Keith Blackborg – Self-Made Millionaire by Age 30; Advanced Wealth & Tax Strategies for Passive Investors

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Multifamily Commercial Real Estate Show - Keith Blackborg

Keith Blackborg – Self-Made Millionaire by Age 30; Advanced Wealth & Tax Strategies for Passive Investors

Keith Blackborg, CPA reached financial freedom within 10 years from his successes as an investor and tax strategist. He began his career at Deloitte, a Big Four International Accounting Firm and later started his own firm serving high net worth real estate investors, including nationally recognized apartment influencers. He mastered complex tax strategies allowing clients to legally save ~5-10% of their income in taxes each year. His personal investing experience, deep tax knowledge, wide network and breadth of industry expertise allowed him to mentor clients in business, making their whole operation more efficient and profitable. Listen to Keith to learn advanced wealth and tax strategies for passive investors!

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Keith Blackborg 0:00
getting clarity about how your business serves your wealth business, your active business. Are you growing? Is it simply income? Are you growing equity in the business is your business something you can actually sell? If you’re not sure, there’s actually ways this is what I work with clients on is putting systems in place, and growing the business in such a way and looking at the financials to actually make it worth something or maximize the value of sale. So you’re either able to exit and sell your business for something significant and transition more that portfolio to that portfolio of passive investments taking money out, or you turn it into something more passive where you just have a board level role in your active business and you’re no longer in the day to day operation.

Abel Pacheco 0:50
Hello, hello. Welcome to the five talents podcast. I’m your host Abel Pacheco, I interview the top commercial real estate investors and industry experts so you can learn from their experiences. So if you’re an investor, a high w-2 earner or real estate or tech sales professional that wants to invest in real estate without having to manage properties or leave your day job, then this podcast is for you. Or if you’re already investing in real estate, but you’re doing it part time and you want to become a full time, multifamily or full time commercial real estate investor. This podcast is for you too. You’re going to learn a ton. You will learn from real life multifamily investors and other professionals in the industry. They’re gonna share their blueprints for success. And I’m super excited that you’re here. So I hope you enjoy the show. Hello, hello, this is Abel Pacheco, your host for the five talents podcast. We are super excited today because we have another amazing guests. Mr. Keith, Blackboard what’s going on, Keith?

Keith Blackborg 1:51
Hello. Thanks for having me, Abel.

Abel Pacheco 1:53
Yeah, man. I’m extremely excited. I’m humbled. I’m appreciative. I’m happy that you’re coming to join us on another amazing show here because you’ve got a ton of value a ton of insight and knowledge to help a lot of our listeners guests and you know, those that are trying to get to that spot of financial freedom, or as you would put it work optional in three to five years, man, so I’m excited to have you Well, thanks for coming. Thanks for coming.

Keith Blackborg 2:20
Thank you. Thank you.

Abel Pacheco 2:21
Yeah. So key for those that don’t know you, I’d love you to you know, to give us an introduction, but I’ll drop a couple of nuggets in a couple of gems because you know, when I first met you got to meet at a real estate seminar conference and I forget what city were in Miami maybe but hear me it was Miami and and I’m like listening to the some of the insights you’re given. I go, Oh, what are you doing? And so I got a I got a few letters behind my name, but some of them CPA and when you started mentioning that you’re the owner of financial journey, LLC, I was like, Okay, what what is that? What are you doing? Exactly, and just to hear that you coach help others, you have that mastermind to really help you know, people on their financial freedom journey or as you put it, work optional in three to five years that helping business owners and other like minded investors really establish their strategy and their tactics and, and the plan to create that for themselves. Man, I was like, Dude, we definitely need to have a conversation. So I’m excited. You’ve been a CPA for a number of years. So you’re not just giving advice, you know, just off the cuff. You’re well trained, educated, knowledgeable in the spot. And then now you also have done some syndications on your own. And you also do help others. So you’ve got a great background and let me turn it over to you for your introduction. In your own words. Tell us who you are and what you do, and we’ll start the conversation here brother.

