How I Bought My NEW Las Vegas Home For $0

What's up you guys, it's Graham here!

So, as some of you know, I recently bought a home in Las Vegas, and I'm gonna be moving from California full-time by the end of the year. However, even though there have been a multitude of various reasons behind this move, let's focus for a moment on just the financial aspect of it, because I understand this is something that's been brought up a lot lately, and I want to take some time to address it. But in order to do that, let me snap my fingers really quick and transport myself all the way to Las Vegas right after you smash the like button! Seriously, as soon as you hit the like button, I will appear in Las Vegas. Just try it out. Try it! As soon as you hit the like button.

So, I think it's no surprise that if there's one thing I'm known for, it's my persistent frugality. Since I was a kid, I've always had this weird fascination with saving money. Throughout my entire life, I've always found enjoyment in trying to stretch the value of the dollar as far as it will possibly go.

Well, along that same line of thinking, I want to clear up some of the confusion about this house that I just recently bought in Las Vegas. Even though the purchase price of this home was one million four hundred and forty thousand dollars, and that's a lot of money out of pocket that on the surface seems completely unnecessary and out of character, at the end of the day, it's actually going to cost me zero dollars to move here. In fact, by buying this house, it's actually going to save more money than I spend to the point that this home is going to make me substantially more than it costs. And if you're confused, here's how this works for my situation.

Now, until this house is finished, I'll be living in Los Angeles, California, which is really important to mention because California has the highest state income tax throughout the entire United States at as high as 13.3 percent. See, here's how that works, and I just have to say, the subject of taxes is easily one of the most important topics to understand, and it's such a shame that schools never teach you about this. Most people will just figure it out eventually on their own, at which point it's usually too late.

So, here is exactly how it works and exactly what you need to know. Here in the United States, you first have what's called your federal tax bracket, which is how much money you owe the IRS depending on how much money you make. This one is the same throughout the entire United States, no matter where you live here. This one applies to you, except if you live in Puerto Rico, but that's the topic for another video.

Anyway, in 2020, here's how this works. As you can see from the chart here, if you're single and you earn under $9,875 a year, you're not going to owe any federal taxes. Then after that, you're going to owe 12% taxes on all income above that and up to $40,125. Then you're going to pay 22% federal tax on all income between that and $85,526. And of course, this just continues until you hit $518,400 in a single year, in which case all further income after that is taxed at a federal tax rate of 37%.

Now, in addition to the federal tax rate, you also have a state income tax rate, and here's how that works. Almost every state has an income tax that you owe them completely separate from the IRS. As you can see from the chart, some states have zero income tax, like Texas, Nevada, Tennessee, Florida, Washington, and so on, and others range anywhere from a few percent all the way up to 13.3 percent. And guess which state I live in? That's right, California, the one with the 13.3% state income tax rate, the highest in the entire US.

Now, just like the federal income tax, there are tiers to what you would pay for the state income tax in California. You're gonna pay 1% state income tax on all income up to $8,809. Then you're gonna owe 2% up to $20,833, and then of course that continues all the way up to 13.3% for incomes of above 1 million a year and higher. That means if I were to earn $3.2 million net in 2020, I would owe about $1 million and $44 thousand towards federal income taxes and then another $400 thousand towards state income taxes in California, leaving me with slightly less than half left over after all taxes are paid.

Now, if we approach this from a purely tax standpoint, Las Vegas doesn't have any state income tax. That means on $3.2 million worth of earnings, I would effectively get to keep an extra $400,000 a year by living here. So, of course, that's where some of the math behind this comes in. I was able to get a fixed rate 2.875% 30-year mortgage with 15% down on this purchase price of $1 million 440,000. That means the mortgage is going to be about $5,078 a month.

My property taxes are gonna be about $1,050 a month, the HOA is about $300 a month, and the insurance on this is another $200 a month. That means my total to own this home is $6,628 per month. However, when you pay a mortgage like this, a portion of that payment goes towards home equity as you pay down the loan. So, that means when you account for the $2,150 every single month that goes into home equity by paying down the loan, my actual out-of-pocket cost is reduced to more like $4,478 per month.

Not only that, but because I'm planning to use half the house exclusively for business and filming, I'm able to write off half the entire cost. That brings my entire out-of-pocket cost to own this home after tax write-offs to $3,582 a month. So, that means even though the purchase price of this house is $1 million four hundred and forty thousand dollars, and it's costing me out of pocket $3,582 a month, not only do I get an extra two thousand square feet to create filming locations from, but I'm also able to save $33,000 a month to move my business over here to Las Vegas.

