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Wealth Strategies with Dave Foster: Growth Mindset & 1031 Exchange Insights · King Dems Podcast | Growth Mindset, Leadership, AI and Business Insights

• 0:00
  Now and Kevin's for the US tax code, because there's this thing
• 0:04
  called the 1031 exchange which allows you to sell investment
• 0:07
  real estate, take the profits, hand that tax and invest it for
• 0:12
  yourself and do real estate. And when you do that, you don't
• 0:16
  have to pay the tax. Now I think that would what that
• 0:18
  would have meant for me 30 years ago.
• 0:20
  I know you know how to compound interest or the rule of 72.
• 0:24
  It allows you to take that tax and use that to purchase the new
• 0:29
  property. So I could buy more property.
• 0:31
  Welcome to the King Dems Podcast, where business
• 0:34
  leadership meets growth mindset mastery and smart financial
• 0:38
  strategies for growth and success.
• 0:41
  We're live, ladies and gentlemen, you once again
• 0:43
  welcome to the Kingdoms podcast and diarrhoea for CFO today
• 0:48
  fighting out of a recorder. We've got with me fighting out
• 0:53
  of Florida, United States of America.
• 0:57
  McLaughlin, Dave, the founder and CEO of the 10th 31 Investor
• 1:04
  Forester. How are you today, Dave?
• 1:08
  I'm doing awesome. It's great to be here.
• 1:10
  As you well know, since I'm in Florida, the air conditioning's
• 1:14
  turned up. It is what?
• 1:16
  It is. Well, it is what it is.
• 1:17
  And of course, yeah, as you all know, I'm in London, England,
• 1:20
  and it's hot, it's summer, it's summer, we're meant to be
• 1:24
  outside. But because of a very special
• 1:27
  human being, I'm inside today. And of course I'm recording a
• 1:31
  very, very special guest. I love to speak in present
• 1:34
  tense. I love to give people their
• 1:36
  flowers while they are alive. And of course I've prepared.
• 1:39
  I'm really interested introduction for Dave Foster.
• 1:43
  Dave, you sit, relax and let me read your introduction.
• 1:49
  So ladies and gentlemen, once again today we are joined by
• 1:51
  Dave Foster, Founder and CEO of the 1031 Investor.
• 1:56
  Dave is a seasoned accountant, real estate investor and tax
• 2:00
  strategist with over 2 decades of experience helping thousands
• 2:04
  of investors legally defer taxes and maximise their returns
• 2:10
  through the power of 1031 exchanges and Section 121
• 2:15
  exemptions. Not not only has he mastered
• 2:18
  these strategies, but he also used them to achieve his own
• 2:22
  dream lifestyle. I'll see the American dream,
• 2:25
  raising four boys while leaving a bird sailboat and building a
• 2:29
  thriving real estate portfolio. Eve is here to share practical
• 2:34
  insights that will help entrepreneurs, investors and
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  business leaders keep their money working for them while
• 2:41
  navigating complex tax laws. Once again, big welcome The man,
• 2:45
  the myth and the legend. Dave Foster.
• 2:48
  Thank you. We're also Dave, a lot of people
• 2:51
  want to be like you. You know, you, you, you.
• 2:53
  You might not do it, but I say intentionally for you.
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  You are leaving the dream of many people and of course you
• 3:02
  are a role model. What can you take us back to the
• 3:06
  moment when you realise that almost 40% of your profits were
• 3:10
  going to the IRS and how that's part of your journey into
• 3:15
  mastery in the 10th 31 exchanges?
• 3:17
  You know what? You're taking me back to Dems is
• 3:20
  the worst mistake I ever made. You're going to make me relive
• 3:24
  that. Are you OK?
• 3:27
  It was about 30 years ago when I was just getting started.
• 3:30
  My wife and I were in fairly high profile careers, but we
• 3:34
  were getting burned out. You know it happens.
• 3:36
  At that pressure, that's the thing.
• 3:37
  That's the thing. A bit of professional, you know.
• 3:42
  We had this remarkable event, we had our first child and all of a
• 3:46
  sudden we realised that there was this tension between wanting
• 3:50
  to do nothing but hang out with our child and the pressures of
• 3:54
  work. And so we decided, you know, we
• 3:56
  need to figure something out. So somehow, two people who had
• 4:00
  never been in the ocean at all decided that it'd be a good
• 4:03
  thing to buy a sailboat and sail away.
• 4:05
  And the way we're going to do that was let's become real
• 4:07
  estate investors. It's got to be easy, right?
• 4:10
  Anyone can do it. So my nickname, you know, yours
• 4:14
  is King James. My nickname is Ready, Fire Aim
• 4:17
  Dave. Ready, Fire.
• 4:19
  Aim. So I just went out and said,
• 4:21
  yeah, let's do this. So I bought a duplex in Denver,
• 4:24
  fixed it up, rented it out, then got ready to sell it and thought
• 4:28
  I was king of the walk that I've done really, really well until
• 4:31
  my accountant told me that I had to stroke a check for $30,000.
• 4:37
  Now, this was 30 years ago. That was real money then.
• 4:40
  It's real money today. It's a real money today.
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  It's a lot of what it's day. That was not part of the plan
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  because we had set very intentional goals that we're ten
• 4:51
  years in the making, and if I was going to have to do that to
• 4:53
  the government every time, just was not going to work.
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  As a matter of fact, today that still haunts me.
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  And it's why I always remind people that do not ever forget
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  that when you're investing in real estate, and I know it's
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  true in the US, it's probably true everywhere.
