Episode 104: Triple Net Tax Advantages with Matt Onofrio

Description:

Triple Net Leases are one of the most attractive vehicles for investors. In this episode, Matt Onofrio joins Tom to help us discover the advantages, risks, and rewards of triple net leases.

Looking for more on Matt Onofrio?

Website: www.wildmooseventures.com

Book: “The Insider’s Guide to Triple Net Investing”

Instagram: www.instagram.com/matt.onofrio/

LinkedIn: www.linkedin.com/in/matt-onofrio-651297161/

SHOW NOTES:

00:00 – Intro

02:10 – What Is Unique About Owning A Triple-Net Lease?

04:17 – How Does A Typical Walgreens Triple-Net Lease Work?

06:38 – How Are Loan Terms Different For Triple-Net Leases?

12:08 – What Are The Tax Consequences Of A Triple-Net Lease?

21:20 – What Happens If A Tenant Doesn’t Pay?

23:10 – How Do Capital Expenditures Impact Triple-Net Leases?

24:47 – How Are CAP Rates The Single Most Important Factor To Triple-Net Leases?

26:30 – Can You Structure Interest Rate Increases Into Triple-Net Leases?

Transcript

Announcer:
This is The WealthAbility® Show with Tom Wheelwright. Way more money, way less taxes.

Tom Wheelwright:

Welcome to The WealthAbility Show, where we're always discovering how to make way more money and pay way less taxes. Hi, this is Tom Wheelwright, your host, founder, and CEO of WealthAbility. So one of the really great real estate investments, I think, for a lot of people is a triple net lease. And a lot of people don't understand triple net leases. They don't understand what the benefits are, what the downsides are, what the tax consequences are. So today, you're going to get advice from an expert. Matt Onofrio, so good to have you on the show. Matt's been doing triple net leases for several years, but didn't start out that way. So Matt, give us a little bit about your background and how you ended up specializing in triple net leases.

Matt Onofrio:

Absolutely, Tom. Great to be here. Thanks for having me.

                My background is actually in medicine. So I did anesthesia prior, got a doctorate in anesthesia, and realized that a high-income job didn't really mean that my net worth was growing, and it meant that I was tied to this position because I was paying half of it in taxes. Right? So I started doing a lot of research on how can I build my passive income and those kind of things. And I came around to, after trying apartments and single family wasn't as scalable to match that higher income, so I got into triple net leases, which basically means that the tenant pays their own taxes, insurance, property management. And they're usually credit tenants, so it's a lot better than having-

Tom Wheelwright:

Yeah. So we're going to get really simple here, Matt, because you and I know all these terms, but that doesn't mean everybody listening knows these terms.

Matt Onofrio:

Absolutely.

Tom Wheelwright:

First of all, let's start with the basics. It's triple net, so that means net, net, net.

Matt Onofrio:

Right.

Tom Wheelwright:

So that means it's net of what? Three things, right? What are they?

Matt Onofrio:

Taxes, insurance, and then property management. There's some variations on net leases. They're not all created equal, but those are the main pieces.

Tom Wheelwright:

So basically, the only thing that the landlord is responsible for is the mortgage payment.

Matt Onofrio:

Correct.

Tom Wheelwright:

That's the idea behind it, right?

Matt Onofrio:

Yep.

Tom Wheelwright:

This is truly what we would call mailbox money. The idea is that you should never have to… You shouldn't have to do anything. I want to get into that in a little bit because I know sometimes you do. But the general rule is, particularly if it's a really good tenant, like a Walgreens. I know Walgreens does these. Walmart does them. Safeway does them. So there are some big tenants that you go… You know? They have better credit than you do. So when you talk about a credit tenant, what do you mean by that?

