Latest / REL Freedom Podcast / Ashley Romiti -The Smart Exit: 1031 Exchanges & DST Investing Explained

Transcript

Ashley Romiti -The Smart Exit: 1031 Exchanges & DST Investing Explained · REL Freedom Podcast

• 0:00
  SPEAKER_01: The 1031 exchange is pretty straightforward, right?
• 0:02
  SPEAKER_01: You have to follow certain timelines, certain restrictions.
• 0:06
  SPEAKER_01: But so long as you do that, you can continue to use this strategy.
• 0:09
  SPEAKER_01: And what we call it is um, you know, swap till you drop.
• 0:13
  SPEAKER_01: You can just keep using this strategy.
• 0:16
  SPEAKER_01: Um, because the downside of selling, right, are the capital, the tax exposure.
• 0:22
  Mike Swenson: Welcome to the real freedom show.
• 0:24
  Mike Swenson: We inspire you to pursue your passion to gain time and financial freedom through opportunities in real estate.
• 0:29
  Mike Swenson: I'm your host, Mike Swenson.
• 0:30
  Mike Swenson: Let's get some real freedom together.com.
• 0:59
  Mike Swenson: It's where we put all of our content for you to check out, research and figure out what's going to be the best spot for you in real estate, where you want to go, or what you need to learn.
• 1:08
  Mike Swenson: Today I'm so excited to share we have a wide variety of topics that we talk about and educate people on.
• 1:13
  Mike Swenson: And today we're going to be talking a lot about 1031 exchanges and Delaware Statutory Trust conversations that come up a lot.
• 1:21
  Mike Swenson: There's not a lot of people that probably know this in depth at a level that they need to.
• 1:26
  Mike Swenson: So today's guest, we've got Ashley Romitti.
• 1:28
  Mike Swenson: She is the founder and president of GCA 1031, educating investors on how to navigate investment property sales, taxes, and long-term planning through 1031 exchanges and Delaware Statutory Trusts.
• 1:41
  Mike Swenson: And so this is a great episode for you guys to learn and understand and kind of figure out strategy-wise, maybe some great moves that you need to make.
• 1:49
  Mike Swenson: So, Ashley, we're so excited uh to have you on the show.
• 1:51
  SPEAKER_01: Thank you for the introduction.
• 1:52
  SPEAKER_01: So, Ashley Romitti, I guess before I get into it, I do like to tell a little bit of a story about how I got into this industry, because by no means did I plan to become a real estate expert or work with real estate investors.
• 2:06
  SPEAKER_01: I actually started my career wanting to be a neurosurgeon.
• 2:11
  SPEAKER_01: This was 20 years ago.
• 2:12
  SPEAKER_01: I wanted to be in medicine.
• 2:14
  SPEAKER_01: And I always tell people this because you know, you're talking to young investors, young professionals who are saying, Oh, this is what I want to do.
• 2:21
  SPEAKER_01: And I think what my story shares is that life is not linear, you know, it throws curveballs and you never know where you're gonna end up.
• 2:28
  SPEAKER_01: Um, I grew up thinking you were gonna be a doctor, lawyer, go to grad school, do all this.
• 2:33
  SPEAKER_01: And just through my experience, I fell into the real estate industry.
• 2:38
  SPEAKER_01: Um, you know, realistically, I was pitched.
• 2:41
  SPEAKER_01: I was told, you know, I was doing school, I was studying, and someone said, you know, you get into real estate, you have a lot more freedom.
• 2:46
  SPEAKER_01: You can, at that point, I was like, you know, 20 years old.
• 2:49
  SPEAKER_01: They said, Oh, you can go get lunch whenever you want.
• 2:52
  SPEAKER_01: You can, you know, go make your own decisions.
• 2:54
  SPEAKER_01: And that was very attractive.
• 2:56
  SPEAKER_01: Attractive to me was having that freedom.
• 2:59
  SPEAKER_01: It was something that I had never really thought about for my career.
• 3:04
  SPEAKER_01: Um, and today I am so glad that I followed that because now I have my daughter.
• 3:09
  SPEAKER_01: I get to show up for school, I get to do drop-off and pickup.
• 3:12
  SPEAKER_01: Um, and I have this flexibility from being an entrepreneur and owning my own firm to be able to go out and not only focus on the work that I love, but also do um, you know, the real life stuff, which is why I go to work in the first place.
• 3:29
  SPEAKER_01: And as for real estate, so I started back in um maybe 2013, 2012 at a firm, Marcus and Milichap.
• 3:38
  SPEAKER_01: Probably heard of them.
• 3:40
  SPEAKER_01: You maybe you've worked with them, Mike.
• 3:41
  SPEAKER_01: I don't know.
• 3:42
  Mike Swenson: Yep.
• 3:43
  SPEAKER_01: Um, and I started working, uh represent trying to represent retail owners here in South Orange County.
• 3:52
  SPEAKER_01: Um, I was in my early mid-20s.
• 3:56
  SPEAKER_01: I didn't know much.
