Brandon Hall is a national speaker and founder and CEO of The Real Estate CPA, a virtual full-service accounting firm that works exclusively with real estate investors and business owners. He’s also a multifamily investor and syndicator in his own right as a partner in Naked Capital. 

When it comes to investing and business Brandon lets his passion drive him, but doesn’t let it steer. He uses logic to elevate himself above the fray and make good, informed decisions, and it’s paid off.

What You’ll Learn In Today’s Episode:

  • Let passion drive you, but don’t let it steer. Make investment decisions with logic, not emotion.
  • People are your greatest assets, you’ve got to be able to hold them accountable. Create systems and KPI’s that measure your team’s progress, give them feedback, and hold them accountable.
  • If you’re looking for maximum tax benefits but don’t qualify as a real estate professional, you may want to look into operating short term rentals.
  • As you grow as a real estate investor, you may outgrow your current CPA. It pays to have an expert in that niche.

Ideas Worth Sharing:

“The core piece of their success is just repetitions. They’ve gotten so many more repetitions than anybody else.” – Brandon Hall

“The mistake the investors make is not knowing how to gut-check their advisors, and not knowing when it’s time to upgrade.” – Brandon Hall

“You never have to actually sell the property. You can always 1031, you can always cash-out refinance, so, investing in areas with high levels of appreciation can be a very sound strategy.” – Brandon Hall

Resources In Today’s Episode:

Books Mentioned In Today’s Podcast

 

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Transcript

 

Mark:              Today’s guest is a national speaker and the founder and CEO Of the Real Estate CPA, a virtual full service accounting firm that works exclusively with real estate investors and business owners. He’s also a multifamily investor and syndicator in his own right. As a partner in Naked Capital. I’d like to welcome Brandon Hall.

Brandon:      Thanks, Mark for having me on. I appreciate it.

Mark:              Thanks for being here. You know, you’re a CPA, that’s your expertise. And I think it’s really cool that you not only started a completely virtual CPA firm back in, when did you start?

Brandon:      2015 officially.

Mark:              2015.

Brandon:      And added like $4,000. So sometimes I count it sometimes I don’t.

Mark:              Oh yeah.

Brandon:      That’s the way everybody starts. Nice. I love it.

Mark:              But not only did you start a virtual firm before everyone else got into that space, but I love that you are an exclusively real estate CPA. You want to tell me why you chose to be exclusively real estate, because I think there’s so much value to that distinction. And I never saw any other CPA firm that did that.

Brandon:      So I started my career at Pricewaterhouse Coopers and I was about three months into working there and just realized, man, I did not want to stick around for 15 years to make partner to make 300, 400 K. I thought that I could make a lot more, a lot faster and call my own shots. So I immediately started looking around for another way to earn income outside of a traditional W-2 corporate career, which is what I’ve been kind of trained to get into ever since I started learning about finance and how to earn money. It’s go get a job, but for me, it didn’t really resonate. And didn’t really resonate early on. I was only 23 or 22 at the time when I realized this was not for me. So I started looking for a way out and I ran across a few things.

                        The first that I found was real estate. So real estate offers a way to essentially create cash flow streams, income streams, and over time you can build it up and then you can leave your corporate job. That was really appealing. So I went in, I bought my first three unit property and it was a screaming deal, but it cash flows $700 a month. And I realized at that point, I’m going to have to do this for like a decade in order to really be able to quit my job. I mean, like 15 more of these properties to be comfortable. And I didn’t want to wait that long. So I started looking really for what can I do? And I didn’t really want to run a CPA firm at the beginning. Just kind of fell into it by answering questions on bigger pockets and decided from the get go with the CPA firm, that I was exclusively going to focus on real estate more so for selfish reasons.

                        The first one was, well, I think that a lot of rich people are in real estate. And the second was if there are a lot of rich people in real estate, this will prove to me that real estate is a good place to put your money. And it did prove that to me.

Mark:              And where was that first property that you bought.

Brandon:      Hickory, North Carolina tertiary market out in the mountains of North Carolina.

Mark:              Oh, nice. You know, real estate is touted as the most tax advantaged asset class there is. Do you want to give me your thoughts on whether that’s true or not? And if it is true, what makes it that way?

