All Forum Posts by: Brett P Swarts

Scott Bower:

How did you really find that this was an area where you could excel at and help people?

Brett Swarts:

Yeah, so my story starts in the Real Estate game at Marcus and Millichap, a Real Estate Investment Firm in Northern California, where I was a Commercial Real Estate Broker helping people buy and sell mainly multifamily apartments here in the Sacramento Area. It was 2006 and things were going really well, you know, it was kind of reminds me of a pre-COVID, prices were high, rents were growing, everything was doing very, very good. Then all of a sudden, something happened. The crash, but even before that, I was brand new to the game, and I was just trying to survive in the business. You know, I was newly married, I had a daughter at home. And I was, you know, as commercial real estate broker, you either sink or swim, either you make a big check, or you make zero, there's no salary, there are no benefits. But I love the business. I was just trying to make it. And I was making a little bit and I was getting going, I don't know, if you've ever been so scared Scott, where you barely made any money, you're not sure how to support your family. But that's where I was, it wasn't always easy. You know, it was a struggle. People are telling me to go get a real job, what are you doing? And I just started to get some momentum going in the business and then 2008 hit. Then it really became like, “oh my gosh, do you love this business or are you going to go, get a real job, as long as a lot of my friends would say, right? And I said, you know, I love the business, I'm gonna figure out a way to do it.”

So I do it, every good entrepreneur does. I actually got a side job at a restaurant Cheesecake Factory serving cheesecake nights. And by days, I mean, I would call and help owners get out of or figure out a way to lower their tax rate based upon new property values from things that just completely hit the wall, help them negotiate with banks, help them get concessions with the rents with their renters, help them do anything they can to keep them going. Because not only was I going through the struggle financially, but they were going through something that was very stressful to they were losing half of their wealth, some of them lost everything during this crash. So we try to figure out how do we add value to clients? And how do we help them escape feeling trapped by capital gains tax? And what we found out as we did our research was people had done 1031 exchanges and had overpaid for properties, right, they had sold high and bought higher 180 days later, and they take on the massive amount of debt. And then when the music stopped, they were left with values that were lower than what they owed for some of them or are close to it or cash flow that was an unpredictable right with people losing their jobs. And so they were losing everything. So we said there's got to be a better way. And if you've ever had someone come into your life that teaches you something that opens up a whole another Buddy call, a blue ocean opportunity. But that's exactly what happened to me, my manager at Marcus, the military at the time, brought in a gentleman. This is about 2009 to speak on what's called the Deferred Sales Trust. At that point, we understood that now we can help people escape the capital gains tax to 1031 exchange forever, so they never have to feel forced to overpay for a property never have to face having to take on too much debt.

So the plan was this, I was gonna roll it out to my clients, I was going to grow my business. I was going to help a lot of people and become like, you know, the top broker at doing this. So that's what I started to do, I started to roll it out, my business started to grow. My value started to grow because I was giving them something that no one else had and to liken this to blockbuster versus Netflix, the blockbusters like the old 1031 exchange, all right, very restrictive 45 days to identify 180 days to close, equal or greater value have to stay in the same asset class type, right? I love commercial real estate, but I also love it when the prices are more of a buyers’ market, which we think we're going to move into. Well, that's the old way of doing things. The new way is the Deferred Sales Trust. It's like Netflix, right? You can buy whatever you want to, you can be passive or active. You can put it into multiple asset types, you can put in stocks, bonds, mutual funds, or real estate or a new business venture or developing real estate. You don't have to do equal or greater value. You don't have to take on any debt if you don't want to. You get a brand new depreciation schedule. As soon as I understood that everything changed. Fast Forward, five kids now, my wife and I were able to be full-time. First was commercial real estate broker then we transition to training brokers, training financial advisors, training commercial estate operators, luxury realtors on how to use this strategy so they can grow their business and or if you're the client listening to this so that you can escape feeling trapped by capital gains tax.

You have just listened to another information-packed episode of capital gains tax solutions with Brett Swarts. We hope you enjoyed today's show and found it helpful. Visit to access the show notes and to access more resources. Don't forget to leave a Review and join us again next time.

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

Brett Swarts:

Welcome to the capital gains tax solutions podcast. Hey, I'm here with my new friend Scott Lewis. We're gonna be previewing the full episode. But we're gonna be talking about this episode: The biggest frustration with capital gains tax deferral and the 1031 exchange. So Scott, before we go there, though, would you give our listeners a 32nd background on you and your current focus?

