BiggerPockets Real Estate Podcast

BiggerPockets Podcast 244: “Unfair” Taxes and Unfair Advantages with Linda Weygant, CPA

Expertise:
371 Articles Written

There are a lot of reasons to love being a real estate investor. One of the most impressive is the “unfair” tax treatment investors get by the US Government – and we mean that in a good way! On today’s episode of The BiggerPockets Podcast, we sit down with CPA Linda Weygant to learn more about those incredible tax benefits. You’ll also hear how she discovered the power of real estate through her clients, and how that led her to begin her own investing journey. Linda shares how she navigates the messy world of investing in properties that have HOAs, as well as how she uses her “unfair advantages” to succeed where others fail. Finally, as a CPA, we have a special “tax-focused-Fire-Round” where we talk about LLCs, deductions, and much more!

Want more articles like this?

Create an account today to get BiggerPocket's best blog articles delivered to your inbox

Sign up for free

Click here to listen on iTunes.

Listen to the Podcast Here

Watch the Podcast Here

Help Us Out!

Help us reach new listeners on iTunes by leaving us a rating and review! It takes just 30 seconds and instructions can be found here. Thanks! We really appreciate it!

This Show Sponsored By

Freddie Mac LogoCheck out Freddie Mac, the leader of multi-family financing, they make homeownership and rental housing more accessible and affordable.

Get a quote today by visiting: freddiemac.com/smallloan

Fire Round Sponsor

simplisafeCheck out SimpliSafe Security’s DIY home security systems; an affordable, wireless, cellular, and customizable system that doesn’t require a contract!

Try it today with a discount: simplisafepockets.com

In This Episode We Cover:

  • How Linda got into real estate
  • Why the government likes real estate investors
  • What her first deal looked like
  • What to look out for when using credit cards for rehabs
  • Should you be debt free before investing?
  • Debt to income ratio
  • Why she chose a townhouse as a first investment
  • Her HOA story
  • The landlord vs HOA mentality
  • How she got her positions in the HOA boards
  • Rent-By-The-Room apartments
  • How to manage Rent-By-The-Room
  • Investing with family and getting an LLC
  • How one should handle their business
  • Where she’s headed in the next 10 years
  • And SO much more!

Links from the Show

Books Mentioned in this Show

Fire Round Questions

Tweetable Topics:

  • “The costs to maintain a property go up every year.” (Tweet This!)
  • “Always be open for something new.” (Tweet This!)
  • “Always treat your tenants with respect.” (Tweet This!)

