Wealth Systems for W-2 Real Estate Pros (Lenders & Team Members)

0:00How can I become more valuable as an employee in an organization? This is a cell phone. This is a computer. Online businesses have their phone number. You use your cell phone or the work phone to call the people online, try to sell them computer parts. That was basically the training. I don't know. But that took two weeks to figure that out. And she said, Yeah, but what happened today? I retired the day after the stock crashed and my entire retirement was tied up in the stock. And I've got to wait until that stock comes back up. So I need that certain nest egg to retire. Welcome to Be Wealthy with Brett Tanner. This is episode 0004. Back in the studio call. Never thought I would say that in our this is our office call this is home grown Tanner capital upstairs I mean this is the pantheon of success as I like to think about it. And so today we're talking about how do you get how do you get from your office to have your own podcast studio as an employee that's not going to cover actually cover how to be wealthy as an employee. And so you've got advantages, right? As an employee, There's advantages as an employer. And so let's talk through those. Right. So the first advantage I'm joined here before we jump in, I'm joined here by Cole Coles in the sound with Cole saying, What's up, Cole? Can you believe we're doing this? Are you can you believe the tens of thousands, if not millions of people that we're going to help today?

1:28We're employees. We want to be wealthy. Calls that get you charged up. What exactly So what's your in so number one, where should you start? As an employee? You should start by driving up your income. Right now, you might say, Brett, I have a job. It pays me $60,000 per year. I'm on salary and there is no opportunity. The first question I would ask you, is there anyone in that company that makes more than you? Is there anybody out there? Cole In that business, this hypothetical scenario, if you're sitting there making 60,000, does someone make more than you? Or if it's a company with 50 people, I bet you someone makes more than you. So that doesn't mean that $60,000 is what the company is. The max they can pay. What it means is that's all they're paying you, right? That's the market value you're bringing to their business. Now, certain jobs have certain market value, but you could also focus on how can I become more valuable? How can I become more valuable as an employee in an organization? There's lots and lots of things you can do. We're going to cover in this episode. If you are self-employed, you could listen to this for your employees or for strategy, but you could also jump ahead to our next episode. We'll cover how to be wealthy as an employer. There are some different tax advantages. There's more tax advantages as an employer, but there's lots of things you could do as an employee.

2:48The first thing you do as an employee. How do we drive your income up? We're going to cover that. But let's let's go to the four variables of your investing and what to think about, right? Number one, four variables that affect your wealth, your returns. First one being time. How much time do you have to invest? Is it ten years, 20 or 30 years, 40 years or longer? The longer you have, the more compounding can occur, the more wealth and money you can create. Number two second variables. How much money did you start with? What do you have right now? Number three is how much money can you put away every single month? This is where, you know, we've got a lock in your burn rate. It's we're stop acting rich. That book matters because the amount of money that you can invest every single month and the return you get in the time determine where you land. Right? I was blessed. I didn't have a lot of money. I had to go build all of my wealth from ground zero in. So I started with very little money. I had a long horizon. And so the returns I could get, what affected the returns was the knowledge I had, the people I knew, and how much money could I can I push down my expenses every single month and get into a number that was comfortable? I had a great life and that everything beyond that number, I would invest it right. So as an employee, how can I figure that out? Secondly, you should figure out how do I increase your skills? How do you go out and increase your skill so you're more valuable to the business? First thing I would do, figure out what your company cares about. Go to your manager. If you can reach the owner or someone in a high level decision making capacity and ask them what they actually care about, what is the biggest thing you're focused on?

4:27What is the biggest challenge in your business? What is the biggest opportunity? Said another way Why don't you pretend you're the owner of the business? And where do you see that opportunity? What items? Where would you take advantage if you were that owner? What would you do? Right? And the reason I ask that is if you can go in, step away and step into this ownership mentality. What most owners, if you can go create a new profit center, create extra money in this, go save money on this other thing. In large part you're well, first of all, you're way more valuable to the organization, right? We're not looking for the employee that shows up, clocks in, clocks out. That's a role player, right? That role is is valuable. There's something there. But if all you're doing is punching and punching out, you're doing the core work, nothing more. You're essentially a commodity, right? I know that sounds terrible. And I'm going to get blown apart online. But if the role is just I come in, I punch and punch out, I give nothing more than what's needed. I'm not available ever after hours. I don't want to gain my skills. I don't want add more value. The organization. The organization is going to value you. So it doesn't mean if you're the front desk person, you can take on a leadership or an ownership mentality from any position in any business. So go out and figure out how do I get more skills and help help the company, help them with the specialty item.

