Hey everyone, and welcome to Passive Real Estate Investing. I’m Melissa Nash, your guest host jumping in for now. Let’s dive in.
Welcome to the show, Josh. I am so excited to have you back here today. So welcome, welcome. This is our second interview. And for all of you listening, you might recognize Josh as soon as he starts talking. We did a really great episode with him where we were talking about some of the creative things that they have done as a builder. So Josh and his team are new construction builders in Florida, and they’re one of the most creative teams that I have come across. In fact, what we were talking about in that previous episode, and I will link it for you guys, they came up with a creative rent by room, kind of a corporate lease situation, to really up the cash flow on their rental.
So that was an excellent episode. So I want you guys all to go listen to that. And again, I will relink it for you.
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But today, Josh, I am so excited to chat with you because there is a new twist that you guys have recently incorporated with one of your clients. And you and I were talking about it and I was like, wow, this is such a cool idea. We need to do a podcast episode about this and share with everybody. Basically it’s a twist on the 10 31 exchange and we are calling it a poor man’s improvement. So that’s a big teaser for you guys. If you currently own rental properties and are thinking about a 10 31 exchange, or maybe you just want to put this in your pocket for down the road when you do wanna think about a 10 31 exchange. This is really creative and that this is literally what this show is all about is you know, putting some creative things in your brain and working with creative people. I absolutely love working with creative people. So here we are. Welcome to the show. Josh, tell us a little bit about yourself. Remind our listeners a little bit who you are and who you serve.
Yeah, hey, thanks Melissa. Thanks for having me on again. It’s great to be here. Yeah, we’re basically investors, right? We invest, we, I personally own a hundred units. My partner in units, you know, we’re investors first. We build a company, you know, that’s kind of by investors, things like investors. And we kind of make things for investors now, right? <Laugh>, so kind of everything with that same mindset. So everything kind of comes I think, from a different lens, a little bit, right? ’cause Again, everything’s with the investor mindset and you know, if we were, we’re building these same properties for ourselves and then we offer that same service, you know, to our clients. You know, whether that’s new construction, whether that’s buying a perfectly finished duplex that’s already rented, whether that’s property management, what, whatever, whatever chain of the service. You know, we’re a fully integrated firm from development. We take stuff from ground up and we develop land too, like all the way to the end, right? So we’re kind of across the spectrum of different opportunities.
Yeah. Well, and that’s, that’s one of the things that I love working with you guys and I know many of our clients do as well, is that exactly what you said. You were investors first and you figured out this model because you’re like, Hey, something is broken here. How do I grow? How do I scale? How do I make better property management? How do I make a better product? ’cause That’s what you are seeking, that’s what you wanted as an investor. And so when you created those systems for yourself and now you’re like, Hey, now I can actually offer this to other people and help them. I think that really is why you guys are successful. So well done on you guys.
Yeah, no, and just to expand upon that, like we’ve all, we believe there’s ways to make money in every market up, down. You know, I started in the foreclosure, you know, days when things were crazy and we did that. Then we shifted to the new construction market early, earlier than most people saw. And then again, there’s always a way, and I think what we’re gonna talk about today, this poor man’s improvement is new to me. 10 30 ones are very old and we, I thought I knew everything about 10 30 ones, but I learned something new and I’d like to share there, right? You know, something like that. ’cause It’s creative, it’s cost effective and it combines, in my opinion, the best pieces of real estate. I think, you know, one of the best things about being in the real estate business is just the tax advantages that it provides investors over the long term.
You know, i I come from Wall Street, you know, stocks like that doesn’t exist. You know, you sell something, you’re paying you capital gains, right? You know, unless you’re in some kind of private equity fund or whatever. But like for the most part, we pay capital gains and, and in real estate we have this advantage and it’s, it says 10 31 and there’s, most people view that kind of standardly, right? You know, you have, you sell a property, you exchange it for a like kind asset. You have 45 days to identify a new property or a list of properties and you have 180 days to close it, right? And they think, well that’s kind of simple. Has to go through an intermediary. I’ve done something what’s called reverse 10 31 we don’t have to get into now, but like, this is kind of a little bit of a twist on that.
