Strategies for Avoiding Capital Gains Tax in Real Estate

Aaron Revere (00:00)

you’re paying through the nose for your insurance premium, for your several multifamily properties, your portfolio. Why don’t we look at strategies that can help you self-insure and we can maybe cut that premium in half and different things like that. so basically for people staying in the real estate world and of course real estate investors love their world. They don’t wanna leave. They just love real estate. There’s nothing better than real estate, right?

But it’s showing them through some financial tools, some other finance stuff out there, they can just make their own financial, their real estate portfolios that much better, right? They can really maximize what they’re doing for them.

Micah Johnson (02:07)

Hey everyone, welcome to the Real Estate Pros podcast. I’m your host, Micah Johnson. And today I’m joined by Aaron, who is making serious moves in the wealth strategist space, especially when it comes to elimination of capital gains tax for high earners and real estate investors. Aaron, happy to have you, man. Welcome to show.

Aaron Revere (02:23)

Same here, thank you Micah.

Micah Johnson (02:25)

Absolutely. I think our listeners are really going to take something away from how you’re approaching that elimination of capital gains tax, how you’re helping those high earners and investors keep more of their money, use it smarter. So I’m excited to dive in here. So for people who may not know you yet, what markets you operating in and what is your real main focus right now?

Aaron Revere (02:43)

Sure, so I’m right now in Boca Raton, Florida. I live here three years now. Originally born and raised in Los Angeles. I am a wealth strategist, which is kind of like the intersection between insurance and taxes and borrowing and investments. So I sit with, I got a lot of folks who are real estate investors, because that was my old world. And I’m helping them, like you say, with capital gains tax. And especially right now at the end of the year, it’s a lot of trying to figure out if there’s any other kind of deductions that we can.

squeeze together for them so that when they hand their book to the CPA, know, at, you know, probably at April 14, ⁓ that they actually have ⁓ some good deductions there.

Micah Johnson (03:21)

So you mentioned that you had a previous life in real estate. Tell me a little bit about that story and transition from how you connected these two worlds together.

Aaron Revere (03:30)

Sure, so in

2012, I was a real estate agent in Coal Banker in Los Angeles. Hop, skipped and jumped to ultimately I was in Douglas Elman of Beverly Hills, which was when it was just starting out. I guess famously the Altman brothers were down a few cubicles away from me. And I realized quick as a real estate agent that if I wanted to really earn some commission, I needed to get friendly with the real estate investors, not just the home buyers.

because they’d buy something, know, seven years, I’m not hearing from them. So I started working with investors. And in that time, 2013, 2014, 2015, there was a lot of development going on. That’s when a lot of this McMansion building started happening. And so I would go to properties, I would meet the investors, usually who were there with, you know, the fence open on the construction sites, I’d be able to walk in and meet the investor and ask them what else they were looking for and then go find it. I started to learn.

you know, kind of what their acquisition criteria was and how much money they were looking to make on the deal and what their construction costs would be. And I just loved it. just, kind of felt that’s really where I started getting interested in investing overall.

Micah Johnson (04:34)

⁓ Yeah, I have a past life as a real estate agent too. When I met my first investor and just started discovering those same things of holy cow, this one person wants to move 30 to 50 houses a year. That’s what I’m talking about. This is a way to really dig in and learn that behind the scenes. So you got started there. What was it ultimately that led you to where you are today? What made you want to make that jump?

Aaron Revere (05:45)

So I became a real estate agent. And like I said, I loved working with the investors. I wanted to become one as well. And I did, I I flipped houses. I started buying and selling houses in Pasadena, California. ⁓ And I actually got a, now that think about it, I got a historic preservation reward for flipping one house over there. We made it look really authentic. ⁓ And that was fun. And then I also got my mortgage license. Cause I always liked the idea of really having like all the tools at my own disposal.

right and really seen an investment or a piece of real estate from every angle, the lender angle, the contractor angle and obviously the buy and sell by being the real estate agent. And I did that for a while until you know kind of COVID came and then even though I was a gosh, what do they call it? I was allowed to work, right? I was an essential worker. It didn’t matter. ⁓ Even though I was a contractor and I could go you know, let’s say work on Mrs. Johnson’s kitchen besides for my own projects.

