Wealth Formula by Buck Joffrey

Latest Episodes:

401: Real Estate Market Trends Nov 26, 2023

Show notes

A lot has happened over the past year in real estate. It goes to show how quickly things can change.

Unless you have been living in a cave, you know that interest rates went way up really quickly. When that happens, housing typically goes down in value significantly.

Oddly enough, in much of the country, that wasn’t quite the case. Why? Well, there wasn’t much inventory. Record LOW rates created both a frothy market and a huge amount of liquidity in the housing market.

People thinking of selling at that time sold. People thinking of buying were able to buy much more expensive homes than they normally could because of cheap money. And many of them locked those rates in.

When there was a huge increase in interest rates, liquidity in the markets went way down keeping prices still elevated because of a supply and demand imbalance.

A similar story was seen in investment real estate that is largely driven by cap rates. The difference being that much of investment real estate is purchased on floating rates. And, as many of us have seen, that has resulted in forced selling.

Anyone who does not have to sell right now is not selling. Those who are forced to sell are losing money. This period in time for real estate investors will be emblazoned in our memories the way the financial crisis of 2008-2009 is. Hopefully some of us will also take advantage of what is occurring like people did in 2010.

I anticipate 2024 will be a time with blood in the streets as many rate caps are expiring. This will be a great opportunity to pick up properties at significant discount. And those who do will very likely be rewarded for the ice in their veins.

Why? Because predictions of lower interest rates in 2025 are overwhelming. If those predictions come true, it will create a situation where the investment real estate market becomes frothy again. People unable to hold on to properties is 2024 will be the biggest losers because they didn’t do what they had to do to stay in the game.

I know that staying in the game is not easy. For many of you, this period in real estate time has been the first and only time we’ve ever experienced loss. We know rationally, that, investors are not supposed to win every single time but that’s what we witnessed for the past 14-15 years and we got used to it.

But real estate is like every other asset in that it has cycles. This cycle ended abruptly and violently but another one is about to start.

In this week’s episode of Wealth Formula Podcast, you’ll once again hear from an expert on the real estate market from the National Association of Realtors.

When you hear what he has to say, along with other economists, you will understand why the mantra in the real estate investor ecosystem continues to be, “stay alive until 25”.

400: Trying Not to Run Out of Gas in Your Tesla Nov 19, 2023

Show notes

When I moved to Montecito a few years ago, I was amazed at how many people didn’t seem to work.

To be clear, we don’t have a homeless problem out here. We just have a lot of people who own businesses. And it’s not quite true that they don’t work. They just don’t have regular hours so there’s a disproportionate number of people hanging out during the day.

Of course, I myself am a business owner and my businesses have experienced their fair share of pain over the last several months. In fact, my cosmetic surgery business in Chicago finally went out of business after almost 15 years.

And I know it’s not just me. Everyone is slow and it seems like there are layoffs going on everywhere—lots of skilled people are losing their jobs.

So I have been racking my brain trying to figure out why the economy is supposedly doing so well. I have come to the conclusion that we are not looking at the right indicators for the time that we live in.

It’s like we bought an electric car but are still watching to make sure we have a full tank of gas when we should really be paying attention to the battery charge indicators.

We’ve always judged the economy in terms of two major indicators: jobs and GDP. And those numbers haven’t looked that bad even after a year of oppressive rate hikes.

But what does the jobs report really tell us? Is it telling us that many people left the workforce during COVID-19 and never came back? After all, you are only considered unemployed if you’re actively trying to work.

And when you see all those new jobs added to the jobs report every month, is that taking into consideration the additional part-time jobs people are taking just to make ends meet? The numbers we get make no distinction.

The bottom line is, I am convinced we are missing something that will become very clear within the next 12 months.

My guest on this week’s episode of Wealth Formula Podcast believes this too. Believe it or not, he’s an Austrian economist I discovered on TikTok. And, because of him, I now have a TikTok account and you probably will too!

Show Notes:

00:05:59:05 Who is Peter St Onge?

