Wealth Formula by Buck Joffrey

The last couple of weeks, we’ve been deep in the world of buying businesses. But what happens when it’s time to cash out? Maybe you’re ready to sell your business, that investment property you’ve managed for years, or another major asset you’ve poured your energy into. If you’re like most people, the thrill of a big sale is quickly followed by a less-exciting thought: “Wait, how much am I going to owe in taxes?” It’s the classic one-two punch—first the celebration, then the sinking feeling as you picture Uncle Sam’s hand reaching for a chunk of your hard-earned gains. But here’s the good news: you actually have options. Real, legal, IRS-approved options. And the right strategy can mean the difference between watching your profits shrink and putting your money to work for you—sometimes for years to come. Of course, things get a little trickier if you have a mortgage or other debt on the property, but don’t worry—we’ll break that down too. Let’s start with one of the oldest tricks in the book: the 1031 Exchange. If you own investment real estate, you’ve probably heard about this one. The idea is simple: sell your property, buy another “like-kind” property, and—if you follow the rules—kick that tax bill down the road. But here’s the twist: if you’ve got a mortgage, you’ll need to replace that debt with equal or greater debt on your next property, or pony up the difference in cash. Otherwise, the IRS will want a piece of the action right away. So yes, leverage matters! Now, maybe you’re tired of being a landlord but still want those tax perks. Enter the Delaware Statutory Trust, or DST. This is essentially 1031 exchanging into a syndication that is designed for this type of thing. You sell your property and, instead of buying another one yourself, you buy a slice of a big, professionally managed property—like an apartment complex or shopping center. DSTs often come with their own loans, so you can match your old mortgage and keep the tax deferral going. The upside? No more midnight calls about leaky faucets. The downside? You’re trusting someone else to run the show and they need to be good at it (just like any syndication operator). And, there are some rules and restrictions that can affect your returns negatively. But what if you’re selling a business? That’s where Employee Stock Ownership Plans, or ESOPs, come in. Imagine selling your company to the people who helped you build it—your employees—and deferring a big chunk of your capital gains tax in the process. It’s a win-win, but if your business has debt, things can get complicated fast. This is definitely a strategy where you’ll want a seasoned advisor in your corner. Now, let’s talk about installment sales and structured sales. In this scenario, instead of getting paid all at once for your asset, you spread out the payments—and the taxes—over several years. Structured sales even bring in a third party to guarantee those payments, adding an extra layer of security. But—and this is a big but—if you have a mortgage, the IRS treats the amount the buyer pays off as if you got that money in cash on day one. So, you’ll pay taxes on that portion right away. For example, if you sell for $1 million but owe $600,000, you can only defer taxes on the $400,000 you actually receive over time. The more debt you have, the less you can defer. And finally, we have the Deferred Sales Trust—the topic of this week’s Wealth Formula Episode. Think of this as the “supercharged” version of a structured sale. Instead of waiting on the buyer for payments, you transfer your asset to a trust, which sells it and invests the proceeds. You get to choose how and when you receive your money, and the trust can invest in all kinds of assets while your taxes stay deferred. It’s flexible, it’s powerful, and it gives you the chance to grow your money while you wait. Which of these strategies is right for your situation depends on your goals, your assets, and whether you have debt on the property. The key is knowing your options and working with someone who can guide you through the maze. That said, for assets that have no debt, I really do think the deferred sales trust is something that everyone should know about, and that’s what my guest on this week’s episode of Wealth Formula Podcast is an expert on.

Last week on Wealth Formula Podcast, we dove deep with an expert who specializes in due diligence for small business acquisitions. To reiterate, what makes small business acquisitions especially enticing are the incredible financing opportunities available through the SBA. Imagine this: you only put down 10 percent on a $5 million business, and suddenly, you’re in control of a business that throws off a million dollars per year in cash flow after paying monthly loan charges. That’s what these numbers look like. Now obviously, it’s a business, and it’s not going to be quite that easy. That’s why you have the higher cap rate. But the value proposition makes it worth consideration nonetheless. It’s complicated stuff, and whether it’s buying commercial real estate, funding a promising startup, or acquiring a multimillion-dollar established business, the right guidance can mean the difference between stress and success. So, this week on Wealth Formula Podcast, we’re taking the next logical step and talking to an expert on funding these deals. After all, there is no sense in doing all that due diligence if you can’t actually pull the financial trigger.