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  You have a silent partner, and in America it's called Uncle
• 5:13
  Sam. It's the government.
• 5:14
  They are your partner whether you like it or not, and they're
• 5:18
  going to take their fair share. And Kevin's for the US tax code,
• 5:22
  because there is this thing called a 1031 exchange which
• 5:26
  allows you to sell investment real estate, take the profits
• 5:29
  and that tax and invest it for yourself in new real estate.
• 5:35
  And when you do that, you don't have to pay the tax.
• 5:37
  And I think that would what that would have meant for me 30 years
• 5:40
  ago. I know you know how to compound
• 5:42
  interest or the rule of 72. Is one of the world.
• 5:45
  Yeah, and if I was making 10% a year on that $30,000 thirty
• 5:51
  years ago, how much would I have right now instead of writing a
• 5:55
  check to the government? Almost $1,000,000 is what I'd
• 5:58
  have from one mistake. So yeah, it keeps me up still at
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  night. But we've done OK because we
• 6:05
  discovered the 1031. And since that time, that's been
• 6:09
  my mission, both for myself and for clients.
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  So, so for those people who are new to this right, what exactly
• 6:17
  is a 10/31 exchange and why is it considered such a very, very
• 6:23
  powerful tool for real estate investors?
• 6:26
  Well, let's just imagine that. We'll stay with my example.
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  Let's say that after my profits and after tax, I had $80,000 to
• 6:36
  invest in a new property. If I put 20% down on that
• 6:39
  property, I can buy a $400,000 property, right?
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  Well, what if I had that plus the tax?
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  Let's say the tax is only 20,000.
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  Now I've got $100,000 to purchase new real estate with.
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  Because I'm not paying the tax, that means that I can buy a
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  $500,000 piece of real estate. So if I pay the tax, I can only
• 7:04
  buy a $400,000 piece. If I don't pay the tax and do a
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  1031 exchange, I can buy a $500,000 piece of property.
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  Now over time, over five years, let's say, even if those two
• 7:15
  properties appreciate at the exact same rate, if I was able
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  to buy a $500,000 property to start, I'm going to be selling
• 7:24
  that for quite a bit more then if I could only buy a $400,000
• 7:30
  property. And that's what the 1031
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  exchange does. It allows you to take that tax
• 7:36
  and use that to purchase the new property.
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  So I can buy more property, I can generate more income.
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  And that's the compounding effect that Albert Einstein
• 7:45
  loved so much, is it allows us to use the tax to make our
• 7:49
  money. So are you able to do like a
• 7:52
  walk through right for the key requirement that every investor
• 7:56
  has to meet in order to have a successful exchange and be
• 8:02
  compliant? Yeah, absolutely.
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  Because that's where the that's really where the rubber hits the
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  road because the IRS lost a lawsuit about 25 years ago.
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  And when the government loses A lawsuit, they're never happy.
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  So they had to let us do these, but they didn't have to make
• 8:18
  them easy. So there are some very stringent
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  requirements. The first thing is you want to
• 8:22
  think about this in an order of sell, then buy.
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  And I know that's totally different from regular.
• 8:29
  We always think of a real estate as starting when I buy a piece
• 8:32
  of property. And as a matter of fact, are you
• 8:34
  familiar with the old proverb, you make money in real estate
• 8:38
  when you buy it? Because the idea is that
• 8:43
  everybody's looking for bargains.
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  So I want to find that cheap piece of real estate that's
• 8:48
  undervalued, that someone doesn't know what it's worth,
• 8:51
  and I'm going to go buy it and then I'm going to make money
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  when I sell it. The 1031 exchange is the exact
• 8:57
  opposite. The 1031 exchange starts with
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  when you sell a piece of property.
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  So it has to be investment real estate that you sell, and then
• 9:09
  you replace that with new investment real estate.
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  That's all that it qualifies for.
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  But it can't be any type of investment real estate anywhere
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  in the United States. If your property you sold was in
• 9:21
  the United States, then there's a couple timing requirements.
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  You only have 45 days to find your new property and you only
• 9:28
  have 180 days to close on it. So you don't have a lot of time.
• 9:31
  You got to be pretty focused. Now the same taxpayer is going
• 9:35
  to sell, it's going to buy, and you have to use.
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  This is the key. You have to use what's called a
• 9:40
  qualified intermediary to do this.
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  You cannot do it yourself and then just report it on your tax
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  return. The qualified intermediary has
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  to be involved prior to closing your sale, which starts the 1031
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  and they're actually your guide through the whole process.
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  So all of these other requirements are you're LED
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  through them by your qualified intermediary.
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  But if at the end of the day you have followed those and you have
• 10:10
  purchased at least as much real estate as you sold, you get to
• 10:14
  definitely defer paid all of that tax or depreciation
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  recapture. So how does the 10th and one
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  exchange compared to paying taxes upfront?
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  Like what's the portfolio impact over, say, over a period of time
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  that is more than 10 years? Got a boy, I wish I had my my
• 10:34
  screen pulled up. We've got some examples that we
• 10:37
  show people where over 4 transactions.
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  That's all just four. Every five years they sold a
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  piece of property they started with $100,000 for the investor
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  that does the 1031. The investor that paid the taxes
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  they went starts with $80,000 so their ferries.
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  Their second purchase. The investor that does 1031 is
• 11:02
  able to buy 500,000. The investor that pays the tax
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  could only buy 400,000. At the end of 20 years and four
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  transactions, the investor doing the 1031 exchange will have,
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  with everything else, stayed the same, $11.8 million of real
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  estate that they own and control.
