Ep493 Unlocking the Power of 1031 Exchanges

Curious about how to leverage the power of 1031 exchanges for your real estate investments? Join us as we sit down with Mike from 1031 Specialists to unravel the complexities and benefits of 1031 exchanges. You'll learn the ins and outs of how these exchanges work, who can utilize them, and why having a qualified intermediary like Mike's company is crucial. We also discuss the limitations, such as their inapplicability to primary residences and certain vacation homes, ensuring you're well-informed before taking the plunge.

Planning to maximize your investment strategies? Discover critical timelines involved in 1031 exchanges, including the 45-day identification period and the six-month closing requirement, with expert insights from Mike. We dive into advanced strategies like reverse exchanges for well-capitalized investors and continuously rolling over properties to defer taxes. You'll also hear about the concept of "swap till you drop," providing significant tax advantages for heirs, and how to transition to more passive investments while benefiting from 1031 exchanges.

Clearing up common misconceptions, we emphasize the importance of involving the right professionals, such as attorneys and CPAs, for structuring and tax-related queries. We also highlight the flexibility in property types allowed under 1031 exchanges and the potential complications when partners have different goals. Whether you're an active or passive investor, this episode arms you with the knowledge to enhance your investment strategies and achieve greater financial freedom. Mike's expertise and practical advice make this a must-listen for anyone serious about real estate investing.

Access Julie's calendar, the investor club, Conscious Investor Growth Summit, social profiles and more when you CLICK HERE

Episodes referenced in the introduction:

• Repurposing Your Past
• 3 Things to Understand About Syndication
• The Gut-Health Connection: Holistic Approaches to Total Wellness with Brittney Oliver Baker
• Secrets to Achieving Level 10 Success for Busy Professionals
• Self-Directed IRAs for Savvy Investors
• Mineral Balancing: The Science-Backed Approach to Vibrant Health

Transcript

Speaker 1: 0:02

Hello Conscious Investor and welcome back. I'm your host, julie Hawley. For over four years, I've paired my background in real estate, investing, education and coaching to create powerful content for you each week. This podcast is where we take a holistic approach to investing by focusing on three ingredients to a life of personal freedom health, mindset and wealth. We'll talk about everything from passive investing through syndication and how to use your retirement accounts to boost your investing, to mineral balancing and gut brain health, and into topics that cultivate your inner strength and resilience so you can thrive regardless of any of life's current events. And yes, those are all episodes currently available and linked in the show notes below. Join me each Monday for a mindset episode and later in the week for an interview with expert investors and health professionals, so that you can experience your greatest health, strongest mindset and build the wisest wealth. Welcome back, conscious Investor.

Speaker 1: 1:00

Today I am joined by Mike and in this conversation we are going to talk very specifically about 1031 exchanges. If you don't know what a 1031 exchange is, do not worry. We are going to go into the ins and outs of 1031 exchanges. We go into what it is and how it works and the tax advantages of it. We talk about who can utilize a 1031 tax exchange. He goes into the details as to how do these 1031 exchanges actually work, why do you need an intermediary and why is his company such a powerful, qualified intermediary to work with. He also gives you some great considerations like, hey, this doesn't apply to your primary residence. No, you can't use your 1031 exchange on vacation homes. If you hang out in that place more than 14 days, you're not going to qualify. You can't use it on a fixed. So he's going to go through all of those details and nuances about it, but ultimately, I think you're going to find just as I do.

Speaker 1: 2:12

1031 exchanges are a powerful tool for real estate investors to grow their wealth by deferring capital gains. In fact, one of my favorite quotes that he had was he says gains. In fact, one of my favorite quotes that he had was he says swap until you drop, and it's just a funny way of talking about the benefits of repeated 1031 exchanges. We also talk about how can we 1031 exchange out of a syndication or into a syndication and what are the nuances of that. So if you are a passive investor, if you're active investor, this is really important for you to understand in your investing process and health sorry, wealth is one of the one of the powerful echelons of the conscious investor, and so I'm confident this is going to support you in a powerful way and, as always, I want you to you.

