Ep 58 - Foundations of Success in RE Development with Dale Wills

Join us for an informative episode of the Mark Perlberg CPA Podcast as we welcome Dale Wills, an experienced developer and syndicator. Dale shares practical insights on tax strategies, project management, and investment opportunities, drawing from his journey of building over 1,500 homes and launching his real estate investment fund.

In this episode, we explore the value of continuous learning and building a strong peer group through podcasts, books, and seminars. Dale also discusses his experiences during the 2008 market collapse and his approach to REO properties, providing strategies for resilience in uncertain times. With over 30 years of experience, Dale offers valuable perspectives on mortgage interest rates and future trends for both new and seasoned investors.

Additionally, Dale shares his expertise in financial and project management, especially when dealing with contractors. Learn about the risks of upfront payments and how to structure contracts to protect cash flow and ensure timely project completion. We also cover advanced tax strategies, such as bonus and accelerated depreciation, and discuss innovative investment opportunities in the next phase of our housing development project. This episode is filled with expert advice on real estate investment.

To learn more about Dale and what he's working on go to: https://www.centrahomes.com/
To become a client go to: www.markperlbergcpa.com

Transcript

Mark Perlberg : 0:00

All right, welcome everybody to the Mark Prober CPA Podcast, Super excited to be joined by Dale Willis. Dale is an experienced real estate developer who transitioned into real estate syndication and has developed more than 1,500 homes across 50 plus projects totaling more than a half a billion dollars in project value, and we're going to talk about some of the things that he's doing and working on and tax strategies. And, dale, in your own words, why don't you introduce yourself in 60 seconds or less?

Dale Willis: 0:37

Yeah, you did a really great job, mark. I've done real estate in some fashion for most of my life. I'm a hobby farmer raising cattle. I've got a wife and six kids. We just started a real estate investment fund to allow people to be able to jump into the deals that we're doing. So we continue to develop land, build homes. We're predominantly in the upper Midwest Minnesota and the surrounding states, but we've just started some operations. We're doing a little bit in Southern California and Salt Lake City as well.

Mark Perlberg : 1:09

Awesome. Now let's talk about this hobby for a second. Are you sure this is hobby and not a part-time business? You got going on here.

Dale Willis: 1:18

Well, it's a part-time business that I probably lose money. I have so much fun I don't really pay attention. We've got a small herd. We run 20 to 40 head of cattle and we do the whole thing we breed them and preg test them and my son's a YouTube guy and he did a whole video on it. That was pretty fun the day that we were preg testing them and tagging their ears and giving them their shots and it's a lot of fun.

Mark Perlberg : 1:44

Very cool, very cool, and it's a lot of fun. Very cool, very cool. Um, and you're based out of Minnesota, right?

Dale Willis: 1:48

Yep, we're based in Minnesota All right, cool, cool.

Mark Perlberg : 1:53

Now we have.

Mark Perlberg : 1:54

We have a lot of folks that start off in maybe house flipping and you know development areas and we get a lot of newbies here and one of the most common misperceptions that they have that I've had to explain to them is the concept of inventory.

Mark Perlberg : 2:15

So we have guys they'll build and develop a home and then they'll sell it and they recognize $100,000 profit and they're so excited and then they want to know well, well, I have a hundred thousand dollars of profit, I don't want to pay any taxes on it all, so why don't I just buy another house that I'll flip? See the challenge here. Yeah, so now they have a hundred thousand dollars of taxable profit, they unload all their profits into another flip and that they don't realize that that flip, that new property, is inventory, that has capitalized and you can't write off it until you have cost of goods sold and at that point you have more taxable profit. So when we're doing their returns now, the unfortunate thing is now they're wondering to themselves we're hoping that they had set some money aside for their taxes, but there is none, because it's all in these flips.

Dale Willis: 3:21

It's interesting you say that, mark. It's a little bit different application. But doing real estate is a business, you know buying a house and flipping it. You're self-employed, you're in business for yourself. And we see it all the time with trade contractors.

Dale Willis: 3:34

You know somebody that's new, they're really an excellent plumber or whatever the trade is. They say I'm going to start my own business. They start that business, they make this money and then they go out and they buy a new $80,000 truck and now that money's not in the bank account and they go buy all of these different de minimis assets, whatever they're trying to build their business up. And then they get their tax bill and then all of a sudden it's like, well, I don't have any money, I had to spend it all. It's like, well, it's not exactly how it works that $80,000 truck, you know, depending on the year, but most of the times you can't expense that truck this year. You're depreciating it over the next five.