• 3:57
  SPEAKER_01: I looked really young, and I'd go in these meetings with these savvy, sophisticated investors.
• 4:04
  SPEAKER_01: And I remember being in one meeting, and someone looked at me at the senior I was with and said, Why'd you bring a high school intern?
• 4:12
  SPEAKER_01: And so I went to the team and I said, I have to figure something out.
• 4:18
  SPEAKER_01: Like I'm not being taken seriously.
• 4:20
  SPEAKER_01: I'm in my early 20s, I look young.
• 4:23
  SPEAKER_01: And so we came up with a strategy where I was going to work with 1031 investors.
• 4:28
  SPEAKER_01: Um, it was right after the 2008-2009 recession.
• 4:33
  SPEAKER_01: Single tenant triple net properties were becoming uh more popular as right baby boomers slowly started to retire.
• 4:44
  SPEAKER_01: And so what we restrategized was working, I would work nationally with the single tenant property owners doing cold calls, doing everything over the phone.
• 4:54
  SPEAKER_01: It was, I need to speak before anyone saw me.
• 4:57
  SPEAKER_01: And it's I I laugh at that story because again, I never would have planned for that.
• 5:02
  SPEAKER_01: It just was circumstances put me in a situation where I had to get a little bit more creative.
• 5:07
  SPEAKER_01: And that is how I started working with 1031 exchange investors was, you know, I'm based in Southern California.
• 5:14
  SPEAKER_01: I was working out of the Newport Beach office.
• 5:16
  SPEAKER_01: And so I would work with, you know, helping the local investors reposition their equity and move out of state into these single tenant triple net properties.
• 5:25
  SPEAKER_01: And for the triple net owners, um, and for those who don't know what triple net is, it's a net, it's a lease structure where the tenant holds all the responsibility, the landlord does not have that responsibility.
• 5:39
  SPEAKER_01: And so they're a great passive strategy.
• 5:42
  SPEAKER_01: And um, and so a lot of those those owners that I had worked with, they had bought their deals at seven, eight, nine caps.
• 5:52
  SPEAKER_01: And now we were going out and we were evaluating them at four or five caps.
• 5:57
  SPEAKER_01: So they were repositioning their equity.
• 6:00
  SPEAKER_01: So it was a really good time to kind of step into that space.
• 6:03
  SPEAKER_01: Um, and since then I've just really narrowed down on how I work with investors.
• 6:10
  SPEAKER_01: For me, the what drives me are the clients that I work with, right?
• 6:15
  SPEAKER_01: I love, I work very much with your savvy or not even always savvy, your your real estate investors who have been in the industry for a while, they've owned their real estate and they're looking to reposition in their portfolios into a passive strategy.
• 6:32
  SPEAKER_01: And even more so today, right?
• 6:35
  SPEAKER_01: It's harder to find deals.
• 6:36
  SPEAKER_01: I mean, you've probably shared about it on your podcast on and when we talked briefly on finding good deals today.
• 6:43
  SPEAKER_01: It's very hard.
• 6:44
  SPEAKER_01: Interest rates are a little bit higher than you know what we were used to a few years back.
• 6:49
  SPEAKER_01: And so I'm see I'm even seeing younger individuals come into these uh what we would call alternative investments, specifically the Delaware Statutory Trust or even other types of private placements where you can come in, you invest, you know, with um much larger companies, you're becoming in as a fractional owner, you're not, you don't have any voting rights, but you have this very strong team who's doing your acquisitions, who's doing your underwriting.
• 7:19
  SPEAKER_01: And so, yeah, so so the the age, the group that I've been working with are those retiring investors, but I am seeing people coming in younger to these deals.
• 7:29
  SPEAKER_01: I'm also seeing that people are retiring earlier, right?
• 7:33
  SPEAKER_01: So it's it's been a very cool experience to work with this population and and continue to see them grow.
• 7:40
  SPEAKER_01: Um, but that's a little bit about me.
• 7:43
  Mike Swenson: I was gonna say first, um, when you talked about looking young, that was before the days where we had all the filters, right?
• 7:48
  Mike Swenson: You could have like been on some calls and had some aging filters so you didn't look so young on your calls.
• 7:53
  Mike Swenson: So you're just a a person before your time in technology.
• 7:56
  Mike Swenson: So, but yeah, I mean to your point, you know, I've had uh the opportunity to work with investors of various types, and you know, some of them really want to be hands-on.
• 8:06
  Mike Swenson: I will say, probably some of them starting out like the idea of wanting to be hands-on, and then they realize shoot, this is way tougher than I thought it is.
• 8:15
  Mike Swenson: Um, or they do have some success and they try to do it on their own, and as they scale, it turns into a full-time job, a second job, because they're working whatever you know their their day job is and they're building their portfolio, and it's just draining them because they're dealing with calls from tenants on nights and weekends, and they're trying to get out of it.
• 8:34
  Mike Swenson: You know, I I remember talking with uh somebody looking to do a syndication, and they had you know eight or ten units, not a huge portfolio, but they're like, I would love to just get out of this because I spend so much time doing it.