Connect with Linda

Real strategies that work for real people seeking to build wealth through real estate investments. Co-hosted by Brandon Turner and David Greene, this podcast provides actionable advice from investo...
Read more
    JD Martin Rental Property Investor from Northeast, TN
    Replied over 2 years ago
    I love this podcast! Listened to it this morning on the way in. From @Scott Trench’s “I don’t think the other guy even knew he hit me” – hilarious – to Linda’s approach to slow & steady (even with 3 offers accepted at once!) – this was a great episode. Some of what she talked about I heard in the same way I approached investing. These kinds of podcasts really resonate with me! And Brandon & Josh are great, but look out for this Scott Trench dude – he’s a pretty good substitute host – great job all of you!
    Linda Weygant Investor and CPA from Arvada, Colorado
    Replied over 2 years ago
    Thanks so much, JD. I’m really glad you enjoyed it!
    Jack Eyer Rental Property Investor from Birmingham, AL
    Replied over 2 years ago
    Linda The next time I get a CPA to come to our group and Talk on Taxes, going to invite you. YOU get it.. Just had my local guy who I respect greatly, but by the time he butchered what I wanted him to talk about, I was a sleep. Tax Attorney sitting next to me said, never get CPA to talk about reducing income by RE Losses again, get a Tax Attorney he said.. You approve some CPA’s can step out of the box- ha.. Thanks, Jack Eyer
    Jack Eyer Rental Property Investor from Birmingham, AL
    Replied over 2 years ago
    Linda- do apartments offer as much the same Write Offs as do houses?
    Linda Weygant Investor and CPA from Arvada, Colorado
    Replied over 2 years ago
    Oh goodness! Some of us have a little more practice speaking about these things than others. Would love to help you out if you ever need it.
    Linda Weygant Investor and CPA from Arvada, Colorado
    Replied over 2 years ago
    Apartments can actually have an even greater benefit, Jack. If it’s a sufficiently large enough building, you can have a Segregation Analysis done for even more (accelerated) depreciation benefits.
    Chela
    Replied over 2 years ago
    Linda, great podcast!! It was fabulous to see you last month and we just held the club at the stinky flip you visited when you were here. Looking forward to connecting again.
    Linda Weygant Investor and CPA from Arvada, Colorado
    Replied over 2 years ago
    That’s great, Chela. Loved hanging out with you in Madison. That house is epic. Here’s hoping that those cats fade into memory (including nasal memory) very soon!
    Don Spafford Investor from Idaho Falls, ID
    Replied over 2 years ago
    Very inspiring for those of us just getting started. I totally agree with Linda with showing respect. Everyone wants to get treated with respect. I always say that integrity is the most important thing to maintain because it reflects who you are and how people will remember you. Very good random 6 questions as well.
    Linda Weygant Investor and CPA from Arvada, Colorado
    Replied over 2 years ago
    I agree, Don. If you don’t have integrity, your business has a very weak foundation. Always better to approach things in a manner so that they don’t trip you up later!
    Christopher Smith Investor from brentwood, california
    Replied over 2 years ago
    I’ve been a pretty successful securities market investor for most of my life, but as a result of the financial crises I took the opportunity to buy heavily into the rental real estate market in the 2010 to 2012 time frame. I can attest to the really compelling tax benefits that I guess I knew always existed but didn’t really fully appreciate. Specifically in my real estate activities I have had huge capital appreciation (well over 100% in less than 5 years), plus significant rental income. I pay nothing currently on the enormous capital appreciation I have had, and roughly half of my annual rental income is offset by depreciation. Last year I probably paid tax on 15% to 20% of my total rental real estate income (i.e., capital appreciation + rental income). Since I have a regular job that already puts me in the higher tax brackets before I even start reporting investment income sources, the rental real estate has turned out to be hugely beneficial in allowing me to keep the lion’s share of what I make. A very nice net worth accelerator.
    Zoe Floyd Flipper/Rehabber from Central Florida
    Replied over 2 years ago
    Christopher – really appreciate seeing the numbers to your personal testimony “15-20%”. Very motivating – Thank you!
    Linda Weygant Investor and CPA from Arvada, Colorado
    Replied over 2 years ago
    That’s great, Christopher! The benefits are real – the best legit “scam” I know of.
    Zoe Floyd Flipper/Rehabber from Central Florida
    Replied over 2 years ago
    Linda – Loved the answer to your famous four+ ?#4…. I agree that it knocks the wind out of the sail to see those strong statements. I’m focusing on something that you exactly mentioned “place in life”. I’m in a place in life where I think it’s a benefit that I don’t need to have HUGE returns right now. I’m in the education phase of my plan right now. When I move to my “start up” phase, I just really need to not have a loss… beyond that “Who cares if it’s not THE BEST DEAL”, at least I’m doing it. Great advice for the big loss property – Having enough reserves for the unexpected. Scott – Unless I missed it somewhere, Amanda’s book about Tax Strategies didn’t make the show notes list. By the way, always love the quality of your questions! Thank you! Not a knock on Brandon & Josh’s questions… you are all great!!! Thanks for this phenomenal resource. Getting a ton out of it! ~Zoeimy
    Linda Weygant Investor and CPA from Arvada, Colorado
    Replied over 2 years ago
    The one statement I really wish I’d made is “You can’t expect to enter the game at #1” or something like that. I always think of my best comebacks days later, usually while driving or in the shower….
    Tracey Geary Rental Property Investor from Ocean, NJ
    Replied over 2 years ago
    Linda, I loved you concept of renting out the rooms instead of the house. In NJ, with our very high RE taxes, it is hard to make the numbers work on single families. This could be a great alternative! I totally identify with it because way back when I first moved out of my parent’s house, I lived in a rental to share. It was a 3/2 condo that was much nicer than what I could afford on my own. Definitely will be doing some research on this. I also liked your comment on #4. I may not be making the absolute best investments, but I am investing and seeing better returns than I was getting in my money market and I can move my way up the food chain. Love the podcasts as always! I made sure it was downloaded before I left for work yesterday so I could listen on my drive in.
    Linda Weygant Investor and CPA from Arvada, Colorado
    Replied over 2 years ago
    Room rentals can be lucrative. In my experience, only a little more work nets higher returns. And I’m so glad you agree with me on getting started. Who cares if you don’t have “THE BEST” deal. You’ve still got a deal and if it gets you better results than the .001 you’re getting from a savings account or the 4%-8% average return from mutual funds, then go for it!!! You’re still ahead!
    Meghan McCallum Specialist from CHICAGO
    Replied over 2 years ago