Speaker 1: 3:03

You to remember, this show is sponsored by Three Keys Investments. Three Keys Investments provides passive investment opportunities that provide housing for humans through investments in multimillion dollar apartment complexes and assisted living facilities, so you can say goodbye to the hassle and headaches of owning rentals and say hello to living the life you want with the people you love, all while enjoying the real ownership in real real estate. Let's get started, mike. I am so excited to have you on the Conscious Investor Podcast. Welcome to the show.

Speaker 2: 3:39

Thanks for having me Real excited to be here.

Speaker 1: 3:42

I'm excited about this conversation, but let's dive into the basics, right? The one question we launch the show with every time what do you do and how did you get started?

Speaker 2: 3:53

Yeah, so you know, I work for a company called 1031 Specialists. We're a qualified intermediary that facilitates 1031 exchanges for investors in all 50 states across the country. To be honest, never thought I would be in this weird specific niche of real estate. I've done a bunch of 1031s myself as a real estate investor and started my career in brokerage and then, on the principal side, buying multifamily properties for a large West Coast operator. And you know, during COVID, when the activity, you know, subsided a little bit, you know, I had an opportunity to meet some of these guys here in Denver, where I'm located, and they were doing some really interesting things and taught. You know, talk to me about this qualified intermediary business. And I was like, you know, my partner, John, who started. I'm like John, what's so special about a qualified intermediary business? Right, Like they just, you know, collect a fee and you know, do, you know do the paperwork. And they said, Mike, here's what's so interesting.

Speaker 2: 4:54

80% of the qualified intermediary business is owned by the big three title companies Fidelity First, American Stewart They've got their little subsidiary companies that are rebranded and named something else and then the 20% are the CPAs, the attorneys, the guys that really do this on the side, or the local guys in all the communities that have been doing the missionary, marketing, the lunch and learns for the past 30 years.

Speaker 2: 5:19

These guys are 65 years old, they have a website that hasn't been updated in 15 years. They've got no social media, as you know, Julie, it's super important right now to have a presence, and they give their broker partners and investors no incentive to work with them besides just saying, hey, I'm just going to do a good job, and we know that's really not the case most of the time, right? So I saw the opportunity and I've, you know, six months and it's been really great, you know, learning and meeting people like you and just trying to, you know, make sure that the 1031 education is out there to the masses, Cause we believe if you're a real estate investor, it's something you should at least explore. But a lot of people, for whatever reason you know, get hung up on it and don't know kind of where to start.

Speaker 1: 6:13

I can tell you that you know, you and I as real estate investors, we have an opportunity to speak with private investors and it blows my mind how many investors don't know about the 1031 exchange. Like they're savvy, experienced investors Like I have some friends they had been transacting they for years, like two decades did not know about a 1031. And I was just my mind was blown. I'm like how did you not know about this? How have you been paying all those taxes? What?

Speaker 2: 6:41

Yeah, I mean, it's like the thing about real estate investing is to generate more money, right, and generate more cashflow. But like, yeah, people aren't using one of the you know most. You know we call it a gift from our government to real estate investors like the eighth wonder of the world. They're not even, you know, exploring it just a little bit to see how they can get to their financial goals faster. And you know we're kind of dumbfounded too. So now it's our mission to kind of get out there and, you know, spread the good 1031 word.

Speaker 1: 7:11

It's just so important. All right, so we're we might actually be talking above you, precious conscious investor. So we're going to back everything up because maybe you're like my friends who, for he, had been investing for 20 years and did not know what a 1031 was, and you know what. I have to apologize, conscious investor, I didn't mean to step on your feelers. If that did, we all learn. Remember, I didn't learn about syndication until I was in my 40s and I'd been involved in real estate. So the best part about this whole process is that we can learn and we can expand on what our investing practices. So let's back way up, mike, to the beginning and say Mike, what is a 1031 exchange?

