#78 - Lifestyle Investments: Leveraging Seaside Property for Passive Income with Casey Roloff

[00:00:00] Hey, welcome back to Passive Income Pilots every one another week here learning about financial and investing education

[00:00:07] I'm Tait Duryea here with my buddy Ryan Gibson, what's up Ryan?

[00:00:11] Not much, Tait good to see you.

[00:00:12] Good to see you.

[00:00:13] Congrats on your sister and her wedding.

[00:00:16] Thank you, two kids in one summer, I tell you what.

[00:00:20] Yeah, it's been a good wedding season for you, I guess.

[00:00:22] It has.

[00:00:23] It has.

[00:00:23] It's wedding season for sure and it was beautiful.

[00:00:25] Nice.

[00:00:26] Well, I'm excited today about the guest because we want to show you a real world example of how you can invest in stuff that we talk about on this show.

[00:00:37] So for example, we talked, I think an episode number three or four about opportunities zones and everybody's probably like, what the heck is that?

[00:00:46] And we've also talked about self-directed IRA investing.

[00:00:49] We've also talked about using your life insurance to actually invest to leverage invest in real estate episode 70.

[00:00:59] Yeah, episode 70.

[00:01:00] So if you haven't listened to episode 70 maybe you want to rewind and go back to that episode to learn all about how to leverage your life insurance to invest in real estate.

[00:01:07] Get a better multiple and get a death benefit which is fun.

[00:01:11] And then we've been talking a lot about on the show, the rental, the short term rental loophole tax loophole big time.

[00:01:19] And then we've also talked about depreciation and cost segregation. Well, guess what?

[00:01:24] This episode smashes all that stuff together.

[00:01:27] And we had a really fun story.

[00:01:30] Yeah.

[00:01:30] Casey Rolloff is an interesting guy.

[00:01:33] He's built an entire town on the Washington coast called Seabrook.

[00:01:38] Bought the acreage and started from nothing 25 years ago and has turned it into this incredible little community that Ryan, you have vacation there.

[00:01:48] So while this might seem, you know, if you're at Lannabase or you're on the East Coast, this might seem like a far-flung thing but great opportunity to to look at sort of a turn key investment product that sort of like the serious episode is more of a lifestyle print play that has a tax component to it.

[00:02:07] We're certainly not endorsing this investment. We're not trying to sell Casey's town here, but it's a really interesting could be solution for those who want to take advantage of that short-term rental loophole and don't want necessarily want to get their hands dirty finding that that STR and getting a bunch of sweat equity. So Ryan, I know you stayed in Seabrook.

[00:02:27] It's cool. It's an amazing little town.

[00:02:30] Yeah, I mean, who's run into somebody who's built an entire city literally and you know that's the interview guest but you know, take you bring up a really good point which is you may listen to this episode.

[00:02:40] You might be thinking why would I want to invest in Seabrook? We're not endorsing this investment at all though it's a great place to vacation. I've been there twice.

[00:02:47] But you know, whenever I go visit a place, I always think like who built this place? How did it get founded? How did it get started? How can I invest there? Then you walk into the front office or you look at the real estate listings in a community town and you see a million dollars for a house.

[00:03:01] And you might be thinking like how could I ever pay a million dollars for a house in a resort town?

[00:03:08] And you might be thinking like the only way I can do that is to save up, you know, for a three or four hundred thousand dollar down payment put that money down and then rent it as a rental strategy.

[00:03:18] And what the point of this episode is to show you that you might have considerable tax savings because of where this community is located inside this opportunity zone.

[00:03:30] You might be able to use the short-term rental loophole in addition to that to shield some of your taxable income from Delta or from United or from Hawaiian or wherever you're working.

[00:03:41] And then also, it's going to give you the option potentially as well to maybe use your self-directed IRA or your 401k whatever it might be to self-direct into to buy this or leverage your life insurance strategy.

[00:03:56] All these things kind of converge on something like this and at the end of the day you end up with a really cool rental property that you might actually want to personally use.

[00:04:05] Now again, this might exist on the east coast. They might have this down in Florida. They might have this down in the southwestern portion of the United States.

[00:04:13] But here's a real look at an opportunity zone investment that happens to be the only seaside community in Washington and you can take advantage of all these tax strategies and investing strategies that we've talked about on the show.

[00:04:28] So that's why when I bumped into Casey when I was touring Seabruck or walking around my family, I was like, I got to get this guy on and just talk about how you can take all these strategies that we're talking about on the show and combine them all into one.

[00:04:44] And then all of a sudden that million dollar house maybe becomes like 500,600, 600,000 when you add up all the tax benefits and you add up all the income you can earn from that and you go, oh, that's actually a lot more achievable potentially.

[00:04:56] When I look and use all the tools in my toolbox that we learn on passive and compilates definitely. And it's also an asset that you can enjoy as something that your family enjoys.

[00:05:08] You know, it's very much like our episode about the airplanes. It could be a lifestyle asset. You know, investing doesn't always have to be how do I get the highest IRRR.

[00:05:18] You can also be about, hey, how can I make a strategic investment that over the long term will appreciate and I get to enjoy along the way. So just something to think about when you're thinking about a long term legacy asset where the the more you're going to melt away for the next 30 years.

[00:05:34] And then you own that asset outright something that could work for your strategy just to get the ideas rolling and and the creative juices flowing. So in any case, it's a super interesting story.

