Sophisticated Investors Do This Before Selling Property

David Wiener: If you sell a property without a tax strategy, you're not making an investment decision, you're making a tax donation. And here's the real problem. Most investors don't lose money on bad deals, they lose it on bad exits. Because by the time they start thinking about taxes, the decision has already been made for them. So today we're breaking down how sophisticated investors think about tax mitigation before the sale and what to do when your original plan no longer works. Stay with us because later in this episode we're going to walk you through a five-step tax mitigation playbook, and I'll also show you where strategies like cost segregation fit into that process to accelerate your cash flow. Welcome back to the Tax Strategy Playbook. I'm your host, David Wiener, also known as Mr. Cashflow. On this show, we break down the strategies real estate investors and business owners use to legally reduce taxes, increase cash flow, and build long-term wealth. Because smart investors don't just focus on how they make money, they focus on how they keep it. And today's conversation is about staying in control of your outcome, especially when the deal doesn't go as planned. today my guest is Jim Whitesides, founder of Soundtrack Advisors. Jim works with commercial real estate investors and business owners on one of the most important and overlooked parts of investing. How to make better financial decisions at the exact moment they matter the most. His focus is on tax mitigation, exit planning, and structuring strategies that help investors reduce unnecessary tax exposure while still making strong investment decisions. What I like about Jim's approach is that he's not leading with a single solution. He's helping investors think through the full picture. So they can make smarter, more flexible decisions. Jim, welcome to the show.

Jim Whitesides: Thank you very much. I'm glad to be here, David.

David Wiener: Let's start here. Because this is where most investors I think get it wrong. They treat taxes as something you deal with after the deal instead of something that should shape the deal itself. So where do you see investors lose the most money when it comes to taxes?

Jim Whitesides: I think that an important point to make in answering that question is that you know having a game plan up front and evaluating all of your options before selling a property is really important. And evaluating what's going to come next, what your options are, and how that's going to play out, including backup plans when things don't quite go the way you expected.

David Wiener: Because they don't always go the way you plan, right?

Jim Whitesides: Right.

David Wiener: So I I believe it needs to even be considered before they even buy the property, but what's the difference between reacting to taxes and actually planning for them?

Jim Whitesides: good question. every time we buy an asset, we buy it to sell it. We're going to sell it eventually anyway. So I I would echo your comment there that when we buy things we need to think in terms of a sales strategy or at least be aware of what it might be. and the way I think of that is either the dog wags the tail or the tail wags the dog. And so when we when we expect to have an asset sale or a real estate transaction, again knowing what the options are ahead of time is a very important one. And I'll offer an example. I've had clients before who are in partnerships, and when they sell a property whether they wish to make their postclosed decisions together or separately is a very important consideration. And and so certain steps can be taken before entering into a contract, before contracting to sell an asset or a property that will mirror their you know their desired outcome. If they don't take the right steps then they may not have the option to to choose what comes next separately. They may have Together.

David Wiener: And that's not always possible, especially at the point where maybe the partnership is breaking down, the the property is being sold because of that, it can become a big issue, I would assume.

Jim Whitesides: Yes.

David Wiener: So when does a tax issue become a long term wealth issue?

Jim Whitesides: well, I think that the way I think of that is that you know, a a common strategy when it comes to real estate is to kick the tax can down the road as far as possible. And there are different ways of looking at it, of course. you know, the contrary opinion would be pay your taxes now because our national debt is so high that tax rates can only go up. And I and I get that. that's kind of a a a different Question, I think, but the the way I think of the answer to your question is that if you pay taxes now on a sale, you have fewer dollars to reinvest and grow over the long term. So, in most scenarios, the the best strategy for building long-term wealth is to avoid paying taxes if possible, have the largest pile of equity you can following a transaction and have that larger pile grow on a tax-deferred basis as long as possible.

David Wiener: We did an episode not too terribly long ago on ten thirty-one exchanges and I want to go there in just a minute. But the theory that was presented was defer, defer, defer, die, and then pass that that real estate on to your heirs. In that case they're not gonna be selling the the real estate and and people need to think about that from the very beginning as well, So you know I'm involved with cost segregation and bonus depreciation. I'm a cost segregation provider. So How do you think about strategies like cost segregation on the front end, especially when investors are trying to maximize their cash flow before an eventual exit?

