BRETT SWARTS INTERVIEW – How to Create and Preserve More Wealth With a Deferred Sales Trust

Welcome to the Next Level Income show where it's our goal to take your income, your investments and your life to the next level. I'm Chris Larsen.

And I'm Caleb Welborn.

You can get your free copy of our book@nextlevelincome.com book today's show is sponsored by the Multi Family Investor Nation Summit. You can see myself and many other experts in the multifamily world speak in this three day virtual meeting June 11th through 13th. You can register now at www.medifamilyinvestornation.com and and you can find a discount code in the show Notes Today on today's show, we're excited to have Brett Swartz. Brett Swartz is considered to be one of the most well rounded capital gains tax deferral experts and informative speakers on the West Coast. His audiences are challenged to lean into multiple capital gains tax deferral strategies, create and develop a tax deferred passive cash flow optimal timing wealth plan of their own and execute on this plan so that they can create and preserve more wealth. Brett is not only the founder of Capital Tax Gain Solutions, but he's also the host of the Capital Gain Tax Solutions podcast. Each year he equips hundreds of business professionals with the Deferred Sales Trust tool to help their high net worth clients solve capital gains tax deferral limitations. Brett's passionate about educating people on capital gains tax deferral with a deferred sales trust, how to divest from a business or real estate and gain freedom from feeling hostage to a 1031 exchange that invest back into a new business venture or investment real estate at any time, all capital tax gains deferred and he calls this optimal timing. Brett's experience includes numerous deferred tax sales I'm sorry, deferred sales trusts, DE statutory trusts, 1031 exchanges and $85 million in closed commercial real estate brokerage transactions. He's also an active commercial real estate broker and investor. He has brokerage experience and ownership in multifamily senior housing, retail, medical office and mixed use properties. He's a licensed real estate broker who holds series 22 and 63 licenses. He was formerly an associate at the largest commercial real estate brokerage firm in the country. He has his own multifamily brokerage company now and he has years of experience and hands on training from some of the best in the business. Brett lives in Roseville, California with his wife Melanie and their count them five. Brett, thanks for being on the show today.

Hey Chris, thanks for the introduction. And next time I'll make that shorter for everybody because I know that was a lot. And, Caleb, thanks for having me on the show, too.

Absolutely.

No, man, I like that. I love all that you've done, all that you have accomplished, and all that you're doing. I think if I have to say deferred sales trust and real estate, you know, I was getting a little tongue tied there, but we look forward to hearing more about it. So, you know, Brett, you and I connected through the real estate community, have a lot of. A lot of shared connections with you being out in California. You know, our audience is nationwide. Please share a little bit more with the audience, you know, about your story and how you got to be here and also the capital gains tax solutions podcast that you host.

Absolutely. So, you know, most commercial real estate investors, you know, business owners or highly appreciated homeowners, they struggle with capital gains tax somewhere between 30 and 50% of their gain when they go to sell. And so we use a deferred sales trust to give them tax referral, liquidity, diversification, and the ability to eliminate the need for the 1031 exchange. But my story starts back in 2006 when I was at a company called Marcus and Millichap, and I was helping people buy and sell investment properties. And we Learned about the 10:31 exchange and about day three. It's really what drove. Drove transactions and drove tax deferral and really added value for clients, was understanding how to transact in and out of properties. At the time, I was kind of new into the business. You know, I was just married, you know, first kind of first child. And, but. And we. I was just trying to make it in the business and trying to figure out a way to make it, try to be the provider. I loving what I was doing, but it was hard to make it because, you know, something really hit, hit, hit at that time was in 2008, the crash. And it hit my family hard, but it also hit a lot of my clients really hard and friends and family. So some people lost everything. I was in Northern California. Sacramento is one of the hardest hit cities in America. And we saw people who had worked for 20, 30, 40, 50 years and had too much debt and had overpaid for properties via 1031. Just get decimated and lose everything. And so about that time, I said, you know, there's got to be a better way, right? There's got to be an alternative. There's got to be something we can do to escape the feeling of feeling trapped, to overpay for properties via 1031 EXCHANGE. And let's figure it out so this never has to, never has to happen to us ever again or any of our friends or family or clients. And so at just the right time, our manager at Marcus and Millshot brought a gentleman in. And I say right time being the time in my journey that was looking for something like this. He brought in, it was 2009, after everything kind of had hit, he brought in a gentleman to speak about the deferred sales trust. And so we sat there and we listened. And like most, most people who learn hear about this for the first time, they go, this seems like it's too good to be true. This seems like I would have known about it. I've been in the industry for a long time. Why isn't my CPA or why aren't the 1031 exchange companies telling me, oh, why isn't my commercial real estate broker telling me? And all we could say is, you know, well, let's learn a little bit more. And that began the journey of how can I implement this strategy, still provide for my family, add value in a marketplace where transactions had just dropped, you know, completely. Sort of like what's happening right now in the Corona crisis, the whole market was flipped upside down and people were very cautious and just to. So that's kind of the beginning of the journey. And I'll pause there, you might have some questions.

