YFP REI 117: Navigating Liability: Growing Real Estate with Confidence

Attorney Brian Boyd shares his passion for educating real estate investors on tax strategies and wealth creation through real estate.

Episode Summary

On this episode of the YFP Real Estate Investing Podcast, hosts Nate Hedrick and David Bright welcome special guest, attorney Brian Boyd.

Brian, a passionate advocate for educating real estate investors on tax strategies and wealth creation through property investments, offers valuable insights on getting started, scaling up, and creating a lasting legacy. His expertise extends to conducting seminars and speaking engagements, making him a valuable resource for those looking to enhance their understanding of real estate and taxes.

This insightful discussion on real estate investing, featuring personal stories, expert advice, and practical strategies will help seasoned investors and those just getting started on their real estate investment journey to navigate the complex world of property investments and taxation.

About Today’s Guest

Brian T. Boyd is a skilled business litigation attorney who works hard to address your legal problems in Franklin and throughout Middle Tennessee. At the Law Office of Brian T. Boyd, PLLC, clients receive large law firm experience and capability, plus the attentive personal service of a small law firm. Clients, big and small, get the same superior service for every business formation, commercial litigation, tax, or estate planning need. Brian will listen carefully as you express your wishes and goals. He responds with realistic assessments and uses his legal knowledge to chart the correct course of action. He is as invested in you as you are in him. Whether Brian acts as general counsel for your company or addresses an individual entrepreneur’s urgent legal matter, you receive sound recommendations and maximum availability to his expertise throughout the legal process.

Key Points from the Episode

• Real estate investing with a pharmacist-turned-attorney. [0:06]
• Real estate investing and legal advice. [1:16]
• Lawyer’s journey from law school to tax law practice. [2:41]
• Passive income strategies and real estate investing. [6:34]
• Real estate investing and tax strategies. [13:09]
• Tax benefits of real estate investing for working professionals. [17:35]
• Real estate tax strategies and professional status. [23:58]
• Using LLCs for liability protection in real estate investing. [29:05]
• Real estate investing, liability protection, and property management. [34:23]
• Insurance and liability protection for real estate investors. [40:18]
• Real estate resources, including podcasts and books. [45:00]
• Real estate investing and tax strategies. [49:12]
• Real estate investing with industry experts. [55:54]

Episode Highlights

“I’ve really found this passion for it and talking to people and educating them on like, Look, I get it. We went to school, we took the student loans, we’ve done everything right, and it’s killing us. So how can we get our time back? And the answer is real estate.” – Brian Boyd

“Section 469 specifically says that real estate, by default, is passive. What does that mean in layman’s terms? Well, if you’re not a lawyer or not a CPA, and you’re just listening today, and you’re listening for the first time, the IRS says income is either active, or it’s passive. And if it’s passive, you can’t take the losses associated with passive income to offset active income.”- Brian Boyd 

“Because once you get all your facts in front of a judge, and you’re able to say, Your Honor, I did everything right, you know, I followed the law, I gave them every opportunity. I didn’t have to do this, but I did here it is, you know, that’s going to do everything that you need.”- Brian Boyd 

“Being a penny wise and pound foolish by not putting the right things in place by not paying the money up front, it could bite you.”- Brian Boyd 

“I can’t be in two places at once. So having a team allows me to work on my business and not in my business.” – Brian Boyd 

“Or like, once you really have tangible, day to day touching of your real estate, you know, even cutting the grass. You know, that’s important because it makes it real to you. But it also gets you more invested in it, and you stop treating it like a stock and you start treating it like an asset that you need to care for.” – Brian Boyd

Links Mentioned in Today’s Episode

• YFP REI 113: Short Term Rental Tax Loophole
• YFP REI 115: What is REPS? 
• YFP 109: How Two Pharmacists Pay No Income Tax Through Real Estate 
• YFP REI 96: Managing Risk and Taxes through a Real Estate Team with Thomas Castelli
• Bigger Pockets 
• Tax Smart REI Podcast
• The Road to Serfdom
• Replace Your Income by Brian Boyd
• Brian Boyd on Instagram
• Brian Boyd on Facebook
• Subscribe to the YFP Newsletter
• YFP Disclaimer
• Your Financial Pharmacist
• YFP Real Estate Investing Facebook Group
• Nate Hedrick on Instagram
• David Bright on Instagram
• YFP Real Estate Investing Website
• David Bright on LinkedIn
• Nate Hedrick on LinkedIn

Episode Transcript

Nate Hedrick  00:06

Welcome to the YFP Real Estate Investing Podcast. I’m Nate Hedrick.

David Bright  00:09

And I’m David Bright. We’re both pharmacists and real estate investors that believe that real estate investing does not have to distract from a meaningful career in pharmacy.

Nate Hedrick  00:18

Each episode, we share stories that educate and inspire pharmacists to leverage real estate investing as a part of your financial plan. 

Nate Hedrick  00:28

Hey, David, how’s it going?

David Bright  00:29

Hey, good, thanks. How you doing, man?

Nate Hedrick  00:31

Good. We are excited. We’ve kicked around the idea of having an attorney on the podcast for years. And we finally, we finally got one to come on the show, which is great. So we had a really nice talk. It was awesome. 

David Bright  00:44

And he had a really compelling story. It wasn’t just an attorney that knows things about real estate, but he dove into it personally. And so knowing the legal, the tax side of things, jumping into real estate, right in the midst of the 2008 real estate crash. So he’s kind of earned some bumps and bruises along the way, and so has a lot of experience of the good and the bad of real estate, how to how to protect yourself within real estate and how to strategize among all of that. 

