Tax tips for the Real Estate Professional and Passive Investor

Marc Cesar 

[00:00] Welcome back, everyone, to this episode of the No BS Apartment Investor podcast. And today we have Mr. Larry Pendleton with us, who is a fellow real estate investor and a CPA with a passion for adding value to fellow investors. And on today's episode, Larry will be sharing with us all the tax tips and secrets that you fellow investors might be missing out on to help save taxes or that can help put more money back into your pocket. So, with that said, Larry, welcome to the show, sir. 

Larry Pendleton

[00:38] Appreciate you, Marc. Grateful to be up here. 

Marc Cesar 

Yeah. I appreciate you, man. I know we had you on the meetup a while back and it was a very great time speaking with you and we had to have you back on the show to educate us. So, let's jump right into it, man. 

 Larry Pendleton

[00:56] There's definitely an opportunity, so always helpful, always grateful. Opportunity and value. So ready to get going. 

 Marc Cesar

[01:05] Nice. I appreciate it. So, give us a bit of background on what you do. I know your investor and CPA, tell us a little bit more about that. 

 Larry Pendleton 

[01:15] Yeah. So, CPA by trade. Been doing tax strategy and tax consulting and preparation for over a decade. Started investing myself in real estate roughly about six years ago now from that standpoint and I definitely saw an opportunity and just from consulting with my mentors, it seems like this it kind of made more sense to kind of combine the two and primarily focus on professionals in real estate, whether it's other investors or contractors, agents, people interested in getting the real estate, so I just saw a huge opportunity to combine those worlds because a lot of when I'm implementing the stuff that I've done for myself or I'm on the path of doing from that standpoint, so been a flipper or I still do some flips every now and then. Not my primary focus. The primary focus is more on buying home rental properties from a long-term perspective, primarily multifamily, and then if it is going to be single family, we get more into corporate housing, whether it's Airbnb, housing for travel nurses, and opportunities like that and also looking into new development as well as prices have been just ridiculous as we have experienced these past couple of years. So, opportunities where it's cheaper to build it and it's kind of demand your own comps from there and just adjusting to the wave of what real estate is taking the zone at the moment. 

Marc Cesar 

[03:05] Nice. So, what exactly drew you to real estate? You said that you're a tax professional by profession, but what captivated you to say, hey, let me add real estate as a leg in my career.  

Larry Pendleton

[03:11] It was actually my partner with PC Financials, Terreon Conyers because he was already in real estate since 2012, so he already had a few properties going in. So just kind of helping with his tax strategy and then other clients that were in real estate, you start to see those tax savings per se and then also just getting an understanding of how involved were they because at the time, either had a full-time job, been working the business or no full-time job building business and it's like that aspect of passive cash flow became rather appealing to me from that standpoint there as we all know, it's not completely passive, there's a lot of work, but it's not W-2 building business type of work from that standpoint there's here. So just having that strong network around me and they kind of drew my appeal and saw how the numbers work and took off from there. 

Marc Cesar

[04:12] So what is the driving factor that once you added real estate into the portfolio as a string, as a leg, what is the driving factor that motivates you to keep doing both aspects from the tax standpoint and from the real estate standpoint, what is the burning? Why? 

Larry Pendleton 

[04:33] Well, I do have my own personal mission to help as many people achieve financial freedom through real estate and taxes, but then I feel like I got born into this matrix per se of going to school, getting a job, and retire and people want to do more with their lives, they're typically hamstring on the amount of money they got coming in, how it's coming in trading time for money and as well as being hit a lot with the taxes. So that aspect especially personally, like just kind of seeing my dad growing up and working a whole bunch of hours and I was never in need of wanting anything. So I cannot complain about that, but to see somebody work that hard and lose a lot of money on the taxes from that standpoint just to provide for his family was like okay, there's another way around it. Then you read certain books and you hear about the Robert Kiyosaki’s and the Michael Blank’s of the world and then say, okay, let's see what this real estate can possibly do in the aspect of hey! I can be chilling on the beach and still getting cash flow from these rental properties or I'm not involved because I put a team and system in place to ensure everything is going smoothly from that standpoint, there so that aspect of just wanting to help people, pretty similar to my dad as well as myself it's kind of a lot of that trading time for money so more of us can go after our purpose and mission in life. 