5:49Go figure out something you could do that would help reduce costs or increase their income or create a new line of business. Right? You've got to start thinking radically different if you want to change your income as an employee. I'm gonna give you an example. Let's say you're in the roofing business, and based on this roofing business, you've got a big customer that is a lot of it's a lot of insurance work and you've got another big customer that's that's referring you a ton of business, right? So it's main two main sources of business. Well, let's say you're sitting there, you're at the front desk, you're in your twenties and you've got content skills you love, you know, the online world in terms of social marketing, social media marketing, and you say, Hey, I would love Mr. Owner, I want to go out there and build out our online presence. I want to build out our Facebook or Instagram or LinkedIn. I want to have all of our social media where it's captured. We're telling our story, we're presenting content consistently, it's engaging content, and I want to do all those things. I'm going to capture these leads and I'm going to root them in there. Could I get a portion of the profit that we make from these leads? And I would tell you, overwhelmingly, a smart business owner is going to say, yes, if you came to me one of my businesses and said, I'm going to build out this new division, here's the resources I need, here's how much money it's going to take, here's what I think the returns will be. And if I'm able to do that and large, they're going to be spending my time, which is nights and weekends after hours working on this.

7:16Would you give me 20% of that profit created? My answer call. My answer would be no question. There's no question. I would think about it. You should always go as the business owner. We should be looking at inspiring our staff, showing that our world is so large they would not need to leave our world to accomplish their goals, right? They don't have to leave us. They can accomplish their goals in the organization and together, one plus one doesn't equal to right. And if you change that math, right, that equation one plus one can equal a lot more than two. I've got I've got relationships. I've got people in my world, in our business that are so valuable. It's not just two people together. We're able to produce what, ten or 20 people could create it. And I'm able to we're able to do that all the time because I'm incentivizing my people based on, number one, what they want. I want to help all of my people really live like this, all be wealthy. I want my employee staff, my business partners to be wealthy. Right? How do I do that? I got to create enough business, enough opportunity that they can as an employee in our world, you can have a big enough opportunity to going to accomplish all of your goals and you're actually getting what you want it right. You're getting what you wanted out of your life. So get really clear. Start asking the skills and developing the skills. Maybe it's more education. Maybe you get to go back to school, get additional degree that would allow you to do different projects or different tasks. In this business, they'd be more valuable to company. Maybe you need to go back and get an MBA. By having an MBA in this company, you're able to move to a different division that pays more money, right?

8:46Maybe it's a specialty training, something you're currently outsourcing. Hey, we got to send this off for testing over here, and you might make the hell you get that training. I'll I'll need help buying that machine, but that I could do that testing for us in house. It'll make it faster, will make more money. If you presented that to a smart business owner, I think you're going to see a lot of people pick up on that and want to and want to invest in you. The interesting thing about when you start asking these questions and looking like this and in thinking like this, what do you think you've done in terms of your peers at the office? You've just elevated yourself to a different level. The owner is going to be blown away. Is there someone who's got, you know, between our 29 contractors and our employees going over 100 people in all the organizations? And when I look at it, it's funny that calls one of our newest guys an organization about a year ago. And yet when we do have our state of the company every month, we've got more. We come together, all the business owners that they own equity or they own profits. Interest in our different companies, about seven or eight different businesses. We all come together once a month. They've got a format they present and I do some training, some updates on legal things and things we're working on and there's a form and how we present on how the business is performing on its goals every single month. And I ask you, wasn't very long. Cole originally came in to film it and it was about, I don't know, Colt was four or five months in. I said, Hey, I want you to come to the state of the company tomorrow and your question was, Am I coming to film? I said, Well, yes, but I also want you to be you're coming as an attendee. I want you to come because I need your perspective and you're treating this company as an owner, which is so rare.