Nate Hedrick  01:15

Brian Boyd is who joined us this evening. Brian is, like I said, a lawyer and attorney. He has his own law firm. He’s also an avid real estate investor. He’ll tell you all about his portfolio here. And as you listen to the episode, it actually is a friend of a past podcast guest Matt Coughlin pharmacist and is his wife is an  MSL. So he’s in the industry. He knows pharmacists, lives and breathes this stuff every single day. So it was great to be able to go through some of it with him, someone that’s an actual expert.

David Bright  01:48

Yeah, he got into some questions that we get all the time, too, right. Like you and I’m having this question like, Do I need an LLC to invest in real estate? And so I really liked that he was able to answer some of those things and give his viewpoint and his answer wasn’t exactly what I was expecting, either. I was expecting that, as a lawyer doing this for himself, he would have this crazy complex something going on. But no, it made sense. He was able to convey it in a way that I think made sense and could make it pretty practical for for folks trying to get started. 

Nate Hedrick  02:20

I agree. And I think my favorite part was that he didn’t say talk to your lawyer. He was just like, here’s the answer. I am the lawyer. Like it was great to have that firsthand. So hope you guys enjoy the episode. Brian is an absolute wealth of information. So stick with him. And enjoy. 

Nate Hedrick  02:38

Hey, Brian, welcome to the show.

Brian Boyd  02:39

Hey, thanks for having me. Guys. I appreciate you being here. David, good to see you. And thanks for having me on the show. I’m excited talk.

Nate Hedrick  02:47

Yeah, this is great. We, we love the opportunity to get a lawyer in the hot seat. It’s not not often we get to do that. So pretty, pretty exciting to sit down and chat learn more about what you’ve been up to. And I know there’s actually a lot of similarities between law school, pharmacy school, obviously, you know, the clinical, what we’re learning is different. But the amount of practice required is very similar. So why don’t you jump in, tell us a little bit about your journey to becoming a lawyer what your practice looks like today, just to give us a little bit that professional background? 

Brian Boyd  03:15

Yeah, that’s a great question. And my practice has evolved over time. I went to law school late. And when I say late, I went when I was 25. So not terribly late. But I had already graduated college, I had gone to business school, I was out in the real world working. And my roommates were lawyers. My best friend was a lawyer. And I just decided, you know what, if they can do it, I know I can do it. And so I went to law school, and that was in 2001. And 9/11 happened. So geez, I remember I was sitting in civil procedure, reading for property law, which was afterwards and it was a harder class for me so. And then the teacher came in, turned off the TV because we’re all just staring at the TV, what is going on. And I was on the East Coast and I was actually in Delaware. And I just remember all these pagers -this is back when pagers were things started going off- and these were military personnel from Dover Air Force Base. They stood up left and we never saw them again. And it just It was wild. So you know, that year of law school, I decided, you know what, I don’t want to go through that. So I moved back south went to finish law school in Alabama at Stanford University. And then my second year of law school, which is the year I moved down there, I decided, you know, I don’t want to be in a courtroom. I don’t like talking to people. I don’t like arguing with people. And I decided to take a very different tact and that everybody just gonna glaze over in a second. I liked tax law and took every single tax course they had, which was eight courses. And then I started applying to tax school. So for lawyers, we have to go back to school. So for doctors, or foreign Ds, for example, this is the equivalent of a fellowship. So I went and did another graduate degree at Georgetown. And then I was recruited out of my class by one of my professors to go work at Ernst and Young, in Washington, DC, and doing tax. So it was it was a fascinating journey for me. But eventually, I moved back to Tennessee, joined a law firm here, and then the great meltdown of 2008 hit. And you know what, when you’re a transactional tax attorney, there’s not a lot for you to do when the market just fell apart. So I lost my job and went out on my own and scared to death. But I’m still standing and I have 22 rental properties. Have a lovely wife, she’s in your industry. And, yeah, so along the way, I started picking up these random clients, and they were developers and contractors in and around Nashville, Tennessee, which is where I live, and who knew that that would turn into what it has become for me today. So a little bit about that. I had this one client, and he had this interesting business plan, he would build 10. condos. All what you would consider a brownstone. They’re all side by side, he would sell seven and keep three. And so I started talking to him about that one day. I’m like, why are you selling the seven and keeping the three he’s like, because the seven I sell will pay off the property. Then I can have it reappraised and I can pull the income out. And that was my first introduction into a cash out refi. And then I’m like, well, okay, well, now you had dead on it. You didn’t have debt, they were free and clear. Why are you putting debt back on. And it’s like, because I’m going to take that money and I’m going to do it again. And so he would get them leased up. And this is very common in real estate, he would get them leased up, their rent payments would pay the note. And he would just take the money and do it again. And again. And again. Now the last time I saw that client, and he hasn’t needed my help in a long time, was about five years ago. And at that point, he was making a quarter million dollars a month. Yeah, remember he was he was a developer like that’s, that’s what he did. So yeah. And I think if I remember correctly, and I may not, his father had something like 5000 units under management. And this is what he grew up doing. This is what he knew about I was like, this is, this is beautiful. And so it clicked with me. I took my my tax knowledge, and I overlaid it. I’m like, Well, if he did this, he started tweaking this, he started tweaking that. That’s that’s how I came up with a lot of the strategies I use today. Now the strategies change as the tax law changes, because it’s not like a molecule that you know, that molecule and this molecule, and this is what they do. Congress changes our tax laws all the time. So I have to keep up with it. But that’s what happens.

