Today's guest is Tom Wheelwright

Tom is a CPA, CEO of WealthAbility®, Rich Dad Advisor, entrepreneur, international speaker, the bestselling author of Tax-Free Wealth and The Win-Win Wealth Strategy. Join Sam and Tom in today's episode.

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[0:00] Intro

[0:51] The 3 questions

[1:57] Scaling CPA firms

[5:38] Things to hyperfocus on now

[10:08] Cost segregation firms

[12:09] Solar opportunities

[20:05] Doing well / Making mistakes

[24:41] Closing

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Connect with Tom:

Facebook: https://www.facebook.com/4wealthability/

Twitter: https://twitter.com/WealthAbility

Instagram: https://www.instagram.com/tom_wheelwright/

Linkedin: https://www.linkedin.com/company/wealthability/

Web: https://wealthability.com/

Connect with Sam:

I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.

Facebook: https://www.facebook.com/HowtoscaleCRE/

LinkedIn: https://www.linkedin.com/in/samwilsonhowtoscalecre/

Email me → [email protected]

SUBSCRIBE and LEAVE A RATING. Listen to How To Scale Commercial Real Estate Investing with Sam Wilson

Apple Podcasts: https://podcasts.apple.com/us/podcast/how-to-scale-commercial-real-estate/id1539979234

Spotify: https://open.spotify.com/show/4m0NWYzSvznEIjRBFtCgEL?si=e10d8e039b99475f

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Want to read the full show notes of the episode? Check it out below:

00:00:00:00 - 00:00:22:07

Tom Wheelwright

If you're in a location, if you have commercial property in a location that gets decent sunshine and you're not doing in solar, you're missing out on one of the easiest ways to make money there is right now. I mean, consider you get a 30% tax credit and with 80% bonus depreciation, you get a 65% tax deduction.

00:00:22:23 - 00:00:29:04

Intro

Welcome to the How to Scale Commercial Real Estate Show. Whether you are an active or passive investor. We'll teach you how to scale your real estate. Investing business into something big.

00:00:31:16 - 00:00:49:04

Sam Wilson

Tom Wheelwright is a tax and wealth expert. He's a CPA CEO of Wealth Ability. He's a rich dad, advisor, an entrepreneur, international speaker, and the bestselling author of Tax Free Wealth and the Win Win Well Strategy. Tom, welcome to the show.

00:00:49:23 - 00:00:51:12

Tom Wheelwright

Thanks for having me, Sam. It's great to be with you.

00:00:51:16 - 00:01:01:16

Sam Wilson

Absolutely, Tom. The pleasure's mine. There are three questions I ask every guest who comes on the show in 90 seconds or less. Can you tell me, where did you start? Where are you now and how did you get there?

00:01:02:16 - 00:01:34:20

Tom Wheelwright

Well, I started as I grew up in Salt Lake City, Utah, so I actually spent two years as a mormon missionary in Paris learning how to get rejected in French, which was kind of my start in entrepreneurship, and then started with Ernst and Young and built run sold CPA firms for the last 30 years. So right now, currently running a network of CPA firms around the U.S. So we have over 60 CPA firms throughout the U.S..

00:01:35:23 - 00:01:57:06

Sam Wilson

Wow. That's that's a lot bigger than what I even understood here. You know, talking to you before you came on the show. So you have I would say then you have a comprehensive understanding of what it means to build and scale businesses among real estate holdings probably as well. So that's that's really, really fascinating. Building and scaling CPA firms.

00:01:57:17 - 00:02:07:11

Sam Wilson

What's the need in the industry? I would think inside the United States that, you know, every town has its fair share of CPA firms. How are you finding opportunity in that space right now?

00:02:07:15 - 00:02:38:08

Tom Wheelwright

Well, the challenge is, is that CPAs, we have a weird industry. We sell something that people don't want and we give away something they do want. So we sell tax returns, financial statements. Nobody really would do a tax return if you didn't have to. People need them, but they don't want them. And CPAs don't do a very good job of providing tax advice.

00:02:38:16 - 00:02:59:16

Tom Wheelwright

They're they'll respond to your questions, but they really do not understand the tax law very well. And they do not do a good job of of really taking a proactive approach to helping their clients reduce their taxes, which there are thousands of ways to do it. And most CPAs, unfortunately, don't do that. So it actually makes it for a pretty blue ocean for us.