Speaker 2: 7:56

Yeah, let me. Let me break this down simple for people. So a 1031 exchange really simple, guys is the swap of one investment property for another investment property without paying a diamond tax. And 1031s have actually been around the US for 100 years and it's been. You know the grandmasters, the guys, you know who you see on TV. They've been utilizing it for a long time and, you know, as long as you're a real estate investor, you know you can do a 1031 exchange, no exclusion.

Speaker 1: 8:27

Okay, when we say real estate investor, some people might say, oh, I have to be like Julie and Mike and I have to go and buy apartment complexes or commercial real estate. So let's even break down who is qualified as a real estate investor.

Speaker 2: 8:42

Yeah, I mean, simply put, you can inherit a piece of land and you are a real estate investor, right? So it could be. There are more than 16 different types of real estate that qualify for someone that owns a real estate investment property. It cannot be a second home that you Airbnb occasionally and spend three months out of the year there. That's not an investment property, that's personal use. There's a 14-day personal use maximum that the IRS allows for someone to do a 1031 on their vacation home and most people can't do that. But for most people, as long as you own an investment property, this isn't for something, for primary homes or second homes. And again, investment property. It's broad, but there are so many different types of investment property that qualify and the great thing, julie, is like you can swap from property to property, from asset class from asset class from city to city, as long as it's in the US and as long as it's held for real estate or business purposes.

Speaker 1: 9:48

Love it. Okay, so I can swap from. I was just talking to my friend Denise about land. I can swap from land into retail. I can swap from retail into multifamily. I can swap multifamily into land. I could go for like we can. I just want to exaggerate this a bit.

Speaker 2: 10:07

Oh, you want, let's, let's exaggerate it a lot, you can swap a piece of law, law, law law raw land for a rental home.

Speaker 2: 10:15

Okay, you can go from, you know, office building to a shopping center. You can go from, you know, buying a property, owning a property in Seattle, to swapping something in Florida, and you know you can. This is a great strategy for when the market changes and when different asset classes become really popular. Last three or four years, multifamily was all the rage. Now we're starting to see, you know, some fixed expenses really increasing and people are want, you know, property like retail, for instance, or single tenant net lease in the Midwest that have great yield. That's an option too, so you can, as the market changes, you can consolidate. You can go from one property, you can go from three properties to one, or you can expand your portfolio. You can go from one property to three to diversify. So it's a really great tool and you know we'd like to say like the options are infinite. So you know you definitely can. You know, have that be something part of your investment strategy.

Speaker 1: 11:13

I love it Okay, is there anything we cannot invest into?

Speaker 2: 11:17

Just, to over exaggerate that.

Speaker 2: 11:19

Yeah, yeah, I mean, look, you know, primary homes like we get people all the time calling up like, hey, I'm doing a prime, you know I'm going to buy this and I want to, you know, have a primary property or a second home. You know, vacation homes, like a vacation home is obviously different than an Airbnb business where someone doesn't live or use two weeks out of the year. So I would say, as long as it's an investment property and not a property where someone is doing a quick rehab and flipping, that is something that someone could do. And just to expand on that a little bit for everyone listening, the IRS really breaks it down by intent, right. So they look at it. If you ever get audited, they look at it to say, hey, you know what was the intent to buy it as an investment property or was the intent to buy it as a fix and flip?

Speaker 2: 12:10

Because an investor typically an investment property, you typically have a tenant which signs a lease and you collect rental income. That is primarily how you collect income from an investment property, whereas a flipper developer, on the other hand, typically codify. You know their inventory held for sale on their books and they get you know the economics derived from a sale which you know the IRS says you know we're going to tax you from a, you know, capital short gains, capital gains perspective. So that's you know kind of what I want to. You know, make sure people realize, because we have a lot of flippers call us and like, hey, I just did this quick fix and flip and I'm like, yeah, that doesn't you know, that doesn't qualify.

Speaker 1: 12:49

That is not going to work. All right, how does this process work? Let's walk the conscious investor through the process.

