Real Estate Tax Expert Warns Investors: Don’t Bite on Risky Fix and Flip Deals

Marc Hyman (00:00)
recommend strategies where you’re massively leveraged and you have no wiggle room. It’s all based on how much do you earn and how many kids do you have to feed and how many kids do you have to put into college. You know, you’ve got to manage your risks, not just jump, you know, jump as and and not believe the guy who says give me $100,000 and this million dollar fix and flip is going to be worth two million in two days. Don’t bite on that.

Michelle Tack (00:05)
Mm-hmm.

Welcome to Real Estate Pros podcast. I am the podcast leader, Michelle Tack. I have a great operator with us today from Santa Barbara, California, Marc Hyman. Marc, just say hi to the folks.

Marc and I spent some time earlier to prepare obviously for the podcast. So one of the things that I thought was super interesting is the focus on real estate taxes and planning around taxes in terms of acquisition of properties, ⁓ longer term, shorter term, what have you. And Marc is also a lawyer.

⁓ by trade as well. So we’ve got some interesting things to unpack there, Marc. ⁓ we don’t necessarily always have the, the fortune to have someone that really understands the tax areas as well as being a lawyer. So, ⁓ for those that may not know about your business and what you do, can you explain, you know, what your focus is and in what markets that you serve?

Marc Hyman (03:06)
⁓ I help real estate investors maximize the benefit of the tax code by helping them develop tax strategies for themselves that meet their financial objectives and maximize their use of the tax strategies that are written into the code that benefit them.

Michelle Tack (03:26)
And do you do that across the United States or there are areas that you really ⁓ specify as location? Do you care or?

Marc Hyman (03:36)
I don’t care, but one of the interesting things, I live in Southern California and one of the amazing differences between California where I’ve been living for 30 years and New York where I lived in the past is that so many people in California…

have some kind of interest in real estate, whether they are building a duplex in their backyard, an ADU, whether they inherited something, or whether they spend their free time looking at houses. Back East, the world that I came from, doctors, lawyers, engineers, these people are working 60, 80 hours a week.

Michelle Tack (04:08)
Ha

Marc Hyman (04:08)
making

their W-2 income, they have no time to worry about tenants, evictions, roofs. So it’s really been fascinating. So I don’t know how widespread this is, but it’s clearly not a New York phenomenon. It’s clearly a Southern California phenomenon. I see it in Florida, because a lot of people have a leisure life, so they can drive around and say, I’m gonna make that an Airbnb, or I’m gonna do this, I’m gonna do that. So I’ll talk to anybody anywhere, but you

you should have at least a half a million dollars worth of assets ⁓ before the tax strategies really kick in. Although a couple of hundred thousand dollar homes is a start as long as…

Michelle Tack (04:51)
Yeah,

Understood. You you and I talked about having a plan B that often, and I see this in interviewing and folks in terms of when they were earlier in their careers is that, you know, on paper, something looked really good. It was all about cash flow and, you know, getting the return. And then ⁓ there was something shifted, either something catastrophic, like, for example,

you know, the fires in up in, you know, Palos Verdes, California, and that whole area, or it was a hurricane, things that are not controllable. ⁓ And, you know, they didn’t have a plan B and that’s not to be negative. It’s just a matter of why plant Bs are so, so important. Can you talk about that a little bit in terms of how you advise people, maybe the three biggest tenants of your philosophy when you

Marc Hyman (06:11)
Please.

Michelle Tack (06:36)
advise people about taxes to think through.

Marc Hyman (06:39)
So, well, you know, I…

I’m big on insurance, okay? think insurance, you know, when you’re working and if you don’t, know, medical insurance and home insurance are two important, two of the things that need to come out, you know, even before food, because you can always, you know, go shop at a different market for lower cost meat, lower cost vegetables, but you need, and I believe you need insurance if you, from a very conservative point of view. Some people are happy to walk away from their property. That’s not me, okay? So,

Michelle Tack (06:44)
huh.

Mm-hmm.

Mm-hmm. Mm-hmm.