00:03:00:03 - 00:03:12:18

Sam Wilson

Yeah, I would. I would think so. Speaking of on on the blue ocean, the term blue print comes to mind. It sounds like you guys have figured out a way to move into a city, set up an office. Here's how you do it. What's what is that playbook.

00:03:12:18 - 00:03:38:22

Tom Wheelwright

For you, you know? Well, you know, we do we don't set up offices. We've actually we've actually brought in members into our network that are established CPA firms. And what we do is we train them and we provide a system for them. And then we we do some marketing and sales for them. So we're actually we're actually their resource to be a better CPA firm.

00:03:39:07 - 00:04:00:02

Sam Wilson

Got it. Got it. And you mentioned there the two things, you know, that I think a lot of times and certainly been mostly my experience is that the tax planning, the tax the CPA side of it is a very reactive business. What do you guys do in order to make it in, make it and make that a proactive, engage with your clients before that tax bill comes due?

00:04:00:09 - 00:04:01:11

Sam Wilson

What's that look like?

00:04:02:04 - 00:04:30:20

Tom Wheelwright

We do a couple of things actually unique to us. First of all, with every new client, we actually build build out a long term plan of action for the long term strategy. We find out take a very holistic approach. We look at their we look at really four areas of their finances. We look at their wealth. What are they going to do with their money, which some you specialize in?

00:04:30:20 - 00:04:53:22

Tom Wheelwright

I know we look at their tax, income tax, but we also look at their asset protection and their estate planning because you want to take a very broad picture if you really want to understand a client. And then we really focus on all the positive incentives in the Internal Revenue Code instead of worrying about the IRS is going to come get us.

00:04:53:22 - 00:05:14:09

Tom Wheelwright

So we're looking for those things that the government wants us to do, things that they want us to invest in. Real estate being one of those and which one do they want to invest in? And if they're willing to do what basically partner with the government as an act to partner with the government will show them how to seriously lower their taxes.

00:05:15:03 - 00:05:38:08

Sam Wilson

And that's the I like the I like the way you said that the positive incentives that are out there because yeah, I mean, so many of us we want to avoid like, oh, it's, you know, I want to make sure that I don't get hit with that tax or get hit with this tax. But you're kind of turning that on its head and saying, how do we how do we actually work alongside the incentives that are being placed out there to make this a more favorable outcome for us?

00:05:38:08 - 00:05:51:24

Sam Wilson

Let's talk about those two or three things maybe that are on the top of your mind that you would say are some of the things that people should be thinking about right now. What's a what's a hyper focus, maybe for you and or your firms? You say, hey, here's advantages that that can be had at the moment.

00:05:52:17 - 00:06:28:13

Tom Wheelwright

Well, we do a lot of work with real estate investors. Really. Our primary specialty is entrepreneurs who also invest in real estate and real estate. Of course, that has had huge tax advantages for the last several years with bonus depreciation, right? Where we get to not just take it over 27 half years or 39 years and commercial property, but we actually can take a deduction for things like the contents of the building, the land improvements on the building.

00:06:28:13 - 00:06:54:08

Tom Wheelwright

We can take that deduction immediately. So what that means is that for a typical investor, if if there is let's say you got a 75% loan to value, you're probably going to get a deduction equal to the amount of your investment. Right. And that's a big deal. I mean, you can put $100,000 into an investment and get $100,000 deduction.

00:06:54:08 - 00:07:16:23

Tom Wheelwright

That's pretty cool. Only in the last few years. So we've been will do that in the U.S. in real estate. It it's gone down this year so we were at 100% prior to this year. And then this year we're 80% about bonus depreciation. But remember, we still get the rest of the depreciation, so forth. But what I find is, is that invest ers and a lot of syndicators do this.

00:07:17:06 - 00:07:40:08

Tom Wheelwright

They don't do a cost segregation, which is required technically it's required by law anyway. The IRS doesn't enforce that law, but it is required. And and what they don't do is go hire an engineer with a CPA and go out and actually do a real detailed analysis. And because of that, they end up leaving a lot of money on the table.

