This conversation with Brett Swarts explores the numerous benefits of DSTs, their role in deferring capital gains taxes beyond real estate transactions, and practical examples of people who have successfully applied this strategy.
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Transcription
The Hidden Truth About 1031 Exchanges
Brett Swarts: Your 1031 exchange agent or broker, he doesn’t want you to know about this. The 1031 exchange companies don’t want you to know about this, right? And they want to keep you in this 1031 exchange. But guess what? Businesses don’t work for 1031. Bitcoin Primary homes, stock. We’re working on an NVIDIA stock sale right now for about 20 to 60 1031 eligible.
Ben Fraser: It’s really another, creates another option set for your capital gains from just the 1031. One, you have more assets that qualify. And two, you can actually go from active to passive, where it’s very. Difficult to do if you’re going 1031, cause you have to buy a light kind of real estate.
Brett Swarts: He’d been active his entire life.
He’s now in his early seventies and he’s Brett, I’m wanting to get a ROE that’s stronger than my three to 5%. This is possible. Like you don’t have to be in the old 1031 and that’s really the secret here is A, identify the problem, B, clarify where you actually really want to go and then C, find out the solution and the team to help you get there.
That’s really the secret to all of this.
Introduction to the Podcast and Guest
Ben Fraser: Welcome back to another episode of the Invest Like a Billionaire podcast. I’m your host, Ben Frazier. And today my friend, Brett Swarts, was super excited to have this conversation. If you don’t know Brett, you’ve probably seen him around. He’s been in the podcast circuit for a while, but.
Amazing educator. He’s the founder of Capital Gains Tax Solutions, and he is an expert in DSTs. And not the DSTs you’re probably thinking of. These are Deferred Sales Trusts.
Brett Swarts’ Journey and Expertise
Ben Fraser: And when I first learned about this concept I probably met Brett, what, was it five years ago? And I thought he was full of it.
I’m like this isn’t real. And as I got to know Brett, we’re in a few different groups together. Just love what he brings to the table, his expertise in this topic. And it’s something that if you’re not familiar with deferred sales stress, you need to put everything down, sit down, focus, and listen to the next 20, 25 minutes here.
It’s going to be pretty revolutionary for you in understanding how to protect and defer your taxes. Anything capital gains related, not just real estate. This is the Invest Like a Billionaire podcast, where we uncover the alternative investments and strategies that billionaires use to grow wealth. The tools and tactics you’ll learn from this podcast will make you a better investor and help you build legacy wealth.
Join us as we dive into the world of alternative investments, uncover strategies of the ultra, discuss economics and interview successful investors.
Brett, welcome to the show.
Brett Swarts: Man. It’s so good to be here. Y’all never forget meeting at Hunter Thompson’s event down in the Los Angeles area. And we’re hanging out and it’s you and your dad. I didn’t know who you guys were from anybody. I was just shaking hands and I’m like, and I can tell yeah these are the vets.
Like these are the guys that have decades of experience. And then number two, they’re also cautious and skeptical. I’m like, all right. And it’s literally the story of the journey of this whole thing. Cause I was a real estate broker, Marcus in Sacramento, and I was calling the old dogs, trying to teach them new tricks.
And I feel like commercial real estate in particular, especially multifamily. It’s and I love it because as I am, that’s who I am too. And I started out, helping people buy and sell that. But that was like the mindset and the mentality is like, Hey, 1031 value, added by forced appreciation. It’s not just multifamily, it’s industrial as well.
But the mindset is that we don’t need to go to Wall street. We don’t need to go to these other things and just, let’s build consistent, durable cash flow. And And so that was I’ll never forget like seeing you guys. I’m like, yep, this is making whole calling days.
It’s going to take me closing the deals and showing the results like really hands on before they’re going to move. And so I actually appreciate the tourists more. Cause that’s the world I come from.
Ben Fraser: No, it makes sense. Especially if you’re trying to pioneer. A less commonly known concept, right?
Cause everyone knows 10 31. So if you do 10-31, that’s obvious . Oh yeah, I know that. But. This is a newer concept that the cause has been around for a long time, but the understanding of it is pretty new.
Understanding Deferred Sales Trusts (DSTs)
Ben Fraser: So let’s rewind a little bit, give us a sense. You said you used to be a broker, you stumbled across this idea of a deferred sales trust.
