Real Estate Tax Strategies for Long-Term Wealth with Addison Thom

Addison Thom (00:00)

the tax code gives you the roadmap for how to make wealth in America.

One of the biggest advantages of that is buying real estate, using leverage to own real estate, and then renting that real estate out so that a tenant is paying your mortgage, So now you have cash flow, you have market appreciation, and you have the tax advantage that for most of our clients wipes out their annual tax obligation.

We built our company around developing, build for rent, single family homes, duplexes, you name it, and markets. So kind of the areas where they have lower state income taxes,

big upside on equity appreciation just because of mass migration from population. And you have high demands for rent with an underserved market for available property to rent.

Quentin (02:20)

Hello everyone and welcome to the Real Estate Pros podcast. I’m your host Q Edmonds. Super excited today about my guest. ⁓ man, this guy is full of knowledge. ⁓ Very, very knowledgeable about what he does. Very knowledgeable about, you know, some words that we don’t want to talk about taxes, but I’m gonna let him talk and talk about the different things that that his business provides and their strong season with their really unique advantage in this market. But.

I’m just so excited to introduce you guys today to Mr. Addison Thom How you doing today,

Addison Thom (02:54)

Good Quinn, thanks for having me on man.

Quentin (02:55)

No, absolutely. I appreciate you being here. Thank you so much. And like I said, you know, I’m excited about your unique lens, what you’re going to bring to the conversation. And I want your voice to be the dominant voice here. So I’m going to actually decrease. And I just want you to take out listeners into your world. Let us know what you are, your main focus are these days. You know, what it is that you’re doing and honestly what markets you’re operating in as well.

Addison Thom (03:24)

Yeah, great question. ⁓ Well, you mentioned taxes earlier, which some people cringe when you bring up the IRS or the tax code. But 23 years ago when we started our company, we were looking at all of the tax advantages from real estate. And

the tax code gives you the roadmap for how to make wealth in America.

One of the biggest advantages of that is buying real estate, using leverage to own real estate, and then renting that real estate out so that a tenant is paying your mortgage, right? So now you have cash flow, you have market appreciation, and you have the tax advantage that for most of our clients wipes out their annual tax obligation. ⁓

We built our company around developing, build for rent, single family homes, duplexes, you name it, and markets. ⁓ I think we’ve done projects in 23 or 24 different states. ⁓ Right now we’re centered specifically in the Sunbelt states. We really like Texas, ⁓ Missouri, you name it. So kind of the areas where they have lower state income taxes, they’re

pro-business, ⁓ and you have big upside on equity appreciation just because of mass migration from population. And you have high demands for rent with an underserved market for available property to rent.

you know, overnight, you have a couple million people moving into Texas. There’s not a couple million available homes to rent or apartments. And so we took advantage of that.

⁓ And part of the way that we position ourselves is ⁓

affordable new construction homes that our tenants want to stay in and treat them as their own and you know lowers maintenance for our investors and increases cash flow.

Quentin (06:04)

Absolutely. One of the things that I like that you said earlier when we was talking is that you make yourself accessible to everybody. You’re making real estate accessible really to all people. We’re talking about high clientele and not just so high clientele. You make sure that you make things accessible for people who really want to get to real estate. And that’s one of the things I loved about what I heard you say earlier.

Addison Thom (06:25)

Yep, absolutely. mean, we have.

Google, Facebook, Boeing executives that buy 10, 15 properties from us every year just for the tax advantages, all the way to a new graduate from college that saved up some money and wants to get his foot in the door of owning real estate, owning a piece of America. And then we have a lot of W-2 employees that change jobs and wanna self-direct their IRA or…

Want to get out of the nine to five 40 hour work weeks and just want to start setting their family up for long-term wealth So we have something for everyone which I think definitely sets us apart

Quentin (07:06)

Absolutely. Now I know that’s not always especially easy in this climate. So what’s been the key to keeping that machine running smoothly?

Addison Thom (07:13)

It’s our people. ⁓ It’s our approach to our clients is understanding.

why they want to invest in real estate and not just, hey, it sounds sexy. The mom on my kids soccer team is a real estate agent. She’s telling me the market’s really good. I want to jump in, but really hammering down on why are you investing in real estate? Because one of the hardest things is knowing when to buy, knowing when to sell and what your long-term goal is for that property. And so I want to understand that from you because it’s different if you’re 25 versus if you’re 60 and

getting ready for retirement. Your risk profile is different. The length of your runway is going to be different.