So to that end, I was out walking with a client. When I say walking, we were actually walking fields hunting for turkeys. And we were talking about how can we make money while we sleep? Passive income. That’s basically what we’re talking about. This is in 2015. And, sorry, I’ve got text coming in about a property I have. And I was like, Well, tell me about your business a little bit more because I was his lawyer, but I didn’t really get into the details of his business. He owned a coin laundry. Okay, but he owned two. I was like, what’s, what’s the money like in that? And like, how much time do you have to spend at it? Because as a lawyer, I do exactly what I’m doing right now. I sit in front of a computer and I work and I was like, I don’t want to do that. I want to be out here walking fields for turkeys. And I can’t do that if I’m having to make money. And so we started talking about it. Then he started telling me about his depreciation on the equipment. I was like, Are you serious? It’s that good. And so my gears start going and I’m like, well if I did that, if I did this, and I put it together like that, like, I would actually not owe money every year, I would get money back. And so that led to me cashing out my Simplified Employee Pension. It’s called a SEP. I took the hit. It’s a 10 and 10 penalty, 10% interest, 10% tax. And I went all in and built a coin laundry a year later, I sold it. I made 4x on it. And I did four things with that money, paid off a student loan. I bought two new shotguns because I liked it. I bought my wife a new wedding ring, because when we got married, it was 2011, I was still getting over the 2008 hangover. And I bought her what it could have done. And I bought my first short term rental. And that led to two other purchases that year of long term rentals. And then I sold the short term rental a year later made $75,000 on it, took that, put it with my equity, took some money out of the bank. And I bought 13 single family homes in Chattanooga, Tennessee. That has been a book unto itself. But I will tell you this, we bought these houses for about $40,000 apiece. What do you think a $40,000 house looks like? It’s terrible. So we have really like blood, sweat and tears into these houses. And last year or two years ago, we put about $600,000 into. And so we took our monthly rent from $10,000 a month gross to $21,000 a month gross. And the way we did it was we got rid of all the riffraff, the people that weren’t paying rent, that were people you don’t want to associate with. We’ve made these houses, very nice. New siding. And when I say siding, it’s not vinyl siding, it is LP SmartSide. It’s the stuff that’s on the side of my house outside. So we went all in – new roofs, new gutters, new windows, new doors, new kitchens, new bathrooms, all of it. We just dumped it into that and we raise the rents. And we’re now starting to get that that benefit. But what it also has done for us has allowed us to go back and do a cost seg study on this with that new added basis improvement. So our basis has raised $600,000. So you go in to do the new basis, do the cost seg and suddenly you’ve got this great depreciation number that is helping offset your active income. So that’s been our journey. In fact, the texts that are coming in right now we have a package for sale in Gatlinburg, Tennessee, and I haven’t really been reading it. But I saw my wife just texted Whoa. So it must be good news. So when I get off here, I’m sure I’ve got to look at contracts and see where we are. But yeah, that was the story. That’s that’s how it goes. But the funny thing is, my clients, they would come meet with me like the one we were talking about, or others and they’re like, how are you doing what you do? And I’m like, well, it’s all real estate. And I kept having the same conversations over and over and over again. And I actually started writing out an FAQ- Frequently Asked Questions, and just say, hey, if you’re interested in this, take a look at this. Get back to me with any questions, and then we’ll talk about it. Because I was literally I literally had a speech made, like, like, just sit down, let me just tell it to you. And they would come back,  how do I do this? And how do that?  Like that’s what we can work on. But I need you to understand the basics first. That led to me writing a book. Because my speech turned into chapters, those chapters turned into, just like a law review article or something, you just start sketching it out. It’s like LLCs, what do I need to know? Here’s how you do it. And here’s what you do. And this is what it needs to do. So that turned into a book. So my outline when I went to my, my writer, she said what’s your outline? And I’m like, oh, here it is. And I emailed over. She’s like, this is 55 pages. And I’m like, well, yeah, I mean, I was I’ve been working on it. And you know, she’s like, you don’t have far to go. So that turned into the book and the book turned into podcasts, the podcasts turn into speaking engagements and speaking engagements turned into bringing clients on that only want to know about this and me helping them along the way and and, you know, two weeks ago, I was speaking to 200 real estate agents, explaining cost segregation, bonus depreciation, regular depreciation, how to hold an asset, how to find an asset, real estate professional status and in the short term rental loophole. So it just kind of evolved in now, you know, in April, I think, April 28, we’re doing another seminar here in Nashville. And it’s going to be a four hour seminar where I go over the lifecycle of real estate professional status, short term rentals. So how to get into it, you know how to qualify, then it’s going to be, let me tell you about taxes and how they work with real estate. So I’ll go over bonus depreciation, which is 168k. I’ll talk about straight line depreciation under 179. I’ll talk about business deductions under Section 162, business interest deductions under Section 163. Then I’ll talk about cost segregation. And then I’ll talk about 1031s, 721, up REITs Delaware statutory trusts, you know, so it’s the whole life cycle of being a real estate investor. And that is, I’ve really found this passion for it and talking to people and educating them on like, Look, I get it. We went to school, we took the student loans, we’ve done everything right, and it’s killing us. So how can we get our time back? And the answer is real estate. There is no other investment that I know of, with maybe the exception of life insurance, but you have to work to fund the life insurance. Real estate appreciates. It provides tax benefits, it kicks out cash, and its legacy creating wealth. And what I mean by that is, you know, lawyers and CPAs, we joke we say, defer, defer, defer die. And that’s how your children get rich, right? So you defer through 1031, you defer through 1031, you defer 1031. And the whole way, you’re scaling up, and then when you die, they get a step up in basis. And so they don’t owe any taxes, which is wonderful. And you’ve created this wealth. But that is really, just in a nutshell, what I do. And I teach people how to do it. For example, I had a breakfast meeting this morning, with a buddy of mine, who got his MBA at Harvard. And he’s, and he’s getting ready to move. And he’s like, I just, we just moved into this house. We’ve been there two months, they have been in this brand new house in Nashville, Tennessee, for two months, and they are moving back to California. And I was talking to him, I was like, why? He’s like, well, I got a job offer out there like. Okay. I’m like, and you’re selling the brand new house? Aren’t you gonna lose your shirt? He’s like, well, we will get our money back that we put into it. I’m like, why sell it? Why? And he’s like, because what are we gonna do with it? I’m like, well, you’re gonna rent it out. Like, make it a rental. It’s like, Well, we already have our old house here that we were renting out. I’m like, keep them both. Why aren’t you cost-segging these? Why aren’t you depreciating them? He’s like, I don’t know what you’re talking about. I’m like, that’s fair. Let’s do some quick math. I pulled out my phone. And I’m like, well, what do you buy for? And let’s take out the cost and land. I started just doing rough numbers for him. And I showed him this number. And he’s like, are you kidding? That’s my deduction? Like, yep, that’s what I said. Well I said not exactly, I don’t know what the actual numbers are. But this is a ballpark of what you can expect. And he’s like, we have to, we have to have a meeting. Like, seriously, pull out your phone, let’s calendar this. And this, like, we had a conversation on Monday, and we met this morning. And so he’s like, this means I’m not going to sell the house. I’m going to do exactly what you’re telling me to do. Because I didn’t realize the tax benefits associated with it. I’m like, yeah, he’s like, that changes everything. And this guy works in finance, right? So he’s a hedge fund guy. He’s like, I had no idea like, I used to work in real estate, but we’re doing 1031s and all these structures. I’m like, yeah, but there’s no reason for you to know this. You didn’t go to tax school. You don’t do this. You’re not involved in real estate everyday. You don’t listen to podcasts about tax. I mean, that’s me. You know, you do what you do, and this is what I do. And he’s like, that blows my mind. I’m like, great. I hope it helps is like, well, you gotta show me what to do next. And so, new client, but, you know, it really changes people’s outlook on life when you show them. I can make you more money. Your personal wealth will increase and your tax liability will go down. And it’s mind boggling to people. Because it’s axiomatic to what it really is right? You’re making more money, but you owe less in taxes. How is that possible? Now, I did have to explain the difference to him about section 469, which I think is where a lot of our listeners tonight are going to be interested. Section 469 are the passive activity rules. And section 469 specifically says that real estate by default, is passive. What does that mean in layman’s terms? Well, if you’re not a lawyer or not a CPA, and you’re just listening today, and you’re listening for the first time, the IRS says income is either active, or it’s passive. And if it’s passive, you can’t take the losses associated with passive income to offset active income.

