Essential Tax Strategies Every Real Estate Investor Must Know

Dylan Silver (00:01.218)
Hey folks, welcome back to the show. I’m your host, Dylan Silver, and today on the show I have Austin McMillan, real estate investor entrepreneur in Birmingham, Alabama. Austin, welcome to the show.

Austin (00:14.574)
Thanks so much, Dylan. We’re excited to be here,

Dylan Silver (00:17.698)
always like to start off at the top of the show by asking folks how they got into the real estate space.

Austin (00:25.614)
Yeah, man. Mine was an interesting journey, probably a lot like everybody else, but didn’t grow up with any kind of family members interested in real estate, obviously besides your personal home. And really just kind of surrounded myself with a lot of people that were in that space and like everybody else on the planet was listening to Bigger Pockets. And so that kind of got me interested in that whole world. And so back in 2021, I guess it was the end of 21,

just started really, actually all of 21, started diving in deep to, you know, I want to try at least dip my toe in the water, buy some type of property to see what we can do there. Ended up finding a property through a wholesaler. I got on a bunch of wholesalers lists and started just learning about, you know, how their operations work. And I knew enough about the area, obviously living in Birmingham, Alabama, that I wanted to do something somewhere close to here.

And the original plan was to do an Airbnb. I was all in on the short term rental space. You know, we’re looking at, you know, I’m big on the data and financial analysis side of it. So was doing performance based on a lot of different things. And so I was all in on the Airbnb world and ended up closing on a property in 2021, end of 2021 with the plan to do Airbnb. And then halfway through our, were going to gut it and renovate it and kind of get it up to Airbnb standard.

And halfway through the renovation, the city we were in outlawed Airbnb’s halfway through our renovation. They were allowing it before when we bought it, and then halfway through it, they eliminated it. And so we had to pivot. And so we knew the building or the property was close enough to downtown Birmingham with multiple hospitals. So rather than go long term rental, we decided on a midterm rental. Cuz we had already bought all the furniture and all the things that we needed to kind of make it the Airbnb.

Dylan Silver (01:55.138)
you

you

Austin (02:17.446)
And so we had to pivot and just do 30 plus day stays at that property. So we did that, we renovated it and lost it into there. And it’s been doing great since. So we just have one rental property. I’ve bought a business since and done different things, but I’m still very interested in continuing to grow the real estate world.

Dylan Silver (02:35.01)
The midterm corporate housing space is very interesting. I’m not too familiar with it, but I’ve had a couple of guests on the show here who’ve educated me. And what’s really interesting about it is it’s a hybrid, if you will. It’s not like you have typically tenants or people staying there for long, long periods of time, although that could happen if they have successive…

there but you’re really getting kind of a guarantee that this is going to be as much as a guarantee as you could have in real estate that this is going to be a tenant because the business that employs them in many cases is like well if they’re not going to be working for us we need someone else living there so it’s kind of a

Austin (03:19.054)
Yeah, Yeah, and it’s been interesting for us because we actually leverage both Airbnb and another platform called Furnish Finder that kind of, I would say 50 % of our guests that come through, come in through Airbnb and 50 % come in through this Furnish Finder, which is more of the corporate housing model or like the medical staffing model. And so from that standpoint, both of them have worked really, really well.

And I would say our average stay is probably between three and four months per tenant. So we flip it three to four times a year. And it’s just been fantastic, man. It’s been filling up like we’d expect it to. I think it’s performing better than a long-term rental would in that same area. So we’re very pleased with what the midterm rental world is doing.

Dylan Silver (04:05.452)
Sure, I and you talk about Airbnb, I forgot that you could do that. So you could set like a minimum duration. I know I’ve seen that a lot because I’ve gone to go book an Airbnb for myself and I’ve seen I could only stay, I have to do two or three nights and I said, I’m only gonna do this one night but this looks like a really cool Airbnb and you can’t do it. So there’s a way where you can do it for, has to be more than 30 days and then that way it affects the model.

Austin (04:23.47)
Yeah.

Austin (04:29.432)
That’s Yeah, so for us on the settings on our host side of Airbnb, I’d literally say minimum 30 nights stay is the minimum. So if anybody’s searching for a two night or three nights stay, our property never even pops up, right? It’s only for people that are searching for longer stay. So we’ve had people outside the medical world or corporate housing world stay that are construction worker working on a project in Birmingham for four months or some people that’s having

their spouses having some like medical things done at one of the major hospitals in Birmingham and they need to stay for two months in Birmingham. So it’s been interesting a lot of the different guests that we’ve had just from that model of the midterm.