• 8:46
  Mike Swenson: Yeah, and so I think over time, I mean, I think there's value to you know figuring things out where you're at in learning, but there's also value to kind of pushing the easy button.
• 8:56
  Mike Swenson: If you don't have to do it and you don't want to do it, there's lots of ways to be passive.
• 9:00
  Mike Swenson: And then that's kind of what we do in our space with you know our apartment buildings is passive.
• 9:04
  Mike Swenson: But yeah, to your point, like there's opportunities where you don't have to do the grind.
• 9:08
  Mike Swenson: You might think that it's a it's a badge of honor, it's something you have to do to be a real estate investor, but you absolutely don't have to do that stuff.
• 9:15
  Mike Swenson: So just kind of my personal take of the experienced, you know, the investors or you know, want to be investors that I've worked with.
• 9:21
  Mike Swenson: Like, yeah, there's people that just get burnt out doing this stuff, and it's pulling them away from what they want to do in their life.
• 9:28
  Mike Swenson: And so team up to you, right?
• 9:30
  Mike Swenson: The people that just want to go live life and you can help them with everything else.
• 9:34
  SPEAKER_01: Yeah, it's funny.
• 9:34
  SPEAKER_01: And um, you know, everyone always asks, they assume that I'm a big real estate investor and I own my own properties.
• 9:42
  SPEAKER_01: And I tell people after working with landlords for nearly 15 years, I I prefer a passive strategy, right?
• 9:51
  SPEAKER_01: I am not looking, I I hear the horror stories of, you know, we call it getting out of the three Ts, the tenants' toilets and trash.
• 10:00
  SPEAKER_01: Um and just, you know, owning real estate is like you said, it it takes time.
• 10:06
  SPEAKER_01: It's another part, part or full-time job, depending on the number of doors or the quality of the asset.
• 10:12
  SPEAKER_01: And so um, I'll I'll kind of dive right into DSTs.
• 10:16
  SPEAKER_01: What they they are designed for are for those who want the passive income.
• 10:21
  SPEAKER_01: I will say most of the time the clients who invest are older.
• 10:24
  SPEAKER_01: Um, it you don't have to be, but the structure of the DST makes it so that it's more appealing to those investors who are looking for capital preservation and income.
• 10:34
  SPEAKER_01: There's a little bit of appreciation if the real estate is structured that way.
• 10:40
  SPEAKER_01: But, you know, when you're looking at your broader portfolio and you're saying, you know, you want to diversify, diversify, maybe allocate some to growth, some to income, some to capital preservation, this is gonna fall more into those latter categories.
• 10:54
  SPEAKER_01: Um, and then before I dive in, I do want to share these types of investments are um you do have to be an accredited investor to invest.
• 11:03
  SPEAKER_01: So, what accredited investor is, uh, for those who don't know, either you meet a certain income requirement or a net worth requirement.
• 11:10
  SPEAKER_01: And so everything I'm speaking about requires that all the investors I work with show proof.
• 11:16
  SPEAKER_01: So Delaware Statutory Trust, it is a trust that owns a piece of real estate.
• 11:21
  SPEAKER_01: Um so if you think about you might own real estate in your family trust or in your LLC, it's the same concept, but what makes it very different compared to when you invest in other types of entities or other types of syndications is that DSTs are 1031 eligible.
• 11:40
  SPEAKER_01: So a 1031 exchange is a tax-deferred exchange where you can buy and sell real estate here within the United States and you do it all tax deferred.
• 11:49
  SPEAKER_01: Um, it's IRC code uh 1031.
• 11:53
  SPEAKER_01: And what it says is you can buy and sell real estate that are that are investment properties and they must be light-kind, but it's a great strategy then for investors to not only build their wealth on the front end, but also to preserve it on the back end.
• 12:09
  SPEAKER_01: So, for just a quick example, you know, here locally we'll see a lot of investors start with maybe a single family home or a duplex.
• 12:18
  SPEAKER_01: They buy it, they build up a little bit of equity.
• 12:20
  SPEAKER_01: Now they want to move into four units.
• 12:22
  SPEAKER_01: Well, now they can sell that real estate and go using a 1031 exchange, go buy that four unit and they could slowly build their portfolio in that manner.
• 12:32
  SPEAKER_01: And the 1031 exchange is pretty straightforward, right?
• 12:36
  SPEAKER_01: You have to follow certain timelines, certain restrictions.
• 12:39
  SPEAKER_01: But so long as you do that, you can continue to use this strategy.
• 12:43
  SPEAKER_01: And what we call it is um, you know, swap till you drop, you can just keep using this strategy because the downside of selling, right, are the capital, the tax exposure.
• 12:55
  SPEAKER_01: Um, if you've owned a real estate asset and it's appreciated, you're gonna owe capital gains on a state and federal level.
• 13:02
  SPEAKER_01: I'm in California, we're upwards of 13% on capital gains for the highest earners.
