Unlocking Tax Secrets: Sean Graham on Cost Segregation Strategies

Dylan Silver (00:00.824)
Hey folks, welcome back to the show. I’m your host, Dylan Silver. And today on the show, have Sean Graham. And Sean is the founder of Maven Cost Segregation Tax Advisors. Sean, welcome to the show.

Sean Graham, CPA (00:14.755)
What’s up Dylan, happy to be here.

Dylan Silver (00:16.854)
Yeah, man, before we hopped on here, we were chopping it up, talking about how you found us and the interesting business model that we have and looking to expand yourself. But I always like to ask my guests at the top of the show, how did they get into the entrepreneurial space? It’s not always obvious and sometimes it’s a leap of faith.

Sean Graham, CPA (00:37.633)
Yeah, I think I’ve always been an entrepreneur at heart, but I went down the accounting and finance route because I wanted to understand the financials and have that as my foundation to go run and operate my own business when the time came. going all the way back to college, feel like I got my master’s program for accounting, you get two electives and I’m the

only person in the whole program who’s using my elective to take an entrepreneurship class. So I’ve always had it in me. I think real estate was the entrance point for me. To me, it’s one of the easiest ways to become an entrepreneur in a way that’s tangible, it’s real. You can get a rental property. Pretty much anyone can get into real estate, get a rental property, and having somebody pay you rent, and it’s a real cash flowing business.

I love real estate, I’m super passionate about it, and I’d say that was like my first, I tried several different things, right, but that was like my first successful point into entrepreneurship was through real estate.

Dylan Silver (01:50.19)
So it sounds like, although you’re in the service space, accounting and taxes and so on and so forth, that you had your first love as real estate. And so were you doing fix and flips? Were you buying and holding? Were you wholesaling? What was your entry point into real estate?

Sean Graham, CPA (02:09.539)
It was house hacking. was using FHA loans, going, buying a small multifamily building, three units, moving in, living in one unit, improving the other units, raising rents, which makes tenants mad. You turn it over, you get new tenants in there if they don’t want to stay, and refinancing it at a higher value. Getting out of the FHA loan.

and then repeating the whole process again. And that was my entrance point into real estate.

Dylan Silver (02:43.886)
And so at that point in time, you, I’m imagining doing this on the side while also pursuing a career as a tax advisor. And am I correct in saying that?

Sean Graham, CPA (02:56.067)
Kind of, not exactly. So I was always in the W2 space. So first of all, I start off in public accounting and tax and finance, and then I went into a couple different things, worked for a large publicly traded company, and then I ended up working for like a small private equity backed and ran business, which was like a ton of fun. But I started building up real estate on the side while I was doing that. So I was building up my real estate portfolio.

and eventually I went full-time into real estate. I opened up Maven Cost Segregation Tax Advisors because I saw a bridge between my background in tax and accounting with real estate and that was specifically through cost segregation. So that’s how I bridged those two worlds and I love my business, what I do and it’s a lot of fun, but I don’t do tax returns. said, what I do is I help people.

say like minimize their tax burdens. I sincerely help people pay as little tax as possible through the means of real estate, you know, in a compliant way. And that’s through depreciation and cost segregation studies specifically. It’s like the main tool to get that. But yeah, that’s where I’m at.

Dylan Silver (04:12.28)
Selfishly Sean and this is my ignorance showing right? When I hear you know accounting tax advisor cost segregation, and this is really like this is the level that I’m at I’m thinking okay Well accounting is the person who keeps the books keeps track of things you don’t want combingling x y and z Tax advisor that’s the person that files your taxes with cost segregation. I have I’ve never heard this term before so break that down to us

Sean Graham, CPA (04:15.49)
Yeah.

Sean Graham, CPA (04:38.659)
Okay, so yeah, this is great. So, you know, one of the main benefits of real estate are the tax breaks. So, you people get mad, they see all these like wealthy, super wealthy real estate owners and investors, but they don’t own any taxes, right? There’s a reason everyone was mad at Donald Trump for like not, he doesn’t want to show his taxes. Well, he doesn’t, he didn’t want to show his taxes. He’s not paying any tax. Why is he not paying any tax? Because he’s a real estate investor. And so the IRS,

incentivizes, it wasn’t that he’s doing anything wrong, well, I guess that’s a different story, I’m sure there could be, could not be, but my point is on the real estate side specifically, there’s ways to negate all of your taxable income, So you do that through the means of what’s called depreciation. So the IRS incentivizes you to invest in real estate, and they do that by allowing you to depreciate the rental property, or the investment property, over a certain period of time.