Where again, the best thing is you can sell a property, take your cash, your proceeds not pay gains, and then exchanges, what we do is get you a brand new construction property that has not been built yet, which can be tricky with timelines. And you know what I just outlined there and without doing what you call a reverse, and we’ve now figured this out. We’re, we’re actually gonna, we just figured it out yesterday, candidly, <laugh> with the clients, it’s first time I’ve done at least. And I think it’s a pretty good way for investors. I think they’re gonna love it. ’cause Again, it combines the 10 31 and also gets you a new construction duplex, or excuse me, property, not just duplex single family as well at a wholesale price. What does that mean? That the same cost of construction we pay ourselves is the price you get, right?
And that then creates an equity opportunity on the back end. So you build something for four 50 and it’s worth five 50. You’ve created a hundred grand of equity. So let’s just use an example, right? And we can get into the mechanics of it. But like you sell a property for $300,000, you have 150,000 of equity or profit in that, you know, you can do an exchange, not pay tax on that, that one 50 use that one 50 basically as a deposit on a thing. We get a fully permanent lot that we already have in our inventory from one of our clients. We source somewhere.
We close on it. So we, the builder are gonna own it, but it’s simultaneously you sign a contract with us and again, it’s a build contract for the full value the land plus the building. And then you put a deposit down, your intermediary can do this. They can actually fund that deposit to us that allows for us to pay for that land. We build it up to that certain level, like that $150,000 level, the 10 31 80 intermediary again funds all that money to the builder. And then we have to continue to build. This gets the tricky part. Like we, again, you sold a $300,000 property in our example, we have to get to a $300,000 value so you don’t have any tax consequence, right? Then we continue building basically on our dime in this case until 300,000. Then we quote, sell you again our company bolts title until that moment in time. At that point we sell you the property for the $300,000. And then you basically get a con, you know, a construction loan that has a half bill property that funds the rest of the construction till the very end or a bridge loan. And at the end of that, you know, you, you own the property, you’ve created another a hundred thousand dollars of equity on the backend, and then you can do a cash out refi at that point and get your money back.
It’s a lot to, I know it’s a little, it’s a lot to unpack there. I’m trying
No, no, no, no, no. I’m, I’m breaking it down. The most easy possible scenario. So, okay, so for all of you guys listening, I don’t, I don’t know if you understand the awesomeness of this. So first of all, you sell a property for a profit. So there’s $150,000 profit there, right? That’s your equity in this property when you sold it. So instead of paying capital gains on it, you guys, capital gains on real estate is not cheap. I mean, depending on where you are with your income level, 30 to 40%. So instead of paying 30 to 40% in taxes from that $150,000 gain you made on this great investment that you’re now selling, you can do what’s called a 10 31 exchange. And you hire an intermediary. And you guys, they’re so easy to work with, they, and it’s, it’s really cheap. I’ve done it many, many times.
They handle all the paperwork for you. It’s not stressful, it’s not something to worry about. Again, let me know if you’re thinking about a 10 31 exchange and I’ll get you in touch with some really amazing contacts there. I know you’ve got some contacts there too as well, Josh. But anyways, they handle everything for you. So now you’re not gonna pay taxes on this $150,000. So now you have to replace it and buy a new property. So we do these 10 31 exchanges all the time. This is what we provide. We have access to inventory like Josh’s and we can help you pick out some new properties that you’re going to cashflow really great from. Now, the cool thing that Josh just said that they have figured out is they have figured out a system that’s actually quite tricky because you have to work with people that know what they’re doing from the ten three one exchange company to the title company to, you know, the builder or the seller.