Scott Lewis:

Yeah, I'm Scott Lewis. I'm the CEO of Spartan Investment Group, where at Spartan, we are focused mainly on acquiring Self Storage assets for our portfolio. We're also interested in building some RV parks as well, as partners have kind of a full service vertically integrated firm, where we have an acquisitions team to go out and find really good deals, we have a finance team, both on the debt and capital side to find really good debt partners and engage with our private investors. And then we have an operations team, both on asset management and property management, and then also construction. So we go kind of soup to nuts from finding the deal all the way to disposition.

Brett Swarts:

Beautiful, and that helps you to create and preserve our wealth for your friends, family, and partners. And so I appreciate you sharing that, by that we're going to dive into the full story of Scott, his background, his service to the country in the military, and his thoughts on leadership and building teams and the Self Storage world and why it's advantageous versus the multifamily world. But in this quick episode, Scott is curious what's the biggest frustration you have with capital gains tax deferral options, and or the 1031 exchange.

Scott Lewis:

So I think there's, they're, they're really great programs. I think, for the layperson, they're very hard to understand and execute. And I think there's a lot of folks out there that claim to know what they're doing here. But they can really kind of get you in some trouble there. We had an example of one of our investors kind of getting burned with that, with a 1031 got some bad advice from their custodian, and they ended up paying several $100,000. So getting the right person on your team that has the right set of values and the right set of processes in place to kind of help you through and kind of navigate that complex Labyrinth, it's there for good reasons, and they're in their good programs. But just understanding that and being able to navigate that while doing you know, if you're a high net worth, Doctor, I mean, you're cutting people open, you're not necessarily worried about what form to file. So just kind of having that team player that is going to be there for you and navigate.

Brett Swarts:

Yeah, very well said, by the way. I'm just curious about what that mistake was or the miscommunication or what happened in that particular deal. Do you know what the crux of it was?

Scott Lewis:

It was a timing issue. They were told they had more time to do something. I don't remember exactly. They were trying to 1031 into one of our deals. So there wasn't one of our investors. So we just know that they had a 1031. And there were some timing things that they thought they had more time to line up our deal because they were trying to knock down two deals at the same time, and they misfired with us. And unfortunately, not only did they lose their 1031 deferral on our portion of it, but they also went past their due diligence, they lost their earnest money with us.

Brett Swarts:

Yeah, that's a big challenge, though, we just say to fail 1031 exchange, without having to identify anything using a deferred sales trust on a 128 multifamily property in Georgia. And then he took those funds, and he put it back into multi multifamily passive investing with some partners. And so if you want to learn more about that there is a solution. It's called a deferred sales trust. And you no longer have to worry about the timing restrictions ever again, you can buy at optimal timing whenever you want to. We liken it to the Netflix way of doing things versus the old blockbuster way of the 1031 if you want to learn more about that you can go to www.capitalgainstaxsolutions.com that's www.capitalgainstaxsolutions.com. But for our listeners, Scott who wants to learn more about you and what you guys are doing, what's the best place for them to find you.

Scott Lewis:

They can head to our website, www.spartan-investors.com. They can learn kind of all about Spartan and if they're passive investors, they can go to our invest now and kind of get linked up with our Investor Relations team. If they've got some questions about the podcast about leadership or anything directly for me, I could be reached at [email protected].

Brett Swarts:

Beautiful, thanks Scott. Look for the full show here live on youtube actually right now and to drop on iTunes shortly. Thanks, everyone for listening and hope to have you listened again on a future show. Thanks. Bye.

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

A.H MAHMUD:

What is the difference between 1031 Exchange and DST?

Brett Swarts:

A 1031 Exchange is another part of the IRS Tax Code called IRC 1031 that allows somebody to trade real estate, for other investments, real estate, so as to be investment to investment and to defer tax. So let's say you had a million-dollar piece of real estate, and now it's worth 5 million, where if you were to sell, you can roll it all into another property, investment property, and 5 million or more and you can defer tax. Whereas the 453, installment sale or deferred sales trust, you could do the same thing, except you don't have to go back into real estate. So you can sell, you can put the money into a trust and then you can sit on the sidelines and buy whenever you want. That's really the power of the deferred sales trust, it gives you a chance to really time-marketplace rather than having to buy something under pressure.