So if it’s like commercial, non-residential, you depreciate it over 39 years. What that means is like, okay, if you buy a building for say $500,000 and it’s a rental, you it’s an investment property and the land’s worth 110,000. So now you’re left with $390,000 basis. Well, the IRS says, well, you can straight line depreciate this. You can write off $10,000 every single year over 39 years.

Or if it’s residential, you do it over 27 and a half years. So imagine a $275,000 rental property depreciating over 27 and a half years, you get to write off $10,000 every single year. Does that make sense?

Cost segregation allows you to front load those losses. So rather than waiting 30 or 40 years, which is a long time, we use the time value of money to, like we’re accelerating these losses and getting these losses, a big portion of them in year one. So we can recategorize things from 1250 property, which is real property, which is the stuff that goes in 27 and a half years or 39 years for commercial. And we say, hey, IRS, actually like this group here, like,

Sean Graham, CPA (06:45.229)
these components, this should go into 15 year life. This should go into seven year life. This should go into five year life. And in fact, due to bonus depreciation, we’re gonna write off a huge portion this year, year one. And so that is a very, very powerful tool, right? And so as real estate investors grow their portfolios, but even just starting with one property, they use depreciation to completely offset.

their taxable income. And there’s certain ways to do it because there are certain rules around it, but essentially, the IRS looks at real estate as a passive activity. so depreciation is a passive loss. So passive losses like depreciation offset passive income, like your rental income. But then there’s certain ways as you get deeper into it to even use that income to offset everything from portfolio gains to W-2 income, things like that.

And people do that by either being a real estate professional or using the short-term rental loophole or having their spouse qualify, things like that. But basically the purpose is to make real estate active in the eyes of the IRS, allowing you to offset other active income.

Dylan Silver (07:59.532)
I’ve said this before, and this is a really interesting segue here, because on a very low level, I’ve said, look, if you have an entrepreneurial bone in your body, and you’re doing something else, that’s W-2, and you’re paying however much in taxes, even if you don’t make a profit, you can be running mile IQ when you’re going to your business meetings, be deducting those expenses, and then get that money back on the taxes that you already are essentially overpaying in your job.

Sean Graham, CPA (08:00.866)
Thank

Dylan Silver (08:26.732)
Whereas if you weren’t doing that, might be a little bit trickier to do that because you might not be able to deduct that if you don’t have a business running outside of it. And so on a very low level, that’s something that I’ve seen and I’ve done myself. And expanding to the level that you’re talking about, it’s something that I think is really like behind a wall in a sense. Most people think, well, what do I do? Where do I go? It’s got to be, you know,

effectively, you know, totally foreign to them. So you do need a trusted advisor to go and break this stuff down because it’s not always like straightforward and you tend to go places and feel like you’re not saving that much. I mean, this is just my experience as someone on the outside looking in.

Sean Graham, CPA (09:13.953)
Yeah, so my job, Dylan, is to, as you go buy a rental property, whether it’s just a small single family home, or you go buy, you know, like a big office building or large multifamily or self storage, whatever it is, if you buy something with the real estate and it’s not your primary residence, my job is to help you use that real estate to offset your taxable income. So if you think about it, it’s not only like, okay, you have appreciation.

buildings going up in value or you force appreciation or just natural appreciation over time. Then you have the cash flow, the rental income. You have all the tax benefits of being able to write off things related to your business, right? And use those as tax deductions. But then you have the depreciation standpoint too, which allows you to lower your overall tax burden. So real estate is a beautiful thing, it really is. What I do is I either work with you and your tax CPA.

to give you losses to lower your taxable income. That’s what I do. I make money by doing cost segregation studies. Everything I’m talking about, right, this is all leads for me, it leads into the cost segregation work.

Dylan Silver (10:25.313)
So Sean, walk us through going from, as an entrepreneur yourself in your space, going from working for other people to launching Maven cost segregation to then scaling that to where you are today. What was the process like and at what point did you realize, know, I have a niche here and I’m going to, you know, see where I can take this to.

Sean Graham, CPA (10:48.203)
Yeah, so I think Steve Jobs has a great quote that says something like you can only connect the dots looking back. And it’s so true, right? Like Dylan, I have no clue what will lead to this. Like me getting on this podcast, talking to you, right? Like maybe I’ll do a cost segregation study for you. Maybe we’ll become friends. Maybe like, who knows? I don’t know, you know? Or maybe like, like I introduce you to somebody who ends up changing your life or you introducing me to somebody who ends up changing my life. Like you just really don’t know. So I’m a big believer in

Dylan Silver (11:01.41)
You

Sean Graham, CPA (11:17.291)
in networking, in just spending time to get to know people and connect, because that’s what the world’s about, right? To make money to become more successful financially, people have to give you money from one way or another, right? And so give you money for your services or your business or whatever that is, but you have to get in front of those people and connect and get to know those people. And so…

you know, I, think I always knew I was going down the entrepreneurial route. I’ve always had complete faith that like, it, I’m building something that’s going to work, but not necessarily knowing what that was. So I think there’s two, there’s two things that are like really tough for entrepreneurs in my opinion. One is like, you know, not knowing what it is in the very end.