You have to have some smart people that kind of can help you put this together. Now, Josh’s team has already done this and they’ve put this together, which is really awesome. ’cause Then, you know, they, they put in the sweat, blood and tears, and then the rest of us can kind of jump in and kind of not have those learning curves. But then what they do is they’re going to build in this example, a new construction duplex for you. Now, because of the way they set it up, they’re giving you that equity because they’re forcing the value through the new build. So you guys are getting the build at, you know, cost what, what he was saying earlier. Now when the property is done, you just made a hundred thousand dollars profit. So not only did you save, you know, capital gains on the $150,000 property that you sold, you’re not paying that. You’re deferring that, then you just profited a hundred thousand dollars. So Josh, what are we gonna do with that? A hundred thousand dollars? What can somebody do with it? I mean, it’s it’s their money. They’re now not taxable on it. It’s outside of the 10 31 exchange now. So, but this is.
Yeah, great question. This is the beautiful thing that I, if people really, when the light goes on and they understand this, this is how, and again, it all depends on your client’s goals. You know, mine is, my personal goal is on a thousand units, right? I’m at, I’m at a hundred now, so I have a long way to go, right? You know, I’m, I’m just getting started, right? I’m 15 years into this or whatever, <laugh> and like, but this gives you this ability like this hamster wheel to take we can walk through the numbers, but you do this refinance, now you have that money in your pocket again. Well, you can go build another one and you can do it again. You can do it, you can kind of continue to build properties without putting, maybe you have to put some equity, but very minimal equity into that deal and really build a portfolio by being smart and creative versus just using your hard earned cash from your day job, putting it into there.
Yep. You guys, so this is a pretty big deal because there comes a certain point in all of our, you know, real estate investing portfolios where we’re like, okay, we wanna scale, we wanna grow. Where are we getting more money from? You know, obviously if we’re saving, you know, we can tap into our own savings account and you know however we’re making money, we can tap into that and buy. But the idea here is we’re tapping into equity that we just force that equity so it’s free money. So we’re able to grow and scale with free money. So I can’t think of a cooler concept. So Josh, you’re in Florida. So let’s talk about the Florida market here and, and pivot, because we’ve talked about this before, but there’s a lot of misinformation out there that I’m always dispelling. So these projects are in Florida.
So let’s talk about the area that you’re in and let’s talk about what the returns might look like. So you guys, just, just so you know, I’ve been involved, involved in the Florida market for the last 10 years. There is appreciation in this market. There is cash flow in this market. Now, what is the strategy? The strategy is long-term buy and hold. This is the strategy with all of our markets, with all of our properties. We want you to hold these long-term, this is for wealth creation, generational wealth, long term. But we do need to cash flow because we need to keep the properties sustaining themselves and hopefully put some extra money in your pocket as you continue to grow your portfolio. So, okay, so that was very long, but I wanted to get that out because I have seen substantial growth in Florida. Actually, I’m not gonna say substantial. I’m gonna say steady. Florida has a little bit more appreciation. There’s a lot of rental demand, there’s a lot of people still continuing to move there. So what are you seeing in Florida right now, Josh? And what market are you in?
We’re in the south. I think the, we gotta talk about Florida for a second, but Florida’s a big state, you know? Yeah, it’s it’s the third largest state by population in the country. You know, California is number one, Texas at 40 million, give or take. Texas is number two, give or take at 30 million. And Florida’s number three at 23 million. You know, a lot of people don’t realize that past New York state, you know, where I used to live and work about 2015, about 10 years ago, you know, so it’s the third largest pop, most popular state and one of the top two fastest growers along with Texas, right? So that demographic trend is still in place despite things you think, I think, you know, the real estate market has been softer over the last two years, but I think it’s kind of been in a downturn.