Matt Onofrio:

Yeah. So one of my tenants is a FedEx distribution facility, and so you can look at… They're publicly traded, so if you want to know how they are… So you have local, regional, and national credit. So I want to know how well my tenant's doing. If they're publicly traded, I can Google them and know pretty much immediately how their stock's performing. If I'm looking more at local, regional, then I'm needing to look at the tenant's financials themselves. How are the store sales doing, or traffic counts, foot traffic counts? Those kind of things. There's other ways to measure it.

Tom Wheelwright:

So let's kind of walk through a typical triple net lease. Pretty much you're talking about a single tenant. Right?

Matt Onofrio:

Mm-hmm (affirmative).

Tom Wheelwright:

So let's take a Walgreens because that's the simple one. It's actually the one that I used in my book, Tax-Free Wealth, as a way to really… You've gone through the… Like you did: multi-family, you've gone through the commercial, you've gone through these others and you go, “You know what? I don't really want to spend any more time at it. I want to retire or I really want to expand my portfolio, but can't do it in the syndication world because I can't actually put enough money into syndications, et cetera. So I'm going to go to the triple net lease.” So let's kind of walk through a Walgreens for example. Let's just walk through a Walgreens deal. Kind of what does that even look like?

Matt Onofrio:

Yeah. So I've done four of them this year. I've done four Walgreens. The beauty of Walgreens is they have to report store sales per their lease. So if I'm going to underwrite a Walgreens, really, especially when you're looking at retail, I want to know how many vehicles go in front of the building per day. You can use a technology called Placer.ai, which goes off of your phones. You can know how many people walk in out of the building every day and rank it against all the other stores. Then I'm going to look at what the Walgreens does and they'll be able to… It depends on the lease, but usually you can get at least three years of the store sales to see how they're performing. And then you have a rent-to-sales ratio. So you can see basically if they're going to be able to keep paying that.

                And the benefit is some of these stores do services other than just prescriptions, which was helpful in some of the neighborhoods that they're in. You know? The downside to Walgreens is a lot of times they're signing very, very long leases, but there aren't rent bumps. So if you're asking me why I don't like them, they'll sign a 60-year lease, it'll start with like 25 years, and then it's a bunch of five year options after that, but it's usually flat rent. So it's more like a bond. Right? And then you're more focused on what debt am I going to get on the property? And it's all an arbitrage of the debt to the rent. However, yeah, super strong credit, they're doing really well. So at that point you're just looking at what's the delta between rent and debt?

Tom Wheelwright:

And in that case, typically Walgreen corporate is guaranteeing these. Right?

Matt Onofrio:

Absolutely.

Tom Wheelwright:

So for example, if… And I've seen this happen in my neighborhood. A Walgreens will decide, “I don't want to be in this location anymore. I want to move my location.” That doesn't mean they stop paying the lease. Right?

Matt Onofrio:

Correct. Yeah. Even if the location is dark, they're going to keep paying. They have the option to sublease it many times. So maybe they're going to put in a Dollar Tree or something like that. But yeah, they're going to keep paying that lease forever. And then you can think about how you're going to repurpose the space.

Tom Wheelwright:

Which that's the benefit of that.

Matt Onofrio:

Mm-hmm (affirmative).

Tom Wheelwright:

So you got the option as soon as they stop in there. Presumably you have an option to re-lease if you want to get out of that lease, but knowing that you've got the security of that long term lease, if you know-

Matt Onofrio:

Correct.

Tom Wheelwright:

You know? Like the economy's bad or interest rates are bad or whatever. So let's talk a little bit about… And we're getting right into this and I love that. Matt, let's talk a little bit about loans because I've always felt like the loan terms are one of the most important part of any kind of real estate acquisition. We tend to focus on… You know? The real estate people will tell you it's location, location, location. But those of us that do a lot of real estate, we really know it's the debt, debt, debt is really what it comes down to because like you say, “It's that arbitrage on the debt that actually makes it worthwhile.” Otherwise, it's a really low rate of return, particularly when you're talking about a AAA, like a Walgreens. So let's talk about what… First of all, when the bank looks at that loan, are they looking at your credit or are they looking at the tenant's credit?