Mrs. Johnson wouldn’t let me in because, you know, because I’d sneeze in her kitchen, you know, so it didn’t matter. ⁓ So I realized the only thing that I could really do ⁓ was do the mortgage thing. And then of course, mortgage rates were really good. And so that just pushed me kind of more into the finance side and being away from the actual, you know, touching the actual physical properties and just kind of being more on the dollars and cents side. California didn’t make sense for me anymore. ⁓ I moved to South Florida. I’ve been here for three years and been loving it.

and then really been driving, ⁓ started with the mortgage and then adding in kind of the full synergistic approach of the investment and the insurance and the borrowing aspects.

Micah Johnson (07:20)

It’s a fascinating journey to get there. That’s one thing I like about real estate, meeting people in it is you touch different parts of it. And as long as you keep staying in it and you enjoy it, it’ll lead you down a path to that section where the real you can kind of thrive, that the problems you enjoy solving, the part you like to do can come out. So what’s been the key to making that work consistently in this, in the new world that you’re in, in the wealth strategy?

Aaron Revere (07:45)

Well, I think that I’ve taken a larger approach. I’ve been around long enough to see some cycles of real estate, right? And so I see this kind of cycles of the real estate going up and going down, the rates going up, the rates going down. I remember having a conversation with a real estate investor friend of mine in like 2018 saying to him like, you know, maybe there’s something you can do to hedge these interest rates because I just can’t see how they can go lower. They’re gonna go up and you’ve got a lot of real estate.

Let’s figure out how you don’t have to just eat those higher rates when your loans come due. Nothing came of that conversation, because didn’t we all think rates were gonna stay at 3 % forever? So nothing came of that, but that was the kind of thing where I saw, I don’t wanna say I saw the writing on the wall, but I certainly saw that there are cycles that can truly move up and down. bringing in the wealth strategy, I saw investors who sometimes, for example, on the tax side, they’ll hesitate to sell a property.

because they don’t want to pay the tax. And then yes, of course, there’s a 1031 exchange. Sometimes they don’t want to deal with the exchange. They don’t want to get a new property. They’re very comfortable with the property they have, or they’re worried that there’s not a lot of deals out there, right? They’re worried they won’t be able to make their exchange in time. And so having kind of this wealth strategist, of all these worlds coming together, I’m able to give someone a lot more options. I’m able to say like, hey,

For example, 10th-rate exchange is not your only option to not pay capital gains tax. I’m able to say things like, hey,

you’re paying through the nose for your insurance premium, for your several multifamily properties, your portfolio. Why don’t we look at strategies that can help you self-insure and we can maybe cut that premium in half and different things like that. so basically for people staying in the real estate world and of course real estate investors love their world. They don’t wanna leave. They just love real estate. There’s nothing better than real estate, right?

But it’s showing them through some financial tools, some other finance stuff out there, they can just make their own financial, their real estate portfolios that much better, right? They can really maximize what they’re doing for them.

Micah Johnson (09:46)

What do you think’s been your biggest challenge in introducing them to these ideas? What kind of kickback have you got?

Aaron Revere (09:52)

Well, there’s definitely the, ⁓ I haven’t heard of this before crowd, right? ⁓ You’ll definitely get folks who are like, well, why haven’t I heard of this or it sounds too good to be true, right? And a lot of these strategies that I’ll do with folks, I mean, I will show them like, hey, this strategy has been around for 20 years, okay? It’s not that the strategies have changed, it’s you have changed, right? Now you are a player at that level where these strategies start to make sense for you, okay? ⁓

There’s no free lunch. Some of these strategies require, for example, a setup fee, right, let’s say. ⁓ Before the setup fee didn’t make sense, the person’s portfolio, right, the investor’s portfolio wasn’t at a level where that fee could be justified. But when they start getting to a certain level where it’s like, are you kidding? That fee’s a drop in the bucket to what you’re gonna pay in capital gains tax, okay? So it’s worth it all day, every day. You’re still gonna have a savings of, depending on the case and who I’m talking to, you might have a savings of $1.8 million or more.

Right? The fees are, the fees are, are, are 10, 20 grand for one strategy. They’re nothing for saving the $1.8 million. You know what I mean? But if we’re talking to someone who, you know, has one or two houses, there’s a little bit of capital gains for some reason they don’t want to tend through an exchange. I can’t bring up that strategy, you know? And so that’s why it hasn’t come up for everybody. But as people are growing and their portfolios are growing, suddenly some of these strategies make a lot of sense.