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  The investor that simply paid the tax as they went has about
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  four and a half million. What's the difference?
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  The deferred tax from the 1031 exchange went to buy more real
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  estate. Now, at the end of that 20
• 11:39
  years, that investor still owes almost $500,000 in taxes, but as
• 11:44
  long as they owe the real estate, they never have to pay
• 11:46
  it. So I don't know, James, what
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  would you rather be? Own four and a half million but
• 11:51
  don't owe any taxes or owe $12 million and a half a million of
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  taxes waiting for you. As long as he can't, he can keep
• 11:59
  deferring it. You know your your hot fee.
• 12:01
  That's exactly right. Well, and think about this too,
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  if I'm making 10% a year, which is not that hard to do on my
• 12:08
  real estate portfolio, how much I've been making each year on 12
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  million, I'm making 1.2 million a year, 600,000 every six
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  months. I could just put away enough to
• 12:18
  pay those taxes into a bank account with five months worth
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  of income. And at the end of that, I still
• 12:23
  have $12 million in real estate. So that's the power.
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  Smart strategy. One exchange.
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  Smart that. That's pretty much smart.
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  And of course, if you if you don't, your eyes are properly,
• 12:35
  of course, you cross your teeth, your compliance, you may never
• 12:39
  even have to pay those taxes in your own lifetime.
• 12:43
  But like, what are some of the advanced strategies like reverse
• 12:47
  exchanges and of course, construction exchanges?
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  And what should an investor consider when you know making
• 12:55
  these strategic decisions? Right.
• 12:57
  So reverse exchanges are really one big bucket.
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  That would include a regular reverse exchange, a construction
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  exchange, an improvement exchange.
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  Those are all just types of a reverse exchange, and what
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  they're designed to do is to be a workaround from the tight time
• 13:16
  constraints because by law you cannot take title to your new
• 13:21
  property until after your old property sells.
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  But what if you find the perfect property that you want to buy?
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  Well, you could do a reverse exchange which does not change
• 13:32
  the order, but what happens is the qualified intermediary takes
• 13:36
  title to that new property and then we can hold it for up to
• 13:40
  180 days while you get your other properties sold so that
• 13:46
  you extend your timeline. Improvement exchanges are really
• 13:48
  neat because when we're buying, we always like to buy bigger and
• 13:53
  better. But what if I sold a property,
• 13:55
  fixed up multi family property, say for $500,000.
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  But I found a really neat the value add opportunity.
• 14:04
  There was a multi family that I could buy for 300,000 and put
• 14:10
  $200,000 in and have it be worth a bill.
• 14:13
  That's what's that I said. That is like an overhauling.
• 14:18
  You're basically overhauling that particular property and
• 14:22
  it's improves the value. Exactly.
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  And that's what we would do at an improvement exchange because
• 14:27
  remember, you sold for 500, so you have to buy for 500.
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  But what you're really doing is we're buying the property for
• 14:34
  300 and then you're putting the improvements in it so that it
• 14:38
  works for your 1031 exchange. But instead of at the end of the
• 14:41
  day, you get a property that still needs improvements, you
• 14:45
  get basically a brand new property ready to go.
• 14:47
  So those reverse type exchanges can't be really, really welcome.
• 14:51
  You know, I love how you talked about deferring the tax
• 14:54
  throughout your lifetime if you're smart, and then you
• 14:56
  immediately ask me about advanced strategies.
• 14:58
  Here's the most advanced strategy you can get.
• 15:01
  Die. That's it.
• 15:02
  Die while you're owning your real estate.
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  I know you wouldn't think of that, would you?
• 15:06
  Definitely. You know, I always tell people
• 15:08
  that the only two things that are sure in life are death and
• 15:12
  taxes. If you die right, you're still
• 15:15
  going to cheat the taxes because under U.S. tax code, when you
• 15:20
  die owning real estate, your heirs inherit that property with
• 15:24
  what is called a step up in basis.
• 15:26
  So they inherit the property as if they paid market value for it
• 15:31
  on the day you died, which means would they inherit it if it's
• 15:34
  worth $500,000? They inherit it as if they paid
• 15:38
  $500,000 for it. All of that tax that you
• 15:43
  deferred in your 1031 exchanges throughout the years is gone.
• 15:47
  You never paid it. You're a state never painted.
• 15:50
  The air is never painted. That's why the mantra of the
• 15:54
  1031 exchange dams is defer, defer, defer and they die.
• 15:59
  So. So when the hair is actually
• 16:01
  inherited, how about the capital?
• 16:02
  The capital gains are toxic. That all disappears.
• 16:05
  It's gone when you inherit it. So when they inherit, they
• 16:10
  inherit at the market value. About what does the US tax lower
• 16:15
  demand of the hairs? Are they meant to pay any form
• 16:20
  of taxes if they are to sell the the property?
• 16:23
  If they sell the property the day they inherit it, no tax.
• 16:27
  Now if they hang on to the property and say that property
• 16:30
  appreciates another $100,000 from that date, that they're
• 16:34
  going to pay tax on $900,000. So that funds their own capital
• 16:38
  gains. Unless they do what names?
• 16:40
  They they, they, they, they die as well.
• 16:43
  Or they do 1031 exchange. Yeah, they, they keep they.
• 16:46
  Keep I have one family of clients where we started doing
• 16:52
  1031 exchanges for the grandfather 25 years ago.