00:07:40:13 - 00:07:59:20

Tom Wheelwright

As you know, I think the most important thing in real estate is cash. And you got cash to make the next deal. Right. And so you want your cash early. You don't want to be you want to be giving your money to the government to hold on for you. Right? You want to actually be using that money to invest.

00:07:59:20 - 00:08:19:12

Tom Wheelwright

Marissa And frankly, they do too. I mean, that's the whole purpose of this incentive is so that the government is saying, look, if you will go out and invest your money and do it the way we tell you to do it, then we will actually provide that cash will help you with that cash flow. You don't have to pay taxes now.

00:08:19:12 - 00:08:51:21

Tom Wheelwright

You can pay taxes later, maybe never depending on how serious you are as an investor. But definitely what we want is we know that commercial property, we know that industrial property, we know that agricultural, we know that housing, these are all necessary and important to the economy in the United States, that they're necessary aspects to our economy. And so we want to make sure that we take advantage of those and do the things that the government really saying.

00:08:51:21 - 00:09:12:03

Tom Wheelwright

These are not these are loopholes, these aren't mistakes. We're not avoiding taxes. We are doing what the government has said is the law and that's actually one of the things that I'm really high on my mind right now, because we have so many people talking about the rich don't pay tax and they're not paying their fair share, which is they pay all of it.

00:09:12:08 - 00:09:36:22

Tom Wheelwright

So that's hard to stomach that they don't pay their fair share because really the rich do pay most of the taxes and that, you know, somehow they're, you know, cheating. Well, I'll tell you what my my experience is. It's not frequently the rich people. I'm sure there are rich people who cheat on their taxes. But honestly, serious investors don't ever need to cheat because there are so many tax incentives.

00:09:37:20 - 00:09:50:22

Tom Wheelwright

So I think that cost segregation and just taking advantage of that bonus to break depreciation is number one in my book right now. I just think so many people I'm seeing so many people not do it.

00:09:52:02 - 00:09:57:01

Sam Wilson

That's why like, I mean, that seems like the lowest hanging fruit for any of us.

00:09:57:10 - 00:09:58:01

Tom Wheelwright

Doesn't it?

00:09:58:05 - 00:10:07:15

Sam Wilson

Yeah, even even in residential real estate. Like if you're a residential real estate investor, you can still get a court segregation study done. And in that.

00:10:07:15 - 00:10:07:22

Tom Wheelwright

Yep.

00:10:08:00 - 00:10:28:05

Sam Wilson

And it's not that expensive. I mean, really. Right. But let's talk about maybe that for a minute because I will say I've had, uh, varied successes with cost segregation reports. They can be wildly different, one firm to the next.

00:10:28:05 - 00:10:28:15

Tom Wheelwright

They can.

00:10:28:19 - 00:10:38:16

Sam Wilson

Same exact property. How does an investor know when they're dealing with a good cost segregation firm?

00:10:38:16 - 00:11:01:20

Tom Wheelwright

Well, I think you can take some good rules of thumb to begin with. So on your bonus depreciation and you know, I think as a rule of thumb, you are your the contents of your building are probably going to be somewhere between 15 to 20% of the value of the building and the land improvements going to be another 5 to 10%.

00:11:01:20 - 00:11:24:22

Tom Wheelwright

So you could be anywhere from 20 to 30% in that category if you're down below that, then I would be concerned. If you're up above that, I'd also be concerned. So you got to I see on both ends, of course, because like we like to say is that in in taxes, pigs are cute and hogs get slaughtered. So you have to be you want to be a little careful.

00:11:24:22 - 00:11:41:16

Tom Wheelwright

But I really think that the most important thing, of course, you get a good referral, you get either from your CPA or somebody actually preferably your CPA because they actually know the industry and they're probably going to be the best. They're going to probably be the best referral source for you.

00:11:41:24 - 00:12:09:00

Sam Wilson

Yeah. Yeah, absolutely. Absolutely. Yeah. That's that's a big thing. And even even an 80% bonus depreciation still, that's really strong. And something that I'm surprised to learn from you that that real estate investors, commercial real estate investors aren't taking advantage of that, that that truly blows my mind because that just seems so easy. Another one maybe that I think you and I talked about off air here is the solar.