Jim Whitesides: I'm a fan. I think that cost segregation studies can be very powerful tools. They've been very useful for me. I used to be in the self-storage business and we were constructing new buildings every year, and I always did cost segregation studies to maximize the deductions up front and maximize my cash flow. I was in a heavy growth period and it was very effective. I I think that it's worth evaluating. you know, it's it's a strategy that eventually if you're able to continue to build like I was, then it can be very effective. Of course, those taxes will have to be recaptured when the properties are sold. So there's that to consider. But I'm a fan. I think that cost segregation can be a really powerful way to minimize taxes. early on in a project and maximize cash flow.

David Wiener: Well, we talked a little bit about ten thirty-one exchanges and and that's one way to kind of again not not eliminate recapture, but defer the recapture. I think once investors realize taxes matter earlier, that's the first place they go. almost by default, I think, is to the ten thirty-one exchange. So when is and when isn't a ten thirty-one exchange actually the right strategic move for an investor?

Jim Whitesides: that's a really question. I think that there are a number of strategies that that can be employed to address the idea of deferring taxes and and minimizing taxes and maximizing the amount of capital that one has to grow. I can step through some of those options if that would be helpful.

David Wiener: Well, I definitely want to cover those different options as we go through, but talking about ten thirty one exchanges, talking about opportunity zones and those kinds of things. do you see investors who get into trouble with both timing and pressure when they're talking about a ten thirty one?

Jim Whitesides: yes, occasionally it does, it can be problematic. The ten thirty one exchange is is also a very valuable tool. it like you said, defers capital gains, defers recapture, it accomplishes a number of things. And so you know, I I've done them. it's one of the things I focus on in helping others. I think that it is it's very helpful when when someone has a a desire to It to a property and wants to maximize the amount of capital they have for what comes next. It does generally require that, you know, with some exceptions, does require that all of the all of the funds from the relinquished property go into the replacement property. There are exceptions to that, of course, but so if someone has a liquidity mean, you know, there are considerations there. I would say that. with the ten thirty one exchange, there are the good news is there are pretty specific guidelines from the IRS in terms of what rules one has to follow. And that's kind of to your point is one of the rules is from the time that one sells a property, you can't take constructive receipt of it. You have to have a a third party, a qualified intermediary or some other intermediary holding the funds. And you have a pretty short period of time to identify the replacement and then to close on the replacement. Forty five days to identify replacement properties and close within a hundred and eighty. So, you know, it is it can be very compressed, particularly if I have a friend who has a property that he received an offer on, very attractive offer. He wasn't anticipating it and the buyer was a cash buyer, wanted to close very quickly. Well the good news is it was a a profitable transaction. The other news is he then had a very short period of time identify replacements to identify what the right strategy is for him. So yes, a 1031 is a a very powerful strategy. Since there are tight timelines, strict timelines on it, it it I always advise people to get started early and to plan early. And occasionally people do get down to, for example, close to or past the 45-day identification period and they haven't identified suitable replacement properties. So it does happen.

David Wiener: I know in the episode that I did on 1031 Exchanges with Dave Foster, he said that he's gotten calls where somebody said, I d I sold a property and I just learned about this ten thirty one thing and I want to do it. And he says, Okay, how long ago did you sell the property? And they said, forty days ago. That's kinda kinda that's kinda late in the in the game to be doing that. And you know, there are a lot of investors who aren't aware of that's that's really the point of this podcast is to help them be aware of the different options they have. So 1031's a good a good option. It's not the only option. if they're gonna think about a ten thirty one exchange, what should investors do before they get into the ten thirty one to keep control?

Jim Whitesides: well there are several things that are really important to do to avoid getting to that difficult spot where maybe it falls apart. I think that you know as a starting point you have to establish a re a relationship of an account with a qualified intermediary, you know, before the sale. and and you cannot take constructive receipt of the of the proceeds. So that is one basic thing. and a qualified intermediary does not have to be local, it can be anywhere in the country. But you want to establish a you know relationship with a QI. you want to get to work starting identifying replacement properties as soon as possible. and you want to also have backup plans. you can certainly identify a certain number of properties if you want to do a lifetime exchange into another type of physical property, but there are other options too. And I'm sure we'll talk more about things like Delaware statutory trusts, et cetera. and and there are, and I'm sure we'll get to this as well, but there are options if your ten thirty-one falls apart, there are other other strategies that you might be able to employ even if the ten thirty one doesn't go through. But the short answer to your question is start early with the planning process and have a backup plan.