Keith Blackborg 3:46
Sure, sure. So I am originally from California, but now I live in Texas, like a lot of Texans were from New York or California. I started my career at Deloitte and Touche Big Four accounting firm learned from the best. In time I moved to Dallas started buying rental houses into the tablin 10. At age 25. I was flipping wholesaling, my wife ended up running that part of the business. And then in time we transition from residential rental houses into active and passive investments in hotels and apartments. And then I also had a CPA firm focused on the high net worth real estate investors. And so I worked a lot with the Nash nationally known syndicators in the Dallas area, and a lot of the best of the best and so I learned who the best guys were. Along the way, I was director of acquisitions for a hedge fund by 175 houses for them. And so all of this as much financial success as that might sound like I was a millionaire by age 30. Like I had a lot of it. My personal life, though, kind of sucked. I had a CPA firm 400 clients had built up a team of people and these aren’t simple tax returns. These are 15 200 Plus partners in a tax return on a 30 to $100 million property per tax return. And so these are big numbers. And so these are complex, complex stuff. If I ever wanted to get on a vacation, I could never get away from I love my clients. But if a VIP client called me and when needed help closing an eight or nine figure deal, or there was something they needed for me as part of that, I felt like I had to answer that and be there for my clients. And so in time, 2016 rolled around, I thought Hillary was going to get elected, I thought the market was going to crash. I was wrong. But I ended up selling out of a lot of active investments, transition my money to some clients, I knew who the best were. And so I knew the guys who were consistently doubling their clients, their investors money every two to three years, put money with them that went really well. And then just left and traveled the world. So I went to every continent except Antarctica. Over the next two to three years, my wife and I just traveled along the way we got the best souvenir you could ever possibly have. That was my now two and a half year old.

Abel Pacheco 6:06
And yeah, yeah, yeah.

Keith Blackborg 6:09
So excited about that, that changed our lives, kids will slow you down. As part of that trip, we were looking to see where we might want to live ultimately ended up in Dallas, because there’s business opportunities, family lives here, having somebody who can watch your kid is apparently really important and allows you to actually get away. So that was a that was a life changing decision. And at the end of all that travel, at some point, it starts to become lonely. There’s not much of a community, it sounds exciting, especially you’ve never done it. But there comes a point where I was wanting to find fulfilment, other places. And as a part of that manifestation, that passion to help others, I started financial journey as a hobby business, really to help others reach financial freedom. And so I’m not the guy to go out and help somebody create the cards that has never owned a business never done real estate. I’m not the guy to get started on that. I’m the guy who already when you already have some wealth, you already have a business. And you’re looking at the most efficient way to play your cards from a wealth, tax legal perspective, how do you build that portfolio of alternative investments? I’m the guy that shows you how to take your existing stuff, and maximize it, do even more with it, and then have fun along the way. So how do we know community of people that likes talking about this stuff? Oddly enough, I actually like talking about taxes. And there’s a ton of crazy stuff you can do from a tax perspective that most people don’t know, I consider myself more of a tax strategist. There’s a ton of great wealth opportunities that are out there that people just don’t know how to do. So I love identifying the best stuff, and then working collaboratively with other people where other community members who are trying to do this stuff and work together to get maximize the results. It gets lonely at the top. So having a community community run with makes it more fun for everyone.

Abel Pacheco 7:54
Yeah, yeah. What a background and what a story what a good start side, I think this conversation so I wrote down a few few notes, one of the the ones that I think I want to start with is so real estate investing podcast, right? So you started investing in real estate when you were younger. So I heard that. And then I heard you went on to lead a business as the owner, business owner, but very much felt your story felt similar to like a hard working employee that was you’re tied to the business. Maybe business owner maybe didn’t quite on the system. But so tell us how you got into real estate and then how did you start your firm? And what was the decision point? And you know, just a little bit of background there.

Keith Blackborg 8:38
Sure. I heard Robert Kiyosaki speaking at events and I was there’s a local education group lifestyles unlimited in Texas, they’re they’re big in that in that area, my wife in time ended up working, running their financial freedom program there. And so that certainly helped us meet people in time, I’ve always been probably the most annoying staff person to a boss you could ever have in that. I would I would go try and look up answers. But I was consistently asking questions, always asking questions. And so there came a point a few years in where my bosses who had been doing this 34 years who were partners at these large CPA firm, Deloitte could no longer answer my question. And they kept telling me to go to go find out figure out my own answers, because they didn’t know anymore. We were in complex enough stuff that I was like, Okay, I’m now at the point where I understand this stuff. And then I’m doing real estate. So building a practice around doing real estate when you’re already living and breathing it people just come to me for the the tax strategy. They also came to me because it’s like, Hey, I see so many tax returns in this specific business, your insurance is too high, go talk to so and so they’re going to cut it down, go protest your property taxes, you can do this better, and I started connecting people. And so I added a ton of value in different ways. And so my best advice out there is look at all the different ways you can add value and in time you can learn how to communicate that value and charge for that value. You can get paid really well for what you’re doing once people recognize the value you’re able to bring,

Abel Pacheco 10:12
got it? Yeah, what a great insight just that no matter what business no matter what industry no matter what you’re doing, that lubricant for that human interpersonal relationship is helping someone else value providing them value not because you’re expecting something that’s just you’re doing that and now people value it’s the literal value it’s like man it’s your your advice just helped me you know, avoid a million dollar tax situation or it helped me increase you know, my noi by 10k a month which you know, at a five cap for whatever becomes a 500k valuation or whatever the you’re trying to provide somebody else value and now you know, that definitely helps you in your personal and your work and your entrepreneurship journey, investing in different networking. So, yeah, what a great star and Kiyosaki, obviously that’s that’s a good one. We all kind of many of us on this show have her have either seen him or heard him read his books, one of the two and then all sudden, we’re all in real estate, right?

