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Show Summary
In this conversation, financial advisor Jeremy Wilmes discusses the integration of real estate into retirement planning, the challenges of self-directed real estate IRAs, and offers guidance for new investors looking to enter the real estate market. He emphasizes the importance of aligning real estate investments with overall financial goals and the potential tax implications involved. The discussion also touches on current trends in Florida’s real estate market and the growing interest in short-term vacation rentals.
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Investor Fuel Show Transcript:
Jeremy Wilmes (00:00)
You really do not want to have a lot of your money in pre-tax accounts. And I’ll just take it way, way, way back to the simple farmer side of things. Do you want to pay tax on the seed, or do you want to pay tax on the crop? And real estate, just by definition, has already tax deferred just like you tax deferredfor retirement accounts, right? You’re not paying taxes on the gains unless you sell it, right? And then even then you could do a 1031 exchange. If you pass away, then there’s that step up in basis. So there’s way more benefits to having it outside of the 401k than inside of the 401k, the self-directed IRA or pre-tax account.
Dylan Silver (02:05)
Hey folks, welcome back to the show. Today’s guest, Jeremy Wilmes out of Jupiter, Florida is a seasoned financial advisor at Endeavour Wealth Management and Protection, helping families, business owners, and nonprofits build, preserve, and transfer wealth through thoughtful retirement income, estate and legacy planning, business retirement plans, and intergenerational strategies. Holding advanced designations, including MBA, CFP, CHFC,RICP, CASL and CLU, he brings discipline, experience and a methodical approach to comprehensive financial planning. Known for translating complex financial concepts into clear actionable strategies, he focuses on balancing growth, risk, income and legacy goals, always guided by what matters most to his clients. You can find him at EndeavourWMP.com. Jeremy, thanks for taking the time today.
Jeremy Wilmes (02:53)
Thanks for having me.Dylan Silver (02:54)
Now, when we talk about meshing these two worlds, right, retirement planning and real estate, I think a lot of times people ⁓ may have the misconception that these are two totally unrelated worlds and that they will kind of collide when they collide. we were talking before the show, you have an approach that really takes into account that, you know, real estate is a tremendous investment. But at some point in time, people are either going to liquidate or they’re going to start realizing that,I may not want to be so active at this point and I would like to be either a very passive investor or I would like to maybe transition into a retirement stage in my life.
Jeremy Wilmes (03:32)
Yeah, well, you know, down here in the main streets of Palm Beach Gardens, as we like to say, you Palm Beach South is what’s coming. You know, most folks are relocating here. And so that’s a conversation that has to be had in your retirement plan and your estate plan. Do not operate in silos, right? They’re not mutually exclusive. They must work together. So like we were talking, you know, is there, you know, tremendous, ⁓ you know, emotional attachment to the family home? Right. A lot of folks that retire down here move here.And so, you know, we talk about that, then did they maintain that home? Were they keeping that for sentimental value? Is it being rented? Is it going to be gifted? If not, if they’ve already liquidated that, they purchased something down here, they’ve already gotten affinity for the real estate market and they’re starting to understand that. So when we’re doing the retirement estate plan down here, what is going to be the ultimate goal of this asset? Right. If it’s a new acquisition, doesn’t have, you know, all those years of memory and all of that sentimental value.
then hey, what is gonna be the ultimate disposition? Is this gonna be something that we wanna leave? Is there something that’s gonna cashflow down the road? So we begin to have those conversations. And I think Dylan too, we talked about earlier, it’s not all, not everything, but usually when people come to us, it’s that basket. They bring the proverbial shoe box full of things that they’ve acquired. And sometimes they include real estate, which as we said is fantastic. ⁓
A lot of advisors feel that most of your money should go into stocks and bonds and advisory accounts and all those things, but to the extent that clients have the ability to and the desire and understanding of it, real estate is one of the greatest creators of wealth. And if done properly and the planning is done right, it’s something that we absolutely love to see in financial plans and work with.