Marc Cesar

[06:13] Nice. I like it. So, you did allude to earlier that you had your hand and flipping as well and now you're strictly doing rentals for passive income. So, let's jump into the tax talk a bit. Now. I'm not tax savvy, I leave that to the professionals like you, but I know a bit of when flippers when they buy a house, they force the appreciation and so forth, and they get a chunk of profit, let's say 30, 40, 50 grand. Why is it that they get taxed at a higher rate compared to people who invest passively? They are able to offset those capital gains taxes, as they're called. 

Larry Pendleton 

[07:00] That's a great question. And the reason why is because of how the property is treated in IRS eye, because it's meant to be sold, meant to be so quickly the IRS treats it as inventory,  no different than if you were selling clothes or whatever knickknack, whatever from that standpoint there. So the fact that inventory is kind of wrapped into what they call an ordinary income-driven business or active income-driven business, which is subject to FICA taxes from that stand. And those are your self-employment taxes that typically if you're a W-2 employee, you pay half, and your employer pays half. Now, if you're running a self-employed business, then the full 15.3% as of today is all applied to you as an employee and the employer. So, you get this big check, you kind of knit everything out, and then whatever flushes through that is what’s hit on top of whatever tax bracket your effective tax rate is. That plus, hey, you got this additional 15.3% that you guys deal with as well and when you're talking about rental properties, it's not considered as inventory is considered real property. And rental real estate itself, you can see, is seen as per se passive. What that means is that it's not subject to FICA taxes. So, you don't have that additional tax that flippers will come across. 

Marc Cesar

[08:34] Gotcha. So, would you say that the IRS is more pro to people actually holding the asset as opposed to trading in at a shorter point of time or what exactly? 

Larry Pendleton

[08:49] If you can look and follow the tax code itself, you have to assume yes from that standpoint there because the tax code itself is just an incentive plan to get people to move a certain way. If you want people to buy houses throw in the mortgage interest deduction. If you want people to have more kids, you throw in the child tax credit. You want people to invest in rental properties and provide more rentals because more likely the masses will probably need will be renters than actual homeowners, you add stuff like depreciation which is just allowing the investor to recoup some of the cost of the building bases itself over a certain period of time. So, it's tough not to say yes to that question, just how severely flipped income is taxed compared to rental income.  

Marc Cesar 

[09:44] Got you. So, you touched on a word that even I try to wrap my head around, which is depreciation. Now, can you tell us how depreciation work in real estate and the benefit it has for those who are either actively investing in rental properties or multifamily, as well as those who are passively investing. And can you break that down in the simplest term for the people in the back who which may go over their heads? 

Larry Pendleton

[10:18] So the best way to kind of see depreciation is that unlike a car, which is a depreciating asset itself, rental real estate is considered appreciating. Typically, the value is always going up from that perspective there. So, what the depreciation is, going back to what we mentioned earlier, the tax code is the incentive plan. So, to incentivize people to invest in rental properties and provide rental housing for the masses, okay, you pay whatever amount of money for that property, the land itself is not depreciating because it doesn't really devalue. You can't increase it, it's just land. So, once you break out that portion, you just have what they call the basis of the building itself. That's the cost itself. So, if you bought something for a million dollars that is hypothetical, say that $800,000 is actually the building, the value of the building per the IRS as from that perspective there, depending on the land value percentage. So now depreciation and say, okay, now that you have this because you're providing housing for the masses, you can recoup the cost of the building for residential real estate, 27 and a half years. So maybe 800,000 divided by 27 and a half and now you got your depreciation over the extended period from there. And to a point that you can actually find ways to accelerate depreciation and bonus appreciation, all that good stuff there. But that's kind of one of the simplest ways is that you're just recouping the cost of the building basis over a certain period of time, and you get that as a deduction on your tax return. 

Marc Cesar

[12:10] Got you. So do passive investors, those who are just bringing funds into a project and have no say so in the day-to-day, do they get that benefit of depreciation as well? And how does that work for them? 

