Income Taxes and Your Land Business (LA 1585)

Income Taxes and Your Land Business (LA 1585)

Transcript:

Steven Butala:
Steve and Jill here.

Jill DeWit:
Howdy.

Steven Butala:
Welcome to the Land Academy Show, entertaining land investment talk. I’m Steven Jack Butala.

Jill DeWit:
And I’m Jill DeWitt, broadcasting from the valley of the sun.

Steven Butala:
Today, Jill and I talk about income taxes and your land business.

Jill DeWit:
Yay. I tell you I was losing sleep over this. I am so excited, it’s one of my favorite topics.

Steven Butala:
Kidding aside, you don’t have to lose sleep over it, because I do. And it turns out a lot of Land Academy members do, too. And so this is a big topic. We just completed the most recent Land Academy career path program, this was a big topic at the end. And so I did a whole presentation. So I figured I’d do a five, ten minute synopsis here. And really, my whole point being, and we’ll get into it in detail here in a minute, you can’t just let this happen. You can’t let taxes happen to you, like I did when I had a W2 position forever. It’s a completely different scenario. You just let taxes happen to you when you have a job.

Jill DeWit:
I know, because someone else dictates how it’s going to go, kind of thing. You get to say what percentage you want withheld, but that’s about it.

Steven Butala:
Now that you have your own entity, however it’s structured, you have a lot of choices and a lot of control.

Jill DeWit:
I understand. It’s a funny progression with our members like, “Oh my gosh, holy cow, I made so much money.” And then at the end of the year you’re like, “Holy cow, I made so much money.”

Steven Butala:
I made a ton of money and I got to give 50% of it away.

Jill DeWit:
Shoot. What do I do? How do I plan for this? Uh-oh.

Steven Butala:
That’s what we’ll talk about. This is prompted by Jill sitting on the floor, Indian style-

Jill DeWit:
Crying.

Steven Butala:
… in a puddle, writing checks a couple of years ago. We didn’t have to do that last year, fortunately, because of good planning. But two years ago there were crocodile tears.

Jill DeWit:
There were some tears.

Steven Butala:
And I hate that.

Jill DeWit:
Thank you.

Steven Butala:
I don’t want to see you cry ever. Before we get into it, let’s take a question posted by one of our members on the landinvestors.com online community. It’s free, and don’t forget to subscribe on the Land Academy YouTube channel, and comment on the shows that you like.

Jill DeWit:
Eburton wrote, “Newbs. How do you know you have a good deal? Like, how?”

Steven Butala:
I love this question.

Jill DeWit:
I do too. You want to go first?

Steven Butala:
Nope.

Jill DeWit:
Oh.

Steven Butala:
I have a lot to say.

Jill DeWit:
How do I know I have a good deal? It comes in, I hang up the phone, I pull up the map and I glance at my five A’s on the sticky note that’s on my monitor. Access. Yep, it has that. Acreage. Yeah, wow. It’s exactly what I wanted. Attribute. Oh my gosh, look how close it is to the water. Alive. Yeah. I just talked to the guy, now I’m confirming it’s him. This is his name. And here he is, he’s the only one on here. And then affordability. He’s signing this thing and sending it back. Oh. And then, I take it one step further, because I’m assuming I did all my work going into it right on my pricing. I’m going to keep going with this here.

Steven Butala:
Yeah, you should.

Jill DeWit:
And then, now I’m going to go, “I’m going to go double check. Okay. This is all going too well right now.” Now I’m starting to, like, I can feel the butterflies. I’m sweating, my pulse is racing a little bit. Did I screw something up? Now I’m going to jump into some land selling sites, even just Zillow, and look around on the MLS postings and see, all right, what are the other five acres selling for? And then I pull it up and I see, and I’m like, “Okay, don’t get excited yet. Let’s see what’s sold. Holy cow. I can’t find anything wrong with this. I need to get this in.” Now I know I got to run to the bank on this one. That’s how I know. What do you do?

Steven Butala:
Practice. That’s how you know. How do you know the girl you married is the right girl? You don’t.

Jill DeWit:
Practice.

Steven Butala:
You don’t.

Jill DeWit:
Just keep cycling through them. I would argue, with the girl you married, again. There’s a sticky note on your monitor. Crazy? No. Self-sufficient? Yeah. Some life experience? Check. Uh-oh. This is going to well, there’s got to be something wrong with her.

Steven Butala:
The hammers coming soon.

Jill DeWit:
Spending habits?

Steven Butala:
It’s just like your five A’s.

Jill DeWit:
Exactly. That’s what I’m saying. You should have a checklist like this. I used to tell my friends this. Actually this is truth time, I have one of my sweet friends, Holly, I used to say, “Holly, you’ve got to add this.” This is when we were younger. “You got to add these two things to their checklist please. Number one, where do they live? And do they have a car?” It was so funny. Anyway. How are you going to answer?