Brian Boyd  21:08

So people are stuck, because those losses get locked up until you have a sale, okay, or a distribution or a liquidation event. They’re locked over here, and they’re stuck in this bucket. And it doesn’t matter how much depreciation you’re getting, it’s not helping you, which is the biggest problem. So there are ways for working professionals, W2s to take this passive bucket and bring it over to make it active. And then you get all the benefits. Now, if you’re a working professional, my wife and I are working professionals, she’s a W2, I’m a W2 through my own company. So I am self employed. And that is an interesting little tidbit. I want the listeners to understand I’m self-employed. So if I wasn’t taxed as an S corp, I would just take a draw. And at the end of the year I’d owe taxes or I’d pay quarterly taxes. That’s different than getting a W2. So how do I take the passive losses that are locked up over here and help a W2, make them active? Well, there is a treasury regulation called Treasury reg. 1.469-1TE32A. That is what tax practitioners and people in real estate call the short term rental loophole. And that loophole says it’s not actually a loophole. It’s a regulation. But we call it the loophole. It basically says if you spend 100 hours on a short term rental, and you are self managing, and you spend 100 hours a year, and that 100 hours a year is more than anybody else you’re working with to manage that property that takes this short term property and makes it active for a W2 person. Now, there’s a lot more I can get into there. There’s case law on this. There’s revenue rulings on this, there’s more in the regulations about it. But I’m not here to bore your listeners to death. I encourage your listeners to go talk to your CPA, talk to your own lawyers. But this is something for you to talk to them about. Because if you go and buy a short term rental and you do this activity, by managing that property, those losses suddenly become active. And those active losses will go on your schedule C and your schedule C will offset your W2 income. So yeah, it’s how do you this will work. 

David Bright  23:59

We had just in the last few episodes, we did have Amanda Hahn and Matt McFarland, CPAs, that walked us through the short term rental loophole. And we had a story of a couple pharmacists that offset their entire W2 federal tax through that strategy. We’ve talked about that. We’ve also talked about which, I think you started to mention the real estate professional status, which is another one that that can allow for a lot of that. And I think that that just like you’re saying, that is a beautiful way to harness the tax benefits. I feel like when a lot of real estate investors watch these house flipping shows on TV, you can see that you buy a house for a little, you fix it up, you sell it for a lot, you can make money. I don’t think a lot of people inherently see the tax side of that, or the liability side of that. And I think that that scares a lot of people because there’s this assumption that you sell it, for you sell it for a lot more than you paid for it. You’re going to owe a bunch of taxes and there’s no way around that or if you have all this rental income you’re going to pay a bunch of taxes. There’s no way around that. It sounds like one of the things that you’re saying is, if you engage with a professional that knows what they’re doing, there’s strategy that can be applied very intentionally to make sure that those taxes go away or are deferred. And it doesn’t have to be a tax nightmare if you have the right person on your team.