Right. And then two, not knowing the timing of it. So what I mean by that is like, okay, so I left the W2 world. I’m investing in real estate. Like I was going into self storage full time. Right. Like I, that’s what I was going into commercial and I do, and I have self storage facilities. I’ve syndicated self storage. That’s good. But like ultimately that led me full circle back into like the tax side of things, which I never thought I was going to get back to. Right. Or touch again. thought I was completely out just full time real estate, but this ended up being a

like ended up being like my calling or like a better opportunity, like a better future than just only investing in self storage. But I don’t know that at the time. All I know is that I’m going to make it on my own. I’m to be an entrepreneur like it’s going to work out. I just don’t know how it’s going to work out. And I don’t know when it’s going to work out, right? So these things, I think for me, they come with time. think you have to like, it really helps if you love building and operating and you enjoy.

enjoy like just creating something and I do.

Dylan Silver (13:16.172)
I completely agree, Sean. In my experience, so my real estate journey, I’ve said this before, I’m still trying to get some deeds in my name or an LLC that I own. So I’m in the infancy here. But it was, I’m working, selling cars for Nissan, spending all my time there and feeling like I don’t know how to move into real estate. I don’t know anybody, nobody. Like I was shocked, you would think I would know somebody, but I only had seen other people, because all my life was spent 12 hours a day, six days a week practically.

So I’m networking, networking, but it’s not enough. I’m going to one meetup a month, right? I’m online, I may pay for a course. It didn’t change for me until I went to a Texas RIA meetup. I ended up paying a bunch of money to go to a convention in Addison, funny enough, because that’s not far from where I am now, at the time I was living in San Antonio. And that kind of set off in my mind this idea of getting in the room. Because in that room, I had no d***.

deals did not know anything from anything. Couldn’t tell you about Texas promulgated forms, Trek promulgated forms, about assignable, nothing. I knew nothing. So I’m sitting over there and there’s real estate investors chopping it up with me, talking about closing on commercial deals, talking about storage facilities, talking about holding rental properties, wishing that they hadn’t sold properties 20 years ago, how much they’d be worth today.

Sean Graham, CPA (14:38.381)
Sure.

Dylan Silver (14:39.724)
There, you know, some of them were, I remember this lady, we were outside of the Starbucks from the Maryland area. She traveled to this convention in the greater DFW area. And I was thinking like, wow, somehow I’m in the room with these people. And that really just spurred me on to where I ended up going to, which is 20 assignable contracts later, you know, some nominal fees, very minimal, other substantial, getting my real estate license.

you know, now hosting this podcast. And so having that mindset of, I call it like neuroplasticity, like I’m just gonna, I’m gonna shoot my arrow in a direction and I’m gonna head in that direction, but I’m gonna be able to adapt and go from one lane to the other if I’m able to seize on an opportunity. I think that’s like a hallmark of a real estate entrepreneur.

Sean Graham, CPA (15:30.988)
Yeah, man, I think they call that the bug also. You have the real estate bug. You got it. You caught it in that meetup in Texas and Addison and you saw the opportunity, which is cool. It’s really cool. It’s a real estate is a game. It’s a big game. It’s a game from a tax perspective. It’s a game from a cashflow perspective. mean, business is a game, right? Like that’s essentially what it is. And if you can like fall in love with the game and like you’re going to have fun and you’re going to create opportunity and you’re going to do super well.

but you just don’t know when it’s going to happen. And that’s part of the ride as well.

Dylan Silver (16:02.826)
It’s for sure is Sean talk us a little bit through the self storage facilities. Interesting area of real estate. think you’re hearing more and more about this. It’s a little bit. Maybe it wasn’t as promoted as an avenue for real estate investors 10 years ago but today I’m seeing it all over the place especially online.

Sean Graham, CPA (16:21.517)
Sure, what do you want to know specifically?

Dylan Silver (16:23.704)
You know, I would love to know how you got into this space, what you were doing to underwrite these deals, how you found your first deal.