[00:05:47] Let's get to the show.

[00:05:48] Casey so nice to have you on the show. I had the opportunity to go vacation in a community that you built in Seabrick Washington. So thanks for coming on.

[00:05:57] Yeah, appreciate being here. I'm excited to talk about our story.

[00:06:00] Yeah, so what do we go ahead and kick that off? I mean, how did you go about building a seaside town in Washington? What one of the only seaside towns in Washington?

[00:06:10] Well, it was kind of an unlikely journey. I was a real flaky kid in high school and met met my misses right and decided to get my act together. One off to community college wanted to get my four year degree at UPS and to Coloma.

[00:06:26] But tuition was too expensive. So I started a house painting business and but I didn't have any money. So I got $1,000 home depot credit card. I bought some ladders and you know rollers and brushes and all that stuff and ran it up a spray machine and painting my way through college.

[00:06:43] I got a business degree. I got married about that time and then moved down to the Oregon coast.

[00:06:49] But the best thing was we had no development background or construction background and so to actually allow us to look at development in a new lens and I grew up on a cold sack.

[00:07:02] And anything I wanted to do, I would have asked my mom or dad like, hey can you drive me here? Can you take me over to my friend's house?

[00:07:08] It was all drive to and my wife Laura grew up in a neighborhood in Portland where she could walk and bike everywhere and she'd like full independence. She didn't need her parents really to go go places.

[00:07:21] And so I was kind of blown away by that and thought like when we raised our family, I want them to live in a place like this. That all started to kind of purcolate.

[00:07:32] And we got into house design. We designed our first house, you know, no formal background but we kind of want to be architect. So we sketched our first house after looking a lot of houses that we loved in old neighborhoods and things like that.

[00:07:47] And designed a house and we needed $150,000 to build it which we didn't have. And so we went out looking for a loan, the banks laughed at us because we had no experience, we were fresh out of college.

[00:08:00] And then I went to one of the doctors that I had painted as house and as office building. I said hey do you know how I can borrow $150,000?

[00:08:09] Does that absolutely we have this high risk real estate fund out of our pension and we'll loan it to you for 14% interest.

[00:08:18] Anyway, it was all we could find and we were able to build the house. It was spec so we didn't have a buyer for it which is even you know ads even more more risk.

[00:08:29] But thankfully it sold very quickly and then we had people just approaching us saying hey we've got this lot over here we designed and build this house here and we're like oh sure you know.

[00:08:38] And so we basically created a custom home building business and for the next five years and then in 1999 we thought well what if we could design our own neighborhood and how would we go about doing that.

[00:08:51] And all we could think about were the you know again the old neighborhoods that we loved the super walkable at alleys and narrow streets and and you know shops and restaurants and then close proximity.

[00:09:03] And we learned about this place called C-side Florida and most people especially from the west coast have no idea what it is but if you saw the Truman show.

[00:09:13] It was actually filmed and C-side Florida.

[00:09:15] Which which was you know bittersweet right it gave it a lot of exposure but it also made people think oh it's this fake Hollywood set but it's actually a real place.

[00:09:25] And if you were to go there today I feel there's nothing like the what it you know look like on the Truman show.

[00:09:31] In fact a lot of the buildings were fake in that in the then the movie they were props but because it was so early on.

[00:09:38] But anyway the town ended up being the design of the decade and time magazine people travel from all over the world to see and learn about C-side.

[00:09:47] And the story of C-side is really just that they brought back the art of town building.

[00:09:54] Up until 1920s when the car was introduced all we did was build walkable compact mixed use towns and villages.

[00:10:03] So the most beautiful places and the world most desirable places in the world were all built before the automobile they weren't built after the automobile.

[00:10:10] And so they're just like why did we stop doing this these places just become more and more valuable places like Nantucket in Santa Barbara and Carmel and Boseman Montana.

[00:10:21] Like these are the cool places that everybody wants to be but we stopped building them essentially.

[00:10:26] So we learned about the art of town building and they basically took us under their wing and gave us the playbook on how to build our own town.

[00:10:34] So we race back to the Oregon coast we were like 27, 28 years old at the time.

[00:10:40] We found this piece of property was 10 acres and it was it had been for sale for like 10 years nobody wanted it it was next to an RV park in a mobile home park.

[00:10:50] And we thought well this is it that we could do a little you know kind of test it see if this will work here.

[00:10:55] And the doctors ended up putting equity into my real estate deals and so they put in about 350,000 we scraped up about 75,000.

[00:11:04] But we still needed a 1.4 million dollar loan.

[00:11:08] And so once again reached out to all the banks say hey would you guys want to do this neighborhood we need only one point four million dollars.

[00:11:15] They said oh case case you know we're doing your favorite you do not want a development loan.

[00:11:22] The average days on the market at that time and in that community was 270 days on the market you can imagine that you know anything about Seattle's what.

[00:11:32] One day is or something like that but yeah 270 days in the market there was a glut of inventory lot of failed developers and so they really did think they were helping me by not you know proving alone.

[00:11:43] And I said well the reason nothing is selling is because nobody's designing anything well enough and people are thirsty for this walkable mixed use you know can meet more community minded design.