• 13:08
  SPEAKER_01: Um, you owe depreciation recapture.
• 13:11
  SPEAKER_01: Uh, and so when investors go to sell, all that equity that they've built can easily be lost paying taxes.
• 13:18
  SPEAKER_01: So that's what the 1031 is for.
• 13:22
  SPEAKER_01: And historically, or typically, when investors think about it, they think about buying and selling these direct units, these direct assets.
• 13:30
  SPEAKER_01: But what about those who want to be 100% hands off?
• 13:34
  SPEAKER_01: Well, the the typical syndications like I was referencing or entity ownership don't always qualify qualify for the exchange.
• 13:42
  SPEAKER_01: And so the Delaware Statutory Trust in 2004 was made eligible for this tax-deferred exchange.
• 13:50
  SPEAKER_01: And it's be it was it's become more popular probably after 2010.
• 13:56
  SPEAKER_01: Prior to that, there's a structure called tenant in common ticks, which were more favorable, but those uh really went upside down in the in the 2008, 2009 recession.
• 14:08
  SPEAKER_01: And so a lot of these sponsors have moved to this DST structure.
• 14:12
  SPEAKER_01: And what the DST structure does, it's you know, uh a large firm, um, they're called sponsors.
• 14:19
  SPEAKER_01: They go out, they'll buy a piece of real estate, maybe it'll be a you know 50 unit uh$50 million property in Atlanta, Georgia.
• 14:29
  SPEAKER_01: They'll go out, they'll buy it, they'll put it into this trust structure, and then they'll go out to the retail market and they will raise capital through advisors like myself or traditional financial advisors.
• 14:42
  SPEAKER_01: Um, a lot of sponsors are doing it in-house as well.
• 14:46
  SPEAKER_01: But now they're gonna go out, they'll raise$50 million, and all investors who come in are fractional owners.
• 14:54
  SPEAKER_01: What that means is that they're going to get the same benefits as owning their direct real estate without the hassle of getting calls at night from tenants or getting calls that the toilet is leaking, right?
• 15:07
  SPEAKER_01: These are structured where an investor can come in and invest as little as$100,000.
• 15:13
  SPEAKER_01: That's the minimum on these.
• 15:14
  SPEAKER_01: Um, most of them, not all, but most and and get a monthly paycheck, right?
• 15:21
  SPEAKER_01: And they're gonna own a they can visit, right?
• 15:24
  SPEAKER_01: They're gonna own a piece of this real estate, they're going to benefit from the depreciation of that real estate.
• 15:30
  SPEAKER_01: Um when it sells, they're going to benefit from the appreciation.
• 15:35
  SPEAKER_01: So, you know, you get very similar uh benefits as being the direct owner, but you don't have to deal with the hassle.
• 15:44
  SPEAKER_01: And today, I was reading this morning, right?
• 15:48
  SPEAKER_01: We're gonna see 17 to 19 trillion dollars in transfer of wealth from the baby boomers.
• 15:55
  SPEAKER_01: Um that report said that they owned 40 to 50 percent of of the real estate within the United States.
• 16:02
  SPEAKER_01: And so where they're looking to place their capital is they're they're looking for these passive solutions.
• 16:09
  SPEAKER_01: Um a lot of the the kids, the beneficiaries are wanting to do the hands-on.
• 16:17
  SPEAKER_01: Um, you might see that as well with you know, with you uh with your syndications having those younger investors come in because they're not quite ready or they don't want to be hands-on.
• 16:30
  Mike Swenson: Yeah, for sure.
• 16:31
  SPEAKER_01: And and yeah, so that's what the the DST permits investors to do.
• 16:36
  SPEAKER_01: It allows them to come in, get that fractional ownership, um, collect the monthly income and not have to worry about getting any of those calls.
• 16:45
  SPEAKER_01: Um the it is a different life cycle though, than when you go into buying direct or you go into a syndication, maybe with friends or or someone local.
• 17:00
  SPEAKER_01: Um, you know, you're investing today and you're invested typically for five to seven years, and these are illiquid investments.
• 17:08
  SPEAKER_01: So it's very important to, I mean, this is true with any deal you go into, though, you want to do a strong due diligence on the upfront and understand the metrics of the of the real estate you're buying to make sure that number one, the underwriting makes sense, and then you need to be comfortable with that hold period of being in it for five to seven years because you can't exit.
• 17:31
  SPEAKER_01: Um, there's no secondary market.
• 17:34
  SPEAKER_01: And in five to seven years, what's nice about these structures is that that real estate will sell.
• 17:40
  SPEAKER_01: Assuming the real estate is, you know, has appreciated, you'll get that on the back end.
• 17:47
  SPEAKER_01: But now you can go do another 1031 exchange.
• 17:51
  SPEAKER_01: So for younger investors, you know, you're not gonna get in today's market, you're you're not as likely to get those double digit returns.
• 18:00
  SPEAKER_01: It's it's harder to find deals for the DSTs.