What was your journey in that and what kind of initially caught your attention and took us from there?
The Financial Crisis and the Birth of DSTs
Brett Swarts: Yeah, so it’s 2009 the market has really been getting crushed by the great financial recession, right? And clients, friends, and family losing half or all of their wealth and we’re in Sacramento, California, one of the bigger boom bus cities most of commercial real estate actually get hit that hard, at least multifamily in the 2008 crash, but those who had too much leverage, not enough liquidity or diversification, they got crushed.
And so I saw one client in particular, I use this case that he had 50 million worth of value added real estate, multi family, multiple 1031s. He got caught. His name was Steve and Steve got caught and lost everything. Went bankrupt partly because he had overpaid for properties. And number two, he felt like the market was really high.
And he goes, if I sell, I get crushed with the tax. If I sell and want to buy something else I’ll have to take on even more debt. And that’s the problem. Like once you identify that, like the 1031 is not always your friend. And of course, each tool, like a hammer has a time for it and they have a screwdriver.
You have these different tools at different times. You really got to define what you are trying to do? And so what I, what we developed during that time is really a tax flow, cash flow, and a debt flow mindset, right? Most of us in commercial real estate, we’ve been taught it’s all about cash flow, right?
And of course we know about 1031s, and we know about, we want to defer tax, we know about cost sags and depreciation, we have some of that, but I, but how much do we really dive into the timing of all of this and bringing these three together? Debt flow, we’ve taken for granted for a long time, right?
We’ve taken that for granted, and now we can’t take it for granted. We’re getting people who did, who took it for granted, getting crushed. And so it really meant like that pain and Ray Dalio has a good quote. It says pain plus reflection equals progress. And Ray’s one of the smartest guys, one of the books called principles.
And so basically I took the pain of 2000. Now my clients were going through this, but I was going through myself. My wife and I really married our first baby daughter on the way. And I’m the real estate broker wannabe, right? Coal calling people are just trying to make it in the business, but I’m getting humbled really quickly because we’re making no money.
No, like zero, like we’re, no one’s closing anything, including the guys that are making a million or two a year in commissions, no one’s closing anything. And 1 way I actually felt okay, but the other part, I’m like, I got to put money on the table. So I did what every real estate entrepreneur does.
You get a side hustle. My side hustle was cheesecake factory nights and weekends selling avocado egg rolls. And I worked 70 hour weeks marketing, similar to still cold calling, helping clients hold on to their properties, negotiate with banks, get tax reassessments.
How DSTs Can Save Your Investments
Brett Swarts: So I stayed in the game and, but it is during this time when I learned about the deferred sales trust, because when your mind and your heart, is open to the pain of what’s going on and man, there’s gotta be a better way than this 10 31 things do start to show up.
And it was showing up. My manager at the time had a gentleman come in and say, Speak. He’s like the guy I’d speak to on this deferred sales trust. And at that point I sat with 30 other agents and we thought we were the Navy seals of investment real estate saying, if this guy is saying what he’s saying, this is Netflix and we’ve been in blockbuster.
Now at this point, it’s 2009. We don’t even know what Netflix is, but basically I’m saying this is a game changer, but like most people who are in commercial real estate, what do they do? Nothing, right? They sat there and they said it sounds too good to be true. Or, Come talk to me in a few years, but I was, I think maybe naive enough, or perhaps I was hungry enough to try to solve the problem that I said. If this is true, I will go all in on this.
Now at the time I was actually slow on it. I just listened to it. I started to study and practice what it was, understand the tax code of IRC four 53, but as I continued to study and understand fundamentally why it’s different from the 10 31. The more I realized that, wow, this could really solve the problems from our clients.
And so that’s what I started to do. I started to cold call people. But if you ever heard the saying that a client or a prop’s not accepted in his hometown I was that guy. I was the Marcus and Mellon shop guy cold calling people talking about this. I had other agents in the office laughing at me.
It’s never going to work. What are you wasting your time on that for? Just go back to the 10-31. One manager liked it. He was like, Hey, go for it. But the other manager who got in after him said, you need to stop talking about it. And I give the clients the option. If they don’t want to use it, great.
