Why Jacksonville Housing May Be The Best Investment To Make Right Now (And Tax Strategies to Take Advantage Of It)

With interest rates at historic highs and an affordability crisis in full swing, it’s easy to look at our real estate investments and think the best of times are behind us.

But we all know that real estate is a game of local knowledge.

So having an information advantage in a local market that is poised to take a giant leap forward is an opportunity to create generational wealth.

That’s why I’m inviting you to this webinar.

While Jacksonville has been one of the fastest growing cities in America over the last 10 years, and COVID supercharged the whole Florida market in general, it’s the current data we’re seeing in Jacksonville right now that should really excite real estate investors around:

- The current lack of housing supply (and how far it is from catching up to demand)

- The rate of population growth (which will continue to drive the gap in supply)

- The one time tipping point that will bend the rate of home price appreciation upwards (that we see coming in the near future)

- The way local and out of state investors are using advanced tax strategies to take advantage of these tailwinds

This will be a moderated conversation between Gregg Cohen, co-founder of JWB Real Estate Capital, and Daniel Roccanti, CPA and Director at James Moore & Co.

As the co-founder of JWB, Gregg helps lead one of the biggest developers, land owners, and housing advocates in Jacksonville.
They own over 300 single family homes, are developing 20 blocks of downtown Jacksonville, and manage over 6,000 properties of investors around the urban core.

With 10 years of experience in tax accounting and consulting, Daniel works with a wide range of individual and business clients leads. He also leads the real estate team at James Moore & Co, and also invests in real estate, himself.

Don't miss this rare combination of inside knowledge, real estate expertise, and tax strategy built into a unique investment perspective.

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Transcript

Pablo Gonzalez: 1:17

Okay, welcome, welcome, welcome everybody to a, this is a special edition. This is special. Of, this is truly special. Of the Not Your Average Investor Show, we're doing a special webinar with a special guest today. I'm the host for today's conversation, Pablo Gonzalez, over there on the far right. Is a man that I affectionately like to call GC because he's got these like genius concepts He knows how to generate a cash flow. He's a great co host and because his name is Greg Cohen. Say hello, Greg And in the middle of us we have the guest of honor He is the tax director at James Moore. He is not just a tax guy He's a strategist a consultant that helps his clients Make more money, plan for taxes, do better a real estate, I would say just from a little under a little, a real estate expert in your own right. And, the pride of Italy, Daniel Roccanti, is how I say it, Daniel Roccanti, we call him DR, the doctor, the doctor's in the

Daniel Roccanti: 2:14

house, Daniel Roccanti. It's a lot easier to say Daniel Roccanti. Welcome to the show, my friend. Thanks, thanks. I feel like it's one of those moments where it's like, I'm a long time listener, I'm literally in your video sitting here in the middle between you guys, so it's a lot more, but I'm really glad to be here. Thanks for giving a call out to my Italian heritage. We were kind of joking around. I'm a little watered down these days. Yeah, my, uh, ancestors were a lot more Italian than I am. I'm a little more olive guarded, but thanks. We got it. We got it.

Pablo Gonzalez: 2:40

Unlimited breath stinks on the way. We got folks checking in for, we see a couple of members from our community. We normally start these shows with someone we like to call the roll call. We got the ringmaster in the house. We got the early bird in the house. And we've got somebody. Well, do you know Alina

Daniel Roccanti: 2:54

Penning? Yeah. Yeah, I actually do. She's with the FICPA It's like the Florida Institute for CPAs. I'm glad that she's here to support us. Love that Alina.

Pablo Gonzalez: 3:03

Welcome. Welcome We host a show every Tuesday. We talk about real estate. We talk about Jacksonville. We talk about better ways to save for retirement It's called the now your average investor show. You can check it out on podcasts or YouTube or join us live here on, on, on Tuesdays at 1230, right around this time. But, uh, I want to just real quick, kind of like dive into the nature of, of what we're doing here today. I know that the two of you are both very passionate about Jacksonville and where it's going. I was overhearing a podcast between Daniel and GC over here, DR and GC. From that seat over there. And I saw you guys jamming and we're just like, man, this would be really, really great to tell everybody what we're so pumped up about, where Jacksonville is going right now, the unique opportunity that's happening. How to take advantage of that opportunity while also saving on your taxes, right? With some really good strategy and then what's the easiest way to get it, right? Like, what is the frictionless way to put some chips on the table right now with what is happening? But I would like to kind of just start with how do you guys know each other? GC, you want to start?

Gregg Cohen: 4:05

Well, you know, we both, come from the land of the most amazing college and college football team Gainesville, which is where I first got to learn about James Moore. Obviously, DR over here is a big Seminoles fan, but

Daniel Roccanti: 4:18

But we, like we said, A lot of people at our firm are big UF fans, so I don't hate the Gators, just like to beat them in football. That's

Gregg Cohen: 4:25

very kind of you. I don't know if I can say the same thing about the other side. So funny story actually, my business partner, Alex Afakas, who is our president and I started the company many years ago and before Alex started JWB with me, he actually had a job. He actually had a real job back in the day and that was working for James Moore back in Gainesville. So we always have a special place in our heart for James Moore. He left that job and then we started JWB, but we have a lot of mutual connections. And so, you know, over the years we've stayed in contact and we've always just loved working with James Moore. And so the opportunity came to kind of do some of these valuable education and you know, helping people see a different perspective on how to take advantage of real estate, how to understand a real estate market. And one that's about to pop and how to do it in a tax efficient manner. And we said, well, let's, let's kind of get together and do this on behalf of both of our clients. So that's what brought us here today.

Daniel Roccanti: 5:18

It really is. It's, it's more about, this is educational. You know, I deal with mostly real estate clients. And so it's a passion of mine. Obviously you guys are in the real estate business So it's a huge passion and then we both live here in jacksonville So we got kind of the inside scoop on jacksonville. So we all want to talk like why is jacksonville such a great market And like you said we kind of had a video that we did on the james moore side It's not out yet But it will be and we were just kind of talking and then we like realized like man we have the same views You know, and then I'm just crazy enough to be a CPA that's willing to get in front of the camera, right? You should have my CPAs are hiding in their office. I'm weird and I'll be like, hey I'll get in front of camera talking people So, just really glad for the opportunity that Greg has given me here And I I'm hoping that this will be super educational for anyone listening. Let's get into it

Pablo Gonzalez: 6:04

guys I you know, Danny, I don't I don't know if you know my backstory is essentially Completely uneducated in real estate, got to host this, not Travish investor show as a effort to build a community around what JWB is doing and all that stuff. And it's, it's worked out really, really well for a lot of people. For me particularly, it's really helped me kind of like pierce through this veneer of outsider in the real estate world to understanding how to take advantage. The best way I can describe it is pattern recognition, right? Like I was very, very involved in economic development in Miami in the early 2010s. And I saw that downtown really, really develop. And I saw everything that's happened in Miami ever since, but it was just too much money for me, right? Like Miami is an expensive place to, to cut your teeth.

Daniel Roccanti: 6:53

It's a great place, but it is very expensive. Yeah.

Pablo Gonzalez: 6:55

So, so, so, so I've been able to myself grow all five door portfolio, thanks to JWB and all these different things. But I just kind of wanted to. I want to tap back into the excitement that I heard you when I was like sitting at that table and, and you were talking to GC about it. What gets you so excited about what's going on in Jacksonville and real estate in Jacksonville as an opportunity?

Daniel Roccanti: 7:17

Okay. Obviously you guys are just way more into Jacksonville and doing what's in it. I'm seeing it from my side as a CPA, but I have a lot of clients. And then of course I live here. So there's just a lot of excitement. Real estate right now in general, this is nationwide. Everyone's a little hesitant. You know, everyone's like, hmm, interest rates are high. I don't know if I should buy yada, yada. It's like, man, I'm sitting back and I'm like, usually the best time to buy is when no one else is. Okay, that's just common knowledge, you know, if everyone could go back in time, we would all buy real estate to 2012 That was the absolute down of the you know of the the real estate recession a lot of my clients who did buy real estate 2012 are in a much better place They are today than they were so it's like 12 years ago But you didn't know that for two years later, same thing with the pandemic pandemics happened and everyone was like, I can't do it. Hold on to my money. Like the world's over. We don't know what's going to happen. There's zombies, you know, all the, all that craziness. Right. And so no one bought. And now looking back at it, just a few years ago, I mean, if I would have bought at the beginning of the pandemic, I mean, I would have doubled my investment. I mean, that's just how it is. Look at real estate now. So now we're kind of in that next. Phase where the pandemic excitement is gone. Interest rates still high. Inflation is unknown. And you're just like, well, should I buy? And it's like, man, if you're a real estate investor, you should always be thinking about what, if I should buy, because you're never going to truly know until two years down the road when everyone else is buying. And then at that point, yeah, you can still buy, but the return on investment is not there anymore. And so what I was hoping to talk about with Greg is like, Why is now a good time to buy and specifically real estate is geographical, okay Baze? You know you buy in one area, you buy another, you're gonna have a huge different return, okay? And Jacksonville's in a place that right now where Potentially ten years, a decade down the road, you'll be really glad you bought today. Because there's just some things where like the risk portfolio buying Jacksonville right now. It's actually not that bad as long as you're holding real estate for a long period of time.

