Discounted Roth Conversions feat. Keith Blackborg | Aspen Funds
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Discounted Roth Conversions feat. Keith Blackborg

Keith Blackborg CPA shares his journey to becoming work optional by 30. Discover exclusive insights into viewing your wealth as a business, explore five powerful strategies used by billionaires, and learn about a discounted rollover conversion for IRA and 401k investors.

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Introduction and Welcome

Ben Fraser: Hello, Future Billionaires! Welcome back to another episode of the Invest Like a Billionaire podcast. Have a great show for you today. I think you’re really going to enjoy this. 

Introducing Keith Blackborg: From CPA to Financial Freedom

Ben Fraser: I interviewed Keith Blackborg of a firm called Financial Journey. He’s a CPA. He talks a lot about his journey and basically becoming work optional by 30 and now sharing the wealth of knowledge that he’s gained of billionaire strategies for millionaires. And so obviously very relevant for our audience and a lot of similar values and great insights. He talks about viewing your wealth as business. He talks about the five different strategies that billionaires are using that millionaires maybe aren’t using.

So it gets really particular. And then near the end of the show, he kind of blew my mind talking about A discounted rollover conversion for investors using IRAs or 401ks. And so really, really cool. I didn’t know you could do this. If you have any investments currently in your IRAs or 401ks, you absolutely need to listen to this episode and hear about this thing right now. You can do that is probably a really good option in a lot of cases.

Definitely check this out. I think you’re going to enjoy it. And as always, if you’re enjoying the show, please leave a review, share with a friend, and give us some feedback. We really appreciate that. And, uh, thanks so much for listening. 

The Invest Like a Billionaire Podcast

Ben Fraser: This is the Invest Like a Billionaire podcast, where we uncover the alternative investments and strategies that billionaires use to grow wealth. The tools and tactics you’ll learn from this podcast will make you a better investor and help you build legacy wealth. Join us as we dive into the world of alternative investments, uncover strategies of the ultra wealthy, discuss economics, and interview successful investors.

Free Economic Report

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Welcome back to another episode of the Invest Like a Billionaire podcast. I am your host, Ben Fraser. Today, we’ve got a really exciting guest, Keith Blackborg of Financial Journey, and he’s coming on to talk about how billionaire strategies can be used for millionaires.

And he’s going to talk a lot about mindset, about tactical strategies. And he’s also a CPA. Um, so he comes with some real knowledge. Very excited to get into this discussion today. Key. Thanks for coming on the show. 

Keith Blackborg: Thank you. I’m happy to share my real knowledge. It’s great to be here and I love what you guys do. It compliments so many of the, uh, the strategies that we’re going to talk about here today. 

Ben Fraser: Yeah, I love it. When I saw the tagline, when we were kind of, uh, uh, presented to you as an option for the podcast, the billionaire strategies for millionaires, I was like. I mean, Hey, we’re already pretty locked in, right?

Invest like a billionaire. Our whole, our whole goal is to help educate the everyday millionaires as we call them to implement the strategies that the ultra wealthy are using, have been using for a long time, the mindsets, all these things. So super excited to kind of hear your perspectives on this and your journey in it as a CPA.

And, uh, someone that works with these types of clients. So start kind of a little bit, uh, take a few steps back. Um, how’d you get into the position you’re in and what was kind of the journey, uh, into your current practice, right? Cause it’s not a standard practice where you’re working with people, helping them.

In private alternatives, helping them in unique tax strategies, and that’s not the standard, you know, uh, role for a lot of investment advisors or those working with, with these kinds of clients. 

Keith Blackborg: Correct. And if I were an investment advisor, I couldn’t do a lot of what I do because I’d be handcuffed by certain compliance regulations.

Keith’s Journey: Real Estate Success and Financial Strategies

Keith Blackborg: So my background, I started my career with Deloitte. San Francisco moved to Dallas in 2010, and it happened to be a good time to get into real estate. So I’d like to think I was brilliant, but also some market timing helped. So my wife and I started doing some rentals, flips and stuff with houses. A few years later, we got into commercial real estate hotels and apartments.

Uh, so my wife was running the real estate business. I had a tax practice focused on high net worth, uh, apartment syndicators. And that really helped me, uh, grow and meet people really quickly. Fast forward to 2016, I thought Hillary Clinton was going to get elected and the market was going to crash.