Use the 10 31. But if they want to use it and it can solve their problem, who are we not to offer it? And so I now think it’s financial. 1031 or brokerage malpractice. If you don’t know, and at least offer this to your clients, because it can save a failed 1031, it can help people get out of debt and get diversification and get timing on their side.
So wrapping this all up. I just kept calling people. They kept saying, come back when a deal closes, come back when I actually have equity, because I’ve been crushed, you should have called me two years ago, right? And so that’s basically what I did. I just kept at it. And then I actually started the YouTube channel, the podcast, and we went national.
I basically said, you know what? I can’t just stay in Sacramento and do these one on one calls and it’s one on one proposals. I need to go national. And since we went national, everything has changed. We now have five kids. My wife and I I were able to retire from the cheesesteak factory. She’s full time with our kids the whole time.
And I’ve been able to now focus exclusively on this and build a company across the country, and, To help people with really any asset of any kind building a capital gains tax exit plan.
Ben Fraser: Love it. The tagline of your next book should be from avocado egg rolls to saving millions in taxes. I love that.
The Mechanics of Deferred Sales Trusts
Ben Fraser: So talk a little bit about those that we’ve been saying DST, what is it? It’s still a little fuzzy to me. So explain it. Explain it to me like I’m a 5th grader.
Brett Swarts: Yeah, so a DST is a Deferred Sales Trust. That is an installment sale coupled with a trust. A Deferred Sales Trust is just a made up name.
Okay, by the way, not to be confused with a Delaware Statutory Trust. That’s another DST. That is like the Hollywood Video to Blockbuster. Okay, it’s just another 1031. Okay, we can go into that a little bit here in a while. But The Deferred Sales Trust is essentially a seller carry back coupled with a trust.
Okay, a third party trustee, that’s our role as a trustee. And essentially, let’s say Ben has a property sale. In fact, we’ll use an actual deal in Colorado. It was an 8 Ben’s located. This is for a client who is 50 years old. Okay, and it had zero basis. It was a C Corp. He was going to pay somewhere around 35%, at least maybe 40 percent of the proceeds were going to be crushed with tax.
Okay. And so we use the deferred sales trust at the sale to receive the capital and issue him a promissory note. So it promises to pay them over time. And so it seemed like a delayed tax trust. You’re delaying the tax. You have the full amount working for him, the 8 million versus 35 percent less. And the issue, the promissory note is around, I think, eight or 9%, and it slowly pays them over time.
But here’s the cool thing. The 8 million is intact and typically most clients will not tip it to principal, but just live off the interest. And so of course we use the rule of compounding interest, which states if you can earn 7 percent compounding over 10 years, we can double the money. Or 10 percent over, over seven years, we can double the money.
And the Mac just makes sense when it’s big enough. Now for him, what do we really solve? Not only do we solve that ability to grow more wealth. He also wanted to be passive, right? He’d been active his entire life. He’s now in his early seventies. And he’s Brett, I’m wanting to get a ROE. That’s much stronger than my three to 5%.
And I’m not want to have to do it myself. My other ROE is my return on my time, right? Like ROT, would be a better way to think about it. And so he wanted to be A, be passive, B, be diversified, C, increase cash on cash. And so we did all three of these. All tax deferred of course as well. And that’s where the transformation happens is that you don’t have to go into like kind of replacement properties.
You can go into passive reg D deals. You can go into deals like with Aspen funds. You can go into stocks, bonds, mutual funds. Now, most of our clients aren’t big stocks, bonds, or mutual fund people, but we didn’t sit in T belts at 5 percent during COVID and everything was crazy, right? We did sit in hard money lending at 10%, which was actually like, we like money lending to real estate.
And we made about 10 percent of our money with the group that we work with together. And these. This is possible. Like you don’t have to be in the old 1031. And that’s really the secret here is that guess what your 1031 exchange agent or broker or real estate agent, he doesn’t want you to know about this, or he just doesn’t even know about it.
A B the 1031 exchange companies don’t want you to know about this. And they want to keep you in this 1031 exchange, but guess what businesses don’t work for 1031. Bitcoin doesn’t work for 1031. The first two Bitcoin at 13 and a half million for Bitcoin primary homes. Okay. Stock we’re working on in a video stock sale right now for about 20 to 60 million.