Dale Willis: 4:10

So we see it a lot. We'll watch really closely when we hire because we love to work with newer companies and guys that are just trying to get going and establish themselves. We love it. But we'll watch them really closely because when all of a sudden, you know, we see five brand new trucks on the job site for this plumbing company. That's new. We start getting a little nervous and start asking questions because it's like, ah, they often don't understand the tax consequences.

Mark Perlberg : 4:36

Yeah. And now let's say they are being resourceful and they're financing it. They're like, oh, this is great. All you got to put, you know, a couple of grand down and now I get a big truck for $40,000 and we're going to write off. Well, you may not be able to use any of those, even if it qualifies for bonus depreciation, because you may be capped out of your debt basis. If you're an S corporation, then you know, do you even need an S corporation? So there's all these other considerations. Here is why it's important to to work with someone who's educating you. But let's talk about what before we jump into. You know, I'm interested to see your journey here, um, but I'm also interested to see how did you learn about some of these foundational things and the tax consequences of developing property and the tracking of your inventory, building your accounting systems? How did you develop the systems and the understanding necessary for you to thrive?

Dale Willis: 5:38

I think there's a couple of things. Probably the most raw, truthful answer is because I've screwed up before. You know the guy that bought that $80,000 truck and then all of a sudden says I have no money but you need to write a check for $40,000 to the IRS. You know, yeah, I've learned the hard way on some of these things, I think, but really it's surrounding yourself with really you know, really smart people, people you know saying all right, mark, you're my guy. Now tell me how do I avoid these things? What are the pitfalls? And make sure you know I think the principle of having the right who's around you is just so critical and for me that's where I've been really lucky is just I don't know it. You know I don't know it. You know I don't know accounting.

Dale Willis: 6:26

Now I know a lot more about accounting than I used to just because I've been in the business and so I think anybody that's getting started.

Dale Willis: 6:33

It's a really tough balance because I'm starting to try to start my business.

Dale Willis: 6:36

I'm going to flip houses, whatever it is I'm doing, and sometimes I don't want to spend the money to be able to go hire the experts, but at the same time, sometimes I don't want to spend the money to be able to go hire the experts, but at the same time, you can be out of business pretty quick when all of a sudden the IRS comes knocking because you owe them a big check and you don't have the money and you didn't have the experts around.

Dale Willis: 6:52

And so I'd say that's probably the biggest key for me of learning it is just having the right people around you that know, and there's a lot of value. I'm a huge believer in learning. You know the people that are watching or listening to this podcast I think that's just critical to your growth is constantly learning, because you know we're growing or we're shrinking, but I don't think we're stagnant, and and so I you know people are listening to this fall in that category of their learners. But I think that's the key is just be a lifetime learner, constantly trying to find out new strategies and the best practices.

Mark Perlberg : 7:27

And I see here and we get a lot of people coming to us who are in the early stages of developing maybe their first or third or fifth project, and there's a lot of volatility, we see, when they're starting off as well, things can go sideways and a lot of them talk about getting to the starting off as well. Things can go sideways and a lot of them talk about getting to the level that you're at. So you know, where are they going to do? Half a billion a year or whatever it is. You know tens of developments a year. What do you think is different about you, or what do you think are some key things that have allowed you to build this type of scale? What are some things that maybe you're doing that other folks that are starting off or not doing as successful. That makes a difference here.

Dale Willis: 8:14

I think one of the biggest keys is a little bit of what I was just saying is education. I can remember I was 21, 22 years old and I was at a conference in Las Vegas and I was working in banking at the time. And there's this guy you know this would have been 93. And this guy claims that he was worth a million dollars. So you know, I'm 21, 22 years old and a million dollars is like wow, that's just mind blowing that he could be worth a million dollars because he was like 35 years old, and so for me there's just non-comprehensible that he could be worth a million dollars because he was like 35 years old, and so for me there's just non-comprehensible that you could be worth a million dollars and 35 years old in 1993. That was just blew me away at the time.

Dale Willis: 8:53

And he said a really important thing. He says you've got to always be learning, always be reading. When I'm traveling, if I forgot to bring a book with me, I'll read the phone book. Now, keep this in context this is 1993 and we don't have phone books, don't exist, and we also now have cell phones and other resources to learn. But the principle he said is I'll open up the phone book and I'll read through the yellow pages. So, for those that may not be aware, because yellow pages haven't existed for a long time, you have a phone book and your Pages were the sections that you could advertise your business, and so he'd go through the Yellow Pages and he would just learn about what's going on in that area and what kind of businesses were there. What that instilled to me is wow, if he could be worth a million dollars at 35, you know what could I do if I keep learning, and so I've just been a sponge for information. Do, if I keep learning, and so I've just been a sponge for information.