Yeah. So people listening, anyone who's read Chris's book Next Level Income, they're familiar with the 1031 exchange. For anyone who's listening who hasn't read the book yet, we're currently offering free physical print copies as well as the ebook. So feel free to go to our website and check that out. But so Brett, if someone listening first, if they don't really know what a 1031 exchange is and they're wondering, could you provide a brief explanation of that before you then also dive into comparing and contrasting that with a deferred sales trust? What you see as being the main differences and benefits of each.

Absolutely. So just kind of tying the 1031 into the story. In 0504-0607 in that range, people were doing 1031 exchanges because they felt this is the only way to defer capital gains tax. And so basically what a 1031 exchange is, you can sell an investment property and buy a like kind investment property within 180 days. And that is, that is the, that is kind of the big picture. You have a 45 day window to identify. But you need to, you need to also replace equal or greater value, which often means replacing equal or greater debt. And as long as you follow these rules, you're able to defer the capital gains tax. So let's just say Caleb brought a property for a million dollars. He's selling it for three. Okay, that's a $2 million gain. Let's imagine 30 or 40% of that was depreciation, recapture and capital gains tax. So let's just say it's around 8 or $900,000. So instead of paying that, he can perfect an exchange. So he has the escrow send to accommodator the money. Now when the money's sitting there, he can go buy another property. And as long as he doesn't take what's called actual or constructive receipt, he's deferred the tax. And it's just a rule and a guideline that is called IRC section 1031. Now, the challenge with that we found again back to the 050607 market was people were overpaying for properties because they were chasing or chasing the tax deferral. Okay? So they were letting the tax deferral wag the tail, wag the investment dog, and they end up overpaying, taking on too much debt. And we call that non optimal timing. Right? Our parents taught us to sell high and buy low, not, not, not sell high and then buy higher 180 days later. And too often, that's what the 1031 exchange forces you to do. You become, you become pressured to perform in these short time periods. And when the seller knows that you're in a 1031 exchange, they can't wait to go into contract with you because A, they think you probably already overpaid for it, but then b, they don't really need to negotiate with you, so they kind of, kind of hold you hostage. And so in fact, we just, we just saved a failed 1031 exchange here recently with the deferred sales Trust for a gentleman who sold a $7.6 million multifamily property in Georgia. And he has sold hundreds of properties all of his life. And that's exactly what he found himself in. He, he was about to buy a property in North Carolina. He wasn't too sure about it. He was still kind of kicking the tires, thought the price was overpriced. All of a sudden, Corona hit market, you know, basically crashes. And he immediately went to the deferred sales Trust, and we just closed that deal last week. And his biggest thing Was, look, I didn't want to overpay. You know, I've been here before. In 08, I was here before. Right. I didn't want to take on all of this debt. Which leads into the second challenge with the 1031. It's equal or greater value, which means equal or greater debt. Okay. So debt is not your friend. In a highly appreciated marketplace that's uncertain.

Right.

Liquidity is your friend. Diversification is your friend. And waiting to find a property that makes sense at optimal timing is your friend. So anyway, so he decided to do that. So I'll pause there because I know I said a lot and I want to make sure you guys are catching all that.

Yeah, no, Brett, I think that's fantastic. So just walk us back a little bit. So when you say equal or greater debt. So kind of walk us through that. Going back to the same example with Caleb. Million dollar property, now it's worth three.

