The 3 LLC Tax Strategy Every Real Estate Investor Should Know

Kurt Ramalho (00:00)
But if you have a a proper plan in place before you ever you ever get there, you already know what you’re gonna end up paying because you you you you’ve already wrote ha built a roadmap to do so. You know, so I always t try to tell people, you know, to keep it simple, put more more emphasis on what you do before you even get going. You know, the old adage of measure twice and cut once. You know, so you wanna take more time and get in getting your bucket together that you’re gonna use to to collect all of this cash that we’re gonna go out here to make when we’re when we’re doing real estate. But you you also wanna make sure that that bucket doesn’t have holes.

Dylan Silver (02:09)
Hey folks, welcome back to the show. Today we’re joined by Kurt Ramalho, a Georgia-based real estate investor, tax strategist, and founder of The Partnerd Group, focused on tax strategies, asset protection, and financial systems designed to preserve and grow wealth. Kurt, thanks for joining us here today.

Kurt Ramalho (02:26)
Yes, thank you for having me. It’s a pleasure to join you.

Dylan Silver (02:29)
Bookkeeping, tax strategy, tax filing on a base level, what does this look like for folks who would like to get started, but may be accustomed to either doing this themselves rather informally or and trusting a family member to do it for them?

Kurt Ramalho (02:46)
Well, the great thing o about about that is foundation to me is everything and anyone that that wants to start I like to tell people the way that you start a race is usually how you finish it. So, you know, you need to get everything set up properly from the very beginning. Especially if if you want to take advantage of the tax breaks that, you know, that that the government gives us. The government gives us a lot of tax breaks, you know, to do real estate and and real estate is one of the the one the main pathways to wealth in this country. So, you know, if you take advantage of of the accounting side and the structure of putting your your LLCs together properly when you’re gonna do commercial real estate, it really sets you ahead of everybody else before you even get started. So that’s why we kinda focus on that, you know, because again, we like to start the race strong and finish the race strong.

Dylan Silver (03:37)
Now, without giving away all of the gold, but maybe a a nugget here, on a granular level, what does that look like that starting and getting ahead even from the beginning?

Kurt Ramalho (03:47)
Well, from the beginning, I like to tell a lot of my you I’m gonna give a little jewels here that I like to tell all my investors, when when you’re you’re getting into a deal, to actually start three LLCs when you’re actually gonna do do your deals. You know, w your main LLC is gonna be the LLC that you’re gonna acquire that property in. But you also wanna have a second LLC because if you’re gonna do a fix and flip on a property, buy and hold, or you’re gonna do any type of rehab situation on a property. You want to kind of separate those things for tax purposes to be able to leverage the you know the IRS and the government as much as possible, you know, within doing your deals. So one LLC would be the LLC that you actually acquire any bank funding and you know, that you’re actually holding that property in. The second LLC would would actually be the a construction-based LLC that you would be doing all your rehabs through. You know, you would separate those two things. And that third LLC would would be an LLC that you would do your property management and any selling of the property if that’s the thing that you would do. That would create three different zones, if we want to call them that, where you can you can acquire tax savings from the IRS in doing your project. So now when you get on the on the other side of the deal, you know, you’re not left with making a profit and have a huge tax bill to pay at the end of the that that journey as well. Cause sometimes that throws a lot of people off and discourages them. From being in real estate.

Dylan Silver (06:04)
Now, three separate LLCs, this is a strategy that I haven’t heard before, and I think a lot of people listening are gonna be intrigued by this. What do you see as some common mistakes that people make when they are not, you know, partnered with you and are going about this on their own trying to find tax savings where they can?