David Wiener: And isn't that that's pretty true about almost anything you're gonna do? You know, plan ahead. Don't don't react, act. 'cause in the real world, things don't go perfectly. Deals change, timelines shift, suddenly the original plan doesn't fit anymore. What are the most common situations that you see where they have to they have to pivot, they have to change their plan, where they have to look for a different option?

Jim Whitesides: most common sorts of things would be perhaps the the deal falls through on the replacement property, can't get financing, it doesn't appraise, there could be inspection issues, there could be anything that would that would put the closing of the replacement property in in jeopardy or in doubt. That's a very common one. in my case, the first ten thirty one exchange I did, I frankly I underestimated the likelihood that I would find suitable properties and that met my needs. So I had it I had a a deal to sell my self-storage business. I started looking for replacement properties, my deal fell apart. went back, the same thing happened again. Another deal for my business, that deal fell apart. By the third time, I wasn't even looking for replacement properties once it closed, and then I underestimated the amount of time it would take. to find properties that that fit. So the challenges associated with finding appropriate properties are real. Giving financing that is you know that is acceptable terms is real. Those are the most common things. And well that and and not having not having established a relationship with the QI. That's more common than I would think. They sold the property, they took took receipt of the funds And now they want to look to do a ten thirty one

David Wiener: It's too late. And you've got forty five days to to identify the property, but then you've got a certain timeline where you have to close on the property as well. I imagine that's where a lot of things fall apart. Not being able to close on time or you know, those kinds of things.

Jim Whitesides: Yes, very much so. Well a hundred and eighty days sounds like a lot and it can be and often is, but that's why it it's always good too to have that backup plan identified. So in case those don't go through, and I know we'll get to this in a moment, but D S Ts are a very good backup plan to that because they're generally available, they don't require the the investor to do financing. you know, there are other benefits that that make them suitable that one can close on a DST in a very short period of time if need be. So that's that's what we mean by a backup plan.

David Wiener: we've talked about DSTs on a former episode as well. I think that's something that a lot of people don't understand. So I think this is when having more tools matters because if you only have one option, you're gonna try and force that option even when it really doesn't fit for you. So let's talk a little bit about DSTs. Can you kind of define that for the audience, a Delaware statutory trust?

Jim Whitesides: Sure. Delaware Statutory Trust is it is a trust, obviously. It's it's a private placement security. there are similarities to a real estate investment trust, which are generally a little bit better known and understood. with a real estate investment trust or REIT, an investor is buying shares in the REIT. It's like shares of stock. So as such They may be a fine investment, but but they're not 1031 eligible because it's owning shares of a company, is the way to think of it. A DST is a

David Wiener: But in a DST trust they are?

Jim Whitesides: it's a somewhat similar structure, but in a with a DST, the trust owns real estate, and investors in that DST are fractional owners, not of the trust, but of the real estate that the trust owns. So when one becomes an investor in a particular DST, it might be the 0.0176% owner of the property that the trust owns. And since it's real estate, it is ten thirty-one eligible. So that's that's the the primary difference. But the private placement security that is sold through the broker dealer network. So for example, my broker dealer is Quincy Wells Capital. they can only be purchased by you know credit investors through a through the broker dealer network.

David Wiener: I think that's another thing to to point out. In order to purchase a a share in a DST trust, you must be an accredited investor.

Jim Whitesides: Yes.

David Wiener: And and what are the what are the requirements for that?

Jim Whitesides: well the requirements have to do with income level, whether single or married, in excess of two hundred thousand dollars over the last three years or net worth of at least a million dollars. there

David Wiener: Okay. So

Jim Whitesides: there there are other there are other ways of becoming an accredited investor, but those are the most common boxes to check that that make it very

David Wiener: So the bar is there, but it's not super high for most real estate investors, I would say. Okay. So when is a DST trust a better option for someone than a ten thirty one? Are D S T trusts nat they're naturally passive, correct?