10:19This is called one of the new the newest direct report I've ever had. But he comes into the business and he cares for the business like an owner like I do. Well, it doesn't take me very long. Is the owner to I want to reward that behavior, but I also value the perspective. And so he brought him into the state of the company. But it's a way where he's been able to take his role as an employee to actually take ownership. And in taking that ownership, he's able to create an opportunity for himself and he's able to grow his skills, create wealth, and do the things that I'm sharing with you here. So I think a lot of times call when I think about employees. I think they feel like their hands are tied, right? Like, Hey, cool, I've got a job, I've got to do these things from 8 to 5. I punch in one shot, I go home and this is what the company pays. I mean, I'll ask you why do you think that's the person or is that the perspective I right with that? Am I wrong? No, I would say that's not my perspective, only because I see the people that you work with at a higher level, like the Katelyn's of the world, that if I can do more, then I can get there quicker by just putting in more effort. So I would say it's like super complicated. I just I just want more so I do more and I figured at some point, your path. But why do you think other people don't have that perspective? I love your perspective. I love that you're just naturally that way. But why do you think others? Because I don't I don't see that. And when we go to our organizations, we definitely have people that are role players. We have people in our company that you see that they play a critical role.

11:46And this isn't me knocking role players in if you want to be a role player, be one. That's awesome. I will tell you you're probably not going to experience a tremendous amount of wealth as just a role player, right? Because you're you're there's going to be some caps on your income. One of the things I said you can there's there's ways cool that you can find a job I believe today that can pay I feel like the max you can get to 80 to $100000 a year working 40 hours a week if you get a tight skill set and never have to work at night, we can answer anything after hours or anything. I believe when you go on that if you're going to have to work some nights and weekends, maybe get up early, like that's the cost of a massive income. That doesn't mean has to be forever, but there's going to be some time. But what if the extra work isn't a bad thing? Like for some reason online today, putting in extra work has become this bad thing, right? There's little quiet quitting and all this this other, you know, just weird social things we're dealing with today. But what if the work wasn't miserable? Call what have you actually loved what you did. So much? Whether that's an employer, an owner that it doesn't feel like work well in that context. And now you're growing the business, you're taking something you're passionate about and helping helping the business create something in. So I just think it's one of those places I would ask that question and I would go figure out work, Can I create more value? If you can't come in thing, ask your business owner, Hey, where do you think I could go? What would be the opportunities here for me? And ask that owner and what would I need to do?

13:16What are those skills? What do you do? Read who to become a What is that process for me to reach this level? Right. I think any great owner is going to embrace that and be excited. So here's another example, right? So here's an example of employer. My wife's got this friend in the works, a huge accounting firm, huge accounting business, and we go to, you know, my wife, ask me to go to dinner and said, Hey, can I we hang out, help them a little bit or help a little bit from a financial coaching perspective. And it's one of those things where I usually don't offer to do that because it's I've got the training things that I do and it's just I kind of keep the friend, the friend world of advice. I don't have tons of advice unless they're really asking for it. And and these folks kind of were asking, but my wife was kind of pushing that I'm because she cares so much about them. And so she said, hey, he's in the accounting business and so would you sit down and help them. And so they want to grow their wealth, grow their, you know, all the things, right? I want to be more wealthy. What do you do? The first question I ask was say, hey, are you working any overtime? I know you're in this huge accounting business in my guess is around tax season or other times, there's times where you could put additional work and get a little money. And he said, there's no overtime. I said, No, there's no overtime for you or the entire company has no overtime or no, there was plenty of overtime for those that wanted is wasn't getting it. And so when you think about you look at, well, there's an opportunity right there to grow your income. But now we could go, well, what is the position in the company that pays more money?

14:39How can I go get into that position? Right. So I would go there. And so it's funny, I reached out to my random account and friends and word is big company. Hey, do you guys have more? As are more How do I make more money is an accountable. There's tons of ways you can do it. There's different revenue opportunities whether that's you're only doing the tax returns. Can you refer out the bookkeeping portion or there are other ways you make money as an accountant. There's endless ways you could do it. And so when you got to take a step back and realize I think a lot of employees, it's really easy to get just stuck in your own story and to see it more aggressively. It's really easy. Get lazy to just be lazy out there and say, Hey, I'm going to punch in, punch out. This is what it pays and this is what it is. And realize that your life doesn't have to be like that. You can have a massive life whether you're an employee or their business owner and actually the amount of income made doesn't dictate where you land. One of the most eye opening things early in my career is I assumed that the really wealthy people all had really high incomes. Now, don't get me wrong, have your really high income and really low expenses helps. That's there's no question. However, a a good income with really great expense management where you're investing the money early and investing it consistently wins every single time because at some point the compounding nature, the money actually exceeds what you're earning in your day to day job like. For me, my my income is pretty significant, but it's my investment income that that holds my income up so high. Right? Because I can only earn so many dollars per year. There's I mean, I can earn more and more money, but largely that money, I'm taking it, investing it right. So I've got to keep doing those things as I can.