00:12:09:03 - 00:12:13:11

Sam Wilson

You said that there is good opportunity in solar right now. Please.

00:12:13:11 - 00:12:40:09

Tom Wheelwright

Oh, my detail. If you're if you're in a if you're in a location, if you have commercial property in a location that gets decent sunshine and you're not doing in solar, you're missing out on one of the easiest ways to make money there is right now. I mean, consider you get a 30% tax credit and with 80% bonus depreciation and you get a 65% tax deduction.

00:12:40:09 - 00:13:06:14

Tom Wheelwright

So you basically get so you get the 30% right off the top. So if you put $100,000 on a small commercial building, you know, okay, there's your example. I just did it on my building. And you did a that's $30,000 off the top of your taxes, right. And then 80% of 85% of the $100,000, which is about 65%.

00:13:06:14 - 00:13:38:24

Tom Wheelwright

Okay. But that's just how it works, is 80% of 85% gets bonus depreciation. And then we actually get a haircut as the credit. But that's about 65%. Well, if you're in a 40% tax bracket, that's a pretty big number. That's actually bigger than the credit. So really what's going on is the government is saying, well, we'll pay for about two thirds of your solar and then what you're doing is you're reducing your own costs.

00:13:38:24 - 00:14:13:15

Tom Wheelwright

Because here's the key, I think to solar. You need to make sure that you're not selling that power to the grid. You want to make sure that you're using that power. And if you're using that power, you're getting retail prices for it because that's something you're not pain, right? So you're getting retail prices. I know on our on my building, my return on investment is going to be somewhere in the neighborhood of 20 to 22% while on an annual because of that because of the tax benefits.

00:14:13:15 - 00:14:36:07

Sam Wilson

Wow. That's I hadn't thought about the bonus depreciation side of that equation because this is something that we're working through right now on several properties and evaluating those and going, okay, so we put solar, you get the 30%. And then but I hadn't I hadn't put that bonus depreciation part back into that equation to see how how much sense that does make.

00:14:36:12 - 00:14:50:04

Sam Wilson

One of the other things that I'm learning here is that there's even like I know one of the buildings we were looking at has it has an even other there's other economic bonuses inside of that because there's.

00:14:50:08 - 00:15:12:21

Tom Wheelwright

That there are so so for example, first of all, with the solar, sometimes the you local utility will give you credits and they'll give you a rebate. So there's money there. Sometimes you're just your municipality will give you a rebate or your state. Remember, you got state taxes too, and bonus depreciation counts against state taxes as well in most states.

00:15:13:02 - 00:15:52:04

Tom Wheelwright

Yeah. So that's an additional amount that you've got. You know, there are other things you can do. Of course the building, whether it's windows or, you know, other things, they're not nearly as impactful on your taxes as the solar. But remember, the batteries count, too, and the batteries are a key component because solar without batteries is marginal. But solar with batteries is really good because now you got you've got that storage so that if without that, you're actually ending up selling a lot of it to the grid because during your high production times, you can't use it.

00:15:52:04 - 00:16:10:05

Tom Wheelwright

All right? And you need it when it's when the sun's not out. So you can store that in your battery. I've got a couple of batteries in my house. I've got batteries with my in my commercial property. And the batteries, I will tell you, there is they're as important as the solar panels.

00:16:10:05 - 00:16:29:00

Sam Wilson

That's really interesting. Yeah. Because it you know, the direct consumption model works, I guess, to a certain point. But I would only imagine, like you said, that the battery stored in the back end is one of those things that that really makes the whole thing whole thing go round, you know, and there's differences, from what I understand in between some states are net metering.

00:16:29:00 - 00:16:44:14

Sam Wilson

I don't think Tennessee is a net metering state. So I think like here I've learned this all here recently as we've been examining these products going, okay, so they're going to sell it just to sell it to us on the grid at $0.12 a kilowatt hour or whatever it is, I don't know. It was close to these numbers.

00:16:44:14 - 00:16:49:10

Sam Wilson

And then if it goes back to the grid, they're only giving us $0.05 a kilowatt hour.

00:16:49:10 - 00:17:13:18

Tom Wheelwright

Right? Right. So so you want to going back to the grid, you want to be using all of your solar. And if you've got a tenant, then what you want to make sure of is that the tenant's paying you, right? So you actually are set up so that the tenants because it because of the tenant normally pays for the solar for their power, then you're not getting any benefit right from that.