Speaker 2: 12:59

Yeah. So typically a 1031 transaction happens just like any other real estate transaction, except for a couple key differences, all right. One is you have to use a qualified intermediary, like 1031 specialists. A qualified intermediary is really an independent third party mandated by the IRS to facilitate a 1031 transaction, cannot be your own broker, cannot be your own attorney. It's got to be someone completely independent. Two and this is the most important thing, julie is an investor cannot take constructive receipt of their funds, which means the funds from the sale of your property cannot hit your bank account for even a second or else the 1031 will fail.

Speaker 2: 13:41

So typically what happens? You know you're going to have a property that you're selling. You're going to have a contract on that property. An investor is going to sign an agreement with a qualified intermediary and the qualified intermediary does three things. One, we consult before and during the transaction. We plan ahead to, we make sure from a timing perspective and I'll get into that a little bit later that all the deadlines and all the compliance documents are up to section 1031 and turned in at the right time.

Speaker 2: 14:09

And three, we protect and direct the funds. We are not the bank. We don't hold the money, we don't invest the money. We just facilitate the transaction. So when it comes to you closing on your property that you're selling, julie, we come in. You know the investor assigns the proceeds to us. We direct those funds to our partner's bank. That's FDIC, insured the account. The funds sit in a segregated trust account in that client's name or that entity's name. It sits there for the duration of the 1031 transaction and then, once they close on the replacement property, we instruct that partner bank to wire the funds to the seller of that replacement property, thus completing the 1031 exchange. And there are some timelines involved which are really important. You want to exchange and you know, there are some timelines involved, which are really important.

Speaker 2: 15:05

One on the date that you close of your property. You've got 45 days to identify, you know, three properties or property that are replacement properties and you must close within six months. So you know, just to expand on this a little bit, a lot of people will say, hey, mike feels like I've got a gun to my head in terms of these timelines. I don't know if I can identify a replacement property enough with enough time. The clock's ticking.

Speaker 2: 15:25

Well, here's what we say the minute you go to decide to sell your property, start looking for a replacement property. You can do that by yourself. You can make a short list. You can work with a broker to make a shortlist. You can actually put your replacement property under a contract assuming, as an investor, you don't go hard, of course you don't want non-refundable earnest money at risk. Or you can do something called the reverse exchange, where you buy a property first and sell a property in your portfolio last second. But, however, you got to be pretty well capitalized to do that and a lot of people primarily have to sell their, you know, their, their the property that they're selling, to buy the property that they're buying. And you know typically reverse exchanges. A lot of family office clients will do that just because they're well capitalized.

Speaker 1: 16:12

That's really interesting. I haven't heard of anyone doing the reverse, but that that totally makes sense, Especially if you are. Well, anyone doing the reverse, but that totally makes sense especially if you are well capitalized.

Speaker 2: 16:27

What a great buffer, an absolute amazing buffer. Yeah, I mean, I think it's all about optionality, right? I mean, at the end of the day, people can be as successful as they want to be, but it all comes down to planning ahead, Right, and we just feel like that, when you're working with us or in general, like you know, you do the hard work up front, you plan ahead, you know you're going to have a successful outcome. You don't. You're going to probably get a 30% tax hit, which is huge, and you know you're going to have a lot less equity to be able to afford another property. That's going to generate less cashflow.

Speaker 1: 17:03

Oh my gosh, Ain't nobody want that at all. So let's talk about this. I always hear 1031 until you die. That's kind of the concept is just keep the process going so that you're not getting hit by the taxes and conscious investor going on record. Right now, Neither of us are tax specialists and we're not providing or offering tax advice at all. Um, but I do have some questions about that, like about the you know recapture or how can this go wrong? Um, recapture or how can this go wrong. At some point, somebody decides like, okay, I'm off this 1031 bandwagon, which I don't know why anyone get off of it.