• 16:56
  He passed away after 5 or 6 years and his son inherited all
• 17:02
  of the real estate. Now because he inherited it tax
• 17:05
  free, we did not see the sun for a few years, but then he started
• 17:09
  after a while doing his own 1030 ones because they had
• 17:13
  appreciated. He passed away about six years
• 17:16
  ago. His children inherited the
• 17:18
  property and we're starting to see them again just now doing
• 17:25
  their own 1030 exchange. So through process of 1031
• 17:29
  exchanges of death, we've seen 3 generations.
• 17:33
  Generations. Never pay a penny.
• 17:36
  Yeah, real estate hates tax. Come on.
• 17:39
  That is 3 smart generations. You know that that's, that's
• 17:43
  really, really wild. But what what would you say are
• 17:46
  the common mistakes that you have seen investors bake while
• 17:49
  trying to execute 1/10 at one exchange?
• 17:52
  And how can they possibly avoid those mistakes?
• 17:55
  Yeah, The first exchange is simply not knowing that you have
• 17:59
  to have a Qi at Blinks prior to selling the property.
• 18:02
  I get calls still every month and it'll say, Dave, I sold my
• 18:06
  property last week, the bodies at the escrow company ready to
• 18:11
  do it to 31 exchange. And I have to say, well,
• 18:13
  unfortunately you can't because it wasn't documented on the
• 18:17
  settlement statements. And more importantly, according
• 18:19
  to the IRS, even though you haven't got the money in your
• 18:22
  account, you have constructive receipt on it and so your
• 18:26
  opportunity to exchange is done. So not planning ahead and having
• 18:30
  the Qi in place is a big mistake.
• 18:33
  The second one that I see is not researching and planning ahead
• 18:40
  of time. Everything in life is so much
• 18:42
  better if you do it intentionally.
• 18:44
  And intentionality involves planning so ahead of time.
• 18:49
  If you sell your property and we start the exchange that day and
• 18:54
  you're still you're telling me that that next week, Dave, I'm
• 18:57
  looking at commercial properties in New York and vacation rentals
• 19:01
  in Las Vegas. And I'm not sure if I may want
• 19:04
  to do it in San Diego. And I'm still trying to figure
• 19:07
  out where I want to go and what I want to buy.
• 19:08
  I could just about guarantee your exchange is going to fail
• 19:12
  because you're not going to be able to be focused to find the
• 19:17
  properties you want in the demographic and sector that you
• 19:21
  want and underwrite that those in time.
• 19:24
  You just aren't going to be able to do it within that 45 day
• 19:27
  period. So planning way ahead to figure
• 19:30
  out what you want to invest in next and where you want to
• 19:33
  invest next. And that's one of the biggest
• 19:36
  strengths of the 1031 anyways, is that you could react to
• 19:40
  whatever the market is telling you.
• 19:43
  So if you were one of our clients in San Francisco in
• 19:47
  2013, 2014 Silicon Valley was blowing up and it was just going
• 19:53
  crazy. Well, as rents got controlled,
• 19:57
  people were making less and less money off rents.
• 20:01
  So even though the appreciation was great, such a good
• 20:04
  investment anymore, but because a lot of our clients were
• 20:07
  following the market, they watched and saw this guy named
• 20:11
  Elon go down and buy a couple $1,000,000 of Austin real
• 20:15
  estate. And so they sold their San
• 20:17
  Francisco investment properties and did 1031 exchanges to go buy
• 20:22
  West Texas land near the mega factory.
• 20:25
  And that's how they use the 1031 exchange to really ramp up their
• 20:30
  portfolios. But the only way they could do
• 20:32
  that was by planning and anticipating where the market
• 20:36
  was going next and then obviously doing their research.
• 20:39
  So I would say those are two big things, not starting early
• 20:42
  enough and about doing enough advanced planning.
• 20:44
  So like you asked me prior to Stutton dessert episode, it's
• 20:52
  very important for us to know the composition of the audience,
• 20:57
  right? And the the data at the back end
• 21:00
  on Spotify, YouTube purchaser tells us that over 75% of our
• 21:07
  audience are persons between the ages of 28 to 45 years old and
• 21:14
  the mostly professionals, right? And more than 40% of the people
• 21:20
  that watch or listen to this podcast have a university degree
• 21:25
  or higher. And most of them are
• 21:28
  professionals and entrepreneurs first before investors second.
• 21:33
  So how can these people integrate tax strategies, you
• 21:37
  know, like the 1031 exchange into their overall wealth
• 21:41
  building plants? Of course, if you don't plan,
• 21:45
  what would we say? If you fail to plan, it means
• 21:48
  you plan to fail you. Plan to fail.
• 21:50
  I love that. Yeah, that is the greatest
• 21:53
  softball question ever because let's talk about that
• 21:56
  demographic. Games.
• 21:58
  So the first thing we know is we're dealing with professionals
• 22:02
  that have less time, but probably more money.
• 22:05
  So the first thing I would say is don't delay.
• 22:08
  Start now #1 because real estate investing in general, as with
• 22:13
  any other type of investing, is not a Sprint.
• 22:16
  It's going to generate momentum as it goes.
• 22:20
  The longer you're able to keep the taxes deferred, the more
• 22:24
  income you're going to generate, whether it's two years or 20
• 22:27
  years. But if you could structure your
• 22:30
  life to start investing now, you're more likely to get 20
• 22:34
  years of tax deferral and appreciation.
• 22:37
  So it's that much more gain for you.
• 22:39
  So start now. It's the perfect time.
• 22:43
  Here's the prototype investor that you just described, but
• 22:47
  they're what I call the accidental investor.
• 22:50
  Then. Now, I say that because the
• 22:52
  average married age, you know, generally happens after college,
• 22:56
  and 28 seems like it's fairly normal.