But I actually see, we see things firming up, we see inventories coming down. So, you know, there’s been kind of this response and correction and I think affordability’s come, it’s one of the places that’s affordable in the country right now. You know, where this affordability factor we hear about all over is not in a lot of places, but it is an affordable, so I think people tend to find the affordable places over time and the markets kind of balance out. So we’re seeing, you know, some things pick up, which I think is great news, but as a real estate investor, my advice is always, well, the best way you can protect yourself is having a lower entry point, right? And again, you’re gonna enter this property again, we recommend duplexes. I’m just a big believer in the duplex. You know, we can do single families, we do them, but I think duplexes are superior investment vehicles, all minor duplexes.
That’s just the one I prefer. But like, you know, again, what we mentioned earlier, you’re gonna get in a hundred thousand dough below market value, it’ll appraise for a hundred thousand dollars more than you paid for it. And so what better way to protect yourself than have a, you know, and then, then if you calculate return off that price, I mean, it’s, it’s a really high return, but however you want to do it doesn’t matter if you want to grow fast or you just wanna have a high return, either way can be both really good things for your investor. It depends on your investment goals, right? You could keep the equity in the deal, have super high cash flow, or you could refi it out and build another one, right? You know, have less cash flow, but really build a big portfolio. It depends on your age and your goal and you know, how aggressive you want to be. Those are all questions that are, I think, unique to each investor. You know, that’s why I really try to understand what people’s goals are. You know, some people that want to really are aggressive with us now and some people that wanna just cash flow and, you know, they’re, they’re in their sixties and you know, it all depends, right? There’s different, different strategies for different people.
I love how you said that, Josh, because I think that is one of the most important things. There was a, a spreadsheet that used to go around years ago. I mean, I’ve seen this pop up recently, but it’s actually pretty old. And it’s just a, a random calculator that people were giving out online for running investment properties. And the only thing it counted for was cash on cash return. And then at the, at the very bottom it would like, you’d like put in all the numbers and it would spit it out and it would say, green, your positive cash flow X amount, go buy it. Or it would say, red, you know, your cash flow’s too low, don’t buy it. And that always kind of frustrated me in a way because there’s so many different strategies for different times in your life. Age goals and also cashflow.
Like the amount of money that you have in your bank account to continue to invest. And, you know, it doesn’t account for anything outside of just year one cash flow. To me it, it’s so limiting. You know, your mind is just stuck on this year one cash flow year one cash flow. But that’s not what’s happening in markets like Florida. We have to be able to look ahead and look at your five, look at year 10 because appreciation is happening because rental increases are happening. In fact, I just talked to a client of mine who bought a property, I think it was 2021 in southwest Florida. And he is like, I have increased the rents on this property like times now. And he is like, I’m cash flowing, 700 bucks a month. You know, this was a great investment for me the first year.
He’s like, yeah, the cash flow wasn’t as exciting, but he is like the tenant has been paying down on this property. The property has gone up in value. He could do a 10 31 exchange if he wanted to. He could tap into the equity if he wanted to. But the big thing here too is he’s been able to take advantage of those rental increases and he’s holding the property, you guys, he’s in it five years now. Okay, now is when he’s getting really excited about the numbers. So it is a buy and hold strategy. So that being said, you guys, this is why it’s so awesome for you guys to talk to somebody like Josh, who is an actual investor. Talk to somebody like myself who’s an actual investor and let’s help you put together that strategy. You know, like he said in these deals, do you wanna take that equity out, take that a hundred thousand dollars out and use it, I don’t know, go on a vacation with your family, it’s free money or do we want to continue to invest it or do we wanna leave it in the property so you cash flow higher and we can help you walk through it.
Sometimes it’s nice to just brain dump on somebody and say things out loud. Sometimes I say things out loud and it kind of helps me walk through my thought process. So you guys, that is what we are here for. That is what this episode is all about. It’s to help you get creative. And again, going back to Josh and his team, they are creative. Just that last episode we did with him where his team have figured out how to cash flow higher in Florida is pretty awesome. So I want you guys to go back and listen to that where they’re renting by the room if you want to, you don’t have to, but it definitely jumps up that cash flow. So, okay. So anything else to add to that, Josh?