• 18:03
  SPEAKER_01: But you can see a little bit of growth and you can continue, you know, in five to seven years, you can continue to reinvest and defer those taxes.
• 18:12
  SPEAKER_01: And that can be quite a cut, that can be quite a saving for investors who are looking to, you know, maybe invest another 20 years, but they don't want to cash out.
• 18:21
  Mike Swenson: So yeah, that's that's kind of like the broader overview of the DST market and and who's investing in you would you'd given the example of you know, like a$50 million raise, you know, for a large property in at in Atlanta or whatever.
• 18:35
  Mike Swenson: So just to kind of compare, you know, the stuff that I look for.
• 18:39
  Mike Swenson: Now I'm on the smaller end for syndications.
• 18:41
  Mike Swenson: So most of our properties are 25, 50 units.
• 18:45
  Mike Swenson: We're we're you know working on one.
• 18:47
  Mike Swenson: We've got two that are over a hundred.
• 18:48
  Mike Swenson: I know there's other syndicators that do you know 250, 500 to 1000 units.
• 18:54
  Mike Swenson: So kind of talk about like size-wise, the types of properties location-wise, like if I'm an investor, how do I find these?
• 19:02
  Mike Swenson: How do I know that they're reputable versus you know, buying in Atlanta versus something in Boston, right?
• 19:08
  Mike Swenson: You know, so kind of like what's that due diligence look like for selecting something like that when you know my job, so I do 506 B, so it's very much personal relationships, people that I know for these DSTs, I'm guessing you probably don't know the person that's buying the$50 million apartment building in Atlanta.
• 19:27
  Mike Swenson: So kind of walk through that due diligence phase and kind of what types of properties or what types of things.
• 19:32
  Mike Swenson: I know it can kind of be anything, but um, but yeah, just a little clarity on that.
• 19:35
  SPEAKER_01: Yeah, so um, you know, what's really unique about the DSTs and and part of why they qualify is there's what's known as the seven deadly sins um that are outlined that really state things that cannot be done with a DST.
• 19:48
  SPEAKER_01: One of those things is that they cannot go and raise capital.
• 19:52
  SPEAKER_01: They can't um through that hold period.
• 19:54
  SPEAKER_01: So when they structure the DSTs, they're gonna raise some extra capital up front, known as the reserves account.
• 20:01
  SPEAKER_01: And that account is gonna be meant to kind of, you know, help maintain the property through the hold period.
• 20:07
  SPEAKER_01: Um that's important to understand because it speaks to the type of assets that you'll usually see within a DST.
• 20:14
  SPEAKER_01: They are going to generally be, you know, and it doesn't have to be, but like if we're looking at a multifamily property, we're typically typically gonna see relatively new construction in a core market, right?
• 20:28
  SPEAKER_01: We want a strong metropolitan area where we see uh migration, where we see people moving, where we see industries moving in.
• 20:36
  SPEAKER_01: Um, but we want to balance that with, okay, but we don't want to see too much new supply coming online.
• 20:42
  SPEAKER_01: And so those are the types of markets that you're investing in.
• 20:48
  SPEAKER_01: It's you they are usually in more of what we would call landlord and tax-friendly states, right?
• 20:53
  SPEAKER_01: I'm here in California.
• 20:55
  SPEAKER_01: I don't know last time I saw a property, a DST in California, right?
• 20:59
  SPEAKER_01: We're not, um, it's it's a little bit more challenging.
• 21:02
  SPEAKER_01: So where a lot of these deals will be will be like in your Sunbelt states, um a little bit in the Midwest today, right?
• 21:09
  SPEAKER_01: We're seeing more in that Ohio market.
• 21:12
  SPEAKER_01: Um we still have you know, Florida, Florida's kind of picked up.
• 21:18
  SPEAKER_01: Insurance was an issue for a while, but now Florida's picked up.
• 21:21
  SPEAKER_01: Texas is pretty soft though.
• 21:23
  SPEAKER_01: There's so there was so much development through COVID, but you'll see them nationwide.
• 21:28
  SPEAKER_01: But what we're looking at is not just the state, but what's happening in that market, you know, what's driving the demand for that.
• 21:37
  SPEAKER_01: And that's on the multifamily.
• 21:39
  SPEAKER_01: DSTs can also have commercial assets, so it can include a single tenant property that has a corporate guarantee, like a triple net.
• 21:48
  SPEAKER_01: It can have a portfolio of those.
• 21:50
  SPEAKER_01: It can include, um, you know, recently we've seen self-storage has been prominent.
• 21:57
  SPEAKER_01: Um, self-storage, I don't know if if you've Talk too much with the audience about self-storage.
• 22:02
  SPEAKER_01: Recently, it's it's had a little bit more challenges than it had historically.
• 22:06
  SPEAKER_01: So we've seen a softening in the opportunity in self-storage, but industrial, right?
• 22:11
  SPEAKER_01: Your industrial properties, as we see manufacturing pick up here in the States, we see those semiconductor facilities coming in.
• 22:20
  SPEAKER_01: So we're seeing specific assets geared towards that.