Sean Graham, CPA (16:30.997)
Yeah, well, self storage is technically a business. It’s not really real estate. And so that changes some things because it has the benefits of real estate. It’s the same concept as real estate, but essentially it’s a business. You’re running…

in operating a business that rents sheds to people and they pay you on a monthly basis for these sheds, right? And you provide certain services, forum protection, know, like security, a gate, a fence, that sort of thing, right? And because it’s a business, the SBA looks at it as a business and they’ll finance it. They won’t finance multifamily. They won’t finance, you know, real estate. They’ll finance self-storage.

So that’s how I got into self storage. I wanted to get into commercial real estate. I didn’t wanna put 30 % down on a multifamily building, right? But this was a good entrance point for me into commercial real estate, but using SBA loans. And so that’s what I did. I’d partner with people, I’d bring in capital, I’d find the deals. You said, how did I find the deals? mean, everything, calling, texting, going on like…

finding every single self-storage phone number, right? Like getting on Google Maps, just contacting, just reaching out, submitting on their website, cold email campaigns, you name it. I think I did everything except for mailing letters. I didn’t mail letters.

Dylan Silver (18:03.022)
The mailers, Sean, I was speaking to a guy in some flyover state on the podcast and his first deal that he got, he wrote a thousand handwritten letters sending it out to one of these lists. It might have been a distressed owners or landlord, I forget which one. And then he later found out that there is a service that hand writes letters for you. But it’s interesting how people can find their lead funnel.

Sean Graham, CPA (18:25.283)
Yeah,

Dylan Silver (18:32.536)
For me, what I’ve recognized is this is literally just a mindset shift, but going from you have to call the leads, looking at it like a numbers game, to then shifting to I’m genuinely curious, like a genuine curiosity, like you were talking about, it’s a game in a sense. And so, you know, I’m imagining like a…

a computer displays in front of me and mind mapping where the leads gonna result to and where that next deal is coming from. And the more that I started to look at it like that and am continuing to look at it like that, the more it becomes apparent to me, hey, here’s a new creative way for me to get a hold of this person. Otherwise, it can honestly seem like overwhelming and way too much to call through, you know, a thousand people.

Sean Graham, CPA (19:23.107)
Yeah, yeah, you have to find the systems and stuff and see what works. It’s funny, the mailer thing, like I hate mail. Like I just let my mail stack up, right? So it’s like there’s no way I’m sending mail or even paying somebody to send the mail. Like I just hate everything to do with mail. But yeah, you gotta build your list. You have to get creative. You can’t do what everybody else is doing. You you go pay for a list. Everybody’s called that list. You have to go build your own list. You have to make it. You have to figure it out. And you have to network and build relationships.

Look, mean, you’re starting now and if you can be successful now, I think that’s huge because real estate is tough right now. Interest rates are, I don’t know, what is it, maybe like a 20 year high or something like that. It’s tough and so if you can find success and build success now, that’s awesome. Because even if the people who, you’re talking about like assigning these contracts and stuff, wholesaling will.

they sell their house, that’s great, but they have to go buy something else and move into that, right? And so that deters a lot of people from selling. like, yeah, it’s a tough market in my opinion, but this is where you have to get creative and separate yourself.

Dylan Silver (20:36.856)
You know, what I’ve found is that great real estate operators, think much like great entrepreneurs in any field, but definitely in real estate, are able to adapt. And so I’ve seen kind of the trajectory of a real estate entrepreneur on the outside looking in, networking, many, many cases, a lot of people have a similar story to me. You go to a conference of some kind, you pay to get in the room, wholesaling, go from wholesaling to fix and flipping, short term, midterm, long term rental.

Then from there, I’ve seen a lot of people right now get away from that and go into note buying, hard money lending, construction loans. I saw a gentleman who does specifically acquisition of distressed second position liens. And so, you you have to be able to adapt.

Sean Graham, CPA (21:19.713)
Yeah.

Sean Graham, CPA (21:23.395)
You can be successful in all of those, or any of those. You just have to choose which one you’re gonna be successful in. If you try to go do all of those, you’re gonna end up doing a lot of nothing, or it’s gonna take you a lot longer, as opposed to you just saying, hey, I’m gonna be the guy who…

buys distressed properties and I’m gonna like master auctions right there, wherever you are in Texas, you know, like this, like I’m gonna completely own this, this is what I’m gonna do. And because you will always find, people making money in some other way. Now I think like there’s a balance to it, right? Because with that neuroplasticity, as you said, if I said that correctly, you have to be able to see, recognize opportunity.

where maybe you pivot what you are doing, but that doesn’t mean doing, trying to do like a little bit of everything or trying to do everything. means like trying, it means essentially building that one bridge. But if that bridge is in the wrong direction, that’s okay. Like you can move the bridge, right? And like point it in a different direction, but you still have to build it. Don’t, I wouldn’t try to do like multiple bridges. That’s my perspective.