Yeah, just like, I think one of the frustrations 10 31 investors have that I’ve come across is they have a very short timeframe to, to put this money to work. Yeah. 45 days to be clear to identify. And so a lot of times they’re like, I don’t really like the deals I’m seeing. They’re not that great, you know what I mean? And so some people either, you know, if they’re already in it, they have to do something, they, they’re forced ’cause they’d rather do a bad deal, not a bad deal, but a a, an average deal, call it, right? Nobody does a bad deal, but an average deal just to put the money to work and avoid paying the tax. But I think this can be a little more thoughtful where like, again, we’re combining, in my opinion, the two best things in real estate right now and today’s current market environment, build to rent where you’re building, you know, the property from scratch, you, you, again, you’re going entitled to that property.
It’s your property. And you create that, that value creation on the backend, which is still, and, and the current market is the best thing you can do. You know if you can. And, and a lot of times there’s, it involves a lot of trust with the builder to do that. I have, and a lot of people have in different areas gotten burned by builders, you know, so that’s understandable. But also then you combine that with the 10 31 and it’s just like, it’s the most, you’re, you’re combining two very powerful strategies at once. And it’s like when you really put the numbers on paper and really kind of think about it, it’s kind of mind blowing where you can create and it’s, it’s, it’s actually how I, I think back in 2020 I sold a property it was a ski home in, in in Deer Valley Utah.
And I did the same thing. I did a reverse 10 31, which is a similar thing, but it involved a lot more paperwork. It was a lot more expensive. They’re typically eight to $10,000. This poor man’s free, this poor man’s exchange, and we can give you a referral, it’s free. There is no fee at the 10 31 company, zero. They share the interest with you, but the money that’s in the reserve account, that’s the way they make their money. There’s no fees, there’s no other outside fees to it. And so you save a lot of money on that and the, and it makes it very clear, clean, it makes it easier. You know, the challenges for us is make sure that we have a permanent lot that’s usually a three to four month process ready to go. So we’re working on that to maybe if there’s demand, we need to like make sure we have lots of inventory that people can build on.
So we make sure we don’t deal with that issue and we’re confident that we can put the money that we need to put to work in the right amount of time so nobody gets a tax consequence they don’t want. But I really think it’s, it’s, it’s a beautiful use of multiple real estate strategies that wants to really create, you know, a lot of value proposition for somebody in that shoes. And it could change your thoughtful instead of, Hey, should I do a 10 31? Like, oh yeah, let me look at my portfolio, what should I sell? Like what can I turn this into? And it should be a lot of conversations we had there. I think a lot of people would benefit from, a lot of people would benefit from this strategy.
Yeah. Well, and one of the things that you just said here is planning ahead. Because there are things that you guys have to do on your end end, you have to make sure that you have that land that we can do this. So if any of you guys are out there here’s your call to action. I’m going to have a link in the show notes below. I want you guys to reach out to myself and I’ll make you an introduction with whether it’s, it’s Josh or with the 10 31 exchange company. We need to start these conversations early. You know, if you’re thinking about, like I, I was talking to a client who’s like, Hey, you know what, in 2026, we are going to start looking into, you know, changing our portfolio around we might be doing a 10 31 exchange. So they’re thinking about it.
Now those conversations are happening because also you guys, if you have a rental property and you’ve got tenants in there and maybe their lease is coming up to an end, that’s the best time to sell a property, right? When the tenant is not in there, you can get it nice and, and ready to sell. And so if you’ve got those tenant leases coming up in 2026 and you’re trying to decide is this for you, this is the perfect time to plan and just have these conversations. And again, we’ve got everybody lined up in this system for you. We’ve got the lenders that can do the refinance. We’ve got Josh and his team that are experienced builders. We’ve got the 10 31 exchange companies. So we’ve got everybody lined up for you. So click that link in the show note and just let’s just start having those conversations.