Matt Onofrio:

Right. So assets offset liabilities. So they're going to look at the primary repayment source being the tenant and their credit. So they're going to risk rate the loans in a certain way. So obviously that's very low risk on that kind of a loan. They will look at… A borrower can't add to a deal, but they can subtract. So if they look at a borrower and they have some problem, that could maybe subtract from the loan, but in general they're not going to add to it. They're more looking at the tenant. And really, especially during COVID, the main buildings that I'm pursuing are like grocery-anchored tenants. We do a lot of industrial. Those kind of things. But then as far as the lending goes, usually we're able to get 80% leverage, 25-year ams, rates are under 4%, we may see a little bit of an uptick in rates.

                But if you have a really long lease, like let's say you get a 10 or 15-year lease, you could potentially get interest only. You know? I know a guy locks his rates at 3.5% interest only for 10 years. There's different… The five things you need to pay attention to on a loan are origination fee, the rate, the amortization. Is there a prepayment penalty? So prepayment can be really important. And usually like, I'm okay with having a prepayment on a refinance, but not on a sale in case you ever want to exit. So that just protects the bank. Right?

Tom Wheelwright:

Right.

Matt Onofrio:

And so there's different things you can negotiate with the lender and a lot of it's relationship based. And then once you… You know? Are you local to the deal? Those kind of things. So that's some of the times what we can help people with.

Tom Wheelwright:

So let me ask you this. So how important is it that you as the landlord, you as the owner, have good credit when you're talking about a Walgreens and that type of a tenant?

Matt Onofrio:

It's significantly less, I guess, less important. You know? Commercial and residential are kind of two different worlds. Right?

Tom Wheelwright:

Right.

Matt Onofrio:

When you're buying residential, I mean, especially if it's single family that's seen as a liability, as you know, we know that Robert Kiyosaki talks about. But it's just these are much more stable. So you do have to… I would say the first one is a little bit more difficult, but after that, it's kind of like credit. Right? Once you have one building, they want to lend more to you, not less.

Tom Wheelwright:

So how dependent are they on your assets? So is this typically a recourse loan or a non-recourse loan? Are they looking to you as the borrower to repay this or are they looking solely to the property?

Matt Onofrio:

So that depends on how much you're willing to put down. If you're going to get 80% from the bank, it's going to be recourse. You know? If you're willing to put 30%, 40% down, then there are non-recourse options that would be more like CMBS debt. I have tended to be a little bit more aggressive being younger, of, “Hey, I'm willing to sign personally on the loans,” but if somebody's older and they maybe want to be a hundred percent not have recourse, then that is an option. You just have to leave more equity in the deal for the lender.

Tom Wheelwright:

And then you were talking about 20-year ams. So for those of our listeners who aren't familiar with that term, it's amortization, which doesn't mean it's a 20-year loan. Right? That means simply that your payment is based on it being amortized over 20 years. But typically, don't most of these loans have balloon payments?

Matt Onofrio:

Correct. And that's the kind of the fifth item when you're negotiating bank terms, and that is the term of the loan. Most of them are five years. And the banks… Basically, the bank is locking in for a period of time while their rate may change with the feds. So a lot of times when they're giving you a rate, they'll say, “It's the fed plus 2.5% or whatever number it is. Right? So they basically will lock it for a certain period of time. You can get a 10-year lock period, but the rate will be higher for that. So most of the time it's a five-year balloon. And at that point, a lot of people, that scares people. But really all that means is, “Hey, we may have to adjust the rate at that point.”

                But you would've paid down debt, so the SIM payment, even if… Let's say the rate goes up a percent. It may be a similar overall payment because you're paying… You have a lower principle amount even if you have a higher rate. Or you can go and renegotiate with another lender or sell the property. Do that kind. And it's a natural decision point because the lion share of that appreciation's going to come up front. So you may want to trade at that point because when you 1031, your cost basis obviously stays down and then you're able to get another hit on bonus depreciation on the next property.