And so we pride ourselves on understanding the person. I always call it treating the patient instead of the disease. So we want to provide something to the actual individual. And then our team just, you know, everyone wears a lot of hats ⁓ on our staff and everyone prides themselves in being solution oriented. So, you know, there’s a book written by Jocko Willink called Extreme Ownership and we preach that at our company. So, you

It might not be your job, but it is your responsibility to find a solution.

Quentin (08:30)

I love that. I love the quote, man, treating the patient and not treating the disease. I mean, that puts it right into focus. And so I absolutely love that and what you’re doing for the people that you’re servicing. ⁓ Now, of course, there’s moments when things get real. Maybe a deal goes sideways or a time when you had the pivot fast. Do you have any stories like that that maybe you could share to give people that unique lens of

having to overcome some real adversity with some deals that you had that you was involved in.

Addison Thom (09:02)

yeah, absolutely. mean… ⁓

anyone in real estate or investing that sits around and tells you everything’s gonna go perfectly is just lying to you. I mean, it’s not a matter of if, it’s a matter of when, and especially when you’re talking about the human condition. So in real estate, you’re dealing with people, you’re dealing with tenants, you’re dealing with a property manager, a maintenance team, the builder. ⁓ So things can go wrong or miscommunications. ⁓ I would say, you know, one of the

biggest lessons that we learned is to really be cognizant of the people we bring on on our building team, just like the quality of work that we want to provide to the market. ⁓

especially when real estate gets busy, roofers don’t show up on time or they cut corners on framing or laying flooring, things like that. so really being slow to hire and quick to fire is what I call it. They’re not living up to our standard. They need to go and we need to get somebody in. And by doing that, you funnel out the bad actors and you really put yourself in a position to align yourself with people that have the same vision as you

of,

providing high quality at a good price and then honoring their warranty on their work is making sure like all of our property, that’s why we don’t do fix and flips, that’s why we don’t buy old portfolios because our investors buy property from us and you know.

Three months in, refrigerator goes out, there’s a crack in a window, the flooring peels up because the air conditioning unit hasn’t been set below 76 degrees. Our building teams come out and replace all that for free. And so that was definitely a learning curve for us early on of just, you know, at the scale that we operate on.

you save yourself a lot of headaches and a lot of time ⁓ by knowing the people that you’re hiring to build the property and that they will come back and make things right. Because that’s a big risk, right? Other than that, man, I would say, I could tell you some interesting stories about tenants. We’ve served evictions and kicked people out of houses.

Quentin (11:40)

Absolutely no alignment.

Addison Thom (11:54)

⁓ where the family situation goes poorly and they’re going through a divorce or they’re in trouble with the law and none of that shows up on a background. And so the way that we position ourselves in those circumstances is really being in states and municipalities that don’t have squatters rights and that I can file an eviction notice. Great state of Texas, I call it the greatest country in the world, but Texas does not mess around with that.

and you file an eviction notice, they get a notice to vacate and the sheriff will show up at the door and make sure that they move out. So, you know, I’ve heard a lot of horror stories and we’ve dealt with older markets and, you know, Chicago, Los Angeles, New Jersey, New York, where, you know, a tenant doesn’t pay their rent and it takes you six months to get them out of the property.

Quentin (12:40)

No, Texas, like you said, Texas is not playing around for sure. Yeah. And I love you, quote, when you, when you was talking about alignment and you said slow to hire, quick to fire, alignment is everything and hiring people that you can trust and disassociating yourself from people that you can’t trust. Alignment is everything. And, know, I see why you guys been around for a long time, 23 years of doing this. I can see that you’re in it for the longterm and I see why with the systems that you have in place, you know.

I can see the success and why it continues to happen. so let me ask you this. What are you most focused on solving to scale in next? What’s the next real goal?