[00:11:56] And they're like yeah get out of here and so I ended up finding a broker who linked us up with a bank and southern organ you know probably five or six hours away from where we were you know developing.

[00:12:08] And they looked at the doctors financial statements and they're like oh we'll do we'll do this loan.

[00:12:13] Because we'll go after the doctors if we don't get our money back.

[00:12:18] So we launched the project and I parked a travel trailer in 18 foot travel trailer at the entrance and in the first 90 days we sold a half the community and we paid off our bank loan in four months.

[00:12:31] So that's only new we were on to something really big if we could sell in this slow of a market that people were really thirsty for community they were thirsty for walkability.

[00:12:41] It sold out within the next year and then we added more and so forth.

[00:12:46] So we decided we would go find a place to build town I leaned over my wife said the Laura we've got to build our own town like this is if we can do this in this market it just proves the case that.

[00:12:56] This isn't just a floor to thing this is actually an everywhere thing so that's that's what led to the idea of seabrook and we were again that we had just like turned 29 30 years old or something like that at the time and we initially looked on the organ coast.

[00:13:15] And we realized that that market was saturated which is again kind of what the banks are trying to tell us so we thought where where would there be a better place to build this.

[00:13:24] And we thought back to our you know camping trips and hiking trips to Olympic national park along the ocean.

[00:13:29] And we were just blown away by how spectacular the Washington coast was basically from the central Washington coast and without why is there a great beach town closer to Seattle closer to Bellevue.

[00:13:44] It just didn't exist and there's a lot of reasons for that but we found this amazing site that has that ruggedness that you would find on the Oregon coast or the Northern California coast.

[00:13:55] But we're two and a half hours from Seattle you know two and a half hours from Bellevue to three hours we bought the land we paid $2.5 million for 250 acres of ocean from land that was in 2002.

[00:14:09] Now if that would have been on the Oregon coast so to probably been like 75 million dollars the Oregon coast is just more popular more.

[00:14:16] More desirable people thought but we saw I wouldn't trade this for anything on the Oregon coast by the way because we when we looked at the demographics there was we had double the population and five times the household wealth within a three hour drive based on US census data.

[00:14:34] And so you know we purchased the first 250 acres we made about two and a half million dollars was from that first neighborhood we had made you know putting our pocket and we were young enough and naive enough and crazy enough to just roll the dice.

[00:14:50] You know on on the Washington coast and so we bought the land outright yeah I mean I can go into the financing of it all but we've done this thing on a shoe string budget the last 20 years.

[00:15:01] But we now sold over I don't know six or seven hundred million dollars a real estate and the town is.

[00:15:08] Become a real popular destination but now it's really evolving into a place that will more people are going to want to live full time.

[00:15:17] There's a lot there that you said that I just want to like unpack so.

[00:15:22] Number one I love that you had an idea and you didn't let it go and you actually found somebody who had done it.

[00:15:32] And I think a big important lesson is there's always somebody that will help you who's done it and it's amazing how willing and open people are to share.

[00:15:42] So if you have an idea and I think you really want to pursue something there's somebody out there that knows what you want to get done I think that's the first takeaway that I had.

[00:15:50] But this second takeaway is there's always a.

[00:15:54] An investor out there who will give you the equity there is always an investor out there that will help you put together the financial resources that you don't have so.

[00:16:04] You know this podcast we talk a lot about like getting the financial resources together but but you did something you really put yourself out there you're a painting house is.

[00:16:12] And we're doing the gritty thing and you know you don't really get anything in life without getting yourself out into the world and I think you did that and then that's kind of what.

[00:16:19] Connected you to some doctors who do have the money and then you know just be ready for the banks to say no I mean they always say no I mean we we built a big community out in squim Washington every lender turned us away we finance that thing like three times and we kind of know what we're doing right so.

[00:16:34] Sure you run into issues with lenders even today because even with all the experience you know hundreds of acres and building a city literally you probably still run into that so be ready for the challenges I think that's that's super important.

[00:16:46] And then just the last thing just the vision of you know setting out to do it and doing it kind of bootstrapped I mean with with just buying the land cash and.

[00:16:54] You know making sure that you were well protected and kind of rolling your earnings forward I always say like you're always inches from gold you're you may have worked hard at something for a while and you just give up and if you had to swung the acts a couple more times you would have struck gold.

[00:17:07] And so just not stopping and you know getting this done is just such a fascinating story but let's dive into the numbers because I know a lot of people are tuning in to this thinking.

[00:17:17] Okay, you know I personally have visited see Brook multiple times I go back there every year with my family it's an amazing place to go if you do go make sure you take a tour with Casey gives town hall tour tours I think everyday like 11 or something like that that's how we met.

[00:17:34] And and go see how they laid out the city and all the thought that they put into it's really fascinating but we should probably kind of lean in to maybe just.

[00:17:42] The opportunity people have to own a seaside house as a second rental property and also rent it out.

[00:17:50] And make income that way I mean can you kind of talk into those specifics.

[00:17:55] Well, yeah, I mean just at a high level I mean and kind of putting it in perspective.

[00:17:59] So now see Brook is 700 acres so it's already building this ocean front town on the 700 acre piece of land to compare that carmel California is set a 700 acre ocean front beach town.

[00:18:13] Carmel is a hundred and nineteen miles from downtown San Francisco in the number one median income in the US.

