Latest / Glovisor Podcast / Ep. 46: How Investors Are Using Opportunity Zones to Build Wealth & Cut Taxes - John Rubino

Transcript

Ep. 46: How Investors Are Using Opportunity Zones to Build Wealth & Cut Taxes - John Rubino · Glovisor Podcast

• 0:00
  Speaker 1: Imagine investing in areas poise for explosive growth and keeping
• 0:04
  Speaker 1: more of your profit. Opportunity zones aren't just a tax break,
• 0:08
  Speaker 1: they're a wealth accelerator. Welcome to the Globeviser podcast, where
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  Speaker 1: we explore business growth, communication, and personal development through real
• 0:18
  Speaker 1: conversations with people that make an impact. Our guest today
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  Speaker 1: is a veteran in real estate investing in founder with
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  Speaker 1: decades of experience in syndication, private equity, and passive real
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  Speaker 1: estate investments. He's raised and deployed tens of millions of
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  Speaker 1: dollars across tens of projects and delivering consistent returns for
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  Speaker 1: hundreds of investors. Low Visor welcomes John Rubino.
• 0:44
  Speaker 2: Hi, Joe, thanks for having me today. I appreciate it.
• 0:46
  Speaker 2: Get to see.
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  Speaker 3: Uh You're welcome.
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  Speaker 4: Looking forward to the conversation game here. All right, John,
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  Speaker 4: So tell us a little bit more what you do?
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  Speaker 5: Sure well, I guess I could start with a little
• 0:57
  Speaker 5: bit of my journey if you're on mine.
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  Speaker 3: Originally New York I was. I started with the Navy.
• 1:04
  Speaker 5: It was a Navy pilot for twenty years and I
• 1:07
  Speaker 5: have a blast doing that. Met some wonderful people, got
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  Speaker 5: a chance to serve my country kind of followed my
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  Speaker 5: dad's Footsteps series in the Marine Corps, and so that
• 1:15
  Speaker 5: was always an exciting part of my life. Top Gun
• 1:19
  Speaker 5: came out and I was like, I'm going to be
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  Speaker 5: a Navy pilot, and that's what I did for twenty years,
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  Speaker 5: which was great. About halfway through my career, I got
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  Speaker 5: into real estate because I had some friends in the
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  Speaker 5: Navy that were really excited about it. They talked about
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  Speaker 5: wanting to invest in real estate, buying property.
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  Speaker 3: So back in.
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  Speaker 5: About two thousand and three two thousand and four, I decided, yeah,
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  Speaker 5: let's check this out, and I did some research. I
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  Speaker 5: worked with them, we bought a few properties, and we
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  Speaker 5: ended up doing some investments together, which was great and
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  Speaker 5: so kind of fast forward to present day. I had
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  Speaker 5: gotten some great experience as an active investor, and then
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  Speaker 5: during my career I also passively invested with some of
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  Speaker 5: my friends. Because I decided to make the Navy career,
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  Speaker 5: some of them decided to get out and start their businesses,
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  Speaker 5: and so I took some of the money that I
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  Speaker 5: made with them and we were able to invest it
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  Speaker 5: into some of their projects, and so I was getting
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  Speaker 5: about a ten percent a year return. I was learning
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  Speaker 5: more so about demographics and analyzing deals and understanding royal state,
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  Speaker 5: and so it was really exciting to see how my
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  Speaker 5: money grew, but also understanding the ins and outs and
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  Speaker 5: the semantics of how to look at deals, on how
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  Speaker 5: to do the due diligence and know what are good locations.
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  Speaker 5: So when I got back to Washington, DC, after a
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  Speaker 5: few tours, including three years overseas in Italy, which was amazing,
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  Speaker 5: I decided I wanted to start a business centered around
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  Speaker 5: real estate investments. And so the first thing I did
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  Speaker 5: was I made sure I had a great financial kind
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  Speaker 5: of counterpart to what I do, and so I brought
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  Speaker 5: on my accountant, who's been my best friend since twenty ten,
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  Speaker 5: and together we stood this business up, which was really
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  Speaker 5: designed with two kind of you know, thesis or ways
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  Speaker 5: of focusing the business. One was, hey, let's bring on
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  Speaker 5: investors that could partner with us bring in capital, and
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  Speaker 5: together partnering with our firm, invest with folks that are building, designing, developing,
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  Speaker 5: operating projects that you see behind me here. And so
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  Speaker 5: we were able to raise capital that started first with
• 3:15
  Speaker 5: friends and family. We were raising you know, anywhere from
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  Speaker 5: two hundred and fifty thousand, let's say a five hundred
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  Speaker 5: thousand dollars, and then we got into the larger checks.
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  Speaker 5: You know, we're getting into the million, the two million,
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  Speaker 5: the three million, and we started bringing on public accredited investors.
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  Speaker 5: So we said, hey, we've got to you know, bring
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  Speaker 5: an attorney on board and make sure we do this right.