Because, you know, real estate only goes in seven year cycles. I was wrong, but I ended up selling out of, uh, all our active projects. Uh, we had some success selling the CPA firm. I could never quite get away from it. Uh, work long hours. And so my wife transitioned to where we had actually reached work optional, meaning we still like to work.

We didn’t have to work. Uh, we spent the next few years traveling around the world and got the best souvenir we could have gotten out of that. That was our first born son, uh, uh, back in 2019 and we wanted to slow down for a little bit. So we prayed that we could slow down and then COVID happened. So everybody slumped down.

Sorry, if that was my prayer, that triggered that. But uh, along the way I started a financial journey because Um, if I want to make as much money as possible, I go back to commercial real estate syndication, but I really like having this M impact about showing business owners a better way, how you can optimize your wealth, your taxes, all your, your infrastructure, uh, your wealth around your desired impact.

So let’s set your vision and reverse engineer the wealth you need. So you’re not overbuilding for years and years and missing out on what you really could be doing with your life.

Ben Fraser: I love that. So it’s such a cool story. And I think something that probably resonates with a lot of people, right? Where they wish they could be in that boat of work optional and you know, they’re entrepreneurs and business owners and kind of in the grind, right?

It’s hard to. Take a step back and, you know, one work on your business versus just in your business, but then to even have enough, um, uh, vision and understanding of where can I get to, to where this actually doesn’t have to run my life, right? How do I, uh, create long term value and maybe actually diversify some of my.

Network and create that work, work optional, uh, status. 

The Mindset Shift: Viewing Wealth as a Business

Ben Fraser: So talk a little bit about, you know, mindset. Talk about, you know, how does someone who is a business owner, it’s kind of your primary clientele. A lot of people on our show are business owners, entrepreneurs, you know, they, they’ve had some success and, you know, they’ve, they’ve figured it out by working hard, solving problems.

And, uh, just making things happen, but at a certain point, you know, you can’t just keep doing more, you need to, uh, transition and think smarter and talk about some of these things with mindset and how you kind of get to that stage. 

Keith Blackborg: So there’s a key transition that most millionaires miss, and it’s a transition most billionaires make.

And it’s, if you are, if the primary reason you’re in business is for financial reasons, Then you should be taking a step back and viewing your business within the overall aspect of your, your wealth. So your, uh, business, your active business is simply a division of the worth work that you do. And so as you transition along, when you first, you’ve made your first, uh, 100, 000, if you were to put a ton of time into managing it, you got a 20 percent return.

20, 000. Great. You put a little time and effort into your business. You can probably be going further faster by focusing on continuing to grow your business. But if you’ve got a million dollar net worth or a 10 million dollar worth net worth And you can take your average rate of return from eight to ten percent to something higher If you were to hit that same 20 percent by getting into some great investments and really actively managing Your money by looking at what you should be in and when and making wealth The business, then you’re spending a little less time in your active business, but you’re able to really juice your returns by becoming a great investor.

And that’s how you can overall propel the overall wealth, uh, forward by making that, that transition. 

Ben Fraser: Yeah. I think that’s such a great point in a really helpful mindset shift. Right. And it’s interesting. I’d love to hear some specifics on how someone makes that transition. Because it’s easy to say.

And as I’ve talked with a lot of entrepreneurs and even being one, it’s, it’s hard sometimes to take the skills that make you a successful entrepreneur, which is a lot of times taking, you know, inordinate amounts of risk and, you know, very, very, uh, focused on one thing versus diversified to transition into being a good investor, right?

Sometimes there’s a mismatch of. The characteristics or skills that get you to become a successful entrepreneur actually may not make you a great investor right off the bat. Right. And I’ve talked to a lot of people that have difficulty making that transition. So talk a little bit about how, how does someone make that transition and what are the kind of steps and things you’ve seen with people in that position?

Keith Blackborg: So you make a great point. There’s often people that would come to me and they might have a 10 million net worth and. They can almost be a little embarrassed because they don’t feel like they’re as financially sophisticated as they should be for somebody who, quote unquote, has a 10 million net worth.

But the reality is they likely got to where they were because they focused on one thing and they did it really well. And so there was a, there was a quick visual I wanted to share, uh, about just your organizational chart, how you’re new when wealth becomes your business, your career, your work becomes a subset within that, and then you’ve got your investments.