Jim Whitesides: That's correct. It's a passive investment. The investor does not have to do the due diligence on the real estate. Does well you do due diligence on the investment, but doesn't do the same type of due diligence that would be associated with acquiring real estate, does not have to manage the property, put financing in place, those sorts of things. So it's an entirely prepackaged passive investment that is typically sponsored by a large company that has been in the in that space oftentimes for a long period of time. Oftentimes they've had other DSTs that have gone full cycle where they'll we'll launch the DST, operate it and sell it. and so yeah so the the DST is a passive investment that works really well in a couple of areas. in in my case I sold my business and I really wanted I did not want to be a hands-on owner of real estate anymore. I wanted passive investment so I had time to do other things. And so that was one situation. Another situation would be you know, perhaps for health reasons, someone does not want to be actively involved in them in the management of real estate that they're invested in. It also allows you to in some cases reduce your risk in that when you own real estate, you're oftentimes personally liable for any debt on the property. Not so with a DST. So it's non-recourse debt. It's pass you know, there's not day-to-day involvement in the management of the property, there's the same due diligence on the way in or on the way out. and it can be diversified too. Again, some a business owner might have the majority of their or property owner might have a majority of their net worth tied up in one location or in one area, one sector. sell that and then take the proceeds into four, five, six different DSTs and now they're much more diversified by sector, by geography, and so they're it has the potential to fit, you know, in a number of different

David Wiener: So this is not a fit for someone who is looking to use the depreciation against their W two income. Like I see a lot of short term rental owners that are doing cost segregations with me just for that specific reason to offset W two income for tax purposes. This would not be a good fit for them unless they have enough passive income to offset, right?

Jim Whitesides: Well yeah, it's not the primary purpose, certainly. you know, oftentimes DSTs will do cost segregation studies on the properties that they own and they will pass through those those benefits to the investors. So if a DST has a cash flow of let's just say has a distribution rate of six percent, some of that might be shielded and it's not all taxable income. So it some of the benefit there is is still in in place, even if one is not the sole owner of the property, they still have some of the benefits of the cost stake study as a fractional owner.

David Wiener: Okay. So Is there a time when considering a DST is a better option for someone than considering a ten thirty one? And I wanna talk about opportunity zones coming up as well, but as far as a DST versus a ten thirty one, is there is there a time when one is preferable over the other?

Jim Whitesides: there may someone else might give you different answers, but my primary my primary thoughts are are that being being a DST owner is a lot simpler. It does not require searching for properties, putting insurance in place, shopping for insurance every year if the insurance market changes. there's no data day management of of the staffing. so those sorts of things

David Wiener: Dealing with tenants.

Jim Whitesides: and right collections, all those sorts of things are are the on the shoulders of the management company and the DST. And so, you know, I I do believe in in my personal opinion is that you have access as an investor to perhaps a better quality of real estate asset than you would if you were buying real estate on your on your own. I I would have access to certain types of real estate if I was buying it myself, but I would have much greater access to higher quality real estate as a fractional owner in a DOC.

David Wiener: That makes sense. Well let's talk a little bit about opportunity zones. We we've done an episode on opportunity zones in in a little bit more depth, but when we start comparing them to the other options, you know, you've got your 1031, you've got your your DST, you've got opportunity zones. There probably are other ones, I would assume. But how do you kind of choose from the from the menu which is going to be a better option? ten thirty one if they wanna stay in active management of real estate. DST if they wanna go passive, how do opportunity zones work?

Jim Whitesides: it's a really good question. And they they both defer taxes after the sale of commercial property, but they have different kind of objectives. You know, a a ten thirty one exchange, whether it's with property or DST, is primarily a continuation of real estate strategy. the the investor exchanges one property for another. deferring the taxes and moving on down the road. the qual you know an opportunity zone is a little different. It's primarily like a gain reinvestment strategy. The investor sells a property, you know, recognizes the gain and they invest only the gain portion of the sale into a fund that up that invests into opportunity zones. And so Whereas with a ten thirty-one, the entire sale amount, in order to defer all of the taxes, the entire sale amount has to go into the replacement property. With an opportunity zone, only the gains are required to go into the opportunity zone. So it's deferring the taxes on the gains. I think of it this way. those gains are are typically invested in properties that are otherwise investors would need to be given some tax advantages to to spur investment into certain types of properties. They're not it's not like they're net necessarily poor quality, that sort of thing, but it it was created to create incentive for investors to pool their money and and to create real estate opportunities in underserved areas. But the opportunity zone, I believe the primary benefit there is the cost basis of your investment. Someone sells a property for a million dollars, their cost basis was $400,000. The $600,000 gain goes into the Opportunity Zone Four hundred thousand, their basis, can come back to them. It's not required to be invested. So I tend to think of it this way: if an investor has a need for liquidity at the time of the of the sale of their property, then an opportunity zone can provide that. So with with a 1031 Exchange, you sell a million dollar property and you order for all the taxes, the full million goes, you know, accepting all the little the rounding errors, the sorts of things, the full million goes into the 1031 exchange. Whereas with an opportunity zone fund, the six hundred thousand dollar gain would go into the fund and the four hundred thousand would be available to the investor. So if the investor has a need for liquidity up front, that is one way of of achieving that. the trade-off is the funds that go into the opportunity zone are deferred for a period of about five years. and then if they are kept in the fund for a total of ten years, then any gains on the on that investment in the fund are are not taxable as well. So there are some long-term tax benefits, but it is a longer term hold. So everything's kind of a trade-off. the the 1031 has the the benefit of that we've talked about the opportunity zone does offer some further capital gains over the long term capital gains tax deferral over the long term and it has some liquidity up front. So it's really very situation dependent.

