Introduction

Every election cycle, taxes are an issue. Having just finished the mid-term elections in 2022, the question, "Why do you keep paying unnecessary taxes," only came up in a few states. Most issues were focused on debt relief, crime, and Covid handling. Keep your ears peeled wide as we enter the 2024 presidential election cycle. It's coming.

A couple of taxes that are crushing the American people these days are inflation and income taxes. Today, let’s use our time to discuss these two huge issues and how a simple strategy can actually save you a ton of money like the billionaires we love to pick on.

Inflation

Over the last year, inflation has been at 40-year highs peaking around 9%. The Fed slammed on the breaks to the economy when they effectively shut off the money supply by raising rates. We've been sold the story that inflation is based on the cost of a basket of goods like groceries, supplies, rent, etc.

Unfortunately, that narrative is only the measure of the symptoms created by inflation. It's like saying the problem is the 104ºF fever when it’s the infection inside that needs treatment.

True inflation is actually the supply of money. Money is created through inflationary practices by creating more money out of thin air through fractional reserve banking. The Feds encourage lending by reducing their short-term rate, and they reduce supply by discouraging lending with higher rates. Simple in theory, but the effects are long and deep.

In 2008, they opened the floodgates with the well-known multibillion-dollar bailouts to banks, the auto industry, and other "too big to fail" corporations. Unfortunately, small businesses and average working-class folk were left with the bill.

Fast forward to 2020, the Fed again stepped in to "help" stimulate the economy by lowering rates. (by the way, there is a whole lot more to this and I'm really oversimplifying the story here.) This time the Fed and Washington stepped up and sent out Trillions in relief through stimulus checks to individuals and businesses. This time the checks were politically hidden to avoid bad press around "too big to fail". This time they made trivial payments to quell the masses.

In addition, through fractional reserve banking, people saved a lot of their stimulus money which opened the floodgates for lending. When the banks can lend at a 10:1 ratio. Lend $10 for every $1 they have in reserve. That means $9 dollars didn't exist before the banks created loans pumping trillions into the economy.

With this much money supply hitting the streets, the cost of goods rises. People feel wealthy and they spend. High demand drives up costs. Add in supply chain disruptions and drive demand even higher.

This is one of the biggest taxes on the American people that no one calls a tax. Officially it's not. Imagine the value of your dollar losing 20% of its buying power every year. Well, that's ultimately what is happening through the inflationary practices of our money system.

In 1955 a modest 3 bedroom 2 bath home could be purchased for $7500. In Albuquerque, our average 3-bedroom house in 2022 is $350,000. That's a 4566.67% increase in value over 67 years or 68% annually. The house didn't change and in fact, it's no longer new, so old home problems. What changed is the hidden tax inflation.

Towards the end of the article, I'll discuss a strategy to help offset inflation and start building your wealth for real like the wealthy.

Taxes

One of the biggest barriers to building wealth is giving away your hard-earned dollars to the tax man. Unfortunately, the W-2 income or wage earner is the highest-taxed person in our country.

Why? Because the government doesn't offer any incentives to be employed. The government's agenda is to incentivize small business owners and property owners to employ people, so they offer a lot of different tax breaks. Keep in mind that corporate tax rates are considerably higher than the individual, so the taxes collected are significant.

Look at the tax tables over the last 12 cycles. I spent some time compiling a comparison so you can see how they actually compare from 2012 - 2023 under three different presidents.

It is important to note that this is only for example sake, and I am not a licensed tax professional. Be sure to consult your tax advisor to see how this works with your income structure. I used the married filing joint bracket for this example.

Notice that politically, each time a new president takes office they fight for changes to the W-2 tax rates. The income listed on the top line each year represents that year's Median Household Income. As of this writing, 2022 and 2023 are not published.

In 2023, an interesting change is coming. While the government is fighting inflation and taxing us through the back door, increasing their budget and increasing the US debt to never before seen levels, they are also raising the income thresh holds significantly.

My guess is that if you are reading this, you are an aspiring accredited investor with either a household income of over $300,000 or a net worth of over $1,000,000. As of this writing, the SEC is in talks of raising the net-worth requirement to be considered accredited which will greatly limit investment opportunities for a lot of people. At the $300,000 level (SEC minimum to be accredited), the tax burden is $58,800 per year paid in federal taxes. Don't forget your state and FICA taxes on top of that. It is more than 20% of your income paid out towards taxes.