Lately, I’ve been thinking about starting a new business. I know the market seems like it’s crashing around us, and we’re probably headed into a recession. But hey—I started my first business back in 2009, and it doesn’t get much worse than that, right? Well, maybe it can. And that’s exactly why I’ve been considering buying a business instead of starting one from scratch, particularly because of the SBA loan options available right now. Here’s how an SBA 7(a) loan breaks down for a $1,000,000 business purchase: Total Loan Amount: $1,000,000 Typical Down Payment (10%): $100,000 Amount Financed: $900,000 Loan Term: 25 years Estimated Monthly Payment (at 10.25% annually): $8,200 Now, that monthly payment isn’t exactly cheap. But consider this: a business selling for $1 million typically goes for about three times its annual earnings. For those of you from the real estate world, that translates to what we’d call a cap rate of about 33.33%. And remember—anytime your cap rate exceeds your interest rate, leverage works in your favor. Let’s break down the numbers clearly. With annual earnings of $333,333 ($1,000,000 divided by 3), and an annual debt service of about $98,400 ($8,200 x 12 months), your annual cash flow comes out to around $234,933. Since you only invested $100,000 to get this cash flow, you’re looking at a cash-on-cash return of about 235%. Pretty impressive, right? Of course, the devil is always in the details. One reason I’ve never pulled the trigger on buying a small business like this is because, as someone who’s started businesses myself, I know firsthand just how volatile small businesses can be.  Often, their success hinges on key factors that don’t necessarily transfer smoothly to a new owner. Think about it—if small businesses were all this easy, why would anyone ever bother buying anything else? That said, my guest on this week’s Wealth Formula Podcast strongly advocates for buying existing small businesses and believes most people are overlooking a fantastic opportunity. He makes a compelling case—one that might just have you checking out business listings yourself. Curious? Make sure you tune into this week’s Wealth Formula Podcast and see if buying a business might be the right move for you!

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Charlie Munger, the late sage of value investing and Warren Buffett’s right-hand man, once said there are only three ways a smart man can go broke: “liquor, ladies, and leverage.” Now, of the three, leverage is the sneakiest. It shows up dressed like opportunity, whispers promises of scale and speed, and before you know it—you’re in a capital call or margin call. But let’s be clear: leverage isn’t the enemy. In fact, if your goal is to become truly wealthy—if you want to build lasting, generational wealth—you’re going to need it. Unless you’re one of the lucky few who can throw a football 70 yards or sell out Madison Square Garden, leverage is your ticket to the big leagues. At its core, leverage is simply using other people’s money—or time—to amplify your results. It’s a mortgage on a cash-flowing property, a business line of credit, or a carefully constructed insurance strategy. When used properly, it’s the financial version of driving a car instead of walking. It gets you there faster. Leverage magnifies everything—the gains, yes, but also the losses. It’s the volume knob on your financial life. And in the last few years, when interest rates skyrocketed at the fastest pace in modern history, that volume went from background music to full-blown chaos. And here’s the thing: it wasn’t just the rookies who got caught. This cycle humbled everyone—developers with decades of experience, funds with billions under management, and institutional players with Ivy League MBAs. When the tide went out, even the smart money found itself swimming without trunks. Some were caught overleveraged. Others had short-term debt in long-term projects. And a whole lot of people made the fatal assumption that the low-rate environment would last forever. It didn’t. But…just like the last financial crisis, this kind of wreckage creates extraordinary opportunity—if you know how to navigate it. Because as painful as the last couple years have been for real estate investors, they’ve also opened the door to a once-in-a-decade setup. Distressed assets. Motivated sellers. And amidst all the carnage, leverage—used carefully, conservatively, and respectfully—can once again become the powerful tool it was meant to be. This is not a time for fear. It’s a time for strategy. For discipline. For underwriting with humility and deploying capital. This week’s episode of Wealth Formula Podcast is a postmortem on what went wrong in real estate over the past few years as interest rates surged and markets shifted. We break down the hard lessons learned—even by seasoned pros—and explore why today’s environment is starting to resemble the rare window of opportunity we saw in 2010–2011, in the wake of the mortgage meltdown.

