How Real Estate Investors Can Turn Property Losses Into Tax Savings

Jason Malabute (00:00)
Yes, so I was just on another podcast recently about pretty well known real estate investor and he was telling me that a lot of his deals and a lot of the deals of the other operators in his network are is going south.

And I was sharing with him that even though that is not ideal, there’s actually tax benefits to that as well. Because there might be a way for you to offset your active income with your losses from the real estate deal that went bad.

Joseph Crooms (02:16)
Hey everyone, welcome to Investor Fuel Real Estate Pros Podcast. I’m your host, Joseph Crooms So today I’m joined by someone I’ve been looking forward to chatting with. His name is Jason Malabute. And listen, he is into taxes, he’s had a real estate company.

he is helping people that wanna flip their homes. he’s very plugged in, very unique and so hey, Jason say hello to everyone.

Jason Malabute (02:47)
Hey Joseph, hey everybody. Thank you again, Joseph, for having me on your podcast. I very appreciate that.

Joseph Crooms (02:56)
Thank you, Jason. Thank you for being here. I think our listeners are going to take something away from how you’re approaching business, your experience. and so let’s jump right into it. So first off, Jason, for people who are not familiar with your world, your business, give us the short version. What is your main focus these days?

Jason Malabute (03:17)
Yeah, so so I run an accounting firm and we specialize working with real estate investors and real estate professionals, helping them stay compliant with their taxes, save money on the taxes and also bookkeeping for active tax planning and back office support.

Joseph Crooms (03:41)
Great. Jason, how how long have you been doing this helping real estate people?

Jason Malabute (03:48)
Yeah, so great question, Joseph. So I’ve been doing tax and accounting since two thousand and thirteen. I’ve been a CPA since two thousand and fifteen. I’ve been a real estate investor since 2018. But then I started my own accounting firm that specializes in working with real estate investors since

Two thousand and twenty four.

Joseph Crooms (04:15)
much revenue on a monthly basis do you bring in from your real estate contacts from or from that that your then your real estate business

Jason Malabute (05:12)
Yeah, so it just really depends, right? because when it comes to single family properties, back back when I had it, you know, we were bringing about, you know, like we were renting out anywhere between eight hundred to about a thousand dollars per month.

in rents for properties. I’m in the new you have about fifty percent for operating expenses. I had a portfolio of a single family home so I usually had to multiply that by the number of properties I had at the time. But then I transitioned out of that. And then

Now I’m in a multifamily. I’m a general partner in two multifamily deals in Atlanta, Georgia. But what I realize is that, you know, real estate is great investment. it’s great for tax strategies and reducing your tax liabil your tax liability but

But but I think that real estate is not really that great when it comes to cash flow. that’s why when you look at the biggest real estate investors, whether it’s Grant Cardone or Donald Trump or the guys on the street, you will realize that they all have a active business.

In addition to the real estate portfolio that generates

Most of their cash for

Joseph Crooms (06:49)
So how much revenue would you say is real estate and how much is your tax business or how much is it combined? How much is do you move a month?

Jason Malabute (06:59)
Yeah, so I would say that. ninety ninety to about ninety nine percent of my revenue comes comes from my comes from my accounting business because right now our commercial properties is struggling right now. So so right now when it comes to my when it comes to my

accounting business of course is ups and down, but like we know we’ve been doing about twenty three thousand dollars.

Joseph Crooms (07:31)
And that is that is from your accounting and your real estate

Jason Malabute (07:35)
Exactly.

Joseph Crooms (07:36)
Okay, great. So let’s let’s let’s move on. So how do you go about identifying flippers or how does business come to you?

Jason Malabute (07:46)
I just easy multiple ways just as so as mentioned before, you know I used to run my own media group so so I I build a big network there and I still try to go to one networking event per week. Plus we do a lot of social media marketing. we push out

three pieces of content every single day. and then we also do email marketing. And then also I have a I have a lead generation specialist who are who reaches out to real estate investors and real estate professionals through social media to see if they’d be interested in a con

Joseph Crooms (08:38)
And Jason, I would imagine that a lot of your customers they they come to you for tax purposes, so they’re long term. And how do you make the transition like do you s is like they come in your office and you say, Hey, are are you w looking to invest? Is that how you approach them?

Jason Malabute (08:54)
No, no, so actually once you own an accounting firm Joe so your yeah y yeah your insurance company actually does not allow you to go and raise capital on deals anymore. So so they’re gonna

That’s it that’s why right now my main focus right now is just my accounting firm and I’m growing that and then you know, eventually I want to get back into acquiring more rentals.

Joseph Crooms (09:29)
Okay. So you so basically you help you a lot of your real estate customers you do their taxes for is that

Jason Malabute (09:37)
Exactly. Taxes, tax planning, bookkeeping, and also back-office support as well.

Joseph Crooms (09:45)
All right. Okay. I think our listeners are going to take away some how you’ve been approaching it. So first of all, let me ask you this, Jason.

What caught my attention about you was the fact that you did mention the taxes, you you had the real estate experience, and that’s not easy, especially in this particular climate. What’s been the key to keeping your machine running?

Jason Malabute (10:40)
just applying yourself, you know, because that’s the fun part about tax is that it’s always changing. I the the tax law is always changing. And that’s something that I always hear from my new clients, that they always complain that their old accountant wasn’t

keeping up with the tax laws and they felt like they were leaving money on the table because their previous accountant didn’t specialize in real estate. they weren’t proactive enough when you come to tax planning. So we try to break that cycle by always educating ourselves, you know, we’re

but always brushing up on the newest professional articles, we’re always attending CPEs to go and learn about what’s a new tax law. We’re we’re going to seminars and workshops to keep our knowledge up to date when it comes to

When you can see the numerous tax updates.