Investing like a billionaire, that’s an aspect of your life. We’ve also got your finances, your lifestyle, you’re giving that fun. Those are all elements of your wealth business. And so by making that transition and you think about how everything interrelates, there is a key mindset shift that allows you to put everything together and put a more synergistic strategic plan into place because your, your tax strategy, your investment strategy, your work strategy, you’re giving.

Should it all be these segmented things, but when you really put them together, where it’s a cohesive strategy, you get that much further faster. 

Ben Fraser: Yeah. I love that concept of your wealth is your business, right? And so it’s, you work so hard to make your money, right. To make the income and to build the net worth.

But then I see so many people not spending the time necessary or the amount of time that it took them to. Gain the skills or build the business that they have that generates the income. They don’t put the same amount of effort, not even close, not even a fraction of it, into understanding how to make your money work for you, right?

How to put it in investments, how to make good investments, how to do, you know, basic due diligence, how to create a strategy, right? And it’s, if you view your wealth as a business, as one subset versus, you know, I have my work, whether that’s a business or my career that is generating my income. That’s only one component of what’s driving my wealth.

Now I actually have my investments. Using it to work for me and put me into that next level I’m trying to get to. So talk a little bit about that, that mindset shift of wealth as a business and what that really means, you know, for you and the clients you work with. 

Keith Blackborg: So often people are in their business, they’re working on it and they’re focused on growing it and they think someday I’m going to have a big exit and we will help people have an exit structure and how to maximize sales price, structure the business for sale and minimize the tax consequences.

But in preparation for that. Some of it is you need to become a better investor. And so I want people to take the time to learn how to invest when the numbers are small. So if you have 100, to invest, learn how to do due diligence. When the numbers are smaller, make the mistakes when the numbers are smaller.

And that way, when you have a large exit, you have already learned how to manage your money. 8 to 12 percent maybe more because you’ve already developed the skills to be a great investor. And so some of that is learning how to do due diligence and realizing you can’t be an expert on everything and finding either a community of people that can, that can help you.

I know you guys have some great funds, so that could be forming a relationship with you guys. Putting some money in, in some deals, some smaller amounts. And then when you have that big exit and you’ve seen that you guys are delivering great results, up what you’re investing with people and you’ve got the confidence to build on what you’ve done.

And then as things come together over time, there’s some, some big transitions we’re making. So we’re looking at what your cash flow needs. What kind of investments provide consistent cash flow if you need equity investments? What are the things that are going to grow your equity overall? 

Strategies for Millionaires to Invest Like Billionaires

Ben Fraser: Talk a little bit about some of the actual strategies that billionaires are using that you say are billionaire strategies for millionaires.

You talked about making that. That transition that a lot of millionaires miss, but what are some of the other things that, uh, they’re, they’re doing as well? 

Keith Blackborg: So there’s also access to private vetted investments. So finding a team of people who can help you get and find great deals and then comparing notes with other, uh, other like minded peers who are also looking at those having a team of synergistic professionals.

So typically your typical millionaire. I’m going out and saying, I’m going to meet with my CPA. I’m going to meet with my lawyer. I’m going to meet with my investment advisor. And they’re stuck in the middle of this hub, trying to put all these different strategies together and. They’re, they don’t often even have the technical expertise because no one person can know it all to be able to synergize all of these.

And so they’ve gotten good at growing that business so they can step back and find somebody, uh, that can help them synergize all those elements. That’s where they can truly start making wealth of business and transition out of, uh, being in the center of that hub to more of a board level role and having those synergistic professionals that will, It’s just simply work with each other, meet on a monthly or quarterly basis.

That’s where you can start having a cohesive wealth strategy that fits your life, your business, your wealth. 

Ben Fraser: Yeah. I mean, that sounds great, but how do you actually do that? I mean, it seems like it’d be harder to do than, you know, and I’m thinking about my own personal situation, right? I’ve got, you know, different, uh, attorneys and accountants and you have put it all together.

It can be hard. And You know, I may have a leg up over some others because I’m in the middle of, you know, running these investments, but it is still very hard, right? I’m not an expert in taxes. I’m not an expert in asset protection and you know, how to structure the holdings of these investments. I mean, is that something that you help people with and kind of be the hub or how does that kind of work and how do you kind of find it?

