Make Money, Keep Your Money, Rinse and Repeat with Omar Khan

Omar Khan is a CFA charter holder; with 10 years of investing across real estate and commodities Advised on $3.7 billion of capital financing and M&A transactions Syndicated large multi-million dollar deals across the US Advised high net-worth advisors and entrepreneurs on real estate portfolio allocations Global citizen – lived in Dubai, Toronto, Calgary, and Dallas

Episode Highlights Here:

Omar:

So the easiest dumbest thing that I could take was to do a real estate deal. Because you get so many tax write-offs, it’s a; it’s an excellent way to make money get tax write-offs, all of that.

Pierce:

So tell me about those, those capital gains tax that you had,

Omar:

It was just an old family legacy investment of ours, and the trust when you sell it, and the family is going in all their various, wherever everybody wants to cash out, take the money. It was like two generations in the making. For us, for me, at least, it was nice; I mean, at that time, it felt like a nice chunk of change. But one thing I knew for sure was that you know, it’s like, you know, every high-income earner can probably relate to this, you look at your gross, you feel kind of nice about it, then you look at your net, and you feel kind of depressed. Right? It was the same way, as I looked at the game as I Okay, that’s a nice amount of money. I mean, I’m not gonna say no, do it. Right. But then, once I paid off because we had practically no basis in the deal left, we thought, what is my share going to be? What isn’t that going to be? And it was significantly less, right? And I was like, well, I need to find some sort of solution for this. So the easiest dumbest thing that I could take was to do a real estate deal. Because you get so many tax write-offs, it’s an excellent way to make money getting tax write-offs, all of that. So that’s kind of how I started, right? And initially, the idea was Should I look at retail hospitality that offers multifamily. And just through the process of elimination, I got to multifamily it was like hospitality is very operate; it’s very cyclical. So kind of wasn’t feeling that right. Retail was is whatever you want to call it is going through a bit of a slump in terms of retail real estate, not the actual businesses on the top office was very computationally intensive, and D again, I think it was very lumpy in the sense that one tenant leaves there’s a lot of, there’s just a lot of stuff to do, right, your risk management is a bigger issue in office space. So that left multifamily because what I didn’t want to do is get into, say, a vertical, where, you know, you buy smaller properties, right? But then I’m buying really big properties, right? I mean, guys like way more volume than I do, right? But what I didn’t want to do was buy two or three houses because that wasn’t going to solve a wasn’t gonna solve problem. And thankfully, by the grace of God, we were making enough money even at the start of our careers, that cash flowing, say, an additional 100 dollars a month or buying a house and the associated all the work with it. That wasn’t a very enticing thing, at least for us.

Pierce:

Yeah, absolutely. And I mean, that makes perfect sense, right?

Omar:

Like a lot of business processes of elimination, right, as opposed to having the big idea, the big idea is, like, Be Efficient on taxes and make money. But that process of elimination was like, I don’t know, people did SATs back in their day, right? A lot of times, you don’t know the answer. You kind of triangulate that answer, right? Kind of the same thing.

Pierce:

And that makes perfect sense. And I love what you said there, you know, it’s like, you got excited about the gross and depressed about the net because it’s true. And it’s not what you make; it’s what keeps

Omar:

100% It’s what you keep, doesn’t even matter. What you make doesn’t matter.

Pierce:

And I tried to explain that, you know, and we’ve kind of coined this new phrase, you know, tax low versus cashflow, because at some point, right, like the taxes are going to eat into your profits so much it makes them, it makes the asset not worth as much.

Omar:

it’s not even that it’s so funny like, again, a lot of people in our social circle are either the same guys, like my social investment bankers, private equity guys, wife is a physician. So a lot of her friends are all doctors, right? And so these are all people making over 500 grand a year. And on average, even people that live in lower low state income tax states, right? They’re easily paying a couple of $100,000 in taxes, right? Per person, right? So there are a couple of stable doctors or financing doctors, right? They’re easily paying a couple of $100,000 in taxes. And simply what I tell them is, look, forget about making more money, forget about that, for the time being, if you were just to take the pile of taxes that you’re paying right now, and you were able to figure out, say, some sort of solution to either get optimized on it, reduce your taxes by half. So if you’re paying, say, $200,000 in taxes, you optimize it. Maybe you cut your tax bill in half, making the same amount of money, right? That’s an extra 100 grand a year. Right? That’s a lot of money, man because let’s think about it. Most people what are their significant responsibilities, kid’s education, maybe a wedding, financial security, maybe taking a family vacation, all that sort of stuff, you know, just as the usual stuff, right? That $100,000 extra per year on top of whatever you’re doing. You’re just basically you let’s put it this way if you if your kid wanted to go to a private college, and you started even 10 years before the kid has to go to college, you got an extra 100 grand a year, you can cause a lot of damage to that goal without sacrificing anything in your personal life or anything of the sort.

Pierce:

just about allocating your resources correctly, a structural university like it’s a lot of people don’t get it. I was having this conversation with my mailman. He’s got a service-based business that brings in millions and a half Half a year. He’s got zero bases. He’s got zero write-offs. I’m like PA, buy a building, buy something. Something, Do something. Stop writing $500,000 checks to the government. Like, what are you doing?