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  Speaker 5: So we started to do sec Regulation D five with
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  Speaker 5: six filings through a securities attorney, so that every project
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  Speaker 5: that we brought forward for investment was set up under
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  Speaker 5: O business and that each investor investing in each of
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  Speaker 5: those specific projects knew where their money was going, the
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  Speaker 5: type of project, who was running and managing it, you know,
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  Speaker 5: where the location was, and then all the details of
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  Speaker 5: that investment. So we set up our investments as single
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  Speaker 5: purpose vehicles, meaning that every project has a separate fund
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  Speaker 5: or separate investment offering. And so we'll go out and
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  Speaker 5: raise let's say three million dollars to build one hundred
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  Speaker 5: and ninety unit apartment complex, say in Richmond, Virginia. We'll
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  Speaker 5: go out and raise the three million dollars in our
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  Speaker 5: community of investors, we call them our family of investors,
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  Speaker 5: and together with my money and my business partner's money David.
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  Speaker 5: We then bring that capital int to the deal and
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  Speaker 5: we typically come in as a limited partner on a
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  Speaker 5: smaller deal maybe like twenty thirty million dollar deal. Well
• 4:34
  Speaker 5: on a bigger spoke deal, maybe we'll come in as
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  Speaker 5: a co general partner and help the general partner with
• 4:39
  Speaker 5: their equity requirements. So I've analyzed deals now, I've learned
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  Speaker 5: quite a bit of not only where my money fits,
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  Speaker 5: but where the bank comes in, or the debt if
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  Speaker 5: there's a private equity group, a family office, and just
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  Speaker 5: being able to walk a project from start to finish.
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  Speaker 5: And so I've done that for thirteen and a half
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  Speaker 5: years to the firm and the business get you know,
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  Speaker 5: we've raised over forty five million dollars across you know,
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  Speaker 5: thirty five projects, thirty three thirty five projects, and we
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  Speaker 5: continue to grow. And you know, it's been a bit
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  Speaker 5: of a challenge the last couple of years with COVID,
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  Speaker 5: but we're still doing well.
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  Speaker 3: And I'll knock go on one here.
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  Speaker 2: We haven't lost any money, and we've kind of you know,
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  Speaker 2: instead of maybe hitting a home run or a triple,
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  Speaker 2: we've hit singles and doubles, which in this environment has
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  Speaker 2: still been very good.
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  Speaker 5: And we're looking to continue to scale and grow the company.
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  Speaker 5: I've also been doing some coaching and doing some education
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  Speaker 5: on helping investors learn more about growing their well.
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  Speaker 3: Through investing in passive real estate.
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  Speaker 5: So it's it's been a great journey, Joe, and it
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  Speaker 5: continues to evolve. And I just you know, trust the
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  Speaker 5: Lord up above to just you know, show me which
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  Speaker 5: direction he wants me to go to next.
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  Speaker 4: Now, taking projects from the hundreds of thousands of dollars
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  Speaker 4: into the millions, there's a.
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  Speaker 3: Big learning curve there. What would you say was the
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  Speaker 3: biggest obstacle you had to overcome?
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  Speaker 5: Yeah, I would say the smaller projects started out as
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  Speaker 5: you know, general JV joint ventures with borrowers, and you
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  Speaker 5: know they'd bring in twenty of the money, we'd bring
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  Speaker 5: an eighty percent of the money.
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  Speaker 3: Pretty straightforward.
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  Speaker 5: You know, you get a d to trust, you have
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  Speaker 5: a note, you have personal guarantee documents, so it's pretty
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  Speaker 5: clear clip, pretty easy. Budgets are pretty straightforward on renovation projects,
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  Speaker 5: maybe a single family or up to maybe four units.
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  Speaker 5: But when you get into you know, a multi family
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  Speaker 5: commercial real estate deal, you know, the performance and the
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  Speaker 5: financials are quite excessive, quite detailed, and you're looking at
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  Speaker 5: everything from how's the money coming in, how is it situated,
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  Speaker 5: how is it broken down?
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  Speaker 3: How is the bank?
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  Speaker 5: You know, what's the terms the bank's offering, what's the
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  Speaker 5: terms at the equity that's kind of ahead of you.
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  Speaker 5: If it's a larger scale company, that's right in a
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  Speaker 5: bigger check than we do, like a ten or fifteen
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  Speaker 5: or twenty million dollar check, what's kind of their parameters?
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  Speaker 5: The breakdown and costs is just pages and pages, you know,
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  Speaker 5: because you go through soft costs, architecturals, engineering, attorney costs, right,
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  Speaker 5: and then when you get the project developed, if you're
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  Speaker 5: doing a development deal and you're then constructing it, or
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  Speaker 5: we call the vertical, you've got all of your vertical
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  Speaker 5: costs or your construction costs, your contingencies, your insurance, your taxes,
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  Speaker 5: anything and anything that has to do with the total
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  Speaker 5: overall cost of that project. So you're talking pages of
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  Speaker 5: information and then you have to figure out, Okay, what
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  Speaker 5: are we doing with the project when it's done? Are
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  Speaker 5: we selling it individual condo units? Are we're doing apartments
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  Speaker 5: where we're stabilizing them and getting them occupied at you know,
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  Speaker 5: ninety five percent occupancy how are we doing as far
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  Speaker 5: as targeting market rents. So there's a lot of moving parts,
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  Speaker 5: and so to be able to look at a deal
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  Speaker 5: from day one, when you're analyzing it as a good
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  Speaker 5: investment all the way to you know, year three or
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  Speaker 5: year four when you exit and knowing, Okay, so this
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  Speaker 5: is the path we're supposed to go down. But if
• 7:46
  Speaker 5: we go like this or like this, but we're still
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  Speaker 5: moving towards that common goal. We've got multiple exit strategies
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  Speaker 5: so that most importantly my investors in their capital is protected.