Keith Blackborg: Correct, that is sometimes either something I will personally step into or I will help educate people on these elements.

There are certain people that will provide virtual family office services. This is an element. So I’m a CPA. I’ve syndicated stuff in the past. Um, primarily just interested in finding great passive investors. Now pull the community together with investors to help vet the deal. So it’s not just about me.

It’s about a community of successful people that are working on this stuff together. Uh, I officed with attorneys for five years. So I’m not a lawyer, but I’ve been around it enough to be dangerous. And so when you can start pulling these people together, I won’t know. No single person can know. The details of every strategy out there, but if you can have one person that kind of helps facilitate the conversation and you can start listening to everybody at the table, uh, your investment guy, your tax strategy guy, your lawyer, they’re all together.

You can hear the conversation back and forth and then start to, to, to give them some direction on where you want to head. 

Ben Fraser: So you mentioned that, you know, access to private, you know, vetted investments is kind of a key part of getting this thing rolling, right? And so for those that are maybe running a business, they’re not investors, they don’t have a network, they don’t have background in making these types of investments.

They’ve just been sticking it in, you know, ETS and the stock market, but they’ve heard, hey, real estate’s a great place to be, other types of alternatives. You know, talk a little bit about what, how does someone get access, right? I mean, that’s. You just go Google, you know, best alternative investments or what, what do you think is a good approach for people to, um, you know, find out more about this student education and to, uh, really, you know, choose the best ones.

Keith Blackborg: Yeah. So there are endless providers options on the internet. Uh, some will do great. Uh, some will not do great. And so you’re looking for a few things. One, you want to see people that have a track record and look at who they are, what they’ve done before. But then get into a deal and often the same folks will either have investment clubs or will have meetups with their investors, go to those groups and start investing in the community.

Ask those, those kinds of investors who else they invest with. And by building up that community, you start getting real applicable knowledge about who the good providers are. So the big thing is get into a community, talk to other investors who aren’t trying to sell you anything. Find where their best results are and then, uh, follow along with them, have a little peer group.

I believe you guys have an investor club where people can also meet other investors, right? 

Ben Fraser: Yeah. Yeah, we do. And part, part of the whole reason for the podcast is, you know, to help bring education and community around these types of things because I a hundred percent agree. I think. Building the network is the number one shortcut to saving a lot of money and a lot of stress and making the wrong choices.

Because what I, what I’ve seen so many times is as people get excited about the possibility of alternatives, right? When their kind of eyes are open, like, Oh man, I can not only get good returns, good tax advantages. Diversification, you know, not these huge volatility swings you see in the market. Like it gets pretty attractive, but then the first challenge they run into is, well, how do I find, how do I find good deals?

And so they mostly will talk with their uncle, you know, Jerry, who’s done some deals for a while. And, you know, some other people that they might’ve just heard about, but don’t really know. And it’s just kind of, they don’t have the network that they’ve invested in or built out. And so it’s just. You hope that you have some trustworthy people in your circle already, but that’s a pretty big hit or miss.

And so I 100 percent agree. And the cool thing is, as we’ve been doing this podcast, we’ve interviewed a lot of people that have communities like you, that you’re kind of building and doing events and other things that are trying to bring other passive investors together. Because the biggest challenge, like when you’re trying to, you know, vet a deal and, and do the, the track record, uh, review and.

Talk to the operator and understand the strategy at a certain point, you’re just, you’re having to trust you have to send the money over and you hopefully done enough that you hope you have a pretty good sense of how it’s going to go, but even still, like it might not and being able to have conversations with other people that have already invested with certain operators and, and have, you know, done it for longer than you have and have some, have some takeaways and, You know, that is so valuable because you can really shortcut the process by investing in that network.

And there’s so many communities popping up all over of people that are passive investors that are looking to deploy and share the things they’re learning. Um, so I, I love that idea and, and, uh, let’s talk a little about it cause you, you have done events in the past. I don’t know if you’re still doing them, but I don’t know if that’s, uh, something that people can be aware of as well if they check.