Kurt Ramalho (06:22)
Well, I I see a you know, it’s really most people that they’re trial and error, you know, they they try something till it doesn’t work anymore, or or they they get hit on the head with a big tax bill. Then it it spurs the the thought of man, I I gotta do something to fix this. You know, so what we try to do, we try to get everybody ahead of the game. You know, we learn from our mistakes. You know, I’ve I’ve been in real estate and doing flips and and holds since twenty fifteen myself. And and I’ve learned a lot along the way. And being in the industry that I’m in, as far as you know, being a a tax an estate planner, you know, we we are always looking to help our clients to make sure that that we can save them money because, you know, it’s never about how much money you make, it’s about how much money you can actually take home at the end of the day. And setting up those three LLCs is a strategy that that that just it’s it’s the one that that it’s the strategy that we always know. We don’t want to mix our funds together. You know, and and see, if you just operate on the one LLC doing your entire project, now you only have one company that you can benefit from tax wise and get any tax savings from. But if you split but we all know that they’re different components in real estate. So if you’re if you’re able to compartmentalize those components and make separate companies out of each of those those compartment those components, you can get a tax saving on each one of those those different places. And and when they all come together, you you save maybe seventy five to eighty percent of of of what your tax liability would have been with the same exact real estate projects.

Dylan Silver (07:54)
like to ask you about other folks in the tax space and tax preparation. You know, not all financial advisors and consultants are created equally, right? There’s a lot of folks who may, you know be skilled in tax preparation, but they’re not necessarily coming into it with the background in real estate. You’re an investor yourself, you mentioned flips and holds. You know, do you see other folks in this space commonly aware that there are these tax saving opportunities for investors, or are even the, you know, tax preparers themselves sometimes in the dark about these strategies?

Kurt Ramalho (08:35)
That’s kinda what gives us the advantage. It’s it’s giving me an a tremendous advantage over the years because I’m an investor myself. So I understand in the s investor side of of trying to get tax savings and keeping as much as you can at the end of the year. And that’s why I always push a tax strategy. See, most people they they like to deal with the tax implications and and to tax bills at the end of the year when when Uncle Sam opens up. But if you have a a proper plan in place before you ever you ever get there, you already know what you’re gonna end up paying because you you you you’ve already wrote ha built a roadmap to do so. You know, so I always t try to tell people, you know, to keep it simple, put more more emphasis on what you do before you even get going. You know, the old adage of measure twice and cut once. You know, so you wanna take more time and get in getting your bucket together that you’re gonna use to to collect all of this cash that we’re gonna go out here to make when we’re when we’re doing real estate. But you you also wanna make sure that that bucket doesn’t have holes.

Dylan Silver (09:40)
Now, pivoting here, we were talking in the green room about tokenized real estate, right? Yes. For folks who are not familiar with this, what is tokenized real estate?

Kurt Ramalho (09:51)
Well s tokenized real estate is basically, you know, them to make to make it really simple, it’s fractional ownership and and real world assets. basically the way that the world is going now, we’re we’re entering in a world where, you know, people are familiar with the with the cryptocurrency space, you know, and digital assets is now a big thing. Before everything you had to physically touch it. But right now the world is moving towards where everything is gonna have a digital copy to what you you see in the real world, which has now opened up a a brand new revenue space for for investors to to raise money for projects and and investors that hold large portfolios, they can leverage those portfolios into into getting a new stream of income versus their rental income or any or any or any appreciation income that they were getting from those properties. just to give make it a little a little clearer, what we basically do is we would take a property, let’s say for instance we we took a property or a project. It could be a new a new construction bill that an investor wants to raise capital for. Instead of going to a conventional bank to get that, which we’re normally used to, now we can kind of put put that project on a market where investors from around the world can actually buy into that project, you know, in fractions. So you can take, say, fifty percent of a project and fractionally sell shares of that of that project out to raise capital to outside investors and it’s not just a pool of investors that are that’s around you. You know, this is now a global situation where you can have investors all the way from Thailand to Dubai that it once they’re interested in your project, they can invest in that project, get it funded and get a return once you get out of the project.

Dylan Silver (12:11)
Now for folks who are thinking about the different ways where they can become real estate investors, tokenized real estate seems like a great almost hands off way to get started. Is that accurate?