Dylan Silver (22:42.348)
I agree with you. I’m 100 % on the same page with you. Some people are able to do multiple things at once, but I think for the most part, you need to have an amazing team process in place. Let them handle that. most people cannot be doing multiple full-time things at once and just expect to burn the candle at both ends and still be functioning. It’s very, very hard. But pivoting…

Sean Graham, CPA (23:10.679)
Well, the guys you see successfully doing that, Well, like, whatever, look at like a Mark Cuban or something, right? And he’s got like multiple businesses going on. He’s running them all successfully. He’s got a massive team. He’s built a solid, solid foundation on one thing. And if you’re talking about like a young hustling entrepreneur who’s doing multiple things, like probably, but he’s probably not like in great shape or probably doesn’t have like great relationships. There’s something else out of balance is my point.

Right, like you can’t have it all, so you just have to pick what those important things are to you. It’s just the shiny object syndrome.

Dylan Silver (23:40.46)
I totally agree.

Dylan Silver (23:49.262)
You pivoting a bit here, Sean, tax strategy, before I became a real estate entrepreneur enthusiast, right, was the furthest thing on my mind. Because I’m at this point, I think like many people, you have a W-2 job, you pay your taxes, you don’t think about getting money back at the end of the year, especially if you’re single and no dependents, And so it didn’t seem particularly interesting to me, I never thought about it, I always felt like, I’m paying a lot in taxes, but what can I do?

These last couple months, I’ve really been thinking a lot, specifically this last week when I got my real estate license, I was like, man, I’m going to be making money, it’s going to be untaxed, how do I save more of that? And now I’m realizing like, all these people who are potentially in that field who think, well, I’m an accountant, I’m a CPA, you know, I’m just doing this job.

The job is super, super, super, super important. And there are people who are quite literally starving intellectually to find a great accountant, a great tax strategist, a great CPA, right? And now I have a whole new respect for the field in general because I’m thinking all these people right now are slammed, right? All these people are super busy right now. If you advice on…

your taxes, good luck finding someone new because they’re probably up to their eyeballs in advice and feedback right now. And I just have a totally new respect for the field.

Sean Graham, CPA (25:18.881)
Yeah, it’s busy season.

Yeah, it’s busy season for sure. Yeah, I think, I you don’t know what you don’t know, I mean, you’re flip, you’re just signing contracts. Those are all taxable fees. You know, like you’re gonna end up paying like a good portion of taxes on that. So I think anybody’s job as an entrepreneur, if you care about it, right, like it’s to minimize your tax burden overall. How do you figure that out? And so for you, you’re not working at a dealership anymore. You’re in real estate full time.

Well then I’d say like how do you become what’s called a real estate professional? How do you gain real estate professional status? Which is a very specific thing in the eyes of the IRS. And it means that you do real estate full time or like more than anything else, at least 750 hours and you materially participate in it. But that means that you have to materially participate in your properties. So you can’t become a real estate professional just assigning contracts. You need to buy real estate.

you know, and manage that real estate yourself and then put the hours into that portfolio. And technically, all right, more hours than you are putting towards like flipping or assigning contracts or anything like that. And then you become a real estate professional or you go get married to a real estate professional, right? And like have, have your spouse become the real estate professional. And then you have the status that says like, Hey, we can use all this depreciation to offset all the

all of our income. And then you’re good. You’re in great shape.

Dylan Silver (26:55.32)
We could probably fill up a whole other podcast here, Sean, with tax strategy and diving down these rabbit holes here, but we are coming up on time here, Sean. Where can folks go to get a hold of you?

Sean Graham, CPA (27:06.947)
Yeah, I created a URL, a discount for your listeners. Go to mavencostseg.com forward slash fuel as in investor fuel. So maven M as in Mary, A-V-E-N-C-O-S-T-E-C-O-S-T-S-E-G.com and then fuel, F-U-E-L. So go there. There’ll be a discount for the listeners. And yeah, if you can add it to the show notes, that’s great. And

well, you submit your property information to us, we’ll get you an estimate right away, there’s no charge for that, and let you know like, hey, this is the cost of doing this, this engineering study, this is the amount of depreciation you’d be able to accelerate and get, and this is what the impact looks at, a specific tax rate, right? So if you are not depreciating your properties or like accelerating the depreciation on your properties, I’d highly recommend looking into it, contact us.

And then we can help you out. You can also email me Sean at mavencostec.com

Dylan Silver (28:13.614)
Sean, thank you so much for your time today. Thank you for coming on the show.

Sean Graham, CPA (28:18.199)
Yeah, thanks for having me Dylan.