A.H MAHMUD:

Interesting. So it basically gives us more time to think about so what we can do with the world we have.

Brett Swarts:

Exactly, versus the 1031 has a 45-day window to find the property, and then you have to buy that property within 180 days. So oftentimes you're selling high and buying higher 180 days later, which that doesn't make much sense most of the time, because our parents taught us to sell high and buy low, they didn't teach us to sell high and buy higher 180 days later on something that maybe doesn't look so good. So that's where we're in this marketplace, it’s so highly appreciated. values are so high, it's a great time to sell. But it's not a great time to buy, you want to get on the sidelines, meaning want to get out of debt, you want to get some diversification, you want to get some liquidity, and you want to not have all your eggs in one basket. That's what the deferred sales trust allows you to do. Whereas the 1031 exchange, you cannot do that you have to sell a piece of real estate and buy another piece of real estate in that short period of time. Why not buy a piece of real estate, some stocks, some mutual funds, some insurance, some bonds, lending once you spread out all that money versus just buying one single asset which is oftentimes with the 1031 exchange for it is to do to defer all the tax.

You have just listened to another information-packed episode of capital gains tax solutions with Brett Swarts. We hope you enjoyed today's show and found it helpful. Visit to access the show notes and to access more resources. Don't forget to leave a Review and join us again next time.

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

Brett Swarts:

Hey, welcome to an intro to the expert care secrets podcast. I'm your host, Brett Swarts:. And each episode, I'm interviewing some of the best in the real estate brokerage community. I'm here with Kristina Horning. She's out of Oregon in Washington, and we are doing a live deal. We're gonna chat about here just for a second, and intro the full episode, Kristina, how are you doing today?

Kristina Horning:

I'm good. How are you?

Brett Swarts:

Excellent. So what's the biggest frustration when it comes to capital gains tax before on the 1031 exchange as it pertains to you and your clients?

Kristina Horning:

I think people get scared about the days to designate the 45 days, I think that's the biggest issue that people have. And they also just don't know what to buy and where to buy.

Brett Swarts:

Yeah, you know, called the shotgun wedding. Right? Yeah, 45 days to get engaged. And then hunter ages get married, and oftentimes creates a situation where you're not making good quality decisions. And maybe overpaying for properties, there's a better way, it's called a deferred sales trust, you can learn more about that at www.capitalgainstaxsolutions.com. But on a recent deal that we're doing together, in fact, we're aligning strategically with realtors across the nation. A client, co-client, now he's selling a highly appreciated asset. And you know, he's ready to be out of the rent control out of a lot of the challenges with Portland and Oregon, and as a whole. And yet, he doesn't want to1031 and overpay. And so I was able to do some research and fortunately find you an expert who has been there for many years and helps a lot of clients. And so now you're listing and selling the property deferring the tax? It's gonna be a great outcome for everybody. But what would I guess? What is the deferred sales trust that you think it might mean for future clients as well?

Kristina Horning:

Well, I'm still learning about it. And what I've learned so far, it's very interesting. But I think that people that have invested many years ago and properties, it just gives them another resource and to be able to be able to give them options, which in the past I wasn't able to is just amazing, you know, to have, hey, here's one option for you. This is kind of an easier option, which is that deferred sales trust sounds like it kind of is an easier option, less legwork for the client. And that 45 days is just scary. It's just how do you find something in 45 days and nowhere to go? Especially if you're going out of state?

Brett Swarts:

Yeah, 100% and is a realtor too, by the way, I think I'm a commercial real estate broker myself. And what I found is, unless you have you're solving the problem for the client, you'd probably not move the deal forward. So there's a lot of potential listings that you can literally unlock as soon as you solve that challenge. And what's the challenge? I don't want more toilets, more trash, more liability, I don't want to send sales, you know, we just did a deal in Colorado, actually, Colorado Springs is a 49 unit complex. And they're like, well, we don't are 15 and complex, they don't want to trade 50 units for another 100 units, they're ready to be done with toilet trash and liability. They don't want to overpay for a property. Right. So finding out what that challenge is sometimes it's partnership separation, sometimes it's it's, you know, lifestyle change, and then providing a solution. Right? In other words, it's kind of like we're the doctors and our medicine to give to the patient right is that strategy, that solution. And when you do that all of a sudden you unlock more listings, you add more value, you get more referrals, versus just the traditional ways of doing things which most realtors already know. So this is what we're on a mission to do. And I'm glad that you are able to align with this strategically and hope to help more clients in the future. And for those who want to get in touch with you Kristina what's the best place to find you?