Pablo Gonzalez: 9:27

That's a lot to talk about, man. And I want to unpack some of it. I think it's great. GC, why don't you put a little like perspective behind a couple of the things that he's just uncovered there.

Gregg Cohen: 9:36

Well, sure. Let's talk about this idea that I'm always searching for. Is this the right time to buy or what? Because what you said is very insightful. And you know, I've been investing in real estate for 18 years now. I own over 400 rental properties and the amount of times, and we've been doing this show for four years now, we just did our 400th episode. So I get to talk to thousands of investors along my journey. And if I had a nickel for every time that I heard I want to see if this is the right time and I'm going to wait until this, you know, I'd be a rich man. And the thing is, You're always going to have this excuse as to why this isn't the right time. But the thing about real estate is that if you ask any of your friends, if you ask anybody who's actually owned real estate for a while now and you ask them how it's doing, it's hard to find people that lose in single family rental properties if you buy and hold for the long haul. It's really hard to lose. Now you have to do a couple of things. You have to educate yourself. So I really applaud all of you for being here today because that's a very big step. You have to have the right team, and that's why Daniel and I, James Moore and jwb are here because James Moore and JWB can be that team that you need. And if it's not James Moore and jwb, you have to find a team to help you enjoy this experience along the way. But it's really simple here. You know, we don't always know what's going to happen with home price appreciation. We don't always know what's going to happen with interest rates. We'll talk a little bit about what we think is going to happen on the show here. But what I do know is that real estate is cyclical. And if you're buying and holding this asset, there's not a better asset out there for building a better retirement than an asset that. pays for itself every single month, that gives you tax savings, that has principal pay down, that has five profit centers. And then over time, it performs very similarly. It doesn't have these ups and these downs that you have in some other asset classes. So when you put all that together, this idea that, that I'm not going to buy right now, I'm going to wait for a better time, doesn't make a whole lot of sense. And what ultimately happens is People follow the average or typical way of building for their retirement and let's face it. That's not working so this is an opportunity for a not your average perspective and One that has served our clients. So well, I know with your clients as well And you know most of the folks that you talk to as you walk down the street You ask them if you actually own real estate and you've held it for a long time. Are you pretty happy with that investment? You're going to find that the answer is yes.

Pablo Gonzalez: 12:04

So that's the why real estate always, right? But we are right now talking about this idea of why now and why Jacksonville, right? Like you mentioned something along the lines of you see a, a specific kind of like risk profile that you see that's happening locally here in Jacksonville that I would love to dive in on in a second. One of the things that kind of like brought me back was when you were talking about 2014, man, I could, God, I wish I had these like. These inflection points that we, that we see with everybody is something that I, I feel very fortunate to like, as co host of the show, I've been able to now see a couple of these, right? Like these, like pandemic inflection points, the data that we've been able to share with people. It's the reason why we call the show, the not your average investor show. Cause most average people out there when you're like real estate, no matter what's happening in the world, except for maybe like nine months in 2021, everyone's going to be like, nah, that's crazy, man. Don't do this. So let's talk a little bit about this. Like why now? Why Jacksonville when you, when you mentioned the risk profile that you're seeing, what, what, what, what did you refer to?

Daniel Roccanti: 13:09

So first you just need to look at like Jacksonville as a whole. Okay. Think about what's the culture in Jacksonville. What makes it great first is located in Florida. All right. Florida is a very pro business state. Okay. But no income tax. All right, so you have a benefit right there Whether even whether you live in florida or you're in a different state by just investing into the state of florida It's already like hey, I don't got to worry about income tax. Don't got to worry about filing a florida tax return I don't have to worry about that kind of compliance. That's already better roi or return on investment tax guy

Pablo Gonzalez: 13:42

talks taxes

Daniel Roccanti: 13:43

I know you gotta talk I mean it's return on investment, but how can these taxes bid? All right, so you look at it there Then you look at next you're like, okay What is Jacksonville like? All right. Well, actually, Jacksonville is actually technically the largest city in Florida. Now it's because the whole county is the city, but a million people live in the city. Okay. I don't know what the most updated number is, but it's around a million dollars. And then if you take the greater area it's going to be way more than that. Okay. And Jacksonville itself, it's very pro business. We're stuck right between I 10 and I 95. It's like, I can go west, Can't really go east too much, but it's great if you do because the beaches are right there, too. You've got the beautiful St. John's River downtown. You've got tons of area to grow. So it's just, it's already right there for you, ripe for the picking. And then, you know, if you go now, like, like St. John's County is the fastest growing county in the state of Florida. If you don't know what it is, it's just south of Duval County. And it's kind of basically a suburb of Jacksonville these days. A lot of people with their families like going out there. It's great schools great suburb of it. But it's basically still a part of the Jacksonville area. A lot of these people still go to Jacksonville and work downtown or work in the Jacksonville area. So it's already there. The land, yeah, the politics, you know, the government's all behind you. And now it's just like, we need to grow. You know, there's just all these policies in place. Actually Greg could probably do a better job than I can about talking about this, about reviving downtown. Oh yeah. You know, there's the Jag State new stadium. Yeah. There's the four seasons coming in. Okay. And so you just you have a lot of these things on the horizon But real estate is slow moving. Okay real estate is it's like oh one year from now It's going to be completely different but you look back at decades and you're like, whoa jacksville's Not what it used to be. Yeah, and you've seen this in other cities. You've seen this in tampa You've seen this in nashville 10 years ago. Look at those cities and look now It doesn't mean investing in those cities are not great. But if you could invest in 10 years ago, it's much higher return It's way better investment and you're you're in you're in on it and then you're in on you know, the people there It's like that's where I think jacksonville will be in 10 years. It's already a great city You But it still has a pretty, like, reasonable standard of living cost. You're talking about Miami. Miami has turned itself into probably one of the greater, you know, one of the top tier cities in the state, or in the country, you know, online with like, your Dallas's and your LA's and your Chicago's and things like that. But, it's very high cost of living, and it's pretty landlocked. So they have to build it vertical. Not here in Jacksonville, you can build as far as you want. And then we can worry about building vertical. So it's just, there's a lot of opportunity here. And then just take the standard market. We're talking about interest rates, you know, interest rates are high and it kind of stopped the growth. I think we had pretty high growth, obviously, people were going 20 plus percent every year. I mean, a couple of years ago, you double your investments up that slow down, but it hasn't stopped growth growth is still, I think it's like 5 percent somewhere in that area, 6 percent still in real estate in Jacksonville. So, even with all of that. So, what happens when interest rates do go down all those people that are on the sideline thinking I don't want to buy. Are now going to buy and now appreciations that have it prices are going to go back up Because the moment everyone else thinks all right. I want to buy There it's that is the mindset for everyone So it's like right now when people are thinking hey, I don't want to buy now You want to make sure your investment makes sense. They want to make sure cash flows, but rent has gone up It's not as bad as people think it's just When you look at it in a small sample size of what housing costs a few years ago and what it costs now You're like, oh my goodness The reality is if you take back, stop looking at the short term historical data, look at the future and look how, where Jacksonville will be in 10 years. Look at the growth, look how pro business corporations are moving here. There's going to be a lot of high paying jobs, people that need to rent places. There's gonna be a lot of people with families needing, you know, first time places, you know, three bedrooms, two baths, you know, the stable of the rental community, things like that. And it's like, there's just, I'm just very high on Jacksonville. Obviously there's plenty of other places and maybe I'm a little biased because I live here. I don't think so, man. I don't think so. I think, I just think 10 years from now buying right now and you're going to be like, I'm really glad I did.

Pablo Gonzalez: 18:10

I love it, man. I couldn't agree more, right? It's not hard to see it when you're here. And especially if you've shown up from out of town in the last five years, like myself. Sure. It's so easy to see. That we are basically a cake that's about to get put in an oven right now all the ingredients have been mixed And it all looks like it's about to come out delicious and it's all about to happen, right? It's like quality of life. I call this thing orange county california 20 years ago, right? Like with the weather and the beach lifestyle and the road trips and the 20s, right? It feels a lot like it and and everything that you said is is accurate, right? Like Plenty of upside that still feels like it's baked in right to blossom. There is the regulatory environment that is kind of like perfectly seasoned all the way, all the way around, right? Like the oven, the oven has been tweaked in a very, very nice way. And, and we see these perfect examples of, you said it, Tampa and Nashville, like feel like one to one examples of 10 years away. And we all wish we would have bought there 10 years away. And I think that there's like one big through line that happened in those cities, GC, that I think you are particularly qualified to talk about.