Larry Pendleton

[12:24] Now, there is a difference between depreciation and tax loss per se. That same building you're operating in the black, so you have a net income from that standpoint there. But with our tax system, you are taxed at the net amount from there. So, depreciation is a non-operating expense no matter what you do with the building, depreciation is going to be whatever it is, plus any major repairs and stuff that you've done. So, it's a below NOI expense, so now I can potentially take your net operating income it's going to reduce it, it can reduce to zero and can reduce to a potential loss. So, it's beneficial level one from that perspective because you had a number there that you were going to be taxed at, but now it's reduced even further, and it was no money out of pocket to be done. And most of the time you get 100% benefit of depreciation, even though you only put 20, 25, or 30% down on the building itself. So that's one of the benefits that even from a passive investor standpoint there, is that whatever distributions you're getting, like, okay, you're actually going to show depending on how the waterfall structure and if there's a preferred return and all that stuff. But if we're just talking about the actual operations of the building itself, now you're looking at a lesser amount than what was actually operating at. Now, the tax loss per se, I say it does reduce to a tax loss. The passive investor depends on if they can actually claim the losses on multiple factors because of their real estate professional and they can prove material participation with their own portfolio that they are actively involved with. So if you passively involve someone syndication, that wouldn't count because you're not making any management decisions, you're not doing the property management rehab work. So you can group those losses offsetting other passive income, but you may not be able to offset your W-2, or any ordinary business income, especially if you're a flipper as well from that standpoint there. So, it's definitely a thing where you want to consult with your tax adviser to see where you stand on possibly having the tax losses, not only offset your passive income but also offset your non-passive income as well. 

Marc Cesar

[14:56] So, basically, let's say if I am a passive investor and you have an opportunity and to buy the shares in the opportunity is, let's say a minimum of $50,000, to throw that number out there and I am not a real estate professional, I am a mechanic or a banker and I have a basic understanding, I'm sophisticated enough to read the numbers and understand what I'm getting into. You sell me on the opportunity, and I invest $50,000 into the deal. So, how would I be incentivized outside of the returns and so forth? How would I be incentivized on the taxes? Because we do hear a lot that for passive investors, you get the tax breaks, you get this, you get that. But can you explain in your perspective the story behind that? How would I get a tax break or incentivize from the tax standpoint? 

Larry Pendleton

[16:01] Yeah, so it is a fine line and which why a lot of indicators when they do their webinars, they typically mention like, hey, consult with your tax adviser, the advertisers such, but there is a bit of fine print from that standpoint as well because we're just talking about the equity cash flow from the building itself. The depreciation is going to reduce that portion of it potentially down to like, say less zero or you move to a negative from that standpoint there. Now, if you're a passive investor, if you have other passive investments by generating passive income, you're able to potentially offset that. Well, you will be able to offset your passive income and passive gains with the losses from your rental property. So that's an incentive there from that perspective and then potentially depending on your adjusted gross income, even though you may not be a real estate professional, you may have an opportunity to even offset some of your W-2 or self-employment income as well. So, there's a setup depending on your situation and it's always crucial to talk to your tax advisor after hearing these webinars from syndicates or even beforehand so that you kind of know what you get into because more often than your syndicates will admit that they're not CPA’s or tax advisors, they just know that there is this benefit they're going to provide to the investors there. Now it's also important to mention that those losses, even though you may not be able to claim them, they don't just disappear. What they do is call their suspended and roll forward to future years to potentially offset future passive income and passive gains. So that becomes another incentive because if all indication of the property is going to be sold, it's going to be sold for a gain and then you're going to take part in that gain, you're going to be taxed on that gain. If you have all these suspended passive losses that have been rolled forward, that's going to help offset some of that gain there. So from that perspective, you do have that benefit. Now you do have syndication, most of them now, I don't know any that don't offer some type of preferred return from that perspective. And preferred returns are just really a guaranteed payment based on not really the operation of the building itself, it's just investors saying hey, the syndicates, we're going to provide this preferred return. Now that's not offset, that's considered active income and it's not going to be offset. It doesn't offset by depreciation or tax losses from that standpoint there. So, you also have to kind of understand how all that full picture wise is going to affect your tax return. So from a tax perspective, it's also still important to know does the investment itself make sense return-wise for you. Before we start talking about taxes because you don't want that tax tail wagging the investment dollars. If the investment makes sense, then okay, are you potentially paying some taxes on it? Potentially, but it could still be worth it in the long run. 

Marc Cesar

[19:15] Gotcha, that's good information. So, what are some ways for people to build a tax plan for their investments? From your personal experience? 

