Brett:

You're correct about the 1031 exchange, and by the way, what you might be referring to, some people get the DST, they hear about that. There's a Delaware Statutory Trust, and that's just another form of 1031. So that might be another one you are confused with, and yes, a Delaware Statutory Trust, which is a 1031 exchange, does not qualify for a primary home. However, a deferred sales trust, which is not a 1031 exchange uses a tax code called IRC 453, which is a form of a seller carry-back, that is available, in fact, for the primary houses, or cryptocurrency or a business, in 1031, only works for an investment property, and by the way, Biden is talking about limiting that or taking that away as well. So then there's nothing for property owners. But I think for us, for the main part, unless you want to give it all away to charity. So a recent deal right now, Jeb, we just did, that a client did, was another one a primary home in Newport Beach, and this couple there, they were getting a divorce needed to sell, and they had a $6 million liability above and beyond their 121 exclusion, it was their primary home. So they use the deferred sales trust to not only sell and defer, but now they're living off the interest, and what happens is the government says, look, as long as you put into deferred sales trust, it's in a deferral state, you still owe the money. It's just deferred, and we charge zero interest on this six, for as long as it's in businesses and real estate and investments, and on the interest, you pay ordinary income tax on any account, like an IRA account, like a 401k. I don't know if you were referring to Delaware, or did you really hear about the deferred sales trust two years ago?

Jeb:

No, I really heard about the deferred sales trust two years ago. But quite frankly, I mean, that's good information. I'm not super familiar with it. It makes a lot of sense. If you could answer a question on it, what happens if those people pass away? Right? So taxes haven't been paid. It's in this trust, does it then pass on to the heirs without the tax consequences?

Brett:

Close. So it's inside of a living trust, the kids can step into their shoes, and when they step into their shoes, they remain in a tax deferral state, that's our first structure, a DST regular, so they just continue the tax deferral, and by the way, most parents I would think it's up to them, they don't want their kids just to cash out and go spend the money they probably want something that's going to have some kind of tension between keeping it invested living off the cash flow, and just cash out and paying all that let's say a million dollars of tax, so they can step into their shoes, tax-deferred and continue on the second one, which has unlimited build-up, you can do as big of a deal as you want. When you set a deal for Clint, Colorado, there was about 25 million. They sold about a $5 million apartment complex, and they moved it outside their taxable estate, and for that one, they inherited a state tax-free, and capital gains tax-free. So it's a nuance to what we do. So the answer is yes. But it depends on how we structure it, and how you put it inside of your living trust. It takes some estate planning as well. So we can accomplish that.

Jeb:

Good stuff. I mean, there's a lot of property going to be sold, but has a lot of equity. I mean, we've got more equity in property now than we've ever had before, and so a lot of it is to avoid those taxes. If you can do it, it's the way to go.

Brett:

That's what we're doing. Back to the 1031 exchange, for your clients that are doing those, what's the biggest frustration with a 1031 exchange, or especially when it's a low inventory market, and prices are so high? I feel like I get them. I'm calling folks, even this is back in ‘06 and I love 1031 exchange, but go find me that upleg or I'd love to 1031 exchange, but I don't want to run out of time. So what's the biggest frustration that you found for your clients for the 1031 exchange?

Jeb:

I think you nailed it. It's identifying a property in that 90-day timeframe. Just with a low supply at the moment, there's not a lot of property out there, as many of you know, and finding something that fits the bill in that timeframe and not even getting the offer accepted, just identifying it is hard enough, and I think in this environment, getting something accepted, I mean, you can be a cash buyer, you can be as strong as the next guy. But you know, when several people want what you want you're having to do things that you wouldn't normally do sometimes go above and beyond and you could be the strongest, most qualified buyer out there, investor out there, and there's no certainty that's going to happen, which, in terms could set you up for failure and tax consequences if you're not able to make that happen.