Gregg Cohen: 19:21

Talking about downtown here in Jacksonville. And, you know, it is really wonderful to sit down with other professionals and other folks in the community here and have not just myself be excited about Jacksonville. Because for many years, that's, that's what it was. I felt like we at JWB and myself, I was just pushing this boulder up a hill to help people see what a blank canvas we have in downtown Jacksonville and Jacksonville overall, how we have the public and private partnerships coming together, and how we have things moving in this direction. But now I hear it quite often from people outside of myself. The thing here is that, You know, people talk about how can I make the best real estate investment? And oftentimes you hear, I want to be in the path of progress. Where's this next shopping center coming? Or is this next public supermarket coming? Because I want to buy a property right next to that. Well, I'm here to tell you, I'm not. The best, best path of progress you can find is find a city that is about to be revitalized. Yeah. And the data behind this shows that you see more median incomes rising. You see more jobs coming to that city, which brings more amenities to that city, which brings more people living downtown. And then what happens is the real estate investors who own properties in those areas that are right around that downtown area. The rents go up. The home prices can go up. And you know what? This can all be a win for everybody because median incomes went up as well. So people can afford it. And when you talk about what happened in Nashville and you talk about what's happened in Tampa and Denver and Charlotte, there was already a roadmap for this. So it's so exciting because that's what we have going on in downtown Jacksonville right now. This, this isn't just theory though. There's actual data. I'll give you some data behind, behind it. Most people don't know yet. But there's actually 4 billion of active construction going on in downtown Jacksonville. Downtown Jacksonville is only 3. 9 square miles. So 4 billion is going on in downtown Jacksonville right now. And that doesn't even include the new Jacksonville Jaguar Stadium renovation, which just got approved by City Council yesterday, by the way. Pretty cool that we get to share that news here. That's a 1. 4 billion stadium renovation deal. So the, the, the reason why, and the urgency about why we're so passionate about the Jaguar Jacksonville right now is because when you own real estate in an environment like we have here, it's going to follow the same path that you've seen in some of these other markets. It is the greatest way to supercharge your rates of return by buying now, before all of these buildings and stadiums and hotels are, are ready to receive all of these new people living and staying there. It's now. And so that's that big opportunity that we see. And one of the reasons that we're here today.

Pablo Gonzalez: 22:13

So you mentioned it before too, right? Like this idea, it's the two, what I see as the why now opportunity is the intersection between, we know that interest rates are not going to stay this high for this long or for too much longer. Once those drop. It accelerates home price appreciation. And we know we can almost set the clock. This feels really certain. Like you can, the statistic that we share on the show is really relevant, right? Like of how you can set the clock to when Jacksonville is going to like have this Renaissance. We talk about this number of residents in an urban core. Being at 10, 000 and once that happens, developer incentives go away and it becomes way easier to develop really cool stuff, right? Because all of a sudden Whole Foods is like, yeah, you want me to be your anchor tenant in a mixed use development? Sure. Let's go. Right. So, and Jacksonville who forever felt like had been right around 3, 000 residents in the last 10 years has now eclipsed 9, 000 residents. And like you said, 4 billion bucks coming already has the baked in 10, 000 plus. Going to be happening in under 12 months, essentially, right? And then the, the data that you've done on the show is when these things happen, when a downtown comes from, I just come here to work and then I go home, right? Eight hour downtown to, I come here to live, work, play, and hang out all the time, 16 hour downtown, then the home price appreciation curve bends, right? It goes up significantly and it's like buying that investment right before that, that hot tip, right? Like, you know, they're about to have that big product release. And you're, you're betting that it's

Daniel Roccanti: 23:46

going to work, right? It feels like insider trading a little bit. Yeah. That's how I feel. I'm like, is this illegal? It's insider trading. It's not. It's not. It really, and it's just, it's really like, there's a lot of potential upside here, but you got to get in it before you know it for fact, because the time you know it for fact, everyone else is in on it. So that's where you get the most gain. But what I really like also about Jack was there's potential upside, but the floor is also very high. No one talks about that. Like, all right, say it doesn't all work out like we think it's going to. All right, well, I guess I'm just going to still have a rental property that cash flows and gains appreciation of five to six percent every year. That's a terrible floor to have.

Pablo Gonzalez: 24:27

That's that's that's a really good point. I never thought about it with the floor wise. We talk about it sometimes in comparison to other markets like outside of investors. Think of like, oh, it's Florida. It's like there's there's like 3 different types of Florida, right? There's like, yes, there's like Miami, right? Which may or may not be Florida. You tell me there is. Florida, which is all these like towns like Port Charlotte and all these other places that like pop up and pop down. And then there's big city Florida, which is essentially Tampa, Orlando and Jacksonville and off and off that, like, you know, you get risk mitigation from having over a million inhabitants in one place from having a diversified workforce like we do in Jacksonville. You know what I wanted to talk to you about? Well, the last thing that I want to say, which I think is really cool. Just from my own personal experiences, I've seen this downtown Renaissance stuff happen in Miami. I've never seen it happen by stakeholders that come from within the city that are super involved in the long run, in the longterm view of it. And by that, I mean, shotgun has been here forever, but also you guys, GC, the fact that you guys have bought. You know, guys that are all right around 40, about 20 blocks of downtown Jacksonville, aren't just developing let's do this like high price luxury condo here so I can flip it five years later, but you have this conscious effect of how the flywheel is going to affect. Can you talk a little bit about that?

Gregg Cohen: 25:41

Yeah, absolutely. You know, we've been in business for 18 years. And when we started the company, our, our goals were probably just to survive. I was 18 years ago. Our goals were, were much smaller at that point. But. Through our journey, we have been able to serve thousands of clients. We now manage 6, 000 homes here in Jacksonville. We're responsible for tens of thousands of vendors and other relationships that rely on our business. And so our goals really became much more than just surviving, of course, but it became much more than just making money. It became making an impact. And so three, four years ago, we started to look at what was going on downtown. We saw a lot of what you were talking about, and we said, You know what? Downtown Jacksonville is not, is going to need some pioneers. Some small to medium sized business pioneers who are willing to go and to take a risk and make a big investment in downtown because it can't always be just your big shot, con, you know, NFL owners. You need, you need small to medium business owners to do it. And so that's what we did. we acquired 20 city blocks in downtown Jacksonville. We went out and we found the person who was heading up the Water Street to Tampa district, which was uh, The district that revitalized downtown tampa and we convinced him to come and lead a fund here in downtown Jacksonville, his name's brian maul. He was building amazon's hq2 past star of the

Pablo Gonzalez: 27:04

show past

Gregg Cohen: 27:04

star of the show wonderful guy We convinced him and he's built a team here. So we supplied the real estate We brought the leadership in place. We also raised over 200 million to construct what we're talking about here. And so that is our first project. It's called the Pearl Street District. And that is going and the ground is being moved very shortly. We expect construction to start this year and that will be a 500 million development. So what this is, the reason that we did this though is because we wanted to make an impact. And we sit in this unique seat where we can impact investors in a very positive way. We can also impact residents, our renters in a very positive way, and the overall Jacksonville community. And what we know is that when a revitalized downtown happens, it's one of those unique but beautiful things where everybody really can win. so that's what we did. Three, four years ago, we invested 68 million of our own money. to invest in downtown Jacksonville. We've completed downtown renovations already, and we have wonderful tenants that are in place now. Some of these restaurants are opening up now. In fact, we held a summit here earlier this year. We had about 150 folks come and we were able to take people on a tour of JWB's buildings downtown. And I think that tour was appealing because it was nice to see these beautiful buildings and know that they're occupied with Wonderful tenants and the vibrancy that we're bringing, but I think a little bit of was like, I can't wait to come back next year so that we can see another piece happening and another piece happening and happening. So, you know, it's a big part of our mission here. It's not just to, of course, make money. It's to make that impact and become. We're able to affect so many people. Downtown Jacksonville became this platform for us to have the most impact and we're way more excited three, four years, three or four more years into it than we were when we started because it has gone incredibly well.

Pablo Gonzalez: 28:49

Speaking of things that make you excited. Let's talk taxes. All right. Let's do it.

Daniel Roccanti: 28:54

The real reason why everyone showed up. Yeah. Everyone was like, let's get this first part over with and start talking about taxes.

Pablo Gonzalez: 28:59

Yeah. Yeah. I know, I know you've listened to the show before, right? So like, there's an ongoing joke about how like, you can't get, you can't get Greg talking about taxes because it gets too excited. Like when we, when we run on Tuesdays and Thursdays. The runs that we have about taxes like I end up gassed because it's just like galloping

Gregg Cohen: 29:14

Yeah,

Daniel Roccanti: 29:17

I do a lot of taxes though, um, I see my wife's face when I start talking about it sometimes so I get it I get it She's like but it's always funny because it's always really important around tax time like everyone asking me questions and stuff So it is very important. It's not always the most exciting But it can be for real estate.

