After 40 Years in Real Estate, I Still Don’t Know it All: Why Not Asking Questions WILL Cost You


Wish I could give these “commandments” in order, but over the decades I’ve learned it doesn’t work that way. There are times, markets, and economies in which one will jump to the top in importance with the exception of this post’s highlighted commandment. I consider this one to be universally important and useful in any market and under any circumstances. To give it short shrift is to court disaster, often unknowingly. I know, ‘cuz I’ve see me do it — and with disastrous results.

“The investor should know ALL their options, at any given time during the execution of their overall plan.”

Most investors violate this one repeatedly, most of the time sans intent. Problem is, as I’ve said on these pages dozens of times, it’s plainly impossible to find the answer to a question we don’t know to ask. Even the Information Age hasn’t figured that one out. I’ve paid the price for this commandment’s violation countless times in younger days. We read a book or go to a killer seminar that blows our socks off: “Alrighty then, I’ve now filled in all the gaps. Time to build my retirement empire!”



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A Couple Examples I’ve Seen Sadly Repeated

Investors who’re positive they know the applicable rules to their delayed tax deferred exchange. They read a book, even sat through almost a whole hour webinar on the topic. They closed the sale on the property being relinquished shortly before Christmas. Doing the math, they calculate the closing on property(s) acquired should be no later than June 18th. As luck would have it, everything went smoothly, and the exchange closed the week preceding Memorial Weekend. Oops.

Though they complied with every single rule, both big and small, they missed a minor exception to the 180-day timeline. If the filing deadline for personal income tax returns comes before the 180-day timeline is finished, the tax return filing date becomes the new “drop dead” date for closing. Ignorance of that fact has ruined far too many tax deferred exchanges.

There are no do-overs.

The investor now owes whatever capital gains and/or depreciation recapture taxes that would’ve been deferred. No appeal; no “yeah, but”; no “but the dog ate my homework.” Writing a check to the IRS is what the investor will be doing.

Or how ’bout the investors who buy property in large part ‘cuz they love the idea of sheltering some of their income, which is high enough to have them paying at over a 30 percent income tax rate yearly counting state and fed tax hits? ‘Course it’s usually the same folks who think doing their tax returns with software is the thing to do. Who needs an experienced accountant well versed in real estate investing anyway, right? “They” wouldn’t allow this software to be sold if it wasn’t spot on, would they?

Related: Two (Deceptively Complicated) Questions You Should Answer BEFORE Investing in Real Estate

Turns out the investor makes too much money at work. He’s literally barred from taking ANY depreciation against his ordinary income if he earns over the stated amount — $150,000. Ironically, he learns this from his income tax return software while working on his return. 🙂 That has to be an “aw #%&@!” moment if ever there was one.

Allow Me to Tell on Myself

I made the switch from being a traditional house agent to being an investment brokerage owner in late 1976, my first brand new broker’s license landing in my mailbox in January of ’77. From mid ’76 through the beginning of 1980, I was attending dozens of seminars in and outta town. My mentors, all eight of ’em, were mentoring me within an inch of my life. That’s a bit over three years of intense learning, not to mention my on-the-job training happening daily. I was like a goldfish, though. You know, every three seconds, “Look! There’s a castle!” 🙂

They then decided to show me how much I really knew, as I was gettin’ way too big for my britches. Gave me three long-term investment scenarios with local properties and investor “profiles.” I was to execute plans for them using the strategies I thought best. Also, they expected five year before/after-tax IRR analysis of all properties, which were then to be modified to account for cash flow not “internal” at the point of receipt. (Often referred to as MIRR, “M” for modified.)

Their belittling condescension was not only maddening but humiliating. I left in a huff, knowing I’d change their tune but good. Turns out I had not clue #1 of how to do a credible IRR analysis. When told to report with my homework the following week, they treated my “analysis” like the funniest standup routine they’d ever seen.

They laughed, they cried, they outdid each other with one-liners at my expense. It was brutal. The other golfers enjoying drinks and gin rummy in the room stopped to watch. Dad was at the table. All he did throughout the whole ordeal was drink his Jack and eat French fries as they peppered me with questions for which I had amateur answers or none at all. In fact, many of my “answers” merely led to more one-liner material from them. To say I was flummoxed is to be gracious.


They let me gather my thoughts a few minutes, then asked, “Did you learn anything from this exercise?” Wanting to live to see another sunrise, I didn’t say what was on the tip of my tongue. 🙂

I then swallowed hard and admitted I didn’t know squat compared to what I should know. That I obviously was only privy to the tip of the proverbial iceberg. I then apologized for my previous attitude and disrespect.

For the first time ever, they called the waiter over and ordered a plate of steak fries “for the kid here.” Dad lifted his Jack in a silent toast, adding a barely discernible wink. All of a sudden I didn’t feel like such a complete ignoramus loser. There was the slightest evidence of respect on my mentors’ faces. Lesson learned, and how!

The Takeaway

It comes in the form of both sides of the same coin. First is the realization that literally more than nine of 10 investors, regardless of their experience, simply don’t know all the questions, much less the answers.

This is my 40th year of owning a real estate investment brokerage, and I don’t even kinda sorta pretend to know all the answers. Nobody does. Period. There’s simply too much to know. But again, let’s forget about knowing the answers, ok? If a given investor doesn’t even know the pertinent question, what hope do they have of finding the answer before it bites ’em in the butt? See what I mean, Verne?

Second is on the other side of that same coin. If the average investor takes the time to put together a team of experts, the answers to all those questions he/she doesn’t know to ask become far less of a threat. At the very least you need a much experienced real estate investment broker, along with an equally experienced tax accountant — who specializes in tax law governing real estate/note investing. 

Related: 7 Questions Every Entrepreneur Should Ask Daily for a Better Business

Don’t get me wrong here. Any investor can learn to do better than the typical investor we see out there. However, when compared to an investor having the benefit of a highly experienced team on their side, their definition of success will undergo a radical adjustment. I’ve seen the sad look of that realization more times than I can count.

Success isn’t a “comfortable” retirement. It’s a retirement income bigger than the best year the investor ever had. Discover that sooner rather than later.

Investors: How do you make sure you’re asking the right questions?

Leave your comments below.

About Author

Jeff Brown

Licensed since 1969, broker/owner since 1977. Extensively trained and experienced in tax deferred exchanges, and long term retirement planning.


  1. Tim Porsche

    Great article! I learned something new…did not know that with 1031 exchanges your deadline for finding a replacement property is 180 days OR your tax return filing date, whichever comes first. Definitely good to know…excellent information. Thank you

    • Jeff Brown

      Hey Tim — Allow me to give you the ‘get outa jail free card’ if that timing ever happens to you. It made the investors who paid their cap gains taxes livid when they found out too late.

      Simply execute an extension to file on time, meaning on or before April 15th. That will automatically move you new file date well past your 180 day date. Problem solved. Over the years I’ve run into far too many investors who paid their taxes due to ignorance of this law, and it’s solution. Hope this helps, Tim.

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