Brett:

Could agree with you more, we call it the shotgun wedding, right? You get engaged in 45 days, you get married, and 180. But our parents taught us to sell high and buy low, sell high and buy higher, 180 days later, right. So again, I love 1031. I'm a broker. I still do those. It's just I hate having to have my clients still pressured to overpay for a property that they know intrinsically on the value, and on the forced appreciation and on the cash flow, they wouldn't have bought anyway, except for this big tax of 30% to 50%. Capital gains tax depreciation recapture. It plays into my next question. Jeb, diversification, liquidity, and getting out of debt, you were in the lending business. The whole thing just flipped. Right? Not to say that this is going to happen. Lord willing, it doesn't happen like that. All indications seem to be pretty strong at this point. But how important is diversification liquidity and getting out of debt, when there's uncertainty and not sure how long this bull market is going to last?

Jeb:

I mean, I think it's, it's, it's probably the most crucial step of that process, right? I mean, not having debt, and in times where things go wrong, you don't know the outcome. You know, being able to control your monthly output, if you will, is, I mean, provides for a lot more security on your side and be able to sleep at night, not have that anxiety and what have you. I mean, if we're completely transparent here, I mean, come March of last year, I don't have any debt outside my mortgage. But come March of last year, I was a bit worried. I mean, government shutdown, had listings cancel had buyers back out of escrow. I started looking around, going, what happens if this continues for 234 months? I mean, I have assets, I can pull from different places savings, what have you, but how long can you do that? How long can you continue without some sort of additional passive income? And even with that passive income, maybe it comes from a rental property or comes from somewhere else, and now they've been told that you can't be evicted, and now that income is no longer coming in. So there's a lot of things that happened last year, that provided clarity for me, in many ways, and one of those was making sure you know, you have passive income coming from somewhere, making sure that you know, that whatever your debts are your you know, you're able to, to make sure you cover I mean, what happens if this were to happen again, and it was a longer-term? Stay-at-home order, or what have you. I mean, the only reason we're not in turmoil is that there was so much fiscal stimulus pumped into the economy with income add lower interest rates to that, or low-interest rates to that, and in turn, it provided so much stimulus to the economy, that it went the other direction. But to answer the question, I think having no debt, passive income, being able to control what goes in and comes out, provides. I don't even know the right word I'm looking for here, but you know, just peace of mind, I guess would be what comes to mind.

Brett:

I know very well. By the way, to learn more about Jeb Smith at jebsmith.net. We're talking about getting a fresh perspective and outlook on real estate, and also some capital gains tax challenges that have been facing some clients for both of ours. So just take a step back into your business a little bit more now, too. So I'm just a real estate professional. You just got done with our with 700 other real estate professionals at Coldwell Banker, real learning, growing, challenging one another? What's the number one challenge facing the realtor, the commercial broker, the resident luxury realtor, right now? What do you think it is?

Jeb:

It's a lack of supply. It's a lack of supply, for one, but it's also, if you know, as a professional in this business. One thing I've always, been able to rely on is being able to provide my clients with feedback and guidance and really layout, a game plan for how the transaction should go, where the property should sell, where your offer should be. Whatever it is, how you ever want to lay that out, and right now, even as a professional, somebody that continues to educate me, continues to follow the market, so on and so forth, boots on the ground, it almost feels like we don't know what we're doing. Because it's just things people are doing that I've never seen in almost 18 years of doing business, and there's no rhyme or reason to it. In many ways outside obvious, I think there's a sense of FOMO going on, and people are seeing appreciation at a rapid pace and don't want to miss out, and so you've got all of those factors in but the things you can't control are like you mentioned a moment ago, those life events, people moving for one reason or another, and you never know why somebody might pay 100,000, 150,000 whatever the number is above a property's value in some cases, because maybe somebody lives next door, maybe mom lives down the street or whatever it is, and there's some reason people are willing to do these things, and we've never seen this sort of thing at least where things are moving this fast and there's this many people willing to do it so I think from my perspective that is a common frustration. I mean, you know, the event that I went to wasn't Coldwell Banker was a Buffini, event. Brian Buffini and this is where one out of eight real estate agents, you know, we're networking with people that sell one out of eight homes in the United States. So these are high-producing real estate agents, and we're all having the same problems, regardless of whether you're in California or Florida or Utah or wherever it's just, you know, not knowing how to guide your clients is one of those frustrations, along with a lack of supply for buyers.