So these are other assets that aren’t even 1031 eligible. And so identify the problem, B clarify where you actually really want to go and then C find out the solution and the team to help you get there. That’s really the secret to all this.
Ben Fraser: Yeah. So it’s really another, creates another option set for your capital gains from just the 1031.
One, you have more assets that qualify and two, In that example you gave, you can actually go from active to passive where it’s very difficult to do if you’re going 10 31 cause you have to buy a light kind real estate and you can’t go and invest in a fund cause that security is not real estate. So a lot of times it won’t qualify unless they can do a sidecar or some kind of carve out for a tick in a 10 31.
But it’s very rare to find that. So it’s very difficult. So you lock your money up. You get to defer the taxes, which is great, but you’re very limited in the option set that you have if you continue to do the 1031.
Comparing DSTs and 1031 Exchanges
Ben Fraser: What, are there any other disadvantages that maybe the DST has that a 1031 doesn’t?
Is it all, what are some of the pros and cons at a high level?
Brett Swarts: Here’s the reason why I would do a 1031. And by the way, we still help clients do them when they make sense. It’s been a while. We haven’t been buying for a few years because the value has been so high. But when it makes sense to do a 1031, A, it’s a commodity, right?
There’s 5, 000 QI companies out there. They all do the same thing. It’s like an IRF 401k. It’s just really pretty simple. You’re paying about 1500 bucks or so. And the money goes to the QI, it rolls to the next person. Property a, would you buy the property? Anyways, Ben, that’s the first thing. Yeah, I would have bought it either way.
Great. Never makes sense. B the 10-31 is cheaper. There’s no ongoing recurring fees. Three, like your CPA knows it in his sleep. It’s really simple, right? Every broker knows it, right? Like I guess that’s three. Number four, you get a stepped up basis. You get to maintain what’s called the Stepped up basis, right?
Which is important because upon death, the basis steps up, your kids can walk away capital gains tax free, but let me tell you real quickly why you wouldn’t do it. Okay. Number one, you don’t, you have an old depreciation schedule. So then a 10 31, the old depreciation schedule travels. And so an example of a client working with, he has about 14 million real estate properties.
It’s producing about 500, 000 of cash flow right now. He has no depreciation. It’s fully depreciated. It’s in Sacramento. For him, I’m looking, I’m going, look. Okay. I go, his name is Harry. I go, Harry, like if you don’t sell every single dollar, you’re getting taxed on it. Like you’re not working tax flow at all.
You have your cash flow, but it’s getting crushed with tax. I said, why don’t we sell and establish a new depreciation schedule? It goes how do I do that? I go you do a deferred sales trust. First you partner with the trust. And then once the month’s money’s in the trust that owes you. The money in the trust can go into a new LLC and you can buy a new property at the fresh depreciation schedule.
And so understanding that those like levers that you can move into is really key. The next thing is we can eliminate the estate tax. So we had a client that was worth about 30 million. They sold a 5 million apartment complex in Colorado. They actually had some decent 1031s lined up, but they said, Brett, we want to eliminate the estate tax.
This gets confusing for some people because sometimes I think the stepped up basis solves this, but it doesn’t. The debt tax or estate tax is basically 14 million married as the exemptions as of 2026 or 7 million single. So understand the problem. Like you gotta know what my problem is? If you’re worth more than that, the stepped up basis will not solve that.
You have a state tax or debt tax problem. It’s the government’s biggest mousetrap. And so what we got to do is you got to get it outside the taxable state. What we can do with the DST plus is remove it outside the taxable state. Okay. Okay. And so upon the sale, we get it outside the taxable state and all the growth is outside the taxable state, which eliminates the 40 percent debt tax.
Now your kids can also inherit this capital gains tax free. They also get an estate tax free. The individual who did this, they’ll pay cap gains tax over their lifetime, right? As they receive some of the payments back over their lifetime. And so these are some of the things now here’s the kind of the full answer here as well.
Thanks a lot. You don’t have to buy from the same market. You can sell high and buy low is the goal, right? So we can sell high. I had a client with a 13 million exit in Colorado San Diego. And what did he do? He bought T bills, money market account, 5%.