Pablo Gonzalez: 29:34

Agree. Agree. So let's talk a little bit about that, Daniel. I know that when we were talking, we were like, man, you work with a lot of investors that maybe started here and have divested outside of Florida to diversify their portfolio. And, and we're thinking about like, what's the best way to just like talk about this topic? Why are we so pumped about this? How to bring the most value with the people in the room? You're like, man, I feel like I got, you know, got a couple of creative strategies that allow you to take advantage of, you know, tax savings, tax deferred, tax deferment, if this idea of either coming back to Florida or putting some more into Florida, specifically in Jacksonville, makes sense. You want to talk us through these like ideas that you got?

Daniel Roccanti: 30:13

Sure. So first of all, I just want to talk a little bit about real estate, like Most people know that there's a, there's cash flow and there's appreciation. What people always understand is there's a third factor. It's taxes that really affect your rate of return. Okay. That's where I, I am cashflow appreciation. That's more Greg. But when it comes to taxes, that's where I, and that's what makes real estate different. Okay. And if you're overlooking this aspect, you could be costing yourself a significant less rate of return on your investment here by overlooking this. Also, it's just, it's complicated, but so flexible. You, people don't always realize like how you can use real estate because it's a huge incentive. And basically the IRS, the federal government, they need people to live somewhere. So they created this whole tax system that is just a big incentive to make sure that people are always buying houses, providing rental properties, things like that. Now there's some things we do something specific, you might get a little bit better, but it just realized like, if this is a strategy for you in real estate. You know, especially as your portfolio goes, like if you're not thinking of the tax side of it you're potentially losing yourself many, many percents on your return on your investment here. So let's kind of go into investing in Jacksonville. Why, like, why am I talking about this?

Pablo Gonzalez: 31:29

You know our firm and I just jump in here real quick to me That's the whole reason why you work with like a strategic guy like yours, right? Like it's not just like hey, let's talk in march because I gotta do this thing in april. It's hey, how can I? Maximize this stuff. We've shown many times on the show how like one two, three percent over time is millions of dollars. Yes Well, you

Daniel Roccanti: 31:48

you need to be consulting planning advising. This is what I do with my clients It's like if you're just getting your tax return prepared every year coming around like that's great You You know, it has to be done. You're complying with the government. Okay. And you're probably getting some tax advantages there, you know, realizing that you're paying less taxes on not your actual cashflow that you actually receive. It's great. But once you start getting into more investing, it's really about planning. It's about, okay, what's my, what can I do here? All right. This is what I'm thinking. This is the market. Most people, when they start out first investing, they invest in a familiar place, either where they live currently or where they grew up. Okay. That's just where everyone starts. There's no real thought of, is this a great place to invest? It's more of like, it's easy. I already know the area. Okay. And so, and if I live there, then I can operate it myself. Okay, at first you're just trying to squeeze as much like sweat equity out of these things, right? Because to you it's like your goal isn't like, you know, it's it's like all right, you know This is a big deal. I gotta make it work. So i'm putting the sweat equity as you grow It's less about sweat equity and it's more about what it truly gives you back, which is generational wealth in time All right, I can always make more money. I do not get more time. So When you start scaling your real estate at size, you actually get what you truly want Which is time back to spend how I want with my family Okay, or however you want to spend it So once you kind of get through that initial investing phase Most people then go oh and they learn that hey, you can invest other places in this country And you start trying to flip forward, like, what's a great opportunity? Okay, we all just talk about great opportunities for Jacksonville. So you might not be here locally, you might be out of state, okay, and things like that, but now here it is, you got some insider knowledge, maybe you're excited about investing in Jacksonville. All right, so how do we do that? How can we use taxes to benefit that? Obviously, if you have cash laying around and I can say, Hey guys, I want to buy a place. That's great. Okay.

Pablo Gonzalez: 33:51

That's not everybody. That's not

Daniel Roccanti: 33:52

everyone. Everyone has to have cash and real estate people are really bad about not having cash. Like they're always investing in the next deal. So how do you do it? So it's basically using your current real estate portfolio or how many you have. You don't have to have a ton and using that without creating tax consequences to reinvest into Jacksonville. So we're going to first talk about is the light kind of exchange or the 1031 exchange. Okay. It's a pretty simple concept. Most real estate people have heard of it. But basically what it really is is The government is incentivizing that if you own real estate now, it has to be an investment or used in a trade or business So that means no personal residents or anything like that. Okay are eligible for the lycan exchange You can take sell that property and within a certain time frame buy new real estate, again an investment or in a trade or business, all right, and defer all your taxes as long as you do it right, okay. And so what this does is it increases your ROI immediately because before I'd have to pay taxes I'd have to put 20 percent aside or 15 percent aside, all right, now I can reinvest it all into the next property. All right and then two it gives you the flexibility of being like, hey, it can be anywhere in the country What people don't realize is that 1031 exchange doesn't have in the same state doesn't have to be in the same city It just has to be domestic domestic. It just means you can't buy foreign real estate Okay, that means if you are in a different state, all right Even in that state has an income tax, which most states does do. Florida is a little unique, right? So you can actually use this 1031 exchange Sell your property and defer not only the federal but also the state taxes And then invest in a state that doesn't have state income taxes Now a few states like california because it's california have clawback rule basically means you have to kind of trace You know, and then if you eventually sell the property the property and have to recognize the name. You still have to recognize it in California, but most states, once you defer it, it's done. As long as you don't buy back in the same

Gregg Cohen: 35:58

state. That's a pretty cool thing. Yeah, I

Daniel Roccanti: 35:59

know. So it's actually really nice. Like a lot of people say, like I said, they start out investing you know, outside of the state of Florida or the other way around. Sometimes they'll start in Florida and then they want to diversify to other parts of Florida. Okay. But this is an easy way to get your capital out. Invested into it. All right. Now there's a lot of rules here But I just kind of told you a little bit about, like, why this could be a great option because now it's like, hey, I just basically deferred the state implications as well as the federal you know, now state could have been 5%, 15 percent on the capital gain somewhere in that way. I just saved 20 percent of my money right? Yeah.

Gregg Cohen: 36:36

100%. Who likes avoiding state taxes? I think we all do. I didn't know that was possible. That's a pretty cool thing. Of course, check, check with Dan's team. Check with the CPA for your actual situation. But it's good to know that that can be done out there. And either way, I mean, you're probably investing in a market, let's say, Dachshundville for example, where it's a better return on investment even, even if you had to pay that same state income, income tax from the other place or whatnot. I mean, you're still getting a better investment overall. The strategies like this help make it a little bit better as well.

Daniel Roccanti: 37:45

Yeah. And now that you're invested in Florida, there's no state income tax. We talked about this very, very beginning. It's like, all right, I deferred my state income tax to get into a state and now it doesn't even have it. So now I'm worrying about, it's like, here's my return on investment. Don't have to worry about it. Don't have to worry about compliance issues. Don't have to worry about filing a Florida state return. Believe me. When you get your taxes done and you own real estate in a bunch of different states, now you potentially have state compliance. You have to file state tax returns with all those states. Don't have to worry about that in Florida. So it's just another benefit

Gregg Cohen: 38:15

here. How much does that cost for like just the compliance to be filing tax returns in every single state?

Daniel Roccanti: 38:21

Obviously, depending on who you go to, it's going to be different, but you got to realize you're flying a separate tax return. So what it costs you to file your federal return You're gonna have to do that times usually The all the states so if I follow in five states, it's like all right Take the number that takes me to follow in it. It might be a little less but reality is it's that number times five Yeah, and now I got to follow five states too. So you Think about that when you have your rate of return like oh, I want to invest in these states I want to invest in this it's like all right What's going to be my cost to get my tax return because it's compliant you have to comply You know, these states will come after you they want their taxes You Some states more than others. But just realize that that's another cost that you need to think about. Again, that's factors in your rate of return. You don't have to worry about the state floor. We just follow the federal tax. It's actually super nice on my end. I don't have to worry about a bunch of state returns.

Gregg Cohen: 39:09

100%. These are things that you never think about when you are putting a code formula together and you're starting to analyze your potential rate of return. You know, no proforma is looking at, well, what are the additional state taxes that are this is subject to if you're in California or another tax heavy state. Those things just drag that whatever that return on investment is on that proforma down. Florida, we don't have that. That, you don't have that state income tax. It's certainly something to pay attention to that many novice investors never think about.

Pablo Gonzalez: 39:38

We've got a question here from a community member of ours. Are you a baseball fan? I do like baseball. I don't watch it as much

Daniel Roccanti: 39:44

as

Pablo Gonzalez: 39:45

I used to. I've heard of a little lesser known hall of fame first baseman, Jim Kirko, who says who watches with his son.

Gregg Cohen: 39:52

And

Pablo Gonzalez: 39:53

he says, if I invest in Jacksonville while living in California and then move out of the state and then do 1031 exchange, do we still have the clawback issues?