Keith Blackborg: Yeah, yeah. We’ll likely be doing our passive investor event. com, uh, out in late October, October 28th and 27th in the Dallas area. But as you were saying about doing due diligence, it’s about bringing that community together. And so we’ve got, when you’re investing in oil and gas still, I know in Texas. I don’t want to call them all scammers, but we, there are scammy ish funds in oil and gas in Texas.

I live here. I see them. And so for our doctors and lawyers trying to vet them, they don’t know anything about oil and gas, but we’ve got a, in our community, we’ve got somebody who’s the chief drill officer of a publicly traded oil and gas company. He’ll come in and do the technical analysis of it, evaluate those that give some confidence to the doctors and lawyers.

Simultaneously, we had a medical practice buying fund come through a while back. And so our oil and gas engineer didn’t know anything about that, but our doctors knew about medical practices. And so it’s. Bringing that kind of diverse experience together and help helping facilitate great events where people get to connect and grow organically together, along with a sprinkling of key insight and education like you guys are doing with this podcast helps bring up the, the overall awareness and growth of everybody and helps everybody, everybody become a stronger.

Passive investor and really make wealth a business. 

Ben Fraser: Yeah, I love that point because, you know, I come back to the mantra sometimes. I think it’s Warren Buffett that says, you know, invest in what you know, right? And I think that’s a good kind of idiom, but the limited factor there is what you know, right? And the reality is we can’t be experts in everything and nor should we be.

And if someone’s an expert in the medical field, they spent over a decade, you know, in school trying to learn these different things. And then. You know, even, uh, the business side of the medical profession is a whole different animal than just the medical profession itself. And so being in a community where they’re surrounded by other experts in different areas, you can leverage that knowledge to where you don’t have to be an expert and you can know enough to be dangerous, know, know enough to ask the right questions.

But now you’re getting insight from people that don’t have a dog in the fight or don’t have a bias, right, that are trying to sell you something. That can, uh, provide and, and share their expertise and, uh, help you, you know, make better decisions because of that. So I, I love that point that you, that you brought up where it’s, when you’re in these communities, you can pull from the expertise of other people in there and, and leverage that for your own benefit.

Unlocking the Power of Discounted Rollover Strategies

Keith Blackborg: And sometimes once you have a great deal, sometimes you’re looking to, how do I, Mary like investment attack strategy along with the investment strategy. And if, if you’re willing, I wanted to just share this, this quick discounted rollover strategy that most people are doing. Right. Love that. Um, and really this is about how to move money from a traditional account to a Roth account at usually a 20 to 80 percent discount.

So I’m sure, sure. You’re familiar with the apartments, multifamily investing. So, let’s say just for oversimplification, you buy in at an 80 percent occupancy with the apartment complex. There’s a 300, 000 net operating income, which is roughly what apartments are based, are valued off of. Let’s say.

Ben Fraser: Just to be clear here real quick, we’re using, uh, deferred, um, monies in a 401k or an IRA and a traditional, not a Roth, and so you’re investing into the apartment through a self directed account.

There’s And you’re buying an 80 percent occupancy. So kind of, yeah, go from there. 

Keith Blackborg: Perfect. Yep. Pre tax traditional funds. You’re, you put a hundred thousand dollars in six months in. We’ve, the financials are low, we’ve kicked out the non performing tenants. We’ve, um, we’ve also got a lack of marketability, lack of control discount for those familiar with valuations on family limited partnerships.

We’ve had an independent valuation done and they’ve said from an investor perspective, it’s now worth 50, 000. You do a rollover of that asset, not the cash at 50, 000. You pay taxes on the 50, 000, but then it’s rolled over into a Roth and it’s never taxed again. So you guys have that growth. Once it’s converted, we have an increase in the valuation.

You guys are selling a few years later. Now, you’ve got 200, 000 all within a Roth account and it’s like I said, you’re never paying taxes again. 

Ben Fraser: Okay. So yeah, this is pretty crazy. So let’s, let’s, let’s dive in this a little bit. So you’re coming in, you’re saying 100, 000 in two department deals. And for those that are listening on Apple, Spotify, wherever, um, he, uh, Keith is sharing a few slides here and we’re going to link to that at our, um, the website.

Uh, invest like a billion or the billionaire podcast. com and you can download these slides if you want to see the visual or go on YouTube, you can, you can see this as well. But so basically you’re investing a hundred thousand dollars into an apartment syndication. Um, it’s a value add deal. They’re trying to bring up occupancy.