• 22:59
  Well, if 28 and post college means that I already have a
• 23:04
  career, when I get married, I probably already own a house
• 23:08
  because I bought a house to live in.
• 23:10
  Well, when I get married, they've got a house because we
• 23:13
  typically marry people like us, so they've got a house as well.
• 23:16
  They're 28, they're a professional with a career.
• 23:20
  Well, we're only going to live in one house, right?
• 23:22
  Exactly. By the way, do you know which
• 23:24
  one you move into? Well, it's likely.
• 23:26
  It was likely. Let's, let's not, let's not talk
• 23:28
  about that because we were going to be causing some gender
• 23:32
  sensitivity. Oh yeah, the risk of being
• 23:36
  cancelled. We're not going to talk is going
• 23:38
  to be the swab. You got it.
• 23:40
  OK. So you move into one of those
• 23:42
  properties, you just became a real estate investor because you
• 23:47
  have a property over here you have to rent.
• 23:49
  A couple years goes by, all of a sudden you're a little addicted
• 23:53
  to that rent, right? You just like that sugar taste,
• 23:55
  you know that? Carbohydrates.
• 23:58
  Yeah, exactly baby. That rent check every month is
• 24:01
  awesomely nice. That's awesome.
• 24:03
  And so then you start to think about expanding that, hey,
• 24:06
  wouldn't it be cool if we sold this and bought 2 using the
• 24:11
  proceeds as a down payment and your spouse agrees and so off
• 24:14
  you go. You do a 1031 exchange.
• 24:16
  All of that profit is deferred. You buy 2 new properties, then a
• 24:20
  few years later you sell those, you buy 4.
• 24:24
  Or you decide be kind of fun to move into multifamily, let's go
• 24:27
  buy a duplex. Or it's time for us to shift
• 24:30
  into commercial properties. Maybe we buy a vacation rental
• 24:34
  because now we're having kids and we want to start building
• 24:37
  family memories as well as generating income.
• 24:39
  Those are all examples of what our clients have done throughout
• 24:43
  their years as real estate investors, all starting to
• 24:47
  remember as accidental investors.
• 24:49
  And then one day, games, they wake up and they're tired.
• 24:52
  You know why? Because they went from 1:00 to
• 24:55
  2:00 to 4:00 to 8:00. They got 16 properties and
• 24:59
  they've all got plumbing issues and angry.
• 25:01
  Tenants, it's it's difficult to deal with, very difficult.
• 25:06
  So what they do is they sell 4 properties for $100,000, you
• 25:13
  know it's just called $100,000 each and they go buy one
• 25:16
  property for $400,000. So they start to consolidate
• 25:22
  their portfolio. That reduces effort, could
• 25:25
  increase income, but also starts to set them up for retirement
• 25:29
  when they can move from active investing to passive investing.
• 25:32
  And then finally of course back to the whole die thing.
• 25:35
  They die out of their real estate.
• 25:37
  One of the greatest hacks that very few people know of is that
• 25:41
  you can tip to a minute vacation rental.
• 25:43
  You love to ski. You want to ski in Colorado,
• 25:47
  You're not your retirement years.
• 25:48
  So you buy a vacation rental and they when you're ready to
• 25:51
  retire, you can't convert that property from investment real
• 25:56
  estate to your primary residence without having to pay tax
• 26:01
  because the only thing that triggers the tax event is
• 26:05
  selling the real estate. So if you simply change the use
• 26:07
  of it, it changes where it's reported on your tax return, but
• 26:11
  you don't pay the tax. So you can actually set yourself
• 26:14
  up to retire in a beautiful vacation rental tax free.
• 26:18
  Interest in strategic planning is very, very, very important.
• 26:23
  But you know, at some point the the active investors want to
• 26:26
  transition into like a more passive approach, right?
• 26:31
  So how can the 1031 exchanges help investors see from active
• 26:36
  management to that passive income stream?
• 26:40
  Yeah. Well, you know, first of all,
• 26:41
  just in general, the next step, let's think of this as a
• 26:45
  spectrum. So on one end, we've got active
• 26:47
  taking all the calls, fixing all the repairs, doing everything.
• 26:51
  On the opposite end, never touch it, go to the mailbox and get a
• 26:54
  check. Hey all on that spectrum, the
• 26:57
  first thing you could do is hire a management company to manage
• 27:00
  your properties. We get mixed reviews on that for
• 27:04
  people because you still have to manage the managers, right?
• 27:07
  So you got to watch out for that.
• 27:09
  The next thing down would be to transition from single family
• 27:14
  properties into larger multi family properties.
• 27:18
  Dollar three or four single family rentals and buy a 12
• 27:21
  Plex. Maybe one of those units you can
• 27:24
  hire, you can give to a manager in lieu of management fees.
• 27:28
  So you're concentrating and reducing the effort there while
• 27:32
  at the same time hopefully generating more income.
• 27:35
  So that's the next step down towards passive.
• 27:38
  The move from commercial into commercial real estate and
• 27:42
  what's called triple net commercial can be really
• 27:45
  beneficial here because triple deck commercial simply means
• 27:48
  that you have one piece of property, you own it, and the
• 27:52
  tenant is responsible for taxes, insurance and maintenance.
• 27:58
  Now you may have a small building that a National
• 28:03
  Insurance Company has their offices in or a regional tyre
• 28:08
  company, but all you're responsible for is is the lease
• 28:13
  itself. They're responsible for
• 28:15
  everything else, and usually the leases of triple that.