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  Speaker 4: Can you tell us a little bit more about opportunity zones?
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  Speaker 3: Sure?
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  Speaker 4: And what are the advantages for you as an investor
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  Speaker 4: and for the investors that.
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  Speaker 3: You're working with.
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  Speaker 2: The first iteration of the opportunities on a program came
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  Speaker 2: out during the first Trump administration. Was bipartisan approval and
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  Speaker 2: legislation that went through and basically went into law.
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  Speaker 3: It was part of the Tax Cutting Jobs.
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  Speaker 5: Act in twenty eighteen, and so basically with that allowed
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  Speaker 5: as it allowed governors and the mayor of d C
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  Speaker 5: to basically choose areas that were primed for regentrification, areas
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  Speaker 5: that were kind of urban but were growing and saw
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  Speaker 5: a real promise, and so those governors and the mayor
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  Speaker 5: of d C picked those kind of parcels and together
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  Speaker 5: with the Housing and Urban Development Agency basically charted those
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  Speaker 5: different parcels of land across the country and allowed for developers,
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  Speaker 5: either private or public to request, you know, the potential
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  Speaker 5: to utilize that property through a purchase Request for Proposals
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  Speaker 5: RFPs to come in and put together different types of
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  Speaker 5: housing opportunities for those communities. So you were coming into
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  Speaker 5: a rejontrified area, you were looking at building housing, which
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  Speaker 5: is much needed, especially you know you're fast forward today,
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  Speaker 5: affordable housing is such a need, but you go back
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  Speaker 5: to twenty eighteen and it was still a huge need.
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  Speaker 5: So it provided the community with great opportunities for investment,
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  Speaker 5: and it also provided investors with a great opportunity to
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  Speaker 5: come in and to invest to take advantage of the program.
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  Speaker 5: So when the program first started, it kind of had
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  Speaker 5: several milestones and several benefits for an investor. The first
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  Speaker 5: was that if an investor had a liquidated gain for profit,
• 9:45
  Speaker 5: whether it was a business they liquidated or a stock
• 9:48
  Speaker 5: that they liquidated, or some sort of real estate that
• 9:51
  Speaker 5: they liquidated, they could take a portion or the entire
• 9:55
  Speaker 5: portion of their capital gain from that liquidated event, and
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  Speaker 5: they could put it into an opportunities on investment And
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  Speaker 5: basically they had five years from twenty eighteen to not
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  Speaker 5: have to pay the tax the long term capital gain
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  Speaker 5: in that year of liquidation. So the first iteration of
• 10:13
  Speaker 5: this sunsets on December thirty first, twenty twenty six. So
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  Speaker 5: if you came in in twenty eighteen nineteen twenty twenty one,
• 10:21
  Speaker 5: you could continue to hold off on paying that capital
• 10:24
  Speaker 5: gain until text year twenty six. Okay, so that was
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  Speaker 5: the first benefit you had an extension on the capital
• 10:30
  Speaker 5: gain payout. You also had some basis reductions or changes
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  Speaker 5: in the basis on your gain, where if you stayed
• 10:38
  Speaker 5: into an opportunity zone after the first five years, you
• 10:40
  Speaker 5: got a reduction of ten percent of your basis. So
• 10:44
  Speaker 5: if you brought in one hundred thousand dollars and that
• 10:46
  Speaker 5: five year window, you would have to pay a tax
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  Speaker 5: on that only up to ninety percent of that of
• 10:52
  Speaker 5: that gain. So instead of paying the capital gain on
• 10:54
  Speaker 5: one hundred thousand, now you're only paying the gain on
• 10:57
  Speaker 5: ninety thousand, which was fantastic. And then if in twenty
• 11:01
  Speaker 5: eighteen and nineteen and twenty. If you invested in those
• 11:03
  Speaker 5: three years, you also got a five percent reduction and
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  Speaker 5: basis if you stayed in for a total of seven years,
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  Speaker 5: So you got the reduction and basis the first five
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  Speaker 5: years for ten percent, and then another reduction of basis
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  Speaker 5: of five percent if you stayed in for seven years.
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  Speaker 5: So now you have to pay a tax on eighty
• 11:20
  Speaker 5: five thousand instead of ninety one hundred thousand, which was great.
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  Speaker 3: And then the second benefit was you got bonus.
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  Speaker 5: You get bonus depreciation, and bonus appreciation obviously is you
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  Speaker 5: get all the depreciation write offs for each year that
• 11:34
  Speaker 5: you're able to claim depreciation, and you don't have to
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  Speaker 5: worry about recapture on the back end when you liquidate
• 11:42
  Speaker 5: and you kind of.
• 11:43
  Speaker 3: Come out of that investment. So that was the second benefit,
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  Speaker 3: actually it was the third.