Kristina Horning:

www.yourlifestyleliving.com or Facebook, Lifestyle Living by Kristina with a “K”,

Brett Swarts:

Perfect. Hey, thanks everyone and look for the full episode that's actually live right now on YouTube and dropping on iTunes shortly of Kristina story from starting at age 13 working and now a real estate professional in Oregon and Washington area. Thanks so much. Talk to everybody real soon. Bye.

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

Brett Swarts:

Welcome to another episode of the capital gains tax solutions podcast also streaming Expert CRE Secrets. And this is the quick intro. I'm with my new good friend Zack Boothe. We just finished our full episode, which is actually live on YouTube right now. And it's gonna go live on iTunes here shortly. But in this short episode, we're talking about the biggest frustration with the 1031 exchange. So Zack, what's the biggest frustration you, a client friend, a family member have faced when it comes to the 1031 exchange?

Zack Boothe:

Yeah, with a few that I've done. My biggest struggle or frustration with 1031 was the timeframe. So, once I sold a property, you know, you have the 45 days and all those dates, and I found myself wanting to do a deal not to pay taxes, not necessarily because it was a very financially intelligent move to buy that property. So, I think sometimes people have the tendency to make bad financial decisions just to not pay taxes. So, I think that's it's something you got to be careful of something that I struggled with.

Brett Swarts:

We call it the shotgun wedding, right? Or they let the tax tail wag the investment dog. And the shotgun wedding goes like this, you get engaged in 45 days and married and 180. And oftentimes, when you're selling high, you don't want to buy higher than 180 days, we actually did a recent deal. Or it's actually 2006. Now, they sold before, he said the movie "The Big Short", they literally sold this property no six, they looked around like The Big Short guys did. And I'm like this doesn't make any sense. I'm not going to 1031 this is a deal in Minnesota like a $20 million asset. And they move the funds into the deferred sales trust for the first time. And five years later, that property that they sold was foreclosed on by the bank. So a bank calls them says hey, you want to buy it back? And they said well, maybe what's the price? They said well 60 cents on the dollar from what you sold it for. Okay, that sounds like a pretty good deal. So took the funds from the deferred sales trust kinda like a self-directed IRA or self-directed 401K put into an LLC and then they bought that real estate deal at a discount all tax-deferred. So, I heard that story and I said "Wow!", you can do that without doing a 1031 exchange and then the answer is, Yes. So, thousands of closes later billions under management you can now use what's called the deferred sales trust to get what's called optimal timing when it makes sense for you, by the way, you can learn more about that at capitalgainstaxsolutions.com and the full episode we're covering wholesaling with Zack Boothe. He's out of Utah did a really cool thing he's fine. He flew in like an army trooper into he parachuted into Tampa didn't actually do that. But, he got into Tampa from Utah and in 40 days, his goal is to make $40,000 in wholesaling profits, and you can learn more about what he did and his challenges and about the wholesaling game here in the next full episode. But, Zack for those who want to find you right now and connect with you, what's the best place to find you?

Zack Boothe:

Yeah, go to my website dfdmastery.com and you can click on my social media link and follow me anywhere you want to there or you can book a call and speak with me on that same website.

Brett Swarts:

Amazing and if you want to check out the deferred sales trust and go to capitalgainstaxsolutions.com. Hey, thanks for listening to this short episode by now.

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

Brett Swarts:

Welcome to the capital gains tax solutions and Expert CRE Secrets podcast here. This is a short intro into the full podcast with Brent Bowers, you're not gonna want to miss. The landsharks.com is his website. But, in this short episode, we're asking Brent Bowers, what's the biggest frustration when it comes to capital gains tax deferral options? Brent?

Brent Bowers:

You know, I would say just not understanding all my options. And you know, my frustration is, you know, I thought I had to buy like houses and single-family houses and apartment complex and that brings on a whole another level of frustrations as far as renovations getting these, these projects ready to rent out for someone to want to, you know, spend their hard-earned money each month on rent. And then further frustrations are property management and tenant management and late payments. And so just knowing that there are other options, kind of is a little bit of a breath of fresh air, knowing that there are other options that might be a little bit more passive than, you know, buying buildings to depreciate. So I'd say that's it.

