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Updated over 4 years ago on .

User Stats

261
Posts
26
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Brett P Swarts
  • Specialist
  • SAINT AUGUSTINE
26
Votes |
261
Posts

How Deferred Sales Trust Different From a 1031 Exchange

Brett P Swarts
  • Specialist
  • SAINT AUGUSTINE
Posted

Anthony Scandariato:

How is it different, for a lot of my listeners or someone with experience, how is it different from a 1031 exchange? What are the main differences there?

Brett Swarts:

Before we jump into that, I'll give you a little bit of context. I actually started out my career as a Real Estate Broker at a company called Marcus and Millichap, helping people buy and sell multifamily properties here in Northern California. This was during the 2006-2010 range. And at the beginning of my career, it wasn't easy, I was just trying to make it in the business just learning. And it was really just an apprentice to a mentor, who was, you know, one of the top agents and brokers in Northern California for multifamily. And as I learned, I grew, and just as I started to get some momentum going, something, you know, happened was the 2008 crisis, and a lot of folks will probably remember that. And that was really a turning point in my career, but also a big challenge for a lot of our clients and our clients, we're faced with the toilets, trash liability, but also a lot of debt. Why? Because I had overpaid for properties in the ‘05, ‘06, ‘07 market before the crash. So when everything came falling down, my reality of being in the business was also challenged, because I had to figure out a way to adapt and figure out a way to add value beyond what every other broker was talking about. We also wanted to figure out a way to help our clients, friends and partners and family never faced the challenges that they had to face of losing everything, some of them did, and some of them lost half of their wealth. We actually focused on the 1031 exchange and some of the shortcomings. So as a commercial real estate investor, myself, and broker, we love the 1031 exchange when it's a buyers market when deals make sense, or there's a value add opportunity. Or you can do forced appreciation, increase the rents and do all the things that we love to do as real estate investors. But it's not always that buying opportunity, right.

In fact, the last few years, we've seen this inventory really dropped cap rates, you know, really get low, meaning cash on cash return wasn't very good. The same thing happened in the ‘05, ‘06, ‘07 markets. Then people felt like they were forced to overpay, and so they did the 1031 exchange, identify within 45 days, close within 180. But remember, it's equal or greater debt or equal greater value. So what happened was, a lot of them lost everything. So we set out on a journey and my fellow colleagues in Marcus and Millichap were looking for a solution for it. And just at the right time, a gentleman came in and spoke on this deferred sales trust, who's now my business partner, who is from the financial advising world. And it was kind of a different perspective, but basically took the tool and the secrets that we're about to talk about here in a minute. And I started to apply it to my commercial real estate business. And so helping people buy and sell at any time that they want it to. And so my business started to grow. And I succeeded. 3 years later, I've been a commercial real estate broker. I'm also now the Founder of Capital Gains Tax Solutions, where we actually train brokers, real high-end realtors, syndicators, and financial advisors on how to do this, also that business professionals can add more value, and then clients can escape feeling trapped by capital gains tax.

So we can start with the first secret. The first secret is this, selling and deferring hundreds of 1000s of dollars, or millions of dollars in capital gains tax, how to legally break free from the capital gains tax, and find the freedom to buy and sell whenever you want, without ever worrying about a 1031 exchange ever again, which leads into a deal we just closed in Georgia, just about two months ago, three months ago, now, a gentleman was selling his $7.6 million multifamily property. And he's bought and sold hundreds of properties for 30 years. And his name is Dave. And he's located in Northern California. He has numerous 1031 exchanges. He actually thought he had a deal in North Carolina that he's gonna buy. But he looked at the cap rates, and this is right before COVID-19. He said I don't know if this really makes any sense. I feel like it's at the top of the market. I don't necessarily want to buy this property and overpay for it. And so he had learned about the deferred sales trust about a year ago before this. So he was still kind of skeptical, still kind of looking at it. But then COVID-19 hit and he said I'm all in on the deferred sales trust. And so instead of taking on all this debt, which he had about 4.5 million to replace, he decided to put all of his equity, about 3.1 million into the deferred sales trust. And here's the key. We saved his failed 1031 exchange. He was passed this 45-day identification. And he didn't want to overpay, he really didn't like the deals that he had. We helped him defer 1.1 million in tax. So now the money is sitting at TD Ameritrade Bank of New York Mellon, Charles Schwab some of the largest banks in the world. And then he was also able to put 2 million into hard money lending. So immediately he got out of the real estate market, you got all this powder dry. He's on the sidelines, and now it's hard money lending is getting about 6%. And he's just waiting for a deal to come. And that deal may be in a month or two or six or 12. But his point is, look, Brett, I didn't want to buy and overpay for a property. I didn't want to be forced into a 1031 exchange. I was tired of the toilets, the trash to liability. I'm glad I was able to meet capital gains tax solutions, learn about this deferred sales trust and now I can buy whenever I want and create and preserve my wealth. So I'll pause there because you might have some questions about that first secret.

Learn more about Deferred Sales Trust
Visit: www.capitalgainstaxsolutions.com

  • Brett P Swarts
  • Offering