Speaker 2: 17:48

But if they decided they wanted to. What happens, yeah, look, I think here's what a lot of people don't realize and I'll start with this, julie is that there are no limit to the amount of time someone could do a 1031 exchange at all, and that is why the grandmasters in real estate just keep exchanging. They keep exchanging. You get a step up in basis, you generate more cash flow and, like you mentioned, when your time on earth is up and your kids inherit your portfolio, they won't pay a dime in tax based on the appreciation that you made happen. So you know, that's kind of what we mean when we say swap till you drop, which is kind of, you know, funny.

Speaker 1: 18:26

I have never heard that and that is fantastic. I love it yeah.

Speaker 2: 18:31

And so you know the whole premise is is like your heirs, you know, will you know, get you know, is like your heirs will get a step up in basis and won't have to pay a dime in taxes. So they'll eventually just keep the train rolling. If, for whatever reason, someone stops that train, you are gonna have to pay taxes based on your entire portfolio of transactions, aligned. It's specific to everyone's journey. I can't tell you like what that. You know what that share is, but you know our whole thing is is like, you know, why wouldn't you just keep doing it? And for a lot of folks out there who are saying, hey, he just wants to be done with real estate, he's getting to that age where he just wants to retire, there are different vehicles which you can 1031 into that are a lot more passive and that way your you know your family can inherit the you know the empire that you've built and, um, you know not be, you know paying uncle Sam a lot of money.

Speaker 1: 19:26

That's a great great vehicle right there. So how? What are some of the things that they can, that you can 1031 into that are more passive?

Speaker 2: 19:35

Well, you know there. There there are a couple of things, obviously, as you know, it's called tenant in common, tick syndications, right, you're pretty familiar with those where you become an LP and tenants in common, essentially, are set up that they're able to receive 1031 money, whereas other private syndication or even REITs aren't 1031 allowable, let's call it. There's something also called, you know, a Delaware statutory trust. They're called DSTs. You know there's a bunch of sponsors out there, like Inland and Pasco, who you know you can 1031 into. You know their deals as an LP.

Speaker 2: 20:14

You know there's something else called like a 721 exchange, where you 1031 into. It's called an up rate, where you get shares you know in in in exchange for your equity and in a private fund. But after you do that you lose your 1031 eligibility. So there's a couple of different things, but typically from a passive income. I like triple net. I mean I like single tenant net lease deals and you know anything that you know is operationally less intensive as you, you know evolve, let's just put it nicely, and you know don't want to have to deal with the headaches of day-to-day, you know management anymore.

Speaker 1: 20:51

That's really, really fascinating. Now I'm going to double down, since I invest you know, my company invests in multifamily and assisted living and you touched on this because I literally I showed you my phone earlier. I'm like, oh yeah, I'm talking to an investor who wants to 1031 into our deals and I'm like, hey, we might actually have a smaller deal, that could be a joint venture. But when it comes to the syndication model and bringing in 1031 capital, it's always it's like, unless you have a substantial amount of capital, it doesn't make sense for us to establish that tick. Let's go ahead and explain why we have to have that tenants in common or the tick in place in that syndication model to begin with.

Speaker 2: 21:42

Yeah, so basically tenant in common. All that means is when you are a tenant in common, you own a percentage of the deed and I think with a regular syndication as an LP, the GP is on title right. So you're actually not physically on title with a, you know, tenant in common. You are, you own an actual percentage of the deal. You know for a syndication you're just, you know you're a limited partner and you get distributions based on you know how much money you put in. Let's just say so.

Speaker 2: 22:12

You know, like you mentioned, julie, from a structuring perspective, like it takes, you know it takes a lot of work and effort to structure it the right way and make sure that it's 1031 compliant and you know, to a degree it's more, it's a lot, it's definitely more expensive than just doing a regular syndication. But what I can tell you is, you know, based where I'm sitting in, you know the real estate, you know circle today, like a lot of syndicators are trying to set up their funds as like tenants in common, just because capital raising, as you know, is a lot tougher today than it has been in the past and people are a lot more selective. So if you can, you know, accept 1031 money in one of your deals. All of a sudden you're unlocking the potential for the potential for more money in a new investor. So pros and cons to each and definitely understand why setting it up at first is laborious. But it could be another avenue to kind of funding a deal.