Brett Swarts:

Yeah. So, I started a company right to help people escape feeling trapped by capital gains tax using the deferred sales trust. 2008 there was this thing called a crash and a lot of people either lost half or all because they felt they were trapped by this 1031 that had them overpaying for property in the 05206 market, right. And so the deferred sales trust is beautiful and that you can sell the further tax and you can be 100% passive, you can put it into passive multifamily properties, you can put it into active multifamily properties or other investment properties. You can also do hard money lending you can do it all stocks, bonds, mutual funds, and never touch a toilet trash or liability again, which you can learn all about at capitalgainstaxsolutions.com. I want you to listen to the full interview with Brent we're gonna dive into more of this kind of geek out on some of the tech stuff. But, also we're going to dive in on how to create passive wealth using land, vacant land, and how to how to carry paper on for buyers how to purchase at a discount, how to find it, and learn so much more about Brent's story. So, look for the full episode with Brent Bowers and again you can find Brent at landsharks.com. Thanks, everyone for watching this short episode, and we'll talk to you again real soon.

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

Biggest Frustration with the 1031 Exchange with Anthony J. Faso & Cameron Christiansen

Brett Swarts:

Welcome to the capital gains tax solutions podcast. I'm your host, Brett Swarts. We are doing a short teaser episode to the full episode which I just had with an amazing guest Anthony Faso, CPA, and Cameron Christiansen, and they are wealth strategist and host of Infinite Wealth, podcast, and Wealth Consultants out of Las Vegas, but in this episode, we're just focusing on one big question here. By the way, we're also streaming on Expert CRE Secrets as well. And this is the question for the guys: what's the biggest frustration when it comes to the 1031 exchange for yourself for your clients?

Anthony Faso:

Oh, tip for me the biggest frustration is going to be if we all were doing is we are deferring the tax. So, it's not like we're avoiding it. It's still there. We're just kicking the can down the road. And what I'm concerned about, is there some talks recently about raising the capital gains tax for some individuals, particularly if your incomes over a million dollars. So, my concern is, by kicking the can down the road, you may actually pay even more tax.

Brett Swarts:

Very well said yeah, we call it the shotgun wedding too, by the way, on the 1031 exchange. Right. So you're deferring it but you're having to get engaged in 45 days and overpay my other concern with that as well. Just a couple that is not only are you oftentimes just kicking the can, but you're putting yourself in your wealth at risk because perhaps Hey, you're selling high and buying higher 180 days remember what happened in 06-05-04, people were doing that until the music stopped in ‘08. And then they got crushed, run the front lines here in Sacramento. Friends, family, clients, lost half or all and spent the next 3, 4, 5, 10 years digging out of that. So, do not overpay on a strategy that doesn't give you liquidity to diversification. And we talked about that and the full episode but Cameron, what's your biggest frustration because we just heard from Anthony?

Cameron Christiansen:

Yeah, lacking control. Right? Typically what the space that we play in, we play in permanent tax savings. And so, that's what we're trying to take clients is we don't want to try not to defer anything is deferring. You're just deferring into an unknown situation. If we know where we're at, we're comfortable so let's take those tax savings put them somewhere else that we can actually use it and then put it to work moving forward so just be done with it.

Brett Swarts:

Beautiful. By the way, you can find Anthony Faso, CPA, and Cameron Christiansen at InfiniteWealthConsultants.com. Look at the full episode. It is actually on YouTube live right now you go to Capital Gains Tax Solutions or search Expert CRE Secrets and you will find more about that episode. See the episode. Look for the full episode or drop it here. Shortly go to Capitalgainstaxsolutions.com. We can help you with the deferred sales trust. Thanks, everybody for watching this short episode. Bye now.

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

Brett Swarts:

Welcome to the capital gains tax solutions podcast. This is an intro to a full episode with Brad Shepperd. That's coming up. We are talking about investing passively in Southeast, commercial real estate multifamily value add B properties, you're not gonna want to miss that part of the show. We're talking about Brad's story and how you can get more income and more passive income through investing in commercial real estate. That being said, we're coming to a short episode here, and we're just going to talk about one topic that came up. In fact, Brad's wife is a CPA, and he talks about some frustrations, and it has to do with depreciation recapture. So Brad, tell us a little bit more, what's the biggest frustration when it comes to depreciation recapture.