Daniel Roccanti: 40:03

So you do, I mean, basically California, as long as there's really, it doesn't matter if you live there or not. As long as the real estate is in california when you sell it california has a clawback Okay, so you just got to remember that like I said, there's only I can't remember There's only a handful of states that have clawbacks. But as we all know California wants their taxes. They're very aggressive about it. And so just be aware that California is like, if you made your money in California,

Pablo Gonzalez: 40:30

we want a piece of it.

Daniel Roccanti: 40:31

Even if you move out. Yeah. We want a

Gregg Cohen: 40:33

piece of it. But then once you come to Florida, you no longer have to pay the state income taxes while you own those properties in Florida. So at least you stop having to pay. Correct. You stop the bleeding. You stop the bleeding. You stop the

Daniel Roccanti: 40:43

bleeding. That's what a lot of people do is they move out. Yes. You got to deal with all the taxes. You the California. But now you're moving into the state with no income taxes, state income taxes, and then obviously for the future going forward, you'll have to worry about it.

Pablo Gonzalez: 40:56

Yeah, so again, 1031 Exchange, I'm a, I'm somebody that, I own some stuff in Jacksonville the Airbnb craze hit, so I went off and bought some stuff in like Ocean City, Maryland or something like that. And I decide this Jacksonville opportunity is great, right? So I had bought something for 300, 000. It's now worth 650, 000. When I sell that, I can take the gains of that extra 350, 000, put it into a handful of properties here in Jacksonville. Defer those taxes not have to pay that stop the bleeding from the state income tax file less fees for having multiple properties in different states and Yeah, and so most

Daniel Roccanti: 41:36

states are just going to recognize the 1031 exchange Yeah, I think there's like one state out there and like guys, there's there's 50 states. There's 50 different laws You can't know every state's laws here. That's why you need to talk to your professional we have dedicated people at our firm who only deal with states because it's that complicated because you got You the federal law and then 50 state laws. So it can be really, really complicated. But just be aware that the Lycan Exchange is usually recognized by almost every state. It's a good way to defer federal and state taxes.

Pablo Gonzalez: 42:04

Awesome. Kirko's got a follow up question. If properties are passed in an inheritance, do clawback rules still apply?

Daniel Roccanti: 42:10

All right. So, I'm not going to know 100 percent of this answer because you're going to be talking about California and every state is slightly different, but I'm going to go over the inheritance with you. So when you pass away, because this is actually a really good topic to talk about because I was going to bring this up at some point anyway, when you pass away, alright, and you own real estate and you pass it on to your beneficiaries, it's called step up basis. Basically the value of that real estate steps up to its current fair market value. So you have a cost basis That's what the cost is of when you purchased it. Obviously over time it's going to increase in value So what's the fair market value at the date of death? Now you have that so right then and there you have basically wiped away all your taxes if you turn around sold it yesterday Now, of course if it continues to go up in value, you can still have it, but you're starting at a much higher spot Okay So When you do, when you inherit it, okay, like that, now I have this step up basis. I really don't have any taxes on it, okay? So, I don't know specifically with California if they have any kind of clawback on that. Like I said, California is one of those states where I always, you want to talk, you want to talk to a tax professional who knows California. Does the research there. So I can't answer specifically that question, but what can I say is, is when you are passing away, you're given a step up basis. And so we call this a drop and swap. Is that a great, but it's basically, if you really, really care about generational wealth and you hate paying taxes, you do the like kind of exchange where you just keep moving up on rental properties, okay. Swapping your equity, deferring the taxes. Once you pass away. Then your beneficiaries or your heirs get basically step up basis and pay no taxes So then no one pays taxes as long as that fits your strategy Like if you're buying real estate to be like, hey, i'm gonna get the cash flow of benefits and we'll talk about pulling out tax free debt and stuff like that about it There's other ways you can actually make money on it without selling it And then have the strategy of hey, I want to pass these down to my kids my grandkids You So they never ever have to worry about money the same way I did and not to pay taxes.

Gregg Cohen: 44:29

We talk a lot about that on the show. We get a lot of questions about taxes and we get a lot of questions about, hey, you know, I'm getting older and I want to sell, you know, and I always ask people to just have a different perspective because this is an asset that is built so well to step to pass along to future generations. Like you articulated right there, that step up Really powerful. If you have a portfolio of three or five or 10 properties, what's happening is every year you're taking depreciation on those assets. You're getting the tax savings every year on those assets. And then when you pass that to a future generation they don't have to pay those taxes. They don't have to recapture that depreciation. And, and so that's really powerful, but I always ask people to think about it from a different perspective, not just from the tax savings perspective, but think about like. How cool it is to have an asset that is producing income day one to your future generations, and then truly how cool is it to give our future generations a little mini business in itself, which is a single rental properties and mini business in itself. So it's a for me and my kids and my wife, we think about passing these along to our kids as as like a business, a little business that. You know, especially younger generations, younger kids can learn about income expenses. When do I make new investments and whatnot? So for all those reasons, this idea that we have to just kind of clean house and make sure we sell all of our assets before that, that's one that I think people should revisit and think about from the perspective that we're talking about right here.

Pablo Gonzalez: 46:02

I love it. We talk a lot about Real estate for retirement and you know how it's how it's just totally different I'm sure we're gonna hit on this at the end But the idea of like real estate for inheritance is just at another a whole nother level when you're thinking about that Of you know, I I grew up in miami in a in a pretty well to do area, right? I went to a private school. I knew I knew people that graduated college and like they had inherited a Portfolio of real estate that that's what they manage full time and they got to just figure out what they want to do with their life And and build their own career, however, they want, you know, like not not just beholden to it And I just think that that's super super powerful, man. I think it's really cool Yeah you got another little another little one in your pocket before we we move on to the next one

Daniel Roccanti: 46:42

Well, I mean I was gonna go a little bit over maybe more of the technical part, you know I mean, we've mentioned like an exchange kind of well Maybe we should probably go over a little bit like You know, how does it actually work? Because there are requirements. Okay. So to understand a like kind exchange here, basically You are going to use what they call a qualified intermediary. All right, that means you can actually never touch the money All right, so this qualified intermediary you contact them before you want to sell the property they work with you on selling the property and then when the proceeds come In they actually hold it for you And the reason why is the moment you touch any of the money You that is dead. The light kind of exchange is dead and you have to recognize gain all that money Okay, so you never actually want to touch the money So sometimes you have people who come to you and say hey, I want to do a light kind of change I just sold my property last week and i'm like it's too late Yeah, so you need to make sure that you are if this is something you're interested in it's before you sell the property

Gregg Cohen: 47:34

Okay,

Daniel Roccanti: 47:35

and you have to use a qualified intermediary So you got to find someone usually a cpa or somebody can point you in the right direction of a qualified intermediary then the next is you got 45 days to identify your properties You Okay you can usually there's a little different rules, but you can identify usually up to three properties All right, and people don't always know this but you can do a like one for two swap or two for one swap Like a like kind exchange does not have to be one property for one property So if you have like a really big property And you want to have two smaller properties or three smaller properties Or vice versa you got multiple properties and you want to swap it to a one big property You there's all that but you got to be able to identify the properties within the 45 day period the 45 day period starts at The sellable property of the relinquished property then you have 180 days to close Okay So I have to identify the property in 45 days and then they give me a little bit extra time to actually close All right If you do not meet those deadlines, then the 1031 falls through and you have to be taxed just like any normal sale. Okay. So it's important that you understand the timelines. And it's important that if you are going to use this, do it before you sell the first property and you need to be looking at new properties to buy before you sold your old one. All right. So like if I'm working with JWB and I say, Hey, I want to get in the Jacksonville, Talk to them before you even sell your talk before you put it on the market. Talk about to them so that they can be part of your plan and then use the 1031 into your strategy so you can then get into Jacksonville and you don't have to worry about accidentally falling through. You just don't want to be, I unfortunately get a lot of calls like, Hey, I'm interested in 1031. And I was like, I sold my copy a week ago.

Gregg Cohen: 49:17

And it's

Daniel Roccanti: 49:17

just like, it's a sad story to hear. And I have to basically be like, there's nothing, you can't do it. Now, there's other options, and we'll talk about that, but just be aware that that's kind of the technical part. And then the only other one is, I talked about like, you can't have touching the money. You need to reinvest the total amount of proceeds that you receive into the new property. Basically, what that equivalents is you need to buy a property of the same value. So if I have 1, 000, 000 of property that I sell for 1, 000, 000, I need to reinvest into 1, 000, 000 or higher, or two 500, 000 properties, something so that the total value And remember, if you buy multiple do the multiple asset, like kind of exchange, it all still has to fit within the 45, 180 day range.

Pablo Gonzalez: 49:59

Do you see again, anything to add as far as like that 10 31 thing and how JWB helps people?