And you’re doing that through, um, a tax deferred account. So you’re saying six months from now, they’re kind of, you know, cleaning out the, the, the bad tennis or, you know, uh, investing in the project, but it’s still kind of at the lowest point of occupancy. They haven’t finished the renovation plan. So, talk about this a little bit, cause I’m not familiar with you, you said family limited partnership valuations and other things.

So we work with a lot of IRA investors and we, I remember we, I know we have to give annual valuations. We generally just provide, here’s, here’s the cost basis of, you know, what you’ve invested and we’re in the middle of a renovation plan. So, you know, I’m not gonna, you know, do it, but actually might be better to give a lower valuation.

So how does that kind of work? Who, who, who’s the one doing the valuation? And how does this not kind of game the system to where you have liability down the road of IRS or, you know, someone coming back and say, Oh, you just, you know, manipulated the numbers. How does this actually happen? Um, when you’re, when you’re doing this valuation rollover.

Keith Blackborg: So it needs to be true, it needs to be real.

Uh, we’re not just quote unquote trying to game the system, but we are using the rules and tax strategy to our investment. Uh, let’s, let’s use a slightly different scenario, uh, a motel to apartment conversion. You buy an operating hotel, um, and so you invest a hundred thousand dollars in. And then six months later, we’ve shut it down after we’ve gotten the permit through what’s a shutdown apartment worth a whole lot less than what you paid for it.

Somebody can come in and say, Hey, risk is highest because it’s shut down or the apartment has less occupancy. And so we’re going to evaluate it from that perspective. And so the finances have likely taken a dip, which is a temporary part of the project, but they’ve truly taken a dip and the risk is higher.

But we believe in the team. We believe in the guys that are doing it. And so when they reopen it as an apartment complex and they’ve converted from that Moto apartment, there’s a huge increase in value, but now it’s all within the Roth. 

Ben Fraser: Wow. So who is the one doing valuation, right? Because from my standpoint, as an operator, we’re doing some of these value add deals.

I’m not thinking about my investors converging, right? I’m thinking about how to make sure this project performs well. So is this as an investor in the project? You need to be aware of this, um, and kind of drive that process. And, who’s the one doing the valuation? Is it the operator that provides that?

Do you engage a third party? How much does that cost? Talk about the actual people involved in how. 

Keith Blackborg: You engage a third party. Okay. Um, and it usually it’s either a CPA, an attorney, or somebody else that certifies that has a practice of, uh, valuing investments. And there are licenses you can get out there and depends in some cases on what kind of asset it is, apartments might be different than an oil and gas investment, et cetera, where for those of you that are familiar with state planning, you might have heard of a family limited partnership.

And so you can look it up, you invest, if you have a million dollars cash in a family limited partnership, is it worth a million dollars? Most people would think yes, but if I’m a creditor coming in and I don’t have access to the cash, I have the tax liability of getting a K 1 if I’m sued and get a judgment, but I can’t touch that cash for 10 years because of the structure.

Then maybe that 1, 000, 000 is only worth 70, 000, 700, 000, um, lack of marketability discount. Day two, when I’ve invested with you, that money is in your pocket, not mine. What’s worth more money, money in my wallet or money in your wallet with an IOU? And so day two, I can’t go out and spend that money or liquefy funds.

So there can be a discount associated with that. And so this is an independent person, separate from the syndicator, separate from me and the investor, and who’s coming in and saying, hey, based on these factors. I’m going to assign this valuation from an investor perspective. Not the project itself, uh, is now going to be appraised differently for banking purposes.

It’s strictly from an investor perspective. And then they would be the one to represent that in front of the IRS if they were to question that valuation. 

Ben Fraser: Very cool. So this is a third party. It’s not the, not the operator, not, not you coming, making up a value of what your account is worth now. Right.

Sounds like what you’re saying is. Even aside from the project performance itself, the fact that now you have transferred the funds to a third party, i. e. the operator that’s not you, there’s a lack of marketability discount that already reduces the value and then you add on to that if you’re kind of the middle of a renovation project, um, there’s a strong likelihood that as is value right now is lower and You can make that conversion to the Roth, so you’re paying the taxes at a lower valuation.