Brad Shepherd:

I think it's a poorly understood and a lot of commercial by a lot of commercial operators, and how it presented to their limited partners, we get on almost every asset, we do a cost segregation study. So we're able to accelerate quite a bit of depreciation, we're getting monthly distributions or quarterly distributions, which is fantastic. At the end of the year, we get this K-1 that shows a negative return, which is fantastic. So we get to defer taxes at that point until there's an equity event. Generally, we sell the property, now you have to buy guidelines, you have to recapture that depreciation, and now you've got a taxable net positive return. And so that can be a surprise to the limited partners if they're not prepared for that. And so yeah, as you mentioned, my wife is a CPA, she frequently gets frustrated by how that's positioned by some of the operators. Because, you know, you have to make sure you paint that reality, at the end of the day that there is going to be that recaptured, you're going to have a positive game that you're going to need to be given, the IRS is going to want to tax you on and in these commercial syndications at 1031. While it's not impossible, it is very difficult, you generally have contributed a million dollars or more to make it worthwhile, because you have to go through a lot of hoops. And so for most investors, it's just not feasible. And so just a lot of complications, a lot of frustrations around how that can be presented. And at the end of the day, there is a taxable game that has to be dealt with.

Brett Swarts:

Yeah, very well said and exactly right. The depreciation recapture is going to find you right when you actually you know, you got all that, you know that that tax write-off in the beginning, maybe for the first three, four or five years of that accelerated depreciation, right where you're taking let's say, multifamily property 27 and a half years and you're squeezing some of the components down to 5, 7, 10, 15 and you're getting that tax benefit for a few years but then if you sell - Guess what? That's going to be recaptured so, you got to make sure you have a solution for that. Make sure you're prepared for that. The deferred sales trust can in some circumstances depending on the size of the deal and depending on the level of accelerated depreciation and depending on the mortgage over basis if you have one can be a potential solution for that and so there's a lot of moving parts when it comes to every deal so but if you're interested in have that challenge we encourage you to go to Capitalgainstaxsolution.com, schedule your one on one consultation to walk through that likewise there are deals need to be a million or more at least a million or more gained at least two to make it make sense on the fees and the benefit for you. So that being said look for the full episode right now it's actually live on youtube with Brad Shepherd and Brad, for those who want to get in touch with you right now learn more about you what's the best place for them to find you?

Brad Shepherd:

Thanks, Brett. Yeah, the best place to find me is at my website: sugarhouseinvestments.com. Email and phone number, it's all there on that site.

Brett Swarts:

Beautiful and again, capitalgainstaxsolutions.com. Thanks, everybody. Bye now.

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

Brett Swarts:

Hi, I'm Brett Swarts, founder of Capital gains tax solutions. We're in a Deferred Sales Trust Made Simple Series. And in particular, we're gonna be talking about how you can partner with the deferred sales trust to purchase real estate, develop real estate, or a business. So, let's talk about the big challenge a lot of people face when it comes to the 1031 exchange, remember, it must be of equal or greater value, and it must be within a short timeframe. Okay. And when that happens, decisions can be challenging meaning you can overpay for a property, you might not want, you might want to diversify, you might want to buy a smaller deal, there's a number of reasons why you wouldn't want to 1031 exchange, especially in today's market with values being so high, and inventory. So, low prices are being pushed through the roof. But for our deferred sales trust clients, they want the option to actually buy real estate when it makes sense. So, I'm going to tell a couple of actual deal stories. And then after this, I'm going to create a separate video, which is going to kind of map this whole structure out. But, let's start with the deal story - recent deals that I just closed.