Gregg Cohen: 50:03

Yeah, absolutely. The, it's really tough to hit these 45 day windows and the 180 day windows, especially in recent years. Supply has been so low in many markets across the country, Jacksonville included but when you are going to do this, make sure you look for a vertically integrated turnkey rental property provider that can make your life a lot simpler. We, of course, are vertically integrated here at JWB, which means a few things. Number one, we own all of the assets before we sell them to our clients. And so hitting that 45 day window is super easy. You get on the phone with the JWB team. We have a few phone calls and we're able to show you assets and hit that 45 day window with ease because we own them. We're not just brokers. We're not going out there to try to find them. Any vertically integrated company typically will own those assets. The other reason that vertically integrated company is important is because not just the acquisitions is under one roof, all aspects of the investment is under one roof. The most important aspect that will affect your enjoyment here is the property management arm. And so, of course, property management is under one roof here at JWB. And then we could do a whole show on why that's important. But I can just tell you if you want to make sure that goals are aligned and that you're going to be in this and enjoying this for a full market cycle or any length of time, make sure that your management team is vertically integrated. And the same person that is collecting the rent for you is also the same person who sold you the house. Because if not, it's easy for those expectations to change. So that's one of the reasons, especially during COVID time when it was almost it was just so difficult for people to find any sort of inventory, people just call us up and within a few days we can take care of a 1031 exchange. Now we still can take care of a 1031 in a few days. But it's even more important to make sure that you focus on the right teammate.

Pablo Gonzalez: 52:00

Yeah. Just to make that clear, you know, how like I'm teaching these classes for our other, our other partnerships. I've been talking to someone there who was looking at a 1031 exchange and it's, it's easy to hear, Oh, we own the asset. Like, duh, that's how you should do it. Or like, duh, you should have property management under one arm. The other side of this equation is you're working with someone that says, yes, I'm going to help you through a 10 31 exchange. And really what they're doing is like trying to source a property for you. And the deal is like semi closed, but not all the way closed. And all of a sudden that deal falls through and you get stuck with, Oh, I don't have another property that I can switch to the idea of working with someone that has inventory, right. And is. Has the construction team and the property management team doing all these things ahead of time, ready to serve you is the difference between hitting that 45 day goal, that hundred day goal, like, it was milady Jack Chad had those telling us that story about that, right? Like of, of, of missing out on that super, super important. Daniel, I think we're going to save the next tax tip for another edition of this.

Daniel Roccanti: 52:59

Yeah, we went, we went pretty far though. Yeah, it was short. We went long, but

Pablo Gonzalez: 53:02

it's good. We got some good questions I want to address. But I think before we get there, the, the, the, I think the big question is, we're talking about how attractive Jacksonville is. We're talking about how easy, And advantageous it is to do one of these 1031 exchanges and do these like for like into Jacksonville, Greg, as the big dog real estate investor here in the room with 300 properties and, and all the, and downtown properties and all these things, what's, what's the move here? Is it pitch into one of these downtown funds? Like, what do you tell people to do is the, the easiest way to take advantage of this now to take advantage of this like moment before interest rates drop before downtown tips.

Gregg Cohen: 53:41

There's a lot of different ways that you can potentially take advantage of something like this, this information that we're sharing, but I'll tell you how I'm wired. I think I was a CPA in my former life because I imagine you're wired like me. You know, I think of risk mitigation before I start thinking about my potential return on investment. Okay. You know, I love investments that pay for themselves every single month And once they sort of pay for themselves every single month, then i'm like, okay cool Well, let me see what type of outsized appreciation or gain I can get And so when we're talking about how I would advise you to take advantage of this information of The revitalization of downtown Jacksonville. What I would recommend is to not start thinking about going and investing in a downtown building like I have. Now I do that for a very different reason. I have an entire company here and we can, of course, we have a greater opportunity to make an impact. And we also have a an ability to handle the risk that goes along with that. But I'm mainly speaking to mom and pop investors here. If you want to go take this information, go and buy a downtown building, expect to put millions of dollars there to renovate a building that has probably been vacant for 30 years to then try to apply for a city incentive, which takes an entire application process, which maybe you get that incentive so that the numbers potentially can work, But the money doesn't come to until you fork another maybe tens of millions of dollars to renovate that business. So the cash flow swing of doing an investment downtown is really, really intense. So that's one thing I would not recommend for mom and pop investors. I know that. We do that. And it's worked out well, but it's not great for mom and pop investors. The next thing that people would look at is to invest in syndications or funds. And that can be a great investment, but just be prepared to put some money out there too. And be prepared to lose some control. Because when you invest in a fund. It's typically an accredited status and now single, which means your investment might be about 250, 000 or half a million dollars or something along those lines. Now, what we recommend and what our clients are doing are single family rental properties surrounding downtown, which is a unique and different and not your average perspective here. But the reason that we have been investing in these neighborhoods, which are maybe five to ten minute drives from downtown Jacksonville for the last 18 years, it's because these neighborhoods are built to serve all five profit centers. They serve net rental income, which means that it pays for itself. They have tax advantages and tax savings. There's principal pay down, which means your residents are paying your loan down for you. There's home price appreciation, and then there's inflation hedging and inflation profiting. These neighborhoods have that even if downtown Jacksonville wasn't about to pop. And so they are the best risk adjusted return for mom and pop single family investors. To take advantage of because you get indirectly all of the advantages of rent price appreciation home price appreciation that comes along with downtown Jacksonville, you just didn't have to take the risk to be a part of it. And so that's what our clients are doing and we manage about 6000 homes and they're all right around downtown Jacksonville, and we're super excited because not only do these investors get to win as downtown Jacksonville continues on its path. But our residents get to win because our median incomes continue to grow the amenities that we already have in downtown Jacksonville are getting better and better. And those amenities are starting to serve those neighborhoods that we serve as well. So really excited about the triple win, but it's a little bit different than what you may have been thinking about the way to take advantage. A downtown revitalization.

Pablo Gonzalez: 57:33

You're a high floor guy. What do you think about that? I

Daniel Roccanti: 57:35

mean, I think he's right, you know, I mean i i'm high on jacksville. So I agree like even if it doesn't pop Like at the end of the day, you're still gonna have a good investment. You just might not have an amazing investment which with real estate a good investment is still an amazing investment. I don't know if you guys know this i've heard But it all depends on your situation here You know, he was kind of talking about like going in town down investing into a commercial building I'm, like, yeah, that's a real estate professional. That's a trade of business If you are in the trade of business of real estate, it's just like any other business you're active you're doing everything You But if this is an investment, you want to make it as passive as possible. Take my own situation. I invest in real estate. I'm not going to come on here and tell people to invest in real estate and then I don't do it myself. Okay? But I make it as passive as possible. I'm a CPA. It's a time demanding job. You know, I have a lot of things I got to do. I don't, I'm not, I want to go and try to manage the property myself. I'm not going to go and clean toilets, okay? I don't even do a good job in the first place, ask my wife, alright? Yeah, alright. So I don't want that. So I make it as passive as possible. I leverage other people in property management and I don't have the time to go around and figure out Where's the best neighborhood to buy? And what is that? I leverage people. If I really want to get the most return, yeah, it takes time. But to me, my time is more valuable and it still makes sense. The investment still makes sense over time. It still meets my goals of creating generational wealth so that my family can be taken care of and don't have to do what I had to do, which is start from the ground zero.

Pablo Gonzalez: 59:10

So before we hit this hour mark right now, I just want to say that this is what JWB does, right? Like JWB makes it easy to invest in these single family homes. I want to talk about workforce housing here in a second because that to me is another level of risk mitigation and if you are interested in some of the things that we talked about, getting in on Jacksonville, having a high floor doing it completely passively because you are working with a vertically integrated provider that isn't going to make you, you know, Do 10 different phone calls or just handling it and tell you what's going on every single month. I can testify to that myself. I own four properties with JWB. I'm a entrepreneur in the throes of growing a business first four years. So I work a hundred billion hours a week and I still get to grow my real estate portfolio. Go to JWBRealestatecapital. com slash profits. We have a special landing page there, JWB. Real estate capital. com slash profits. Greg just put together this profit calculator that allows you to compare your portfolio, what you can build with multiple properties in out of state, whatever you've got going on. It's a little. Little technology in real estate investing that you just developed in here in house. I think it's going to be really cool. JWB realestatecapital. com slash profits. Thank you for joining us at the hour mark. We've got five questions we're going to dive into. Before we get into that, I just want to say this. I'm surprised you didn't say workforce housing, right? Because to me, what I saw in the, in the cities that I've lived in Orange County, Miami, is this idea that when markets go crazy, Rich people, they love it, right? They're going to go in, they're going to buy all these houses. People want to build for them. They want to do this stuff. The people that get squeezed out is the teacher, the nurse, the fireman, the cop, right? Like the Amazon, distribution center worker and the people that have the least amount of. Supply given to them a home where you can live that is within 15 minutes of your job And you can raise your kids and have them go to public school and do their thing Those are the people that struggle the most with all of this stuff and I say all that to say that JWB's housing stock is Workforce housing It is not low income housing. It's workforce housing 70 to 120 percent of the median income. And that to me is a whole nother level of risk mitigation because there is never going to be enough of that in a growing city. And I've seen it city after city, right? So you want a high floor, right? Like beyond all this, like awesome downtown pop and everything like that. Workforce housing. It's always going to be the people really, really need this stuff in good times. They need it. And in bad times, people that live in like luxury housing, they go to workforce housing. So it's like auto zone stock in a way, right? Like I don't think I'm allowed to say that on here. With that being said I really love the fact that it's workforce housing, because again, the win win scenario of it all. Let's take some questions. You guys ready? Let's go. All right. Cool. We got, I need to move this a little closer to me on the screen here. Jason Johnson, a friend of yours, Daniel. He says, Hey

Daniel Roccanti: 1:02:05

Daniel, I know Jason. Yeah.