So if Caleb had debt on that property, let's say of a million and a half dollars, Right. He basically needs to buy something of equal or greater value from what he sold at the 3 million dollar mark, which often means he's, he's taking on equal or greater debt. Okay. So it's even better to use the example I just talked about. So the gentleman who sold in Georgia was 7.6 million sale of the 128 units. And he has about 3.1 million in equity after closing costs. So he had about, you know, four and a half million or so in debt. So in order to perfect a 1031 exchange, he would have to buy a property at least 7.6 million or greater. Okay. And that means he's going to have to take on that $4.5 million or replace that debt.

Right.

It's really what it means if you don't replace that debt, you have what's called boot and that mood is taxable. Okay. So it's just the rule that you have to follow. But what often happens is people end up buying not just a 7.6, they buy an 8.6 or 9.6 or 10.6. And again, if they bought at a high place and they took on all this debt, we call that dumb debt. Dumb debt is when you overpay for a property that doesn't have any forced appreciation in it that the rents have been through the roof. Right. Essentially you're in a highly priced marketplace. That's not the time to go into debt. The time to go into debt was five years ago or six years ago. When there was a buyer's market, when the price per square foot was low. And now I'm speaking for California, right? And so different parts of the country had different, you know, it's not always a seller's or a buyer's market. So every deal is different, right? But just realize, ask yourself, am I in a seller's market? Am I in a buyer's market? Are these cap rates making sense?

Right?

Is the low interest rates propping up the values? Are the price per square foot making sense? Had the rents been highly appreciated right now, if you can find a value add forced appreciation deal, that's my favorite, do a 1031 make it work. We just think right now, especially given Corona is not the time to buy. In fact, we think the marketplace is going to take a big hit in a big way. And it already has with the stock market. And now real estate could follow and we'll see how it all shakes out. But now we think it's the best time to sit on the sidelines and, and wait to purchase. And that's really the, the, the, the, the biggest value with the deferred sales trust is what we call optimal timing. Instead of selling high and buying higher, 180 days later, with the 1031, we can now sell high, pay off all the debt, and then sit on the sidelines, tax deferred, and keep your powder dry. And we call this the best of both worlds. And we'll give you a case study for this deal. This is the most prolific one we've ever had in the deferred sales trust history. And this happened actually in 06. So a gentleman, ultra high net worth, sold in 06, 20 million dollar property. He put all of the proceeds into his trust. And five years later, that property that he had sold was foreclosed on. And guess who the bank called first. The seller who had sold it five years before. And so what did that seller do? He used his trust to purchase the property. Okay, all tax deferred. But here's the best part, at 60 cents on the dollar. So we called this the Monday morning quarterback, right? He played it perfect. He sold at the exact right time. He sat on the sidelines, tax deferred. He put in conservative stocks, bonds, mutual funds, because that also took a big hit during that time. So he kind of stayed, you know, kind of even. And then when the marketplace crashed and real estate went on a discount, he bought that property through his deferred sales trust, all tax deferred. And that's what we call optimal timing.

Yes. So, Brett, I like that. I'd like to hear more. So let's see here. Maybe walk us through who this is for. So I was like, personally, I was selling three single family rentals and rolling that into two multifamily investments. This would have been, I don't know, five, six years ago. So if you could kind of walk us through what that would look like. And then you just said you can sell real estate, invest it in stocks or bonds or intermediate investment, and then roll it back into something else. So kind of walk us through how that works.