Dylan Silver (05:58)
I’d like to ask you specifically about this idea of people who are retiring in Florida. But then now we’re also seeing, and I think this is only going to increase, people who are active business owners and are able to move their business remotely to all the parts of Florida. And so as I’m just hosting this show and seeing more of that, people from all over the country, from Ohio, from…you know, Texas from Chicago, moving to Florida while they’re still active in real estate. I’m imagining that these are more conversations that yourself and folks like yourself are having where you have active real estate investors who may be managing small, medium or large portfolios throughout the country, not just in Florida, and they’re having an eye on, hey, what does my retirement plan look like? And also too, you know, when is the right time to start having those conversations?
Jeremy Wilmes (06:54)
No, that’s fantastic. You know, I’ll go to the first point that you mentioned. You know, the Business Development Board of Palm Beach County down here has done a fantastic job. ⁓ The initiative started in 2011, the Wall Street South, and the director, you she pulled a query, right, of all of these homes that are owned as second homes. And we found it was 76.mega company CEOs owned second homes down here in Palm Beach Gardens in Palm Beach, Florida. And so we started, you know, putting together opportunities for them to come down and see, look, this isn’t just a place to recreate with the tax situation that we’ve got here with no state income tax, with the pro-business environment, the weather, obviously, but other things that they were putting together to make incentives for business to move here, we’ve started to attract, I think we’re up over 186.
financial services firms have just moved here. Deve Wave, one of the largest quantum computing centers, just noticed they’re moving here now too. that first part you mentioned is yes. And none of that would have happened if there hadn’t been that affinity for second home purchases of real estate, right? It was finding that list of, these folks own vacation rental properties here. Why don’t we just make this their permanent residence and relocate here? So that’s been a fantastic thing for us. The other part that you had mentioned was, you know, looking at real
state as part of their overall strategy for retirement and then that’s right you know the thing is we just gotta make sure it’s done properly ⁓ then we can talk about that more here in a minute.
Dylan Silver (08:21)
You had mentioned something to me before hopping on here, which is interesting because I’ve had so many guests and people talk to me about self-directed real estate IRAs, which hearing it, sounded like a good idea, but you had mentioned it might not be a good idea. Let’s dive into that. What’s the downsides of a self-directed real estate IRA?Jeremy Wilmes (08:40)
Yeah, fantastic question. You know, I bumped into these early on when it was kind of a hot buzz 20, 25 years ago. The issue being is, all right, if you roll over the assets and you make the acquisition, that’s great. But then you got to have a checking account to stack up actual capital.Because you can’t just put money into these things. You’re restricted by the annual contribution limits. A lot of people didn’t know that. So we had clients that, you know, they had a, they rolled over a quarter million dollars, bought a multi-family property and all of sudden they got to do a roof at 60 grand, or they got to do a refit because of termite damage or whatever. Well, they were limited by the contribution limits of their 401k. Unless they had another large rollover, they could bring capital over, which most of the time they didn’t. So the penalties in trying to shore that up and make those
capital, those capex expenditures, it was cost prohibitive. The second thing is, the worst thing that we can do, and really in financial plan we talk about this, that’s why another big buzzword out there has been Roth conversions.
You really do not want to have a lot of your money in pre-tax accounts. And I’ll just take it way, way, way back to the simple farmer side of things. Do you want to pay tax on the seed, or do you want to pay tax on the crop? And real estate, just by definition, has already tax deferred just like you tax deferred
for retirement accounts, right? You’re not paying taxes on the gains unless you sell it, right? And then even then you could do a 1031 exchange. If you pass away, then there’s that step up in basis. So there’s way more benefits to having it outside of the 401k than inside of the 401k, the self-directed IRA or pre-tax account.
I think what happens is a lot of times that…
The opportunity was to, you’ve got a large amount of money in these pre-tax retirement accounts. Here’s how you can procure real estate using those funds. But you’re exasperating the tax problem. You’re making it worse because now you’re to have a highly appreciated asset inside this account that now is going to start spitting off cash flow that would have a favorable income, right, taxation-wise. But now it’s all going to be ordinary income coming out of that IRA.