So you’re paying less taxes than you theoretically would have once the project is complete. And if the project continues to perform well over time, and now you have it in a Roth. Now, the gains that you get from that point on are all tax free. Am I, am I thinking about that right? 

Keith Blackborg: You’re right on. You’re right on. So part of what I’m doing is working with the syndicator on what the financials are going to look like, looking at it from an investor perspective, and then seeing what’s the best timing where we think there will be optimal discounts. Or a lot of apartment complexes right now, some of the guys I’ve invested with are going through capital calls.

And so that shows financial distress in many cases that there’s something that they need more capital. And so that could be a good opportunity for discounted rollovers. 

Ben Fraser: Yeah. I think that’s a great point is you kind of made the example of, you know, here’s a value-add from a hotel to an apartment.

Even right now. I mean, we have way higher interest rates than we had a couple of years ago when a lot of these deals were probably when you invested in them a couple of years ago. Obviously higher interest rates impact values in a negative way. Does that come into the analysis? Like, even if they’re not, absolutely.

Even if nothing’s changed from an operational standpoint, values have come down because of higher interest rates. Can, can that be a. 

Keith Blackborg: I feel, I feel like your light bulb has just gone off and it’s a really bright light as you look at all the use cases. Absolutely. That’s exactly how you can start to look at it.

And all those different factors in cases factor into that valuation. And you can even.

Ben Fraser: If you’re listening to this episode, go talk to Keith right now and go have a look at yours, because this is a real, real thing, right? If you invested in deals over the past couple of years. It’s a hard time right now.

And a lot of these deals are going to make it through and they’re doing capital calls or they have other ways to do it, but just by nature of interest rates being higher, that puts a lot of pressure on cap rates and that is hurting values in the short term if they are sold right now. But a lot of them aren’t planning on selling right now, right?

I’m not selling anything right now. I’m holding and I’m, I’m pushing through and this could be a great time, you know, even aside from what status the business plan is in. So that’s, that’s, this is really cool. I didn’t know you could do this. So, um, I don’t have a whole lot of tax deferred money. I just, I just keep rolling it all in real estate, but if I did, I would be doing this.

Keith Blackborg: Um, yeah. 

Ben Fraser: One other kind of, sorry, go ahead. 

Keith Blackborg: I was gonna say this, these kinds of strategies are where I actually started investing in retirement funds for a long time. I thought, I don’t want the government telling me when I wanna retire. And then I met somebody who had something like 50 rental houses in a Roth account.

I’m like, Oh, that’s pretty cool. He’s never paying taxes on that again. How do I do something similar, but with passive investments? And so you can truly become an expert with some of these, these passive investments and really grow these large Roth accounts. I’ve seen people, there’s several in my community that have multimillion dollar Roth accounts that are really specialized in making the most of it.

And. They’re not paying much in taxes, especially on the Roth accounts. 

Ben Fraser: So, what kind of nuance into the decision making, is this in process here? Because the downside is you have to pay taxes now, right? So there is, there’s a trade off, but you’re, uh, making the trade off for a potentially, hopefully, you know, better outcome down the road.

But I would imagine, you know, if you’re looking at a deal and, hey, they’re doing a capital call. Um, if it’s, if it’s kind of circling the toilet, you probably don’t want to make the conversion, right? Or is there a case to where, because ultimately you want a higher valuation down the road that the gains are not, are tax free, but is there a case to kind of take the risk either way and see if the deal performs or doesn’t perform?

Keith Blackborg: So if you think that the investment’s truly going to sink, so if you invested a hundred thousand dollars, the valuation comes back at 50, 000 and then it goes bankrupt down to zero. That’s a terrible deal. Cause you still had to pay 50, 000 on the taxable conversion. But if you know the team, you feel confident in the team, one of the deals I’m in right now, um, they have, they’re getting hit with interest rate caps.

The banks want more, uh, cash reserves and the syndicators like, Hey guys, I’ve got a large net worth. I’ve been writing, uh, eight figure checks for a while, but at some point, eight figure checks become very expensive. And they needed help. And so I understood, I believe in the team. Uh, I believe they’re going to turn around.

It’s just a thing of their market environment. They’ve had a great track record. And so that’s a case where I would actually do the conversion. If I’m concerned about it going bankrupt, I’m not going to do that. You don’t want to do it. 