Kurt Ramalho (12:22)
It it kinda is. It takes a little technical savvy to to really understand it, but that’s where we come in because, you know, I’ve been an avid crypto guy for, you know, s almost about ten years now. You know, so so I I’ve was one of the pioneers in the space, so to speak, that I knew that that real estate amongst other things were gonna be w were gonna be tokenized eventually along with everything else. So we we kinda wanted to to place ourselves at the forefront to try to be able to help our clients that have portfolios that are normally just used to the to the to the normal streams of income that come with real estate. You know, but this created a brand new vehicle which are, you know, which allows them to to crowdfund in a way which doesn’t other which doesn’t just can consist of their immediate area, you know, because right now there are global investors that are just looking for a piece of America to buy in any way, shape or form that they can. So we can take advantage of that. And by promising great returns because usually w you know, once you do a b ground up construction, you’re gonna have a lot of equity in that property by the time the deal is done.

Dylan Silver (13:27)
Now when you’re interfacing with this space, are you creating the tokens? Are you, you know, an advocate for this? What’s your role or or involvement in this space, the tokens?

Kurt Ramalho (13:37)
Well see, we have we actually have a a platform that that we work with. We we use a incorporate a lot of AI. You know, I’m kind of future this future forward when it comes to business right now. So we’ve incorporated a lot of automations and AI in in into everything that we do within our company. So right now we have a platform that we’re able to, you know, to assess, you know, property the values and and be able to kind of fractionalize it to investors that are interested in purchasing it. Now there’s not so much a tokens that are that are that are issued behind the the the real the asset. The asset is just broken up into a in in into a pie. And and investors are able to purchase a piece of that pie for for designated amounts, you know, and they’re and they’ll hold a fractional piece of ownership in that property or that project. And they can they can sell that piece to whenever they want to, or they can cash that that in, but it allows the the initial investor to be able to raise the capital that he needs or create a new revenue stream that he didn’t have before. So it it’s a it’s a win win for everybody.

Dylan Silver (14:45)
How many investors can, you know, buy into a fractionalized deal?

Kurt Ramalho (15:32)
It can be as it just depends on how you decide to slice up that pie. You know, you can decide you can decide on on how many shares of the property that you want. I always suggest that you that you always retain majority ownership in anything that you’re doing. So, you know, I usually have instruct the clients to to do it no more than fifty percent or forty nine percent of of that property. But it it depended on the value of the property, because we based it on it, we based it on ARV, you know, so once once that once once we know what that ARV on that property is, this this there’s an idea for the investors that want to invest in a share of that that that property to know what they’re gonna get on the end on the inside of the deal. So it’s it’s pretty transparent, you know, and it’s pretty easy. you know the only the only thing and and again once we do the the tax strategy that we were talking about earlier about setting up the multiple LLCs, we’re we’re able to funnel these in a way where it becomes tax free if we’re doing it the right way.

Dylan Silver (16:29)
Now back end question really about how this is set up, you know, if folks are thinking about getting involved and maybe they have a project that they’d like to to fractionalize and and raise capital for, at this point it you mentioned shares, right? Does this become SEC regulated because you have like a a syndication of of some kind or you know, shares being issued?

Kurt Ramalho (16:52)
Now that a great question. Now right now there’s a lot of scrutiny right now, in Congress about, you know, cryptocurrency. Where does it stand? Is is it a security? Is it not? Is is a you know right now we’re we’re kinda still waiting on the Clarity Act to actually define all of the the the real rules and regulations of that. But see r right now, this is no different than because right now you have companies like like auction houses like Sotheby’s and all of these different entities that everything, every real world asset that you can think of right now is being fractionalized, tokenized, and put on a blockchain and being and being sold off to people around the world. Real estate is just no different. It’s a it’s a it’s a space that is brand new, and the people who join who who who who join this space right now are pretty much the pioneers and we’ll we’ll we’ll will pretty much reap the benefits of it before the government really comes in, which they will one day and clamp down with with with the regulations.

Dylan Silver (17:52)
Now, when we talk about the tokenization of real estate specifically, I’ve had many guests come on and talk about how we could get to a point potentially in the future where when people are buying and selling real estate, instead of having to go through this long, you know, title process because it has a unique identifier and it can be verified to the first sale on a blockchain, that it could almost be on some level an instantaneous at least a title process, if not the whole process as a whole, do you share that perspective and outlook on the potential future of real estate?