And then let’s make that worse is when you’re, when you pass away and you pass it on to the next generation, they’re going to have to realize the gains on that whole portfolio within 10 years. So how do you make that work? So that’s one of the things that we’ve really, ⁓ we’ve done a good job of recently, the last, say five years, we’ve got some tax mitigation strategies to get people out of those situations and get those back. And, know, we can get into that. Sorry, go ahead.
Dylan Silver (11:33)
Yeah.No, yeah, the self-directed IRAs are certainly interesting, but I haven’t had, to my knowledge, and I hope I’m not misstating this, I haven’t had a tax professional ⁓ personally advocate for those on the show thus far, and you’re bringing up some great points that I hadn’t thought about. It sounds great to, I have money sitting in an IRA.
What about putting that into real estate? But you mentioned, you know, what happens when additional costs come up, you know, and now you can’t just, you know, easily have access to capital. It’s going, it’s got to come from somewhere and it’s not necessarily as streamlined and straightforward as, you know, it might seem at first glance. And then also too, there’s so many incredible tax incentives right now, specifically that were not available in previous years that folks can take advantage of when they’re doing real estate investing.
that looking side by side, which really makes more sense from a tax perspective, because that’s ultimately why you’d be doing it in the first place, is probably better than just looking at it like, hey, I’ve got this money sitting in this IRA. Why not just put it in a real estate?
Jeremy Wilmes (12:41)
you nailed it. And I think that that might have been some of the, that might’ve been some of the incentive to do it before, right? People are like, wow, I’ve got liquid capital, can go out and pay cash for these assets. But then, you know, what’s going to be the ultimate distribution of those assets and how are you going to get the income out of that, that vehicle? And so again, that’s where, you know, financial planning really plays a fit in a lot of this is just making sure that I tell people.99 % of advisors that you’ll meet out there can grow your money. If you give them money, they’re going to sell you a fantastic piece of property, or they’re going to put you in the right investment, and they’re all going to grow. But did they do it the right way? And that’s where we’re a little more nuanced. We take the end in mind with where we start, because hey, just buying real estate and having it grow is one thing. But at the end of the day, if we’re going to get clobbered in taxes, or we’re going to have to liquidate to send that down to the next generation, that doesn’t make sense.
and just go back to the step up in basis if we owned it outright, it’s tax deferred anyway. We’re not paying tax on the growth. We get favorable treatment of the income from it. But if it’s in an IRA, we’re getting crushed on the income. We’re getting none of the deductions. You’d lose the step up in basis at death. and worse, your family’s going to have to, your beneficiaries are going to have to pay the full ordinary income on the entire value of that, which is way worse than capital gains ever was. So it really is a ticking tax time bomb.
Dylan Silver (14:00)
I’d like to pivot a bit here, Jeremy, and ask you maybe a curveball question, but we, of course, we’re a real estate show, and so we talk with investors who are doing all different types of strategies from fix and flip to wholesale to, know, agents and brokers and folks who are doing, you know, small multifamily duplex, triplex, quadplex up to folks who are syndicators and through their funds and syndications own potentially hundreds of units or fund deals with hundreds of units. And thenYou know, I’m a Texas licensed realtor, so we got lots of land. So RV parks, mobile homes and modular homes are now big. And even, you know, Los Angeles specifically, Los Angeles, California is doing ADU’s, accessory dwelling units. And so there’s so many different ways for folks to be real estate investors. And so for folks who are getting started, it’s almost like, where do I start? Do I start with, you know,
me buying a Airbnb like a short-term rental? Do I do a fix and flip? Do I invest with friends and other people? As someone who is a financial ⁓ advisor and wealth manager, if someone was coming to you with no real estate experience and was saying, look, I’d like to get started investing in real estate, but I don’t know where to start, where would you guide them?