Keith Blackborg 11:14
Yeah, he’s a great guy. I saw naturally at a conference in May, I hung out with a guy for a little bit. Unfortunately, he’s getting he’s getting a little older, his his mental faculties aren’t aren’t quite where they used to be. But for me, in my business, I feel like I’m a terrible salesman. But if I can lead with adding value, yeah, then and people understand the value then getting the best source of me ever growing has always been referrals.

Abel Pacheco 11:38
Yeah. Yeah. Great, great, great insight. And there’s, there’s another word referrals, ask for them, provide them help someone else. And you know, you will lubricate that process. So you became a business owner, 400 clients, multi million dollar tax returns many multiple, you know, hoops and things to learn about yourself and then help others with, but you still couldn’t leave quote unquote, work sometimes. You said, Hey, man, a vacation time and yeah, you got a big client, and you’re gonna help them and you’re tied to the work, right?

Keith Blackborg 12:13
Yeah, actually, it led to quite a bit of conflict in my marriage. Yeah. And there was some other stuff going on. But we were at a rough point between I really felt more married to my job, and for a little while their divorce was considered. So I knew I had to make some changes. And I didn’t want to be married to my business the whole time. And that’s why for me, I will talk about wealth and taxes. But really, the life component of it is so much more important money at the end of the day, I can make more money, maybe I can upgrade my house, upgrade my countertops, I’m very comfortable where I’m at, I don’t really need stuff. But I really want though is more relationships to do life with and and being able to help other people knowing that other people are able to experience life to the fullest. That’s so much fulfilling for me than just making it another million dollars.

Abel Pacheco 13:01
Yeah, brother, I know you’re a proponent of like shifting from building to living Yeah, building the business to exiting and enjoying freedom. So maybe you can you can touch on this mindset a little bit for us. And you know, you’ve seen many multiple different businesses, entities exits, give us some insight here, bro.

Keith Blackborg 13:23
The first and foremost was viewing wealth, I want to view wealth as the business. So all the time, you’re gonna pour into a job, a an active business, your investments, your personal finances, those are all divisions within this overall umbrella, the parent company is your wealth business. So you serve or you grow the active business that you’re putting your time into. But there comes a point where it might make more sense for you to start putting your time and energy into growing your ROI. So if you’re able to get amazing return on investments, let’s say 30% return on your investments, if you’ve only got $1,000, to invest that 30% return is going to give you 300 bucks. But if you got a million dollars, and you’re able to get a 30% return, then that’s $300,000. And maybe in that example $300,000 is more than what you’re earning from your active business. So in time, you’re transitioning to your you’re focusing on growing the portfolio of investments and maximizing that ROI. And by viewing your overall wealth as the as your business, you can start to see it for what it is. And then you’re giving your personal finances fit within that. But it kind of gives you a more comprehensive picture of that business. And what I really like to show people how to do is how to make their wealth business, how to grow it over all that top level picture and make it more passive and really use your wealth business business to fund your vision. What is it that you want? What’s really going to bring you happiness and build the wealth around that often I’ll get to people who are who are in their 60s and they just, they could have reached financial freedom reach work optional when they were 40. But they just kept building, they never had a clue why,

Abel Pacheco 15:09
oh my gosh, yeah, man Well, and and you, you were able to retire at a pretty young age, they’re in your 30s by 32

Keith Blackborg 15:19
32 years longer than I needed to be my life kept reminded me, I reached the point, I want to $10,000 a month in passive income. I did that before I was 30. And I just kept going, my ego was part of that. And so we had to have a come to Jesus moment, as part of that.

Abel Pacheco 15:34
And so you know, help somebody here, right? It’s, let’s maybe a couple examples. The first example, I’m a W-2 employee, I’m in tech, I’m in sales, I got a good title behind my name, I’m making 200-300k a year. But every year, I don’t measure my net worth, I don’t look at my personal financial statement. And I’m just making money and spending it. And you know, I don’t know how people get to $1 million, $2 million, $5 million, like, help him a little bit with the mindset and then maybe a couple of, of easy things that we should be taking notes on right now.