Dale Willis: 9:46

One of the things I love to tell people, especially young people. You know I love it when people come ask for advice because they're learners, they want to grow, and I'll say I want you to envision in your head where you want to be 20 years from now. Say, okay, now most of us all believe that we become the average of our peer group, so okay. So so tell me, Mark, where you want to be 20 years from now. How many people do you associate with on a regular basis, routinely, talk to associate with, that are where you want to be, and if they ever give me an answer that's one or two I say well, your dreams aren't big enough, you know, unless it's your dad. Your dreams aren't big enough if you know anybody, because the reality is, if you've got big dreams and aspirations, you know, and you're in your twenties, you're in your thirties, forties, trying to get going, you generally don't have a whole bunch of friends or any friends that are where you want to be.

Dale Willis: 10:41

So what do you do if you're going to be the average of your peer group? What do you do about that? That's a pretty tough proposal and for me it's. You've got to do that through learning. Your peer group has to become podcasts, it's got to be reading books, it's got to be going to seminars, and I'm just a huge believer in that of always growing and eventually, when you get where you want to be, where that goal is, you will then have a peer group. But in the meantime, how do you create a peer group? And if you're going to be the average of them, you know, if you got big dreams, it's impossible, and so I'm a huge believer in listening to podcasts. Create your own peer group, read books. Create your own peer group. You know, learn constantly, learn and grow, and I would say that's probably the biggest thing that is attributed to what I've done is just that belief and philosophy of just never stop learning.

Mark Perlberg : 11:30

Yeah, I found that it's like a progression on how you're going to access these minds that you really want to connect with. So you start off with the free podcast and the YouTube and maybe some books and I remember one of my favorite places to be when I was broke, getting things started, was the library. And then you may move into courses, and then you may move into paying for a coach or maybe joining a network or having a group of colleagues, and then eventually you're around those people on a daily basis, and so you're just as you embrace these things, you're gradually becoming more and more immersed with people at the highest level, and by the time you've gotten to the point where you're associating with those folks, you've all gone through the same path. You've all read the same books some of the foundational books and are all talking the same lingo, some of the foundational books and are all talking the same lingo.

Dale Willis: 12:25

Yeah, you know that's a great principle I've never thought about. You know you got to start where you are. The library is a great resource. If I've got no money, well, how do I get access to this information? Well, the library podcasts. I think that's a really great principle. That I've never thought about is that progression.

Mark Perlberg : 12:42

And eventually you're talking to the authors of the books and getting direct feedback, and then you're getting the information. That's where you get lightning fast delivery of wisdom and knowledge to your brain as fast as possible when you're ready for it.

Dale Willis: 12:54

Yeah.

Mark Perlberg : 12:55

Yeah, so tell us about let's talk about the development side and then the syndication side. Tell us about maybe some of the wins that you've had. And also I'm interested to know what do we expect coming down the pipeline and current environment of interest? These are really two different questions here. But what's coming down the pipeline? What do we expect to see based on the current trends and interest rates and things that you're considering here?

Dale Willis: 13:26

Yeah, we've been really fortunate. We've had a lot of really great wins. You know we did. The market collapsed back in 2008. The market falls apart and you know it's like do you reach out and grab the falling knife? Yet Is it going to hit the ground?

Dale Willis: 13:44

And we worked really closely with a lot of banks 2009, 10, 11, 12, 13,. Some of the best assets were owned by banks through REO. They'd taken them back and we had a scenario. We worked with a bank and they said, hey, you want to buy these assets? I'm like, not really, I already have my own problems. And we ended up meeting several times and what ended up happening is we worked out a deal that we worked with them to work through those assets to help them. And it's really, you know, as soon as you can figure out how to solve somebody's problem, that's when you've got a viable business. And we figured out how to solve the bank's problems and, as a result, banks, when they have REOs, they've got to write it down and they've got to set cash reserves aside. And once we figured that out, the Fed said you don't need to set those cash reserves aside because these are now considered performing assets. And so we helped a bank solve their problem. All of a sudden, we solved their problem. We had multiple banks start reaching out to us and say, hey, can you do the same thing with us, cause that puts millions of dollars to our bottom line that we can't lend. That we can now suddenly lend if you solve our problem. So it was a lot of fun, you know it only lasted for a few years, but we worked through a lot of assets with a lot of banks. You know different assets that you know if it was something that was partly under construction or something that was partly developed, or houses. And you know we had one group. You know we bought from a finance company that they had foreclosed on actually a lender, and then this finance company didn't know. We bought 450 different properties from them, you know, and some of those turned into one property, turned into 120 houses that we developed, you know, and some of them were just single properties. But that was probably our biggest win and it really just came down to you'll find what you're looking for. We were looking for opportunities and so we found an opportunity.