[00:18:22] Seabrook is while in the making is 130 miles from downtown Seattle and downtown Belle view and the number three meat median income in the US.

[00:18:33] So this is the closest thing to a carmel moment our state that we're going to have there won't be another ocean front town being built.

[00:18:42] Within two and a half to three hours from downtown Seattle just the property doesn't exist the infrastructure doesn't exist.

[00:18:48] And then most of our coastline either developed or it's national park so.

[00:18:53] So that's that's just big picture you know if we could have all gone back 50 years ago and bought in carmel.

[00:18:59] We would all scrape up whatever we could because it's become you know such a such a valuable enduring place.

[00:19:06] And we think we're just at the early stages of that here on the Washington coast anybody that comes in here that serious or you know kind of falls in love with Seabrook.

[00:19:15] We tell them that it only makes sense if this is a place that you really want to build traditions with your family your friends place you want to hang out.

[00:19:23] And it's kind of the easy place to get away meaning you don't need a bunch of gear you don't need a boat you don't I mean you can just throw your duffle bag in a car and you can be at the beach and you don't have to think a lot about our prepare a lot.

[00:19:39] To have time out here but if but if this is a place that again your family falls in love with and it's a place you can imagine yourself coming you know two or three times a year.

[00:19:49] I would say minimum then it's like wow this this could be a good opportunity on something here and you know build well through just the towns growth and evolution.

[00:20:01] We've had higher than normal appreciation rates basically what's one of the things that makes Seabrook really unique is that.

[00:20:09] We saw the vacation rental industry coming to the picture in 1997 which is when Verbo came to the picture right before that I mean you had to kind of know someone that had a cabin or.

[00:20:18] You know you see something in the class of the kids it was a very uncredibly unsophisticated business.

[00:20:26] And then Verbo came to the picture where anybody with a cabin anywhere could post it you know on this website well.

[00:20:33] So when we built our first neighborhood that was all kind of coming out of it sounds like it actually scared me I was like well I want to build this community where people know their neighbors and again have a strong community and I was worried that the.

[00:20:47] You know the problems associated with the case around us could could it road that and so.

[00:20:53] The only thing that we could do to really protect ourselves was get into the business and make sure that we had onsite property management.

[00:21:02] And could make sure our guests have a great experience but also if the owners that are living there whether it be part time or full time.

[00:21:10] They knew that the buck stopped with us and that we were there to make sure that we had harmony in the community.

[00:21:18] You know 99% of a case of our company they could care less about the neighbor.

[00:21:24] They only care about the owner of the house that they manage and then they care about the guests but they're not really is invested in the community.

[00:21:31] So we looked at it as a way to really again kind of put this little umbrella over our community and protect it so that we didn't have.

[00:21:41] Again, parking issues and parties and you know those kinds of things happening and anything they see we want them to report that to us and then we have of course 24 hour security and things like that.

[00:21:53] So and it's worked. I mean we're you know 25 years in from when we started that first neighborhood and it's been able to preserve that harmony and that's that strong community that we we envision.

[00:22:06] So if on the pilot I can buy a house in C. Brook how much am I looking at typically to buy a house and what am I getting what's the what's the typical house like.

[00:22:17] You know our our least expensive kind of you know cabin is about four to 500 square feet about a half a million dollars and but that gets your foot in the door.

[00:22:30] Yeah, it basically opens up all the amenities from our swimming pools pickle ball courts.

[00:22:35] And then again everything's within walking distance and biking distance of our town center.

[00:22:41] So shops restaurants I mean the ideas when you get here you don't have to get back in your car.

[00:22:46] And for pilots we're actually planning a new lounge at the polkly airport, which is.

[00:22:54] Where they call the Bowerman airport and which is an instrument rated air strip you can actually land a 747 on that landing strip.

[00:23:03] Yeah I landed there and I actually got.

[00:23:06] I rented a tour of car and then drove up the seabro for the weekend and then flew home so it's a great year field.

[00:23:13] Yeah, so we want to have basically some rental cars there and then also just a shuttle because again you don't really need a car you just need to get here.

[00:23:21] Most people don't want to really believe necessary let's do an a national park you know day excursion which we have shuttles that will take you up there as well back to what.

[00:23:31] You know you asked so that's kind of starting half million dollars and then we have house that are on that full other extreme.

[00:23:39] And the most luxurious.

[00:23:41] Beautifully designed houses and Lux Magazine that are going for five to six million dollars I'm they're not even for sale these are custom you know custom homes custom design.

[00:23:52] And they're just purely vacation homes or full time residences you don't normally see those get rented out but there are there are some couple of really.

[00:24:02] Extraordinary houses that are in the rental program so yeah that's kind of like that's the full full gambit but what I would say our bread and butter house is about a three or four bedroom house in the 800 to a million range.

[00:24:16] They're not cookie cutter houses these are these are built you know with a really high quality there of course design for the elements here.

[00:24:26] So they're very resilient what kind of revenue would somebody expect to generate and say.

[00:24:32] A $800,000 rental in your community per year I'm not good with that specific question but I can tell you that the average home here.

[00:24:42] In 2018 brought in about $40,000 in top line revenue so now you have to keep in mind we don't control how much the owner uses the house or how much they want to rent the house or how many restrictions they put on the house.