Brian Boyd  25:19

No, absolutely. And to your point about these rehabs and fix and flips, I don’t want anybody listening to us today to get the idea that that’s going to make you a real estate professional. Real estate professional status is different than working in the real estate trades, okay? It’s very different. Real estate professional status, we call it REPS, is it’s a way to engage in investing. And that is a key component here that you must be investing in real estate. Because if you fix and flip, let’s talk about it’s in the name, you buy the house, you fix the house, you sell the house. Well, all that typically happens in a very short timeframe, right? People are trying to buy these, you know, they’ll go in, they’ll make a lowball offer, or they’ll just pay over because they know they can add value to it, and then they can sell it. Because the carrying costs along the way are chewing them up. That income made from that fix and flip is going to be considered ordinary income. And that becomes problematic. Because ordinary income is just like W2 income, it’s not taxed at a beneficial rate. Like if you sell your portfolio after holding it for five years, you get capital gains treatment. You also get depreciation recapture. But you know, there’s capital gains stream into it and capital gains probably runs around 20%. I’m just using ballpark numbers tonight. But the point remains, if you sell a fix and flip, that’s going to be taxed at ordinary income, which means take all the fix and flips you did in the year. And if you hit those certain levels, it could be as much as 39% in a year. Well, that’s a big bite to pay Uncle Sam. So I want your listeners to understand fixing and flipping. That’s not what we’re talking about. We’re talking about real estate professional status as a way to offset your your W2 job. Now it’s very difficult for people to make real estate professional status. If you have a W2. And here’s why. The IRS says under Section 469, that you have to spend 750 hours materially participating in real estate. Well, that means you have to be answering the maintenance calls, you have to be talking to the bankers, you have to be collecting the rent, you have to be going to court to evict people if they’re not paying their rent. And so real estate professional status typically works with long term rentals. That’s why short term rental loophole is over here. And real estate professional status is over here. Because the two are very different. The time requirements are different, the material participation is different. And the way it really works is something else because even if you hit your 750 hours in real estate, the IRS is gonna say well, did you work more at your W2 than you did in real estate? And if so, you don’t get real estate professional status. Because the IRS assumes or presumes that your job requires at least 1800 hours a year as a W2. And so you would have to work 18101 hours in real estate to achieve real estate professional status. Quite frankly, if you’re married, have kids or a dog like I’ve got down here, it’s not possible. I don’t have time. Like I would literally be working 18 hours a day. And it’s just not possible. That’s why for your listeners, especially pharmacists, doctors, people trying to supplement income need to look at the short term rental loophole, that’s where they can create value to an appreciating asset and their own financial well being through tax offsets.

Nate Hedrick  29:35

So let’s say I’m listening and I’m like okay, short term rental loophole, you’ve convinced me, Brian, I’m in like let’s do this. The natural question that David and I hear all the time then is like well what about my liability? I’m a high income earner, high net worth individual, I could be sued, like someone could come after me. Do I need an LLC? I don’t know how to create one. Nevermind This is too hard. Forget about it, right. Like that’s generally how that conversation goes. So it’s So how do you help people navigate that part of it, that the liability the, you know, we have LLCs. It’s not that big of a deal. But I know some people perceive that as a big problem. What does that look like for you? 

Brian Boyd  30:11

Yeah, so for me, my wife and I, we’ve got 22 properties. And every single property we have is in one of our LLCs. Do I have 22 LLCs? No, I don’t. Not at all. I don’t need 22 LLCs. But what I did do for us is I layered my LLCs. So it is layer, it’s a couple of layers of LLCs is providing that protection. I’m trying to isolate the liability through layers of LLC protection, because quite frankly, we we work in this all the time, and I’m a lawyer, I could get sued. My wife’s a professional, she could get sued. You know, we’ve, we’ve built a lot we have a lot, we have a young boy, we don’t want to jeopardize that, you know, we’re trying to get to that next level where I’m standing in a trout stream fly fishing, and she’s drinking a Mai Tai watching me do so. But the point remains is there’s a way to do it. And I’ve worked with ultra high net worth individuals. And, you know, people like you and me that are you know, we’re still working stiffs, and that the application of the structure is about the same for everybody. Now, I will tell you that if a pharmacist came to me and said, hey, I want to buy a short term rental, this is what I’m looking to do. How can you help me protect myself, I would say let’s do this. And I would set up a holding company up top that would wholly owned the LLC down below. The LLC down below would hold the asset and all the money would flow up to the top. And let’s just put together a scenario: husband and wife, you know, both working professionals, they have a partnership. So we’ll make the LLC, a multi member LLC, it’s taxed as a partnership, it’ll file a 1065 at the end of the year, the K1s both go to their their schedule C. And it holds this short term rental. Well, if they ever got into long term rentals, I would open up another LLC wholly owned, and I put it over here. It’s still wholly owned. So now they have short term long term. And that way they can kind of manage the portfolio and it just makes bookkeeping easier too because you need to know what the portfolios are doing, are they performing? And that’s what I would do. Now a lot of people talk about Delaware being the great place to go open an LLC. Nope, won’t touch it. I go to Wyoming. I love Wyoming. And here’s why. Wyoming has complete anonymity, which means you can go to Wyoming, you can get a registered agent, and your name doesn’t go on anything. And you have amazing protections. A lot of people love Delaware, because that’s what we’ve been raised to love. But Wyoming is actually on the cutting edge of LLC law. That sounds weird, doesn’t it, but they were the first ones to create the LLC. So they are actually well ahead of everybody else. And we’re all following them. So they also have this thing, it’s called a charging order protection. And a charging order is when you get sued, and there’s a judgment against you, the judge will give like the winner a charging order and say, Okay, we’ll go get your money from them. Wyoming basically says, No, we’re not going to make this client like distribute out funds if it’s in their LLC. You can’t do that, we won’t recognize that. And so Wyoming has these amazing protections. So I tend to open up holding companies in Wyoming, and then I’ll use your state LLC to hold your state or wherever your LLC your properties are, I will then open up an LLC there. And it’s wholly owned by the Wyoming LLC, because a single member LLC is called a disregarded entity and it flows up to the parent company. So even though their state LLCs. It’s still owned by this Wyoming LLC over here, which provides all these lovely protections. And it’s a no income tax state. So that’s also beneficial. So that’s how I tend to encourage people to think like, hey, let’s think long term, let’s think strategy. We’re playing chess, not checkers here. You know, what is your goal? And I have people that say, Hey, look, I just want to I want to hold real estate for about five years, and I want to sell out and move to the Caribbean like great, we can do that. Let’s figure that out. What does that look like for you? And so that was your plan. I would come up with an idea for you and we would sit down and we map it out and like, here’s your plan. You’re gonna buy one this year, one next year, one the following year. And so you have three. And as you start doing Cost Segregation studies, and bonus depreciation on these, we’re going to offset your income. And at the end, we’re either going to do a 1031, a 721, or DST, or we can just do 1031s into bigger assets, or assets that don’t require so much attention. For example, self storage. I love self storage: no tenants, no utilities. You basically have to have a really good fence and a good security system. And the way self storage is going right now, all you really need to do is use technology, technology can really streamline the efficiencies within real estate management. So for example, instead of using actual padlocks, you can now use electric locks that are connected to your phone, and your tenant, your, your renter that’s renting that unit, you know, if their payment doesn’t go through every month, it locks them out. And they have to pay to get it back open, and they get a new code, and so on and so forth. It’s really pretty cool what they’re doing in self storage. But that’s kind of how I would talk to somebody along those lines about liability protections, long term planning, you know, what is your goal? How do you want to do it. So for me and my wife, we want to get out of the short terms that we have. And we want to move into self storage. That’s why I know so much about it right now because I’ve been reading all that. But quite frankly, it’s it’s scalable, it’s really hands off. And think about it, what is a self storage building? It’s a corrugated steel building with a garage door and maybe a light, right? That’s what it is. And if you have enough land, you can scale it not terribly expensive. And as long as you can keep up with market prices, you’re good. And it just keeps clicking along. Because if Americans are anything, we are buyers and consumers, everything we don’t need, and we throw it into a self storage unit. So that’s my thought on that.