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  Speaker 5: The first was the gain getting extended out, the second
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  Speaker 5: was the reduction and basis on the tax payment, and
• 11:52
  Speaker 5: the third was the depreciation of bonus depreciation. The fourth
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  Speaker 5: benefit was if you stayed in the program which has
• 11:59
  Speaker 5: at MINT on timeline of ten years, you have to
• 12:02
  Speaker 5: stand the investment for ten years. After ten years or more,
• 12:07
  Speaker 5: the gain that you've earned on that profit. When you
• 12:10
  Speaker 5: liquidate that that appreciated gain would not have a federal tax.
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  Speaker 3: You wouldn't have to pay any federal taxes on that game.
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  Speaker 5: And then if you live in forty five out of
• 12:21
  Speaker 5: fifty states, and the fifty in the five states you
• 12:24
  Speaker 5: wouldn't you would have to pay state taxes on in
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  Speaker 5: New York, California, North Carolina, Massachusetts, and and Ara Arkansas.
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  Speaker 5: I can get those to be sure, but those five states.
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  Speaker 5: If you live in any other state other than those
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  Speaker 5: five states, you would also get tax free at the
• 12:42
  Speaker 5: state level. So let's say you're in the project. It's
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  Speaker 5: a one hundred thousand dollars investment. Let's say it's going to
• 12:48
  Speaker 5: be a two x You're going to make one hundred
• 12:49
  Speaker 5: percent return. Let's say you're going to get some cash
• 12:52
  Speaker 5: flow of that one hundred percent return throughout the project,
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  Speaker 5: maybe like in year three or year four. So you
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  Speaker 5: got the depreciation that you're taking off the cash flow,
• 13:02
  Speaker 5: and you're getting the bonus appreciation right off.
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  Speaker 3: So in essence, that cash flow is tax free. Right.
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  Speaker 5: And then when you liquidate, let's say the other eighty
• 13:11
  Speaker 5: five percent of your remaining profit or eighty five thousand
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  Speaker 5: dollars comes out as a long term capital gain at
• 13:18
  Speaker 5: that ten years or beyond point that eighty five thousand
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  Speaker 5: dollars are appreciated gain is tax free at the federal level,
• 13:24
  Speaker 5: and again forty five to fifty states.
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  Speaker 3: So that's the fourth real benefit of this program.
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  Speaker 5: So as you can imagine, in twenty eighteen, everybody jumped
• 13:33
  Speaker 5: into this. Everybody wanted to be a part of it.
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  Speaker 5: The challenges they had was the regulatory process. So a
• 13:39
  Speaker 5: lot of the things that were challenged was the accounting,
• 13:41
  Speaker 5: the ability to capture a lot of these financials because
• 13:45
  Speaker 5: here's a new program, and then obviously everybody wants in,
• 13:48
  Speaker 5: so they had some challenges with it.
• 13:50
  Speaker 3: So in the.
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  Speaker 5: Tax the big beautiful bill that's going to take place
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  Speaker 5: on Gyrour first, twenty twenty seven, it's going to can
• 14:00
  Speaker 5: continue the Opportunity Zone program and bring it into a
• 14:04
  Speaker 5: new timeline, a new track. Okay, So in December thirty
• 14:08
  Speaker 5: first of twenty twenty six, the old program under the
• 14:11
  Speaker 5: twenty eighteen tax cuts and job backs will expire, and
• 14:15
  Speaker 5: then if you start to invest into Opportunity Zone on
• 14:18
  Speaker 5: January first of twenty seven or beyond, because now that
• 14:22
  Speaker 5: program will be permanent. You will take advantage of the
• 14:26
  Speaker 5: opportunity zone program going on, so we'll call it Opportunity
• 14:30
  Speaker 5: Zone two point er, and in two point zero you
• 14:33
  Speaker 5: get first five years. Well, you don't have to pay
• 14:36
  Speaker 5: the gain, So if you come in in twenty seven,
• 14:38
  Speaker 5: you don't have to pay the gain until thirty two.
• 14:40
  Speaker 5: If you come in in twenty eight, you don't have
• 14:41
  Speaker 5: to pay the gain until thirty three, and so you
• 14:44
  Speaker 5: get that five year buffer for the tax.
• 14:46
  Speaker 3: You get a ten percent reduction if.
• 14:49
  Speaker 5: You're in a urban suburban area on your tax, so
• 14:54
  Speaker 5: it comes down to ninety percent of the tax when
• 14:56
  Speaker 5: you pay it in year five. In the new program,
• 14:59
  Speaker 5: if it's a rural opportunity zone, it's a thirty percent
• 15:04
  Speaker 5: reduction and basis so now you're only paying taxes on
• 15:07
  Speaker 5: seventy percent of that game. Okay, we get the bonus
• 15:10
  Speaker 5: appreciation and then you get that tax benefit on the
• 15:13
  Speaker 5: game when it liquidates after the ten years ten years
• 15:16
  Speaker 5: are beyond. So if I come in twenty seven, I
• 15:19
  Speaker 5: get all those benefits and then I have to I
• 15:21
  Speaker 5: can come out as early as twenty thirty seven and
• 15:25
  Speaker 5: not have to pay at federal level tax or state
• 15:28
  Speaker 5: level on the forty five of the fifty states. So
• 15:30
  Speaker 5: that was a lot. I know, I threw a lot
• 15:32
  Speaker 5: in there. So definitely I'd love to hear some of
• 15:34
  Speaker 5: your thoughts and some questions because I'm sure folks are going.