Absolutely. So the first thing to understand about the deferred sales trust is it's not a 1031 exchange. Okay. So commercial real estate is like a religion. By the way, I'm part of that religion. I love commercial real estate. It's my first love. I think it's the best way to create long term and active or passive income and build your wealth. Okay. So don't get me wrong, that is where I've made my wealth too. Okay? But that being said, the deferred sales trust basically offers all of the shortcomings that the 1031 doesn't offer. Okay. And so the first one is it doesn't have to be like kind real estate. Right. Which is great because there's a time to buy and there's a time to sell. Just like it's a great time, we think, to buy stocks because they're on a discount, they're very, very low. Right. And it might come back. Well, likewise, real estate values might be holding up for a little bit right now. It's a great time to sell and wait on the sideline. So that's what the deferred sales trust allows you to do. You can buy though. It works for high end primary homes, it works for collectibles, artwork, it works for businesses. We've done dentists, veterinarians. It works for single family homes, multiple single family homes. So to answer your question, you can sell one property at a time and slowly move it into one trust. So the idea is to create this deferred sales trust wealth plan. And you create this one trust, and that's the center of it. And you can slowly sell one home at a time. So we have some clients, for example, who own 20, 30, 40, 50, 100 homes. And the biggest challenge with trying to package those together and to do a 1031 is timing. Right? And it's if you package them together, you can, sure, you can sell it to a big investor, but he's going to want to probably a 20 to 30% discount. So the intent is to get the highest price for the property you're selling. The challenge is the 1031 really doesn't allow you to do that. The solution is the deferred sales trust and that it can sell each individual home slowly to single family home buyers who can get FHA financing low and pay that extra 20 to 30%, just the regular market for the property. And then you can just slowly put the proceeds into the trust and all of a sudden you compile it and now once it's all compiled, you can use those funds for a down payment on a brand new property. Right up to 80% of the funds we needed to keep 20% liquid in stocks, bonds and mutual funds. But the other 80% can go into your own deal, Kris. But it also can diversify within multiple syndications because here's the other thing. The whole entity doesn't have to move. So you might say, hey, Kevin Bupp has a mobile home park fund. I'm going to diversify and put about 200,000 there. Rod Khleif has a multifamily deal. Dan Hanford has a deal here and I'm going to do my own deal as well. You start to diversify your equity into multiple geographical locations across the US and multiple product types. The 1031 just doesn't allow you to do that. Most 1031s, you sell a single asset and a single product type and a single location. You buy it, you buy a little bit bigger one down the street, but it's, you know, so you have a little bit more diversification because you have more units, but it's still a single product type in a single location. Well, what if you're in a state or a city where the jobs just get decimated and now all of those, you know, renters can't pay and that's. It's facing a deal right now in Vegas. A lot of Vegas is tied to the industry of entertainment and spending. It's like a ghost town right now. And so we had a client who was ready to do deferred sales trust. The deal fell apart because the buyer walked away from his non refundable deposit because essentially the city's been hit really hard. And who knows with a lot of these renters if they're going to be able to pay rent. So I'll pause there and make sure that answered your question.

Yeah, no, I like it.

Yeah, it sounds like there's a whole lot of variables that go into that and really depends on the person's situation. You brought up a few examples there as well as before you mentioned, like the 60 cents on the dollar guy. Could you give an overall say on average how much your clients generally save when they use your strategy?

Great, great question. So the average deal size is 2.6 million in equity or in proceeds, and we're deferring somewhere around 4 to $500,000 in liability. And by the way, this works for carried interest as well. Right. So if you're an operator, this works for carried interest. Carried interest is taxed as capital gains tax. And so when you sell, we want to make sure that the equity and the tax liability is big enough to offset our fees because we do charge fees. And so we found that the minimum is $500,000 of proceeds and about $100,000 of tax liability. So if you're listening and your deal is only, you know, 250 and you're only deferring like 50,000 in tax, we say that's just too small. Our fees are going to eat up the savings. You might as well just pay the tax or try to do a 1031. But if you tell me, hey, Brad, I've got five or three, four, five or six of these $250,000 houses and collectively they add up to over $500,000 of proceeds and over $100,000 of liability, then we would say take a peek at that. Some of the other things to consider have to do with resetting the depreciation schedule. So what's happening right now in the U.S. it's according to the American Bankers association, there's about 17 to 20, 20 trillion dollars that'll pass from one generation to the next in the next 20 years. And this is known as largest wealth transfer. Yeah. In the history of the world. And it's by the baby boomers. In fact, there's about 77 million baby boomers in the US alone. And every day about 10,000 are turning 65. So I want you to picture this. The largest wealth transfer in history of the world. And where do they own this? Where's all this, all this wealth at? Well, 50% of it's actually in commercial real estate, it's in high end primary homes, and it's in private equity. Private equity is basically just businesses. Okay, so that 50% is illiquid. It also takes time, energy, toilets, trash management, all of the things that good operators are focused on, you know, executing a business plan. But guess what, these folks are getting older and they want to retire from this. But guess What? They feel trapped. They feel trapped by capital gains tax. They feel trapped by the debt. They've been trapped about the 1031 exchange. And they're looking for a solution. And so we call this the perfect storm that's facing America right now. But it's also the perfect opportunity for operators like yourself to capture and provide a solution for folks who want to sell. By the way, if you sell a business, you cannot 1031 into an investment real estate. If you sell a primary home, you can't 1031. So the intent is to defer the tax and put it into this. Well, the deferred sales trust works for this. Okay. We've done thousands of closes, veterinarians, optometrists, dentists, car dealerships. We're doing a bitcoin case right now. We're doing a horse deal out of Kentucky right now. And so the intent is to basically help them solve their problems. Hey, I'm gonna help you solve your problem of getting out of all of that. And now you can put it into the deferred sales trust, all tax deferred. And then guess what? That becomes an opportunity for you to fund your next real estate syndication. And so I'll pause there, make sure you guys caught all that.