Brandon:      I think it is true. I think that if you invest in real estate the right way, you can definitely invest in real estate in a number of different ways. And if you are going for tax efficiency, you can get the tax efficiency. There’s ways to eliminate your income. There’s ways to reduce your effective tax rates as you are working a day job. That’s what a lot of our clients that are working full time jobs. We can’t go in with real estate and eliminate their taxable income unless they’re married.

And their spouses are managing this real estate portfolio full time. But what we can do is we can show you, hey, yeah, you’re earning $500,000 as a physician, but a lot of people at that point will say, well, I can’t take my losses from real estate. So it’s actually not providing any tax benefits. And we’ll say, well, that’s not totally true, because if you can positively cash flow, then you can earn $600,000 as a physician. You can earn $500,000 as a physician, a hundred thousand dollars of cash flow not paid tax on a hundred thousand dollars of cash flow.

                        So we tell the IRS that we only earn $500,000 from our physician income. We’re only taxed on $500,000, even though we earn $600,000, that’s where the efficiency piece comes in. So, so real estate can be tax efficient for anybody that’s investing in real estate. And if you are working a part time job or your spouse is working part time job, or one of you is not working at all, all of a sudden real estate becomes incredibly powerful because you can effectively eliminate your taxable income.

Mark:              Yeah. And it seems like there’s so many tools that you can use to improve and increase your tax efficiency. I have to say my first exposure to the tax benefits of real estate was with my first duplex and it hit me like a bolt of lightning. I got very lucky. I bought this property in LA and I paid $435,000 for it in 2000. And I sold it in 2005 for 1.27 million. And I had a gain of $835,000. And I had read about real estate taxation and I went to my accountant and I said, can my wife and I take our married couple primary residence exclusion on this duplex. And then also, could we 1031 exchange, the other unit that is being rented out and the accountant said, yes. And so we got $500,000 tax free. And then all the other gain was rolled into a 14 unit building.

Brandon:      And you know, I’ve been talking about cash flow, but you’re talking about some really solid appreciation, which you see a lot on the West Coast. And so, you can think about that. Let’s say that you weren’t living in the duplex. Let’s just assume that you weren’t. And it was just straight up a rental property. It’s appreciated the $1.2 million. You do a 1031 exchange. You buy a bigger building, but then you do a refinance on the bigger building, a cash-out refinance. And you’re able to pull that $800,000 out tax free. So you can most certainly build wealth, very tax efficiently. You never have to actually sell the property. You can always 1031; you can always cash out refinance. So investing in areas with high levels of appreciation can be a very sound strategy.

Mark:              And it’s taken me a long time to hone a long-term strategy. But at this point, my strategy is exactly that I’m never going to cash out. I’m going to 1031 exchange every property. And I have been doing that consistently and then ultimately pass them onto my heirs.

Brandon:      Exactly. You have your $1.2 million building. It’s got an $800,000 built-in gain. You pass away. Then your heirs inherit it. They get a stepped up basis, meaning that they get to inherit the property and the basis gets to equal the fair market value at the time of death. So their basis is 1.2 million, which means that they can start depreciating it at 1.2 million, which is great if you’ve been 1031, and you’re always carrying forward that old basis, right. You never really get to depreciate the new basis, but your heirs can step in. They can depreciate at the new basis or they can just sell it straight up. They don’t have to hold it. And then maybe they don’t want to deal with real estate. So they just sell it at 1.2 million. And it’s $1.2 Million of basis. There’s no gain to pay tax on.

Mark:              That’s pretty remarkable. I discovered cost segregation maybe three or four years ago. That’s a go-to. It’s automatic now with every new building and I became a real estate professional as well. What are your favorite tax benefits of real estate?

Brandon:      That’s the apex of tax planning for real estate is real estate professional status. If you can qualify as a real estate professional. And if you pair that with doing a caustic study and then claiming 100% bonus depreciation, that’s where we really get to being able to wipe out our taxable income and not pay tax. So real estate professional status. If we back up a little bit, section 469 of the tax code that defines rental real estate activities. It makes the default passive activity, meaning that passive losses can only offset passive income or gain from sales of other passive activities. So if I sell one rental at a gain, the losses from another rental can offset that gain. The problem though is that most real estate will produce a passive loss.