• 15:36
  Speaker 3: To be like, what the heck did this guy just?
• 15:39
  Speaker 3: All right?
• 15:40
  Speaker 4: So let's start off. Does this apply only to new
• 15:44
  Speaker 4: builds or rehab projects?
• 15:46
  Speaker 5: You know, it has to meet the criteria of the
• 15:48
  Speaker 5: Opportunities on program, which there is legislative guidance, there's guidance
• 15:53
  Speaker 5: from a HUD, there's you know, all kinds of guidance
• 15:56
  Speaker 5: that you can look at, because you do have to
• 15:58
  Speaker 5: maintain a shirtain characteristic of these properties a certain level.
• 16:04
  Speaker 5: That has to either be a business or it has
• 16:06
  Speaker 5: to be managed by a business. So there are parameters
• 16:09
  Speaker 5: there that are inside the law that different investments that
• 16:13
  Speaker 5: are coming in to invest in an Opportunity zone track
• 16:17
  Speaker 5: have to meet in order for it to qualify to
• 16:20
  Speaker 5: be what's called a qualified Opportunity Zone business or a quasby. Okay,
• 16:26
  Speaker 5: and then the investment itself either gets invested directly into
• 16:31
  Speaker 5: the quasby or it could come into what's called a
• 16:34
  Speaker 5: qualified Opportunity Zone fund or cooff and so a business
• 16:39
  Speaker 5: like me, I raise money, right, and so we have
• 16:43
  Speaker 5: two opportunities zone investments that are inside of opportunitiesoned businesses.
• 16:49
  Speaker 5: They're operated, managed, and controlled by our sponsor partner. And
• 16:53
  Speaker 5: then we bring in the capital through a qualified Opportunity
• 16:57
  Speaker 5: Zone fund to invest in to those projects through the
• 17:01
  Speaker 5: qualified opportunities owned business that's owned by the sponsor. Okay,
• 17:06
  Speaker 5: so the sponsor meets the parameters of the requirement of
• 17:09
  Speaker 5: that business to qualified opportunities owned business, and then the
• 17:13
  Speaker 5: sponsor can go out and raise money directly into the business,
• 17:17
  Speaker 5: or they can go out to a broken dealer, a
• 17:19
  Speaker 5: syndication company, or a capital raiser to bring money through
• 17:23
  Speaker 5: a qualified Opportunity Zone fund. That's the business side for
• 17:27
  Speaker 5: an investor. You know, you basically are looking for these
• 17:31
  Speaker 5: types of deals most of them, I'm in say, all
• 17:34
  Speaker 5: of them, but a good chunk of them, or development
• 17:36
  Speaker 5: deals because again you're looking at a ten year minimum, right,
• 17:40
  Speaker 5: So it's ideal to find these tracks as land that's developed,
• 17:44
  Speaker 5: land that you can bring in and basically get zoned
• 17:48
  Speaker 5: and entitled to build, and then you have the opportunity
• 17:51
  Speaker 5: to do construction so that usually takes about three to
• 17:55
  Speaker 5: five years, right, So you're still going to get returns
• 17:57
  Speaker 5: that are either recruing or they're going to be deferred.
• 18:01
  Speaker 5: But once the property starts paying out cash flow, you're
• 18:05
  Speaker 5: going to start getting distributions on a development deal probably
• 18:08
  Speaker 5: around year three or four, year five, and then the
• 18:12
  Speaker 5: cash flow is going to take you out to your
• 18:13
  Speaker 5: ten and then with the liquidation of that opportunities on
• 18:17
  Speaker 5: business or when you're maybe taken out with a refinance,
• 18:20
  Speaker 5: you're going to get caught up on all those years
• 18:23
  Speaker 5: that you didn't get at distribution, plus you're going to
• 18:25
  Speaker 5: get your appreciated profit on your exit.
• 18:27
  Speaker 4: It seems that it's a lot easier to work with
• 18:29
  Speaker 4: someone like yourself who's out there hunting for these deals
• 18:33
  Speaker 4: and not have to develop the property to have to
• 18:36
  Speaker 4: go through every single aspect. Is that when you see
• 18:39
  Speaker 4: more people doing that kind of investment versus hunting for
• 18:43
  Speaker 4: their own properties.
• 18:44
  Speaker 2: Yeah, My response will always be it depends a good
• 18:47
  Speaker 2: friend of mine, Tommy that if you have a bigger business,
• 18:52
  Speaker 2: Let's say you have a registered investment advisor you work
• 18:55
  Speaker 2: with where you work with appropriate deal that looks for
• 18:58
  Speaker 2: these types of deals for you as an investor.