If you thought inflation at 8% was bad enough. The reality is that all of the taxes we pay through our income, sales taxes, property taxes, etc. plus inflation hits nearly 50% of our income every year!

Most of the accredited investors we work with are also either self-employed or high w-2 income, high net-worth individuals looking for investments to grow their portfolio, increase their passive income, AND REDUCE their tax burden. We're in the business of working hard to advance OUR personal undertakings, yet everyone else has a hand out extracting from our pockets.

So what do we do?

Solution

What if you could invest in assets that have historically grown during recessions and especially high inflationary periods?

What if you could invest in assets that are tied to real property that are incentivized by the IRS to lower your tax burden?

What if you could see an increase in your retirement portfolio that is growing with tax deferment or tax-free to even higher returns?

We are big fans of investing in alternative asset classes that reduce risk and increase wealth, unlike traditional market-sanctioned securities. We focus on commercial multifamily apartments. By providing a limited partnership security instrument through a 506(c) offering, these alternative investments fall under the IRS rules for passive investing.

The IRS considers investing in limited partnerships as passive income and they provide incentives to reduce the tax burden on these types of investments. In Sept 2017 Congress passed a Jobs Act that authorized the IRS to provide 100% bonus depreciation to be utilized through Dec 2022. Over the next few years, they are phasing the bonus depreciation down 20% each year until it is finished with the last 20% bonus depreciation in 2026. By 2027, this is gone.

Our current offerings in Allen, TX (200 unit class B apartments) and in Atlanta, GA (208 unit class B apartments) are estimated to yield a 40-80% depreciation against any investment in those deals. Positions are still available on these now-performing assets we own in our portfolio. Sign up to partner with us! For example, a $100,000 investment is estimated to see a passthrough loss of $40,000 - $80,000 in 2023 against 2022 taxes.

Passive income distributions start paying out in December on the Atlanta asset and in Sept 2023 on the Allen, TX asset. Essentially, these assets are creating income and showing losses helping shelter tax burden. For any qualified real estate professionals (an IRS tax designation) these losses can even be used to offset taxes on ordinary income.

What does that mean? It means that real estate professionals can use, let's say a $60,000 loss on their Limited Partnership position to offset that $60,000 tax bill on their ordinary income.

As a licensed real estate broker in New Mexico, I know a lot of brokers who don't invest in real estate and who do not have any retirement savings outside of the traditional markets. This is an amazing tool for licensed real estate brokers and agents who earn high incomes and high taxes. Their tax burden it extremely high.

Other folks we see this work with are doctors, dentists, engineers and other professionals who may own a few rental properties that qualify them as real estate professionals, but they aren't getting the losses they need against their tax burden.

Inflation and fear of recession have people scared and running from real estate based on a knee jerk memory of 2008-2012. During that time, residential real estate declined in value for 4 years straight. Right now big time economists are looking at 2023 as a minimal decline (will not erase gains over last 2 years) and a modest increase in values starting in 2024.

Historically, real estate has been the driving force out of recessions. When demand picks up, so do values.

Historically in commercial multifamily, recessions have shown increases in occupancy levels, stable rental rates, and solid stable growth. Inflation causes rents to increase in commercial multifamily assets. When rents increase, so does passive income.

With a historic hedge against inflation, a 'safe' refuge against recessions, and IRS sanctioned tax shelters, these assets outperform their traditional assets on Wall Street all day long. During recessionary periods, many people have experienced 20-50% or more declines in their portfolio values in relatively short periods of time. That type of volatility does not happen in the multifamily space.

Summary

Look, I get your skepticism.

It is natural when the only news you listen to is mainstream media. Fear is not an investment strategy. Fear paralyzes and is the catalyst for losing a lot of money through emotional investment decisions. Within the ranks of top billionaire investment strategies is to buy when prices drop and everyone else is selling. Reduced demand creates a SALE of assets that makes billionaires and multimillionaires even richer.

The biggest taxes on our money and on our labor are inflation and income tax. With the simple multifamily investment strategy of reallocating your existing portfolio and retirement accounts into hard assets, you can participate in one of the greatest drivers of wealth creation. Your other choice is to hold on where you are and continue to lose money through false hope in a faltering system.

The system is designed to make money by the people who designed it. All you have to do is start playing by THEIR rules of investing, not the rules they give you to stay in the system.

For more information on how you can easily step into the ranks of mega-rich investors, visit our deal flow page to see what offerings we have available at the moment.

NOW is the time that creates Millionaires!

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