                        At the end of the day, we’ve got depreciation. We can accelerate it with cost segregation whenever we’re doing a big rehab. There are some things that we can do when we’re applying the 2013 tangible property regulations to accelerate losses. Most real estate at the end of the day is going to produce a taxable loss, not necessarily a cash loss. And that’s key to understand you can have positive cash flow, but tell the IRS that you actually lost money largely thanks to depreciation.

So if most real estate produces a loss and Section 469 of the tax code says that real estate is default a passive activity. Then that means our losses are passive losses and passive losses can only offset passive income. Or like I said, gain from the sale of other passive activities. There are two exceptions to the rule. One is if you earn less than $150,000, you can take up to a $25,000 passive loss allowance.

                        The other exception to the rule is to be qualified as a real estate professional and materially participate in the rental real estate activity. If you can do those two things, then your passive losses will switch to being non-passive losses and non-passive losses can offset business income and W-2 income, capital gain income, dividend income. It’s a non-passive loss, so it can be used in totality. There’s no limit really. So that’s the big one. So being a real estate professional, you have to spend 750 hours and more than half your time working in a real property trader business.

And that second piece, though, the more than half your time, that’s the piece that always tosses out to people that have full time jobs. You have a full time job. You’re working 40 hours a week. The tax court’s going to relatively routinely shoot you down in terms of being able to substantiate real estate professional status. There are people with full time jobs that can substantiate real estate professional status, working more in real estate than on their full time jobs, generally pilots, boat pilots, airline pilots, people in the creative industry, things like that.

Mark:              The big benefit of that is when you have that job, you have active income. And that typically can’t get offset by real estate losses, which tend to be more often passive. Is that correct?

Brandon:      Right. Right. So, so if I’m running a business or if I have a W-2 job, I have non-passive income and my passive losses for my rental real estate activities can not offset my non-passive income. So I have to switch it from passive losses to non- -passive losses. And one way to do that is to qualify as a real estate professional and then materially participate in my rental real estate activities.

Mark:              So the hundred percent depreciation, one of the, I think the three that you mentioned is fairly new, that came out of 2018. The tax reform act

Brandon:      Bonus depreciation has been around for a while. It’s always been at 50%, but the tax cuts and jobs act 2017, bumped it up to 100% bonus appreciation. So when you pair that with the real estate professional status, like if I qualify as a real estate professional, I buy a $1 million apartment complex. I run a cost segregation study on that. I’m going to be able to allocate about $300,000 worth of value to five, seven and 15 year property. And that’s what cost segregation does by the way. So when I buy property, it’s 27 1/2 year property, meaning that I have to depreciate the building value, not the land value.

                        So I buy a million dollar property, maybe $800,000 is allocated to building; $200,000 is allocated to land. I can’t depreciate land. So I just look at the $800,000 of building. And I depreciate that over 27 1/2 years, and depreciation is just an annual expense that I get to claim. I don’t have to pay for it annually. It’s a free expense. I get to claim and the purpose is to track the deterioration of my asset, but a cost segregation study says, well, in that apartment complex, though, not all the components are going to last 27 1/2 years. You have carpeting, you have cabinetry, you have appliances, you have the electrical and the plumbing that feeds the appliances. All of that is only going to last five years. Then you have land improvements. You have parking lots, you have shrubs. All that’s only going to last 15 years.

                        So a cost segregation study says, let’s take some of that $800,000 and let’s reallocate to five, seven and 15 year depreciation buckets. And the 2017 tax cuts and jobs act says that any component with the useful life of less than 20 years, it can be 100% expense in the year of acquisition. So if I go buy a million dollar apartment complex, I can probably allocate 250 to $300,000 worth of value to five, seven, 15 year property. And then I can 100% write it off. And if I qualify as a real estate professional on top of that, now that’s a non-passive loss. I could get a $300,000 non-passive loss; go write it off my W-2 income, my business income, my spouse’s W-2 income, business income. So it could be really powerful.