• 19:02
  Speaker 5: They could help with the management, they could help with
• 19:04
  Speaker 5: the identification of the right characteristics of the property you're
• 19:08
  Speaker 5: looking for. But if you're working with a larger company,
• 19:11
  Speaker 5: they should also have a director investor relations or an
• 19:13
  Speaker 5: investment relations team that basically controls the money coming into
• 19:17
  Speaker 5: those investments. Right, So they would be the ones that
• 19:19
  Speaker 5: would be similar to me, but they would work directly
• 19:22
  Speaker 5: with a sponsor. So they would be working with individual
• 19:25
  Speaker 5: investors or larger scale investors and basically be working with
• 19:29
  Speaker 5: them to invest directly into the qualified opportunities on business
• 19:32
  Speaker 5: through that sponsor. If it's a smaller project, a developer
• 19:37
  Speaker 5: maybe that's really focused more on building the property and
• 19:41
  Speaker 5: meeting the criteria. They may come to a business like us,
• 19:44
  Speaker 5: or they may go out to a registered investment advisor
• 19:46
  Speaker 5: and say, hey, look, you set up a qualified Opportunity
• 19:49
  Speaker 5: zone fund. Bring the fund to the deal, and then
• 19:53
  Speaker 5: those investors can pool their capital together with yours and
• 19:56
  Speaker 5: invest in or qualified opportunities own business through a qualified
• 20:00
  Speaker 5: Opportunities on fund. So it just depends on the size
• 20:03
  Speaker 5: of the company, their staff, who's part of the investment
• 20:07
  Speaker 5: relations team. If it's a bigger company, then yeah, I
• 20:11
  Speaker 5: would feel comfortable as an investor going directly to that sponsor.
• 20:15
  Speaker 5: If it's not it's a smaller company, or if it's
• 20:17
  Speaker 5: a company like me that's actually out hunting for these deals,
• 20:21
  Speaker 5: I'll bring those types of deals to my investor base
• 20:24
  Speaker 5: so they have the opportunity to invest alongside with us
• 20:26
  Speaker 5: inside of our qualified opportunities on fund.
• 20:29
  Speaker 4: So is there an investment strategy where opportunity zone investing
• 20:34
  Speaker 4: doesn't make sense?
• 20:36
  Speaker 3: Yeah?
• 20:36
  Speaker 5: I mean the first thing is if you don't have
• 20:39
  Speaker 5: a liquidated gain, then you know, you can't really invest
• 20:42
  Speaker 5: inside inside of a qualified opportunities on fund. So if
• 20:45
  Speaker 5: you have a business or you have stocks and they're
• 20:48
  Speaker 5: crushing it and you don't want to liquidate, then don't
• 20:51
  Speaker 5: you know, continue to do that.
• 20:52
  Speaker 3: But if you're coming up on.
• 20:54
  Speaker 5: A situation where you're going to have a sizeable gain,
• 20:57
  Speaker 5: excuse me, let's say you're selling a business. Listen, you're
• 21:00
  Speaker 5: going to make fifteen twenty thirty million dollars, it makes
• 21:04
  Speaker 5: a lot of sense to park a good chunk of
• 21:06
  Speaker 5: that into an opportunity zone investment because you'll be able
• 21:09
  Speaker 5: to invest in that, you'll be able to await that
• 21:13
  Speaker 5: five year period to pay the tax, and you're going
• 21:17
  Speaker 5: to get that reduction of basis, So ten percent on
• 21:19
  Speaker 5: a fifteen million dollar gain, it's one and a half
• 21:22
  Speaker 5: million dollars a tax you don't have to pay on
• 21:24
  Speaker 5: that fifteen million of gain. Right, But it's really a
• 21:27
  Speaker 5: capital gain investment. It's a capital gain liquidation to invest,
• 21:30
  Speaker 5: whether it's a short term gain or a long term gain.
• 21:33
  Speaker 5: So if you don't have those types of funds or
• 21:35
  Speaker 5: you're not going to liquidate, it wouldn't make sense to
• 21:37
  Speaker 5: invest inside of a opportunity zone. Another thing, and I
• 21:41
  Speaker 5: know we won't speak too much on this, but like
• 21:43
  Speaker 5: if you have folks that have a own active property
• 21:47
  Speaker 5: and they want to do a ten thirty one with
• 21:50
  Speaker 5: a ten thirty one, it's money that went into the property,
• 21:54
  Speaker 5: money that comes out of property one hundred percent, right.
• 21:57
  Speaker 5: But if they sell a property they own and it's
• 21:59
  Speaker 5: an investment and property and they want to come into
• 22:01
  Speaker 5: an opportunity zone, they can keep the initial investment or
• 22:05
  Speaker 5: invest that in, right, and they can invest all of
• 22:08
  Speaker 5: the gain or a portion of that end. So again
• 22:11
  Speaker 5: I recommend talking with your tax professional and you know
• 22:15
  Speaker 5: your financial advisor.
• 22:16
  Speaker 3: But the nice thing about opportunity zones.
• 22:18
  Speaker 5: It's passive, right, whereas with at tendary one, you're actively
• 22:22
  Speaker 5: owning a project or a house. You have renters, and
• 22:25
  Speaker 5: if you're older you want to liquidate some of that portfolio.