When it comes to building wealth, the allure of exotic investment products can be hard to resist. From cryptocurrencies to rare collectibles, these options promise excitement, exclusivity, and the potential for big returns. But are they truly superior to buying the market or some rental real estate? Let’s take a look at a few popular exotic investments. 1. Cryptocurrency: High Risk, High Reward? The upside is real—early adopters have seen life-changing gains, and blockchain technology offers genuine innovation. However, the volatility is intense; prices can crash as fast as they soar, and risks like hacks or regulatory shifts loom large. Compared to the stock market’s historical 7-10% average annual return (adjusted for inflation), crypto offers a wild ride that can pay off—but only if you time it right. In my opinion, if you want to jump on the ride, there is no better time than now. 2. Rare Collectibles: Passion Meets Profit Investing in art, fine wine, or vintage cars blends enjoyment with potential gains. A well-chosen piece can appreciate significantly. For enthusiasts, the emotional reward is a big draw. On the flip side, these markets are illiquid (selling takes time and effort), and costs like storage, insurance, and commissions add up. Unlike real estate, which generates rental income, or stocks with dividends, collectibles don’t pay you while you hold them. 3. Private Notes: High Yields with a Catch Private notes involve lending money directly to individuals or businesses—often real estate developers or small companies—in exchange for interest payments, typically offering yields above traditional bonds or savings accounts. It’s a chance to earn solid returns, sometimes 8-12%, while supporting specific projects or borrowers. The appeal lies in the potential for steady income and the ability to negotiate terms. However, defaults can spike during economic downturns, and your money is often locked in until the note matures. Compared to real estate, which offers rental income and appreciation, or stocks with liquidity and diversification, private notes are a niche play that requires careful vetting of borrowers to make sense. 4. Private Equity: The Elite Investment That’s Not Always Golden Speaking of niche plays, private equity (PE) often comes up as the ultimate exotic investment, especially for the wealthy. It’s frequently billed as a special opportunity reserved for the elite, where funds pool big money to buy, revamp, and sell companies for hefty profits. The perception is that PE is a gold mine, delivering returns that leave the stock market in the dust. But is it really the wealth-building powerhouse people think it is? This week’s guest on the Wealth Formula Podcast argues that private equity might not be the golden ticket it’s cracked up to be.

As I reflect on the difference between Trump’s first administration and his current one, I notice a marked shift. When Trump first took office, his message and objectives weren’t clear to me. Beyond the promise of building a wall, I struggled to understand his vision. This time around, it’s vastly different. His message is laser-focused, and I’ve been particularly intrigued by the administration’s economic approach. Many of his advisors and cabinet members come from the private sector, bringing a deep understanding of markets and business that’s unprecedented in American government. One of the most notable figures often in the news is Elon Musk. There are mixed feelings about him now, with some people even vandalizing Teslas—a stark contrast to how he was viewed just a few years ago as an icon among liberals. Personally, I admire Elon for his vision and commitment to changing the world through Tesla and SpaceX. He doesn’t need to be involved in these endeavors, but his passion for making a difference is evident. I believe his efforts to impact America’s economy align with his broader mission. What better way to change the world than by strengthening the economy of the greatest nation on earth? However, Elon isn’t the only notable figure Trump has brought on board. There’s an impressive roster of individuals, including Treasury Secretary Scott Bessent, who might be the mastermind behind Trump’s overarching financial plan for America. I’ve been following Bessent closely, reading his statements and listening to his insights. When I tune in to what he has to say, the confusing aspects of the current economy become much clearer. On this week’s episode of the Wealth Formula Podcast, I’ll share what I’ve discovered and what I think it means.

Renewable energy is often discussed in political terms, but here’s a straightforward look at the financial side. In the last decade, solar energy costs have fallen dramatically—by nearly 90% since 2010.  In top markets, solar panel costs dropped from about 29 cents per kilowatt-hour to under 3 cents. By contrast, new coal and gas plants still cost between 5 and 17 cents per kilowatt-hour, and these figures don’t include the unpredictable nature of fuel prices. According to firms like Lazard, solar and wind power now average around 2 cents per kilowatt-hour, while operating existing coal plants typically costs 4 to 8 cents. This clear cost advantage is encouraging a shift away from fossil fuels. Globally, the change is evident. Countries like China, Europe, the United States, and India are ramping up their renewable investments, with almost every new power plant built today relying on solar or wind.  Nuclear power is also seeing increased investment as a reliable, low-carbon option. As we have discussed on previous shows, that is my primary reason for being so bullish on uranium stocks. The bottom line is that even if you’re not interested in the conservationists’ approach to energy, renewables are replacing fossil fuels rapidly. This week’s guest on Wealth Formula Podcast will help you capitalize on that.

It’s been some time since we did an Ask Buck show, and I realized last week that I have some unanswered questions in the inbox. The first question I read ended up being kind of a broad one, but it made me really think about how it all started for me. I started this podcast over a decade ago after realizing that there were not a lot of good resources for high-paid professionals to learn about personal finance. Of course, there were the Suze Ormans of the world, but what I wanted to do was to share what I had learned in my attempts to mimic the wealthy when I first came out of surgical residency training. There were many painful lessons along the way on my own journey. But I did manage to put it all together better than most. With that, I feel comfortable providing perspective on how I would do it if I were starting over again today. That’s exactly the question I got from one of our listeners and the one question I will address on this week’s Wealth Formula Podcast.

In this engaging discussion, Larry Leppard, managing partner at Equity Management Associates with over $60 million in assets, shares his journey from gold to Bitcoin. He delves into Bitcoin's historical volatility and its enduring appeal, especially among younger investors. The rise of institutional interest and the shifting dynamics of investment priorities are highlighted. Leppard also explores the advantages of Bitcoin over traditional assets and its potential as a hedge against economic uncertainty, urging listeners to embrace the new financial paradigm.