Yeah, I appreciate you stopping. So how is this. I have a friend, he sold his business, he put it into a. It's a crat. Was it a charitable remainder trust? How is that different with the crt.

One of the biggest challenges, it's not very flexible when it comes to changing. Right. So basically, you're married to that charity, and once you go there, there's no turning back. With the dst, you could be married to the charity, and then you could essentially get divorced and go marry another charity. Right. And meaning they may change their values that you're looking and why you started with them at first, and that might be new leadership. So taking the long term perspective, you can be very, very flexible with the DST versus the crt. And that would be the answer to your question. Hopefully that makes some sense.

Oh, yeah, definitely makes sense. So you kind of talked about the costs and the. You know, who this might be a fit for. What are the downsides, aside from the costs? Brett, you know, who is this not for? What are some downsides, some limits to this?

Let me touch on two more of the upsides, and then we'll. Then we'll get on to the downsides.

The other one, which good salesperson.

Yeah. And it's really important to understand this as a whole, because Especially this next one we call the estate tax advantage. Okay. So many, many commercial real estate owners, it gets really confused that they think they can just 1031 and die and get the stepped up basis and be tax free. That is true for capital gains tax, but it's not true for estate tax. And so let's talk about that for a second. So estate tax essentially is if you're an ultra high net worth individual worth more than 22 million and you're married, or 11 million and you're single, by the way, in 2025, those are set to expire and we think they're going to drop back down to 11 married and basically five and a half single. But let's just use the current, current rates. Right now, anything that's inside your taxable estate is going to be hit with a 40% death tax. Estate tax. Okay, so let's imagine, Caleb, you're married and you're worth $52 million. Okay. And imagine all 52 million inside your taxable estate. Well, if you pass today, you will get the stepped up basis for your capital gains tax. So your kids are great. I don't have to pay any capital gains tax. Awesome. Way to go, Caleb. You did a 1031 and you stuck to that plan. However, the estate tax is going to kick in. So what are they going to do? They're going to take the first 22 and they're going to say that's out. And that other 30 million that's left, Caleb, is going to be hit with a 40% death tax. That's $12 million. So the intent is to get it outside of the taxable estate as quickly as you can before you pass away. The challenge is the 1031 doesn't take it outside the taxable estate. Now you can do some FLPs and some gifting and a lot of clients will do that. And if you're listening to this, they probably done that. But the biggest challenge is they can't get it out fast enough. Meaning they try to do it, but they can't get it out fast enough. The solution is the deferred sales trust at close of escrow. At close of the trust, not only do we defer all the capital gains tax, but then we move it outside the taxable estate. So we just saved you 40% on that $30 million, which is, imagine was a $30 million sale of an apartment complex and we saved $12 million outside your taxable estate. Nothing else can do that. So that's very powerful. And the second one is A brand new depreciation schedule. So I started to touch on this earlier, but I don't think I got the full thought in. So for the baby boomers who've owned real estate for if it's multifamily, 27 and a half years is the depreciation schedule on a straight line. But eventually, if they've owned long enough and they've depreciated long enough. Right. And they've done 1031 exchanges, right. They run out of depreciation because 1031. One of the downsides is the depreciation schedule travels. So imagine you own a $10 million deal, Kris, and you've owned it for 27 and a half years on a straight line and you have a zero basis now. Well, if you do a 1031 exchange essentially and you bought another 10 million dollar deal, you have zero depreciation. That's not good. Depreciation is one of the number one reasons to own investment real estate. Right. Offsets all of the income or a lot of the income. Right. So now if you do that same deal and you sold 10 million into the trust and you bought a brand new property, $10 million through the trust, guess what, you got a brand new ten million dollar depreciation schedule.