Tom Wheelwright:

So we're going to back up a little bit here. Okay?

Matt Onofrio:

Yeah.

Tom Wheelwright:

Again, I'm not assuming that people know bonus depreciation, 1031, et cetera. So let's talk a little bit about the tax consequences. I have a little bit of knowledge in that.

Matt Onofrio:

[crosstalk 00:12:04]. Let's go.

Tom Wheelwright:

So let's go through that because I actually think that there are some different tax consequences to a triple net lease than there are to other real estate purchases. But of course the big tax benefit for real estate is depreciation. And in 2022, we have a very big benefit called bonus depreciation, which means that somewhere, literally between 20% and 30% of our purchase price is going to be deductible in the year we buy property. And we have to do what's called a cost segregation, which means you hire an engineer, you hire an accountant, and they go out and they actually do measurements, they do cost analysis, and they make sure that they've got a big thick report that should the IRS ever come knocking on door, you can hand them the report and say, “Here you go. Here's our cost segregation. This proves that this is what this allocation should be.”

                The reason we're doing that is because when you think about a… When you buy a property, you're really buying four different parts of the property. You're buying the land, which doesn't get depreciated at all. You're buying the building, which in this case is going to get depreciated over 39 years because it's commercial real estate. And then you're buying the land improvements, which some cases you get up quite a bit, particularly in a triple net lease because you've got all the landscaping, you've got the outdoor lighting, you've got the outdoor parking, you've got all sorts of things. And that qualifies for bonus depreciation. And then you also got the contents, which you may not have any.

                So that actually, that's an interesting one for triple net leases because in a lot of these cases… I mean, take a Walgreens. They tend to find a piece of land, then they will build their building, and then they will sell it and lease it back. And they may not be selling you any of the fixtures. They may put all those in themselves. So that of course depends on the tenant. You know? Whether they're putting them in, whether you're putting them in. Of course, if you're putting them in, you get a deduction for that. That's bonus depreciation. If they're putting them in, they get a deduction for it. S you know? That's the big key.

                So the question is, “All right, so down the road, when we sell that property, some of that depreciation, not all of it, but some of that depreciation, the building depreciation particularly, or the land improvements, there could be some recapture.” Now it's fortunately it's at 25%. It's not at 37% or some higher rate. If that comes into play in 2022 or beyond, it is an issue that you are going to… You know it's temporary, right? So if you're only holding up for two or three years, you're going, “Okay, I'm going to get this. I'm going to get the cash in advance for two or three years.” And then basically, I'm not going to pay all of it back to the government. That's a good news because I've got that 12% differential. If I'm in a 37% tax bracket, I'm paying back at 25%, that's a win even if it's two years later.

                And this is something that a lot of people don't understand. And this is another reason why during bonus depreciation times over the last few years, Matt, we have found a lot of people not doing a like-kind exchange, a 1031 exchange, which means you sell the property and you buy another property equal or higher, and then you don't pay tax at all until you sell that property. And you can actually do that until you die. And then that actually goes away. So that's in chapter… That's in my book. We talk about that in Tax-Free Wealth.

                But the reality is that with that bonus depreciation sometimes we're better off actually not doing that like-kind exchange. And I guess one of the benefits though, Matt, that you would find with a triple net lease is it's pretty easy to do like-kind exchange. Right? Because you're not talking about… You don't have multiple investors involved in it. You don't have to worry about syndication. You don't have to worry about any of that. You have complete control over buying and selling that piece of property.

Matt Onofrio:

Absolutely. And I think that's one of the things… I have a book coming out as well. And I encourage people like, “Hey, control is why we get into real estate.” Control of our time, control of our taxes, control of all that. So if you own the property, like you said, a hundred percent yourself, you decide which year you're going to buy or sell and how it's going to affect you in that tax year versus being some LP and a syndication and you're just along for the ride. So I absolutely agree. And there are a lot that you can trade into. And when you trade, then you get to redo bonus depreciation. So [crosstalk 00:16:36]-

Tom Wheelwright:

Well, as long as you're not doing the 1031, that is correct.