[00:24:58] So that's just an average across the board about $40,000 today or this year our average house will average about 60 to 60 to $62,000 in revenue so we've had almost a 10% per year increase and that's that's just drawing a straight line from 2018 to 2024.

[00:25:18] And that cuts through the COVID years which nobody could leave the state and of course our numbers are off the charts right but if you take that out.

[00:25:27] Just a steady growth we've had about 10% per year growth so an average house is that kind of three to four bedroom house but then the other variables are you know how do you furnish it.

[00:25:39] How well do you maintain it like we encourage our homeowners to come out at least once a quarter and just walk the house make sure you know everything's in good order.

[00:25:48] You know it's a partnership where the on site property management company but we're not going to look at the house like an owner would so that's why having a good.

[00:25:57] You know an owner that's engaged with the property really helps us do a better job for our home on.

[00:26:05] So that's kind of just high level if you're you know dreaming about owning a house here.

[00:26:11] If you could just look at it as you're going to cover half of your expenses in the first year and that's not taking advantage of the tax stuff that you and I have talked about you know if you were to put 20% down after you pay up you know the your property taxes your insurance and.

[00:26:27] You know your monthly dues things like that if you can cover half of your expenses and you can stomach that.

[00:26:35] Well then it's kind of a no brainer because.

[00:26:38] Now you've got this place so you can go and use a couple hundred nights a year if you want to but more importantly that annual revenue is just going to keep ticking up.

[00:26:47] And of course today's interest rates the numbers don't look as good but if rates are going to go down and income is going to go up you can just imagine and you know three or four years I mean you could be in the black.

[00:27:00] And have this property that's also appreciating so I mean we think that the up side's pretty pretty good.

[00:27:07] I'm sure all listeners are familiar with my renal air vnb and that's exactly what we went into it thinking is you know hey you know we're probably break even for a little bit less for the first few years but.

[00:27:17] We can refine it later and when come continues to pick up and opportunity in this case don't see side property in Washington again if you haven't done yet check it out on Google maps pretty cool it's directly west of Seattle.

[00:27:33] I just a legacy asset.

[00:27:35] I want to get into the the tax realm here this is always the fun stuff is like you know how do we how do we lower our tax bills with investments that we make what is an opportunity zone.

[00:27:49] And why would this be declared an opportunity zone was it in OZ when you purchased it how many acres do you currently own and what are they what are the implications for investors when they bring money into an OZ.

[00:28:03] Well so the OZ I think was approved like in 2018 Ryan you might know maybe 2017 2018 and it was designed for.

[00:28:15] either new construction after January 1 of 2018 or like major renovations an opportunity zone if you bought a direct like a building and then the international district in Seattle for example which is an opportunities on.

[00:28:30] And you bought it for a million dollars the way I understand the qualified opportunities on working is you'd have to put at least a million and one dollars into the building.

[00:28:39] And so we're going to be able to qualify because the idea of the opportunities on is to create investments, sale of goods, great new jobs and markets that need need that.

[00:28:51] So we're in a county very rural county that you know used to be a timber you know huge timber industry that really dried up and so this was a natural for the qualified opportunities on.

[00:29:05] So when we bought the land we were you know do thousand to and so yeah was not an opportunity zone we didn't know anything about it until 2018.

[00:29:14] And then we heard about it we were like wow this is pretty incredible and I think the Wall Street Journal had an article that described the opportunities on as a 1031 exchange on steroids because it has some some similarities but it also has some major differences.

[00:29:30] The major differences are if you follow the guidelines for 10 years.

[00:29:37] All your gains or 100% tax free unlike a 1031 exchange where if you own a property for 10 years.

[00:29:45] You're forced to buy another piece of property to defer the tax so people that do 1031 exchanges which is a great way to build wealth I'm sure a lot listeners do 1031 exchanges.

[00:29:55] But you're just kicking the can down the road eventually you know the tax man has to get paid and the opportunity zone is a real gift in the IRS code where after that 10 year period you could take your money and run you don't have to go and buy anything else you can just stash it.

[00:30:13] And that's why we actually have owners here they bought just because they fell in love with Seabruk but now they bought additional property.

[00:30:21] Just for a state planning purposes because they can hold on to it for 10 to 20 years take that gain whenever they want in that period of time and you know again add value to their state and pass it down to their family.

[00:30:37] If you're not following along with the so what here here's the so what so your pilot you just sell a bunch of real estate you have a massive gain right or you sell a bunch of stocks for a massive gain you sold all your Nvidia at the right time or whatever.

[00:30:51] And you've got stock gain or real estate gain or any gain on in your investment sale of a business I think it's those three.

[00:31:00] Yeah, so like let's say you're sitting here in 2024 and you're saying oh my gosh.

[00:31:05] I I just made a bunch of money and I'm going to have to pay a lot of taxes.

[00:31:11] You could buy a house in Seabruk and as long as you follow the 10 year hold and all the provisions right you just buy a house in Seabruk you entered into service.

[00:31:20] And they build it you know they're going to have a newly constructed house for you so you're doubling your amount that you put it on land cost which they help you do they'll it's turn key.

[00:31:30] You wipe out that game you're able to defer that game by putting into into an OZ and any any gain from within the OZ is tax freeze is how I understand it right.

[00:31:39] Correct me if I'm wrong but if let's say you you bought in video stock for a hundred grand it went up to a million you've got a nine hundred thousand dollar gain set of paying and you wanted to sell it you're like hey I think it's going to crash for some reason right and you want out.