Keith Blackborg 16:08
So first and foremost, I want you to align your spending with your vision. So some people will really go all in like Dave Ramsey with budgets and stuff like that, there’s maybe a time and place for that. But really, if your vision is to be work optional, and three to five years, within 10 years, then you need to start systematically putting money aside for investment and investment savings account. And then as part of that, you start finding the great deals like thru Abel, where there are great investment deals, find those deals, invest with them. And in time, you’re pulling money systematically out of your work, whether that’s owning a business or as an employee, putting it into these deals. And at at a point in the future, you’re transitioning actually out of your work into your wealth business where that becomes your focus. So do you want to remain passive and only invest passively? Or maybe there’s an opportunity where you think, hey, I want to learn about syndication? What are the best opportunities in syndication right now, I will say apartments right now there’s a ton of people, it still still be a great investment. There’s a ton of people teaching apartments. So if you were to go, maybe there’s another asset class, even beyond apartments that you want to do, there’s a ton of things you can do in real estate. So start, what’s your competitive advantage? What are you good at? What is your network and resources? What financial resources do you have? What opportunities in the market align with your competitive advantage? And then as a syndicator, you can start pursuing them. And then there’s of course, investment and tax strategies that that complement whichever way you’re trying to go?

Abel Pacheco 17:48
Cool. Well, we’re definitely going to break in to the tax strategy in a second. But let’s hit this one more time. Right. So what I heard was part of this anyways, if I’m trying to get out of this rat race, even if I’m a business owner, because there’s a lot of business owners that are even they work even harder than the W-2 employees, even more hours, even more nights and weekends, because they’re the owner. So if I’m trying to get out of this rat race, I need to be able to pull my money out of the business, or my w-2, and I need to systematically invest it into something that’s going to provide a return when I’m not working. I made my money work hard. I’m sorry, I’ve made my money working hard. Now I’ve got to make my money work hard for me.

Keith Blackborg 18:30
Yes. And part of that getting clarity about how your business serves your wealth business, you’re active business. Are you growing? Is it simply income? Are you growing equity in the business is your business, something you can actually sell? If you’re not sure, there’s actually ways this is what I work with clients on is putting systems in place, and growing the business in such a way and looking at the financials to actually make it worse something or maximize the value of sale. So you’re either able to exit and sell your business for something significant and transition more that portfolio to that portfolio of passive investments taking money out, or you turn it into something more passive, where you just have a board level role in your active business and you’re no longer in the day to day operation.

Abel Pacheco 19:17
Yeah, yeah, I love it. I love it. This is That’s good stuff. I think it freeing for somebody right now that may not have been thinking about this, and maybe or maybe they’ve heard it many multitude of times, but something’s just gonna finally click, which is if you’re the business owner, and you don’t have systems in place, then you’re working harder than you need to. And if you just spend a little bit more invested a little extra time to create those systems and put the processes in place. Not only will your job become easier, your day, your day job or day business ownership, but also the value in your business goes up because you can now exit and somebody else will value that higher because they don’t have to put time, effort and energy they’re just going to own a stream of income. As opposed to another job, right?

Keith Blackborg 20:01
Yes, if your business is really a job, you’re gonna have a tough time selling a job. If your business is a true business that operates without you, then you have something of significant value. And the more you can grow, the multiple that you can sell it on, goes up exponentially. So a million dollar net revenue business per year versus a $10 million net income business per year are going to sell on very different multiples, the $10 million business is going to be exponentially worth more than the $1 million net income business.

Abel Pacheco 20:33
Yeah. All right. Well, it’s good stuff. It sounds like you’re you help coach, a lot of investors, business owners high net worth, you know, just individuals, not only just on on this tax strategy, but you know, hey, this is this is the this is the machine that creates the seeds. So let me help your machine get even better. It’ll create more seeds, and we can go plant those seeds in a more more spots. Is that what your mastermind and your coaching is a little bit about?

Keith Blackborg 21:00
Yeah, yeah, that’s, that’s part of it. Yeah, I really enjoy working with people on them and seeing the light bulb moment and how their life can change and what’s possible. So many people feel limited that they have to do things a certain way that they have to be in their business for these amount of years. And frankly, often we can take their existing can’t handle cards and say, Well, why don’t you just do this or that and watching the light bulb moment where they realize they don’t have to work 60 hours a week, or maybe they’re even working 30 hours a week, but they realize they don’t have to possibly do anything anymore. With a little bit of time and energy, their life could be so much better. Just put a little work and that’s why I love talking to people and seeing those lightbulb moments go off so fulfilling.

Abel Pacheco 21:45
Hello, hello. You’re listening to the five talents podcast. I’m your host, Abel Pacheco. If you’re enjoying this podcast, then I know you’re serious about achieving financial freedom. Are you ready to create your own path through multifamily investing for yourself and your family? Then I know you’re gonna appreciate our Investors Guide to multifamily investing. It’s titled tackling commercial real estate the easy way we use this guy to invest ourselves in $93 million worth of real estate. So we’re going to show you the basic mechanics of multifamily syndications and how to evaluate your next passive investment opportunity. So the best part, if you subscribe to our podcast now leave us a review and a rating. I’m going to give you a free copy of our ebook. So please take a moment to do that. Now. Once you’ve done that, go to, make sure to let us know you left a review and we’re gonna send you a free copy. So thank you so much for subscribing in the five talents podcast, we really appreciate it

The wealth business I’ve heard you say many multiple times I’m really taking a few things from you. I’m going to start saying work optional in three to five years. I keep blackborg and I probably will also say your wealth business more than a few times. That’s it’s really good. That’s your wealth business. Right? It’s I had a I had a former CRO chief revenue officer that I worked with. And he used to say, well, this is good for the company. Let me show you how to do XY and Z for this tech company that I worked with. But he goes but let me show you something that was probably good for Abel Pacheco Inc., he and he would give me the side nuggets. And I was like, Man, that was so valuable. Thank you very much because it was more than just making money at work. He’s like, let me let me show you for Abel Pacheco inc. And he was really talking about my wealth business. You know, let’s figure out how to create a better life.