• 22:29
  Speaker 5: The gain that you realize from that portfolio could be
• 22:31
  Speaker 5: put into an opportunity zone deal and you can hold
• 22:34
  Speaker 5: off on paying the capital gain tax for the liquidation
• 22:37
  Speaker 5: of those properties.
• 22:39
  Speaker 4: If one of our listeners wanted to work with you,
• 22:41
  Speaker 4: what would that journey look like.
• 22:43
  Speaker 3: Yeah, that's a great question.
• 22:44
  Speaker 5: Obviously, Opportunity zones are part of our portfolio. We also
• 22:49
  Speaker 5: invest in, you know, multi family projects. We're in Washington,
• 22:52
  Speaker 5: d C. Maryland, and Virginia. We have projects down in
• 22:55
  Speaker 5: the southeast to Georgia, South Carolina, North Carolina, so we're
• 22:58
  Speaker 5: all over the southeast and mid Atlantic. For me, I
• 23:02
  Speaker 5: love talking with people who have interest in learning more.
• 23:06
  Speaker 5: Want to talk to us and meet with us and
• 23:08
  Speaker 5: really have us walk through our business plan, our strategy,
• 23:11
  Speaker 5: and our thesis to really understand how we operate and
• 23:14
  Speaker 5: then really you know, put us on the hot seat
• 23:16
  Speaker 5: to ask any questions they have.
• 23:18
  Speaker 3: We're very transparent.
• 23:20
  Speaker 5: We love to share previous projects that we've been in
• 23:23
  Speaker 5: current projects. And then obviously we have a questionnaire, we
• 23:28
  Speaker 5: have our credit and investor perspective of folks that want
• 23:31
  Speaker 5: to join us, they would fill that out, and then
• 23:33
  Speaker 5: once they join us as a new investor, they're in
• 23:35
  Speaker 5: a position to see everything that we've done, we're doing,
• 23:38
  Speaker 5: and getting ready to do.
• 23:39
  Speaker 3: There's no fees to become an investor with us.
• 23:42
  Speaker 5: You just are in a position to be part of
• 23:43
  Speaker 5: our family and you also have the opportunity to see
• 23:47
  Speaker 5: everything we do. We have we utilize the Juniper Square
• 23:50
  Speaker 5: Investment Portal, which is fantastic, and all of our investors,
• 23:54
  Speaker 5: their distributions, their communications.
• 23:56
  Speaker 3: Our taxes. We do all the taxes for you too.
• 23:58
  Speaker 5: By the way that you come in and invest on
• 24:01
  Speaker 5: with us, We're going to take care of all your
• 24:02
  Speaker 5: tax documents and we upload those onto your Juniper Score
• 24:07
  Speaker 5: portal page. You could pull up each investment you're in.
• 24:10
  Speaker 5: Any new deal we have. We put in a data
• 24:13
  Speaker 5: room on Juniper Square, so we walk through. We have
• 24:15
  Speaker 5: a very thorough and detailed onboarding process for our new investors,
• 24:21
  Speaker 5: and we never want our investors who are coming in
• 24:23
  Speaker 5: that our new investors feel pressured that they have to
• 24:26
  Speaker 5: invest right away.
• 24:27
  Speaker 3: They don't.
• 24:27
  Speaker 5: We would rather bring someone in when we don't have
• 24:30
  Speaker 5: a deal so they don't feel that pressure. And then
• 24:32
  Speaker 5: the best question I get after I bring them on
• 24:34
  Speaker 5: and they feel comfortable with us, is when's your next deal?
• 24:37
  Speaker 5: So obviously that's very important. Folks have come in and
• 24:41
  Speaker 5: have toured projects with us. We love to do that.
• 24:43
  Speaker 5: We have some active deals right where I live here
• 24:45
  Speaker 5: and outside of Fairfax County, Virginia, and so we want
• 24:49
  Speaker 5: to make sure those that are joining us feel really
• 24:52
  Speaker 5: good about us before they even think about their first investment.
• 24:55
  Speaker 4: Can you share a client success story?
• 24:58
  Speaker 3: Sure? Absolutely.
• 25:00
  Speaker 5: We had some deals before COVID that really were grand slams.
• 25:06
  Speaker 5: We came in with a very conservative numbers. We had
• 25:10
  Speaker 5: a three year project in Washington, d C. For a
• 25:14
  Speaker 5: new construction project. We expected to bring in about seven
• 25:18
  Speaker 5: hundred and fifty thousand dollars and after three years we
• 25:20
  Speaker 5: expected about a half a million dollars profit. After three years,
• 25:24
  Speaker 5: we made six hundred and seventy five thousand profit.
• 25:26
  Speaker 2: So obviously our investors were very happy. They made a
• 25:29
  Speaker 2: much better return.
• 25:31
  Speaker 5: Some of our direct investors who have utilized self directed
• 25:34
  Speaker 5: iras have seen success using that as a platform to
• 25:38
  Speaker 5: invest with us. We have eight to nine doctors that
• 25:41
  Speaker 5: have stood up LLC and LLC to invest with us.
• 25:45
  Speaker 5: And so a success story for me is when you
• 25:48
  Speaker 5: invest with us after one or two projects, you're not
• 25:51
  Speaker 5: digging into your pocket anymore to bring in any more money.