Bitcoin and Real Estate Investments
Brett Swarts: And then he also did Bitcoin at 40, 000. Okay. He bought Bitcoin at 40, 000.
It’s about 65 right now. All tax deferred. The trust did. So how cool is that? And now really what happened in real estate over the last 24 months from when he sold it is going down. So now he’s buying back into real estate, all tax deferred. And so that’s really the concept, as real estate investors, pros that you are, we are right.
We basically know when it’s a buyer’s market and it’s a seller’s market. The biggest thing that’s always held us back is the timing of it all with the capital gains tax. So this is where we free it for us, for us and people love it.
Ben Fraser: Very cool.
Understanding the Trust Structure
Ben Fraser: So let’s walk through just a little bit of the high level structure.
I think you’ve touched on it a little bit, but effectively you say you have a property that you sell. Then it goes and is basically purchased or sold to a trust or the gains are transferred to a trust. You’re assuming the grantor and the beneficiary initially and then your firm or some intermediate acts as a trustee.
Is it irrevocable trust? Is it revocable? And then how do you establish you said you can create a promissory note from the trust as the beneficiary I’m assuming so talk through some of the kind of pieces how you structure just a basic deal So we have idea of some of the movement of the money here.
Brett Swarts: Yeah, so it’s first of all It’s not a transfer to a trust like when you think of an irrevocable trust or revocable trust And the sense that let’s say revocable trust is a living trust where you want to, avoid probate, right? That’s a revocable trust where you transfer it in there, right?
And in this scenario, this is a third type of trust. It’s called a business trust, and it’s a sale to a business trust. You can’t own the trust bin, although your kids can be the beneficiaries of the 2. 0. If you own the trust, it’d be taxable. You just sold it to yourself. You didn’t do anything right. And this scenario, you are selling it to a third party trust that owes you the money and it pays you over time.
Deferred Sales Trust vs. 1031 Exchange
Brett Swarts: By the way, it’s not unlike a 1031 exchange. What do you do? You send the funds to a third party qualified intermediary, a 1031 exchange. This is a third party deferred sales trust. Now this trust company itself is Capital Gains Tax Solutions, but the actual trust that we form as a new EIN That only does business.
Let’s say it was your deal, Ben, it’d be you and your wife, right? It only does business with you. The funds never moved out of your approval or your signature. There’s a third party tax preparer. There’s a third party financial advisor. There’s, if you want it to be, you can also just go back into your own deals if you want to.
There’s a third party like Charles Schwab, like there’s all third party tax attorneys. There’s all these groups that are third parties to keep the controls and the transparency and accountability in place.
Control and Compliance in Deferred Sales Trust
Brett Swarts: But you can’t have unilateral control, which is the second biggest objection to the deferred sales trust is like, Greg, I’m an entrepreneur.
I want control. I want to control my own destiny. I’m used to being the owner, doing it all myself. This is probably not for you because 20 to 30 to 50 percent of the proceeds are the government’s anyway. So what the government is saying is, Hey, Ben, if you cooperate through this tax strategy and with a third party trustee to have some accountability and compliance to this whole thing, would you, we’ll cooperate with 40 percent of which is our money.
60 percent is yours, right? So you can have unilateral control of 60 percent of your money. Let’s say it’s a 10 million exit in, in, in tax a fornia, you have a zero basis. You would have paid 40 percent of tax, right? So you can have 6 million by yourself, Ben, or you can give up some controls. And have 10 million but here’s the reality.
It’s like a self-directed IRA. You can turn around and partner with the trust and you can run an LLC into your own active deals. So if you’re an entrepreneur like us We can go back and do our own deals. Right? And this is you’re like, oh, that overcomes that. Exactly. Like a lot of people, they mis, they misread this and they go, oh, I’m just gonna be a passive retired person.
I don’t want to be like, yeah, I don’t want you to be that either. In fact, we wouldn’t have started the company if you couldn’t be the entrepreneur that you want to be. And so if you’re listening to this saying, yeah I wanna be able to control all this and, great. How about an extra 4 million on a 10 million exit?
You can do that. You can partner with the trust. This is the best kept secret of the whole thing. The next thing I would say is legality. People go how I haven’t heard of this seems too good to be true. There’s thousands of transactions, a 27 year track record. Billions in gross sales assets values over the years.