00:09:20:23 Is there such a thing as true conservative economics in the modern political system in the US?

00:13:44:01 Is the economy actually doing well?

00:16:38:18 Why is the job rate going up when people are getting laid off?

00:21:38:03 Why high GDP might not suggest a strong economy

00:25:57:21 Statistics on Bankruptcy

00:28:50:18 When is the next recession coming?

00:35:40:04 Why have we not seen more regional bank failures?

399: Tax Mitigation Strategies in Real Estate Nov 12, 2023

Show notes

It’s NFL season and I’m still glued to the TV despite my team’s rough start and the fact that we lost our starting quarterback for the year.

In case you don’t know, my team is the Minnesota Vikings and our starting quarterback was Kirk Cousins who just went down with a brutal Achilles tendon tear.

Kirk makes a lot of money—$30 million in 2023. Of course, when we think of professional athletes, we generally think of them as crazy rich so you might not be surprised.

You might be surprised to know, however, that the actual median salary in the NFL in 2022 was only $860,000 per year. I know for a fact that a lot of you Wealth Formula listeners make more than that.

You know what I think of when I hear numbers like that? I think about how much they must be paying in taxes. Kirk Cousins is probably paying at least $12 million of his salary in taxes. And those guys at the median salary level are probably paying out almost $400K. They are, after all, W2 wage earners.

Again, no one is starving even after paying those taxes but it certainly puts things in perspective. After all, it’s not really about how much you make. It’s about how much you get to keep.

Every person’s finances are like a small business. You have income coming in and you have expenses going out. A small business is going to do whatever it can to decrease expenses so it can keep more profit.

So, if you are a business, what is your biggest expense? Probably taxes. And if that’s the case, what are you doing to try to reduce those expenses and bring more money to your own bottom line?

To be clear, we aren’t talking about anything illegal here. As it turns out, there are plenty of things the government wants you to do that will help you save on taxes. My friend, Tom Wheelwright, calls the tax code simply a series of incentives.

That’s the smart way to look at it. As it turns out, your best way of saving on taxes tends to be through the way you invest. And, there is simply no industry that has more tax benefits than real estate.

I truly believe this and want you to understand why. If you choose not to act on this information, that’s fine. But at least know what you are missing out on so you can only blame yourself. I am always amazed at how extremely financially sophisticated individuals have no idea what they are missing.

This week’s Wealth Formula Podcast reviews some of the major concepts in tax mitigation via real estate investing. There’s something here for everyone including those new to the game. So make sure to tune in.

Buck

Show Notes:

00:09:30:01 How are people overpaying taxes?

00:10:34:14 How to get around active income with passive investments

00:18:55:22 Real Estate Professional Destination

00:21:19:24 Audit protection

00:22:29:07 Getting the benefit of being a Real Estate Profession through your spouse

00:24:25:19 Getting the benefit of being a Real Estate Profession with short-term rentals

00:25:29:15 Should I put my real estate in an LLC?

00:26:48:22 The role of a C-Corp

00:28:51:10 How to audit-proof your returns

00:30:45:18 Are you more likely to be audited if you are a Real Estate Professional?

00:32:24:16 How to use your kids to reduce tax

00:34:06:15 What is the cost segregation analysis

00:38:43:18 Upcoming new tax laws

00:42:34:21 Learn more about Keystone CPA

398: There’s More to Alts than Real Estate Nov 05, 2023

Show notes

The world of real estate is kind of a cult. Members of this cult tend to think that pretty much anything outside of real estate is just a waste of money.

I used to subscribe to this religion. And, for the most part, I still kind of do. My portfolio is largely real estate and I truly believe it is the most tax-efficient consistent way of building wealth out there.

But it’s not the only way. I’ve made plenty of money as an entrepreneur and I know that you can make a lot of money in other kinds of business as well.

The key to making money in any of these endeavors is to know what you are doing. I know how to start businesses and I know how to make those businesses profitable, but I don’t really know how to buy them or know which business to invest in.

It’s good to know your weaknesses because they are often not insurmountable. If you don’t have the expertise, you just need to find someone who has it that you can trust.