00:17:13:18 - 00:17:21:06

Tom Wheelwright

Right. So what you have to do is you actually have to set it up so that you build a tenant for their power and the utility bills.

00:17:21:06 - 00:17:40:17

Sam Wilson

You Yeah, well that makes sense. That makes a lot of sense. Do you know, are there this sounds like it's getting more challenging but are there I would imagine there are software programs and things that you can build in that help you calculate that and you're not going out to meters and writing things down, trying to figure out what the tenant actually bills you do.

00:17:40:17 - 00:17:41:13

Sam Wilson

You know anything about that?

00:17:42:05 - 00:17:57:24

Tom Wheelwright

Well, you would actually. Yeah. You actually do your own effectively your own meter so that you are you are actually taking advantage of and knowing what they're using and you're billing them, you know, whatever the whatever the normal utility rate is.

00:17:58:11 - 00:18:29:16

Sam Wilson

Right. No, that's very cool. I like that. And this goes back to the positive incentive things because this is what somebody mentioned here to me recently. They said, look, they figured out that it's cheaper and probably a faster implementation because our our electric grid is so old. I mean, it's so old. They're said it's cheaper for homeowners to put in businesses, to put solar on their roofs and help offset the cost of upgrading the infrastructure and producing more electricity, give it to them and then put some massive incentives on it.

00:18:29:16 - 00:18:39:17

Sam Wilson

And maybe that'll help kind of stave off the need for immediate, you know, reworking of the entire electrical grid. I mean, is that does that sound in keeping with what you heard?

00:18:39:17 - 00:19:08:15

Tom Wheelwright

I think I think for sure there's that. And I'm, you know, the I mean, the the big problem is, is that if you're looking at from a math standpoint and you're talking about energy usage, solar is not entirely predictable. Right. But with your you know, with your own property, you're much better predicting that. Right? You know what it's going to have you know what your usage is.

00:19:08:15 - 00:19:30:03

Tom Wheelwright

So it's really it's almost like like, you know how blockchain is distributed right out to the end. And Bitcoin, that's what makes Bitcoin work. Well, this is really just your distributing out to the end user. And I think when the end user takes care of it, then then the utility just doesn't have nearly as much that they have to produce.

00:19:30:12 - 00:19:48:07

Tom Wheelwright

They don't, they, they can now use their, their established energy for, you know, for those special occasions when it's really cold or really hot. You know, so that they can maximize and don't have to build so much.

00:19:48:14 - 00:20:05:03

Sam Wilson

Right? Right, right. No, that's really, really cool. Tom learned a lot here today. Let's let's take a look really over the lifetime of your career, I want to ask probably maybe some more, you know, things you've done right, things you've done wrong. You've built a lot of businesses. You've been a lot involved in a ton of real estate.

00:20:05:10 - 00:20:17:00

Sam Wilson

You've done a lot of things over the years. So if there was one thing that you feel like you've done really well in your career and maybe one thing you feel like that was a mistake that our listeners could learn from, what would those things be?

00:20:18:00 - 00:21:02:08

Tom Wheelwright

Oh, wow. I mean, there's it's so hard to pull from all those different mistakes because I've made so many, you know, I think the one thing that I've done really well is understood. I've learned what I really am good at and what I'm not good at, and I've stuck with doing what I'm good at. I find that the mistakes I make tend to be doing things I'm not good at or thinking, Oh, you know, well, this is tangentially related to so I'll go, you know, I'll go kind of my tone to that and I mean, for example, a good example was I was I got my series seven securities license years ago because I'm going,

00:21:02:08 - 00:21:27:12

Tom Wheelwright

well, you know, financial planning tax go right together, right? Yeah. But the thing is, is that I realized pretty quick that that's a whole separate industry. And I don't want to I can't be really good at both tax and financial planning. Can't do it. So I very much find that the old saying a niche will make you rich.

00:21:27:23 - 00:21:54:08

Tom Wheelwright

It's been very successful. I, the real estate investors I know who are super successful, they are very niche real estate investors. I met one yesterday literally. I met one yesterday that he specializes in small bay industrial properties, 2000 square foot base. So these are industrial properties. These are like, you know, like these are cabinet makers, people like that.