Right.

Wow. Right. So back to the baby boomers. A lot of these folks, they've owned for a long time, they have zero depreciation. And. Or if you're doing accelerated depreciation, you guys are running out. And so the intent is to get more depreciation. The challenge is the 1031 doesn't allow you to do it. The solution is the deferred sales trust.

That's awesome. And so. Yeah, yeah, you really laid it out well. And great hypothetical examples. Could you, would you be willing to share maybe if you've used this yourself or if you have a favorite example of someone you've helped help with this to take it from like the hypotheticals to what it can really look like.

Absolutely. So the deal that just comes to mind right now is the gentleman who's selling the $7.6 million property. He already sold it. It was in the exchange he had, he had exchanged into that property. And so his depreciation was already, you know, he's a, he's been in real estate for 40 years. Was already very low. And so now, right now what he's going to do, he's actually going to Brian Burke. But he's planning on putting up to 80% with. Yeah. With practice with Brian in the hard money lending. Right. Now, kind of that line, that's what's where. That's where Brian's kind of focused on as to wait, to wait and then fast forward. When real estate drops, he's gonna go buy. You could also use the one that, the Minnesota deal that I told you about earlier. He got a brand new depreciation schedule when he bought it at 60 cents on the dollar. So. Because he bought it through his trust, so it works. And why does it work? Because it's IRC 453. We're not doing IRC 1031. So they're both tax deferral strategies, but they work in both in different ways. And by the way, your listeners might be knowing, how does this all work? We might want to walk through just kind of an actual example of like the mechanics, because I know a lot of people kind of want to understand it. We're talking about all the benefits. So, Chris, do you want to interact with me and walk through like an actual example?

I think that'd be terrific. Let's do it.

Okay, so let's use the $10 million deal like before. And let's imagine it's a multifamily. Let's imagine you've owned for 27 and a half years. You have a zero basis. And let's say with depreciation recapture, you'd owe 40% inflation tax, okay, plus depreciation recapture. So you're looking at a $4 million liability. So we always start there and we say, hey, Kris, you have 4 million. Do you want to do a 1031? You say, no, these prices are too high. I don't want to take on any debt. Okay, great. Well, how about deferred sales trust? Okay, so you think you want to do it. So how would it work? Well, essentially we would find a buyer. Let's make Caleb the buyer. And Caleb is bringing the full 10 million and he's ready to purchase it from you. But the first thing to understand is he's in a 1031, hopefully. Right? And he's ready to overpay. Now, hopefully it's a fair deal and it makes sense for both sides. But let's just play this out.

He's buying from me. I hope he's overpaying.

Well, so he's ready to buy it from you and you're ready to sell it to him. But the first thing to understand is you don't want to take actual or constructive receipt. Right? So he is. If escrow sends you the funds directly and you take all 10 million in cash, that's when the tax is triggered. Okay, so this is part of how the 1031 works in that we just. Instead of Kris taking that actual receipt, he can send it to a QI company. But there's also another thing that Kris could do. Kris could have carried paper, Right. He could have done a seller qi.

That's a qualified intermediary, right, Brett?

Correct. 1031 exchange. Qualified intermediary. Correct.

I've been through this here just for our audience, for sure.

And so Kris could also do a seller carryback. It's known as. It's also IRC 453. It's the foundation of our structure. So let's imagine he's doing a traditional seller carry back. So Caleb, Caleb says, hey, Kris, I'll give you a $3 million down payment. Would you carry back paper for 7 million? And if Kris said yes to that, guess what, Kris? How much actual receipt did you receive?

3. 3 million, right?

That's the down payment. You got it. Now, the other 7 million is in a deferral state, right? You haven't received it yet.

Yep.

You follow? So that's why it's not triggered now. It's owed once you receive it. And so if Caleb pays you over the next few years, which is why traditional installment sales are not as good as the deferred sales trust, because they're typically short in nature, and then you owe the tax anyways. Whereas the deferred sales trust, you can go on basically for as long as you ever you want. So you understand how tax deferral works now with constructive and actual receipts. So now let's enter the trust instead. Kris could say, you know what? I don't want to do a traditional installment sale for those reasons, and I don't want to do a 1031 exchange, but I want you, Caleb, to cooperate with the deferred sales trust. So I'll tell you what. Bring me the full 10 million. Go get a loan, whatever you want. Bring me cash, whatever you want. Okay? But instead of buying it directly from me, this deferred sales trust is going to jump in right in between you and Caleb, okay? And it's actually going to give you a down payment. The trust is of zero dollars. It's going to ask you to carry 100% financing.