Dale Willis: 15:37

The second part of that question what do we see coming? I think that's just so hard. I have no idea. I think that's just so hard. I have no idea. You know I could say what have we seen? What is experience? You know, I've been doing this for over 30 years in some fashion, and so experience can teach us a lot. But the environment we're in today is entirely different than anything I've experienced in my lifetime. We had inflation back in the early 80s, but I didn't experience that. I was in middle school and high school so I had no idea. So it's really hard to say.

Dale Willis: 16:12

But there's some things. We get asked a lot on mortgage interest rates. What's going to happen? We just use that as an example. When mortgage interest rates jump up on us, everybody paralyzes and they stop buying houses, they stop selling, they stop buying because they're what's going to happen next, and so you'll go through a lull. And then what happens is if those rates stabilize, after about three months, people go. This is our new reality and I'm now going to buy a house, and so you know, you'll see if they jump, you're going to see a pause, but then it'll stabilize.

Dale Willis: 16:44

And now what happens if somebody's buying a house? As an example, they afforded $500,000 at the previous rate. Now they only afford $400,000. Well, now they're going to have to buy a cheaper house. You know, if rates come back down, then all of a sudden we're going to see a big influx of buyers, which is problematic because, if you look at every recession in the history of this country, housing is the first in and the first out every time. And so if we all of a sudden saw the interest rates right now that are jumping between seven and 8%, if they all drop down to 4%, what's going to happen is that $400,000 house is now going to be six hundred thousand. So you're still going to afford a lot less because we're going to see inflation go skyrocket on us. And so you know it's a pretty tough challenge, but I'm a big believer in whatever's going on, there's always an opportunity, and so you look what you're for, what you're trying to find. If you're looking for opportunities, you'll. You'll find them in any environment.

Mark Perlberg : 17:44

Yeah, you make a good point here, because I sometimes get some of our earlier stage investors say hey, well, what do you see working for other people? I don't know if I want to do this type of investing anymore and I think we're going to hold off on acquiring any more assets and just see how the market pans out. Those are only comments that we get from either people who are unprofitable or very inexperienced. The people who are in the trenches have the experience, have a game plan, know how to drive profit, they're always closing deals, they're always pursuing, they're always growing and expanding. They don't wait for the time to be perfect. They don't wait for the time to be perfect. They don't wait for all the stars to align. They have a plan to acquire and grow and build. When this happens and when the extreme other side of the spectrum of this happens, they're always building and growing and developing and profiting Maybe not as much some years than others, but there's no stopping. They're just adapting to each situation.

Dale Willis: 18:50

Yeah, it's interesting. I used interest rates as an example just to what you just said. Interest rates late 60s, interest rates jump up, so 1971, if you said, hey, I'm going to wait until interest rates go down, guess what? You didn't buy a house until 1993. Because it took you 93 before the rates went back down to what they were pre-1971. Well, how much appreciation did people who bought a house in 1971 get between 71 and 93? That was pretty significant. So they totally lost out because they were waiting for the right conditions. So I'm with you. You just got to find an opportunity, seize and go.

Mark Perlberg : 19:31

Yeah, and you have appreciation equity paid out and if you're going to manage these rentals. Another thing that people don't remember to assign a value for is the experience you gain from just being in the game, even if you break even. That's free education. It's better than when I had to drop on my bachelor's and master's degree to learn when the things are a little more favorable, and you'll be ready to profit when the time is right, instead of just putting on your training wheels because you were waiting for everything to be perfect.

Dale Willis: 20:04

Every deal I've done wasn't perfect. I've done deals that I've lost money, but I think that's such an important principle you just taught is that's part of the process, that's part of the learning and growing process. And when you blow it, what do you do about it? You make the best of it and you say I've learned and now let's go.