That is the primary reason that we have partnered with Zulfe Ali in Investor Club. These days Zulfe is a broker-dealer.

But prior to that, Zulfe spent decades in mergers and acquisitions at the largest banks in the world and was the chief investment officer of a sovereign wealth fund in the Middle East that acquired multibillion-dollar businesses on a regular basis.

My goal in bringing him on board is to develop a broader platform of investments in the Wealth Formula ecosystem and, frankly, in my own portfolio. I want to create a platform where all of our investments are of institutional grade whether that be in real estate or any other asset class.

A platform like this for individual retail investors like us does not currently exist. I know that there are plenty of offerings outside of real estate that you see on a regular basis through the podcast ecosystem but I must tell you that I am wary of most of them.

Too many people have been ripped off because the people raising money are either unwilling or unable to do the level of due diligence needed to make sure that an opportunity is real or economically viable.

Hopefully, we can change that with what we are rolling out with the help of Zulfe. He introduced me to today’s podcast guests so I feel comfortable exposing you to them. These guys, in particular, are in the commercial transportation industry and this week’s podcast will focus on an asset class that you are probably unfamiliar with but is dominated by institutional money: the commercial airline industry.

This is one of the areas in which we are currently doing due diligence and my guests today have been identified as a potential partner for our group.

Make sure to tune in. This industry is fascinating and I believe worth consideration as a future addition to your portfolio. Start learning about it now.

Buck

397: Prenups and Postnups: Marital Finance 101 Oct 29, 2023

Show notes

No one getting married thinks that they will ever get divorced. I can tell you that from personal experience.

Yet over half of American marriages end up in divorce. I was lucky in that I had an amicable break-up. Most of the divorces I’ve seen in the past few years have been ugly.

I have two friends finally get through divorces in the last two years. In both situations, the men originally offered what they thought were fair settlements that their wives rejected.

In both cases, the divorces lasted for years costing hundreds of thousands of dollars. And, in both cases, the wives ended up with LESS than originally offered.

But it wasn’t just the ex-wives who lost out. No one wins in an ugly divorce. The kids suffer and there is a huge emotional and financial toll to pay for both sides. The only winner is the divorce attorney.

Knowing this should be enough to convince anyone to have a prenup in place before getting married or even get a postnup in place after the fact.
But it’s not that easy. How do you even bring up a prenuptial agreement when you are in love with someone and planning a life together?

My guest on Wealth Formula Podcast specializes in this area of the law and has experience at the highest level of prenuptial complexity with celebrities, athletes and ultra high net worth individuals.

The issues, whether they are emotional or financial, are often the same and he has great perspective on how to approach these sensitive issues.

So, whether you’re married, divorced or just curious, make sure to tune in and learn the basics on prenups and postnups. LISTEN HERE.

Buck

396: Preparing for 2010 Oct 22, 2023

Show notes

The financial meltdown of 2008-2009 feels like ancient history. And like tragedies that happened long ago, it feel more historical and less emotional.

I remember going to Pompeii several years ago and seeing people turned to stone from Mount Vesuvius erupting. It must have been horrific. But time has made it more of a museum than the scene of an awful natural disaster.

That’s the way most people look at 2008 as well—as ancient history. But for many it was a very emotional time. But those who stuck to their guns and took advantage of blood in the street thrived for more then a decade afterwards.

A very good friend of mine is an incredibly successful entrepreneur in the real estate space. At the time, he was building multimillion dollar houses for celebrities.

He was a household name in Los Angeles. Every famous person wanted a house that he designed. But like many successful real estate people, he got hit hard during that time and lost a lot of money.

It was also around that time that his focus was turning towards hotels. By 2010 he was seeing incredible opportunities on hotels and was looking to raise capital to take advantage of the market. But no one wanted to invest. Even though things were at a steep discount, people were just too afraid.

Fast forward to today, my buddy stopped trying to raise capital and ended up doing everything on his own. And now, he’s in the middle of a $100 million 1031 exchange. And that’s just one of his hotels.