Steven Butala:
Just practice. You have to screw some stuff up. Here’s the thing, I never had any of this. So when I was buying property and I was only just buying on price. That’s it. We didn’t have Google earth. All these things that we review now, I don’t know. I know the longitude and latitude, which I couldn’t really look up, unless I would open an atlas and say, “Yep, it’s in that section.” And we would buy it, because it was $50 an acre and we’d resell it. And we’d always do okay. Until I started to learn the right way to do it. What I’m getting to is that that’s why you have Land Academy. I don’t expect you as a brand new person to know what’s a good deal and what’s a terrible deal. At all.

Steven Butala:
There’s no way you could know that. And you shouldn’t expect that out of yourself. So here’s what Jill and I did. We devised a Thursday call, and we recorded every single one of them. There’s like 300 of them in there now. And each one is two hours long where all we do over the vast majority of the call is review deals. It’s called, Would You Do This Deal? They’re all recorded. They’re all on landinvestors.com. And if you’re a member, you can access those, and watch us look at countless deals. Thousands and thousands and thousands of deals like, “Yep. I would do it for this much.” Jill’s like, “Nope, I wouldn’t do it because of this, this and this.” And sometimes we’d come together on it. And sometimes we just disagree.

Steven Butala:
The vast majority of the time, at least this year, we’ll have a guest, who’s another Land Academy member, they give their opinion, sometimes two guests like, “Yeah, I would do it. Yeah. I wouldn’t do it. And here’s why. Or yeah, you should get off this phone call and actually go buy the property. It’s that good.” We had one of those this most recent time. So I don’t expect you to know it all. It’s going to take you at least a year, of reviewing deals, your own deals, other people’s deals. There’s a Would You Do This Deal in Discord, too. That everybody says, “Yeah, I would do this deal. No I wouldn’t. Is there access?” It takes a lot of practice. You can’t pick up a guitar and start pounding it out like Eddie van Halen. The first time you pick it up, this is no different. And I’m not joking about dating. Tell me a person where it all worked out the first time, and they’re married and they’re happily married to the first person that they dated. And I will-

Jill DeWit:
I’m sure that happens. They waited till they were 65 to get married. I’m sure that happens.

Steven Butala:
If you are one of these people, if you’re this unicorn, we would like to have you on the show. And I will do my best to get the real, like a psychiatrist, you know? Let’s get to the bottom of this about why you’re lying.

Jill DeWit:
Let’s define happy.

Steven Butala:
It’s not possible.

Jill DeWit:
Let’s define happy and settling.

Steven Butala:
Yes, yes, Jill. Happiness and settling are not the same thing.

Jill DeWit:
Because if you can successfully settle I would argue you’re happy. I’m happy.

Steven Butala:
I still think you should raise your standards on a lot of this stuff.

Jill DeWit:
Yeah, I’m sure you’re right. But it’s a little late now. Again, settling is another word for happy.

Steven Butala:
You know, when you’re in a relationship and you remove money and you remove children, that’s like 95% of it. And so land is no different, when you remove the need for money, which we’ve done in Land Academy, you don’t need any money to do this at all. You know? And I used to worry about saying that because it’s like people that are sitting on the hood of a Ferrari saying, “You can get rich quick.” Which I despise, “And you don’t need any money.” That’s ridiculous. Of course you need money. Well, with us, you need some money for your education and you need to put your time in and really be dedicated. But if you find a good deal, we’ll fund it. There’s a ton of people in our group who will fund it.

Steven Butala:
So yeah, when you say start eliminating these things that make your path to success easier, then you’re going to get there. It takes a lot of practice. This is truth time. If you’re brand new, you’re learning like real estate terminology, this is going to take you at least a year to really make it profitable. I don’t think you’re going to lose money, but it takes a lot of practice. That’s the truth. This is a good question. It doesn’t get asked often enough.

Jill DeWit:
I agree. Very good question.

Steven Butala:
Today’s topic, in top income taxes in your land business? This is the meat of the show.

Jill DeWit:
Everyone.

Steven Butala:
I’m going to give you three examples of people in this country that make money. We are the third example. We, meaning all of us Land Academy people or land investors or real estate investors.

Jill DeWit:
Okay.

Steven Butala:
Number one, a person who works at Walmart. Number two, a successful anesthesiologist that works for a healthcare system like Mayo. And number three, land investors. Number one, the person that works in Walmart, gets minimum wage, or maybe a little bit higher than that depending on where they are. They work a ton of hours. They file a tax return at the end of the year, or somebody that files it on their behalf and they get money back and they don’t owe any taxes because they don’t make enough to pay taxes. That’s W2 income, period, they don’t have any expenses that they can truly deduct from their taxable income. They may have some stuff like single-parent credits and all kinds of incentives to not pay taxes that the government provides. As they should at that income level. That’s my opinion.

