Speaker 1: I think it'll have an impact. I think it doesn't change.
You know, interest rates are still one thing, so I
think those have to change in the economy has to
kind of level outcome to terms with like what the
cost of debt right now, but the BOTUS appreciation what
you're referring to, and like the tax cuts and Jobs
Actor that was implemented in twenty seventeen.
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Speaker 3: And welcome. You are listening to and watching the Financial
Survival Network. I'm your host, Carrie Let's. Hey, we're in
the beginning of September, never too late to start to
reevaluating your investment Prospect's best place to be now market
highly volatile. Do you go to real estate? Well, Sean
Graham is with us now Mayven Equities and it's also
a CPA, but we won't hold that against him. And hey,
Sean built up quite a real estate empire. There is
now a good time to get into real estate with
all the volatility and the uncertainty, recession and all of
that good stuff. What are your thoughts?
Speaker 1: Wow, that's ah, that is a good question. I think,
as Robert Kiyosaki might say, it's always a good times.
More just what you are getting into, and you know,
getting into the right deal at the right numbers. So
I'm in self storage, you know, I invest in self storage.
I don't like to force anything, so I haven't. Last
deal we closed on was end of twenty twenty two,
Q four of twenty twenty two, and that's just because
sellers seem to still want the same same numbers that
they did in the middle of COVID in twenty twenty one,
twenty twenty but cap rates, they want to say cap rates,
but interest rates have increased dramatically, So the cost of
the same acquisition is it's much higher from a cash
flow standpoint. So I think, yeah, there's definitely opportunity. There's
people that are doing deals, are doing self storage deals,
are doing you know, residential deals. I think it's always
a good time. I also think that some people there's
gonna be a lot of people who were their debt
is no longer fixed, the interest rates no longer fixed,
and that's being reset here and in coming years, so
there will be some opportunity. I think there will be
some you know, blood in the water where people need
to get out and they need to sell. So I
think the people who are are continuing to underwrite and
continuing to network and talk to respective sellers, those are
the ones who are who are going to win. So
I don't believe in forcing anything just to do a deal,
but I think it's a good time to keep connecting
and you're going to be ahead of the pack once,
you know, interest rates drop a point or anything like that.
Speaker 3: Yeah, so before we get into the interest rate to
forecast for the future, how'd you wind up getting into
self storage? I mean, there's so many different sub markets
in real estate to a residential, single family, all these things.
What led you to self storage?
Speaker 1: Honestly, it's simple. It's a very simple business. It's simple, straightforward,
Like to say we're renting sheds, you know, we're not
people aren't living there, you're not dealing with plumbing, you
don't have to deal with evictions. There's lean laws which
are different, right if people don't pay for their storage space.
But it's a simple business. It's not overly complex. And
so what I was looking to make the jump from
residential into commercial. It's just a matter of, Okay, which
asset class do you want to jump into? And I
think you can be successful no matter what asset class
you focus on, whether it's apartment buildings or mobile home
parks or self storage or retail space, it doesn't really matter.
I chose self storage because of the simplicity and because
of the availability for debt or capital. So the government
looks at self storage as a business. They don't look
at it as a real estate investment person. And really
it's both, right, like you're investing in real estate, but
it is a business. And so when I started, I
used SBA loans, and SBA loans are pretty high leverage.
You can get in or you know, little money down,
ten fifteen percent down, and you have the SBA guarantees.
So banks are more willing to do that. You can't
do that with apartment buildings or mobile home parks. So
it's a little bit different, and that's really why I
decided to go with self storage.
Speaker 3: So what kind of cap rates are we're looking at
in self storage.
Speaker 1: That's a great question. Uh, you know, I think you
have different classes of self storage. You have Class A
facilities that are multi story, they're climate controlled, they're indoor,
their top of the line, right, that's like when you
drive by and you see a public storage or an
extra space storage. And then you have small facilities that
maybe aren't even fenced in, and they are you know,
they may have a gate, they may not have a gate,
they're just outdoor roll of doors there, they're gravel. Those
things are different. So cap rates on Class A facilities
are could be say six percent, maybe sometimes it's five percent,
six percent. I don't really see going above that much.
