Reimagining Real Estate Wealth with Dave Levenson

Most people go into the real estate industry in order to generate wealth and be financially secure, but oftentimes forget that in order to create a self-sustaining community, they also need to give back. Dave Levenson joins this episode in order to remind people about the values of real estate. Having been a part of the industry since he was fifteen years old, Dave shares his knowledge and the values he’s learned throughout his years in the business. Learn when and how to use the deferred sales trust effectively in order to get your timing right in re entering the market after the Coronavirus pandemic. He also gives emphasis to the importance of having corporate social responsibility and instilling this into the youth as the leaders of tomorrow in hopes of creating a better and healthier society.

BRETT:

I’m excited about our next guest, Dave Levenson. Dave is a client of mine. He is a Deferred Sales Trust client. He is a multifamily expert and he has some amazing wisdom, deal stories and inspiration to share with us. He’s going to talk about timing, when to buy real estate. It’s not only buying low but it’s specific about how to gauge when is the best time to buy real estate and when to lower your risk for buying real estate. Also, he’s going to talk about not going into too much debt via a 1031 exchange. He’s going to compare and contrast his Deferred Sales Trust versus the 1031, and why he decided to use the Deferred Sales Trust. He’s going to talk about ways to give back, which is the best part of this conversation. It’s using our wealth, resources and gifts we’ve been given to give back and help those who are most in need. With that, enjoy this conversation and share it with somebody if you find it a value. Thanks so much.

Our next guest is a good friend of mine and a client who closed on his first Deferred Sales Trust. He’s a long-time real estate investor who has lots of wisdom, knowledge and a heart for giving back. He’s using real estate wealth as a way to help other people and to effect change in a positive way in communities, which is what we’re about here at the show. Would you please welcome to the show, Dave Levenson.

DAVE:

Thanks a lot, Brett.

BRETT:

Would you give our readers a little bit about your story and share about your focus especially amongst all of this Corona crisis going on? Go ahead. The floor is yours.

DAVE:

I’ve been in real estate since I was fifteen years old. I’ve made my first investment with my father at fifteen years old and have been doing real estate stuff ever since then. I used it as a vehicle to support myself and my family and move on to doing things to help the community. That’s what I see real estate’s value is. It’s to create a system for us to be able to establish our financial security and start giving back. By financial security, I don’t mean billions and billions of dollars to get there. Comfort and stability are important for your family but using it to move forward with helping the community is an important part of my career.

BRETT:

Tell me about some of those first deals. You mentioned working with your father in real estate, but maybe tell us about one of that some of the first ones that you did personally and what was that like getting started?

DAVE:

The first big one I did was a fun story. I was living in Hawaii at the time. I got a $500 lease option on a half-acre of commercial property near the Mauna Kea Beach Hotel. I had a one-year option and took that option. I went out, got some renderings and sketches for what I could build there. I went around the state two times trying to get people to sign agreements to lease if I were to build it, they would come. I got enough of those compiled to be arranged for financing. I built the building and filled it up over time and after fourteen years, I sold it.

BRETT:

What island was that? I know our readers who may have gone to Hawaii and maybe they’ve driven past the building before. I’m curious, where is it located at?

DAVE:

It’s north of the Mauna Kea Beach Hotel called the Kawaihae Center in Kawaihae Harbor. It’s down the hill from Kamuela where I lived with my four kids before I moved back here to California.

BRETT:

What brought you to Hawaii? When you did move there? What was that like? I imagine your kids are forever grateful growing up maybe on the island.

DAVE:

It was typical like a lot of people. I went there for three months and stayed for twenty years.

BRETT:

There you go and you kept doing real estate building, buying, developing and owning. Was that your focus?

DAVE:

Yeah, I built on four or five different towns in a state. I did a historic preservation project in Downtown Hilo. I have a property still in South Kona and Kona Coffee Country. I have a restaurant there, Annie’s Island Fresh Burgers, which my children started and won several awards and with the virus, we are shutting it down. Nothing lasts forever. We had a ten-year run there, but there are no tourists in Hawaii and they’re not even allowed to come to Hawaii.