This was for a gentleman, a client of mine in Alabama, and he actually sold his business for about two and a half million or so. And, he wanted to defer tax, he had a big liability and the liability was approximately $600,000. And, so instead of you know, taking all of the two and a half million or so and then paying that 2.6. He was able to roll that all into the deferred sales trust, which is a good way to put it, carry back paper, he became the lender. And there's a set promissory note to pay him back something around 8% compounding over a 10 year period of time. In the meantime, the next thing he wanted to do was he wanted to go start the next chapter of his career, and he wanted to start developing real estate. And guess what he used? To use the deferred sales trust, in partnership with the trust to go ahead and purchase and actually build, purchase some land and build a building about 72 units in Tennessee. And so, he used the pre-tax dollars, all tax-deferred, put them into an LLC, and purchased this property. So the outcome was great for him. It's also great for the IRS, by the way, the IRS wants the opportunity not only to get the tax revenue, but they also want to be able to diversify their ability to collect as well. So, instead of just 1031, wanting and perhaps putting all your eggs in one basket, and or not investing in anything that actually kind of stifles tax revenue, that's part of why we're hoping the 1031 exchange does stay around because we do think it's good for real estate investors.

So, all that being said, how does that all work? Let's break that down right now. So, the first thing to understand is that the trust owns part of an LLC interest. Okay, so an LLC is formed. So just like, let's imagine you or I were on a, buy a deal together, we're going to develop some apartment building somewhere, you know, we could form an LLC, and you and I could be you know, put money into the LLC, and we could be partners in the deal. Okay, so someone might put more money in the deal, someone might put less, depending on the roles, depending on the expertise, you know, someone might be doing the managing, the building, and the construction, you know, lining up the lender, these are all things that are active participants in a particular potential partner, another partner can just be a silent partner who just puts up the capital. So, this is very, very similar to the way we structure our trust, the trust owning part of an LLC interest, simply form a brand new LLC. And, the trust typically on a lot of times, we'll put up 100% of the downpayment, okay, whatever is needed to move the deal forward or to build the property or buy the purchase the business, okay. And then you as the other partner also own the interest. Generally speaking, we structure on 80-20 meaning 80% to you, and 20% to the trust, okay? It's important to understand that, although the trust may put up all of the downpayment, okay, so it's two members in a new LLC.

Also, the Trust has to be what's called a preferred member, okay, and they must have a preferred member interest. So, they are putting up the funds but they're looking for a preferred return, we typically structured around 8%. We actually mirror the promissory note, which is kind of another video we can watch and understand that but generally, our promissory notes are structured depending on the risk tolerance, around 8% net of recurring fees over any 10 year period of time. So, what we need to do inside of the trust ideally is to go make money on what's owed to you. So, we got to go put in these different investments. So, one of the investments could be this real estate deal, you know, over here. So we're going to, we're typically mirrored that interest of 8% preferred to pay the trust back to pay you, okay, and again, I'm gonna put this in a video. I'm going to try to boxes and lines here coming up after this video. Okay, so now they also need 20% of the upside, 80-20. Let's say, you sell it for a million dollars, after you pay back the 8% pref, what happens? Well, a million dollar gain that is 80% of that would be $800,000, to you, and then $200,000 back to the trust, which is gonna pay you back as well. Okay. So, now Is there an option to purchase and get more upside? There is, you can actually purchase an option upfront. And that option can be a 10-year term or a five-year term. And when you purchase that option, 1.5%, for the 10-year term, 0.75% for the 5-year term, you can carve out the potential upside of that deal. So, that's also a nice way to get more money for you as the partner there.

So, we always recommend, an attorney set this up. It's not just a general LLC, it's specific language that needs to be put in there. And we have those attorneys as well for part of our strategic alliance. And then the LLC files a partnership tax return K-1 to the members, so K-1 to you, the one partner, and then a K-1 to the trust. So, that is how you can partner with the deferred sales trust. Pretty amazing, right?

We're going, to give you unlimited timing. We're going to give you the ability to or the trust is in the structure is we're not in IRC 1031. We're an IRC 453. So we eliminate the timing restrictions, we give you tons of diversification, you get the ability to buy real estate of your own or with partners, put into stocks, bonds, mutual funds, hard money lending, we call this transformational wealth planning and bringing time back on your side.