Joseph Crooms (11:52)
So that’s that’s not easy, especially in this kind of now every operator I know, Jason, has a moment where things just got real. Maybe a deal that went sideways or a time they had to pivot fast. Do you mind sharing one of those with us?

Jason Malabute (12:07)
Yes, so I was just on another podcast recently about pretty well known real estate investor and he was telling me that a lot of his deals and a lot of the deals of the other operators in his network are is going south.

And I was sharing with him that even though that is not ideal, there’s actually tax benefits to that as well. Because there might be a way for you to offset your active income with your losses from the real estate deal that went bad.

Because

Normal normally passive losses can only offset passive income. But the special rules in the tax code, Joseph that says that that if you if you have a loss from your rentals, then there could be a way for you to use that loss to offset your active income with but but

But there’s there’s also drawbacks to that as well, right? so like so for example, if you sell a property for less than the loan amount, then you could be getting some loan forgiveness which is a taxable event. So so that’s one thing that you have to be worried about. at the same time.

if you sell it for a gain then they could then they could be a depreciation recapture. It could also be some capital gains there as well. But going back to the original question there was like there’s a lot of operators out there who are struggling right now. And and a lot of the limited partners are

are gonna be hit with losses, you know, so so so if you are a limited partner and you’re potentially facing a loss, it’s very important you to reach out your CPA and see if there’s a way for you to use that doesn’t

Joseph Crooms (14:27)
Thanks for that, Jason, that I think that was huge what you just shared. let me ask you this. That’s the kind of stuff people don’t really talk about, the losses and and and and have a CPA like you to explain how that works. That that was really beneficial. It’s but it’s honestly, because of that, it’s what separates the folks who just dabble from the ones who stay in the game long term.

Let me ask you this what are you most focused on solving or scaling next? What’s your next real goal, Jason?

Jason Malabute (15:39)
my next goal is to grow my accounting firm. so that so that we can have more real estate investors, save money on the taxes. and then eventually as our revenue grows, I would like to buy more rental doing it for myself as well.

I like to use my example. And I think that’s what separates me for the other CPAs that call themselves real estate specialists is that unlike them, I’ve actually been in the trenches before, like I’ve I’ve dealt with contractors, I’ve dealt with brokers,

When I was looking for multifamily deals, Joseph, I was cold calling owners. People would people would would would hang up on me and people would tell me that my offer is way too low and laugh in my face. so I didn’t know what what every day real estate investor goes through. So

Today I can relate with

Joseph Crooms (16:52)
Jason, do you know how many investors are in real estate that have come to your CPA? How many would you say you have enrolled?

Jason Malabute (17:00)
Yeah, so right now we have about we have about thirty to forty clients right now. And about ninety nine percent of them are on real estate. I can only think of one client right now who is not involved.

Joseph Crooms (17:17)
Gotcha. all right. So that’s big, especially when you’ve already have the knowledge of real estate so you know how to talk their language to capture their attention, you know? the so the next moves can either compound things or create chaos depending on how you play it. Now, I know a lot of people listening are either early in their journey or looking to level up.

think they’re gonna benefit from hearing this. When it comes to building relationships and growing your network, what’s been the biggest difference for you?

Jason Malabute (17:48)
Well one of the people that I really look up to as an entrepreneur is Grant Cardone. I know that he’s a very polarizing individual. Some people love him and some people hate him. But one of the things that he used to talk about is that

There’s one difference between the word contact and contract. And and let me let me ask you ask you that question, Joseph. You know deal with the difference between the word contact and contract.

Joseph Crooms (18:24)
The contact is the person who can eventually develop a contract if your contact is strong and you’re and you know how to get the information that you both need.

Jason Malabute (18:37)
You are you are in the right ballpark, Joseph. So so so he said that the difference between contact and contract is the letter R and and the letter R stand for relationship. And and you cannot you cannot convert

somebody from a contact to a contract with a client without having a relationship with those people. And it doesn’t matter if you are trying to raise money for your next real estate deal and you’re trying to get somebody to invest fifty thousand dollars, a hundred thousand dollars into your project, or if you own a CPA firm and you are

trying to get a new client to trust you for you to advise them on their taxes, right? because when it comes to taxes and money, people are very sensitive to that kind of stuff. so that’s why having a relationship works very important.

Joseph Crooms (19:47)
Well, thank you for that little test you gave me, Jason. I appreciate that. but I understand. Perfect. Well listen, I appreciate your time, your story, your philosophy, especially what you just shared with me. That’s rich. I’ll we’ll hold that there.

If someone wanted to reach out and connect with you or maybe collaborate more about what you’re doing, that’s a very big important part. What’s the best way to reach you?

Jason Malabute (20:12)
So you can either reach out to me to my social media which is which is @JasonMalabute. You can find me on Instagram, LinkedIn and Facebook. Or you can go to our website which is RealEstateTaxPro.com

Joseph Crooms (20:33)
Jason, run it around one more time. For those that may have been looking for a pen or trying to gather the information, just run it to one more time. You got it.

Jason Malabute (20:40)
Of course, so you could reach out to me through social media, just search @JasonMalabute, that is my social media handle. Or you could visit our website which is RealEstateTaxPro.com

Joseph Crooms (21:00)
Thank you. Well Perfect. Thank you for your time, Jason. And for those of you tuning in,

make sure you subscribe, those of you that have been listeners. We got more conversations coming from operators just like Jason Malabute who are out there building real businesses for real people. So listen, I’ll see you on our next episode of Investor Real Estate Pros Podcast.