[00:31:54] If you liquidate that you have a nine hundred thousand dollar gain and you'd be able to take that whole million dollars and go invest it somewhere else and you defer the game so it's the IRS says okay.

[00:32:03] You put this into an OZ no problem will let you coast on paying the tax on it for now and then when you eventually sell that that asset inside of the OZ 10 years later you wouldn't have to pay any capital gains tax on the appreciation of the asset within the OZ that house in Seabruk right.

[00:32:19] Yeah that's the way we understand it of course we're always never giving tax legal investment advice so do your own to diligence and check with your attorneys and your CPAs but that's that's generally how OZ's work.

[00:32:32] And now you get this rental property that you can use.

[00:32:37] For personal use you can run it out you can make income on it it's in a highly desirable very well built community that people flock to and by the way it's the only seaside.

[00:32:47] Community like this in the state of Washington I mean I don't know if anybody's ever driven the coast from.

[00:32:54] You know the Pacific Northwest all of them in the very northwest corner of Washington down the coast it's a very very beautiful place and you know Casey I know that you brought this up but you really don't need a car there you know I was actually kind of disappointed I rented that tour just to give me up from the airport.

[00:33:09] And it just sat there in the backyard the old time and you know I was surprised on how much walkability there was and the ocean is right there and top notch dining and grocery store everything is right there and it does.

[00:33:23] You know really become an awesome place to take your family and and you know and then you know I understand people are starting to live there long term as well and that that percentage is growing.

[00:33:31] Real quick the opportunities on sun sets December 31st, 2026 so in the if all indications are they're going to extend it and that will there's there's more value in the deferment earlier on in the opportunity zone so like you don't get as much benefit that because it's it's because it's ending soon.

[00:33:53] But when it's when it was 2018 actually got a longer deferment of paying that initial tax bill.

[00:34:01] Now that's on the gains that you made before you went into the opportunities on because again the opportunities on investment.

[00:34:06] And there are no taxes do if you follow the guidelines for that for that 10 year period people can look that up obviously themselves and read about that but the other part of see broke that most people don't really know is that it's taking us 20 years to get half of our town center built that's shop about 25 shops and restaurants.

[00:34:27] But we're doubling that over the next four years so there's going to be with our town center a new school that's already the funding is already approved.

[00:34:38] A new community center and a new medical center over 120 million dollars is going to be invested in our town and our surrounding community over the next four years.

[00:34:49] Now that doesn't that no you know homeowners don't pay for that that's all coming from.

[00:34:57] Of course, our development and you know new sales of course but so you could buy a million dollar house today.

[00:35:04] And you're done but meanwhile we're doubling the size of the town center adding new amenities adding a medical center a new school.

[00:35:14] I mean if people think prices are high today come back in five years because when the town is completely buttoned up and all the constructions out of the out of the town center.

[00:35:25] It's going to just be more more appealing.

[00:35:28] That's awesome.

[00:35:29] Okay, so I have two questions for you first is seasonality.

[00:35:33] What is the seasonality look like here because I live in San Diego for a while it's the oceans cold there.

[00:35:41] I can't imagine what it's like winter.

[00:35:44] Yeah, my daughters of San Diego so I know it well and she's always like dad it's a lot colder than you think down here you know it's the Northwest.

[00:35:53] I mean people are still flocking to our state in our city because we have something something works up here and it's because we have an incredible natural environment.

[00:36:04] And we have a very temperate climate so you know with all the smoke and the fires on the summer time a lot of people are second guessing, you know kind of the east side of the mountains east side of the cascades.

[00:36:16] But the ocean is always going to be the number one destination for I don't know care where you are the ocean is always going to be a draw.

[00:36:24] You know the mountains are closed second of course so the follow up question to this is when you look at the potential buying a property down here and short term renting it what's the average length of stay.

[00:36:36] What I'm getting out here is we've talked a lot about the short term rentals we pull on the show.

[00:36:40] And you know the fact that you can buy an STR rented out during current calendar year and use bonus depreciation and that counts as an active offset to W2 income which is incredible.

[00:36:52] You don't have to go about getting real estate professional status you could just buy a short term rental and as long as the average length of stay is seven days or less within the current calendar year.

[00:37:01] You can take the depreciation right off from that asset in the current year and write it off against your W2 so we have a lot of conversations with the investors they're saying you know I'm man I'd really love to go buy an STR this year but.

[00:37:13] Sounds like a lot of work and I don't know where to go well, so let's explore this this option within the context of seabro if somebody comes down to that community and they decide to buy anything from a cabin up to a.

[00:37:26] $1.5 million house what does that look like what is the average length of stay like can you make it less than seven days on average until the following year.

[00:37:36] What is the property management look like in terms of you know can somebody manage it themselves to to qualify as.

[00:37:42] For active right off some I know that I have to run a lot at you, but let's let's kind of sort of unpack that explore I didn't answer your first question is in how seasonal how seasonal is it.

[00:37:53] Yeah yeah it's a lot busier than you think so our average house rents about 175 nights a year I would think that that would be above average across the country I would think San Diego I mean if you've got the right property at the right price.

[00:38:09] You're probably doing you know 250 nights a year or something like that but yeah most people are pretty impressed with the occupancy that we get to it's of course summer time spring break all this all the.