• 28:18
  Commercial properties are 15 to 25 years.
• 28:22
  So it's a lot less work, isn't it?
• 28:24
  That would be the next step. The furthest you can get on the
• 28:27
  passive end would be probably a product called a Delaware
• 28:32
  Statutory Trust. Now, these are fractional
• 28:34
  ownership of actual real estate, but because the IRS has blessed
• 28:38
  them officially for 10:31, you can buy that fractional
• 28:43
  interest. So you might buy 1% of an Amazon
• 28:47
  distribution centre and you do nothing other than give them
• 28:53
  your money and you sign the membership agreements.
• 28:56
  And from that moment on, you walk to the mailbox every month
• 29:00
  to pick up a check. Every five to seven years, that
• 29:03
  company will sell that asset and you'll do another 1031 exchange.
• 29:08
  That's as passive as it gets. So you know, the Kingdom's
• 29:11
  podcast is about growth mindsets, leadership and
• 29:16
  business insights. And I very much appreciate the
• 29:19
  fact that you are a guest that aligns with the three major
• 29:25
  themes that we have set out on the podcast.
• 29:29
  And also when you look at the diary of the CFO, right?
• 29:34
  So the diary of the CFO actually sets out to provide, you know,
• 29:40
  smart financial strategies for business growth.
• 29:44
  So it's very important that we have those financial strategies
• 29:48
  to help us to achieve smart business growth.
• 29:51
  So with that said, I know that you've seen with your wealth of
• 29:55
  experience, when I see thousands and millions of businessmen,
• 30:00
  entrepreneurs, professionals that have succeeded.
• 30:04
  And of course, you have seen those ones that have also
• 30:07
  failed. And the difference can be
• 30:10
  attributed to one thing, which is mindset.
• 30:12
  So what would you say is the mindset that separates, you
• 30:16
  know, the good from the great, right, and that mindset that
• 30:21
  helps to build lasting wealth, you know, over time?
• 30:25
  Wow, we do all podcast just on that.
• 30:29
  You know, I would say there's there's there's three things
• 30:34
  we've already talked about The first one, which is
• 30:37
  intentionality. Success doesn't just happen
• 30:39
  accidentally to most people. Sometimes, yes, but you better
• 30:44
  not count on it. I couldn't count on it.
• 30:46
  Intentionality and planning is so huge.
• 30:49
  Pick a goal and then start working backwards from them.
• 30:52
  The second thing is true success.
• 30:55
  And man, I know this is not the mantra that the tick tock
• 30:59
  generation is promoting, but success is a slow cooker.
• 31:03
  It's a crock pot, not a microwave.
• 31:06
  So you've got to be patient. You know, if you heard the
• 31:09
  phrase, it's not timing the market, it's time in the market
• 31:14
  that determines your success. So, and then the third thing, I
• 31:18
  think it, this is going to be very counterintuitive.
• 31:21
  Although we read the stories of self-made billionaires and
• 31:25
  billionaires, I think the greatest mindsets you can have
• 31:29
  is that of giving. And I really believe that with
• 31:32
  all my heart because for the compared to the few people who
• 31:36
  can make it all on their own, there are so many more people
• 31:40
  that achieve success because they shared their dream, they
• 31:46
  shared their success with others and that simply propelled them
• 31:51
  further. And sharing your success, having
• 31:53
  a sharing mindset is going to make a lot more successful
• 31:56
  people. You know what I'm just about?
• 32:00
  There's an African proverb. Does it come from Nigeria that
• 32:02
  says if you want to go fast, go by yourself, if you want to go
• 32:08
  far, take a village? Yeah, well, we we have scenes
• 32:11
  like that. Similar.
• 32:13
  Yeah, we they, they say where I come from in Yorba land, they
• 32:18
  say Iggy called Dabushi, meaning one she doesn't make a forest
• 32:22
  so. Yeah, exactly.
• 32:26
  I can't. That's the people that have
• 32:28
  helped to spur my success. We're already successful, and
• 32:32
  it's up to me to pay that format to help others become
• 32:35
  successful. And then when we become
• 32:37
  successful, we continue to be blessings to those who have
• 32:42
  helped us. That's that's what's going to
• 32:45
  make the world a better place. Yeah, you know that that also
• 32:48
  reminds me of of another proverb from Nigeria, they say Karen
• 32:52
  Kapoor meaning like when we walk in company, when we walk in
• 32:58
  groups, right, It brings honour to us as a people, right?
• 33:02
  Yeah. So basically you, you, you move
• 33:05
  together and of course you achieve success together.
• 33:09
  But a lot of people have that individualistic mindset and it
• 33:14
  baffles me because, yeah, the the, the as, as human beings,
• 33:18
  right? Our instinct is self
• 33:20
  preservation, right? Yeah.
• 33:23
  And it's counter intuitive. And for the lack of a better
• 33:27
  word, in, in some sense, it's sort of foolish if you think
• 33:30
  about just yourself and think, oh, you, you want to be greedy.
• 33:33
  And you can achieve a lot by being greedy or being of
• 33:37
  personal hearts right? Like you can't go far that way
• 33:42
  because you will definitely need people.
• 33:44
  And I don't personally do not like the idea of a self-made
• 33:48
  whatever self-made millionaire self-made billionaire because it
• 33:52
  is a fallacy. Are you telling me that nobody
• 33:55
  ever helped you on the way up? Like I've never seen that one
• 33:58
  person that did not need the help of anybody to achieve
• 34:02
  whatever it is that they've achieved.