That time for buying is around the corner again. 2010 is coming. Investment real estate is being hit really hard and its important to keep calm and wait for the opportunities that come before you.

My guest today is a new partner that I am going to ride the wave with when there is blood in the street. He’s been here before and has had a stellar record even in these tumultuous times.

In this episode you’ll see how he has not only survived but thrived in this market and also how he intends to take advantage of the coming distress.

Listen NOW!

Buck

395: Tax Free Wealth and the Zombie Apocalypse Oct 16, 2023

Show notes

I’m not a doom and gloom podcaster as a general rule. There are plenty of those out there predicting the zombie apocalypse.

However, I have to say that I’m pretty sure I’ve been seeing some questionable zombiesque characters running around town lately.

It has occurred to me, however, that most people are not seeing what I am seeing. After all, the job markets are humming along just great and inflation, while still high, has decelerated.

If you are a high paid professional, you are cranking away at your day job and nothing really seems that much different because a little bump in the price of groceries isn’t a big deal to you.

In fact, you might be irritated that your investments haven’t been performing well and wonder why.

But from where I am seated, I have to tell you, it’s kind of scary out there. The investment real estate market is in turmoil and there is significant amount of distress because of the steepest increase in interest rates in American history over the last year.

Real estate syndicators like me are all chanting the same mantra across the board, “stay alive until 25”.

The office sector of real estate is already bathing in blood. The majority of that debt is held by small regional banks. It is hard for me to believe that we won’t have further bank failures.

And it looks like we are about to have another war in the Middle East. What do you think that’s going to do to energy prices?

Guys…it’s kind of scary out there. Pay attention. 2024 is likely to be a very tough year and there will be pain. And the global economy is not the fault of one person or a single company so stop pointing fingers.

Now there is a silver lining to this all. As much as these transitional periods cause pain, they are also opportunities. Everyone successful says the same thing. Those who can overcome their own fear and can act rationally during this time will be in for the best investing years of their life.

In the meantime, take the time to make sure you’ve taken care of housekeeping items. Make sure your asset protection is in place. Make sure your estate planning is done and that you have adequate life insurance coverage. Do the mundane things that have to be done for proper personal finance plans.

Tax planning is part of that. And, if you haven’t really sat down and thought about how to mitigate your own tax liability, you should do that now.

My guest on Wealth Formula Podcast this week, Tom Wheelwright, is the smartest tax professional I know. Make sure to tune in to our discussion about taxes and his 5 decades worth of perspective on today’s global economy.

Buck

394: Beyond Real Estate: How to Cash Flow with Stocks Oct 08, 2023

Show notes

My portfolio is not what most would call diversified. I am about 70-80 percent real estate, 10-15 percent permanent life insurance and about 10-15 percent higher risk stuff. My only stock exposure is only high-risk stuff like mining companies on the Toronto Stock Exchange. To be clear, I am not advocating for this approach. That’s just what has worked for me up to this point in my life.

I should add that, unlike ten years ago, I am also far more open minded to expanding my investments into different areas. That’s why our investor club started working with a broker dealer/RIA better versed in private equity and paper assets.

Unlike 10 years ago, I am no longer dogmatic in my “alternative asset or bust” position. In fact, as a general rule, I have softened on many of my more emphatic beliefs. My gray hairs have now convinced me that it just makes sense to have an open mind.

I still believe that alternative assets are where the life-changing opportunities are but there are other considerations such as sector diversity, hedging and cash flow. Cash flow is not what you typically think of when you think of paper assets, but it is something that you certainly can create with stocks in very unique ways that don’t involve simple dividends.

Andy Tanner wrote a book about this kind of investing in Robert Kiyosaki’s Rich Dad series and there is really no one better at explaining it then him. So, if you want to continue to explore other ways of investing your money, make sure to tune in to my conversation with Andy on this week’s episode of Wealth Formula Podcast.

Buck

393:Economic Impact of Emerging Technologies Oct 02, 2023

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392: Back to School: Tax Mitigation Sep 27, 2023

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