Mark Perlberg : 20:21

So one of the things I'm wondering now is one of the things we see with developers in particular is the greatest challenge is dealing with contractors and being I'm sure you have your stories, because I've heard so many stories about contractors abandoning projects. You know all sorts of craziness going on and a lot of times people come into this thing not expecting it and that just leaves such a sour taste in their mouths and it's hard for a lot of people to overcome. So how have you built so many properties and overcome the challenge of finding adequate contractors and people to support you on these projects?

Dale Willis: 21:06

You know that's a really good question. I mean, part of it comes with experience, you know, and knowing who the guys are that are going to take care of you and not. Does that mean that we haven't had contractors walk off the job? No, but you know, one of the things that we just firmly believe we don't pay you until the job's done.

Dale Willis: 21:25

And if a contractor needs me to pay him 50% upfront to stop and start a job, that's often when people get hurt the worst. It's like wait, wait a minute. If you are so new and you are so cash poor right now that I need to pay you upfront, we're probably not a good fit for each other. And often they'll say, well, I need it to be able to buy the materials I'm like, so you're such a great credit risk that your supplier won't give you terms, because most suppliers will give you terms. And so you know, if you've got to pay up front and your supplier is not going to give you 45, 60 day, 120 day terms, you know you've got a problem and you know, if we got a bigger project, we'll do progress payments and we'll always do a retention.

Dale Willis: 22:06

And so if it's a project that's going to take eight months to build well, most contractors can't float eight months. So we say, okay, we'll do once a month progress payments. So a month is done. You're 10%, okay, well, I'm going to give you six or seven or 8% of that job, depending on what it is. Two months are done. You're now 30% done. Okay, well, now I'll pay you 25%. It depends on the project on how we'll do it. We have found that protects us because it keeps them on the job site. But if you're paying them too fast and early, that's when we see you get in the biggest trouble.

Mark Perlberg : 22:41

I found and this is not just for contractors but for any business owner, including myself is accountability has to be. Anytime you're paying someone, there has to be some form of expectations or mutually agreed upon and there's some form of accountability, and that is monitored on a regular basis, because things can really blow up in your face. And also incentives. So have you ever provided an incentive for them to finish a job on time or anything else like that by any chance?

Dale Willis: 23:14

Probably not the best advice I could give. We actually, in all of our agreements with our trades, we have penalties for not being on time. That's an incentive.

Mark Perlberg : 23:23

I guess that's an incentive.

Dale Willis: 23:24

It's not. I'll give you a bonus if you finish on time or early, but we we do have penalties If you don't do what you promised to do. There are penalties because if the project takes me twice as long to get done, well, a house is probably the easiest way to do it. You know, if we're building a house and let's say it takes four months to build, well, if you have terms with your contractors that are 45 day terms, well, you think about that. You're building a house and let's say it takes four months to build. Well, if you have terms with your contractors that are 45-day terms, well, you think about that. You're building a house in four months.

Dale Willis: 23:52

The guys that were doing work at two and a half months. You haven't even paid them yet when your house is done. And so the house is now finished, well, at the two and a half month mark, that means you haven't even paid half of your bills. What does that do for your cash flow? So if you can close that house to your end buyer at four months and one day, you only needed half as much cash to build that same house as you would have if you were paying them the day that it was owed.

Dale Willis: 24:24

And so if you think about that and you say, okay, well, if you had subs that are slow, that showed up on the job and they're slow, and now all of a sudden that job takes you five months, you do the math and all of a sudden, instead of needing 50% of the cash to do that job, it could have gone up to 70%, and that could be the difference in making the deal work or not work, because now you had to borrow that much more money, you had that much more interest to carry that was on it, and so speed to market is really critical, and that's why we'll tell our subs if you don't abide by this. I'm not the one that showed up late, I'm not the one that failed what I committed to do, so therefore, I shouldn't be paying the consequences.

Mark Perlberg : 25:11

So you need to pay the consequences if you're not going to do what you promised. Here's a story of the opposite happening in an unfortunate instance where a client with a little less experience working with the contractor Major project, multi-million dollar rental, and it was short-term rental and seasonal. The contractor takes way longer than he should, so now they miss out on renting the property during the busiest time of year, major opportunity, costs over budget, taking way longer, and now he's out of money to pay back the contract. So meanwhile the owner has had a major loss because the contract is too long. Now he can't pay back the contractor with any earnings and now the contractor is putting a lien on the house and the contractor isn't even done with the work. So certainly there's a lot of value in structuring these relationships and setting expectations in the contracts to protect yourself and ensure that you're going to be profitable and sustainable.