Larry Pendleton

[19:25] Yeah, just getting with your tax adviser and yes, that's going to cost and getting all your investments together, like, hey, this is potentially going to do this year, and this is not a before April 15 discussion. If it is, you're talking about the new year, you're not talking about the year that passed from that perspective there and most likely I said whether it's mid-year. Just kind of gets an idea of here's the different investment you got going on. What's that potentially going to look like? Or someone does present a deal to you. That's a good time to meet with your tax advisor and say hey! I'm looking at this. They're claiming this and this was my potential tax implications related to it and how would that affect everything else? If you got pay raises or you started a business or you had a child, all that plays a factor just to kind of know what the potential tax implications are going to be. So, putting that plan together is taking the time to gather the documents, and working with your advisor on what that tax hit or tax benefit could be for investing in this deal. 

Marc Cesar

[20:45] Gotcha. So pretty much it's worth paying whatever it cost to have an advisor that will advise you the right way. 

Larry Pendleton

[20:52] Right. I think a lot of people, just for most people assume that the person is preparing my taxes. The tax prep is just the tax prep itself. It's just based on what was happening last year. If you're trying to get more planning and stuff, you're stepping up, you're leveling up from that standpoint there like you're no longer eating at McDonald's. You're going to Ruth Chris now depending on where you're going to. So to a point where you're getting what you're paying for, as long as that's clearly communicated, then all that should be helpful. And also, a factor here is the tax savings that my adviser is also able to add value because they're recommending these things or telling me to avoid this from that perspective there. 

Marc Cesar

[21:43] Gotcha. Now, I'm not sure if you're able to answer this, but feel free to give me a shot. If you can just let me know. But is there an entity that works best from a tax standpoint when investing? And is there one that we as investors should avoid? 

Larry Pendleton

[22:01] As investors in real estate, you definitely want to avoid corporations. S or C, well, we’ll just start with the S-Corp, C-Corps are kind of more for your larger companies, and so you really don't want those properties then you don't want your assets from rental real estate stay in there, especially well, S-Corps, definitely more than any other ones, because S-Corps you're required to pay yourself a reasonable salary, which means you're paying FICA taxes on your income. Now, if you're receiving passive income that's not subject to self-employment taxes, you are inherently taking income not subject to FICA taxes and now you're moving into an entity that is required, and now you're making it subject to FICA taxes from that standpoint there, depending on how big your investments are from there. So more often than that, LLC will suffice for most passive investors from that standpoint there, it all passes through to their personal tax return. I have not seen a situation where a C Corp has been valuable, but it just doesn't make sense. You're trapping losses in there. Unless you're trapping the potential of tax losses in there, that's not going to pass through to you from a C-Corp perspective. So typically, it's really just keeping it simple. An LLC, whether it's with your trust if you have a trust, or whatever, we just will suffice from that standpoint there. 

Marc Cesar

[23:39] Gotcha. Good to know. I've always heard this from different coaching programs that I've been part of or other investors, that there is an incentive when children are employed by entrepreneurs within the frame of their business. Can you provide some clarification on that? Like how our kids paid, how the children paid, how are they taxed if they are taxed at all, and what is the mindset behind that? 

Larry Pendleton

[24:09] Yeah, so when you're talking about children that you can claim, once we set 17 below where the entity itself is solely owned by the parents or one of the parents, from that standpoint there, the children are excluded from FICA taxes automatically. So you can actually set up a salary and as of today, it's $12,000 and some change up to that you can pay them and they potentially will not pay any taxes at all on that because it's at or below the standard deduction for the year. We'll see what the changes are at that point. And like I said, they don't have the FICA taxes, so they're not going to get a refund, they're not going to pay any taxes. It's just that they receive $12,000 or whatever reasonable salary up to the amount that the parents decide to pay them from there. And the parents and the custodians get the deduction in their business from that standpoint there. So, at a high level, that's the benefit. And you're actually treating them like employees like there's an employee agreement involved in there and there are actual roles and responsibilities and their time being tracked from the standpoint. There's a reasonable salary in place. Like if you are going out and going to hire somebody to do whether it was cleaning up the office or cleaning up one of your rental properties or filing paperwork, how much will you have paid somebody else to do that and launch you within that ballpark range, it could be the exact number, then it's considered a reasonable salary. There's actually money coming from your business account going to their account. So, you're showing the actual paper trail and how you pay employees from that standpoint. So, the benefits of taking income from your higher tax bracket, passing it down to your kids, and for most of you, keeping that income and that wealth per se flowing through your family from there. 