• 34:04
  So I wonder why people like to promote the concept of being a
• 34:08
  self-made millionaire or self-made billionaire.
• 34:12
  Come on, some somebody along the way helped you.
• 34:15
  Did you just drop from heaven or something?
• 34:18
  Like growing up you had parents, you had uncles, guidance,
• 34:22
  aunties that took care of you that make sure you did not die
• 34:26
  as a child right? You went to school or you were
• 34:29
  taught a trade by people. So how come the concept of being
• 34:35
  self-made? I don't understand.
• 34:38
  I stand to be corrected, but to be honest I don't understand the
• 34:41
  concept. OK, here's what you're going to.
• 34:44
  This is going to resonate with you, my friend.
• 34:47
  Even a lion by himself can't be killed.
• 34:51
  Yeah, you see. The lions you see, the lions of
• 34:54
  my home. Where he is surrounded by his
• 34:57
  pride. Yeah.
• 34:58
  Nothing. Can't touch him.
• 35:00
  Yeah. So I very much love that.
• 35:02
  And you know, I very, very much appreciate you.
• 35:05
  And there's something that always see that an attitude of
• 35:09
  gratitude is good attitude. And when a person shares their
• 35:13
  time with you, they share their life with you because the SI
• 35:16
  unit for measuring life this time.
• 35:18
  So for me to you to love and respect, you know, for, you
• 35:22
  know, joining us on the podcast today, but I will not let you go
• 35:25
  without putting you through the Pacific Ring of Fire.
• 35:28
  It's like you say, hurricane season.
• 35:31
  Let's have the quick fire around.
• 35:33
  Thank you. Ask you 5 questions that give me
• 35:36
  the first answer that comes to your mind.
• 35:38
  Are you ready to rumble all? Right, let's do this.
• 35:42
  OK, So what is one book on wealth or strategy that changed
• 35:47
  your life? Whatever happened to penny
• 35:49
  candy? Interested in it?
• 35:51
  Now I know it's a book by Richard Marbury written for 14
• 35:54
  year olds, but it's the best primer on inflation and
• 35:57
  inflationary monetary policy you've ever read.
• 36:00
  Well ET say everything for 40 years 40 year olds in my country
• 36:05
  in Nigeria this there's a popular say in the city full of
• 36:08
  40s a fool forever. Well, I'm a four year old that
• 36:11
  appreciates 14 year olds. So the second one, what is the
• 36:15
  biggest myth about taxes or 1031 exchanges?
• 36:19
  Biggest myth about 1031 exchanges is going to be that
• 36:26
  you could simply sell a piece of property and without planning,
• 36:29
  make it succeed. That goes back to our old.
• 36:32
  Game. This whole thing, yeah.
• 36:34
  And if you fail to plan, you plan to fail.
• 36:36
  Think about it, Link to Plan is even a plan on its own, because
• 36:39
  it means your plan to fail. So don't blame people who fail
• 36:43
  to. Plan well, you'll be a success
• 36:44
  at least just a. Way a reverse engineering world.
• 36:49
  It's a What's your dream destination you'd love to sail
• 36:53
  to next? I would love to sail to
• 36:56
  Georgetown in the Bahamas every week.
• 37:00
  About 600 I. Had that on my mind.
• 37:03
  You read my mind. Yeah, 600,000 boats congregate
• 37:09
  there all winter. Yeah.
• 37:10
  They, yeah, they have a great time.
• 37:12
  Would not want to go there this week with that hurricane out
• 37:16
  there, but yeah. Well, you read my mind because
• 37:19
  the Bahamas is 1 a fantastic coastal island that that I've
• 37:24
  always appreciated. And of course, God rest his
• 37:26
  soul. There's this guy who was very
• 37:29
  popular from Bahamas, Miles Monroe.
• 37:32
  Yes, I had the opportunity to meet him before his demise.
• 37:36
  Very great guy, you know, highly, highly resourceful and
• 37:40
  loaded well. So one daily habit that keeps
• 37:44
  you financially shocked. That keeps me financially
• 37:47
  shocked. OK, this one's counterintuitive.
• 37:49
  I make the bed every day. Yeah, I like.
• 37:52
  What does that do financially for me?
• 37:54
  It's my way of telling my wife I love her so she goes out and
• 37:59
  works extra hard. Poppy wife Hopper.
• 38:03
  Exactly. Guys out there, I hope you're
• 38:05
  taking notes. You need to take notes from Dave
• 38:09
  Foster. Yeah.
• 38:10
  That that's, that's our, would I say our foster father now,
• 38:14
  right. So you need to take the notes
• 38:17
  from Dave Foster in order to succeed faster.
• 38:20
  Make with that information whatever you wish to do with it.
• 38:24
  So the very last one is if you had to start all over again
• 38:28
  today with just $10,000, how would you invest it?
• 38:31
  Again, a really counterintuitive question.
• 38:34
  I would invest in a membership being Toastmasters and anything
• 38:40
  education wise, not liberal arts, technically technical
• 38:43
  education. So whether that's Microsoft
• 38:46
  Suite or some sort of AI or SEO training is public speaking
• 38:55
  where you learn? Because I think I think one of
• 38:58
  the things that we're great danger of losing the Society of
• 39:03
  the day is the ability to communicate face to face.
• 39:06
  We could do it over screens. We can read text.
• 39:09
  We do all this, but being able to communicate face to face and
• 39:12
  honestly, what I think is the people that I've done business
• 39:15
  with overtime, that I've chosen to do business with overtime,
• 39:18
  it's people that could look me in the eye while speaking and
• 39:23
  maintain their credibility. Yeah, and composure.