David Bright  37:14

I think a lot about there’s probably less risk from liability with different asset classes, as you compare, like self storage to maybe short term to long term rentals to maybe different commercial spaces. I’ve also heard a lot of advice. And this is where I’m going to throw it at you with your attorney hat on. I’ve heard a lot of advice of think about those asset classes, think about insurance, think about some of these other variables as a way to prevent problems from happening where you’d ever need to leverage those LLC shields. So particularly from that angle, are there things that you would suggest that real estate investors do to keep themselves out of trouble so that lawsuits don’t happen in the first place? And LLCs? Not Not that you would go without an LLC necessarily, but that you wouldn’t be dependent on that as your final shield of defense?

Brian Boyd  38:05

Yes, actually, I think that’s a great question. And I think it drives at the heart of the relationship between landlord and tenant, because the tenants are going to be the one that sue, right? I’m not typically going to serve a tenant. But what you need to do is get a really good property management software. And you don’t get on the phone, you don’t pick up the phone to talk to the tenant, you don’t do that at all. You want everything in writing, you want to be able to and this is just me talking about, you know, when you go to court, what does it look like? Well, you can’t really say, well, he said this to me know, what you want to be able to do is to be able to print off that that communication and show it to the judge. That way, you can also print off their payments, you can print off their maintenance logs, you can print off everything else, and you have an entire file to just give to the judge, like here your Honor, here is all is. And I speak from experience on this. We have always had property managers, property management software. And the few times it’s gotten adversarial in court with a tenant, for whatever reason, in fact, one tenant said, I didn’t sign that lease. And I pulled up the lease. And I’m like, Your Honor, here it is. And I handed it to her. And she looked over at this tenant, like that’s your signature. And the tenet’s like no it’s not he forged it. Guys, I can’t forge it. We use DocuSign. I can’t forge it. So and the judge was  savvy to that but because I was able to print everything off, print off all the communications, print where we told them something, hey, you need to do this by this date. And then this is where we are. A good property management software will go a long way to prevent you from even having to use the LLC shield. Because once you get all your facts in front of a judge, and you’re able to say, Your Honor, I did everything right, you know, I followed the law, I gave them every opportunity. I didn’t have to do this, but I did here it is, you know, that’s going to do everything that you need. And it won’t even bring into play your liability protection, because you won’t have liability at that point. But in the event, you do have a liability issue, here’s what I tell people, you want to get a general liability policy for your LLC. You want to make sure your properties are insured with homeowners or multifamily or whatever else. And then on top of it, you want to get a commercial umbrella policy. I’m a big proponent of insurance, not only for the property and casualty world, but for whole life and universal life. I love those products as an investment and as a infinite banking system. But if you do that, your layers of liability will go a long way to protect you. God forbid you ever end up in front of a court and you have to like explain why you didn’t do this or why you didn’t do that. That really goes a long way to help. And not only that, if you do get sued, you just call your insurance guy or girl and say, Hey, I’m getting sued, okay, since the lawsuit, you send it over, an insurance defense attorney will step in. And you know, you’re not coming out of pocket for that, because I promise you paying a lawyer is not fun. People don’t enjoy lawyers. And quite frankly, we’ve probably have a reputation we deserve. But I’m not that kind of lawyer, I’m trying to help you. So point being that. Being a penny wise and pound foolish by not putting the right things in place by not paying the money up front, it could bite you. So just go ahead and get the insurance, you know, State Farm, Nationwide, Liberty, whoever you use, I don’t know. But I would do it. We have all of our properties insured, we have a general umbrella policy, and then we have this general liability policy as well. So, it’s important.

