Prashant Kumar, CCIM - Founder, MyRealtyGains

Prashant Kumar, CCIM – Would you tell me what are the benefits of real estate investing for such high-tech minds?

Omar Khan – Look, I think I’m going to start by just saying that the vast majority of listers predominantly are high income earners. We’re looking at people whose household incomes are 3 to 500,000 USD that give or take at the minimum, and while a lot of people are making that money or slightly more, they don’t feel like they’re rich because they’ve very high-demanding jobs. They’ve got families. Typically, the type of people that have talked about is conservative. They don’t spend money on stupid things. They’re saving and investing. They’ve already emigrated from a country, so they’ve done a lot of hard work. They know how much hard work they’ve done to get to this stage. I tell a lot of those people the same story with my brother-in-law. He’s not an immigrant, but he’s busy. Right. He works at Google. He makes a lot of money. Now, he’s very good with his money. They don’t spend money on stupid things but the biggest expense you have on your books, whether you realize it or not, as a high-income earning family or a person, isn’t your mortgage, say if your kids to go to college or private school. It’s the amount of taxes you pay. If you’re in a state like California, if you say making 400 or $500,000, I’m assuming that’s around 4,50,000. Don’t quote me on that. You’re in the highest tax bracket which means any amount of dollars you make a post that bracket, you’re going to be paying close to 50% in taxes for every incremental dollar. For instance, if you made a million dollars above the highest flat, they’re not making a million. They’re making maybe 500,000. Right. You have to start thinking like that, where is the rest of this money going?

If you’re conventionally investing, say just in stocks, I invest in index cards and mutual funds. If you’re just doing that and you’re not doing other things you have to realize you’re not maximizing the potential returns that you can make for your family. And the big reason for that is look, that the vast majority of the financial advice on offer.By the way, I’m a CFA charter holder. It’s a gold standard of portfolio and wealth management but the vast majority of wealth or financial advice that’s given, look, even the term wealth management, says management of wealth. That assumes you already have wealth. If you don’t have wealth, you have to create wealth first, and you can’t create wealth by taking the same advice.

Let’s say somebody who’s making $100,000 or $60,000 and doing the same thing that they were doing because you make five, six, seven, eight, nine, or ten times the money. You have a very different set of options available to you. If you don’t take advantage of those options, you don’t get into tax advantage vehicles like real estate. You leave a lot of money on the table. Right. And this is something. And again, I’m coming back to my brother-in-law, for example. He knows I do this for a living. He’s a pretty financially sophisticated guy. I was in the Bay Area last year, last month because my wife and kids are traveling. I was in the Bay Area. I was with my brother-in-law. We were hanging out. And during the day because he’s working from home. He was hearing me talk with a bunch of my different investors, similar sort of profile, right? So at the end of the day, we’re just watching I think we were watching TV or a movie or something. So he’s like, okay, so tell me about this depreciation write-off. What are you doing?

And again, he kind of knew it in his head. But it’s like when we were talking right before this podcast, we all know as an example, that we have to eat, right? We have to exercise, we have to meditate. Knowing is one thing, doing it is something different, right? So he knew about all of these things, heard about them but he put them behind of his head, didn’t do anything about it. He and I started talking and I kind of explain, okay, this is what happened. I showed him my tax returns. You see, we make money. This is how many tax write-offs we get. Our tax burden, even though we’re making similar or more money than you, we’re paying no taxes on the money. And he’s like, well, how can you pay no taxes? I was like, well, you get all these write-offs, right? And it got to the point and this is within a ten-minute conversation and he’s an engineer, right. He’s very analytical. He’s a software developer at Google. It got to a point where after 10-15 minutes, he’s like, all right, I’m going to go to sleep, whatever. Next, he was working from home. He didn’t do any work.

He spent the whole day making some complex fancy model, right? He comes back to me at the end of the day and says, hey, do you want to look at this model? And I’ll start I was like, no, I don’t want to look at this model. Right? And he said, look, I sat down for the whole day. I knew the answer in the first ten minutes. I could not believe it and I’m quoting him. He said, look because my sister is doing her Master’s in data science from Georgia Tech, right?

He said if your sister graduates and unless she gets like, say $250,000 job right out of school, which is probably not going to happen because there are good jobs, right. It is worthwhile for her to not do a

job, sit at home and become a real estate professional.

We still take the money that we’re saving and investing, and as a household, we will make more money. You explain this to the average person.

The average person does not understand. Well, how would somebody who’s going to make six figures, how would that household make more money if the person who was going to make six figures stayed at home and didn’t do the job, right? Because we’re trained from day one, do a job, go to work, make money, save it, invest it, the game is rigged.

Okay?

This is not a conspiracy theory. The game is rigged because if you don’t take advantage of the same investments and the same tax rates that other rich people are taking, you’re basically like a McDonald’s worker just for the higher month’s hourly wage.

Prashant Kumar, CCIM – What you are saying to the listeners is to diversify their portfolio?

Omar Khan– Do not just put all that diversify. Just realize that because you were rich or richer, there is a universe of options available to you that is much different than the universe of options available to somebody who makes one-third the money you make.

Prashant Kumar, CCIM – That is correct. Yeah.