Yeah, no, I think that’s great.
Now, oh, sorry, what were you gonna add to that?
I said I’m always fascinated ’cause you know, like I said, the 10 31 is been around a long time. I thought I knew everything about it, but again, I’m still learning something new today, right? You know, you know, this poor man’s improvement and it’s the fancy name for it, but it’s <laugh>, it’s something new and creative and I, I think it’s brilliant.
Well, and again, it takes the right people to be able to put it together. There’s so many different things that I’ve been able to do with my portfolio and grow it. And number one, it’s all about connections. It’s about people, it’s about trust and relationships. And then it’s about people putting their creative brains together to make things happen. So, so Josh, what if somebody doesn’t have a 10 31 exchange? And what if somebody is like, Hey, you know what, this sounds pretty cool. Can I buy a property in Florida? Can I buy a duplex? A we’ve got two options with you and correct me if this is wrong. So number one, you’ve got finished done properties. So if somebody’s like, Hey, I just wanna buy a property tomorrow, I don’t wanna deal with a construction loan. What you got for me? We’ve got inventory for them with you guys. And then number two, and again, we can do the rent by room or we can do the, the full leases and we can kind of talk about that. And then number two, what if somebody wants to be involved with you guys on a build and they’re not doing a 10 31 exchange and they’re just going to put a down payment down? Or do you guys work with with individuals like that as well?
Yeah, no, that’s exactly what we do. I mean, this is just a, the, the poor man’s improvement talked about. It’s just a derivation of that. But at the end of the day, he is just to us a build client, right? And for us, we, you know, kind of half of our business is just building for people that want, whether it’s ourselves or clients, you know, building their own investment properties. We do that. And then the other half is, you know, properties we’re building, renting out and selling. You know, it’s kind of ready to go inventory for investors, right? And we’re, we we’re kind of agnostic to whether you, whatever you do, you wanna buy an existing one or you wanna build one and create the value for yourself, we’re happy to help you in either way you want.
Perfect. There you have it. You guys, we need to hook you guys up. We need to get you the numbers. We need to show you what things look like. We need to show you what the timelines look like. We need to see if this is for you, if this is something you’re interested in. Again, Josh and his team are ready to take your calls. I’m ready to help you. So I hope this episode was helpful for you guys. Thank you so much Josh, for introducing this poor man’s 10 31 exchange. I’m very, very excited for people to take advantage of this. I think it’s actually brilliant. I actually have a property for sale right now. I’m hoping that it sells very soon and I’ll be doing another 10 31 exchange myself. So, you know, we are going to be having those conversations as well. So thank you again. You guys reach out to me and I will hook you up with Josh and his team and Josh, thank you again and we will see you. I’m gonna bring you back because we’re just gonna make this a series. We’re, we’re gonna see what other creative building you guys are doing. Again, I keep saying creative ’cause you guys keep coming up with these awesome ideas. So we’ll have to bring you back again.
Alright, awesome. We would love to do that. Thank you. I do think the name is Rome by the way. It should not be called a Poor Man’s Improvement. I think it’s quite the opposite. So <laugh>, you know, it’s like, you know, it’s a, it’s a great way to build wealth but you know, I think the name’s kind of ironic, you know,
It is, it’s really rich man’s improvement is what it should be called exactly.
You know, it kind of reminds me of the book that was inspiration me, the Rich Dad Poor Dad book a long time ago. Right? So, but yeah, it’s a name we won’t forget. Right. Poor Man’s Improvement, so.
Exactly. Awesome. Thanks again, Josh.
Alright, thanks Melissa. Bye!
Thank you Melissa and Josh. We hope the discussion offered some meaningful insights and practical tips you can use. Remember to subscribe so you stay up to date with every new release. Thank you for your continued support and for spending your time with us today. Until then, we still catch you on the next episode.
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