Micah Johnson (11:46)

It does make sense, especially because there’s not a reason to hear about the strategy. You wouldn’t go research it before you actually needed it. And that’s not something a lot of folks just sit around and look up each day. It’s definitely not real estate folks desired reading. We’re going to want to read about something else for sure. So one, it’s got to make them feel better, right? We all like that feeling of growing, don’t we? Where we get to, we get that access into these new tools that are for us. So I think

I think that’s fascinating, just the education piece that you’re bringing. So looking ahead, what are you most focused on solving next?

Aaron Revere (12:21)

So, you I know you’re, think your audience is probably very much geared towards real estate investing. ⁓ One of my strategies is really good for people who let’s say are just a luxury homeowner, right? If they’ve got a home that, you know, this was fairly typical back when I was real estate agent in Beverly Hills, maybe someone’s got a home that they’re gonna sell now for $10 million. When they bought it, they bought it for two or three, you know, and they put some improvements into it, but there’s a lot of capital gains there. So.

I’m looking forward to reaching out to those folks even after the sale. And this would apply to commercial real estate investors too. ⁓ That even after the sale, there’s a tax strategy for them that can help them not pay that capital gains tax. And that’s really, especially for the luxury homeowners or whatever, that’s really their own strategy because they can’t tend to an exchange. So I’m looking forward to, ⁓ I’m gonna dial up my marketing and hone it in to reach some of those folks.

You know, I know someone else who’s, who’s, ⁓ we’re doing a deal right now and they don’t want to do a 10 through an exchange. And this is someone who’s had a real estate portfolio for 30 years and he’s just reaching an age. He knows the kids are not interested and he’s just at a point where he’s like, I know I could invest the money in other things, which he’s also had along the way, but he knows those other things his kids are way more interested in. And so I think he’s starting to make a little bit of a portfolio shift.

where he’s moving a little bit less into his real estate. He’s keeping his favorite properties, of course, but he’s moving into some, he’s moving that capital into some other things that he knows is really where his future with his kids working with him is, if that makes sense.

Micah Johnson (13:58)

And how popular is that? Is that a trend that you see as people keep aging in the real estate space as they go along?

Aaron Revere (14:05)

yes and no. I mean, the nice thing about real estate is there is no passive income. I think we should all know that by now, but it’s, it’s, it’s getting close, right? It’s, it’s kind of passive. And so that part’s nice, especially for kids, you know, it’s not that much for the kids to handle, but I mean, I do know someone who’s, who’s a father passed away kind of suddenly and he had to take over the real estate portfolio. And this is a big portfolio. It’s become his full-time job. He manages, they manage their own properties.

But that’s all he does now. He had a different business and he basically, you know, he did a sunset on it and now he just manages dad’s portfolio. So even though we’d like to think it’s passive, it’s not really passive, right? ⁓ I will say though that real estate overall, cause I definitely deal with people who are selling their business. do these same kind of tax strategies for them. The people who own the business are more likely to say, Hey, my kids aren’t interested in my business.

The real estate, it does lend itself a little bit better to kind of that generational wealth play.

Micah Johnson (15:02)

Interesting. So something they’re more open to holding on to. So keep that your mind out there if you’re building that generational wealth of real estate. Kids kind of like to keep that one. So for my listeners who are early in their journey or trying to level up, what’s the biggest difference for you when it comes to building relationships and growing your network?

Aaron Revere (16:00)

⁓ When you’re starting off, your network is everything. ⁓ Because you, let’s just assume you don’t just have a bucket of money. Someone’s once said to me, it’s like you’ve either got resources or you’re resourceful. You’re not usually both. If you’re both, you’re really lucky. And if you’re neither, you’re screwed. ⁓ So presumably, let’s talk about someone who doesn’t have a ton of resources. So you’ve got to be resourceful. So one way you can be resourceful is you’ve got to go find that network.

Micah Johnson (16:15)

Mm.

Aaron Revere (16:29)

I mean, when I was a young real estate agent, like I said, I was trying to meet the investors. I realized I could walk into the houses under construction. You know, I can’t go up to, I mean, I guess you could, you can door knock. I just never had any luck doing it. I did do it a few times, but when I would try to go up and door knock at a homeowner’s house, the second they saw me, the door either didn’t open at all or, you know, it stayed shut for the most part. ⁓ But with a construction yard, with the fence, the fence was open because they were moving the Bobcat in and out. You know what I mean?