[00:38:22] All the holidays but I mean short term rentals are pretty much limited by school calendars right for most people right and that's that's kind of see.

[00:38:32] But every weekend this place fills up so there's always something going on in the weekends all of our shops and restaurants are open seven days a week they wouldn't be open up seven days a week if there weren't people around here on a year round basis.

[00:38:46] And our shops and restaurants are thriving in this market so you know they're doing sales on a per square footbases of what you'd find in Seattle it's not a place that goes to sleep like all use shalan for example Lake shalan which is a popular.

[00:39:01] I would say it's the number one most popular summer destination but that place just closes down I mean once school hits it's closed down for the most part you know six eight months and then you know that starts to come back.

[00:39:16] The coast is a real year round destination you don't need chains you're not going over a mountain passes it's just really easy to get to.

[00:39:24] Got it so what is the property management look like if somebody was going to say you know I had a really big year in the airline I want to buy an STR because I want to be able to write off let's say 200,000 against my active income and I need to buy it somewhere and I go you know taking a look at see Brook.

[00:39:42] The requirements are that I self manage for for at least 100 hours in the current calendar year at the average length of stay is seven days right is that something that can be.

[00:39:53] Accomplished just real quick I just want to make sure that if you're listening to this in your minds blowing unlike we talked about OZ right we talked about tax deferral for that right that that differs you selling an investment so if you have an investment gain.

[00:40:08] You know you sell stock by business real estate and you have a gain from investment activity.

[00:40:15] This place is special because it's actually deemed an opportunity zone and you could defer those taxes forever potentially right.

[00:40:22] Take is now clarifying something different in addition to that right that's an addition to your tax deferral from your investment activity you could also offset your.

[00:40:35] Active income from the airlines right your W two income your your hard and earned income by potentially allowing Casey arrow kind of working with Casey's team on self managing the property.

[00:40:51] Or doing something for a limited period of time because remember guys you could buy this property on December 15th actively manage it for 15 days.

[00:40:59] And then decide that you know I think Casey's team would probably do a better job and then flip it back to them and you get the depreciation so.

[00:41:06] Breaking that down if it's a million dollar house you might depreciate 200 thousand dollars against your earned income in addition to any OZ investment activity.

[00:41:14] So I just wanted to make sure we're talking about two very different things that can both add up to hundreds of thousands of dollars and right off.

[00:41:23] I didn't mean to jump and I just wanted to make sure that we were dissecting the two of part so what would you say to a guy that says hey you know I want to act I want to have to I want to actively manage this for a limited time would you potentially be okay with that.

[00:41:36] I think that there's a way for us to do that we're known or can self manage and some owners do self manage but very few people it's it's a lot of work we make it really easy for people that's the whole idea is it's kind of a turn key operation.

[00:41:49] And you know I know people that manage their own short term or else and I know it's a major headache all the late night calls and so the foot stop for the test here we're stopping our foot for the answer.

[00:42:00] You buy towards the end of the year you actively manage it for a very short period of time and then you flip it back to Casey you get that depreciation and then you then you truly make it a passive investment.

[00:42:12] And flip it over to Casey's team to manage so that we're just trying to give you guys the listeners ideas right this is these are these are strategies to think about when you go into planning the best way to buy investment property.

[00:42:24] And please coordinate with your CPA on this don't just go out and do it and then tell your CPA on April 1 that hey I did this.

[00:42:34] I'm looking forward to all the right off so they go well where's your documentation that you were actively managing where's your logs.

[00:42:40] You know show me that you spent a hundred hours self managing this in the last calendar year go you didn't you say oops I didn't do any that so work with your CPA on this.

[00:42:48] You know if you're planning on implementing the strategy totally so Casey what's next for C Brook I mean I know you talked about the hospital the school the YMCA that you're developing but.

[00:43:01] Why are saying you've developed about a thousand homes there you know what's kind of the look forward for 2025 like what kind of what kind of availability are you going to have what houses are you.

[00:43:10] Building what what's kind of on top of mind for the next six to 12 months.

[00:43:15] Well so just to clarify with us about 600 homes there bill.

[00:43:18] Okay about half of those are our our rental program so about 300 plus homes the other half or just either people that live your full time or they live your part time or they're just a pure vacation home you know and they.

[00:43:32] But they they like the benefits of having the onsite management because if they want us to you know stock their fridge or clean their house or.

[00:43:42] You know maintain their hot tub we can do all that for them and if they ever needed to put their house in the rental program they love having that option to put their house in the rental program you know the number one focus is finishing this town center.

[00:43:56] You know it's the main street in town center that makes postmen and carmel and Laguna Beach and all the all the great places out there.

[00:44:06] And that's the draw that's that's that's the soul of those communities and that's what creates tremendous real estate value.

[00:44:14] So there's nothing more important than finishing our town center and we are about to break ground on the final block.

[00:44:21] And we expect to be done in the next three or four years and the town will really sing when that town center is is really complete but yes the the new school the community center.

[00:44:35] The first phase of the medical center space basically an urgent care clinic to start with those things are also going to make this system word as I will place the vacation and also the more desire to live full time.

[00:44:48] And then we have two you know two more villages that surround zebra that are approved and we're breaking ground on the first one called makers village and that will actually have artisan merchants.