Keith Blackborg 23:45
That’s great, too. Like a great guy.

Abel Pacheco 23:47
Yeah. Was Mr. Genuine, he’s a good guy. Okay, so let’s continue this path. We’ve your coaching or mastermind, obviously, it’s much more than a 30 minute conversation we’re having but at least you’re you’re sparking a little bit interest for somebody to say, Hey, I should be working on my wealth business, I need to be the CEO of my wealth business, I need to create not only more income, but a better way of life. So you got that part. So people are taking this information, they’re applying it, they’re creating more wealth, more seeds to plant in, you know, in their investing journey. Now, taxes, you’re the CPA, right? Give us you know, just start with the nuggets that, you know, I don’t want to mess up the question the line of questions here. Tell us you know what most people miss, tell us what, you know, the aha moments just lay it on me and then we’ll start going down this this path, right,

Keith Blackborg 24:37
you know, I could speak probably 30-40 hours on tax strategy. So I’m gonna pick something that is probably unique to your audience that’s going to apply to passive investors but even syndicators could use as an example. And this is a way to maximize results. So first and foremost, I love 401k’s and solo 401k Our way to invest in whatever you want. So we’re going to go much deeper than that I’m sure most of you guys have heard of self directed IRAs, etc. What I really love is rollover discounts, meaning I put money in a traditional 401k. And over a few years, I’m getting $100,000 in a traditional account. And so I’ve gotten a tax deduction for $100,000. If I were to try and roll that, that that $100,000 cash to a Roth, I’d have $100,000 tax liability, probably the highest tax bracket possible. If I don’t have state income, I’m already at 37%. If I’m in California, I’m probably over 50%, I’ve just lost half my money in a rollover from a traditional to a Roth, and it’s gone. So instead, let’s say you invest in apartment syndication and the syndicator is able to use this strategy out a massive amount of value to their investors, and it doesn’t hardly cost them a thing. So you invest I as the passive investor invest $100,000 into Abels, apartment syndication, cable, buys it at 80% occupancy, that apartment complex, and he’s going to take it down to 60% occupancy six months in. So as a result, we’ll say the net operating income is is going to drop in half. And as a result, since apartments are valued based on the net operating income, the value of my investment of $100,000, is also going to temporarily drop in value to $50,000. So now I do a rollover of the investment, not the cash from the traditional to the Roth account at a $50,000 valuation. So my taxes was previously 37% on $100,000, I’m burying $37,000 in taxes, instead on paying half of that value was at 18,500 in taxes, so I just cut my tax liability in half as a result. And because I invested with Abel, my the value of the apartments now going to skyrocket at some point in three to five years to 150 $200,000. So I had I kept that that same investment in a traditional account, eventually I’d be paying taxes on the 150 – $200,000 Withdraw. Now it’s it’s now tax free going forward because it’s within a Roth. And I was able to do so at a discount. And so with these rollover discounts, there’s multiple things, you can factor into discounting the rollover, but you can often get a 30 to 70% discount when going from a traditional to a Roth account.

Abel Pacheco 27:31
Alright, so I followed, I think the majority of what you’re saying, and I want to kind of go back to make it easy for some people who may not hear the lingo every single day, like you do, right. So at the highest level, right? Well backtrack and have one, there’s the 401k. So 401k, 401k, whatever, in your in your retirement plans, you’re talking about the difference between pre tax and post tax at the highest level, right? One is, if you’re if you put some money in and the government hasn’t taken their piece yet as as a, you know, investor in your own retirement, then at the very end, when you pull that money out, the government’s going to tax it. And so you want that number as small as possible. If it’s gigantic, which is like you’re kind of from a mindset of like, Man, I want that number as big as possible. But the bigger it is, the more you get taxed. So a Keith just laid out is a strategy to take a big number 100k shrink it down, now tax it and then make it grow again, where it grows not at where it grows tax free. Is that is that at the highest level

Keith Blackborg 28:44
that is that’s it able you should start teaching tax seminars. That’s great.

