Today we're joined by Alik Levin, principal technical manager at Oracle and a client of The Real Estate CPA. Alik has also recently released a book: Own Your Future with Real Estate: The Quick-Start Guide to Replacing Your Salary by Renting Out Single-Family Homes.
In this episode we discuss why Alik chose real estate, how he scaled his portfolio, his book, and, as always, his favorite tax strategies.
Why Real Estate?
Alik began investing in real estate in 2016 after reading Rich Dad, Poor Dad. He began to understand the difference between savings for retirement and income for retirement.
8 Benefits of Real Estate: Cheap insurance, straightforward leverage, equity, appreciation, tax benefits, risk-sharing, demand, and finally, real estate is a business. With exposure to these factors, many more doors are opened and you perspective on the business world can change.
Alik believes it's the most familiar type of investment with the lowest barrier for entry. There is likely less of a learning curve than investing in other asset classes.
Scaling a Portfolio
BRRRR Method - Buy, Rehab, Rent, Refinance, Repeat
Building a house from the ground up is also more aggressive forced appreciation. When you build a house from scratch, the bank still appraises it at market value, so there is an immediate large jump in equity.
Alik believes education is key to scaling a portfolio. As your portfolio expands, it's important to stay ahead of other issues such as taxes and bookkeeping. This requires discipline and routine. You must be aware of all aspects of the investment that require your attention - this will also allow you to hire a professional when it's the best idea!
First, you must find a tax professional that understands real estate. Alik believes this is the most important tax strategy! It's often not easy to build your team of professionals, so you must vet your team. A tax professional can help you plan your year so your moves are tax-optimized. If you only speak with your CPA come tax season, there is no strategy that can be applied - this is a plan that must be developed and executed during the year.
Being aware of depreciation and depreciation recapture is important, and even a cost segregation study if applicable to any of your properties
The real estate professional status is important to consider, as you can use your passive real estate losses to offset ordinary income.