Marc Cesar

[26:25] Gotcha. So, I know you said it's up to 17. Is there a minimum age where we can employ our children for something like this? 

Larry Pendleton

[26:37] There's not a documented minimum age. I have a two-and-a-five-year-old, okay! more likely than that, they're not going to be filing papers that would deem to be reasonable and worth paying anyone to do from that standpoint there. It will actually cost me money in a negative way from that standpoint there. So you're looking at it from the Goober baby, goober baby had a paycheck, and I believe it was roughly $5-6,000 from that standpoint there. So can you do advertising with your kids and, hey, you're in this commercial, and if you're doing all of that, that makes sense. We're like, okay, you're trying to portray yourself as this family person on your commercials, and you're paying your two-month-old a salary, it has to be reasonable. The substance has to make sense from that standpoint there and documented in a way where it's audit proof from that standpoint because I say we will be drawing red flags from that standpoint but doesn't mean you do anything wrong unless you have your two-month-old on the payroll for sweeping. Like, okay, that doesn't make sense at all. You're just kind of begging to be penalized from that standpoint. There's not so much of a minimum age per or say, it's just being in court with labor laws and all of that. So, you just want to make sure you're all in compliance with all that stuff. 

Marc Cesar

[28:20] Gotcha. So, folks, don't take your two-month-old or hire them as a contractor to swing some hammers in a rental for you because that's an automatic red flag. 

Larry Pendleton

[28:30] Yeah, I can take my two-year-old to my property. Like, I'm not paying him anything because there's nothing he's going to do besides just wreck shop more often than not. 

Marc Cesar

[28:41] Gotcha. Now, we always ask this question to everyone who comes on the show. Can you share a story or a situation where in your journey, whether as a CPA or as an investor where something just went totally left field that wasn't expected? And can you tell us what went wrong? How did it affect your business and how did you manage the situation? Of course, how did it help you become a savior investor and a better accountant, depending on where the coin falls? 

Larry Pendleton

[29:17] I know we talk before we start recording, but I'll even go as current as now as I mentioned before, I'm part of one group in the midst of selling a 16 unit in Newport News, Virginia. The buyer today walked away from the deal. There were tenant issues like our team got shifted around and some people move, especially our main boots on the ground move. So, it's like, okay, we don't have the team in place to properly asset manage this thing. Even though it's 30 minutes away from me, it's just okay, that wasn't my particular role with the team itself, so that's why we kind of went on sale, the market is still crazy, so we were able to possibly even sell it for what we thought we would get three and a half years from now because it was a five-year hold from that perspective. So just this morning, we sent out a letter to fire our property manager because we need to bring somebody in that is going to be more hands-on with the matter considering our team dynamic from that standpoint, we've already reached out to lenders, and it's having open communications with our investors as well. Like, here’s the deal, we're already drafting letters, that aspect of it, just having to be on your toes because we were not expecting for it to be to them to walk away. Like even with the known issues with the property itself and most of it is just tenant turnover and all the issues that covid has brought with just making it difficult with evictions and whatnot and it kind of goes back to how me personally, I was kind of speak for myself inside the whole team, is it okay if you go to bring property management team, how vetted are they? I mean, we got recommendations, they got some thumbs up, no one's going to be 100%. Like it smiles all the way around from other investors. But the aspect of, hey, things are kind of falling through the cracks, like why we're having to kind of point these things out, it's all part of asset management as well, and making sure that you got the plan in place, so you're just ensuring that the property management is following the plan that your team has. So, making sure you have a solid plan in place, the dynamics of your team as well as everyone's role per se, where it's easy to just try to keep the team small and for a bigger pot per se but you have to know yourself, you have to know what you got going on. I have a wife and two kids. I'm building PC Financials, I'm part of other investment groups, and I have my own personal portfolio. How much time do I really have to put into this besides my role as the number’s person doing the financials from that standpoint there? So the learning points from that, I guess it's kind of a Rod Khlief aspect of the nose getting bloody within multifamily, but it's not all just like high returns and all that. So, it's a difficult conversation to have with investors, like we thought it was going to sell and we're not like, hey! we're going to get this refinance in place, we're going to get some capital, some of the initial capital returned to them from there, and then start distribution all over again 1s once we get a new management place in the property, restabilize again from that standpoint. As recently as today has gone down and I'm pretty sure after this call I'll be back on the phone on following up on the lenders that reach back out to me on terms and whatnot and get that going as well. 