Jeremy Wilmes (15:52)
Fantastic question. All right, so Dylan, I say, all right, I have a bunch of neighbors around us as well, right? They’re young families. And I would say, get on the ladder, right? The problem is everybody thinks that their first home has to be their dream home, right? That’s going to have four bedrooms, this, that, and they’re looking at a million, million, five homes. And then they’re getting upset because they’re never going to qualify for that, you know, in their early 30s coming out the gate. And I was like, look.Right? Your first car most likely was not your dream car. Right? Unless you were lucky. you know, I put that, would take that with a grain of salt. But the point I’m trying to make is get on the property ladder. If you’re renting a two bedroom apartment, go out and buy a two bedroom condo or a two bedroom townhome. Right? More than likely, right? You know,
outside of the down payment, your monthly payment is going to be less or what you’re paying in rent, which is just tossing money away, but you’re on the proper ladder now. You’re building equity, right? And as you get that one and you get that save up, then you get your next year next. So for me, would be first, make sure that you’ve got your own mask on before you put your mask on others, kind of like on the airplane. So if you’re not already on the ladder, get on the real estate ladder, buy your first home, right? And again, if it’s not your dream home, buy a home that you can afford.
get in the market, right, then you can start building sweat equity, fixing it up. That’d be step one. Step two is.
You’ve got your dream home. You’re thinking about it. Now you’ve got some savings, right? Then it just kind of depends. How hands on do you want to be? Right. If you’ve got a couple that has the ability to go in and put some sweat equity into it, right? If they, if they actually enjoy it, they got to enjoy it, right? If you don’t love going in and doing that work, you don’t really want to have that task. Somebody would do that because they’re going to hate you. you’re to hate the job, it’s just not going to work out. But they love getting their hands dirty, you know, doing some paint, doing some drywall, changing things up and have some fun with it. And they have to be
the means then I would say yeah then you look at a fixer or flipper or if there’s something that’s in their their area that hey that’s a nice investment. I also tell people look at where you vacation right if you’re big skiers if you’re having skiers down here in Florida right the summer times here are tough right as a lot of people will go up north right it’s not just the people up north come down here during the winter it’s like we like to go up north in the summer so you know if you’ve got a spot that you like to recreate
and there’s the ability to get into a rental or vacation rental there, that’s a fantastic place to start, right? We thought, you when I was in Maui for 10 years, we had clients all the time that would go to Whistler for the winter and go skiing.
Well, was an opportunity. Could they buy into a condo tell it allowed them to rent it out when they weren’t there? Now it’s cash flow. Those are fantastic first steps on the ladder after you’ve got your primary residence. But again, you we would work with, you know, their real estate professionals, but also what their appetite is and what their financial ability is going to let them do.
Dylan Silver (18:32)
Yeah, I think a lot of people start with something that they’re not particularly enthusiastic about, which can be challenging because I had a guest tell me, you know, if you’re hosting a short term rental in Airbnb, but you don’t enjoy being a host, that can be challenging because you’re going to be most likely self managing or and you’re going to have to be in constant communication with guests, potential guest cleaners. And it’s a constant turnover. And if you don’t enjoy that process,that maybe put a sour taste in your mouth going forward with real estate in general. So you do want to find something that you actually might do regardless. You mentioned snow burning and the reverse of that going up in the summer. And so if you’re already doing that, look at that types of investments. I love that feedback. We are coming up on time here though, Jeremy. Any new projects that you’re working on and then also as well, what’s the best way for folks to get in contact with your team?
Jeremy Wilmes (19:26)
Yeah, new projects, know, with the new legislation, right, and the immediate deduction on short-term vacation rentals, that has really spurred an interest into real estate investment, which is fantastic. We’ve got a company here that’s in my office building the part of the estate planning council down here in Palm Beach Gardens, four to two investment managers, they’re 1031 exchange specialists, they’re nationwide, they’re fantastic in that area.As far as getting a hold of me, I’m on LinkedIn, Jeremy Wilmes, J-E-R-E-M-Y-W-I-L-M-E-S. Our website is www.endeavourwmp.com like Wealth Management Protection. I will tell you though, it’s back here, it is the British spelling. says in Captain Cook’s Endeavour Ship. You can read about that on the bio. But yeah, I appreciate the time today. It was an absolute blast.
Dylan Silver (20:12)
Thanks, Jeremy. Thanks for hopping on.