Speaker 1: 23:09

And providing a powerful solution to people that are looking to continue their real estate investing in a different vehicle, that are looking to continue their real estate investing in a different vehicle. Actually, so I was just talking with somebody about funds and trying to create and establish a fund that allows that 1031 flow in. Is that just a matter of within the fund, having just putting a tick in there?

Speaker 2: 23:33

Yeah, I mean we've got, we're partnered with one of the best structuring attorneys in the country. He's been doing this for 40 years literally, and that's someone we can introduce you to. Just people in general, if they want to structure their deals, is TIX, but there is some nuance around it and you just have to make sure that you set it up the right way Because again, like with the 1031, it's just like kind of like your personal taxes, it's kind of an honor code based system, and so whatever you put on your tax returns and your forms, like you only get in trouble if the IRS comes knocking Right. And if they do, you just want to make sure that everything is structured in a way that's compliant and you know it makes sense to go, you know, pay the extra money and go the extra mile just to make sure it's set up, just in case, you know you find yourself in that situation.

Speaker 1: 24:21

Definitely, oh, absolutely. It led to another question and then my question just kind of like vaporized, which is not normal for me, but it just shows that I'm actually like this is such an intriguing, you know, concept when we think about how are we supporting investors in their own personal portfolios? Because, conscious Investor, many of you have just some small duplexes and single family homes that you are transacting with, so supporting you in that. But then, looking at this at scale, how can we support people at scale which is so powerful? I think the question I was going to ask and this is more clarification for myself because what happens is that there are a lot of different people that are the quote experts that know how 1031s go, but that's just from their own personal experience. It's not what they do day in, day out, and so I think there's a lot of misinformation out there.

Speaker 1: 25:20

So let's go back to the tick structure real fast and just say what I've heard is we need to have a tick for every single investor who's doing a 1031 into a deal. Additionally, we've come into some turbulence in bringing in and trying to achieve this for investors in the past Because okay, great, now they have to get cleared by the lender. They have to go through the entire process that we are going through as a sponsor team. And so all that to say accurate, not accurate, like. What's your experience with this on the intermediary side?

Speaker 2: 26:00

Yeah, I mean, look, I think, where we sit in the transaction, you know we typically let the attorneys handle that. You know, in terms of, like, the structuring aspect of it. So, like any questions regarding that, like, talk to your structuring attorney, like we don't get involved in the weeds, just because, like again, like we try to be super, super independent, as like our, you know, which is mandated by the IRS. So you know anyone who's like hey, mike, I've got a tax question. I'm like go go ask your CPA. Mike, I've got a structuring question, go ask, you know, you know your attorney or one of our attorneys that you know we can recommend. So you know, here's what I'll say is like anything else, right, you know.

Speaker 2: 26:39

I think the theme here is like, if you plan your fund, you know ahead of time, right, like, and not do it last minute, there's a greater likelihood of success that you know it'll work out. I think where people run into issues is when they're trying to jam in and open up. You know something, when there's a shorter subscription period, right, just to, you know, just to kind of close the deal. And you know, you know this, it's like all right. Like you got 1000 balls in the air like how are we going to make this happen? And you know it just gets really, you know really messy, really quick. So you know what I can. What I can say is, like any of those questions, like if you're planning to do a tick structure or planning to go into a tick, like, talk to an attorney and make sure you understand how it works and that way you're better prepared, you know for your own, you know investment.

Speaker 1: 27:27

I love it, yes, so, so, so true, is there anything else you think, hey, everyone in the world needs to know this about 1031s, or let's start there.

Speaker 2: 27:38

Yeah, I mean, look, it's just like a regular. Like I said this before, it is just like a regular real estate transaction, except for a couple of documents, right. And I think that is really the most important part. And you know, as former brokers and investors who you know, we've had the intention of starting this business and one of the things that we realized was is, like everyone always, for whatever reason, is like hey, I don't want to pay the fee if I don't close on the replacement property, right, like that is a psychological barrier of friction. So what we've done is we've said, hey, you know what, we are going to give our investor clients 100% money back guarantee if they don't close on a replacement property or if they decide to opt out.