Dylan Silver (05:09.918)
Austin, is there a one central midterm or corporate housing online kind of distribution platform? You mentioned one, I hadn’t heard of it, but I know Airbnb is what everyone thinks of for short term. Is there one central one for that midterm corporate housing?

Austin (05:27.266)
I would say the most popular one is Furnished Finder. So that’s what we’re currently using. it’s very…

there’s two kind of people groups on there. It’s travel nurses, like temporary medical staff that will go and live temporarily and work at these different hospitals. And honestly, you know, post COVID and right after COVID, that’s all we were getting was just like travel nurses, cause so many hospitals needed people to come in and support the staff during that whole world. And so a lot of our people came through, you know, travel nurses, that world. And then the other side of it is the corporate housing side that people are looking for, whether it’s, Hey, you know, somebody’s,

house just burned down and they got to rebuild the house and they in a temporary place to stay or somebody’s coming in for work for a period of time, they’re going to go to that platform to look at the available spaces in the areas. mean, furnish finders everywhere, just like Airbnb is everywhere. And you can search for properties just like you can on Airbnb.

Dylan Silver (06:21.954)
So when I think about my real estate journey, I’m a wholesaler, I’m also a realtor. I’m trying to get my first deed in my name, maybe a fix and I don’t know if it’s a fix and flip, it’ll be in someone else’s name, but at least it’ll be in my name temporarily. Or maybe short term rental, corporate housing. have a fear, hearing these stories where if you go and you try to do the short term rental route, that it could be disallowed at a certain point in time. But you were able to pivot very well and actually

Austin (06:30.222)
That’s good.

Dylan Silver (06:51.908)
still able to use Airbnb as a platform just by doing longer bookings. Is that something that you’re aware of working in many areas? So for these places where they’re not allowing Airbnb, when people think of the short-term rental, can they use that strategy where just keep the booking, it has to be longer than 30 days and then they can therefore do it?

Austin (06:56.546)
Yeah.

Austin (07:11.182)
Yeah, 100%. I think the biggest key to that strategy is where is that dirt located in comparison to what’s going to draw people that are looking for those type of stays, right? So we benefited because we’re 10 minutes from downtown Birmingham, which is where all the major hospitals are. And so tons of people that are looking for that type of work, it’s just centrally located, very, very close place to be able to do that. And so I think if you’re in the middle of nowhere or a resort type place or down at the beach, you you might struggle to pivot into a midterm.

But if you’re close to a metropolitan area, I don’t think you would have a problem at all pivoting or just always just even if you bought a property to say I only want it to do midterms. You can go that route. I think if you’re close to a bigger city.

Dylan Silver (07:53.9)
Pivoting a bit here, Austin, you mentioned before hopping on here that you were in San Antonio for the final four, I believe it was Auburn, it was Auburn, right?

Austin (08:00.503)
Yeah, that’s right. That’s right.

Dylan Silver (08:02.068)
And so, you know, I think about investing as a real estate entrepreneur. I a lot of times think about Texas. I’m in Texas. We like to think we have one of the best markets for single family homes in the country as far as an investor standpoint. I think a lot about Florida, because there’s a lot of real estate entrepreneurs that just seem to migrate to Florida to kind of be around the vibe. And they also have, you know, relatively favorable conditions for real estate investing. And I mentioned before, hopping on the show here, we didn’t we haven’t had a lot of people from Alabama.

We haven’t had a time, but I think Alabama’s probably another great spot, and especially too, when people think about real estate investing nationally, they might think of some other places. So probably Alabama is ripe for a lot of people to come in and start investing in single and multi-family.

Austin (08:41.143)
Yep.

Austin (08:50.444)
Yeah, there’s no doubt. mean, when I was deep in the research, I bought a business sense of my, my mind has shifted a little bit to building a business on top of doing real estate stuff. But when I was deep in the real estate world, Alabama was actually a pretty hot spot, especially post COVID because that 1 % ratio that everybody’s looking for, for the rental rates, you could pretty much hit on almost any property you would want to buy in the state of Alabama versus trying to do that in California or the DC area or something like that.

Dylan Silver (09:10.785)
Yeah.

Dylan Silver (09:15.916)
well.

Austin (09:19.502)
It’s near impossible because the prices of those properties were so high. So lot of actually outside investors from other states were coming in to buy a bunch of property in Birmingham or around Birmingham, really anywhere in Alabama, just because you could get those cash flow ratios that you were looking for on a rental.

Dylan Silver (09:19.532)
Yeah.