Abel Pacheco 28:49
Well, I mean, that’s that I didn’t know this was possible. So we’re gonna have to dig in. Don’t go too technical on us. But you know, that’s what we do we put money in and you know, this is Abel Pacheco when I was 26 I was working in tech. I was the sales guy. I got up to two 300k a year I was finally making some good money. My CPA said you need to max out your retirement plans fully fund them because the company does a little match I didn’t even realize or think about pre tax or post tax I had no idea I don’t even know which one I chose. But I chose the one where it’s like I’m going to get taxed at the end so not the not the taxes right up front at the end. And so I just chose that that’s what I started investing with my first syndication dollars I was not a GP I was a passive investor. So I put my moves in 401k to a self directed IRA, which I think it’s smarter to go solo 401k Now that I learned right, but anyways, self directed and then I put it in there now as it sold I pay taxes on a bigger amount your did the exact opposite. So tactically speaking or like one step down, you know how did that happen? How do you do that, you know,

Keith Blackborg 30:02
one step down as the syndicator, or the passive investor,

Abel Pacheco 30:06
as the as the tax strategist, you’re advising your clients to do what exactly I moved my money

Keith Blackborg 30:12
I’m suggesting, if you own a business, it was just, you know, employees start a solo 401k, I think there’s a bunch of benefits, I’m going to leave it at that solo 401k is over that you have employees that there are certain providers I work with, that can still allow you to self direct, there’s just some extra hoops you have to jump through. And a lot of people will tell you, if you have a 401k, with employees, you can’t self direct, that’s not true, there’s still ways to do it, it’s just you got it, you got to know the right guy who can set this up and make sure that there’s the right protections in place for you and the employees

Abel Pacheco 30:44
are leaving old job my case mine and my wife, you leave the old job. And now you can direct it wherever you want to, right.

Keith Blackborg 30:51
And, and if you don’t own a business, but you leave a job, if you can just earn $1,000, doing something selling stuff out of your garage, you can start a business. So just something that that looks feels and is legit. You just got to earn a small amount of money. Now you can start your 401k. And then from there, you’re you’re taking your money out, you’re using something like solo, the neighbors group, they’ve got a really simple, cost efficient platform, very easy to use, they’ve got you can even set up a account directly I like Solera bank out of Denver, Colorado, and you send your money off to in my case, if I’m the passive investor, I’m sending the able the GP the syndicator, able takes the money, six months in Abel as a syndicator says, hey, I can tell because of my I’m watching the deal that this is probably going to be the lowest NOI, the lowest occupancy, we’re probably at the lowest point now I’m gonna have a CPA or an independent third party who values the investment cost 500 to $2,000, for the investment for the valuation, but if I able, facilitating this, I can copy and paste that same valuation and use it for one investor or 100. Investors. Yeah, so that’s where it can be really cost efficient.

Abel Pacheco 32:09
I’ll pause it right here, just for at least my one layer deep, which is the apartment complex that we’re buying. It’s 80% occupied was the example that Keith gave, which is very real, you know, it’s not stabilized, which is 92 is now it’s a little under occupied. So it’s technically 80 the reason it might go down to 60 is maybe we have some tenants that really shouldn’t be there. They’re not paying rent, they’ve been skating on the old property manager, no one’s kicked them out. They have delinquencies past do whatever. And now, especially the eviction moratorium thing that, you know, I think that just got changed, right? So anyways, you plan for as the operator, you plan for your occupancy to even go lower. And then as you start to renovate the apartment units, the interiors, the exterior is all that stuff, the apartment complex kind of comes back to life, you get in you’re, you know, quote unquote, you know, the people that maybe have been causing some issues among the other community members, now you have tenants that are moving in, they see the increase of value on the on the property, so they’re paying more rent. So you’re saying at the bottom somewhere, like when I would say as the operator, I would communicate in advance to my investors. Number one, this is a great opportunity for this type of play. So I’m telling them before they invest, and then I’m communicating to them when I think we’re at the bottom 60% before our way up, is that right? That’s right.

Keith Blackborg 33:41
And there are actually multiple ways to get valuation discounts. Even if you don’t have that big drop, maybe there’s less of a discount, but there’s still ways, but we could spend a whole hour just on this topic.

Abel Pacheco 33:50
Okay, good deal. Well, we’re gonna have a conversation later anyways, but Okay, so I communicate with everyone. And so back to the investor, they’ve taken their money in solo 401k. They put it in this, you know, it was already in this post tax, and they’re not gonna get taxed on it, but now they’ve traded it lower valuation, how does that? How does that part work?

Keith Blackborg 34:10
So in the moment that they got the lower valuation, they approached, whoever the custodian is, or I like I said, I like with the neighbors group. Let them know here. Here’s the addition the sign valuation by somebody else, saying that this, this investments really worth $50,000. In that moment, you’re going to do the paperwork to roll it from a traditional to a Roth accounts. And then it’s moved to the Roth it’s more of a paperwork thing. And you’ve got the documentation to for the lower valuation.