• 22:23
  SPEAKER_01: So what the DSTs incorporate are these assets that are, like I said, usually class A, core, stronger markets, um near projects that are going to support it for that five to seven year lifespan.
• 22:38
  SPEAKER_01: And you really want to stick with the asset classes that have been proven to perform even through economic downturns.
• 22:49
  SPEAKER_01: Right.
• 22:49
  SPEAKER_01: There are certain asset classes that um senior housing had some struggles through COVID.
• 22:54
  SPEAKER_01: We all saw what happened, and it has put a hindrance on being able to raise some capital in that industry, in my perspective.
• 23:03
  SPEAKER_01: Um, but I mean, you can also invest in student housing.
• 23:08
  SPEAKER_01: Um, I a really unique one is, and this isn't a DST structure, but it's in this 1031 realm oil and gas.
• 23:16
  SPEAKER_01: You can invest in the subsurface rights in the different basins.
• 23:20
  SPEAKER_01: And so, and we'll we can speak to that one a little bit too further, but um, those are the assets that you see as for right, how do you find a good deal?
• 23:31
  SPEAKER_01: Um so there are over 50 sponsors, these are both 506C and 506B deals.
• 23:39
  SPEAKER_01: Um there's let's call it 90 deals on the market, give or take at any given time.
• 23:46
  SPEAKER_01: And there is no um guided underwriting on these deals, right?
• 23:53
  SPEAKER_01: You are investing with sponsors who have done the underwriting.
• 23:56
  SPEAKER_01: Just like your investors come to you, they're gonna look at how you underwrite deals, they're gonna look at how you've done, they're gonna ask who are you as a person?
• 24:03
  SPEAKER_01: So it's just like investors come to you and do that, it's it's kind of the same on the sponsor level, right?
• 24:10
  SPEAKER_01: When we're looking at sponsors, we want to look at sponsors who have been around for a while, who have been through economic cycles and who have come out, you know, not necessarily the deal.
• 24:24
  SPEAKER_01: Like some deals have struggled, but we want to make sure that the sponsors have treated the investors right, that they've put the investors first.
• 24:32
  SPEAKER_01: Um, and then you know, so when you look at a DST, I I say this everyone, when you look at any sort of syndication, look at who's sponsoring it first, because at the end of the day, that's who you're investing with.
• 24:44
  SPEAKER_01: Um and again, these if you want to look at some of the sponsors, you have um, you know, um uh inland, you have Blue Rock, um, Black Rocks coming into the space right now.
• 24:57
  SPEAKER_01: So these are not your mom and pop shops.
• 25:00
  SPEAKER_01: These are they have private and publicly traded reads, they have different interval funds, these are multi-billion dollar companies.
• 25:07
  SPEAKER_01: Um and so they that's who you want to a lot of times invest with.
• 25:12
  SPEAKER_01: So that that's the number one.
• 25:14
  SPEAKER_01: Look at the sponsor.
• 25:16
  SPEAKER_01: We look at the real estate, right?
• 25:18
  SPEAKER_01: Make sure the metrics of the real estate pan out because of the restrictions.
• 25:23
  SPEAKER_01: You want to have, I would say more you know, conservative underwriting.
• 25:29
  SPEAKER_01: Uh, and then you want to look at the trust structure.
• 25:32
  SPEAKER_01: What does that DST trust structure look like for the investor?
• 25:35
  SPEAKER_01: Um, these are two to three hundred pages, and this is where working with advisors and professionals is very important because if you haven't looked at one of these before, you're gonna open it and you're not gonna know where to look.
• 25:49
  SPEAKER_01: And you know, thankfully everyone today runs it through like AI and they're like, well, and I can tell, I'll get these lists of questions, someone will send me, and I'm like, Well, you put this through chat GPT.
• 26:01
  Mike Swenson: I didn't consult my attorney, I just ran it through AI, and uh, it's a lot cheaper that way.
• 26:06
  SPEAKER_01: Yeah, and I'm like, I mean, but they're solid questions, and it's to me, it's been nice because I think that that AI has for has allowed investors to ask more sophisticated questions and also to look at the risks in the deals and and have those conversations.
• 26:23
  SPEAKER_01: People can put out what they want, but does the data support it?
• 26:28
  SPEAKER_01: Um, so I I think AI is fun and how it's supported.
• 26:30
  SPEAKER_01: But the that was a long, long way to tell you about how you know these deals go through very thorough due diligence if you're working with the right advisor.
• 26:40
  SPEAKER_01: Um, not everyone does that right.
• 26:42
  SPEAKER_01: There's you you just want to make sure that you work with someone who is doing that sort of due diligence and making sure that the long-term viability, the exit strategy is all in place, and that you're gonna get, you know, there's no guarantee, but that we want to do our best to be able to provide that income through a whole period, be able to provide capital preservation and maybe a little bit of appreciation if if the market permits.
• 27:09
  Mike Swenson: Are you looking to get started or scale in real estate investing but don't know your next step?