BRETT:

It’s a wild time and I’m sure readers are curious. For someone who has so much experience in real estate with the bull markets and the now bear markets and what’s happening, I’m curious what’s your overall take on this crisis?

DAVE:

The value of a DST is for times like this. You don’t want to buy it right now. If you’re selling, you have a choice of taxes or a DST. A DST provides you with the opportunity to wait and you don’t buy at the top of the market and you don’t buy at the bottom of the market. One of my rules is I let the sharks feed. The bottom happens, foreclosures happen and the sharks come out and start picking up the foreclosure. You have lift offs and stability that is 10% or 15% off the bottom and you know the market is finally going up. You jump in and make your buy. The reason for that is you don’t want to be trudging along on the bottom for 3 or 4 years holding your property. The DST is a great vehicle for right now.

BRETT:

I appreciate you sharing that and I have such wisdom to let the sharks feed. We call it the Blue Ocean versus Red Ocean Concept, not necessarily we, but there’s a gentleman who wrote a book on that. Essentially, the Red Ocean is where all the sharks are feeding and all the blood is in the water. Everyone’s at a frenzy and everyone’s going to get hurt there. The Blue Ocean is the wide-open place where you could fish. It’s peaceful, calm, and has lots of opportunities. That makes a whole lot of sense. Walk our readers through a little bit about it. This is about a year-long process. Before the DST, what was the idea of even looking at it for the first time? This is when the market is going great and things are going well. What made you think, “Maybe I’ll look at this for the first time?” What caused you to consider it?

DAVE:

Even though it wasn’t a strong market, I’m older and I was looking at retirement. I didn’t want to keep on the treadmill and trade up. I was looking at doing a DST and that’s when I vetted your company. My accountant got involved too and we talked to your attorneys and everybody in your group that was important. It all checked out quite well and I was thinking that I wasn’t going to find another deal necessarily that I wanted to trade into. I would do a DST to give me some flexibility in doing other things, not having to trade up with another bigger mortgage and things like that. It turns out we found an amazing deal anyway. We own that deal for seventeen months. We made 250% on that and we put it into a DST.

BRETT:

Walk us through your 1031 experience in the past or even different deals where you would sell, buy add value or build something. I imagine you’ve done a lot of those over the years and compare that against the Deferred Sales Trust. A lot of our readers are reading this for the first time. They don’t know the main differences. They get them confused with the Delaware Statutory Trust, which we’re not. We’re a Deferred Sales Trust. Could you walk us through what you liked about the pros and the cons of a Deferred Sales Trust versus 1031?

DAVE:

In 1031, if you don’t want to have mortgage relief, you’ve got to keep getting a mortgage, either the same or bigger with every time you trade up. I’ve done trade after trade where the mortgage has gone up every single time and the opportunity gets bigger. All of that is good if you’re not thinking about retirement mode, which is where I’m at right now. My first significant exchange was a funny one. I was a realtor at the time. My broker got a Rolls-Royce out of someone’s yard in Hawaii, fixed it up and promised to give this fellow $15,000 once he sold it. This is a 1982 recession and no one had any money anywhere so we traded the Rolls Royce into a lot.

We traded a lot into a house for a house and another house. It was eight different legs in the exchange and it wound up where the last house was traded into an acre parcel right in the middle of the town of Kamuela, Hawaii, but the parcel had three Hawaiian graves on it. I had to move the three graves with the whole Hawaiian ceremony with the permission of the owners that wanted to do this to close eight different legs of an exchange. That was pretty exotic. A Rolls-Royce all the way through to moving three graves for everybody to get paid.

Check out our full episode Link below.

https://savetax.capitalgainstaxsolutions.com/capitalgainstaxsolutionspodcaste1