    LINDA!!!!! You did it! I love when someone I know does something they find “scary” and then KILLS IT!!!!!!! Great Podcast! The REI Club members all say THANK YOU for the shout out! We loved having you take ” The Midwest Tour” though, Grand Rapids missed out! This podcast was great and I hope it opens the eyes of SO MANY INVESTORS not getting the most out of their investments. LOVE LOVE LOVE!!!!!
    Linda Weygant Investor and CPA from Arvada, Colorado
    Replied over 2 years ago
    Thank you Meghan. You’ve been a huge catalyst for me on my journey. Turn about is fair play!
    Kim Stofan Realtor from Sacramento, CA
    Replied over 2 years ago
    Linda, I really enjoyed your podcast and got so much out of it. It’s awesome to see intelligent, well spoken women out there investing and making things happen. It’s very inspiring for me. I appreciated hearing your thoughts and experiences dealing with HOAs. Also loved your comments about conducting yourself in a calm manner and being respectful to everyone. Great, great show!
    Kim Stofan Realtor from Sacramento, CA
    Replied over 2 years ago
    quick question about being a Real Estate Professional, is the 150K cut-off for individuals or combined income if you are married?
    Linda Weygant Investor and CPA from Arvada, Colorado
    Replied over 2 years ago
    Oddly enough (for IRS rules), it’s $150,000 whether you’re married or single. The one exceptions is if your status is Married Filing Separately, in which case the passive loss limit is $75,000.
    George Wines Rental Property Investor from Denver, CO
    Replied about 2 years ago
    Knowing that the 150K AGI IRS rule prevents a non real estate professional from deducting losses…do you have any general advice for those people for how they could find tax shelters similar to real estate investing? This could be general advice or you could point me in the direction of articles, but I recognize that your response isnt official CPA advice
    Joe
    Replied over 2 years ago
    God forbid anyone ask the CPA a tax question.
    George Bittar Investor from Parsippany, New Jersey
    Replied over 2 years ago
    Hello Linda, great podcast thank you for sharing your experiences and wisdom! This podcast was very timely for me and hoping you can provide some guidance or recommendations as someone who is a HOA subject matter expert :). My unit in Chicago is an HOA where rentals are prohibited. I am looking for any creative ways around this covenant in the bylaws. It is currently listed on the MLS right now and was acquired as an REO over the summer for the purposes of flipping to an end buyer. My last buyer fell through and I am just thinking ahead in order to consider other strategies as this deal will get more and more marginal while we wait to close and just want to have a plan b. I own the property in an LLC and in some of my research I came across a strategy of adding a tenant with a very minor stake to the operating agreement of the LLC as a work around was proposed, but this seems to carry high risk and other circumstances that can add further complexity. I can also make a formal request to the HOA, but since this is prohibited I don’t see why they would approve unless hardship was present. Thank you for taking the time to review this I really appreciate it. George
    Linda Weygant Investor and CPA from Arvada, Colorado
    Replied over 2 years ago
    I wish I had some great advice for you on this, but I don’t. Once an HOA goes down the path of prohibiting or seriously discouraging rentals, it is VERY hard to turn that ship around. As I mentioned in the podcast, the “Us Vs Them” mentality that seems to come from owner occupiers is incredibly strong and difficult to combat, even when you come fully armed with facts, articles and statistics. My first advice would be to get a position on the board and see if you can influence from there, but odds are good that the rest of the board would be highly resistant to changing this rule. You would have to slowly recruit other like-minded folks onto the board over time in order to be able to get a majority vote. ANd even if you could get these individuals on the board, depending on where the restriction is (by-laws, covenants or rules), it may take a vote from all homeowners to change the restriction, which may still make it impossible despite having a favorable board. Having your tenant owning a small sliver of the LLC feels dangerous to me because they are now, in effect, “in business” with you and their actions might be able to increase liability on your part. It’s also an obvious ploy to get around the rules and I am always loathe to engage in such shenanigans. A lawyer would be able to advise you better on the downsides of such a ploy.
    George Bittar Investor from Parsippany, New Jersey
    Replied over 2 years ago
    Thanks for responding on this. I definitely want to do things on the up and up, but just want to make sure I don’t leave any stones unturned when it comes to any potential loopholes or creativity. WIth this condo being out of state I don’t think serving on the board is an option and the time it would take to make a case would just continue to add to my deficit while it sits empty waiting for it to sell. I actually received a new offer tonight so need to try to work some magic here and just get this one closed even if it requires taking a loss depending on final #s. This is all part of the education and how to better approach future deals and consider all challenges and work around them if I get into another where an HOA is involved.
    Chris Long Investor from Saint Louis, Missouri
    Replied over 2 years ago
    This was far and away my favorite BiggerPockets Podcast . Linda doesn’t have the self importance of alot of successful investors and seems as knowledgable as anyone I have heard on the podcast. I also invest in primariliy condominium units so it was nice to hear someone else is have luck in that area. I am also an insurance agent specializing in condo associaitons and in my area have actually never seen an HOA that totally restricts rentals. Particularly after the financial crisis many associations had to choose between allowing rentals or allowing a significant number of owners to be foreclosed on losing a significant portion of their operating budget. Thta being said if an association restricts rentals they are likely very serious about the rule and even sneaking by on a technicality can be dangerous since the Board can fine you for almost anything and make your life completely miserable.
    Nathan G. Real Estate Broker from Cody, WY
    Replied about 2 years ago
    My favorite shows are the small-time investors (no offense) that are slowly (not too slow!) and deliberately building wealth. I do wish there had been more questions only a CPA could answer…even if they start with, “It depends…” like most real estate questions. Great job, Linda!
    Michael Cohen Rental Property Investor from Burlington, VT
    Replied about 1 year ago
    Hi Linda, Thank you for sharing your story. Any chance you would be willing to share some of the juicy details around the partnerships? I am in the process of potentially doing a partnership with a friend of mine and am looking for some words of wisdom. I bring some experience & knowledge (would be identifying the deal and presenting to him), he brings the money. Both of us are looking to support this venture but want to come up with a fair deal. How were you able to bring your family into the mix without causing any future conflict? Thanks, Mike