Matt Onofrio:

Right.

Tom Wheelwright:

So you do a 1031, you don't get to take the depreciation twice. So I want to be really clear on that.

Matt Onofrio:

Right. Right, right.

Tom Wheelwright:

You know? Whatever depreciation you took, you don't get to take that again. However, if you sell it, recognize the 25% capital gain, you can get a 37% bonus depreciation on the new property. And that's why sometimes, certainly for 2022, we still have 100% bonus depreciation on the land improvement in the contents. And in 2023, that goes to 80%, 60%, and then down to 50% going forward after that. But one of the nice things, of course, since 2017, is this is allowed on used property. That was actually the big change in 2017 for bonus depreciation. People think, “Well, we went from 50% to 100%,” but the bigger change was we went from only new property to used property, which means that you can be doing this with-

Matt Onofrio:

That's huge. Yeah.

Tom Wheelwright:

… triple not leases. You know? It used to be, yeah, if you bought a Walgreens and it was brand new building, no problem. But if it had been… You know? If you're buying a used, like an industrial space, you're buying a… You know? You're doing a triple net lease that's in the middle of the lease term, something like that, you didn't used to get that. But we do get that right now. So we do have a bit of a window of opportunity here with the bonus depreciation.

                There are a couple of other tax issues that I might just kind of raise for consciousness purposes. We have this qualified business income deduction, which after that first year becomes important, because in the first year we're not going to get it because we have a loss. But in the second year we might because we might have actually positive taxable income from that property. And that 20% qualified business income deduction might be beneficial. Here's something that everybody should be aware of. The IRS says it does not apply to triple net leases. So that is not something you're going to get in the triple net lease world.

                Now, if you're doing this on a regular basis, you don't care because you're buying a triple net lease every year and you're never going to use that anyway. But for those of you who are thinking, “Well, this is my retirement, and I'm just going to sit on this Walgreens lease for the next 20 of years while I'm retired,” that is going to become… Actually, just know that you're not going to get that deduction. The other side of it is this passive versus active question. Do I get the deductions currently or do I have to wait until I sell the property to get the deductions? And that actually depends on whether you have other active real estate. If you only have triple net leases, just to be clear, you're not going to… These are going to be passive losses, which means, doesn't mean you don't get the loss, it means that you don't get to use the loss until you have passive income.

                Well, here's the great thing about this still, this idea, Matt, is that let's say that you got bonus depreciation on, let's say, a $10 million building and you got $2 million of bonus depreciation. Okay? Then when you sell it, let's say you sell it five years down the road. And you're going to pick up… Let's say you end up picking up that $2 million as capital gain. Well, here's what's going to happen. The depreciation that gets freed up at that point, that $2 million loss, that offsets your ordinary income, your 37% income, not your capital gain income. So you actually get taxed at 25%. You get a deduction at 37%.

                So even though you're postponing, you're doing what we call conversion. And let's say you have a high income business or a high income job, something like that. At that point, now you may get to offset that ordinary income against your… You get to offset that ordinary income with a depreciation and only be taxed at capital gain. So it's something that most people don't realize that this is a benefit even if… So some people will say, “I'm not going to do a cost segregation. I don't get the benefit.” Well, that's not true. That's fundamentally false because you will get it. You might just get it a few years later.

Matt Onofrio:

Right.

Tom Wheelwright:

You know?

Matt Onofrio:

Or if you're a real estate professional, then you could go to zero. Right.

Tom Wheelwright:

Or if you're a real estate professional and you aggregate, then you can get it for sure.

Matt Onofrio:

Mm-hmm (affirmative). Right.