Dale Willis: 26:12

Absolutely. Yeah, that's really where we'll see a lot of people get hung up. You totally get this. This is what you do for a living. You're accounting and real estate. But you know, one of the keys is the language of business is accounting. If you don't know that language, it's really hard to be successful. You know, if I go visit Mexico, it's really hard to function if I know zero Spanish. You know, yeah, can I get by? Absolutely, but can I get by as enjoyable if I'm touring all over the country and going where people live and seeing them? Yeah, it's going to be really tough. And the same thing is can I run a business not understanding some of these basic accounting principles? Absolutely, I can run a business, but it's a whole lot tougher. And if I understand the language of business, it makes it a lot easier. And just the principle you just taught just now, you know, is a perfect example. You got to understand what is the value of money, what are the delay costs, the opportunity costs.

Mark Perlberg : 27:11

Oh yeah, Well, so now what I'm wondering is what?

Dale Willis: 27:20

are some of the things that you're doing to mitigate your taxes. You know we're in the best business in the world to mitigate taxes. Oh, yeah, yeah, I believe anybody anybody that's making money and paying a very low tax bill are the best patriots we have because, effectively, congress has put in place certain mechanisms that say we need people to invest money in certain areas in our economy, and if we're investing in those areas, we're going to give you lower taxes. We're going to reward you for doing what you ask, and so when somebody figures out how to really lower their tax bill by making a lot of money, you're really the most, you're the best patriot, because that's what exactly. What Congress is asking us to do is they're saying, hey, we're going to incentivize you to pay less taxes because now you're investing in something that we need that's going to help our economies.

Dale Willis: 28:17

And so when you can lower your tax bill, you're really doing exactly what Congress has asked us to do. Now, whether or not you like Congress or not, it's a totally different thing, but you know, being in real estate is the greatest vehicle, you know, for a lot of the listeners that are listening, that are getting going. You know you have a lot of episodes where you talk about this, and so I would encourage listeners, if you're not familiar with this podcast, go back in time and listen to some of those, because we don't want to jump into it here, because you've got some experts that have talked about this. But if you're not a real estate professional, it's really hard to take advantage of some of the tax laws that are out there. And I'm a real estate professional, so I get all of the benefit of the bonus, depreciations and all of these great things, because my income comes from being in real estate, and so it's tough. We had, you know, example I paid zero federal income taxes for several years in a row.

Mark Perlberg : 29:14

Awesome.

Dale Willis: 29:15

And it was fantastic, and a lot of it was through bonus depreciation and accelerated depreciation and, you know, owning different assets and we have in our company one of the benefits that we provide a lot of our employees is they can buy a house. They can buy houses regularly at cost. So they might buy a house that's $400,000 and you know they're buying it for $320,000 to $350,000, depending on the house and the circumstance. And I've got several of them that take advantage of this and they buy them and turn them into rentals and then they'll periodically sell a few, take their equity and buy another one, so they're reducing their debt and it works really well. We have a few that have really taken advantage and have built up quite a portfolio of properties.

Dale Willis: 30:00

I'm talking to one of my employees and he's like, yeah, it sucks, though I don't get to take advantage of some of this depreciation, and I was like that's right, this is horrible. You're paying all these taxes because he's in real estate, because he works for me, that's what he does but yet he doesn't get the advantages because he's not considered a real estate professional, being a W-2 employee doing real estate, and so it's like this is horrible. What do we do and we actually so. We own a real estate equity company that people can invest in, and that's where it all started, because I'm like this is totally unfair. You know my employees. I want to help them build wealth the same way I'm getting to build wealth, and when we defer taxes, you can accelerate that wealth building a whole lot faster. And so we started looking into it, and that's actually was the catalyst of starting this real estate equity firm is because I wanted my employees to be able to build wealth, and so we said, well, why not offer that to anybody?

Dale Willis: 30:59

But one of the things our employees take advantage of is we have, as a company, we have a simple IRA, and so they invest in a simple IRA, as then we do matching funds. So whatever they invest up to a certain amount will match it, and so that's all pre-tax money. We encourage them, depending on their circumstances, is convert that to a Roth IRA and then they can take that. You know and again, there's another episode you guys talk about and I would encourage listeners if you want to know more about it, watch these other episodes but they take that and they put it into what we'll call a self-directed IRA, but it's basically where they can invest it into the real estate deals we're doing. And they're doing it as a Roth, so a Roth is you know they pay tax on it already, but now when they take that money out and we've run some scenarios that we have employees that can invest in deals that if they invest $100,000 from their IRA today, in 10 years that IRA is worth over a million dollars. Wow.