So I just walked in along and I wasn’t dressed like a crew member on the construction site. I was dressed nice. I was wearing a suit and ⁓ dress shoes and everything. And they just thought I was like friends with the investor. They thought I was a buddy or something or an investor in the deal. But then I’d ask them, it’s like, where’s the, I’m trying to meet the owner. We’re supposed to have a meeting here or whatever. I was resourceful. And that helped me build my network.

And the network, you know, it worked out very well for me. Those guys, some of those guys that started in 2015, 2016, you know, at the time they were flipping one, well, it was always new construction, but they were doing one or two, which then sold for anywhere between 2.2 to $3 million. Some of those same guys are selling maybe four or five houses they moved into, and those houses are not selling for less than 10 million.

Micah Johnson (17:46)

Wow. I like how you went on offense there and that’s something I encourage people to do. I love that quote about if you either have resources or you’re resourceful, there’s a way to get in front of people. There’s a way to go get in the way of opportunity is how I like to say it. And I think it’s something that, especially if you’re interested in the real estate business and doing this, you have to get used to is putting yourself out there. Nobody does it alone by themselves in a room in the back of their house.

Okay, so if someone wants to connect, collaborate, or learn more about what you’re doing and find out more about the wealth strategies that you’re using and see if it’s a good fit, what’s the best way to reach out to you?

Aaron Revere (18:24)

So the easiest way to get directly in touch with me is my email. So that’s pretty simple. It’s Aaron, two A’s, R-O-N, at K-H-A, that’s like Kilo, Hawaii, Alpha, and then group, which take out the vowels, GRP.com. So Aaron at KHAgroup.com. It’s just, you know, I like when people are direct, you know, just come at me, don’t worry, you’re not gonna scare me and I don’t bite, you know. ⁓ If someone wants to kind of look around and kind of understand a little bit more about what I do,

I have a YouTube channel. And if you search in the YouTube search bar, KHA wealth solutions, you’ll find me kind of a black logo with KHA in a circle. That’s how they’ll find me. Right now I’m talking about on that YouTube channel, I’m talking about some mortgage strategies to help pay off a mortgage fast. But then I’ve also got videos of course about what probably is going to be a best fit for your crowd, your crowd, which is, you know, a capital gains, not paying capital gains tax.

I got two main ways of doing it. ⁓ And I will say that one of them you gotta do before you sell the property. And that’s kind of, ⁓ that’s kind of all of the, the getties, if you will, where it’s about you wanna, you wanna manage, you wanna control the asset, but you don’t wanna own it on paper. And that strategy you wanna do before you sell the asset. But the other strategy I have, we have another way of eliminating capital gains tax, which a person can even do after they’ve made the sale.

which is a pretty big deal because obviously, besides for 10th and exchange where you got basically 180 days to close, there’s not a lot of options beyond that. So whether someone had a failed 10th or 1 exchange, decides they don’t wanna do a 10th or 1 exchange at all, or if they’ve just got some sort of maybe high-end home that’s not gonna, that maybe they’ve used up their first $500,000 as tax-free and they still are looking at a big gain of let’s say, I don’t know, $250,000 or more.

Um, then I’ve got a separate strategy that they can do. Uh, you know, even if they sold their house in January, they can still enact that strategy in December of the same year. It’s gotta be in the same calendar year though. Um, and I’m constantly putting out more videos on, on YouTube, um, about those strategies and, other strategies, whether it’s, you know, reducing taxes and paying less insurance and paying off a mortgage faster, smarter investments, that kind of thing.

Micah Johnson (20:23)

Man.

Okay.

Man, I like how you’ve taken your whole experience now and just can keep condensing it into the most effective way for your customer to get ahead and whatever it is they’re doing. I just love meeting people like you that go on offense is what I call. You are out there actively trying to solve that problem for your customer. So man, I really appreciate your time, your story, your perspective. I think we need more people in the space doing it like you’re doing it. So thanks again for being here.

And for those you tuning in, if you got value from this, please make sure you’re subscribed to our podcast and like this episode. You’ll find Aaron’s contact info in the description. So if you are needing capital gains tax recommendations or strategies to help you grow your business, whatever it needs to, please reach out to Aaron. He’s doing some great things in the space that can help you level up your game. So we’ve got more conversations coming up with operators, just like Aaron, who are out there building real businesses.

Thanks for joining us. We’ll see you on the next episode.