• 39:27
  Yes. Yeah, people, people are fast
• 39:30
  losing it in this age and time. And I wonder like what is
• 39:33
  happening, what is happening? But I think it's really best to
• 39:38
  to have that hybrid, you know, being able to communicate in
• 39:42
  person and of course, you know, communicate via digital tools.
• 39:46
  And it involves putting yourself in those situations over time,
• 39:50
  over time. I remember in university I was
• 39:54
  an MC, I'm called advance conferences, right?
• 39:58
  Spoke in front of large audiences and I did not realise
• 40:02
  that me putting myself in those uncomfortable situations.
• 40:06
  Was preparing me for bigger and greater leadership roles, you
• 40:10
  know in yes to come. So when I see people being
• 40:13
  scared, you know, to present in front of an audience of 502
• 40:18
  hundred people, say even 1000 people, I laughed because like
• 40:22
  back in university, I was doing presentations in front of 5000
• 40:26
  people. So why would 100 people
• 40:29
  intimidate me, right? So I think it's important for
• 40:32
  people to put themselves out there, especially very early in
• 40:36
  life, right? It helps you to be able to have
• 40:39
  that confidence, right? To to be able to excel and being
• 40:43
  able to communicate is very, very important because no matter
• 40:47
  the level of technical skills that you have, right, you need
• 40:50
  to be able to comfortably and confidently communicate the
• 40:56
  knowledge of those technical skills.
• 40:59
  And that's what is going to take you, you know, far and help you
• 41:03
  to, to achieve things with those skills that you have.
• 41:07
  So I don't know what you what, what you would say regarding
• 41:10
  these things. Well, you're absolutely right.
• 41:12
  It's Warren Buffett. Actually.
• 41:14
  That quote's been running around.
• 41:15
  Now, if you're going to invest, first invest in yourself.
• 41:19
  Invest in education. Absolutely, absolutely.
• 41:22
  Like a very, very important. I remember, you know, like I
• 41:25
  remember somebody when I was investing in my MBA, this one
• 41:29
  was like, oh, why don't you invest in probably like a
• 41:32
  property back home in Nigeria or something like you doing more
• 41:36
  education. And I'm like, excuse me, do do
• 41:38
  you understand what it means to have an MBA?
• 41:41
  I don't know, like the biggest investment you can possibly
• 41:44
  invest is investment in yourself.
• 41:48
  And investing in yourself helps you to exponentially increase
• 41:52
  the capacity of revenue that you can possibly earn overtime.
• 41:59
  And yeah, I'm I'm not a multi millionaire now, but you are.
• 42:02
  So I love it to come from you to advise that the younger people
• 42:07
  out there letting letting them. Go look at the zeros today,
• 42:13
  tomorrow. Yeah, very, very important
• 42:15
  because I think a lot of young people in this age and time
• 42:19
  because that investment in education does not bring the
• 42:23
  immediate, you know, gratification.
• 42:25
  Just like TikTok behind the TikTok generation, we want to
• 42:29
  like, just think we we can put in X and get XYZ immediately
• 42:36
  after. It doesn't work that way, but
• 42:38
  it's difficult explaining it. But when they see established
• 42:42
  figures like yourself reiterated these things that you know,
• 42:46
  millennials like myself are saying, I think he hits a home
• 42:50
  run better. Of course I can't be saying it
• 42:53
  to my generation. You won't be saying it to your
• 42:55
  generation if it's not true. Lived it.
• 42:57
  Yep. Absolutely.
• 42:58
  And of course, that's why I very much appreciate having, you
• 43:02
  know, great individuals like yourself who are role models and
• 43:06
  mentors to the up and coming generation from me.
• 43:11
  To you. It's a love, respect,
• 43:13
  appreciation. I do not take your time for
• 43:15
  granted. And of course, I wish you the
• 43:18
  very best. And my prayer for you is that,
• 43:20
  you know you keep being successful in health and in
• 43:25
  wealth. So before you leave, do you want
• 43:27
  to leave a shout out to anybody? Well, thank you for having me.
• 43:30
  This has been absolutely awesome.
• 43:32
  Well, I thank you. I love your mindset because
• 43:35
  that's, that's really where it's at.
• 43:36
  We the 1031 exchange is just a tool.
• 43:40
  It's a tool that you could use to do some great things in real
• 43:43
  estate, but the greatest tool in the world is of no value unless
• 43:48
  there is a willing hand that's going to wield it.
• 43:52
  And that hand has to have the education to do it, the mindset,
• 43:56
  the drive and the desire to use it.
• 43:59
  And if you've got those things, and that's what I love about
• 44:01
  what you and I have talked about with what you're doing so.
• 44:05
  I thank you very much. I hope people can come and find
• 44:08
  us at That's It 31 investor.com. I know you're gonna put it in
• 44:12
  the show. Yeah, it's gonna be in the
• 44:14
  discussion. So guys, look into the
• 44:16
  description and get it. Well, it's time to go.
• 44:19
  And of course, I wish we can have you on a gain on the
• 44:23
  podcast. And of course, guys do the right
• 44:25
  thing like comment, share it with your network.
• 44:29
  And of course to like come your weight gain.
• 44:31
  Always go for something in your life.
• 44:33
  Remember, I always say conceive, believe, strive to thrive and go
• 44:38
  achieve. And of course, till we meet
• 44:40
  again next time. It's goodbye for me.
• 44:43
  And all the way from Florida, United States of America.
• 44:47
  It is a faster goodbye from Dave Foster.
• 44:51
  Thank you.