Mark:              It’s pretty amazing. I know it’s sometimes hard to wrap your head around. I know it was for me the first couple times, I heard it, but once you understand that, initially we were given what, 27 1/2 years to depreciate most of a property. And that means you get a little amount of your original purchase price divided by 27 1/2. And now you could take all of that in year one, which is a huge increase in your depreciation.

Brandon:      Absolutely, absolutely. And so if you keep acquiring assets, you can always claim this bonus depreciation and it’s powerful. It’s incredibly powerful. It’s how a lot of our clients don’t pay tax on their taxable income and the first time, kind of like you’re saying like the first time you’re going through it, you’re trying to figure out like, what the heck this is. And a lot of our clients, and sometimes CPA’s even they’ll go, Oh, that’s way too risky. I can never get $150,000 refund.

Mark:              Yeah.

Brandon:      I’ve never seen that before. You get nervous. It’s totally legal, totally legit. And we just work with clients on helping them substantiate

Mark:              One thing that was interesting when I started to go through this, and you mentioned, I think you allocated maybe in a million dollar building, $800,000 will go towards the property, the building and 200,000 will go towards the land. I have noticed investing in Los Angeles and this last year where I think the tax rolls had valued a 24 unit building that I owned and may had allocated 90% of it towards the land 10% towards the property. And I’m like, this is a 24 unit building and you’re telling me that it’s only worth like $500,000. So in the discussions it’s like you have to contest that. And obviously the rationale behind that allocation was that the County wants to collect as much tax revenue as they can. And they can collect tax revenue by reducing the value of your property. And so we had to fight it.

Brandon:      How did that go for you?

Mark:              I consulted the cost segregation firm about coming up with an accurate and supportable allocation between land and improvements. And we submitted, and I have not had anything contested yet. Knock on wood.

Mark:              Now, if you’re enjoying the show, please do us an easy favor and hit the subscribe button. And if you like the show, please give us a five star review. As a listener I always wondered why podcast hosts are always begging me to subscribe and rate them. Well, now that I’m on the other side, I see why. It allows other listeners to find you.

So here I go. If you like the show, please subscribe and give us a five star review. I like doing it. And more importantly, in an era of unprecedented hype over real estate investing, my goal is to be a truth teller. Real estate is not as easy as it’s made out to be, but you can do it. If you can get past the hype and get to the truth. My aim is for this show to help with that. Anyway, let’s get back to the show.

Brandon:      So most of our clients live in San Francisco in New York City. And that’s the exact problem that they struggle with when they’re investing in their own neighborhoods is my land value is 80, 90% of the entire acquisition price. So if we’re looking at that same $100,000 property that I’m talking about or that same $1 million property you can’t depreciate land. So we have to do an allocation between land and building. First of all if you live in LA, San Francisco, New York City. You’re only on a million dollar property. You’re only getting $200,000 of building basis.

                        And you’re only going to be able to allocate $80,000 or so to five, seven or 15 year property. It significantly reduces your ability to maximize the strategy. So one thing that you can do is you can definitely challenge it. You can actually go to the assessor’s office and challenge it, and we’ve seen some mixed results with that. But another thing that you can do that with strategy that we often employ is we just kind of look at what would it cost to reconstruct this asset? Because that’s really a better indication of building value than whatever our County assessor is going to provide. But you have to be really careful because the tax courts have ruled in the past with the County assessor.

Mark:              Right. And I know when I was agonizing over how to proceed; the discussion became lean on the appraisal. So you don’t necessarily have to pay someone to go do all this stuff, look at your appraisal because an appraiser comes to your property and values it and values how much it will cost to reconstruct.

Brandon:      Insurance too sometimes they’ll put a replacement cost on your premiums that you’re purchasing.

Mark:              Sure. Yeah.

Brandon:      And that’s always.

Mark:              Yeah, that’s another great one. What do you think the biggest mistakes that investors make with their taxes? Are they missing glaring opportunities?