• 27:14
  Mike Swenson: Are you overwhelmed thinking about finding deals, analyzing deals, doing due diligence, and managing properties on top of it?
• 27:21
  Mike Swenson: Go ahead and push the easy button and invest with us.
• 27:24
  Mike Swenson: Real estate investing is what we do full time.
• 27:26
  Mike Swenson: We've done dozens of deals with hundreds of doors.
• 27:29
  Mike Swenson: We have the knowledge and experience to handpick the best deals that most investors can't find.
• 27:34
  Mike Swenson: We've at large off-market deals all the time where you can hopefully find returns and economies of scale that you just can't find on your own.
• 27:40
  Mike Swenson: The best thing is it's 100% passive to you for less capital than you put down trying to acquire a property on your own.
• 27:47
  Mike Swenson: Don't let this year go by where you don't make the leap, add to your portfolio, or you just did an analysis by paralysis.
• 27:54
  Mike Swenson: To find out more, visit freedomthroughrealestate.com and click on invest.
• 27:59
  Mike Swenson: You can book a call and learn more there.
• 28:01
  Mike Swenson: So get to scaling your portfolio now with us by your side.
• 28:04
  Mike Swenson: That's freedomthroughrealestate.com and click on invest.
• 28:08
  Mike Swenson: And I think yeah, the key for people to remember is yeah, there's so many things you can do.
• 28:12
  Mike Swenson: And so obviously you help with kind of finding is this the right time for me, what I'm looking for, and then finding an investment opportunity that matches with that.
• 28:21
  Mike Swenson: Because yeah, like you said, if it's a five to seven year hold, um, and then that's the thing that we tell investors, it's not like if I had my own duplex and I wanted to sell it, I can just call an agent or sell it myself, whatever that looks like, because I need the money.
• 28:34
  Mike Swenson: Here you can't because you don't have an active share in being able to have those voting rights to say I want to sell.
• 28:40
  Mike Swenson: And so um, that's where things like self-directed IRAs for us has been helpful because it's like, well, if if you're not planning on having those funds till retirement, it's not like, hey, this was in my bank account yesterday and now it's not, and I need that money.
• 28:53
  Mike Swenson: And so just understanding it's a different place where your money's going and it's not coming back right away.
• 28:58
  SPEAKER_01: Exactly.
• 28:59
  SPEAKER_01: And that's one of the I you know, I I shared a little bit about myself and my real estate experience, in my opinion, and how I work with investors, and I think that we need more of this in the industry, is working with investors to help them understand what the opportunities are.
• 29:17
  SPEAKER_01: Probably what your podcast is doing is being able to educate investors on these different avenues so that they can make an educated decision on what's best for their portfolio and their long-term goals.
• 29:28
  SPEAKER_01: Because I will have investors come to me and we'll we'll have conversations about, you know, we'll look at what their real estate, their existing portfolio, what their basis is, you know, what their goals are for income, what their long-term goals are, what they're planning for their estate.
• 29:45
  SPEAKER_01: And you need to make sure all of those line up because I want to, I mean, I want it, and I assume others wouldn't want to put a client into an investment where it's not the right fit.
• 29:57
  SPEAKER_01: It doesn't match those goals.
• 29:59
  SPEAKER_01: And so what I do with clients is I run through all of that and we talk about our DST is a good option.
• 30:06
  SPEAKER_01: Um, really a good comparison in this market is that single tenant triple net property where you buy a dollar store, you buy um a QSR quick service restaurant where you own the real estate, you are able to sell it if you want.
• 30:24
  SPEAKER_01: But the way that the lease structure is, it's these net lease.
• 30:29
  SPEAKER_01: Uh, if you have an absolute triple net property, you know, the tenant is responsible for maintenance, taxes, insurance, and the landlord is collecting that monthly check.
• 30:40
  SPEAKER_01: And so, you know, that's a good avenue for if a client says, Oh, I want the liquidity, I want, you know, you know, so there's other options that we want to look at to make sure it's a good fit.
• 30:51
  SPEAKER_01: Um, for some clients, cashing out.
• 30:54
  SPEAKER_01: It sounds crazy.
• 30:55
  SPEAKER_01: People will be like, I'm just gonna pay taxes.
• 30:57
  SPEAKER_01: That's 30, 40 percent.
• 30:59
  SPEAKER_01: But there it's such a broader picture to look at than just this one transaction, right?
• 31:05
  SPEAKER_01: Um maybe they need that liquidity, maybe that is a smaller portion, you know.
• 31:10
  SPEAKER_01: So you that that's something that I do with investors is that broader assessment to make sure we're going in the right direction.
• 31:19
  SPEAKER_01: And if if the the inventory that I have isn't a good fit, that's where, you know, working with referral partners and just having that broader sense of availability in the market.
• 31:30
  SPEAKER_01: Um and I wish we saw this more today.
• 31:33
  SPEAKER_01: Um, we're a very transactional um industry across the board in real estate.
• 31:40
  SPEAKER_01: And I I do like to provide more insight uh and education, which I appreciate because that's what you're doing with the podcast, so that investors can pick the right option.