Nate Hedrick  42:19

We appreciate that, Brian, it’s nice to get insight from someone that like lives and breathes this stuff, right. It’s not like I don’t know this, on this podcast one time like this and this guy said it. Like no, you actually are doing this day in and day out from a legal standpoint. So it’s great to get that info from from the source. 

Brian Boyd  42:35

You’ve got to do it. You’ve got to do it. 

Nate Hedrick  42:38

I want to make sure we have time for our final infusion questions. These are three questions we try to ask every guest on the show. So a bit of rapid fire here for you, Brian, I’ll just dive right in what’s one tangible strategy that helps you to work on your business rather than simply in your business?

Brian Boyd  42:59

Yeah, that’s a great question, having a team. And here’s what I mean by that. I can do a lot. I’m a lawyer. I’m a property owner. I’m a landlord. I can do a lot of everything. But you know what I can’t do?  I can’t fix a plumber, I can’t fix a plumbing issue. I can’t fix an electrical issue, I’ll probably get electrocuted. So we have a team around us at all time. We have a banker. We have an insurance agent, you know, I can handle the legal. But we have an accountant who’s also our bookkeeper. That’s important. And we have a handyman. And every location we are we have all of that. Now, that is so important. Because just managing real estate in and of itself, it’s not terribly difficult. Like once you get into it, you’ve done it once or twice, or you’ve done it for a year you’re good. You’re comfortable, you have a single family home, you have a tenant, not a problem, the Hvac goes out you call the Hvac guy and they come out fix it. But when you start scaling, that’s where it becomes problematic. You know, we’ve got three empty houses right now. And for various reasons. One couple decided they wanted to buy their own house and so they bought a house. And so now we’re turning that property. Another guy, he wanted to take a job somewhere else. So we let him out of his lease. And now that property is empty. So now we have two. And then we had another tenant whose lease ended up in Knoxville, and he moved out and we’re trying to put somebody in that unit. So three properties were open right now and we’ve got teams in every place because every time somebody moves out you’ve got to go turn it. So handyman in Chattanooga go do these houses. Handyman in Knoxville go do that house. I can’t be in two places at once. So having a team allows me to work on my business and not in my business. 

David Bright  45:02

Second question is what’s one resource that’s been most helpful to you in your real estate journey? Whether that’s a book, a podcast, a person, author, a website, what really got you going?

Brian Boyd  45:12

Okay, there’s two answers to that. The the podcast that got me going is Bigger Pockets. Because when we got into real estate, I took a Madisonian approach to understanding everything I could about that. And James Madison had this philosophy of how he would learn something, he would read everything on the topic. And that would inform how he would treat that topic. So I read everything I could on all these forums, I engaged with people. And that was even when we had the short term rental and gallery that we sold a year later, I was just trying to learn as much as possible. This is a new industry, I need to learn, I need to learn. And BiggerPockets has this wonderful forum that you can go in and you can pick your topic and you just talk to people and it’s great. So that got me started.

But there is this one podcast, I listened to religiously every Tuesday. And it’s the real estate and it’s the REI CPA, CPA podcast. It’s these guys out of North Carolina that talk tax, and they talk tax about real estate. And I love it. And I know what does that say about me, there’s probably therapy and my future that I love tax so much. But the point remains is I always pick something up, even if I know it, and I know it cold, like the short term loophole, I know it cold, I have read it, I have studied it, I have done everything you can about it. But every time it comes on, I don’t turn it off. I just listen to it. Because I’m always trying to find that one little nugget or that one little nuance that I didn’t pick up the last time. And quite frankly, I will listen to podcasts over and over again. And it’s gotten to the point where I will listen to a podcast and I’m like, I liked it. Let me listen to it again. And I’ll just start taking notes on it. That’s cool. And you know, that’s one of the ways that I tried to really be on top of things because quite frankly, kind of like you guys in the pharmacy world, I have to follow this evolving law. That last year was different than it is this year, like bonus depreciation is 60% this year, last year was 80%. You know, but there’s a bill that just past Ways and Means Committee that’s going up to the Senate that may bring 100% bonus depreciation back. Now I do know that there’s a child tax credit issue with it, and they’re fighting over it. But that’s the kind of stuff I’m following.

So that helps now the one book that I’ve read and it’s not gonna be Rich Dad, Poor Dad. It’s the Road to Serfdom. And the Road to Serfdom. I read it in law school. It’s not a it’s not a long book. It is just these basic economic principles. And you can apply it to anything. And that book is hands down the most important book I’ve ever read in my life. Because it just allows you to think with clarity about a topic. And it’s a very short read. And, you know, I don’t even know if it’s in print anymore. I think about mine at the time on Amazon, but that was in 2001 right? So they weren’t the juggernaut they are today they were selling books back then. Yeah, so that’s those are the three resources that really kind of informed the way I think about things.

Nate Hedrick  48:50

I love that and definite shout out to the Tech Smart REI podcast. We had Thomas Castelli, one of the hosts for that show back on episode 96. Love those guys, they’re they’re awesome. I’m totally with you on that show being a it’s a good it’s a good nerd out. But also like they make it engaging, which it’s hard to make tax engaging. They do a good job. 

Brian Boyd  49:07

It’s hard to make it really engaging. But yeah, we try. We try.

Nate Hedrick  49:12

I love it. And then Alright, so then the last question for you. What’s one piece of advice if you had to boil down all your knowledge to one piece of advice that you’d give to a pharmacist contemplating a start in real estate investing, what would that be?

Brian Boyd  49:25

Aim small, miss small.

Nate Hedrick  49:27

I like it. 