Dylan Silver (09:37.75)
That’s fantastic and good to know because now I’m going to be looking at deals and I might buy some leads in Alabama. I don’t know. But you mentioned buying a business. Let’s dive into that because I think folks have multiple ways where they can kind of.

Austin (09:41.679)
haha

Dylan Silver (09:54.3)
a portfolio and one of those ways is build a business another one of those ways is buy rental properties or fix and flip wholesale right or do something transactional but you can also buy a business and I think there’s actually a lot of overlap between buying businesses and buying real estate

Austin (10:10.818)
They’re 100%, man. So me walking through my first real estate deal in 2021 taught me so much about asset purchasing. How can we do this to produce a cash flow? How do we leverage the bank to basically see the cash flow that we wanted to do? And I’ll have to come on later and tell you just that whole real estate deal. It was mind blowing. I basically got a check from the bank back more than I had fully into the property. So there’s no money invested in the property. It was just…

Dylan Silver (10:35.072)
Wow.

Austin (10:37.952)
crazy thing. Anyway, I didn’t know that was real and it actually happened to be real and it was weird. It was fantastic. And it was, you know, right after COVID. So, you know, interest rates were super, super low nuts scenario. So anyway, that taught me a lot about the same concept of buying a business. And I’ve always known that I wanted to run and own my own business one day. And so it, an opportunity presented itself where we got to get into the accounting space and really serve other business owners through the lens of finance.

Dylan Silver (10:41.881)
you

Austin (11:05.59)
And I’ve been a numbers guy. I’ve always been that numbers guy. Just like I mentioned, even in the real estate deal, I was doing performance and different things to make sure cashflow was what I thought it was going to be. And so I went on a whole trail of like, how do we buy a business that could potentially continue to build wealth, just like real estate does for me and my family and an opportunity to present itself. And we closed on the business in 2023, basically doing full service accounting for small businesses in the service space.

Dylan Silver (11:21.922)
Yeah.

Austin (11:33.934)
Actually, when we closed and was still drawing me to real estate is the business that we bought was 100 % in the property management space. So we were serving property managers that were managing single family, multi-family, commercial, all of these things in real estate. And I knew a little bit about that space and I’ve just learned a lot more in that space because we’re producing the accounting for those business owners that are serving their customers. So it’s been a lot of fun.

Dylan Silver (11:59.03)
Do you have a surrounding background?

Austin (12:01.87)
I do not buy education, but by just being thrown into the weeds of it. So I worked for a company for almost eight years on the financial side of the bigger landscape company. We were acquiring, I think when I was there for seven years, we acquired 12 different other businesses. So that’s where I kind of learned about acquisition and buying other businesses. We were owned by an investment group. So I got to see what they were interested in. And so we were buying businesses. I was on the financial side, understanding how to evaluate other businesses, evaluate assets.

Dylan Silver (12:07.326)
Yeah.

Austin (12:31.948)
all those things and that’s where I kind of got into the deep end of the pool in the accounting world. And so I just knew that space and just walked into the accounting arena from there.

Dylan Silver (12:40.834)
So when I hear accounting, and I’ve had so many different people in accounting, tax strategy, cost segregation, mini cost segregation, these terms kind of flow and overlap in my head, because I think there’s a little bit of everything in each of them. Are all people, are most people that are doing accounting also doing some type of tax strategy or preparation?

Austin (13:05.048)
So no, we’re actually an example of that. So we are more of the accounting department that is the day-to-day bookkeeping controller CFO type work that’s meeting with business owners to basically make sure that they’re doing things and they’re knowing what the performance of their business is so they can make tweaks and become more profitable. So we’re operating in that lane. And then we basically hand off our produced financials to their CPA of choice during tax season to go actually file the taxes and go all that.

Dylan Silver (13:30.646)
Yeah.

Austin (13:33.07)
But I will say we’re actually at the forefront. We’re exploring, I think tax strategy is a huge need out there. And I love it. I’ve understood it from real estate world. we, 2021 was a great year for us because we got to speed depreciate all the stuff on the house that we bought and all these things, right? And so I think there’s an avenue there that we’re leaning into to basically explore that world to really help people from a tax strategy standpoint.

Dylan Silver (13:47.318)
Yeah.

Dylan Silver (13:57.504)
Yeah, I had heard these terms and they were brand new to me and then I’ve heard them a couple of times. Cost segregation, mini cost seg. And I realized, and I’m not super well versed on this, but I’m exposed to it enough that I say, okay, this is possible, that everyday people who might not necessarily consider themselves real estate investors, but if they own their home,

They can somehow through using LLCs and also tax strategy turn their home into a… I’m not exactly sure what the terminology would be here, portions of it that depreciate, of course the home itself appreciates over time, but there’s aspects of it that you’ll need to repair so you can write those items off.