Class C, Class D facilities you're looking at like eight percent,
so seven eight you know, a percent something like that.
So then you have everything in between. So I think
the value of self storage is really the size of
it and the type of tenant that it attracts, the
type of customer it attracts, because all that, you know,
goes into economies of scale and to how you can
run it. If you have a portfolio, and uh, as
well as just rental rates, do.
Speaker 3: You manage your own facilities or you rent them out
to an operator.
Speaker 1: We do both, so it did it. We don not
rent them out to the operator, So we don't use
a you know, publicly traded name or anything like that.
We don't use a reate to to manage our facilities.
So we manage them in house. Some of them are
just solely in house. Uh. Some of them we have
a third party manager that just focuses on self storage
to help us. And some of them it's like, okay,
we just outsourced the call center, but then the actual
management dealing with the tenants to turn over the auctions,
all of that we keep in house. So a lot
of my team is overseas. We use a lot of
people overseas to to run the facilities and to manage
them and manage the call center. They're not overly complex,
but it really just depends on the size of the facility.
Speaker 3: So I bet you have some crazy stories there, especially
with the auctions and what people wind up storing in
your storage facility.
Speaker 1: Man, I don't. I don't have any like, uh, you know,
crazy crime stories or anything like that. No dead bodies, nothing,
nothing that's gonna you know, make a TV show or
anything like that I think disappointing. Yeah, you just try
to avoid there's there's always I think, like every area
of the country, you know, you you have certain a
certain amount of population has issues with with drugs and
so that's get involved. But nothing too nothing too exciting.
Speaker 3: I heard of people actually living in them.
Speaker 1: They do, they try sometimes they try to living them.
I have luckily knock on wood here that hasn't happened
to me so far, but yeah, people will try to
live and live in them for sure.
Speaker 3: Wild Wild. Hey, so we're looking at, you know, an
interesting section submarket of real estate. So tell us about
cost seg studies, cost segregation studies and how that's beneficial
in in self storage for sure.
Speaker 1: So on the CPA, that's my background and so I
have a cost segregation firm and we just focus on
helping investors in real estate owners and operators break down
the depreciation benefits of their investment property. So you know,
we do everything from large commercial like self storage. We
do detailed studies on on these down to more streamlined
versions what we call modeling studies for residential investors. So
I think there's a gap in the market where a
lot of people they have a rental property. They just
have a couple of rental property, single family homes or
maybe a small multi family but they don't they don't
want to pay thousands of dollars for a cost aggregation study.
So that's where we come in and we have what
we call a modeling study, which is more streamlined. It's
focused on like the big ticket items. It's not going
to get every single detail out of the property, but
it's kind of getting eighty percent of the benefit for
twenty percent of the of the cost. And that's what
we're looking to do. So I think when you when
you look at cost aggregation, the irs right, she's taking
step back. The IRS is, well, you bought a building,
you bought this investment property. You can depreciate it over time.
You can write it off right if it's commercial thirty
nine years, if it's a residential type of property, twenty
seven and a half years, and so little by little
over thirty or forty years, you're expensing out the cost
of the property less the land value, butch is the
cost of the actual building and taking those deductions on
your tax returnd right. And that's why you see a
lot of real estate investors they don't pay any taxes.
Most of this is because of depreciation. They have a
lot of depreciation right off, and it can offset most
of their income. What we do is we come in,
we say, hey, well, not everything is going to be
depreciated over twenty seven and a half years or over
thirty nine years. We can actually accelerate a lot of it,
expends a lot out in year one, push a lot
of it towards the first five years or the first
fifteen years, and we lower the life spans of the
different components of it. And our job is to get
the investor or the owner as much of a depreciation
expense upfront as possible. So this helps them off set
their their really you know, their their income. So the
irs kind of looks at income in two buckets and
there's a lot obviously I'm speaking from a high level,
there's a lot more detailed than this, but uh, they say, okay,
path you have passive income, passive income from inventing, investing
in real estate, and you have depreciation, which is part
of real estate is a passive loss right, and so
it allows you to offset your passive income from real estate,
or it could be from other things like capital gains
from selling a long term buy and hold, or it
could be investing in the stock market. Whatever it is,
it helps you offset those passive gains. On the other side,
you have active income or what I call active income.