And here’s the key over 29, no change IRS audits, all no change, no findings, literally batting a thousand. So you go bro, why don’t we know about it? Because you haven’t met our teams to execute this, right? That’s really what it comes down to. Like we’re in the information age where people can look up information all over the internet, but it’s really what we’re really in.
We’re not, I’m sorry. We’re no longer in the information age. We’re actually in the implementation age, right? Who is it that has a proven track record and system and a team in place to execute it? That’s what makes all the difference. And that’s what we do here at Capital Gain Tax Solutions.
Ben Fraser: Got it. So you can basically sell it to the trust.
Are there any limitations on your ability to take proceeds from it? You mentioned you can get interest income if you’re doing some lending or something, you can take the profit off of that principle. But what are the limitations?
Investment Flexibility and Tax Deferral
Ben Fraser: So you get the access and control over the 10 million now.
Can you still have access to that full 10 million over some period of time? How does that work?
Brett Swarts: Yes. Let me give you the model right now So a it all depends on how we invest the funds I have clients sitting in t bills sitting in money market accounts making about five percent And we’re just picking off opportunities as they come up We have clients sitting in about a 10 lending fund that in about 30 days We can raise our hand and get the money on about 30 days.
Okay So that’s the first thing to understand is we can invest into liquid investments or semi 30 day liquid investments, or it can go into longer term deals. In regards to the capital itself, there’s always a promissory note, but it’s set to pay you a certain amount starting at a certain date, right?
Some of our clients like to defer the income tax for a couple of years, and it’ll delay it for one or two years and let that accrue. So let’s say it’s a 10 million note out of California or New York. And we hit it, we hit an 8 percent interest rate on the note. Okay. We’re earning 800, 000, let’s say on average, net of fees is typically pretty, pretty common what we can do.
And they would have had only 6 million, and working for them and now they got the full 10. So the idea is, can we defer the income tax? So you can defer it for a couple of years and then you can start receiving it. Most of our clients like to only get partial interest payments starting in about year three.
Okay. Now, it doesn’t mean you can’t access it to go to other real estate deals or do another business venture. That’s all tax deferred in and out. Okay. The only time you pay tax, Ben is when you receive a personal payment to your personal account and then you get a 10 99 INT for that. So that’s the, that’s the, that’s the answer.
Now, the promissory note can be amended and then there can be a larger amount sent out. We’ve had clients do that where at first they’re starting with interest only payments starting in. Year one, but then six months into they’re like, Hey, I’d like to amend the note. The notes can be amended and it can send you a big payment.
You’ll pay tax on that. Some clients have a big payment out front. You can do that, right? So it doesn’t have to be 100 percent in. And the last point I’ll use is sometimes we’re doing a third, and a third, like I’ve done a client 6 million exit. They did a partial 1031 exchange, partial Delaware statutory trust, and a partial deferred sales trust.
So don’t realize that it’s not always one size fits all to solve the problem. And that’s really what I want to encourage everyone to think about. It’s if you are working with professionals that only have the hammer, guess what solution they’re ever going to provide. It’s always going to be the nail to hit the hammer.
That’s all they, that’s all they know how to do it. So everything’s always a nail. Everything’s always a nail. What if it’s not always a nail? What if you’re, it’s a little more complex, right? What if it is a partner that wants to separate from a cute, from a partnership separation that the whole entity doesn’t have to move?
What if it is diversification? What if you want to get out of debt? What if you want to eliminate the estate tax? What if you want timing on your side? These open up other ways to do things. And that’s where the Deferred Sales Trucks comes in and just completely blows the other things out of the water.
It doesn’t even come close once you get it. But you gotta have the conviction and the confidence that A, it’s legal. B, you have controls in place. And the last one is C, that the investments, it’s gotta be an investment, not an expense. You gotta make sure that the fees make sense.
Ben Fraser: It sounds like though, like with the 1031, you have these very limited time frames, very limited options set.
And in this, you can do it without a whole lot of Limitations of selling to the trust and then it sounds like you can make investments over a period of time, right? So you have to identify 1 single property and make sure all your bases line up, your debt lines up and timing lines up and then you can invest over time.