16:09It's easier for me is that money pool of your net worth grows like this, right? That's going to create more annualized income, which may at some point outpace your actual work income for a while. For me, my investment income has been outpacing my work income just due to the nature of the investments that we're involved in in the size of the net worth. So additional questions I'd be asking if I'm an employee, right, If I, if I can I work overtime, can I outsource something? Can I take on additional work? Right. If I can find a way to get additional things or tasks accomplished in the same time, can I bring those and get those done? And can I get paid something more for that? Now let's talk about benefits that you can leverage if you're an employee are some benefits, as you should think about. Number one, if you're in if your employer offers a401k plan that's got some sort of a matching to it, I would no question participate. I would put I'm not a fan of company for one K plans because typically they mandate what you can invest in. You're either in the standard mutual fund stocks allocation or you're invested largely in company stock, which could be amazing or could be bad. I've just seen the bad side of it, so I only want to put the amount up to the minimum they're matching. So again, if they're putting in 4 to 5% match and you put in the money up to that and they're matching a fiber, you're essentially getting 5% free free money or free stock or whatever that is. It can make a lot of sense. Early in my career call, I've only had two jobs ever and I work for a Fortune 500 company called Insight. And I was out there in the day. I started with the company and there was this celebration. This lady been there since day one, had all her money in inside stock, her retirement.

17:49They celebrated her. Susan's riding off in the sunset and she retired. And I went through training and it was about two weeks of training to learn how to sell stuff. And I don't know why the training took so long, because basically the training back then was this is a cell phone, this is a computer online. Businesses have their phone number. You use your cell phone or the work phone to call the people online to try to sell them computer parts. That was the basis of the training and I don't know, but that took two weeks to figure that out. So as I came out of training, the lady, Susan was sitting next to me when I got on the floor and I said, Hey, aren't you Susan? They celebrated, retired, all that. And she said, Yeah, but what happened? The day I retire, the day after the stock crashed and my entire retirement was tied up in the stock. And I've got to wait until that stock comes back up. So I need that certain nest egg to retire. And I'm a young 21 year old this time not really understanding how the world works. But I realized I didn't want to have my entire nest egg tied to something else. So the reason I'm not a fan of huge corp retirement plans is typically a mandate where you can invest it. But I would still participate because later, if you said to go on your own, there are ways you can do it, but participate up to the match because you're getting the free money, right? You're getting the free money. They're providing another benefit you might have. I would go look at your benefits, right? You need health care. We all have it. It's one of our biggest expenses. Most companies are going to have fantastic health care, but you should shop at Sears. Your employer's likely paying half that. They might be paying all of it.

19:14So go look and see what are the options around health care and how do those benefits actually work. Can you get better insurance privately or is it way better? And there's an incredible benefits package with your company. Make sure you're looking at what those benefits are. Great employers. Some big companies may have massive employee employee packages that you want to take advantage of. Next. I would say as an employee, if you can fund a Roth, do it. If you can't get with Horizon Trust, get with somebody and figure out how you can factor in. Get a Roth account, start working. And as soon as it's got enough funds in there, self direct that thing and put your money in your own hands and put it in the things that you know next on taxes. Right? So we talked your largely W-2. There's not a ton of thing you can do on the tax side but go you know set up your Roth set up a traditional IRA if you can. Now, you can look at the tax investment options, right. What are tax deferred or are there any things you can place your money in that aren't taxed the same rates you've got? Municipal bonds are taxed differently. Some annuities are taxed differently in a lot of cases. Right. The best tax play is real estate because of depreciation, depending on your job and your spouse, give a partner their job. There are some requirements in real estate. Everyone gets straight line depreciation. So I'll give you some basic math here. Actually, let me see. I did on my phone. I don't have much for somebody here. Let's assume we go buy a house for 300,000, an investment property for $300,000. The way the government's going to look at it. And we'll and we'll we'll have some links in the show notes. It'll break this down in terms of costs and how we do it. But if you buy an investment property and you don't say anything to your accountant, the way they're going to set it up, they're going to take that 300,000 our purchase, they're going to take 20% of the price, they're going to allocate it to the land.