Brandon:      The biggest mistake outside of real estate professional status, it’s the 2013 tangible property regulations. Those regulations tell you how to treat expenditures. So if I make an improvement on my property, is it actually an improvement or is it considered a repair? We see a lot of mistakes there. And oftentimes, frankly, that’s where we make the most money. And that’s where at least first year of working with the client, that’s where we’re going to make the most money by correcting those mistakes. And that’s where we’re saving our clients the most money too. It’s just taking a look at that balance sheet and saying, hey; your prior preparer has not been following the 2013 tangible property regulations. Here’s what we can do to fix it. Here’s the cost, here’s the benefit. And they go; I didn’t even know that that was an issue.

Mark:              So it’s better to allocate them as capital improvements?

Brandon:      Well, not necessarily. So, the 2013 tangible property regulations. When you step through them, it’s going to tell you relatively clearly how to treat expenditures. So you have a 24 unit property, let’s say that you replace five HVAC units. When you replace five HVAC units. You’re probably going to pay $60,000 in materials and labor. Maybe a little bit more, maybe that’s a little bit high. That’s probably a little bit high. You’re probably going to be like 45, something around there. So $45,000, that’s your expenditure. Five HVAC units. A lot of CPA’s will say $45,000 is a lot of money and this was an improvement to the property. So we are going to capitalize this $45,000 and we are going to depreciate it over 27 1/2 years. And those CPA’s are likely and correct. When you look at the 2013 tangible property regulations, there’s a lot of tests, but one of the tests that you have to step through is called the Betterment Adaption Restoration tests, the BAR tests, and they focus on materiality.

                        So there’s a material improvement. What is the threshold for materiality? And there’s no bright line test. The threshold that they use in examples is 30%. So if I replace five out of 24, that is, what is that? 20% of my HVAC system, probably a little less. Once I factor in all the duct work and everything else that feeds that HVAC system. So if I’m replacing 20% of my system, that’s not a material improvement. Therefore under the 2013 tangible property regulations, I can very likely write that $45,000 expenditure off as a repair. I don’t necessarily always want to do that because I have to watch my NOI. Like if I’m going to go and sell the property, I want to boost my NOI. So putting it on the balance sheet at that point makes a lot more sense. But if I’m looking for tax efficiency, writing it off as a repair is going to make more sense because I get the expense today, meaning that I get my tax reduction today, meaning that my tax reduction now gets the time value of money of growing over time.

                        Also, when I sell the property at some later point, I have to pay what’s called Section 1250, Section 1245 recapture, depreciation recapture. I get taxed on all of the depreciation that I’ve ever taken or could have taken when I sell that property. So by writing these HVAC units off today as a repair, I avoid that future tax whenever I liquidate.

Mark:              Sure. That makes sense. I think a lot of investors are also, investing passively with syndicators or other deal sponsors and taxation is such an important part of the investment. What kind of questions do you think passive investors should ask of a deal sponsor before they jump on board?

Brandon:      The most important one, which is not a tax question, is what happens if you die. That one needs to be asked every single time, if you die, Mr. Sponsor, what is going to happen at that point? You don’t want to end up with a property that just tanks as a result. But in terms of tax questions. The first thing that I always encourage people to ask is just what sort of tax mitigation strategies, if any, are you going to be applying to the deal?

 Are we going to be cost sagging? Are we going to be claiming a hundred percent bonus? Are we going to be electing out of the business interest limitations? Tell me what the plan is from a tax perspective and what you will typically find is the sponsors that have it put really well together. Can either tell you right then and there, or they will pull their CPA on. Who’s been helping them pretty closely. And the CPA will be able to jump right into the conversation. The sponsors they take a couple of weeks to get back to you.

                        And they give you like high level, not really direct answers. Those are the folks that might not have a plan might not know, and it doesn’t make them a bad sponsor. It just means that if you’re going to invest in this and you’re hoping for any sort of tax mitigation to happen, you’re probably not going to be happy with the result.

Mark:              That’s great. So you have gotten into, you’re a partner on Naked Capital. Can you tell me a little bit about that? Do you guys do syndications?

Brandon:      Yeah. Yeah. So what we do is we work with syndicates. We consult with some syndicates on like tax and legal and planning stuff. And then we raise capital at the same time and help the syndicates out with investor relations and that type of thing. So we’ve been in a couple of deals, a couple multifamily deals, a couple of mobile home parks, but our primary asset class is a B-class multifamily. Our idea is, in down markets people move out of class-A and into class-B and in up markets people move out of class C and into class B. So we always felt that class B is a pretty safe place to be from a multifamily investment perspective.