And then it sounds like you’re you can also. Plan out your tax exposure over time, too, right? Because you’re only getting taxed on distributions that you take from the trust. So if you don’t want to, get all up front, you want to spread it out over time, you can plan out that, I think you call it tax flow, right? And that’s probably what you mean, but is that accurate?
Brett Swarts: You nailed it. You literally nailed it.
Case Studies and Real-Life Examples
Brett Swarts: I’ll give you, I’ll break it down even again with the client. Warren and Catherine sold a 2. 5 million dollar property in Sacramento. And their 000. They did multiple 1031 exchanges into this property.
I actually was the broker on this one to help them on this. They never sold because they didn’t have a great solution. They were facing rent control. They’re facing fires. They’re facing insurance costs that are going astronomical. But the biggest thing is they had two twin daughters a little bit later in life.
And they wanted to spend a lot of time with them and they’re 10 years old. And Warren is spending his time in traffic, driving two, three, four hours over a weekend. He’s like, why am I doing this? Like I’ve got the millions I’ve got, eight years really with my kids before the girls are gone.
And then maybe another 10 before they’re 20 or 15 for their marriage. He’s I want to spend time with my family and he goes, what do I do? I’m like we can sell your assets. We can increase your cash flow, which we have up to 190, 000. So it’s about a 60 to 70 percent increase in cash on cash.
He has all the time in the world to spend with his family. He’s bro, this is amazing. I have no more toilets, trash termites. And it wasn’t like a big headache of a property either. It was just enough to take that distraction away. And that’s what I would say. Why settle? For the way things have always been done when what you really want is sitting literally just sitting on a platter for you.
You can go with Aspen funds and get double digit returns on your money. You can increase your ROE by 20, 30, 40, 60, 70%. You can be passive. You can be diversified. There’s also asset protection built into this. People’s heads explode on this video. They go, it’s just, it’s too good to be true. And you’re like, okay, come talk to my clients.
Read the book, get the best selling book, take out the book, come to these conferences and meet us like this is what we’re doing, but yeah, this is part of why I love it too. I grew up playing basketball and I always love going to the games. The way games are the best because the team would talk trash and we are like.
bunch of six foot white guys, a couple of guys a little bit taller. And like people, like we’ve been playing since together. We’re like second grade. So we were like, we never lost a team except seventh, eighth, ninth, 10th, 11th, 12th grade, which are like the state semifinals, but showing up, you wouldn’t think much of us, but we would show up to the away games and we would dominate teams. And the best was like silencing the crowd. So I think this is part of why I love what I do, because I know we have something so incredible that silences the crowd, but yet there’s still a lot of people that are like, what, like how does it hasn’t been had read on two years ago, you listen to your podcast and it’s we’re here now and we’d love to help you out.
I’d love to show you our track record.
Ben Fraser: Very cool. A couple of the kind of more minute questions, but what that I’m thinking is, when you, if you invest already in reg D offerings, you have syndications, right? When you get a return of capital because of a sale, can that be applied into this DST or does it have to be real estate or a business?
Or if you have gains from this, from the sale of an asset through investment passively. Does that qualify or not?
Brett Swarts: It all depends. Let me give you a case study for the client. He’s done six exits out of six reg D. Oh, there were syndications. I’m sorry. Those were syndications. There wasn’t a fund.
So he was a GP. He didn’t, it’s 120 million worth of apartment complexes. Across like multiple states. So he had these smaller GP positions, right? And these six different exits. And that was a traditional syndication model out of an LLC, right? So that is there. Okay. So now let’s go into a fund. So it depends on how you hold those positions.
So if you had an LLC, for example, and that LLC invested into a fund a million bucks, let’s just say, and it turned into. 3 million over 10 years or something, right? Had cash flow, you had shares that increased right in the fund. It increased X value. Is there a way that potentially you could assign the interest of the LLC prior to the exit of the three and have the LLC receive it and then put it into the trust?
Yes. However, it all depends on the fact pattern, the details there. I’d have to see it, right? I’d have to see it and look through it, but it does work for private stock.
Eligibility and Fees for Deferred Sales Trust
Brett Swarts: It works for public stock needs to have at least a million dollar net proceeds, million dollar gain. Here’s really important, right? Cause people hear this and oh, great.