• 25:54
  Speaker 5: You're basically making money off that original investment, and now
• 25:57
  Speaker 5: we're using those gains and that growth that you've had
• 26:00
  Speaker 5: portfolio to invest in future projects. So that to me
• 26:04
  Speaker 5: is a success strain itself. One specific project that we
• 26:08
  Speaker 5: had that went well even through COVID was we developed
• 26:11
  Speaker 5: and built a one hundred and ten unit condo billing
• 26:14
  Speaker 5: in Washington, d C. Right on the water across from
• 26:18
  Speaker 5: the Marine One hangar for the President and Washington Nationals
• 26:22
  Speaker 5: Baseball Stadium. And that was a tough project because it
• 26:25
  Speaker 5: was during COVID, so we learned quite a bit. But
• 26:29
  Speaker 5: at the end of the day, I've actually still did
• 26:31
  Speaker 5: very well, made a great return, and had the opportunity
• 26:33
  Speaker 5: to invest on a water for a property in.
• 26:35
  Speaker 3: Washington, D C.
• 26:36
  Speaker 5: Which is pretty It's pretty rare in these days, which
• 26:39
  Speaker 5: is pretty cool.
• 26:40
  Speaker 4: If listeners remember only one thing from today's conversation, what
• 26:43
  Speaker 4: would that message be, have.
• 26:45
  Speaker 5: A good plan right, understand what you want to do,
• 26:47
  Speaker 5: and if you're investing in real estate, do you want
• 26:50
  Speaker 5: to be active or passive. If you want to be active,
• 26:53
  Speaker 5: obviously you have more time, know the risks, you understand
• 26:57
  Speaker 5: what the business plan is.
• 26:59
  Speaker 3: But if you're one I get involved in passive investing.
• 27:01
  Speaker 5: Whether you're a business owner and you just want to
• 27:04
  Speaker 5: have a portfolio of capital put aside to invest passively,
• 27:07
  Speaker 5: you want to learn more about the road path or
• 27:10
  Speaker 5: the way to get to being financially independent, understanding the
• 27:15
  Speaker 5: big picture and holistic to be involved investing in passive
• 27:18
  Speaker 5: real estate. Yeah, I'd love the opportunity to talk with you.
• 27:21
  Speaker 5: I'm a relations based person. Come from a big time
• 27:24
  Speaker 5: family of multiple business owners, and I think the best
• 27:29
  Speaker 5: thing that I ever heard about my family was that
• 27:31
  Speaker 5: the customers treated them my family, and that meant a
• 27:34
  Speaker 5: lot because that meant that they were doing the right thing.
• 27:36
  Speaker 5: So I'm very relationships based, I'm very transparent, I'm very candid,
• 27:41
  Speaker 5: and I would be totally honest with you. And if
• 27:44
  Speaker 5: you have questions about a specific investment, or you want
• 27:46
  Speaker 5: to walk through scenario or if I can help you
• 27:49
  Speaker 5: with what you're looking at, I'm happy to do that.
• 27:51
  Speaker 5: I'm not an advisor, I don't pretend to be one,
• 27:53
  Speaker 5: but I kind of help you walk through some of
• 27:55
  Speaker 5: those investments and kind of at least point you into
• 27:57
  Speaker 5: the right direction to talk to the right professionals.
• 28:00
  Speaker 4: But where can our audience connect with you, learn more
• 28:03
  Speaker 4: about your work and continue this conversation.
• 28:05
  Speaker 3: Yeah, Joe, I appreciate it.
• 28:07
  Speaker 5: You know, feel free obviously to share my communications or
• 28:10
  Speaker 5: my contact information writer with your listeners. I'm on my
• 28:14
  Speaker 5: website at Jiddinvestments dot com.
• 28:17
  Speaker 3: It's just one word. You can look that up on
• 28:19
  Speaker 3: Google and find us.
• 28:20
  Speaker 5: I'm also on LinkedIn, John Rabino, you can find me
• 28:23
  Speaker 5: on LinkedIn, Facebook, Instagram. But most importantly, if there's a
• 28:27
  Speaker 5: listener out there that really wants to connect with me
• 28:29
  Speaker 5: directly shoot me an email. It's my first initial, Jay,
• 28:32
  Speaker 5: my last name Rabino, and that's at JID Investments all
• 28:36
  Speaker 5: one word dot com and Joe. I'm fine with you
• 28:39
  Speaker 5: sharing that, and so if so folks want to reach
• 28:41
  Speaker 5: out to me directly, I'd love to hear.
• 28:44
  Speaker 4: From great Well, John, thank you so much for joining us.
• 28:46
  Speaker 4: We appreciate your time and the value you shared.
• 28:49
  Speaker 3: Yeah, I appreciate it.
• 28:50
  Speaker 2: Help to come visit you again sometime soon and thanks
• 28:52
  Speaker 2: again for the time.
• 28:53
  Speaker 4: Definitely thanks everyone for listening. If this episode inspire you,
• 28:57
  Speaker 4: shared with someone who needs it, and don't forget to
• 28:59
  Speaker 4: follow the glib Vasa podcasts for more conversations that make
• 29:01
  Speaker 4: an impact. Till the next time,