And so that’s what people are saving, you know, really tons of money. And then you could also potentially put it as a home office. And I’m like, man, everybody should be doing this.

Austin (14:43.053)
Yeah.

Austin (14:53.977)
Yeah, that’s so true. I mean, I’ll give you an example for the Airbnb that we purchased. I mean, so there’s two sections on that depreciation schedule. You can have your long-term depreciation, which the IRS basically says like 29 and a half years, essentially 30 years, that you can depreciate like dirt in a building. But then we had all the improvements that we made, kitchen renovation, new landscaping, all the things that we did to the house, that we could depreciate over a 12-month period or in that first year.

And so we got a massive write off against the profits of business or W2 or whatever you’re doing to pay the government for those taxes that you can write off to reduce or deduct those taxes from what you’re actually owed in the government for that speed depreciation side of the cost seg like you’re saying. Right. So there’s so I think when you start exploring the whole business ownership and real estate world those are the two best plays in my opinion to really reduce your taxes.

Dylan Silver (15:38.848)
Yeah.

Austin (15:49.752)
from a standpoint of trying to build wealth for your family.

Dylan Silver (15:52.788)
Austin, there’s a couple businesses that I think are maybe hot commodities that people are talking about quite a bit, especially in real estate circles, right? So I guess they would be considered cash-heavy businesses like laundromat or like…

Austin (16:08.622)
Yeah.

Dylan Silver (16:10.37)
car wash, these types of things. And I’m curious to get your perspective on, know, for people who may be starting out and like yourself may have a rental property or a couple of rental properties or may not. deciding which avenue should I go to? Should I go to the real estate investing route? Should I go buy a laundromat, right? Which one’s gonna be more maintenance? Am I actually gonna make money with either of these? What’s your general feedback?

Austin (16:12.11)
Yep.

Austin (16:22.872)
Yeah.

Austin (16:31.853)
Yeah.

Austin (16:35.692)
Yeah, I love that question, man. I think so much of it depends on the passion of the person of what they want to go pursue. Because, I mean, in reality, there’s really no such thing as true passive income. You’re always going to have to work for a little bit of something. So really, it’s like where your interests lie and where do you want to grow in. So that’s what I’ve talked to other people about, whether you want to get into self storage or car wash or laundromat or just single family, multi family.

I think you have to have a natural draw or a natural bend to one of those areas and that’s gonna actually let you win a lot quicker I think based on your personality, right? So like if you’re just looking strictly as an investment, all of those could be great investments. So you have to have your ability to say like, well, when I get that call on a Friday night, which one will I be least, you know, more upset about to actually answer the call to go fix something? Because in reality, all of the things in all of those areas, things are gonna break and you’re gonna have to jump in to go do those things. And so you just have to say, well, what am I willing to do?

Dylan Silver (17:32.098)
I’ve heard people say they call it an Airbnb host, but most people don’t emphasize the host, right? You actually have to like hosting people, know, shock. And so people, I mean, I have a mentor up here who’s an Airbnb host and you you have to deal with problems. Like what happens if there’s a party that is thrown over there? What happens if items get damaged, right? And so now it’s, and plus if you’re doing the actual short term in your city and they allow it, there’s…

Austin (17:36.174)
Yeah, That’s right. Yeah.

Dylan Silver (18:00.998)
all the time people coming in and out you gotta clean it you have to make sure that it’s ready for the next person you have to keep high reviews if you don’t keep your high reviews you’re gonna get booted off Airbnb so it’s not like set it and forget it type of thing and to get to that scale where it maybe could be you’ve got to now be employing people to where they’re coming out they’re cleaning it regularly you might have to have property managers to oversee these properties and you’re managing them so it’s not like you’re just throwing money in the stock market and you know hoping for the best this is very much

Austin (18:12.888)
That’s right.

Dylan Silver (18:31.093)
active work.

Austin (18:32.598)
Yeah, there’s no doubt. mean, literally this morning I was texting my cleaner to prepare for the next turn on the house that we have. And we only have one, right? That’s that one. But I was texting him. And then last week I was texting our plumber because they some issues with the plumbing for the guests that were currently sitting in there. So it’s like, never, unless you can hire a team to go do that stuff, things work at scale, right? If I had 10 properties, I could easily hire to go do those things. But with just one property.

Dylan Silver (18:47.244)
come.

Austin (18:57.388)
I’m just in the weeds of kind of handling all those things. Messaging on Airbnb, all the stuff. So yeah, man, it’s not passive.