Okay?

Now follow me, Kris, if you receive zero today, how much actual receipt did you receive?

Zero.

So how much taxes triggered today?

Zero.

You got it. Now, immediately in the same escrow, the trust turns around, it sells it to Kalyn for $10 million. Okay? So now Caleb takes the property. Didn't affect Caleb at all. He's, he's happy. He's got his apartment complex. He's off and running. The smoke clears and guess what? The trust bought it for 10 million from you and it sold it to Caleb for 10 million. So how much gain did the trust have?

It's a wash, right? Yeah, got it.

So the trust has zero gain. So the money sitting at some of the largest banks in the world, TD Ameritrade, okay, Bank of New York Mellon, Charles Schwab, which is actually now TD Ameritrade. And you're happy, Kris, because you're in a tax deferral state. Caleb's happy because he got his property and now you can invest it how you want based upon your risk tolerance. You might put some with hard money lending, you might go a little bit into your own deal, you might go into someone else's deal. This is where the whole kind of world opens up. We call this the blue ocean versus the red ocean. The red ocean is full of the sharks. And what are the sharks doing? They're in the 1031 frenzy and they, they're all just rushing around trying to buy deals and overpay or like most indicators, like, forget it, I'm not going to do a 1031, I'm just going to pay the tax. They're also blood in the water because they just paid 30 to 50% in capital gains tax. Now they might have some cost segregation to offset that, which is good. But how about you get a new depreciation schedule and you add that. So I'm going to pause there because I said a lot and make sure you guys understood what just happened in that transaction.

Yeah, I think that's great.

I mean, yeah. And where you say, they're explaining, you know, when the smoke clears and coming out on top like that, that's fantastic. So here, sort of wrapping up the show here, the question we always come to at the end, at end of the day is if you could go back in time with everything you've learned up till today and then talk to yourself when you're 25 years old, but only offer one piece of advice from everything you've learned, what would that piece of advice be? And it could be about business or life or, or anything.

You learn to work harder on yourself than you do on your job. Learn to work harder on yourself and then you do on your real estate investing. Right. Or whatever, whatever profession you're in. And this is a quote by Jim Rohn, R O h, n. And essentially it speaks to that if you work hard on your job or work hard on your real estate investing, you'll make a living, Right? But if you're harder on yourself, your personal development, your leadership, your spiritual walk, your relationship with your friends and family, your career aspirations and goals, collectively work on all of those. You'll make a fortune. And the idea is not to make a bunch of money, although that's a byproduct of adding value. The idea is to become everything you were created to be. Right. Because the gift of a goal or achieving a goal is never what we get from it. The gift is what it takes of us to accomplish it, what we become because of it. Okay. And when you become a better leader, you're better for your family, you're better for your community, better for your partners, and you're going to be naturally going to be better at finance because you're just going to grow and learn and do all of the things that we're talking about here. So that would be my last, my last part of advice. And if you want to touch on the downsides, we can touch on that, too, because I know I promised I would.

Brett, it's been fantastic. I loved all the examples you've given. And if people want to learn more about deferred sales trust or they want to get ahold of you run by their personal situation or just want to listen to your podcast, what's the best way to get in touch with you?

Yes, you can go to capitalgains taxsolutions.com you can also search Capital Gains Tax Solutions podcast. We also have a free guide on our website where you can download Escape Feeling Trapped by Capital Gains Tax. It'll cover how it can save a failed 1031 exchange. It'll cover the new depreciation schedule, all the things we talked about. You can also search on YouTube. We do three to five minute videos. I do about all of these subjects. So feel free to search on YouTube as well.

Yeah, no, your resources are great. And for our audience, we're going to have all the ways to get a hold of Brett, his resource guide online. We're going to have the discount code for the multifamily Investor Nation Summit June 11th through 13th. And also our link to our free book, which is going to be@nextlevelincome.com book. Brett, thank you so much for joining us today on the Next Level Income Show.

Thanks, Chris. Thanks, Caleb.