Abel Pacheco 34:43
Yeah. And I always I still get confused. The Roth is the one where now you’re paying taxes on that amount, but you don’t have to pay taxes on any of the gain ever. Right? Right. Okay. So current tax law Yeah, under the current tax, so so everyone understands like You would have had to pay tax on 100k. Now you don’t you only pay it on 50k or the lower number, you pay your taxes, which typically we’re, you know, most of us are like trying to defer, defer defer. This one’s like No, no, take it now. Because the lowest is going to be, and you take it, and now it can grow from 50 to 100. I could exit an investor out, we’ve we’ve, we’ve closed the deal. Two, three years later, we sold it, I’ve given them their money back and they have this bigger dollar amount. Now they can go invest that for the rest of their lives and never pay taxes again. So is that right?

Keith Blackborg 35:38
That’s right. There’s some people who are in their taxes. Again, there’s $1.40 that have $5 million plus Roth accounts, they own maybe they own 40 rental houses, they own a bunch of syndications apartments indications, they’re never paying taxes again. And in today’s rising tax environment. That’s a huge, not only tax tax savings, but just competitive advantage. Imagine if you’re not having to pay taxes and all your competitors are

Abel Pacheco 36:04
holy moly, like these are things that I set syndicators, myself as an operator, I don’t put in our offering memorandum the benefit of cost segregation and depreciation and accelerate. I don’t put this in the mathematics because I know there’s some investors that maybe are not real estate professionals, so they can’t take advantage of this stuff, right. But this sounds like regardless, I don’t have to be a real estate professional, I could be any, anyone. And if I, if I just follow this strategy, I can do this, I can pull it off.

Keith Blackborg 36:34
Exactly. That’s why I picked this one to show there’s a ton of things you can do as a syndicator. Way more, basically, you’re given a whole list of leverage to legally manipulate what you want your tax strategy to be. There’s guys I’ve worked with who would be making eight figures, and we’d show zero or negative income. And so really, the question was, how much do you want to pay in taxes this year?

Abel Pacheco 36:55
Hmm. Man, what a what an amazing mindset. So I’m here scrapping for, you know, the difference between 12%, you know, maybe a 12%, pref, because I think it still is going to be a little lower, which, you know, I’m starting to see more and more Dave Ramsey says 12% all the time. But in a really smoking deal, your two or three years ago, versus today, those those percentages are coming out. 15, 16, maybe he got 17. But this is like who you know, it doesn’t matter at this point. 15, 16. Who cares? 12 Because I’m avoiding so much more in taxes for the rest of my life on this on this seed

Keith Blackborg 37:33
And if you as a syndicator, if you’re that seat, maybe you charge an extra 5% of the of the equity than you normally would to help facilitate this. And it’s really a truly a win win for for both.

Abel Pacheco 37:45
Yeah, man, that’s awesome. It doesn’t need to be a 70/30. It could be a 65/35 or 60, or whatever. If you’re, if you’re listening, and this is, you know, you’re a new syndicator or a new operator, and you’re trying to make these deals work. Well, sometimes, you know, and maybe the passive investors get this or not. But either way, what happens is you look at a deal and like, well, I could cut my pay. And if I cut my pay as a syndicator operator, now I can hit your passive investor return. But ultimately, I’m cutting my pay, I’m doing the same amount of work from cutting it. And now this is an additional option for operators to say, well, we could make this deal work in a different way. Let’s you know, hit returns differently. And also, this will be a huge tax saving. So man that that’s that’s amazing, Keith. That’s amazing, brother. Thanks. Good. Well, cool. So that’s one Keith’s got more. So before we go, I have maybe a couple more questions there. So it’s out with you about but we want to make sure we get you know how people can reach out to you. So I think this is a good point, right? A good time. If somebody wants to reach out to you for your services, jump in your mastermind, get some coaching, you know, strategy, what tax strategy, what’s the best place for them to reach out to you and who do you want to talk to you also?

Keith Blackborg 38:59
Sure, the best way to get a hold of me is financial is my website. I’ll give my email address, please respect it. Keep that financial And I’m happy to connect with really my core audience. My core avatar client are people who are either who are business owners that are looking to sell or maximize the value of it, or they’re accredited investors. And they’re typically got how the high income from something else that they’re really able to fuel the an investment in a portfolio of alternative investments. Or there’s somebody who’s already got some income, has some experience, maybe looking to syndicate. I’m not the guy that’s going to go deep on how to run a certain kind of business. I’m more of a guy that’s like that independent financial consultant that helps give you the lay of the land and decides what’s right for you. And all the different resources the community what’s going to help you go faster, and the tax stratagies and investment strategies that are going to really maximize your results. And as a result that leads to a lot of value for people.