Speaker 2: 28:19

So now, julie, you, me, the investor, we're all in alignment to get a deal done where we either all get paid, just like a typical real estate transaction, or no one gets paid. And typically, you know my experience working with third party vendors and I'm not going to name any. You know out, you know any specifics, but we all know those folks that have taken a deal hostage for seven to 10 days and you've lost all momentum and then doubt starts to creep in and you know, either an investor or you know or someone's like actually I don't know if I want to do this deal anymore and that third party still gets paid and they don't really care about the outcome, right, and so our whole thing is like well, that's kind of silly to, you know, make someone pay us if they're not successful. And so we're trying to encourage and remove any friction to doing a 1031, any barriers, and that way, worst case scenario, you just pay the tax, just like doing a regular deal.

Speaker 2: 29:15

If you don't close your replacement property.

Speaker 1: 29:18

And I think that I love that concept of being structured in a way that it's just very transparent. It's very much a friendly approach to saying, hey, we're on your side, we're here to help you out, and yeah, that makes so much sense. How about misinformation? You probably get to hear and have seen a lot of things because you've been investing in real estate for so many years and everything just outside of this. So what's the misinformation that needs to be corrected about 1031s?

Speaker 2: 29:53

Yeah, I think first and foremost people think that they have to go from one multifamily to another multifamily and stay in the same asset class. That is like it blows people's minds when they realize like, oh yeah, this piece of land that I inherited that's not cash flowing at all. We can use that to buy a retail building. And now a retail building and now you know, make you know hundreds of thousands of dollars in cash flow a year. Like that that really blows people's minds, I think. You know just in general.

Speaker 2: 30:22

You know a lot of people really don't understand, like you know, the timeline aspect of it. You know you've got 45 days from when you close again to identify properties. But really you know that 45 days can turn into. You know as long as it takes. You know as much time as you want. Like you're the one who decides when you close and if you're going to sell a property, like you should be looking for a replacement and you can line it up in a way where you know it's. It's really easy. You can close on one thing. You can close on the property you're selling and then close on the replacement property. You know that same week if you want.

Speaker 2: 30:57

So I think, from a planning perspective. You know, people just are really confused. And then you know, I think, just in general, like you know the information out there of, you know if I'm in, you know if someone's in a partnership, right, and let's say, julie and I are in a partnership and you know I want a 1031 and Julie doesn't want a 1031, you could still, you know, go your separate ways and maintain your 1031 eligibility, but you know you have to come come back with that structuring attorney and make sure that something is set up before the PSA is signed so you can maintain your status. So, you know, I think it's just the fear of people just not having that information, not being informed or even asking. And then again, like, the most common one is like, yeah, like you can't do your primary home or your, you know, your vacation home. Like, yeah, you know, my wife and I stay in our vacation home for three months out of the year and then we invest it for nine months. Well, still, three months is still, you know, 25% of the year. Right, like you can't, you can't do that.

Speaker 2: 32:01

But I think, first and foremost, it's just any city, any town, you know, I think people get tripped up with light kind. You know what is light kind mean it just like remove, like kind. It just means investment property. So I think that is really I'm trying to simplify it for everyone that is really the most important thing. And you know, I think a lot of people get started with having a portfolio of homes that are cash flowing and you know they don't realize that they can consolidate you know those 20 homes into one multifamily building and you know they don't realize that they can consolidate. You know those 20 homes into one multifamily building.

Speaker 2: 32:34

And you know now you know they're they're, they're centralized and they don't have to stress from each property to property and that's totally, totally doable. So it's just, you know, having the courage to ask questions and reach out for information. And you know we're trying to repackage and repurpose all this information into really cool material which we have. And I think before you've got people, you know, let's say, someone who's a lot older using a whiteboard, you know drawing out 1031, like no one's got. You know no one's got time for that to listen. You know to listen to that stuff and it's confusing. And you know we want to make it approachable. So that's kind of what we're trying to do.