David Wiener: Yeah, it all kind of depends on what they need at the time, it sounds like. and what they're what they're trying to accomplish. are there trade offs that you see people overlooking on between the three options?

Jim Whitesides: There are there are others as well. I think that a lesser known option would be a 721 exchange, which is similar to a ten thirty one, but it can only be done one time. So one sells a property, does a seven twenty-one exchange into perhaps a REIT, real estate investment trust. The taxes are deferred. but unlike a 1031, where they can that can happen swap and swap until you drop continue continually throughout life, a 721 exchange is just a one-time sort of thing. so there are often times when that could be worth considering. An example would be: I'm working with a client now who is selling commercial property. she's 70 years old. She would like to defer the taxes, but she anticipates the possibility of needing some liquidity down the road. So one of the things we're considering is when she sells her property that she would do a 721 exchange into a a a REIT. And at that point the the taxes are deferred, and if she needed liquidity down the road, she could sell those operating units from the REIT to generate some liquidity and that's when she would pay her taxes if she had to generate some liquidity that way. So it gives you some again, situation dependent, but in her case, since she expects to possibly have some liquidity needs, it that's that's kind of a a good split the difference between a 1031 exchange and an opportunity zone.

David Wiener: And I I would imagine too that's why people are talking to you. Because most investors that I know, when it comes to an exit, they kind of look like a deer in the headlights and they're not sure what direction they should go. So they come to somebody like Jim Whitesides and say, Okay, here's where I am, here's where I wanna get to, what are my options? And then I would assume you go through all the options with them and kind of help them decide, where their best option lies.

Jim Whitesides: Yes, and and in addition to that, I think that a common challenge too is that even if an investor is not even if they are pretty informed and they have good advisors and they have a CPA and they have a tax attorney, you know, those people sometimes are spread a mile wide and an inch deep. and they may or may not be always up to date on the latest developments. or they may have a history with a particular option where there were problems with particular option maybe years ago, but there have been changes since then that that need to be brought to light. And an example of that is one that I'll bring up from the the legislation, the tax legislation that in twenty twenty five that related to accelerated depreciation. There are now offerings that where investors can place funds, for example, if if there's a ten thirty one that breaks up They may not be able to defer their taxes from a 1031 exchange, but they are able to take the proceeds, invest in an accelerated depreciation offering that provides passive losses to offset the passive gains from their 1031. And so now they're still able to wipe out the taxes on the property on a property sale achieve their goals that way. They these are relatively new developments and as you've as you're well aware, there are new developments with opportunity zones as well. and those are reasons why sometimes our best advisors are are our are trusted advisors. We need some you know, we need to hear some new voices too,

David Wiener: And I and I love that you said, a lot of the CPAs and things are ten miles wide and just not very deep. My dad was a CPA and he always used to tell me almost the exact same thing. He said, To be a CPA in today's world, you've got to be at least ten miles wide and about a foot deep. And then you need to surround yourself with people who are a foot wide and ten miles deep on the different things

Jim Whitesides: Okay.

David Wiener: that, you know, you you and that's where you and I come in. Because when it comes to depreciation and cost segregation and bonus depreciation, I'm about a foot wide, but I'm about ten miles deep. And so you know, I think that's that's really, really important. So okay, we've talked about the most common strategies 1031s, opportunity zones, DSTs, 721 REITs. Beyond those, This is where more advanced planning starts to separate the experienced investors from everybody else. When does it make sense to move beyond standard strategies into some more custom structures?