Pablo Gonzalez: 1:02:07

Well, he says as one of your clients at James Moore, as you already know,

Daniel Roccanti: 1:02:11

I

Pablo Gonzalez: 1:02:13

own three properties in Tallahassee with a sizable amount of equity. Should I continue to invest here where I live or take advantage of that 10 31 thing and put some chips in the Jacksonville market?

Daniel Roccanti: 1:02:24

So this is where, like, having a consultant and an advisor really come

Gregg Cohen: 1:02:28

in.

Daniel Roccanti: 1:02:29

This, obviously, this is a very personal question. Jason, I'm going to have this conversation with you, not on live television here. Basically, I'm going to have this conversation with you. We'll set up a meeting. We'll talk about your personal situation. But reality is, if I talk in general, like, what do you want? Where do you want to invest? I'm high on Jacksonville. But all right, are you high on Jacksonville is or do you want to do that? You know, do you want to take you like you said he has three properties It's like do you want to take all three? Do you want to take one? You want like what do you want to do? That is a bigger conversation and then we talk about how to do it in a tax advantage way Okay, so it's not a one size fit all question. I'm high on this. Do you agree with me? Do you want to put your future in here? You kind of mentioned this a little bit. I just wanted to, it's kind of a little off topic, but it's important that in this country to create wealth, to have equity. Okay? Doesn't matter. You don't have to go out there and own a business. You can go work for another company, but then you need to make sure that you're taking the money you have, setting it aside, and putting equity in something, like real estate. Because when we have the pandemic happen, inflation goes, everything pops, people that did not have equity, all of a sudden, they're like, hi, everything's more expensive, my salary barrier went up, and now it's a tighter budget. Everyone with equity was like, well, my equity just popped even twice what inflation was. It doesn't even matter. So where are you at? Are you at the end that you're struggling when inflation pops or you're at the end where my net worth goes up when inflation pops because I hold equity.

Gregg Cohen: 1:04:09

That's what we all lived. Yeah, that's what we all live as a country. That's what we live through. So that is 100 percent true. And I really love your answer too. And Jason's question, You know, there's three things to think about when you're investing in real estate, investing in rental properties. It's the team, it's the market and it's the property. And most investors start by thinking about the property first. And now Jason was talking about the market, which is really great. Most investors start with the property and spend all their time, you know, dedicated and committed to understanding every measurable there. But they fail to think about the market and then they fail to think about the team. And, you know, one of the things that we do when we get to talk to the client, the first thing is we encourage them to do their due diligence on the team. And that's why we have a couple of phone calls, even before we start talking about properties that we think might be a good recommendation for them. So I loved your answer because what you told Jason was let's talk to let's focus on the team. Let's focus on the plan Let's focus on making sure this is the right plan for you. Correct that customized plan It's the same thing that we do at JWB whenever we start a new client relationship as well That's very different than the advice that many people will get out there But the secret is if you have a great team like Jason does right here You have a great team that can support you. It's vertically integrated in your real estate endeavors. They're in that market that you know is a great market. If you do one and two correctly, then the third part and choosing the right property will not only be successful, it will be enjoyable. And so I'm excited that Jason's doing the right thing and talking to you and

Daniel Roccanti: 1:05:38

we'll definitely talk Jason. And you know, obviously I want the best for you in this situation, but you're right. When you start investing outside of where you live, it's a little scary and you have to trust that other people and other teams are in place. I

Pablo Gonzalez: 1:05:52

feel like you guys just dropped a couple of like fundamental golden nuggets, right? Like this idea of. Understanding the why first before you do something and having a team, the idea of prop, you know, not property first, but team first market second. I feel compelled to share to me the ultimate golden, Oh, the, the inflation part of it, right? Like owning equity to me is a, is a major, major thing that really opened my eyes. And you know, it was actually a conversation with Tim Horvath where I was like, Oh my God, why, why am I not thinking like this?

Gregg Cohen: 1:06:24

Yeah.

Pablo Gonzalez: 1:06:24

Where, where I decided to really start going hard at, at real estate. The, the big eye opener for me, which I, which we just went over in one of our last episodes of the natural address show with Lee and Kelly is this idea that we're also taught safe, safe, safe, safe, safe, safe, safe. So you have this thing and then you spend, spend, spend, spend, spend, spend, spend, right? Like, so that you just kind of start depleting this thing and we're living longer and it's not really tied to inflation or not. And all these different things. And when it comes to real estate, if, if it's not just safe, safe, safe, safe, safe, so you can like live off this as a one pile of cash, but it's just like. Get equity and assets, assets, assets that you then live off of that stuff continues to get better with time, even in retirement, right? Like one way you become most vulnerable at your most vulnerable, you have this pile of cash and you gotta be really, really safe with it because. You know, you can't risk that thing, and the market might go up and down, and it might do that to you, while the other one, you have more power, even in your, in your later years, you can do these tax strategies, you can cash out refi, you can, you can liquidate, whatever, right? So, I just think this idea of like, Understanding how real estate fits in, in your retirement portfolio as this like way to hedge against being most vulnerable, you're most vulnerable is, was the big eye opener for me.

Daniel Roccanti: 1:07:39

Yeah. It's all about appreciating assets. Yeah. You know, cash actually slowly decreases over time and in time value of money. So if you're holding too much cash, that's why most real estate investors are asset rich and cash poor because they, they understand the basics of time, value of money. So that's true.

Gregg Cohen: 1:07:55

Cool. And special note there for Jason, that Profits Calculator that we have built is perfect for you actually. So I would highly encourage you to go there, jwbrealestatecapital. com slash Profits. What you can do there is you can actually compare what three properties in Jacksonville will actually return for you. So you can start to answer that returns question. And then if you'd like to reach out to my team, my team can actually compare your Jacksonville property to your Tallahassee properties and see how, Those are likely to perform in the future to really help you make the best decision. And

Pablo Gonzalez: 1:08:24

even blend it, right? Like you don't have the cash all the way out of Tallahassee. It's, it's both ends, right? Exactly. Yeah, totally. Great. So Jen Filson, we call her the fairy godmother of the Knott Traverage Investor Show community. She's here with her friend, Jolene. They're in Maui. No big deal. Easy flex. And Jolene wants to know how you determine the step up basis.

Daniel Roccanti: 1:08:45

So you're going to want an appraisal, basically, just like you do when you buy a house, you know, it usually doesn't cost that much, a couple hundred dollars, working with your CPA or your estate attorney, obviously when someone usually passes away, there's an whole estate. If you're on this, you probably have some kind of sizable assets. You just, I would always recommend having an appraisal. If you don't have an appraisal the IRS can just come in and Have an easier time basically being like, how did you come to that number? Right? Don't go use Zillow's number you can use it as a quick estimate, but you can't use it for your tax returns Go out spend a couple hundred dollars get a real crazy fuck

Gregg Cohen: 1:09:24

And that's something that we can help you out with as well here at JWB We help out all of our clients and many times you have fair market value requests When you're investing in a self directed IRA. So those requests are really normal. We have real estate agents on our team who can provide comparable market analysis, or at least put you into contact with an appraiser that can make it easy for you.

Pablo Gonzalez: 1:09:41

There you go. Yeah. Well, we really haven't talked about it. Just like the white glove experience of being a JWB real estate investor. As someone that has done this myself I can tell you that you, basically, I live in Jacksonville, I haven't even really seen my properties, because it's completely passive. I just talked to somebody about monthly, where they tell me, hey, this is what's happening, this is how it's going, and that's it. Right? Like, it is just like owning the most passive thing that you can knowing that there's a team that can handle anything and everything that happens around it, from these transactional things, if you want to grow, or if you want to get in, To, you know, the inevitable of, Hey, something's happening in my property. We're just going to handle it and just let you know how much it costs. Mike Foster, another great member of our community says, just JWB offer a service of holding the sale proceeds during the. Oh, before I say this, I want to rush to Jim Kirko says, does Daniel take on any new clients? If so, contact info. I put your LinkedIn in the chat. But if you want to just kind of give a, do you take any new clients and info?