00:21:54:08 - 00:22:21:01

Tom Wheelwright

Right. That's all he does. He's he's worth a fortune. He's made a fortune in that specialized area of investing. And he doesn't go outside of it any. And he stays in his. Yeah. He can expand his market, you know, his location a little bit, but he stays in his in that business. So for example, we build we have software, but it's software for our CPAs to use for the clients we have.

00:22:21:15 - 00:22:41:10

Tom Wheelwright

So we have a software business, we have real estate, but the real estate is commercial real estate, the houses in our CPAs and and our business. So we don't stray from what we're really good at. And that's where we've been. That's where I've actually been most successful. And where I've been least successful is probably getting into things that I'm just not good at.

00:22:41:10 - 00:22:54:07

Tom Wheelwright

Like I'm not a really good manager, I'm a much better leader than a manager. And so for me to be the manager is really bad idea and people are not going to like it. I'm going to cause problems.

00:22:55:02 - 00:23:12:20

Sam Wilson

So I like it. I like it. That sound advice certainly appreciate you taking the time to share those. And that's I mean, yeah, that's that's something that, you know, like all of us can relate to, especially the the one about focus. I mean, just zero in in and stay in there. And that's a challenge. That's a challenge for, I think, all of us.

00:23:12:20 - 00:23:19:06

Sam Wilson

And anyway it is. Yeah. I mean, especially as an entrepreneur, we only see opportunity. It's like, oh.

00:23:19:14 - 00:23:42:03

Tom Wheelwright

Exactly, exactly. So literally, I'm an event, a mastermind group yesterday with 80 entrepreneurs. Right. And they're all doing different things. They all sound so exciting. They're great. And I, I actually talk to one that is doing something that I've been interested in. Well, he's like light years beyond. I mean, it would take us years and we'd never catch up, right?

00:23:42:05 - 00:24:00:01

Tom Wheelwright

And I'm going, so let him do it. Right, right. We're way ahead in our industry. And, you know, we're taking on an industry that, you know, take, you know, taking on something that you're good at, that you really enjoy, that you thrive doing. I think that's what makes life great.

00:24:00:08 - 00:24:17:10

Sam Wilson

Yeah, absolutely. Absolutely. And that that that brings you know, that's full circle to the idea of becoming a passive investor. Hey, if you want to you want to participate in that cool business, let me be a capital provider and you go and I'll just watch. I'll get your monthly report and it won't take any bandwidth from it.

00:24:17:10 - 00:24:23:04

Tom Wheelwright

So that's I do a lot of that. I now do a lot of passive investing for that reason.

00:24:23:05 - 00:24:41:15

Sam Wilson

Right, right. Because you can scale into things that you're interested in experts. Right, without being the expert. So that's very, very cool. Tom I've enjoyed certainly our conversation today. Thank you for taking the time to come on the show and really give us some insight into where we can be taking advantage of the positive incentives that are inside of the tax code.

00:24:41:20 - 00:24:52:04

Sam Wilson

Learned a lot from you, learned from your mistakes and the things that you have done certainly really well. Thank you again for coming on. If our listeners want to get in touch with you and learn more about you and or your books, what is the best way to do that?

00:24:53:00 - 00:25:12:22

Tom Wheelwright

Really best what I do is just go to our website well stability dot com and we're happy to evaluate your prior your tax return earns take a look at them see if there's something that we can do if if we can raise it if there if we can't we will let you know. We only like happy clients.

00:25:13:05 - 00:25:20:07

Sam Wilson

Fantastic wealth ability dot com. We make sure we include that there in the show notes. Thank you again, Tom. Certainly appreciate it.

00:25:20:07 - 00:25:20:16

Tom Wheelwright

Thank you.

00:25:21:23 - 00:25:43:08

Sam Wilson

Hey, thanks for listening to the How to Scale Commercial Real Estate Podcast. If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts, whatever platform it is you use to listen. If you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners as well as rank higher on those directories.

00:25:43:08 - 00:25:46:14

Sam Wilson

So appreciate you listening. Thanks so much and hope to catch you on the next episode.