Dylan Silver (19:04.33)
It’s not passive. know, when I think about my journey as a real estate entrepreneur, and I think a lot of people who have done real estate wholesale have a similar story. I was doing something else. I sold cars for four or five years. I was working in San Antonio, Texas at the end for a Nissan dealership. And I said, don’t feel like I’m making progress. Yeah, I’m making money, but I feel like I don’t know how to build wealth from this. Like my bank account balance may be getting larger, but I don’t necessarily know.

that this is like a good long-term strategy and I was seeing other people kind of doing the same thing and there would be a handful of know anomalies but for the most of our people were doing the same thing so I said I’m gonna try my hand at this real estate thing started networking networking networking I really wasn’t doing enough networking I was more reading right so I would go to one meeting a month of some kind right a re-event or something

Austin (19:36.919)
Yeah.

Austin (19:49.07)
Yeah.

Austin (19:52.439)
Yeah.

Dylan Silver (19:56.876)
Finally went to a paid conference from there, got my first couple wholesale deals. I’m now probably 20 or so wholesale deals deep at this two year point. Became a realtor. And now if I look back to the beginning, I kind of think like I should have just networked harder from the beginning. Like I could have, if I made a couple key connections, it could have sped up that learning curve so much. So my general advice to people who are starting out is,

Like, yes, you do need to know the knowledge. And for sure, when I became a realtor in Texas, it wasn’t an easy exam. I needed to study. But also, if I could have swapped however many months of time that I kind of wasted trying to get all the information and instead just started meeting people and being like, hey, I’m an aspiring real estate investor. I’m starting out in wholesale. You know, would love to connect. And that would probably have sped up my journey immensely. Do you feel the same way? Or do you feel like the

Austin (20:31.981)
Yeah.

Dylan Silver (20:54.216)
X’s and O’s or the logistics are more important than the networking.

Austin (20:58.03)
No, I 100 % agree with me. mean, everybody’s heard the term, your network is your net worth. And I 100 % believe that, right? So like the opportunities that present themselves from just continual connections and being in front of people and building relationships is unbelievable. I’ll give you a perfect example. The whole reason I bought that house with zero experience in real estate is because I was meeting consistently with a group of guys at a coffee shop every Wednesday morning for years prior to that. And three of the guys in there were in real estate.

And I went to them and I was like, I don’t know anything about it, but I love what y’all are doing. Y’all are talking about all these things that y’all are doing. And they’re the ones that were like, listen, Austin, you just do it. Don’t look back. Like just take the risk and do it. And if it wasn’t for those guys, I probably just would have still been listening to Bigger Pockets or whatever podcast and never actually done anything, right? So the people and the accountability of those people.

can a lot of times force you to do things for the good of you and your family that you wouldn’t have done otherwise because they’re helping you kind of build confidence off of them to go do those things. So I’m 100 % on that. And one of the best books I’ve read over the past few years on that concept is a book called Who Not How by Dan Sullivan. And it’s that entire concept. So rather than immediately let your brain go to the X’s and O’s and try to figure out how do I solve a problem, try to reverse your mindset to say,

who do I know that could help me solve that problem? Because when you collaborate together, better things happen. so anyway, it’s fantastic book to read and it’s got me in mind thinking a lot about just business building and real estate in general to get to the next level.

Dylan Silver (22:27.872)
It started with coffee, coffee and then Airbnb and corporate housing. That’s it. Austin, we are coming up on time here. Where can folks go to get a hold of you?

Austin (22:29.966)
That’s right.

That’s right.

Austin (22:39.212)
Yes, I’m new to the social media game, but I’m all in on it. Once again, it’s another great way to build relationships. And so I’ve been off of it for a long time, but recently been jumping back into it. So Instagram is where you can find me. My handle is Austin D. McMillan. And so anybody can just message me in there. And actually, Dylan, for people that are in the service-based industry, if they’re business owners in the service-based industry, I actually have a free video and guide.

to help people create better profits in their business. It’s all about setting up your bank accounts in the correct way and allocating money like you should right when you receive money. And so if anybody that’s listening wants that, feel free to just go find me on Instagram and you can message me profit, the word profit, and I’ll send you that PDF and video directly over to you to hopefully try to improve your business and increase the profits in what you’re trying to do in the service world. So, happy to do that.

Dylan Silver (23:33.578)
Austin, thank you so much for coming on the show today. Congrats on your success and your continued success.

Austin (23:40.3)
Awesome. Thanks so much for having me, Dylan. I appreciate it.