I got this, a hundred thousand dollar gain. I want to defer my tax. It’s too small for us. Okay. And for you really, because the fee’s got to make sense, right? By the way, the fees are about one and a half to 2 percent on a recurring basis on the AUM. Which is the net proceeds into the trust and about 1.
5 on the first million to 1. 25 on a one time fee for the one time legal fee up front. We do this all on a conditional basis. You can get charged unless you close, but those are just generally the fees. Okay. That’s why we like to see a million dollar net proceeds million dollar gain per transaction to make this make a lot of sense.
Okay. What I would say is that if someone’s listening to this and you have a scenario. And you have at least a million dollar net proceeds, million dollar gain that sit down with our team, go to capital gains taxes. com. We’ll do a one on one consultation with me or one of my team members. And we’ll find out if this is, if it could be a good fit for you.
Ben Fraser: And then the last question is for businesses, right? So we have a lot of folks listening to this that are entrepreneurs and business owners. Some that I know are actually in the middle of a transaction to sell a very large capital gain. Is this something they should be talking to you about or something they can think ahead of before that transaction closes?
Planning for Business Sales and 1031 Exchanges
Brett Swarts: Yeah, absolutely. So really important to understand that you must set this up prior to the close of escrow. If you’ve closed escrow or the business is closed, the assets close, it’s over, right? It’s too late. So there’s really two windows for every asset. That’s not an investment in real estate.
You must set it up. Prior to the closer basketball, but even prior to the buyer, removing all contingencies. Okay. If you’re selling a large business it is even more important to do planning with this early, earlier than even, do you want to list the business or get the offer? If you’re under contract, we can still help you, but just realize the more MNA advisors and attorneys and cooks in the kitchen.
The more they have their vested interest for your business to sell. Not that they’re going to stop it per se, just, something new to them. So we can put an option language to give you that option. So that’s the first thing I would say is, get with us now. We’ll give you some quick option languages to give you the option on the table.
Number one, number two, if you’re going to be considering doing a 1031 exchange, we want to encourage you to use our service called the best 1031 exit plan. And it gives you the regular 1031 exchange with the top, top 1031 company in the country. Number two gives you our expertise to help you navigate the deferred sales trust should 1031 fail.
Okay. Should you want a backup plan? And that’s the key here, right? You want to build the right team and have the right people in place to help you execute this. And yeah, that’s the best 1031 exit plan. And in that scenario on day 46, basically we can put the remainder into the deferred sales trust after your first 1031 or day 180, just depending on when you’ve identified, when you’ve not identified, we’d work with you to really understand how that all works.
Ben Fraser: All right. Cool.
Getting Started with Capital Gains Tax Solutions
Ben Fraser: Brett, what’s the best way for folks to. Get a hold of you and you have a new podcast you’re launching too, right?
Brett Swarts: Yes. The first thing is if you want to learn about capital gains tax solutions, just go to https://capitalgainstaxsolutions.com/. Check out the new book, Building a Capital Gains Tax Exit Plan.
It’s a great place to start. It’s an ammo Amazon bestselling book, which is cool. We have Kevin Harrington from shark tank in the book, really neat. And some other really smart multifamily and commercial real estate people in the book. We have a brand new podcast. We’re launching X in fact, on August the 20th, depending on when you’re listening to this 2024, it’s called build it to billions podcast.
So you can give more, all of it away and we’re bringing on amazing guests like Ben Frazier, hopefully your dad to talk about stewardship over ownership to talk about, legacy, talk about not only scaling to billions for the sake of winning in business, like we all want to do, but scaling for impact.
And so it’s an inspiration project, if you will, but also like a calling to do that. And so we’re transitioning to that podcast full time. So you can check that out by searching YouTube or iTunes, build it to billions.
Ben Fraser: Exciting. Brett, thanks so much for coming on, man. It’s really fun.
Brett Swarts: Thank you, Ben.
Ben Fraser: This is the Invest Like a Billionaire podcast, where we uncover the alternative investments and strategies that billionaires use to grow wealth. The tools and tactics you’ll learn from this podcast will make you a better investor and help you build legacy wealth. Join us. As we dive into the world of alternative investments, uncover strategies of the ultra wealthy, discuss economics and interview successful investors.