Addison Thom (13:18)

I think just to continue what we do, I mean, we are not artists. A lot of builders get into building and they wanna tell you how nice their floorclams are, their finishers, or, I put in this archway over the door, whatever, okay, great. We’re not painting the Sistine Chapel here. We are… ⁓

Very boring in our approach. We build the same six to eight floor plans over and over and over again to give us economy of scale to make it as efficient and as quick as possible while delivering the highest quality. So I was telling you, we have at any one given time, we have 1,500 to 2,000 doors in process at a time.

⁓ I would, my biggest challenge with that is finding a way to increase that, really. ⁓

You know, that goes with banking relationships, that goes with ⁓ making sure that a lot of people can scale and they lose the quality of their product. So you go from building 300 homes a year to 600 and then all of sudden now you have this issue of making sure the quality control is still there.

So we’ve got to the place that we are by really being cognizant of that. I mean, I think our first year in business, we sold maybe 40 properties and it took us,

15 years in, we’re selling 300, 400, 500. And then COVID happened and everyone and their mom wanted to buy real estate. And so we had to learn really quickly how to scale that up. thank God that we have the staff that we do, we were able to do that. Everybody’s working around the clock to get there.

and we’ve gotten to where we are now and over the next you know 10 years I’d like to be able to double that production.

Quentin (15:45)

Absolutely. And I know that’s absolutely big. 15 to 200 doors in process at once. mean, that’s incredible. You you have just great things that’s in place. And I know, you know, the next move, can either compound things or create total chaos depending on how you play it. But I love, like, the goal is, you’re like, we’re going to double this 10 years from now. And so I just see you guys as just a powerhouse. And again, man, I appreciate your perspective and your lens on what you’re sharing. And so, you know,

You talked about having people in place, the right people, having a right alignment. And I really think, you know, we got people that’s listening, they’re early in their journey, they’re looking to level up. And I think it would benefit them hearing this from you when it comes to building relationships and growing your network. What’s made the biggest difference for you?

Addison Thom (16:33)

think it starts with any business relationship requires a certain level of trust and for that trust not to be broken. so doing what you say you’re gonna do, either as the, on either end of the relationship, right? That is absolutely required.

⁓ I think that has been our key. And like we were talking about earlier, it’s not a matter of if or when. Markets go through cycles, interest rates change, vacancies happen. The people that are with you in the trenches to solve problems, you’ll find out really quickly what their character is and who is honoring what they say they’re gonna do.

That’s been our real commitment and we you know good or bad that can come with a lot of War, you know scarring of us being committed to that ⁓ But I mean that’s the only way to do it in my mind is you just it might cost you some more money You might have to call your banker tell them you’re gonna be late on paying off your construction loan Because we’re dedicated to doing the right thing ⁓

And the alternative, I think you see what happens, those people are no longer in business. So that’s been the real, and aligning ourselves with people of that same character, that’s really it.

Quentin (17:46)

Yeah, I guess it.

Absolutely. That makes sense, Again, 23 years, man, I see it, the alignment, the right relationships, building trust, it makes all the sense in the world to me. And again, I can see the through line of why your business has been successful and why you keep being able to service the client. And so I thank you, man. I thank you for your unique lens of perspective on what you guys are doing. And so listen, before we wrap, if someone wanted to reach out to you, connect with you,

maybe collaborate with you or learn more about what you’re doing, what’s the best way for them to reach out to you?

Addison Thom (18:26)

I would say the best way to find out what we’re all about is, you our website’s great. It’s SD, like Sam David, IRA Wealth. We actually started off only building property for people’s self-directed IRAs, and then we expanded from that. You can email me at Addison. That’s ADDISON at sdirawealth.com, sdirawealth.com. And my phone number is 806-224-5102. I make myself available for all of our clients.

24-7.

Quentin (18:57)

Ms. Addison, I appreciate you so much, man. I appreciate your time, your story, and your perspective. We definitely need more people in this space that’s doing it the right way like you’re doing it. And so, sir, I thank you again for being with us. I thank you for sharing. This has been a pleasure.

Addison Thom (19:12)

Thanks, Quentin.

Quentin (19:12)

Absolutely. And for those that’s tuning in, if you got value from this, please make sure you are subscribed. You do not want to miss out on these great conversations that we’re having with operators just like Mr. Addison Thom Like this has been incredible and we want to continue to bring you this incredible content. So you got to make sure you are subscribed so you get it. And so thank you so much, Mr. Addison and to everyone else. We’ll see you on the next time.