Mark:              I agree. I experienced that in 2008. I had a class-E property and weather the storm very well. What’s the biggest mistake or the most common mistake most investors make from a tax perspective?

Brandon:      Well, the area that they mess up the most is real estate professional status. And like, I was just talking about the 2013 tangible property regulations.

Mark:              Sure.

Brandon:      The mistake that the investors make is not knowing how to gut check their advisors and not knowing when it’s time to upgrade. The majority of tax returns that I review on sales calls have errors in them. I think the statistic is around 86%. When you look at who prepared the tax returns, it’s typically your cheaper CPA’s, they’re charging 500 to $800 for a tax return. And there’s nothing wrong with that, except for the fact that they’re just not niche experts and you don’t need niche experts all the time. Like we get 30% of the people that fill out our web forms to try to become our clients.

                        I tell them, you don’t need us right now. You’ve got real estate, but you’re not at the level where you really need us. It’s just understanding at what point do you switch? And I think that you switch when you go to your tax advisor and you’re asking them questions about the 2013 tangible property regulations. You’re asking them questions about real estate professional status, cost segregation, a hundred percent bonus. And they kind of look at you with a blank stare and say, I’ll get back to you. That’s probably when you should start to think about switching.

Mark:              Yes. Going into, like you say, a niche CPA that exclusively works on real estate accounting because yeah, I think the scope of the accounting universe is so complex and I’ve found that some CPA’s that I thought would just have a great blanket view and understanding of everything. You start to bump up against their limitations. When I start asking them about specific, maybe a little more arcane, real estate related opportunities or regulations.

Brandon:      And it doesn’t make them bad CPA’s, they don’t have enough repetitions. And that’s what it really comes down to at the end of the day. All professional athletes. They’re all freakish. The result is freakish. But if you look at their life at the kind of the core piece of their success is just the repetitions. They’ve gotten so many more repetitions than anybody else.

Mark:              Right.

Brandon:      It’s the same thing with any sort of professional, like at our firm, we only do real estate. And as a result, we get thousands of repetitions a month of just real estate stuff. We’ve seen lots of crazy stuff that other CPA’s probably won’t see in their lifetime because this is all we do. But if you ask me about mergers and acquisitions, I’m not going to be able to help you. So you have to be able to pick a CPA that knows their stuff with whatever venture you’re going down at that time.

Mark:              There’s a cool Bruce Lee quote, that he says, I’m not afraid of a man who has practiced a thousand different kicks. I’m afraid of a man who’s practiced one kick a thousand times.

Brandon:      Exactly, exactly.

Mark:              Where do you see the best opportunity in real estate investing right now, either due to tax advantages or simply due to the unique economic situation we’re in?

Brandon:      Probably you’re going to see the best opportunity to come. Q3, Q4 2020 in short term rentals, I think multifamily is going to be fine. A lot of our clients have been collecting rents. Totally fine. You might see some opportunity in commercial, but short term rentals are going to offer a unique tax advantage that all of the real estate will not offer. And that is the whole Section 469 of the tax code that I was explaining earlier, where you have to qualify as a real estate professional to make it non passive.

                        Well, short term rentals are excluded from the definition of a rental activity per Section 469, meaning that in order to claim my losses from a short term rental activity, as non-passive, I do not have to qualify as a real estate professional. I just have to materially participate in the activity, meaning we can all work full time jobs and I can buy short term rentals, cost, segregate them and claim the losses as non-passive and offset my W-2 income. It’s not something that I can do with long-term rentals. I have to qualify as a real estate professional first.

Mark:              Well that sounds like a nice opportunity.

Brandon:      It is. And a lot of CPA’s don’t report it right. A lot of our tax returns, I don’t even think we’re a hundred percent accurate going into the end of 2019. And it really wasn’t until the cares act that we started producing a white paper on this. And we, we recognized, Oh, short term rentals fall outside of the scope of Section 469. And as a result, you just have to materially participate.