Dale Willis: 32:01

And they keep compounding that and they keep investing in their simple IRAs or their, you know, depending on. You know the average listener may not have access to a simple IRA, but everybody has access to an IRA. Everybody has access. So we teamed up with Equity Trust as an example. So people transfer it to them. Equity Trust then invested in our project and now, all of a sudden, they've got the ability.

Dale Willis: 32:24

You know I'm the worst investor in the world when it comes to stocks. You know the old saying that the market can stay irrational longer than I can stay liquid is really true. You know my IRAs. Every year, until we came up with this plan, every year, my IRAs were always, you know, zero to a negative number in growth rate, because I always thought I was so smart. It's like, yeah, I'm just not a stock investor. I just don't know how to predict if Tesla is going to go up or down this week. And you know, now it's like, oh, I could put them into real estate deals and that's something we're doing Not necessarily strategists just for me because you know you are limited on how much IRA money you can invest at any given time.

Dale Willis: 33:10

But that's something that we've offered up the employees and it's working really great, but it's a really a great vehicle, you know. But you know the listeners that are saying, hey, I want to start building up. Initially it's tough. You've got to start somewhere. But if you're working a full-time job and you're trying to flip houses on the side or do something on the side, well, until 50% of your income is from real estate, it's really tough to take advantage of it. But start somewhere, go. Don't let perfect get in the way of progress.

Mark Perlberg : 33:41

Some other opportunities here. So let's say you're restricted because you got to own at least 2% of the business to get rep status. You could consider now this might be and this may not work and it probably doesn't, because then you lose your benefits. But you could have made him a contractor. Then he could be rep as a sole prop, or you could have his wife get rep status, or you can invest in short-term rentals which doesn't require rep status, but those ideas may not work for him.

Dale Willis: 34:10

Those are good ideas, though, worth looking at. I like that, mark. That's really good advice.

Mark Perlberg : 34:15

Yeah, the wife one is a good one. So I mean we explore these things and see what makes sense for the client. Sometimes they get really excited and then they realize, well, like my mom, my wife would be a horrible landlord or you know, she's too busy. She's too busy raising the kids or whatever. But it's interesting to see that. And then obviously, the short-term rental thing which is everybody's jumping on now, with seven days or less as a workaround for the rep status, is really neat. But even if you don't have that, there's still so much advantages in having tax-advantaged real estate inside of. You know that's offset by the appreciation and using leverage. So there's still so much cool stuff out there, even if you don't create losses, that you can use. Those are really good ideas.

Dale Willis: 35:00

I love that I'm going to losses that you can use. That's it. Those are really good ideas. I love that. I'm going to have to share that with some of our team.

Mark Perlberg : 35:05

Yeah, or you could have a pig, so you invest in oil and gas or something other sources of passive income that use those passive losses. We rarely see it, but we get it every now and then. So what I'm wondering is so you're doing syndications now, can you? Um, so what I'm wondering is so you're doing syndications now, can you break down the numbers of what kind of profits are you expecting and are you seeing, and what kind of projects are you working on?

Dale Willis: 35:29

so we we decided so we're fairly new to this. We've been really, really fortunate. We've used internal cash to do all of our deals. Um, you know, and then it was two years ago that I'm like, how do we help our employees create wealth? And that's where it was like the syndications ultimately came about. And so our initial offerings that we have right now is we're we're offering that somebody can invest in our real estate, real estate development and housing.

Dale Willis: 35:56

So, example we have a deal that it's a phase two. We did phase one with all of our own cash and we built I think it was 40 houses. We sold them all. We know exactly what's going on. I said, okay, so for these early ones, let's just replicate what we're already doing so we can say with a lot of confidence that this is a really good investment because we invest in this every day, all of my money. And so we said, all right, well, let's just take phase two. It's another 39 lots and we're going to build those and we already own the land, and so we're about to start putting the development, put the lot you know, the streets in the streetlights, kind of things and then we'll build and sell 39 houses and as that one is an example. You know, based on historicals, we're forecasting a 17.9 IRR and that's one that somebody just writes a check minimum 100,000 investment. Or if they wanted to do it with their IRA, they can do a minimum 100,000 through the IRA. Somebody can go to centracapitalpartnerscom and they can see all the information. But that's an example of one. So we've got two of those. Eventually we'll start offering up. We do some work in apartment deals, some small commercial, and eventually we'll start offering those that people can invest with those. But initially we're doing the for sale housing subdivisions are the ones that we're offering, offering up.