Daniel Roccanti: 1:10:39

I'm always taking new clients. So that I never turning it around. Obviously we don't, we would want to have like a discovery meeting where we just got to talk a little bit more about your situation and see where it goes from there. You the information and also I think it's in like the webinar, you know section or whatever But if you don't it's just daniel. raconte at jmco. com

Pablo Gonzalez: 1:11:01

Got it. I'll put

Daniel Roccanti: 1:11:01

in

Pablo Gonzalez: 1:11:02

the chat as i'm moderating this next question, jim okay So mike foster does jwb offer a service of holding the sale proceeds during the 1031 process a

Gregg Cohen: 1:11:11

great question mike We do not perform as qualified intermediaries. That's What I'm talking about here. So no, we're not a qualified intermediary, but guess what? My one phone call away. It's like everything. Um, and we have some incredible relationships that we built up over the years. And so we'd be happy to facilitate that relationship, make that referral to you. And you know, that team is of course held to the same standard of customer service because they know how we treat our clients. So you'll be in really great hands.

Pablo Gonzalez: 1:11:38

Love it. And I put Daniel's email in the chat for you, Jim, and anybody else that wants to shoot him an email, I'll tell you, I try to hire Daniel immediately after our call, and he's like, I don't know if you're a big time enough for me, so I know that you work with sophisticated investors. No, no. No, not what you said, not what you said. I

Daniel Roccanti: 1:11:53

said, let's have this

Pablo Gonzalez: 1:11:53

video first and

Daniel Roccanti: 1:11:54

then let's see if Trump is able to say it.

Pablo Gonzalez: 1:11:57

Just saying, Daniel is, Daniel is somebody that's out there working on major tax strategies. You're not just, don't call Daniel on March to do your tax return, right? Like a long term relationship. If you really want to find a new CPA

Daniel Roccanti: 1:12:09

and really want to have someone, please do not show up during tax season. You need to show up now between the end of the year. Get ready for it. I just

Pablo Gonzalez: 1:12:17

don't want the thousands of people that listen to the show just reaching out to the last minute, man.

Daniel Roccanti: 1:12:20

I mean, most common you got people showing up at like March being like, Hey, or even April sometimes. Like at that point, the best I can do is extend your return and see if we can figure it out. Yeah, yeah.

Pablo Gonzalez: 1:12:31

Okay. So, all right. Jim Kirko, says, sorry about the topic. It's okay, Jim. We got you here, man. We appreciate your time. Can you guys comment on any tax advantages or strategies to use with a real estate professional designation and how to qualify? Do JWB slash Jacksonville passive investments qualify?

Daniel Roccanti: 1:12:47

Okay. So this is a whole webinar on its own. We can literally spend an hour on this. I'm going to give you the quickest answer as possible. Okay. So to be a real estate professional designation, it just means that you have to meet certain active requirements in your real estate, your rental real estate. Okay you got to have about 750 hours in a real property trader business. So what is a real property trader business? That's for another day, but a real property trader business. And then you have to materially participate in your rental real estate. Okay? Half of your activities have to be within a real property trader business. So what you've got to realize is if I have a full time job, take me, I'm a full time CPA, right? I cannot be a real estate professional. All right, so you have to be your full time job Has to be in a real property trade of business that you actually own equity in All right, so just realize that you're probably not going to be this designation if you just work for a company That's not you know that so you're not really a real estate professional. Okay, that's how you be it. So Their activity can it be passive or can or not all the time? All determines if you meet this real estate status There's this crazy thing out there where you can basically elect all your rental real estate together to meet the material participation rules So even if you're not like you were saying with pablo Like I don't even barely ever deal with my rental properties. You could technically still meet it because you are as a whole between all your rental properties still but just realize and the whole benefit of it Is that if your real estate professional status now, your real estate losses are not considered passive. They're considered active They can offset your active income. It's a great status But do realize to meet this is very very specific to your scenario And you need To be talking to your tax advisor about it. A hundred percent.

Pablo Gonzalez: 1:14:33

Real quick, everything that we just said applies to an active person as well as a passive person, right? Like those things that we were just talking about.

Daniel Roccanti: 1:14:40

Correct. Like light counting exchanges and things, it doesn't matter if you're active or passive, you can still take the benefits. The problem is, is if you're having rental real estate losses and you are not considered a real estate professional, that's called the passive activity loss limitations, those losses might be limited. But you still have the same benefits when it comes to electronic transactions.

Gregg Cohen: 1:15:00

Got it. And so for all our projections, and I would encourage all of you to do the same, we assume that you're not going to get the active real estate professional designation. Because if you get that, your tax savings just skyrocket basically. So we assume that you're not, we assume that you're losing your passive losses. But if you can get this, If your lifestyle and your career, you know, go to that direction, it can only get better from here.

Daniel Roccanti: 1:15:24

But real estate can still be a great investment if you're not a real estate professional. Like I said, I do it in my own scenario. I'm not a real estate professional. I will never meet it. I still invest in real estate because it's just a great investment.

Pablo Gonzalez: 1:15:35

Ditto. All right. Mike Foster says, if during the 1031 process, you buy properties of even slightly less value than the property sold. Do you lose a small portion of that tax deferral benefit, or do you lose the entire deferral tax benefit?

Daniel Roccanti: 1:15:49

Oh, it's going to be the small portion. It's called a partial capital gain. So basically the boot, the money that you received. Okay. So if I sold it for a little less. There's going to be some excess there. That excess, like say it's 20, 000, I'm going to have big hell of games over 20, 000.

Pablo Gonzalez: 1:16:05

Easy peasy. Great question, Mike Foster. Jim Kirko's last question. Does flipping meet the material participation in Airbnb?

Daniel Roccanti: 1:16:11

So, flipping is a real estate trader business. Okay, it's completely different than the real estate. It's not the same at all. You should treat it like a trader business. It's actually subject to self employment taxes, but this goes back to, yes, it meets the 750 hours of real property trader business. Okay. And then more than half your time has to be in a real property trader business, but it does not meet the rental real estate. That's completely different. Those, The losses or income you have in flipping is ordinary income, the same as running a business. Okay. Airbnb, oh gosh, here we go. Airbnbs are always a hot topic. Airbnbs are super complex. It all depends on the average use of the life in an airbnb and how your material participation is but it can be airbnb is a little different if your average use of life is under a week Then it's not technically considered rental real estate and it's passive It's considered a little bit more trade or business, but it's a hybrid because it's kind of like a hotel But it's not subject to self employment taxes. You can see how complicated it gets Airbnbs are really, really hard to give advice on the air. I would spend an entire hour just talking about Airbnb. So the question is like all most CPAs give you, it depends.

Gregg Cohen: 1:17:26

It is so nice having a real It's so good! It's so good, man! I get these questions a lot on the show, and I can give like 10 percent of the answer, and then I'm like, we're gonna have to have you talk to somebody like Daniel Ayer.

Pablo Gonzalez: 1:17:37

Signore Roconte, you have done a phenomenal job today, my friend. You came in here a little like, ah, a little nervous. How

Daniel Roccanti: 1:17:44

do you feel? I mean, the lights are bright, it's a little hot. It's spicy out here. But I mean, we had a good time, and most importantly, I hope this just gave some a little education And I hope that, you know, a lot of it, some people will create some generation.

Pablo Gonzalez: 1:17:57

You were, you were awesome, man. This was really, really great. We get a lot of these questions all the time. And the way that you're able to answer them was I learned a ton. I know that the community got a ton of value. I want to thank everybody that showed up, right? Whether they're like Jason, who is one of your friends, or like Jen and Jim, who are one of our friends. We're now, we're now all friends. Yeah. We're now all friends. I encourage you to come on Tuesdays if you want to tune in live or check out past episodes of the podcast, not your average investor show, but if you want to get this thing started, go to JWB real estate capital. com slash profits. Check out that calculator, hop on a call with Greg's team here. Do like I've done and so many of our other Not Your Average Investors have done and just count on the power of a vertically integrated team that has been doing this thing for 17 years. This place is really special here. Everybody that you meet is like, it's like a Chick fil A, right? Everybody's just real happy. GC, any last words about you, my friend?

Gregg Cohen: 1:18:49

It's just really special to, to bring a group here like we have with, with the three of us, all right, slightly different aspects of the real estate community or the tax community or the entrepreneurial community and to really get excited about. Jacksonville and you can really get excited about taxes and hopefully to make it fun and enjoyable for all of you. So really appreciate the partnership that we have. I know all of our clients, especially the ones who showed up who are on the show normally asking all these accounting questions and tax questions. I know they really, really got a lot of value out of it. And yeah, just really excited to meet all the friends from from James Moore as well.

Pablo Gonzalez: 1:19:20

Never take it for granted that you spend an hour and 50 minutes here. Great questions, Daniel. Thank you again for coming. Do you see any advice for everybody? Don't be average.