Kurt Ramalho (18:31)
Yes. The the entire face of real estate is gonna change. one for the better, one for the worse. The but this is why I I tell everyone that’s in in the the bracket where it’s gonna not benefit you, such as title agents, real estate agents and and people people i in in that area, is to leverage the technology. That’s how that’s how you’re able you’re gonna be able to to stay relevant because as technology and AI progresses, it’s gonna make title searches, you know, proof of ownership deeds and records, it’s gonna it’s gonna it’s gonna make all of these things unable you’ll be unable to to counterfeit them, one, which is gonna which is the benefit to the people, but at the same time the people who manage these systems, th they’re eventually gonna be replaced by AI. But what what we’ll end up with we’ll end up with a system that’s more that’s more proof driven than anything else and you won’t be able to kinda like how deed theft right now is a huge problem in the United States. Those days will come to an end one day soon, w once everything hits the blockchain because the blockchain is so transparent. No one will no one can’t you know put put something on there that’s not that can’t be verified, if that makes sense. It’s the simplest way I could put it.

Dylan Silver (19:44)
So when folks are looking at this from a speculative standpoint and not just transactionally, right? But if they’re investors and they’re looking at this the same way that they might look at, let’s say, stock options, right? From a from a speculative standpoint and using leverage, do you see that t coming into this arena as well where folks are looking at this from purely the, you know, upside as far as a digital asset token and share, and not so much from the underlying real estate.

Kurt Ramalho (20:14)
Well, see, the that’s the the great thing about real world assets versus crypto tokens. Because most crypto tokens they’re all speculative right now. Especially right now, you know, it’s just it’s it’s more of a gamble thing. You’re you’re hoping that this horse wins. But when it comes to tokenizing real world assets, that’s a whole different story. Because real world assets are exactly what they are. They they hold their their value right here. We can feel them, we can touch them, we know what those are. So investing in in in tokenized real estate and tokenized assets that are real world is a way safer s you know investment than than say the speculative cryptocurrency market where you’re investing in tokens and hoping that that company or whatever technology that that’s behind them it’s g it’s gonna make those tokens go up. We all know that real estate’s gonna is gonna appreciate no matter what. you know, mo artwork is gonna appreciate no matter what. Mo you know, most real world assets, they’re gonna have a natural appreciation that that comes along with them regardless. So that’s how it it’s it’s more of a guaranteed investment where we can kinda predict where where that investment will go versus having a speculatory market like the cryptocurrency market where, you know, you kinda hold your bag and h and and pray that that that that you’re gonna get a green candle on it. You know. Yeah.

Dylan Silver (21:36)
You know, that’s a great point. And I think there’s a lot of folks who when they hear all of this happening, they’re either gonna jump in and, you know, get ahead of the curve or they may be, you know, concerned, right? And we see all of that. We are coming up on time here though, Kurt. Any new projects that you’re working on? And then also anything you’d like to mention directly to our audience.

Kurt Ramalho (21:56)
Well, I’m just here just to l let you know that we we are out here, we exist, and we’re we’re here to tokenize any real world assets that and then any investors have or any portfolio holders have. We’re here to to help guide investors into getting the tax strategy done in the beginning and not at the end, w where whether it’s too late. You know, and we we like to walk people through it and and and show people how to automate what they’re doing, even even down to to real estate investing. we like I said, we’re a very AI heavy driven company, you know, so we implement the algorithms and all of those different things that are going on right now to make sure that investors can find the proper deals, structure those deals properly, get all the tax advantages and create new streams of income for them with the tokenization that we that we’re able to do for companies right now and clients. You know, so I’m I would love for everybody to come tap into my website, you know, with thepartnerdgroup.com. You know, come check us out. I I give away a lot of free information, you know, and I try to educate people as much as I can. and if you don’t want to go through that learning curve, we’re always here to do it for you.

Dylan Silver (23:08)
Kurt, thank you so much for your time today. Thanks for joining us in the show.

Kurt Ramalho (23:11)
Yes, thank you for having me.