I'll finish with this last deal story. This is actually the deal story, which inspired me to start capital gains tax solutions. We call this the Monday morning quarterback deal. And I remember watching a football game on the weekend. And you're like, oh, if the quarterback would have just seen that one play there. You know, he could have won the game? Well, in 2006, we feel like this particular deferred sales trust client - He used the Monday morning quarterback strategy and that he dropped back and he played it perfect. He sold at the peak, he parked the funds in the deferred sales trust. And he's looking around for a deal before that before he parked it, actually, and he's going to can't make sense of this, this marketplace. I think something's going to happen. I think the market is going to change. And so you know, I'll use this deferred sales trust for the first time. So, he deferred all of this tax, he sold a very large property in Minnesota, sat on the sidelines, and he sat there and he waited, he waited and waited. In fact, he waited five years with those funds and buy on the sidelines. I mean, he was in conservative investment-grade securities. And he was just patient with his funds. He paid off all of his debt on that property. And he's just waiting on the sidelines. Well, five years later, that property that he had sold, the buyer had bought it. He was foreclosed on by the bank. And so the bank calls back the original seller, the DST client said Hey, would you like to buy the property back? And he said, Well, maybe what's the price? He said, Well, 60 cents on the dollar. So he goes, wait, so you'll sell me back my old property at 40% less? And they said yeah, if you'd like to buy it back, he said, Okay, sure. So he did this DST partnership where he put the funds into the trust. And then from there, he bought the property back. All tax-deferred, okay, not using a 1031 exchange. And that is the power of the deferred sales trust, the ability to do just that sell high and buy low when it makes sense for you on your terms, versus, you know, potentially overpaying via the 1031 exchange.

So, I hope you enjoyed this video, hope this made sense to you. You can go to capitalgainstaxsolutions.com and then look, we're also going to create another video okay, so it's going to be the second part of this series where I'm literally going to walk through the boxes. This is going to be the tactical boxes of what I just talked about. But you can go to capitalgainstaxsolutions.com to learn more about the deferred sales trust. And if your deals at least 1 million or greater net value and at least $1 million of gain or greater than the deferred sales trust can be a great fit for you remember, it also works for cryptocurrency or for primary home sales. It works for business sales, it works for course commercial real estate sales, works for just about any highly appreciated asset of all kinds stock including public and private. The deferred sales trust is a great way to defer tax and create and preserve more wealth. So, I'm Brett Swarts I appreciate you watching this video. Please rate review, subscribe, share this with somebody who can who needs some help today perhaps when they're selling something that highly appreciates it. Appreciate it so much for you watching this video. Thanks, so much. Bye

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

Brett Swarts:

Welcome to the Capital GainsTax Solutions podcast and special episode Expert CRE Secrets podcast. I'm your host, Brett Swarts. And we have a full interview coming up with Gino Barbaro, but we are simply focusing on one thing today and that's the biggest frustration with the 1031 exchange. So I'm curious Gino, what's the biggest frustration for yourself? Friends, family partners when it comes to the 1031 exchange?

Gino Barbaro:

It's a timeframe right? It's 45 days to identify six months to close the deal but more importantly, deals out they're hard to find right now. And I think someone has just said about a shotgun wedding, they don't always end too well. And you're out there rushing it, you're getting top dollar for your deal. But then all of a sudden everything else out there is trading for top dollar. So do I want to roll in, quote-unquote defer some of my savings on my taxes into a deal, and overpay for that deal? That's the frustration that we're that we see out there right now.

Brett Swarts:

Yeah, 100%, and sometimes our parents, you know, taught us to sell high and buy low. They didn't teach us to sell high and buy higher, 180 days later with more debt and a lower cap rate and less cash on cash return just to potentially lose and that's what happened for a lot of my clients, right? They had overpaid and 050607 and then they kind of knew the writing's on the wall but they felt trapped by this thing called the 1031 exchange. By the way, there's a solution now called the deferred sales trust you can now sell high, buy low, passive, or active in and out of real estate all tax-deferred. You can learn more about that at www.capitalgainstaxsolutions.com. That being said this full episode is gonna be jam-packed with ways to become more of a multifamily entrepreneur, building systems, mindset leadership, overcoming false beliefs. Gino just opens up in a way that is going to be super valuable, valuable for you and it was for me so check out the full episode is actually live right now on YouTube and it's going to drop soon on iTunes. Thanks so much, everybody and if you want to reach out to Gino Gino where can they find you?

Gino Barbaro:

Go to www.jakeandgino.com and you can even hit me up at [email protected] is my email address.

Brett Swarts:

Beautiful and if you want to learn more about the deferred sales trust and ways to escape feeling trapped by the cap capital gains tax and 1031 you can go to www.capitalgainstaxsolutions.com. Thanks, everybody. Bye.

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