Brian Boyd  49:28

Don’t go out and don’t go out and buy it a five bedroom, eight bath house on the beach to Airbnb it. Don’t do it. Buy something near you. And I don’t know wherever you are, the big city or whatever, that you can get to you know, in a 30-45 minutes, maybe. Because you’re gonna have to, there’s a learning curve and what we do and until you actually have gone in and you’re changing air filters, or you’re, you’re mopping up something that shouldn’t be there or, you know the lights broken. Or like, once you really have tangible, day to day touching of your real estate, you know, even cutting the grass. You know, that’s important because it makes it real to you. But it also gets you more invested in it, and you stop treating it like a stock and you start treating it like an asset that you need to care for. That’s my advice to people is: aim small, miss small. Buy the two bedroom, one and a half bath, you know, condo down on Broadway that you can, you know, run out to bachelorettes every weekend. And then you go on Monday and you clean it up, and you do it again for the next weekend. But you need to have your hands on it. Now, once you get so many under your belt, it’s different, you know, you start hiring cleaning crews and things like that. But that’s different. Aim small, miss small. Don’t shoot for the stars. Not a great idea, especially if you have zero experience in it. We did this backwards, we came out of the gate and we hired property managers. And then we found a lot of mismanagement and a lot of waste. And what do I mean by waste? I try to be as efficient with people’s dollars and time as I can be because that’s my job as a fiduciary. So I expect the property manager to do the same. And they don’t. They don’t. And I’m not bagging on all property managers out there. But my experience has been they they slide these fees in and you’re like, what is that? And you know, there’s a premium fee. It’s like, what was premium about it like, and like, just crazy stuff. We had a property manager and at our Montana house, he spent $1,000 last month for the hot tub. He didn’t call me. I’m like you’re only authorized to spend $250. Anything above that you have to call me. And his response was, Well, what would you have had me do? Because it was about the treatment. I’m like, Well, I would have told you to shut it down. It’s January, nobody’s going to Montana. Like they’re not fly fishing in January. Like shut it down. Nobody’s in it. You don’t have any bookings for January, and you just paid $1,000. And we didn’t make any money that month. So I’m carrying the note anyway, why would you do that? It’s just silly things like that, that don’t make economic sense to me. So that’s what I would tell myself years ago, I’m like, hey, get your hands on this first. Manage it yourself, and then pass it off. Because once you know what you want, and how you want it run, you can then hire the right property manager for your property, not just a property manager, you need the right property manager.

Brian Boyd  49:30

I like it. Yeah. Last question we have is where can people find you if they want to reach out and learn more? 

Brian Boyd  53:24

So great question. You can find me on TikTok at it’s @BrianTBoyd. You can find me on Instagram at Brian T. Boyd. And on Facebook, at Brian T. Boyd. And then there’s a website Brian T. Boyd. And if you’re interested in some of this content that I’ve talked about, I have made, you know, economically achievable prices for anything that I’ve you know, recorded. So I did an entire course on real estate and taxes. It’s like two and a half out to two and a half hours. And I go over all of this in great detail. If you’re really looking to you know, fill your boring Friday night. I think that’s a that’s a showstopper right there. Maybe. So, you know, you can find it in my link tree. But yeah, I mean, and I’m always available if you just email me or something. And you know, you’re, you’re nice to me, I might be nice back and talk. But you’d be crazy. You’d be surprised when you see on social media, right? Like one guy tonight called me an Illuminati because I pushed my glasses back up on my nose. I’m like, No, aren’t they rich? I’m not rich. So, no, I’m on social media.

And you know, I’m gonna be doing some speaking. I’ll be speaking April 20. Here in Nashville, doing a seminar. It’s a four hour seminar over the lifecycle of real estate investing, everything from how to qualify under short term rentals loophole, to the real estate professional status, through the tax benefits, how to achieve those tax benefits to how to hold your property, where to go actually set up that holding company. I like, like Wyoming, I’m not opposed to other states, I just have to have a good reason. Maybe you can convince me. And then you know, 1031, 721 and other things out there that help you go through the entire lifecycle of real estate investing. So I’ll be that’ll be in April, and there’ll be more to come. I’m trying to do this more. I think educating people on, you know, enhancing your life through real estate is a great thing, whether it’s helping to pay for your kids college, to taking that extra vacation every year to you know, growing massive wealth, and you know, flying private, if that’s your goal, hey, I can help you get there. But that’s where you can find me. 

Nate Hedrick  55:54

Brian, we really appreciate your wealth of knowledge. It’s it’s awesome to talk to you and to see how much you live and breathe this stuff. It’s really cool. So thank you for spending the time with us and sharing so much with the audience.

Brian Boyd  56:05

Absolutely, guys, thanks for having me. Y’all have a great night. 

David Bright  56:08

Thanks for listening to the YFP Real Estate Investing Podcast. If you like what you heard in today’s show, please leave us a review and subscribe to the show so you never miss an episode. If you have a question know someone that would make a good guest or want to connect with us, head on over to YFPrealestate.com and join the growing YFP Real Estate Investing Facebook group.

Nate Hedrick  56:26

As we conclude this week’s episode of the YFP Real Estate Investing Podcast and important reminder that the content of this podcast is provided to you for informational purposes only and is not intended to provide and should not be relied on for investment or any other advice. Information in this podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with their financial advisor with respect to any investment. Furthermore, the information contained in our archive newsletters, blog posts and podcasts is not updated and therefore may not be accurate at the time you listen to it. opinions and analyses expressed herein are solely those of Your Financial Pharmacist unless otherwise noted and constitute judgments as of the date is published. Such information may contain forward looking statements, which are not intended to be guarantees of future events. Actual results could differ materially from those anticipated in the forward looking statements. For more information, please visit yourfinancialpharmacist.com/disclaimer.

David Bright  57:20

Thank you for your support of the YFP Real Estate Investing podcast. Have a great rest of your week.

Advertising Disclosure

Current Student Loan Refinance Offers