They call it ordinary income, right, And that's your W
two income, that's zero business income, and that's tax at
ordinary ordinary tax rates. Depreciation, which is a passive loss,
typically cannot offset that active income or able to do
is like talk to a lot of people and see
if there are oppert The sou is that there are
some things where you can get into certain there are
certain things that you can do to use depreciation to
offset your ordinary income. So we help people of those.
Couple of those I don't know you might have heard,
but like short term rentals, right, those are considered ordinary
income ordinary businesses if you follow the if you meet
the qualifications. There's also the real estate professional status, like
if you're in real estate full time. All those things
can help you use your passive depreciation losses to offset
your ordinary income.
Speaker 3: So okay, and so originally you could like write off
all the other than the structure. You could write that
off like instantly under Section one seventy nine the day
you bought it, but now that's like phasing out. So
obviously this election for real estate investors is going to
have a big impact because if if the Trump tax
cut gets reinstated, we're going to see a boom in
real estate, aren't we.
Speaker 1: I think so yes. I think kill haves the I
think it'll have an impact. I think it doesn't change.
You know, interest rates are still one thing, so I
think those have to change in the economy has to
kind of level out and come to terms with like
what the cost of debt right now. But the bonus
appreciation what you're referring to, and like the tax Cuts
and Jobs Actor that was implemented in twenty seventeen and
really said from two thousand full year twenty eighteen through
the end of twenty twenty two, a lot of the
life anything that was like less than twenty year life
so five year life class or fifteen year life class,
those items could be expensed out in year one one
hundred percent their bonus appreciation. So we still have that,
like in twenty twenty four, it's it's actually sixty percent
of it, and that's slowly being being phased out right,
it is going down twenty percent every single year. But
even besides that, like you are able to push a
lot of it towards the five year life and towards
the fifteen your life, we're seving year life class, and
those things allow you to expense it out quicker. So
it's not as beneficial as if the bonus appreciation was
implemented right away, but you're still getting a lot of
benefit there as opposed to waiting, you know, close to
thirty or forty years. So yeah, it'll be interesting to
see what happens, see what passes. I Nope, they were
looking at extending the bonus appreciation earlier this year. It
didn't pass, and pretty much was one of those things
where it's like, hey, let's just wait till after the election.
So we'll see. I try not to get tied down
into it too much. It's you know, it's I think
botus appreciation. It comes and goes in at different times,
and so there's been around for decades, and there's plenty
of times they've incentivized people to buy real estate now
and incentivize the bonus appreciation. So we'll see what happens here,
all right, it's.
Speaker 3: Going to be interesting. Well, hey, I appreciate you coming on,
and I guess it always is a good time and
a bad time to buy real estate, and sometimes it
all depends on those imponderable intangibles about what's going to
happen in the future that none of us know. Hey,
if we want to find out more about you, connect
with you on the web. How do you do that?
Speaker 1: Yeah, so I had my teammate make a link just
for your listeners. So if they go to Mavencostsegg dot com,
forward slash Carry, I'll give them a discount. There is it,
you know on any cost egg studies We do any estimates,
So either go to mavencosts egg dot com, forward slash carry,
or just go to or just email me Sean at
Mayvincostsegg dot com. And that's the best way to get
a hold of me.
Speaker 3: Great link is in the show notes to this interview
on Financial Survival Network dot com. Just go there, click
it when you're there. Please sign up for free newsletter.
Got a lot of interesting tips to make you money,
like what Shawn's doing it to save you money, and
just sign up. And if you've got a question for
Sewan myself, always as always, send me An email to
Kateltcarriets dot com sewn thanks for stopping by all right,
Thanks Kerry, appreciate you having.
Speaker 2: Me, Thanks for listening to Carrie lets. This Financial Survival
Network your solution to today's trying times. For the latest,
go to Financial Survivalnetwork dot com. Financial Survival Network now
more than ever,