Speaker 1: 33:10

I love that. So let's let's go here and say how do people connect up with you and what kind of resources do you have available that they can download or yeah, that's a.

Speaker 2: 33:21

That's a great question. So you know our website is 1031specialistcom. You know you can email us at 1031 at 1031specialistcom. We just came out with our how to do a 1031 exchange. You know it's called freetaxwealthcom. It's a seven day. You know, once a day email for seven days teaching you how to do a 1031 and the benefits Really easy. We've got something called our 1031 Bible, which is literally, you know, 99.9% of anything that you guys need to know about it. We've got something called our 1031 Bible, which is literally 99.9% of anything that you guys need to know about it. We've got all the materials. We also have something called the 1031 Exchange Calculator. My partners are former Goldman Sachs Ernst Young guys, so before they actually launched this business, they downloaded all 150 calculators from all these other qualified intermediaries and they improved upon it. So we have that too.

Speaker 2: 34:14

It's really great for specific scenarios and if you want to understand what your tax liability is for your specific property and then what you need to do for replacement property, and so actually, julie, I just came into my mind what is another myth or something that people should know.

Speaker 2: 34:32

So one of the most common questions we get is how do we do a full tax deferral on our property, meaning if I sell a property for a million dollars and I've got $500,000 in equity and a $500,000 mortgage, what do I need to identify to satisfy the full tax deferral? And this is really important. It's not just the equity you got to replace the equity tax deferral and this is really important. It's not just the equity you got to replace the equity and the mortgage amount. So if you're going to buy a new property, you have to buy a property worth at least a million with that same mortgage amount and with that same you know equity amount. And if you take a lesser you know mortgage amount, you're going to have to bring more equity to the table to satisfy you know that price, if that makes sense.

Speaker 1: 35:14

No, that does. That makes total sense. And, yeah, I'm so glad that that came, you know, that came to your mind because, yeah, that's an important element right there that I think a lot of people overlook.

Speaker 2: 35:25

Yeah, I think you know, I think a lot of people are just like oh, I'm just going to be looking at the equity amount, but it comes down to the proceeds and proceeds are the equity and the debt that's on the deal and there's obviously a bunch of different ways you can replace that. But it's super important to know to get the full tax deferral you have to replace both of those in the transaction to Pearl, you have to replace both of those in the transaction.

Speaker 1: 35:55

Absolutely paramount, Gosh. This has been awesome. Mike, I really appreciate the time you've taken to just come in and kind of set some of the records straight and give us some of the inside edge, because there's a lot of misinformation out there and there's a lot of just people need clarity on this whole entire concept.

Speaker 2: 36:17

Yeah, no, I appreciate you having me on and you know, if anyone has any questions or scenarios like we're happy to happy to answer at 631-438-1031.

Speaker 1: 36:24

I love that it ends with 1031. Wise choice for sure.

Speaker 2: 36:29

Kind of a vanity play, but yeah, I think it's easy for people.

Speaker 1: 36:33

Yeah, no, it totally works. I appreciate that. That's awesome. Conscious investor Thanks so much.

Speaker 1: 36:38

I know that this definitely helped clear the weeds for you on a lot of different levels and probably even introduced many of you to this entirely new concept. So it's like that's what do you know? Know, the conscious investor is here to serve you in that capacity. Please do remember that adventure belongs on the trail and not in your investing or your personal life. So if you are looking to take your first or next step in your investing, please make sure you go down to the show notes below and schedule a time let's talk.

Speaker 1: 37:09

I like to know what are your goals, and it's a very fun, comfortable conversation and if it's not, something that Three Keys Investments can support you with, guess what? I know a lot of really amazing people that I can connect you up with, and I do. I have a strong track record of doing that. If you need support and you feel like you're stuck and you're not living the life that you wanna live, then make sure you go to the show notes and schedule time for us to chat and see if performance coaching is something that is going to support you. Until next time, cheers to your health, your mindset and your wealth. Thank you.