Dale Willis: 37:14

There's a huge need for housing and we're predominantly in entry levels, predominantly in entry level. And the thing I love about the fact that we're an entry level is, you know it's like a big funnel. You know there's this many people that can afford a $300,000 house and there's this many that can afford 400 and this many of 500. Well, we're at the entry of that funnel and so when rates go up, you know that funnel shrinks suddenly on the number of people that can afford 300,000. And you know, we all see it that there's a huge supply issue on housing nationwide and and so, being at the entry of that funnel puts us in a really pretty great position, and so that's why we decided let's do that, you know, give people opportunity to invest with us, co-invest with us in these projects. And so we're just doing the housing right now, because it's just a really a solid investment and I want people to have a really an amazing experience. And so we said, well, let's, let's put together these initial ones that are going to give a fantastic experience for people.

Mark Perlberg : 38:15

Wonderful, wonderful. And do you have any gigantic, scary, monstrous goals or dream projects that you might want to do in the future? Anything you're thinking about.

Dale Willis: 38:26

Yeah, I always have big, monstrous, monster, scary goals. We're right now working on embarking. We brought on a whole bunch of new talent on the team, so we just stole away a guy. He's now the president of Centra Companies. He happens to be my brother, but he was responsible for a billion plus dollars of new construction job sites all over North, central South America and the African continent that he'd have anywhere from a billion to a billion and a half under construction. That he managed. And so we brought him in with some strategic goals. We just hired the senior VP of finance for Buffalo Wild Wings. He helped Buffalo Wild Wings go from 100 units to 1200 franchises across the world. We brought him in as our CFO. We just hired another guy that's been a real estate attorney for the last 15, 20 years, and so we're bringing in the right people with.

Dale Willis: 39:23

The next phase being is we're really, really good at real estate, we know what we're doing and now let's bring in that expert talent that's going to help us go nationwide. And so you know we're now doing deals. You know we're in all over Minnesota, but now we're, you know, putting offices in Salt Lake City and Los Angeles and looking at deals in Florida, and so we're looking at. You know, we're really good at what we do and we love it and we know it and we're passionate about it. Well, there's no reason we need to be limited to just the small footprint, and so that's really the big push is let's grow this thing all over and give the opportunity for a lot more people to be able to grow wealth with us, and so we're really excited about the next phase in life.

Mark Perlberg : 40:10

What do you do for fun or for enjoyment when you're not at work?

Dale Willis: 40:16

We talked about this at the beginning. I love farming. As a kid I used to dream about having a cattle ranch and I can remember I would sit on the grass under a shade tree and I would just sit and dream about this being a cattle ranch and riding my horse and checking on my cattle. And it's funny, I had this vision of a long driveway to my house and it's tree line and grass on either side. And frequently I drive home and I go.

Dale Willis: 40:46

I'm living the dream and one day my wife's with me. She goes what do you mean? You're living the dream and I said this is exactly what I dreamed of as a kid. I'm living the dream. This is the dream I had. I don't want to be a full-time rancher, but you know, I got a cattle herd and I've got a quarter mile long driveway with trees lying down either side, with beautiful green grass, to get to my home, and so I'm literally living the dream and I just love farming. I love the cattle. I've had a few other things. I love snow skiing and water skiing and riding my Harley and all kinds of other things. If it's outside, I'm there, let's go, We'll have fun, but I just really love having a cattle ranch.

Mark Perlberg : 41:35

It's a passion and I love coming home and living the dream. Yeah, I used to dream that I could do stunts on a motorcycle like.

Dale Willis: 41:41

Evo Knievel, I don't really dream that anymore. It's funny how our dreams change as we mature and get older, huh.

Mark Perlberg : 41:45

Yeah, so is there anything any call? So for the people listening who may be interested in learning more about your projects, investing in what you do or learning about what you're doing, where are some places people can go?

Dale Willis: 42:00

If they go to Centra Capital Partners centracapitalpartnerswithaccom there's a whole bunch of information. They can see the projects that we're currently offering. They can see the business models on how they perform, where they're at all kinds of information. So there's a ton of information there and that's really a great resource if people have some interest in co-investing with us.

Mark Perlberg : 42:24

Cool, awesome, well, hey, no. Thank you so much for your time and for those of you listening. If you want to learn more, you got his info and if you want to be a client or you know someone who could join the team, go to markprobergcpacom and we will talk soon. Have a great day. Thank you so much, dale.