So, the way I see it, I'm happy to pay $3,582 a month if that allows me to save $33,000 a month in return. So that leaves me with $28,000 a month left over every single month to move here, not including all of the other benefits of getting to live in Las Vegas. That works out to be almost a $1,000 ROI on my money every single month that I'm here, not to mention I also get to diversify my real estate outside of owning property in Los Angeles.

So, yeah, even though this house might seem like initially a waste of money, this is probably one of the best acquisitions I could have made. Now, for anyone curious, yes, I still will owe California income tax on any income generated from California. That means that I'm still going to owe California income tax on all of my rental properties, and any business in California is going to be carefully accounted for.

But because nearly everything else that I do could be done completely remotely, moving here just gives me significantly more opportunity to continue growing and expanding and giving you even better content day after day. So that's how this house not only cost me zero dollars but it's saving me significantly more money than what I spend by a magnitude of 10. Meaning for every one dollar that I spend here, I end up getting back 10 dollars in return.

Now, this is certainly not to say that anyone can do this because there's a lot of factors to take into consideration, but for me, this is how I broke down the math in terms of how it pertains to my own situation. Now keep in mind, taxes are not the only reason I'm leaving to Las Vegas. Even though this video is centered around the financial aspects of moving, there are many other factors that went into this decision that you can't really put a price tag on.

And for anyone who wants more information on this, check the video I posted about a week and a half ago going over why I'm leaving California, which more thoroughly discussed all of the non-financial aspects of the situation. This is a very well thought out decision, carefully mapped out throughout the entire year, and Las Vegas just makes sense for a multitude of reasons. Not only do I have a lot of friends here, but these are friends I can collaborate with and start businesses with and continue to expand in a way that's very difficult to do remotely.

I'm going to be teaming up with someone else there to start something new, and I believe in-person discussions provide so many other benefits that can't really be done over the phone or with Zoom. In addition to that, I'm gonna have so much extra room for so many extra activities, and there's no traffic, and the opportunities there are a lot greater for me at this stage in my life.

My girlfriend and I both work from home; I barely leave the house, and besides working from my backyard, my priorities have just changed. And listen, the reason behind sharing all of this is purely for the sake of being completely transparent and also bringing you throughout the journey of everything that I learn and experience along the way.

I've documented my entire progress on YouTube throughout the last four years through every obstacle, hurdle, and purchase. And something as big as this deserves to be thoughtfully discussed so that way nothing is being left out. And remember, I'm still going to be paying California income tax on all income sourced from there or any business generated from California. So it's not like I'm going to pay no California state income tax anymore.

But since the majority of what I do could be done from anywhere, and I want to continue to grow and expand as much as I can, new opportunities just lie elsewhere, and that's what I plan to follow. Anyway, in terms of coming back to my thoughts on taxes and building wealth, here's what I've learned: if you want to build long-term wealth, it really all begins with saving money.

You got to save a significant portion of your income and invest it wisely if you're ever going to be financially independent. There's simply no other way around it. And really at its core, saving money is a lot like dieting; it's not meant to be something you just do for a few weeks or for a month here and there and then never again. Creating a budget is something you're supposed to stick with for the rest of your life.

And even though it might seem like on the surface I'm spending more money, every single purchase is carefully planned around not losing value, like the Las Vegas house. But once you get to the point where you can't possibly save any more money, that's the point where you begin focusing your time and efforts around making more money. Maybe you start a side hustle, or you move careers, or you enter into a different field.

This is really all about maximizing your value of time. Now, once this happens, it's really important that you keep your expenses at the exact same level, except now that you're making more money, you're able to save and invest the difference. And lastly, once you've maximized the value of your time and you're saving as much money as you can, then it's up to you to learn the tax code and strategically reinvest back into your business.

That way, you could continue growing and expanding. These are strategies to keep the money you make while simultaneously investing it back in yourself, because sometimes the money you keep could be greater than the money you earn.

Now, I typically don't cover topics like this because it's a pretty niche audience this applies to, and chances are if someone is making a ton of money, they've already been paying someone to set up their business for them. But for anyone curious, at least this is something to be made aware of, and I hope this helps explain the math behind the purchase.

So, with that said, you guys, thank you so much for watching. I really appreciate it! As always, make sure to destroy the like button, subscribe button, and notification bell. Also, feel free to add me on Instagram; I post pretty much daily, so if you want to be a part of it there, feel free to add me there, as on the second channel, The Graham Stephan Show, I post there every single day I'm not posting here.

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