Mark:              I have one short term rental. It’s up on a Lake in Big Bear Lake in California. And I just have it for my own enjoyment, but we also rent it out and I’ve never seen it get booked more solidly. I can’t get up there because it’s fully booked and everybody’s cooped up and dying to get out and out of their quarantine.

Brandon:      So you might have the exact opportunity that I’m talking about other than here. Also invested heavily elsewhere, so it might not matter.

Mark:              What’s a trait you possess that serves you best both in real estate and in life?

Brandon:      I’m a very logical thinker. Much to the chagrin of my wife. I am not a very emotional person, which I think allows me to kind of elevate myself. There are pros and cons. On the pro side. It allows me to elevate myself above the fray and really look at things with a fine tooth comb, understand how everything works and make good logical decisions that have so far paid off pretty well. But obviously on the con side, you’ve got the empathy piece and my wife and many of my employees will tell you. Yeah. Brandon probably is a little bit more empathetic at times.

Mark:              That sounds familiar. I think I’m a little bit the same way, but yeah, I feel like it serves me as an investor is I can be very dispassionate and just play everything as a chess game. And you see in the real estate world, especially new comers trying to get in, there’s so much emotion tied to whether they’re going to buy this deal or not. And often it has nothing to do with the deal is good. It’s they have to get in and they have to keep their momentum or do it for an emotional reason, which seems crazy.

Brandon:      Yeah, exactly. You see it in business too. You see a lot of business owners making emotional decisions. We launched a new podcast called The Staying Power Podcast and we’re interviewing CPA firm owners and law firm owners, professionals, service providers, and just asking them about their pain points and what they struggle with. And a lot of these folks are like, Aw, people. I can’t fire people. I keep them on my team because they mean so much to me and just like, Hey man, look at the end of the day you are bill bell a check. He’s not going to keep C-player on his team for very long. And yeah. So it’s the same thing. Real estate, you have to think with logic, you have to put emotions aside and same thing with business. You have to be able to really do what’s best for the business. And sometimes that means making tough decisions.

Mark:              Absolutely. You’ve had a pretty good career and you’ve moved into this space that you’re in and you’re doing multiple things, but looking back. If you were to pass some advice onto your 20 year old self, what would it be?

Brandon:      Hmm, that’s a good question. Gosh, I don’t know, man. ‘Cause I think that I don’t know that I would do anything differently. You know what, here’s what I do. If I were to pass advice back to my 20 year old self, I would say, get a job where you’re managing people as quickly as you possibly can and learn on somebody else’s dime. Managing people has cost me a lot of money.

Mark:              Sure.

Brandon:      Wasted a lot of money, as I’ve tried to figure out how do you balance being a great leader, a respectful boss, but also somebody that demands results and finding that balance has been incredibly painful. Also enjoyable for me. But I guess if I had to go back in time and say, you need to do this one thing aside from invest in Bitcoin, it’s going to be get management, training and experience on somebody else’s dime as quickly as possible.

Mark:              That’s a great answer because often people of high intellect, they know how to do it, but managing people is a whole different animal and it’s not easy to master.

Brandon:      It really is. And one of the things that has been my single biggest pain point with scaling the CPA firm, we are growing much faster than any other CPA firm that I know. And you spend a lot of time on technology, on marketing, on branding to make sure that the engine works. But then for the longest time, I neglected understanding that my people were literally, everybody always says it and I knew it, but I didn’t really pay attention to it. Your people are your biggest assets, especially in a service business.

                        The service business is live and dies with their people. And it took me a long time to figure out how to really hold people accountable to results. There are all sorts of KPI’s out there and all sorts of things that you can do, but it took me until the end of 2019 to really understand this is how we do it. This is how we become an accountable CPA firm. This is how I make sure that, hey, at the end of the day, Mr. Employee; you can do whatever you want. But if you don’t do these things, you’re not going to get a good score. And if you don’t get a good score, you’re not going to work here. Being able to have the confidence to lay that out and say, this is how you’re going to do it. And then stick to it. It’s been, been a real game changer for us.

Mark:              Yeah. You thought you didn’t have an answer. That’s a great answer. I love it.

Brandon:      Give me a second to think about it.

Mark:              So you ready to do our question round?

Brandon:      Yeah, definitely.

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