Marc Hyman (07:11)
⁓ So I tell people, you know, how much are you insured and what’s it gonna cover and you still flow cash if you’re insured. To me that’s an important B, plan B. ⁓

You know, it’s let’s look at where you are. Have you looked how close to a floodplain you are? Do know anything about the hurricane risk in your area? Flood risk? mean, you know, how many of your houses are sitting on top of a river, you know, that’s never overflowed, but, know, that never is ending these days. You know, let’s look around. Tell me about what you have. ⁓

I’m not a real estate broker, I’m not some guru, but based on speaking to thousands and thousands of people and people coming to me after they fail to have a plan B, I’ve gotten pretty good at what people do right and what people do wrong. you know, you, I don’t…

Michelle Tack (07:53)
See ya!

You

Understood.

Marc Hyman (08:15)
recommend strategies where you’re massively leveraged and you have no wiggle room. It’s all based on how much do you earn and how many kids do you have to feed and how many kids do you have to put into college. You know, you’ve got to manage your risks, not just jump, you know, jump as and and not believe the guy who says give me $100,000 and this million dollar fix and flip is going to be worth two million in two days. Don’t bite on that.

Michelle Tack (08:20)
Mm-hmm.

What would you, what, know, you’ve grown your business, right? You were a lawyer before. Did you ever have a situation in your own business where something went sideways and you had to pivot pretty quickly and you either were ⁓ able to rectify the situation or B, you weren’t able to, but you learned a heck of a lot and it

you know, was a learning lesson that was really important to your business. Anything like that that you can share.

Marc Hyman (09:16)
Rectify. ⁓ You know, yeah, I mean, ⁓ I have clients who are in a fix and flip that’s going to be a short term thing. I…

help them turn it into a long-term hold. It’s not working as a, you know, they’ve run into problems but they’re still manageable. They may lose a hundred, two hundred dollars a month for the first couple of years if we turn, if they don’t sell it, if they just fix it up and just get it rented because they found some problem that might keep them from selling it tomorrow, a cracked foundation or something. And so that, you know, I’ll say let’s do that. had, you know, I

I look and see where we can extract money, cut expenses and provide a plan B that way. Again, younger people always wanna sell, they wanna cash out. And even if you’re buying homes in Pennsylvania for $100,000, get 50 of them by the time you’re 60 years old, don’t just fix and flip them. that’s how I help people is with

Michelle Tack (10:22)
Yep.

Marc Hyman (10:28)
trying to get past the panic and do things more comfortably.

Michelle Tack (11:08)
Yeah, I think you hit on a really important part is that, you know, the folks that I talked to that have done well in real estate, regardless what the business is, it’s been a commitment to the industry. It hasn’t been a two year, hey, I’m going to flip this and things are going to be great and I’m going to replicate that, replicate that, replicate that. Because as we know, with technology, with mortgage rates, with, you know, global warming, all of this is changing dynamically.

Very dynamically, right? I mean, in terms of now in the future. ⁓ So, you know, I would ⁓ encourage folks on this podcast and what you say is look at things longer term, you know? I was referred to Warren Buffett. Warren Buffett never, who’s gonna retire soon, never bought any stock that he didn’t understand the company. That’s one of his mottos. ⁓ But…

Marc Hyman (11:51)
Thanks.

Michelle Tack (12:04)
when you’re going to commit to it, you’re going to take some hits, you’ll lose money here and there, but it’s a commitment over the long term. that’s what, I’m really thrilled that you have that type of background. When you talk about, when we think about your network, how do you leverage a network to fulfill your desires of helping people with tax advice?

Can you explain now what you do? Maybe I think you said you went to some.

Marc Hyman (12:36)
So I

do, you know, I consciously do several things. First of all, I make myself available. You know, one of the interesting things, one of the reasons why I’m successful is that what makes an accountant good at being an accountant is that he or she loves to be in a little room working on numbers and doesn’t want to be out meeting people pressing the flesh.

Michelle Tack (12:57)
That’s right. That’s right.

Marc Hyman (12:58)
So I have that skill set. As I mentioned before, my partner is a CPA and his former IRS agent, but he just wants to, he doesn’t want to leave his office. He just wants me to throw lots of forms at him and he’ll do the work. So my first step is to be available, to go out there and find my clients where they are. They’re going to these meetups on real estate or these Saturday and Sunday free seminar, $100 seminar, $1,000 seminars. I just liked what I learned.

and I like to meet those people and then I eventually get asked to speak at these events. And basically, I have something that nobody else has. I’m showing up to help people with their taxes. That’s unheard of. I’m giving away my secret, but there’s nobody else in the room. There are people selling cost segregation analysis, but there’s nobody that’s there to say, bring me your problems. I’m gonna see if we can…

untangle what you have.