Steven Butala:
Fast forward to an anesthesiologist, exact same structure. Exactly. W2 income, they get a paycheck from the healthcare system that they work. Albeit it’s a different paycheck. You know, anesthesiologists can make a million dollars a year. But they don’t have any control over it. They file their taxes at the end of the year, a bunch of tax was withheld, there’s a pretty good chance they might get some money back, because so much taxes that withheld. They hit the top of the tax bracket. Whereas the Walmart employee hits the bottom of the tax bracket, but it’s the same. That’s the top of the W2. All the research I did, that’s the top of the W2 income, million bucks a year versus the minimum wage. And then there’s everything in between. Plumbers, contractors, interior designers, anybody who’s got a job, all the tech industry, W2 employees. No real control. Then there’s us. And us I mean, this collective community of real estate people, where we are self employed.

Jill DeWit:
Is it any entrepreneur are you referring to in us?

Steven Butala:
Yes.

Jill DeWit:
Okay.

Steven Butala:
If you own a convenience store, if you own any type of manufacturing facility. But let’s stick to land investors, because it’s basically the same. I don’t care if you have an LLC or sole proprietorship or whatever, or just quite simply, a side hustle is what I’m talking about. Maybe you have a W2 job and you’re doing this thing on the side until it kicks in and you can do it full time. You have an amazing opportunity, truly an amazing opportunity to incur expenses that are ordinary and necessary for your business. Is it ordinary and necessary for you to have a computer to succeed at this? Heck, yes. Do you need workspace? Yep. If you have a show, if you have a podcast, is it ordinary and necessary to have a camera? Yes. And on and on and on, you can play this game with yourself endlessly until your taxable income is very small.

Steven Butala:
And so you have control. Congratulations. You’ve given yourself control and when is less control over this stuff better? Name a time when, “No, I really don’t want to have control over my destiny, I just want someone else to take care of it. I want someone else to tell me how much taxes I have to pay. I’m going to go to H&R Block. They’re going to tell me how much money I get back.”

Jill DeWit:
“I’m going to write them a check.”

Steven Butala:
60% of the people in this country didn’t pay any taxes last year.

Jill DeWit:
That is really amazing. When you showed us that part.

Steven Butala:
Sorry, 60% of the households, that’s even worse. It’s more people than that. I guess they prefer it that way. I guess they just want someone to say, this is my tax rate. Show me where to go. I need a paycheck to live and I’m going to jump in the river and let the river just tell me where I’m going to go. Well, where it goes is a waterfall. Let me tell you that.

Jill DeWit:
It goes to Niagara falls.

Steven Butala:
My point is this. And we, in career path, we got spreadsheets, and great detail about the things that you can expense and not expense and where the lines are. I’m not going to do that here today at all. This venue is not conducive to that. My point is this, and I’ll leave it on this. You have complete control. You have more control than most people in the world over the amount of taxes that you pay. Jill’s going to talk about that a little bit more on Friday.

Jill DeWit:
I was going to say one thing too. For you listening that are going, “Great. What do I do?” You interview a bunch of accountants. We just got into a huge discussion on that, just the other day, too. A couple of different times we’ve had this discussion with people. It’s not one size fits all. Two, you’re going to have to go through accountants till you find the right one that understands you, understand your business, and can really help you. Just, we talked about this. So when Chuck said this, Chuck said, “Think about this,” which is true, “You put three attorneys in a room, give them a scenario. They’re all going to have different answers. It’s the same with accountants. You put three accountants in a room, tell them what’s going on. They’re all going to have different answers.” So you’re–

Steven Butala:
And you’re going to g-

Jill DeWit:
… Yeah. Go ahead.

Steven Butala:
You’re going to glom onto the person that you identify with the most. Who sees your point of view about generally paying taxes and all of that. And so there’s accountants who believe that they just want to just tax your revenue, that you shouldn’t expense anything. Or I had a discussion with an accountant that said, “When you own an LLC you can get a paycheck.” Which Jill and I have been doing for decades. And so whenever you make more money, then you should just increase your salary. So you’re paying payroll taxes the entire time. Which that’s outrageous advice. They should be locked up for that.

Jill DeWit:
On that note.

Steven Butala:
An amazing opportunity to, in a very ethical, and it’s set up for you. This whole system in this country was created for you, the entrepreneur. This is America.

Steven Butala:
Taxes are important. America is important. And people are taking a poop on both of those situations right now. And so I’m really serious about it. 60% of the people in this country don’t pay taxes and if you ask them, they don’t believe that they should. We pay taxes. It’s our obligation to make sure that we manage this. Don’t let it happen to you, minimize your taxes ethically and legally, and plan for your tax. My whole point is this, really. You can’t let this happen to you. It’s what, what month is it? September. I’m going to spend a substantial amount of time between now and the end of the year, micromanaging our tax situation to make sure that we don’t overpay on our taxes. And we don’t underpay, quite honestly. More overpay than underpay, and I’m going to make sure that it’s ethical and legal.

Jill DeWit:
Thank you for tuning in. If you’re a Land Academy member be sure you join us on Discord.

Steven Butala:
We are Steve and Jill, Whatever-

Jill DeWit:
And inspiration-

Steven Butala:
… to buy undervalued property.

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