Marc Cesar

[33:30] That is amazing, man. I mean, it's not a story that happened in the past. It's something that's happening right now. But it definitely shows that's what happens in Real Estate, at the 11th hour thing can just go left. But as long as you have a solid plan and you know how to pivot and put contingencies in place, that's what makes you a better investor, and better problem solver. And, of course, having those hard discussions with investors is not always easy, they're not fun, but they need to be had, especially if they're investing money with you. They're trusting you with their hard-earned cash. So you want to let them know, okay, this is what went wrong, and you want to show them that, hey, all right, we have a plan. We have a plan B, and plan C in the event of something happening. So, yeah, I appreciate you sharing that story with us, man, and I hope our listeners definitely learn from it. Now, what is the biggest failure that you've learned from today? 

Larry Pendleton

[34:26] The biggest failures? Personally or just in general? 

Marc Cesar

[34:34] It could be either or both. You choose. 

Larry Pendleton

[34:41] I'm a former price sometimes they'll consider big dumb jocks, so I'm really big on teams aspect of it is just, like, just building out the right teams. Like, for me kind of ends up being one of the bigger failures, and what kind of leads to that failure is the failure of understanding yourself. And I know I mentioned it before. Nothing else really matters until you kind of know who you are, what you can bring to the table, and how you can add value. If you're trying to overextend yourself in these situations where you're dealing with other people's capital, where you're dealing with people whose livelihoods when places they're living it’s like okay, it's good to have the right team in place once you know where you can be of value and then you partner with people who add value to the places that you are, whether you want to call it a weak or just not as strong, there’s a really good book “Who not How” that kind of addresses that and just find the right who’s so that you can do bigger deals, do bigger things because you're not so trying to spread yourself so thin so you have to keep it small because you can only do so much from that standpoint there. So that aspect of just knowing who you are becomes a big failure. If that's not done, it's likely because that leads to not putting the right team in place and that goes into property management or just buying the wrong property from that standpoint and not trusting your numbers. So, it starts with you personally. Everything like whatever issues that we're going with, I make sure I look internally to make sure where I've gone wrong at in this. And then we can start to build out a plan. But until that's addressed, it's always going to be somebody else's fault or whatever ever like, no, this falls on me for these particular reasons. Now, how do we address it from here? 

Marc Cesar 

[36:38] Gotcha. I like that. Now, as both a CPA and an investor, do you have a least favorite part of your job that you hate, or do you just wish you didn't have to do? 

Larry Pendleton

[36:55] As a CPA, I enjoy tax season and other CPA probably understands what I'm coming from is like, there's tax season, then there's tax filing season. Tax season is January through December. It's all year round because everything you're doing is going to affect your taxes. January to April is just tax filing season, and it's based on the past. There's not much strategy from that standpoint there. So, I was like, okay, there's this crunch time, but these four months a year, even though you can get an extension later in the year, but there is a huge press to kind of get everything done, a small time frame. But I enjoy the engagement of meeting people and helping them with their tax situations and bleeding in with what their real estate strategies are as well so that it all kind of works one another and stuff offset one another and this is going to be used in the future and thinking 30, 40 years from now, especially if they're doing retirement accounts from that standpoint there. Like I said that aspect of tax filing season is always a bit of a dread and it comes with the territory, but it comes along with like, okay, I'm actually still helping somebody with their tax situation. Well as an investor it’s always that part of OK, I've never done a deal where I lost an investor's capital. Returns may have been short, but let's say always pushing and making sure we're running deals a certain way, where investor's capital is always protected from that standpoint there, which can be a bit nerve-wracking but also exciting at the same time as well. But I like the aspect of property management because I'm an introvert. I got to deal with these large groups of people, I’m like man I can’t let that happen especially if it's negative from them, especially contractors and all that. I'm not the brow-beaten type of person. I try to be happy and go lucky as much as I can, but I have my strong arms even though they may be small to me that handle that stuff. 