Jim Whitesides: I think that the answer as I see it to that question gets back to starting your planning early. Because if one starts to evaluate whether it's a ten thirty one or ten thirty one with a DST or an opportunity zone, there are gonna be pros and cons. They all have trade offs. And as you go through those, If one really leaps out as being a good solution, that's terrific. But there are times when nothing quite feels right and and we need to and we need to find another approach. and i I'll give you an example. in the current environment, I have another client who is an elderly client who is selling a commercial property. they would like to defer taxes on the sale, but what they really want is to generate lifetime income. And that's what they're really trying to achieve from it. They want to get out of the managing real estate business, doing another 1031 exchange in three to five years. not so great. So, you know, they'll they're willing, and that's still an option, but it's not ideal. So that's where things that are per perhaps a little bit outside the norm might be an ideal fit. And I'll I'll go back to the accelerated depreciation example I mentioned a moment ago. This particular individual, one of the options we're looking at is to this this one offering a dollar invested gets two dollars of passive losses in the first year. So with a two to one ratio there, this particular investor We'll look at what their gain is on the property, we'll take half of that gain and put it into this accelerated depreciation offering. That will yield them the full the amount of their gain in passive losses, so there'll be no taxes on the sale. And then what they really want is simple lifetime income. And so for them, an annuity is a good fit. So a lifetime annuity that perhaps has a death benefit, that has mailbox money, that doesn't put their capital at risk, 'cause what they what this person really wants, if they if they did a conventional ten thirty one exchange, and they're of the opinion, this particular person is of the opinion that real estate values are are high and that they could generally go lower. So part of their motivation for selling is they would like to have less real estate exposure. So for them, the idea of having guaranteed income that doesn't have the same exposure really can only, you know, there are probably other sources too, but the first thing that comes to mind is from an annuity from a guaranteed insurance contract. So those are the sorts of things that we wouldn't be able to talk about if we weren't crisp on the accelerated depreciation opportunity that could take care of the tax piece, and then we can separately use a different product to take care of the income.

David Wiener: So that's that's basically a thoughtful plan rather than a generic plan. I like that. And if one of those three or four more generic strategies pop out at you and that's what you're after, it's great. But not everybody fits into all of those exact categories, then it's time to put together a a specific plan beyond standard strategies. so let's make this practical. If somebody listening is thinking about selling a property or even considering it, I I wanna give a clear playbook they can follow. And let me list out five steps, Jim, and then you can kind of give me your impression of these five and whether they are the correct five. Number one, I would always say start planning before the sale, because your biggest opportunities exist before the deal's under contract. Secondly, define your outcome first. Cash flow, legacy, liquidity, risk, your tax strategy should support the goals that you have in your exit. Three, evaluate multiple strategies early. And get with somebody who's an expert on that. Your tax preparer is probably not. Your tax strategist may be, but may not be, and may need to bring somebody else in. So if you're talking about 1031s, you definitely need a QI. Opportunity zones, tax credits, other structures. Compare all of those before you're forced into one strategy. For maximize cash flow along the way. Use cost segregation if it's appropriate, depreciation strategies to improve after tax returns before your exit. And then five, build some flexibility, coordinate your advisors. It's always good to have a team. So keep multiple paths open, align your CPA, your advisor, your cost seg guy, and your legal team early. Does that sound like a a good five-step plan for people?

Jim Whitesides: That sounds excellent. I wouldn't change anything about all of them. And your last comment there too about having the team coordinate is is really important too because you know, your tax preparer was gonna have a different point of view than your tax advisor. and and your legal advisor has a different perspective yet again. So getting getting them all on the same page is really important so you don't get partially down the road and then have one of them say, Wait, we've got an issue here.

David Wiener: Yeah, and you definitely want to see the whole picture before you leap off the cliff.

Jim Whitesides: Yes. And if you have a like like you said, I think I think it was item number two, you know, have your have a desire to end game in in mind. If it's lifestyle, if it's income, if it's you know, whatever it might be, if you have that in mind, then you can work towards that and it gives you a a framework to evaluate the options from.

David Wiener: Is is there one or or two of those steps that you most often see investors skip?

