Deferred Sales Trust | Old Dawg’s REI Network Podcast

What You Will Learn

• How to avoid paying capital gains tax on your property profits without using a 1031 Exchange
• Why you should never overpay for a property just to meet a 1031 Exchange deadline
• How to gain tax deferral, liquidity, freedom, flexibility and diversification with your funds so you can purchase properties at optimal timing
• What a Deferred Sales Trust is and how it’s better than a 1031 Exchange
• Strategies for Retirees that will get you out of debt, create liquidity, bring investment diversification and help your nest egg grow
• How you can defer capital gains tax from your property sale and invest your profits in other investments besides real estate

About Our Guest

Brett Swarts

Brett Swarts is the Founder of Capital Gains Tax Solutions and host of the Capital Gains Tax Solutions Podcast. Each year, he equips hundreds of business professionals with the Deferred Sales Trust tool to help his high net worth clients solve capital gains tax deferral limitations. His experience includes numerous Deferred Sales Trusts, Delaware Statutory Trusts, 1031 exchanges and $85,000,000 in closed commercial real estate brokerage transactions. He’s an active commercial real estate broker and investor with brokerage experience and ownership in multifamily, senior housing, retail, medical office, and mixed-use properties. He is a licensed California Real Estate Broker who holds Series 22 and 63 licenses. Brett lives in Roseville, California, with his wife, Melanie and their 5 children.

More About Brett

• From the Bay Area (Mission San Jose, California)
• Grew up with his father, building custom homes
• Learned the “sticks and bricks” of real estate, from the ground up completed
• He invested along with his parents – single family cashflow opportunities
• Studied business in college

Moving Into Real Estate as a Career

• Got a job with Marcus and Millichap (commercial investment real estate firm)
• Specialized in multifamily
• Learned about 1031 Exchanges
• This was between 2006 and 2011
• in 2008, just as he was getting his business going, the Great Recession happened
• A lot of people got hurt and a lot of brokers fell out
• He was a relatively new broker, didn’t have high expenses and loved the business and helping people solve challenges with their investment real estate
• What he found out along the way was that the 1031 Exchange is just not everything for everybody at all the times
• That’s how most tools are. They have their limitations and they have their challenges
• After he saw people get completely wiped out and lose everything, take on too much debt and overpay for properties, he set out on a mission to find a better way
• Where clients never have to…
  • feel trapped
  • overpay for properties
  • stay in debt
  • and can find diversification, liquidity and can find “optimal timing” – the ability to buy real estate when it makes sense for them
• His boss brought someone into their office to talk about Deferred Sales Trusts
• This changed his work and “calling” – he had a new option for clients

Brett as an Investor

• Brett believes that, hands down, commercial real estate, cash flow real estate, value-add real estate is the best risk-adjusted rate of return you can have on any asset class, not only for the depreciation offset of income but also for the appreciation and the opportunity where you can be hands-on with your investments
• He personally and professionally focuses on Senior Housing, Assisted Living, Memory Care, Independent, as well as Conventional Multifamily as well as mobile home parks as his favorites right now
• He also invests in industrial, office, medical office, retail, etc
• He primarily focuses on operators who have proven track records and who can find value-add opportunities
• His strength is in raising capital for these groups and investing along side them
• With 5 kids and two businesses, he stays very active on his businesses and he invests as much as he possibly can on these cash flowing real estate deals
• His first deal was in Arizona
  • 50,000 sq ft
  • 2010 foreclosure
  • Half-built retail property
  • The operator built and bought the project
  • Brett rolled his fee into it
• Others
  • Retail center in Yucaia, CA
  • Broken condo deal in Sacramento
  • Ground-up Senior Housing in Elk Grove, CA
  • Does Industrial in Texas

Deferred Sales Trusts

• Most commercial real estate owners or high net worth individuals who own a business or high-end primary home, struggle with capital gains tax, where they pay 30-50% of their gain when they go to sell their property
• For his clients, he uses a Deferred Sales Trust, which is an alternative to the 1031 Exchange, to help them gain tax deferral, liquidity, freedom, flexibility and diversification with their funds, so they can purchase properties at optimal timing – never using a 1031 exchange again – so they can create and preserve more wealth

Largest Wealth Transfer in the History of the Planet

In the U.S. right now

Demographics are such that we have what is called the “largest wealth transfer in the history of the planet” taking place – and this is happening over the next 20 years

They both are but tax deferral strategies but the challenge is they solve different things in different ways

But the 1031 has some challenges, especially in a highly appreciated marketplace and especially when there is not a lot of opportunity to find value-add, forced appreciation opportunities

The number 2 reason not to use a 1031 exchange has to do with taking on something of equal or greater value – which means oftimes you have to take on equal or greater debt

Same thing happened in 2005-2006

They took on too much debt

The music stopped and they lost everything

The solution is to get out of debt when the market has appreciated

Take your cash and put it on the sidelines

Wait for the deal timing to shift

That’s what the Deferred Sales Trust does

There is no restriction on time

The funds can sit in the trust

You can invest the funds in:

stocks, bonds and mutual funds

hard money lending

commercial real estate syndications

You can do it when you want

It doesn’t have to be equal or greater value

Check out our full episode Link below.

https://capitalgainstaxsolutions.com/deferred-sales-trust-old-dawgs-rei-network-podcast/