20:59And you cannot depreciate the land and you're going to take the remaining 80%. So in this example, which is going to be $240,000, and they're going to allocate that to the building and so depreciate in the standard depreciation, you take $240,000, you divide that by 27 and a half years, 240,000 divided by 27 and a half years for residential gives you 80 to 87, $127, $8,727, you will depreciate per year. So that's an expense. Let's just say that rental property makes $20,000 a year net after taxes, insurance each way, management, all that stuff, you're going to subtract another eight $8,727. Now, you're not going to be taxed on that amount. Now, if you qualify to be a professional real estate investor, we can take that same depreciation, that same 27 and a half years, but we're able to shorten it. We're able to take more in the first year and then we'll take less over the remaining 26 and a half years. In that same example that that $300,000 house that had a $240,000 building, you might be able to depreciate as much as $100,000 year, one $80,000 year one, which would if you're in the high tax bracket of 37% plus whatever your state taxes are, it can be a huge, huge savings on most of the buildings I'm buying like that.

22:29I'm going to end up with around probably $100,000 or $120,000 deduction, something like that. In the tax side, I'll be around a 30 40,000 or tax savings per building that I'm buying. Right. So create another incentive to buy real estate. So if you've got a spouse that's maybe going to manage your portfolio or they're going to spend their time on it, there's an amount of time you have to spend to get into to get in. The tax qualification of a professional real estate investor is always, before you make any decision, make sure getting with your CPA tax adviser and checking to make sure that this the things we're talking about, work for your unique situation. We always want you to be checking with them. So we did have a question, a couple of questions on line here. If I was to transfer one from a W-2 to a 1089 T in a real estate, how would I do it? First thing I would do is I would try to figure out what's the side hustle That's that gets me closest to where I want to go. So if I'm working and I'm in the roofing business and that's an 8 to 5 job, or I'm using my skills and pull extra time, but I ultimately want to get into real estate as an investor. I would be spending my nights, weekends and everything in that. I'd be going to the local Real Estate Investment Association as I would be around the work that I wanted to be doing. I would be saving my money. I would be training and spending my money, investing in the education, getting ready to go make that investment. Or and I would start if there's any way I could start that side hustle while I was at my core thing, while I still had the protection of a job, I would do that.

24:01And now you're you're likely not going to get to the point where your side hustle outpaces your current thing. I wish it worked that way. Life doesn't work that way for me. I had to go all in and I left and said, The corporate world wasn't for me and I had to get out there and go get into business for myself and realize that the outcomes I was able to create created the win, and I wanted the massive wins and I was willing to accept the losses. But I want to do right to make my own decisions and create my own outcomes. And I was willing to work really, really hard for that. And I wanted that. I wanted the ball. I wanted when the game's on the line, I want to be the one to shoot it. And that's just the way it was. So I would I do it, I would start W2, I would try to find a side hustle that allowed me to get in the game. And if as soon as I had traction and was going, at some point you're going to have to likely burn the ships, go all in on your on your Newton I need on your business and you will have to make that leap before you do. I would tell you reserves matter as you're making that transition. Save up at least six months, at least six months of your monthly burn rate. So if you need $10,000 a month to live, I would want to have $60,000 saved up before I left my day job so that I had covered. I had six months with earning nothing, knowing that I've already going to make some things. I got a side hustle going. I got six months to figure it out. Is working W-2 a bad thing?

25:23Absolutely not. I think that it depends on what you want and it really depends on who you are. In some in it, just because I think W-2, you can get this this negative connotation, you could still be a leader, you could still run a big business. And he's living incredible life as a W-2. It really depends on what you want. The the game of the highly successful W-2 employee that wants to climb the ladder and achieve is not that different from the entrepreneur. It's just the entrepreneur is reading books and studying and always figure out how to create more efficiency and do it better. You just have to apply those same things as a W-2. And I think that what happens is some folks don't want to apply them, which is okay, but why they might stay in the same spot regardless of what way you decide to go, whether you decide to be an employer, an entrepreneur, we're going to cover all the ways entrepreneurs and business owners have tax advantages. But check out the be wealthy Brett Facebook page or be wealthy podcast dot com. We would love to hear your questions. What's your side hustle? What's your path and what are you how are you maximizing your taxes? If you've got questions, please reach out to us there and we can bring some of those answers back on a future episode. This is the Be Wealthy podcast with Brett Tanner. I will see you back here for how entrepreneurs can be wealthy and leverage your business to create massive wealth. I'll see you in our next episode.