your why? What’s going to drive you to help more people and serve more others?

CGT Massey | Short Term Rentals

Short Term Rentals: Understanding the real estate business will help you to go out there and get stuff done.

 

Let’s put it like this. As the why gets big, the how gets easy. Focusing on that why and giving ourselves some grace and going out and embracing the greatness that we have inside of us. The last part is surrounding ourselves with people who are doing the same. The other saying is, “The average of the next five books and conferences, over the next years that we spend time and energy with,” and environment does affect everything. Surround yourself with people who are doing and practicing these habits. How do you stay centered in your values and also encouraged to charge forward to reach your goals? What are some habits or some disciplines that you’ve implemented?

Prayer and reading the Bible is the foundation. The world comes at all of us. It does and it’s not designed necessarily to do much. Oftentimes, the people that we respect or look up to or that we have access to is when we’re going through our transformation, aren’t necessarily the ones who have been ordained to get us through that transformation. It doesn’t mean that they don’t mean well for you. It means that they can sometimes feel like an obstacle. Understanding that the gifts that I’ve been given are many and that they weren’t all for me. They were meant to be shared to build other people out. My responsibility is to take a dollar and turn it into at least two, to be able to make sure that if I can do something about someone who needs something, to do it.

I want to show you this because it’s important. You’re looking at one of the locations. When I said short-term rentals, most people did not think what they’re looking at. They probably had a different idea in mind, but I got to tell you what this represents. Personally, I couldn’t pull off a design. That’s not something I could do. I don’t know how to make that happen. That’s not me. If you look inside of this, what I get excited about is the number of jobs this represents. When our customer sees this, they don’t care that a 1,000 people may have been in this location before. When they walked through the door, this is what they expect it to look like. I have to hire maintenance people. I have to hire people who can clean. I had to hire the original designer to make this. All of those items had to be purchased and procured, which in and of itself represents an entire chain of entrepreneurs who decided to step out and be great and do something.

We pull all of that together and because of that, we get to deliver quality service. Assuming we’ve marketed it and price it right and all those other things, which are all skillsets that we’ve had to learn and get good at to make happen. In order for us to do well, I get excited about the amount of money that we paid to vendors because I know those are jobs. Those are choices. There’s the freedom to some people and because we decided on a big why, there’s enough room in there for everybody to participate. That’s what makes me move forward. I spend way more time educating, teaching, training and investing in our community than I do my own short-term rental business. Mostly because while it’s easy for me to operate it and it doesn’t take that much time. It’s way more meaningful and that’s the thing. Seeing the Facebook posts over and over again, seeing them duplicate and be able to create something that looks similar and has the same five-star reviews, that fires me up all over again every day. Knowing that somebody is reading this, I’m talking to you and you know who you are.

I’m here for that person. I don’t even know your name and it doesn’t matter. I know that you’re reading because I was too. That’s exactly what gets me going is knowing that we’ve created an opportunity. All of us, as entrepreneurs, create opportunities for other people to also succeed. In fact, we don’t succeed otherwise. All of that is biblical principles. All of that is how we live. The challenge becomes, “Now that we’ve done this, what’s the next step? How do we keep pushing to the next bigger thing?” I don’t know what that looks like all the time, but I’m going to keep my ear to the ground and listen. That’s what’s great. I’m looking forward to discovering and seeing and possibly doing more of the speaking and all that stuff on stages and whatnot.

All of those things are there, but it’s one step at a time. Being consistent in winning the day and understanding that you don’t have to win every day. Give yourself the freedom to fail. These are things that are necessary especially for some of us. The world doesn’t say that this is what I’m supposed to be doing. You have to discard what the world is telling you. You know what’s inside. Go become that thing that you see and it’s possible. When you surround yourself with more of the right people, it also becomes more probable. That’s what I get excited about. Those are the habits that I have to keep practicing because it can go away. We can drift from the habits that got us to where we go.

That is as encouraging as it comes in. One of your superpowers is encouragement. For those readers who learned that, read that again and learn how J is speaking to all of us to be inspired to go out and be all that you were created to be. I want to thank J for being on the show. I remind everybody that you can find him at CashflowDiary.com. He also has an amazing podcast where he’s given us inspiration and encouragement about every single day and bringing on guests who are doing the same. You can find all of that on his website or search that on any of the major podcast providers.

I want to also thank our readers again for tuning in to another episode of the show. We believe that most high net worth individuals and those who help them struggle with clarifying their capital gains tax deferral options, hopefully, you’ve gained some wisdom. Not only with the inspiration that J provided, but also tactically with depreciation, offsetting a capital gains tax and income of building long-term wealth and using the Deferred Sales Trust as one of those as options to consider. As always, not having a clear plan is the enemy and using proven tax referral strategies is the best way to grow your wealth. Until next time, go make it a great day.

Important Links:

About J. Massey

CGT Massey | Short Term RentalsJ. Massey is a full-time Real Estate Investor, Entrepreneur, Popular Podcast Host,Author, Speaker, Coach & All-Around Problem Solver.

Prior to entering the sharing economy, J. taught real estate strategies based on his years of experience. He owned hundreds of units, raised tens of millions of dollars, and even owned cell phone towers.

He was all but “retired” at the age of 38, when one of his students asked what he knew about short-term rentals – the answer at the time was, “not very much.” He started looking into the model and was astounded at the opportunities it presented. J. now runs a 34 unit short-term rental business, and they create more profit faster than any other strategy he has seen before.

That means that you too will now have a business that creates more profits to invest into whatever is most important to you—your family, your business, your future, and your community.

The bottom line is that because short-term rental businesses provides a financial safety net, you can take more risks, develop advanced business skills, and do more of what you’re passionate about.

Love the show? Subscribe, rate, review, and share!
Join the Capital Gains Tax Solutions Community today:

By Brett

Related Articles

Real Estate Investing With Agostino Pintus

Real Estate Investing With Agostino Pintus

“Persistence is what's going to get you through the tough times. Because life isn't always easy.” Agostino Pintus is a multifamily investor, syndicator entrepreneur and he has more than 15 years of experience in real estate. He currently oversees strategic...

read more
Leveling Up Your Business With Violette De Ayala

Leveling Up Your Business With Violette De Ayala

We can all be coaches and guides and help the next person upright and, it helps you to break through a lot of those false beliefs, all those false things that hold us back. Joining Brett Swarts is Violette de Ayala, founder and CEO of FemCity®. As a seasoned...

read more

0 Comments

Learn Our 9.Step Framework

"How To Sell Your Real Estate Or Business Or Any Highly Appreciated Assets Smarter"

Check your email for the Deferred Sales Trust Guide