Tom Wheelwright:

So that's for sure. So let's talk about some of the risks, if we can, of the triple net lease.

Matt Onofrio:

Sure.

Tom Wheelwright:

Let's start with the tenant who doesn't pay. Okay?

Matt Onofrio:

Right.

Tom Wheelwright:

So how do you mitigate that risk?

Matt Onofrio:

Yeah, I think the two biggest risks in real estate period would be vacancy and CapEx. Right? So vacancy is, obviously during due diligence, we're going to be checked, screened very thoroughly for both of these. Right? So when I buy any deal, I want to make sure that I have under market rents and I'm buying the building under replacement value. So we're going to run comps. And in commercial property… You know? In residential, you have Zillow, HomeSpotter, those kind of the things. In commercial, you have LoopNet, CREXi, CoStar. So we can pull comps and know what are the average rents in the market, what are the average price of buildings, those kind of things. So we do a lot of heavy due diligence that way. And you know? Real estate is location, location, location. A lot of my real estate is in Rochester, Minnesota, home of the number one hospital in the world, Mayo Clinic, and so we're buying in locations where we could have alternate uses for the property.

                Got it.

Tom Wheelwright:

Which is really great. So those are some of the high level points.

                Hey, if you like financial education the way I do, you're going to love Buck Joffrey's podcast. Buck's a friend of mine. He's a client of mine. He's a former board certified surgeon and he's turned into a real estate professional. So he has this podcast that is geared towards high paid professionals. That's who he's geared towards. So if you're high paid professional, you're going, “Look, I'd like to do something different with my money than what I'm doing. I'd like to you get financially educated. I'd like to take control of my money and my life and my taxes,” I would love to recommend Buck Joffrey's podcast, which is called Wealth Formula Podcast with Buck Joffrey. I hope you join Buck on this adventure of a lifetime.

                So explain what you mean by CapEx.

Matt Onofrio:

Yeah. Capital expenditure. So there's different stages of lease. You got a gross lease, single net, double net, triple net, absolute net, or zero net lease, and then you've got a ground lease above that. Right? So there's different stages of net leases. But a lot of times you'll have repairs being able to be passed through to a tenant, but replacements may be on the landlord or they may be amortized back to the tenant. So let's say you have to do a roof. In some triple net leases, the landlord would pay for that, and then bill it back to the tenant over the usable life, which is 25 years. So in some scenarios that can actually create a win-win where all of a sudden that's additional revenue that's coming in. So let's say I put money in, but now I've got this extra money that's coming back. So in some scenarios, that can be then capitalized in the value. Your building can be higher.

                So the beauty of the net lease property is you can… There are some levers that you can pull to restructure, and ultimately it's a stream of income. So when you strip it down to its basics… You know? A tenant like Walgreens may not be as amenable to something like this, but you can get really creative. And the exponential growth factor in commercial real state is NOI divided by cap rate equals the valuation. So every dollar I increase to my NOI is an exponential increase in value on the property. And so that's how you can see people get really wealthy doing this.

Tom Wheelwright:

And those of you who didn't quite follow that equation right there, go back and listen to this podcast over and over again because cap rate, that capitalization rate, in my mind, is the single most important aspect or single most important computation to understand, single most important number to understand in real estate. And it doesn't matter what kind of real estate is. The reality is here's something to remember. All investments, all investments are priced based on a multiple of cash flow. Okay? So it all comes down to cash flow. So it doesn't matter if you're in the stock market. We call that a PE ratio. It's basically a cap rate. Right? In real estate, we call it a cap rate. In business, we call it an earnings multiple. It's all the same. The only place it's not is when you're in speculation like single family homes where it's based on basically the speculative value based on supply and demand as opposed to based on any kind of cash flow because it's not necessarily you're not competing against cash flow investors.