Michelle Tack (13:59)
That’s awesome. When you think about a year from now, what would you like to have accomplished in the business that’s near and dear to your heart?

Marc Hyman (14:08)
I would like to help as many, always like to help as many people as possible. that’s at this point in my life, I’m 66 years old. I’ve done a lot of what I wanted, lot of what I’ve wanted I’ve let to do when I was younger. I’ve let slide because I’ve realized thanks to a wonderful wife that those things were really not important. And at the end of the day, just helping people because those of us who were born in the right place with the right parents that stayed together and got the right education, we have an

advantage that nobody else has and and and and you know just just again being Jewish they’re there they’re the Bible talks about not not standing by idly as your as your neighbor struggles as the neighbor stumbles my parents having been doctors who always were changing the the arc of somebody’s life I can’t I can’t sit by and have somebody talking about you know they’re having this problem with their house and this and that without saying hey you know I’ve got an interesting idea that doesn’t involve you know you

Michelle Tack (14:50)
Mm-hmm.

Marc Hyman (15:08)
losing everything.

Michelle Tack (15:50)
Yeah, I say this almost on every podcast, but the folks that I talk to ⁓ that are the most successful, they want to be of service first and the money is second. And just by that combination, the money goes up because you get trust, you feel fulfilled, you enjoy the work. It’s just a wonderful trifecta. ⁓

Marc Hyman (16:13)
I don’t know if it could, you know,

I had some contractors in my house who were looking to do ADUs and they just seemed so hot to get me to sign before they left because, you know, I’ll give you extra $5,000 off if you sign before I leave. And that is so foreign to the way I was raised, to how I believe things should be sold. You know, I believe in the no sale sale, you know, where you’re not selling.

Michelle Tack (16:32)
Mm-hmm.

Yeah, right. Exactly. Yep.

Marc Hyman (16:42)
the

note, you know, and ⁓ I’m genuine about it. I mean, you know, there are people, there are certain people who strike me a certain way that they can call me a hundred times and I won’t ever bring up the point of money. There are other people who call me and challenge me on my knowledge of tax law. Well, you said this, but my guy said that. And I…

No matter, that person I really, I try really hard to not blow them off because I know that they’re in trouble, but I have less patience. But if somebody approaches me, if they’re a damsel in distress or a man in distress or an elderly man in distress, there’s no limit to how much time I will spend with them. And it makes, it strengthens me. And I know that anytime spent with another human being who will somehow benefit me and that that’s my way of doing things.

Michelle Tack (17:14)
Yeah, understood.

I love that.

Can you, before we close for this podcast, provide your contact information for people that want to maybe use your services, get tax information, have a problem, whatever you are, just want to understand better.

Marc Hyman (17:49)
So again, as part of my thing, I have no problem with people calling me directly, texting me. easiest thing a person can do is text me. My phone number, my text number is 805-288-2269. It’s 805-288-2269. I have a website, maximize101.com. And my email address is MSH, my initials, M as in Mary, S as in Sam, H as in Harry.

[email protected]. ⁓

You know, somebody can text me. I’m also on WhatsApp. Again, that’s my, because I have a lot of clients for another business that are overseas. I use WhatsApp all the time. My WhatsApp is plus one, 805-636-9783. You get me at the other end of everything. You don’t get a robot. You don’t get AI. I don’t plan to implement AI for the inbound stuff. I don’t need somebody to answer for me.

Michelle Tack (18:34)
That’s great.

Marc Hyman (18:53)
message I’ll send you back a link or I’ll tell you when we can talk and because it’s just what I enjoy at this point in life and I’m fortunate enough to have a wife that we’ve cleared all we clear the decks in our life our kids are grown they’re they’re emancipated they’re in their 40s and so we have grandkids and we’re not

know, busy polishing the polish. We don’t worry about replacing the cars, know, replacing the tires on our Mercedes and about, you know, the fifth edition to our home. That leaves us a lot of time to care for people in our community.

Michelle Tack (19:28)
It does.

Well, look, really appreciate we appreciate you being on Marc. A lot of great information there to those that are subscribers. We appreciate your continued support and those that are not subscribing but have tuned in and found this content to be valuable. We encourage you to subscribe. Marc, good luck in the future.