Abel Pacheco 40:06
Right on. Thank you, Keith, thank you, brother, you know where to connect with them. And I would encourage you to do so. And if you do, if you’ve heard them here, tell them You heard us on the or heard him on the five talents podcast, I wouldn’t be blessed to hear that. And go ping him reach out to him. And he’s got some good insight for you. So what a great, what a great individual to have in our network. So thank you, keith, you get a lot of business from us. And that’s great, man. So one of the things that you mentioned before, you’re a tax strategist, not a CPA, or, you know, enlighten us a little bit, the tax strategist versus the CPA. This was something I learned in the recent years like 2018, 2019. And I, you know, didn’t know about CPA, what’s a tax strategist? So maybe describe that a little bit and tell us the differences here.

Keith Blackborg 40:56
So I’m still a CPA as a tax strategist, though, I’m looking more at the strategy, the overall picture of what you can do, and how do I merge tax strategy with investment strategy with business strategy, how I find something together? Often people either aren’t thinking about tax strategy, or they’re letting the tax strategy wag the dog, meaning they’re so focused on tax strategy, that they’re missing out on business opportunities. And I think tax strategist versus tax repair, I’m not the guy to just simply take your data and give you a tax return back. That’s what most people do they just prepare taxes. I’d rather help you make history than simply record history. And so with me, it’s I prefer more of an ongoing conversation about what you’re looking to do, what you’ve got going on. And then how do we actually proactively weave tax strategy with business strategy in with like, a Buy Sell agreements with things that you’re thinking of doing. So it’s more of an integrated part of your business. Not something that’s an afterthought.

Abel Pacheco 41:59
Yeah, very, it sounds like a very active approach versus a reactive CPA, I would take what happened and help me, you know, finalize, but you’re taking a very proactive approach, what’s going to happen in the future, let’s help define it and, and set it up the way you want it to go? Sure.

Keith Blackborg 42:17
And, and so me sharing the discounted rollovers, people can go take action on that, and with people, often I’m saying, Hey, you want to do this, we are already I just told you the strategy. If you want help within the implementation, here’s three guys that have worked with that will do this for you, and walk you through the process. And so I’m saying more at that micro level, macro level to really help as many people as possible.

Abel Pacheco 42:41
Yeah, yeah, I love it. Okay. Oh, this is this is awesome. While we’re, we’re here, right? Last kind of thoughts, anything that I didn’t touch on today, anything I didn’t ask you about that you really wanted to share with our audience. I mean, you know, time is yours, I just want to make sure if there’s something you really wanted to hit on, we didn’t get to it. Please share,

Keith Blackborg 43:03
I think my main takeaway is think about first what you want out of life. And once you know where you want to go, then look at the competitive advantage. What’s What do you have to work with, it’s going to make it go faster, what’s your financial resources to work with, once you know your competitive advantage, what you have to work with, you can pick an investment strategy that’s satisfying that you can do in the time that you have to work with, with the skills you have to work with. And then it’s a matter of picking the deal flow that’s going to fit you and where you want to go. Building the plan, then that that kind of puts all those things together in a cohesive plan. And then the supporting relationships, they’re going to help you go faster, the community and network you have around you. And the fact that you’re listening to this podcast right now means you’re investing in yourself. And you’re already on that that pathway, that journey to maybe wherever you want to go. In my case, I help people get to work optional and identify the most efficient path to get there.

Abel Pacheco 44:06
Yeah, all right, baby, I love it. You got to start with the end in mind, you got to know where you’re going and what you want. And then you can build a strategy and a plan and a roadmap to get you there. If you don’t define the end of mind first, you know what you first want in life, then it the same goes any road will take you there if you don’t know where you’re going, right.

Keith Blackborg 44:26
and most people never take the time to even do that.

Abel Pacheco 44:30
Let’s get it on. Well, man, Keith, it’s been a pleasure. so appreciative, so thankful that you would join us, I think you’re going to provide a lot of value to our listeners. And I know you already provide value to your students, your mentor programs and your people that are in your world. So thank you very much for dropping a little bit on us today. So thank you. My name is Abel Pacheco, I’m your host for the five talents podcast, Keith. Thank you.

Keith Blackborg 44:53
Thank you, Abel.

Abel Pacheco 44:53
All right. Bye, everyone. Thank you for listening to this episode of the five talents Podcast with your hosts Myself, Abel Pacheco. Each week we’re gonna bring you interviews from industry experts and commercial real estate investors who follow their dreams and achieve massive success. Before you leave. Let me ask you a few questions. Did you enjoy this episode? Did you learn something valuable? Was your mind stretched to what’s possible and what you can achieve? Do you want other experts just like the one you heard today? If you answered yes to any or all of those questions, then please take a moment to subscribe to the five talents podcast give us a five star rating. And most importantly, leave us a written review. Tell us what you liked. Tell us your favorite guests. Give us any feedback. I’m excited to learn and improve so you can get a more valuable show. So thank you again for subscribing to the five talents podcast.

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