Marc Cesar

[39:34] Gotcha. Understood, man. You're being honest. So, I like that. Now, if you had to give, let's say, top three tips from your experiences on both sides of the coin to people who are looking to get into the investment space as newbies, or people who are aspiring or already seasoned, what would those top tips be from both perspective of what you do? 

Larry Pendleton

[40:03] Think beyond yourself. This isn't golf, this isn't a solo sport per se. I'm cautious even to say a sport. It's an event that involves having the right people. So, once you can, you know what you think outside of OK, I know I'm kind of repeating myself but it’s rather still very important to know where your value is. Think beyond yourself of finding the right people and build that team as well. And then as an accountant, the numbers don't lie. Trusting the numbers, you can't be overly speculative. If that's the case you might as well be flipping properties from that standpoint there. And I'm always in that focus on cash flow. So, once you can now find your value, find the team, and then find what's going to bring you cash flow, and the numbers kind of work towards that, whether you increase rents or not, then you kind of set up for a brighter feature within real estate. 

Marc Cesar

[41:23] Nice. Now, what's next up for you? PC, Financial and Rise Equity Group. 

Larry Pendleton

[41:31] Yeah, so PC Financial, like they were in the midst of kind of our slow growth per se because ironically enough when I left public accounting, I vowed never to open up an accounting company, but the streets kept calling me, so here I am. But I'm going to stick to my vow of not having anything too large. Like I said, I meet every person that wants to potentially become a client and if it's not a good fit, I got plenty of referrals to pass on to from that standpoint there because this is my value where I can kind of get into the foot in the door of a lot of different investment groups including whether it's Rize Equity or Multifamily Masters or Buy Profit Group with Brian Chavez. It's all these different groups that I've been fortunate to be connected with because of the value that I have from PC Financial. So, we're probably getting some more into the consultation for these groups. Do a lot more with cost irrigation for a lot of smaller property investors from that standpoint there is a huge tax saving that can create for people with driving up their depreciation or front-loading depreciation per se, and then with Rize and all the other different groups I'm associated with, it's all about just finding the right deal from that perspective there still in the midst of stuff, markets are still hot. The most recent news is about potential three interest hikes in 2022. So we'll see if that gets the prices down or more reasonable from that standpoint there, but also looking into certain groups of actual new development as well, and possibly building our communities, not just a house here or there. Right now, we're looking to possibly build 70 houses on a few acres of land and be able to provide affordable housing from that standpoint for your everyday person there. So, like I said, other opportunities like that from there, like more multifamily, a lot more short-term rentals, and housing for traveling nurses and other physicians with COVID and their needs for clean, affordable, safe housing as well. We want to make sure that they're getting taken care of throughout this pandemic. 

Marc Cesar

[44:08] Nice. I like that. That's definitely being a go-giver for sure. Now, Larry as we come to an end here, if people wanted to connect with you and learn more about what you do, how would they go about doing so? 

Larry Pendleton

[44:21] Yeah, I'm on LinkedIn, I'm on Facebook, I'm on Instagram, Larry Pendleton CPA. Try to make myself as easily as possible or easy to find. People can happily reach out with my cell phone number, 757-535-8592. Always connect on the initial introduction call just to see if there's an opportunity to connect and potentially work together, whether as vendor clients or potential partners, or investors on deals, and grow from there. 

Marc Cesar

[45:01] Sounds good. And I appreciate you sharing such an amazing take on the tax saving aspect and the CPA side as well as your story as an investor, I'm hoping that all of our listeners will definitely take a lot of the knowledge and wisdom that you dropped today and apply to their business and definitely guys, every link that Larry just mentioned, I will definitely post them in the show notes and make sure to follow him on LinkedIn and connect with him. He's a wealth of knowledge and I backed that. I reached out to him a while back and we had a great conversation about stuff like this. So yeah, man. Larry, thank you so much for jumping on the show and it will always be open to you whenever you're ready to jump back on.  

Larry Pendleton

[45:52] I appreciate it, mark, looking forward to it. 

Marc Cesar

[45:55] Thank you, sir. And with that said, guys, happy investing. And to you and your family, Larry, merry Christmas. Alright, sir.