[00:45:01] Let their makers glass blowers chocolate makers and all the kinds of experiential retail that really you know like what you see it by street market creating again another memory when people come down here.

[00:45:16] And you know we're talking about you know San Diego and you're talking about Hawaii earlier tape but you know the happiest people in the world actually live in.

[00:45:24] Finland and Sweden and Norway and climates that are actually more more rugged than the Washington coast.

[00:45:32] And the reason is is the place making walk when you have when you live in a walkable town or village and everything is you know accessible on foot.

[00:45:42] Your your quality of life goes way up and you never want to go back to a suburban.

[00:45:50] Environment which is why a lot of our people bought as vacation homes now they're retiring here.

[00:45:55] We're here from them you know their kids that go off to college they'll come back and say hey mom dad whatever you do don't sell the beach house you can sell our old house so you grew up in but don't sell the beach house.

[00:46:04] So I think it's the quality of life when you design the built environment in the right way that really creates the value.

[00:46:15] How big does it get what's the critical mass so 700 acres three villages.

[00:46:22] So see brick is like one point out and then two point out was makers village which is by the way like it'll probably take two minutes on a bicycle to get from one to the next right I mean it's super close.

[00:46:35] And then the third village will be.

[00:46:38] Civic Grove which is kind of our crown jewel looks over the ocean unobstructed views will be doing a beach club you know right on the ocean.

[00:46:49] You know a four or five star hotel spa so that's going to be pretty pretty sweet.

[00:46:56] Wow you know one thing I wanted to bring up why we're on the topic of retirement homes you know buying a vacation rental and having it.

[00:47:03] And then eventually retiring in it I did want to bring up a strategy to think about as a pilot that has a self directed IRA I know there was one of our listeners was in the forum talking about hey is anybody.

[00:47:15] Ever bought rental property in their self directed IRA and I just wanted to kind of talk about a strategy in that real quick where you could actually buy a.

[00:47:25] Vacation rental or any rental inside of your IRA and there's actually companies out there that will lend to your hub to your home non-recourse loan to your to your IRA.

[00:47:36] I should say and you could actually go buy.

[00:47:39] Vacation rental property but just know that there are some restrictions to that you can't actually personally benefit from the investment so you can't go stay in it.

[00:47:47] Yeah stay in it things like that so just you know your kids can't stay in it your parents can't stay in it.

[00:47:52] Yeah yes yeah exactly there can be you know this weird thing where you pay you know a bunch of money to the house you know an overcharge and you know stuff you're retirement account more money.

[00:48:03] But what's interesting about that is that when you actually go to retire you can do a distribution to yourself just like you would take mandatory distributions at 59.5 or 64 or whatever it starts.

[00:48:18] You can actually distribute the house to yourself in retirement and then benefit from that house in retirement after you made that distribution.

[00:48:28] So it's kind of a fun strategy where if you're like hey I'm betting big on see book or any vacation rental place.

[00:48:35] I want to eventually live there for now my IRA is going to benefit from it when I retire then I could have the IRA make a distribution literally distribute the house to you now you pay taxes but depending on how you do the distribution whether it's raw or traditional whatever might be.

[00:48:50] But then you can actually then benefit from the house physically after after you retire so just something to think about in talk to your text or how to about when you're thinking about buying rental properties in your IRA.

[00:49:02] Casey how do people find out more about you how do they find you what roads do they take to wander down into into see broken and knock on your door.

[00:49:13] Cbrookw8.com is how you can learn more about it. It's hard to make a website really capture it so the best thing is just come out here and visit it and get your feet on the ground because I think the attention to detail really surprises people.

[00:49:32] You know we're talking about all these investment opportunities and you know how to how to protect wealth but we've really always been driven by the place making aspect and the community aspect and that by the way is also what creates a great investment.

[00:49:51] But we're you know we usually shut down when someone's all about the investment side of it because we're so passionate about the the town design and the place making and again building a strong community where people know their neighbors and

[00:50:08] you know when you walk into the coffee shop they know your name and they know you want I mean it's it's something that people are really thirsty for

[00:50:15] and that's why again people kind of have to see this place to believe in experience it you know it's not a place he just drive through you got to like spend a weekend and really you know kind of immerse yourself in it.

[00:50:27] And I mean just on that on that note you know 80% of our guests last year repeat yes so once we once we get people out here they come back.

[00:50:37] And so it's now just you know getting the word out to more people that's cool well we've been back twice and you're you absolutely nailed it we fell in love with a place I mean it really is amazing I just wanted to think of an excuse to bring you on so I didn't mean to go to heavy on the the investing side.

[00:50:54] And if you do go to see bro do yourself a favor when you go to the the candy shop that's downtown or the ice cream store there's a refrigerator on the right hand side of the cashiers and there's some homemade ice cream sandwiches double cookie.

[00:51:09] And you know they're wrapped in aluminum foil and if they have any left do yourself a favorite grab one of those there are amazingly delicious so.

[00:51:16] And I think you're made across the street in our bakery so yeah that's the real deal.

[00:51:22] Super cool well thanks so much Casey for coming on we really appreciate your knowledge and insights congrats on all your successes.

[00:51:29] Thank you so much guys really appreciate being on and I look forward to watching your show.

[00:51:33] Thanks Casey.

[00:51:35] Thank you sir.