                But in any kind of cash flow, that's what it is. So go back and make sure that you understand cap rate, make sure you understand loans. And I think this point you made, Matt, about the loan risk is you are taking the loan risk. Right? So if you're saying five-year loan risk and you're going, “Okay, that means we need to refinance.” And that's why I presume coming in at that lower… You know? You're in below market rental rates, lease rates so that when you know that that goes up, you do have and make sure that you have that option of increasing the rent to cover that additional interest rate. I know in Walgreens you're not going to get that, but do you typically build that into the triple net lease, Matt?

Matt Onofrio:

Absolutely. So most leases will go up by CPI. A lot of which is on average of maybe a percent and a half a year. However, this percent inflation's this year, it's going to be like 6% or 7%. Right? So I sold a pallet company to a couple and instead of the one and a half regular percent, they're going to get the 6% or 7% bump in their rent. So looking at your pro forma or where things are going, making sure that it either steps up every year. Or maybe you go five years and then get a jump. So maybe every five years you're getting a 10% bump in your rent would equate to that 2% annual increase so that… You know? The way that we make money in real estate is cashflow, loan paydown, depreciation, and appreciation. Right? So absolutely something that we need to pay attention to.

Tom Wheelwright:

Absolutely. Absolutely. Now, you have a new book coming out. Right?

Matt Onofrio:

Yes. The Insider's Guide to NNN Investing should come out in September, but we're going to get pre-order page up and all that kind of stuff.

Tom Wheelwright:

That's awesome. I think it's great. And Matt, if we want to learn more about you and triple net leases, where do we go?

Matt Onofrio:

mattonofrio.com or on social, matt.onofrio. It's spelled O-N-O-F-R-I-O on Instagram. That kind of stuff. People can follow there and we'll be giving updates and with the book release and everything.

Tom Wheelwright:

That's great. So Matt Onofrio, very great to have you on the show. I'm a big fan. As anybody who's read Tax-Free Wealth knows, I'm a big fan of triple nets. At some point because it means that you don't ever have to cash out. This is the important thing. Let's say you start with single family homes, and then you maybe go to a multifamily. And then at some point you go, “Well, you know what? I don't want to be involved at all. I just want to retire.” That's where the triple net lease comes in. So you really don't ever have to cash out of your property. Just know that. You never have to say, “Well, I'm going to sell my property and pay of those high taxes,” because as we all know, once you… If you own that property when you die, you get a basis step up.

                Okay? That was a big topic this last year in the legislation, the Build Back Better legislation, about do we get this basis step up. There's been several attempts over the last 50 years to try to eliminate that and it never happens. I think it's here to stay. I think it's very clearly here to stay. And that means that you can stay in real estate your whole life. You can always borrow against it. You can increase your loan, you can do cash out, [inaudible 00:29:01]. And if you get… I presume, Matt, that if you've got a Walgreens and it's got 30 years on it, and 10 years down the road, I presume you can probably borrow more against that and refinance that at some point and pull some cash out.

Matt Onofrio:

Tax-free.

Tom Wheelwright:

Tax-free. That's right. Debt is always tax-free. So just remember that. You know? Real estate is actually a preferred investment by the federal government. The federal government has said, “If you do this with real estate, we want you to do it. We're going to partner with you. We're going to share the costs and we're going to share the profits.” And that's the deal. That's the partnership with the federal government. And you get to be an active partner while having a very, very, very passive… Not always. I mean, you still can have tenant issues.

                But remember that when you are really focused and get really nearly focused on what you're doing in your investing. And I love, Matt, that you are specialist on triple net leasing. This is what you do, and where I'm a big fan of that. You know? A niche will make you rich. And you get to the point in your life where you go, “You know what? I want to do triple net,” definitely go to the Insider's Guide to NNN Investing. And remember that when you do get specialized, when you do get good, you really do have good people around you. You're always going to make way more money and pay with less tax.

Speaker 1:

You've been listening to the WealthAbility Show with Tom Wheelwright. Way more money, way less taxes. To learn more, go to wealthability.com.