Jim Whitesides: well I think that for the most part, you know, it's just that they're getting started early. That's that's usually the bigger challenge. Now, if someone is regularly transacting in real estate, then it's a little bit more of their DNA to plan ahead and that sort of thing. but particularly if it's someone's a business owner, that then includes real estate, then then you know, the the transaction is not something they've done often, if at all. And so how early you need to start with that is is really the the critical item. So starting that late makes everything else very compressed. And then you're you're trying to d develop a strategy while you're negotiating a closing or when you're you know when you're going through some process with the transaction and that's that's a recipe for for making decisions that are other than what you would have otherwise. So getting started early is the is the number one.

David Wiener: Yeah, I think I shock some of my potential clients because when they contact me for a cost segregation study on a property that they just bought and they're all excited and I say, What's your exit strategy? I don't think they hear that from too many people. And they say, What does that matter? I just bought this property. I said, Well, it it could matter a whole lot. Yeah, we we need to know what your plan is, so that we can determine whether this is good for you or not. And so, yeah, I see the same kind of thing. People don't think about the end from the beginning. And that's I think that's really important. So if this if

Jim Whitesides: Well put.

David Wiener: this episode is helping you think differently about your tax strategy, share it with another investor because most people don't figure this out until after they've already paid the price. And make sure you're following the show either on YouTube or on any of the major podcast platforms so you don't miss future episodes. Jim, let's bring this full circle. Let's leave listeners with something actionable. What's the biggest mindset shift investors need to make around taxes, in your opinion?

Jim Whitesides: the biggest mindset shift, I would say that a a willingness to just be simple and pay the taxes now and get it over with is one that that I struggle with the most. I I'm happy to pay my taxes. We're privileged to live in the country we live in, and it's it's our our civic responsibility, but I too often will come across someone who says, you know, it's complicated, I don't want to screw it up, I'll just pay my taxes now and get it over with. And I think that you know, if what that really tells me is they want simplicity and there are ways of achieving that simplicity while while keeping more dollars in you know in their control.

David Wiener: I I totally agree. What what should somebody do this week if they know they've got a sale coming up?

Jim Whitesides: if you think you've got a sale coming up, I would say I would be glad to talk about circumstances. I would encourage someone to reach out to myself or someone else that's involved with you know, either it's retirement planning or tax planning. Get if you're if you have a inner circle of trusted advisors, get their input initially and but then also look to to get some fresh voices in in whether it's myself or someone else and get comfortable with the idea that maybe you've got the right plan now, but maybe you need to reevaluate it. And I would say get some fresh voices is is something that will be energizing. if if you feel like you're learning something and you're progressing, then it's gonna make a transaction feel a lot more doable and a lot less like something to be avoided. I think that for someone has doesn't feel like they're confident in their advice or they feel like they're they're concerned they're gonna screw it up, they're gonna they're gonna put off thinking about it. Or they're gonna put off making the change that they would kind of really like to do. So that's I I think that would be that would be the thing to do this week.

David Wiener: Any kind of major change always brings stress with it. And, you know, getting competent advice and confident advice from people who know takes a lot of the stress out of that whole situation. So that leads me right into my last question for you. Where can listeners find you and learn more about what you're doing?

Jim Whitesides: well you can find me on LinkedIn. my name is Jim Whitesides. my cell phone is always open. I'm happy to to take calls or emails. Jim Whitesides at Soundtrack LC or my cell phone is 314-363-9659. and on on LinkedIn there's also a calendarly link. So if someone just wants to set up a time, I'm happy to do that as well.

David Wiener: That's great. And I will make sure to put Jim's contact information in the show notes at TextstrategyPlaybook.com. If you'd like further resources and notifications about when new episodes are coming and new episodes that have landed, subscribe to our newsletter. at taxstrategyplaybook dot com slash newsletter. Jim, I really appreciate you coming on and breaking this down for us. I think this is one of those conversations that can save people not only a lot of money, but they could save a lot of stress if they get right ahead of time.

Jim Whitesides: Absolutely correct. Thank you very much for having me, David. It's a pleasure to be here

David Wiener: And if you want more strategies like this, make sure you're subscribed to the Tax Strategy Playbook. And remember, it's not just about making money, it's about keeping it. I'm David Wiener, Mr. Cashflow. I'll see you next Tuesday.