Brett:

Very well said. Brian Buffini is one of the top real estate professionals coaches in the world. Really so amazing. Thank you for sharing that insight. Are you ready for the lightning round?

Jeb:

Let’s go.

Brett:

Go back to your 25-year-old self with the one Golden Nugget you would make sure to tell yourself to do?

Jeb:

Stay patient. I want things quickly. I want things done, and the older I get, the more I realize that things will work out the way they're supposed to work out.

Brett:

Awesome. Number one book you've recommended to give to the most in the past year?

Jeb:

I will say the one I've gifted the most in the last year is Chop Wood Carry Water by Joshua Medcalf.

Brett:

Third question. What is your favorite leadership quote or theme that you strive to live by?

Jeb:

It's a constant reminder. It came from Brian Buffini. The days are long, but the years are short, and when the grind gets tough. You just remember that it's a day that you know, the time goes by fast and translates more into my kids’ lives. Having three young kids, I think you have five? It goes by quickly and just, remembering that while it can get tough. Just stay true to what's going on because it goes by in a flash.

Brett:

Love it. We talked about some challenges for the realtors. But what's the biggest opportunity for realtors right now, do you think?

Jeb:

The biggest opportunity for real estate agents? I think just staying consistent. I mean, everybody wants to get caught up in the hype of taking advantage of, they think foreclosures are coming. Everybody wants to switch their mindset, and do you know the shiny object or what's going on. But I think the biggest opportunity lies in your relationships, staying true to who you are, continuing to nurture those that know you as you trust you'll have a super profitable business and your business will be consistent over the long haul.

Brett:

Love it. Great answer. What are you most curious about right now?

Jeb:

Housing affordability? That's one of the things that I struggle with when thinking about the housing market. I'm less worried about supply and demand and interest rates and all of that because I think it's somewhat controlled and I don't think anything major can happen with that in the short term when I say short term next a couple of years, but housing affordability is becoming more of what I see is an issue and not necessarily an issue but for first-time homebuyers right where I see the disparity you know, the gap starting to widen is those that are really in the entry-level houses, which here in Southern California really starting to disappear, and I start to wonder, you know how that all plays out in the long run?

Brett:

The last question, after all your success, Jeb, and helping all the clients, you've helped over 20 years in the lending real estate business, and your family of three and everything else? How do you stay centered in your values? And how do you stay encouraged to charge forward to reach for new heights?

Jeb:

Faith. I'm continuing to get coaching, business, coaching, writing goals, and really just trying to stay true to myself, stay true to what's important, which for me is family is definitely first and I probably prioritize those over my business all day long. I just try to stay centered around that and the rest will take care of itself.

Brett:

Amazing, Jeb. For our listeners who want to get in touch with you, would you remind them one last time where they can find you?

Jeb:

You can go to my website, jebsmith.net, or on YouTube, just search my name. Jeb Smith.

Brett:

Jeb, I want to thank you for being on the show. Given us a chance to know you a little bit, sharing your wisdom and some guidance here and what's going on with the marketplace. I want to encourage you to keep using the gifts of being an educator and leading others and making things simple so they can make great decisions in real estate, and also want to thank our listeners for listening to another episode of the Capital Gains Tax Solutions Podcast. As always, we believe most high net worth individuals and those who help them they struggle with clarifying their Capital Gains tax Deferral Options, not having a clear plan is the enemy, and using a proven tax deferral strategy, such as the deferred sales trust is the best way for you to exit your high-end primary home, your business anything that has high capital gains tax, you can go to capitalgainstaxsolutions.com. You can also go to expertcresecrets.com if you are in the real estate profession or financial advisor and you can learn how to use the deferred sales trust to grow your business. Thanks, everybody for listening to another show. Please rate review, subscribe. We appreciate you so much. Bye now.