Ben Fraser: Yeah. Cause you basically lock yourself in paying taxes and then you would have actually not had to pay taxes if it goes to zero because you have a loss.

So there’s. There’s that trade off. So it’s, you want it to go deal by deal, right? If you have an existing portfolio that you’re evaluating. Um, so this is, this is really, really interesting. Um, it’s very. Very interesting. 

Keith Blackborg: But, but to your point, when does it make sense typically doing traditional Roth conversions didn’t make sense last year, like in your fifties or more in your thirties, you’re more like you’re almost always wanting to do Roth and your forties.

It’s kind of a toss up, but there’s a brief visual. I wanted to just show, um, about how, if you are putting money into a traditional account, You let’s say over a few years, you’re putting in a hundred thousand dollars into your 401k, you’re getting that deduction against your W 2 income or your business income.

And it comes off. So you get that 100, 000 tax deduction, and then you do the 50, 000 rollover, where now you have to recapture some of that previous deduction. You’re paying taxes on that 50, 000, but you’re still 50, 000 net ahead in the scenario. And then once it goes into Roth and you’ve got all this future growth, that’s never taxed.

Like it’s the, the tax benefits just go up exponentially from there. 

Ben Fraser: Right, right. Yeah, that’s great. I mean, you made a little point on, you know, once you get past your fifties, it might not make sense to convert, but you know, it also depends what you think future tax rates are going to be too. Right.

If you think they’re going to be higher later on, you know, maybe it’s, it’s even still worth it to do this. You got to kind of make that analysis, but, um, yeah, no, this, this is great. Um, what, what other things are you, are you seeing right now with, with, uh, you know, just strategies and things that people can, can do, um, just to continue to level up and, um, Yeah. Yeah. Kind of making their, their wealth, uh, a business. 

Building a Wealth Business: Advanced Strategies and Community

Keith Blackborg: So I mentioned earlier there, there’s the synergistic professionals, I think, getting people, bringing people together and really coordinating all of that. There is, um, your access to your private investments. There’s your due diligence, um, looking at your advanced tax strategy overall, what you’re going to be, you can be investing through donor advised funds.

There’s so much you can do to structure it really starts with, with you kind of taking that step back of where am I at? Where do I want to go? How much money do I need to live the lifestyle I want and give the money I want and then reverse engineer the wealth I need. So if I know I can earn a certain percentage in one of your funds.

And I can spread it across a few of your funds, and I’ve got a million dollars and I can earn, I’m making up numbers, uh, 10 percent across multiple different funds with you, then I know. 10 percent off that million dollars. I can now afford at least a hundred thousand dollars a year. If I’ve got 2 million, I now can afford a 2 million lifestyle.

I think it really starts with taking a step back, looking at where you are, where you want that wealth business to grow. And then once you’ve reached that number where your work is optional, you don’t need to do it anymore. Then it’s just about playing the game. It’s about wealth optimization and letting it grow as much as you want and continuing to enjoy life and enjoy the journey.

Ben Fraser: Love it. 

Connecting with Keith Blackborg and Final Thoughts

Ben Fraser: Well, Keith, this has been really, really, uh, insightful and really love some of the things you brought today. What’s the best way for folks to kind of get a hold of you? I know you have some resources, um, uh, they can download, you know, some presentations. You have a, a little, I think workbook or some other things to talk about resources you have and then best places for, for people to find you. And we’ll put all these links in the show notes. 

Keith Blackborg: Perfect. Yeah, you guys are welcome. Uh, I’m at Welcome to learn about me, what we’re doing, and hopefully we get to work on something together here in the near future, maybe doing an event or something together.

I love you guys. I love what you guys are doing. And several of our community members have invested with you. And I like showing you guys as an option. So if anybody has any questions, happy to connect and with the link, you’ll, you’ll see, I’ve got a discounted rollover guide, the technical guide that you can bring to your professionals.

They can, they can help you validate the strategy, take action on it. But if you want help taking action on it, I’m also happy to help. 

Ben Fraser: Awesome. I’m assuming you have some of these resources of the valuation firms and that you can point in the right direction to help get this done. 

Keith Blackborg: So absolutely. 

Ben Fraser: Awesome. Well, Keith, thanks. Thanks so much. This is really, uh, really insightful and. Appreciate you coming on the show. 

Keith Blackborg: Thanks for having me.


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