• 31:52
  SPEAKER_01: Um, but I will say, you know, most of the time, if an investor has owned real estate for a long time, the 1031 exchange is a great solution because I've never met anyone who was excited to pay taxes.
• 32:08
  SPEAKER_01: They will pay taxes, but they're not like, oh, actually, I just can't wait to pay this 20% to the government.
• 32:16
  SPEAKER_01: Like, um, but they want the liquidity, they want, you know, and it's fun, you know, we have conversations about what they want to do, and some of them, you know, they just want the cash.
• 32:27
  Mike Swenson: Doing a great job.
• 32:28
  Mike Swenson: You're building great long-term relationships with people, and you're taking a much you know, 30,000 foot view of what do they want to have, what do they want to accomplish and where is this gonna go, versus sometimes as investors, they think kind of the the right now, and so you're able to help them see the bigger picture, see the benefit of the uh the passiveness of the investment, and then obviously the the tax savings long term as well, and then helping them long term, because yeah, you're right, this is gonna be a five to seven year thing, and so you want to put them in the right spot, so then either five to seven years later they come back to you, or when they have more money, then they come back to you for other things with other you know assets that they have that they want to put into you know DSTs and stuff like that.
• 33:11
  Mike Swenson: So uh definitely relationship business, yeah, doing a great job helping people long-term, big picture with their their money and their real estate assets.
• 33:20
  SPEAKER_01: Yeah, and then the um one thing I'll add.
• 33:23
  SPEAKER_01: So I I primarily work in the DSTs, it's just been the the niche that I've fallen into.
• 33:28
  SPEAKER_01: But in regards to opportunities in the market, the alternative real estate industry is growing, and there are more opportunities for investors to come in and get into a fund that has more of that growth opportunity or that's more geared towards income.
• 33:45
  SPEAKER_01: And so for the for the investors who are looking for that growth, that um that opportunity to build their portfolio, but you know, I it's hard to find a deal today.
• 33:55
  SPEAKER_01: I admire like you who you're still boots on the ground finding those deals because it is very tough in the I tell people we're we're looking for a needle in a haystack, so you know that's it's what we're looking for.
• 34:06
  Mike Swenson: We've got to find that deal that's worth our time to be able to spend on it.
• 34:10
  Mike Swenson: So it's it's not easy.
• 34:12
  Mike Swenson: Yeah, it takes time.
• 34:13
  SPEAKER_01: Yeah, and so um fine, you know, you don't have to go buy a direct property.
• 34:20
  SPEAKER_01: There's so much opportunity um to get into the real estate market, and I am a huge advocate of that because that is a great way to build wealth, build a portfolio, um, and prepare for retirement.
• 34:33
  SPEAKER_01: And so, whether it be you know getting into something, your first deal, or for those who are working with me who are trying to get out, there's there's ample opportunity, right?
• 34:46
  SPEAKER_01: I mentioned oil and gas.
• 34:48
  SPEAKER_01: It's a very unique asset class that that qualifies for a 1031 exchange.
• 34:53
  SPEAKER_01: Most people don't know that you can buy subsurface rights, you can buy air rights, you can, you know, there's all kinds of stuff that you can buy out there.
• 35:01
  SPEAKER_01: And just being able to get your foot in the door is is just the first step.
• 35:05
  SPEAKER_01: And then using all these different strategies, um, using the 1031 exchange to build it, and then using the DSTs to exit.
• 35:14
  SPEAKER_01: Um all good, all good opportunities for for investors.
• 35:18
  SPEAKER_01: You know, a lot of investors are looking for that last step.
• 35:22
  SPEAKER_01: They're tired of real estate.
• 35:25
  SPEAKER_01: They're they just want to be a hundred percent passive.
• 35:29
  SPEAKER_01: And, you know, there's strategies for that.
• 35:31
  SPEAKER_01: There's what's known as a 721 up rate where you move into a REIT or a real estate investment trust.
• 35:37
  SPEAKER_01: Um and that that you can get to via a 1031 exchange.
• 35:43
  SPEAKER_01: So there are so many paths out there and and the DSTs are going to continue to grow, right?
• 35:50
  SPEAKER_01: It like I mentioned, there's so much wealth being transferred between um generations that it is a topic for investors to know, but also what professionals need to start being more mindful of.
• 36:04
  SPEAKER_01: Because I get a lot of calls from like investors whose maybe agents didn't know about DSTs or 1031 exchanges, and they call me and they're like, I just sold and I have all these taxes that I'm paying.
• 36:15
  SPEAKER_01: What can I do?
• 36:16
  SPEAKER_01: Um they can do OZ funds, which you know, we can dive in it another day.
• 36:21
  SPEAKER_01: That's a whole other topic.
• 36:23
  SPEAKER_01: But um, but it's important for people to understand this exchange process and using DSTs either as a primary or even a backup solution if you can't find another deal.
• 36:34
  Mike Swenson: So much more that we can dig deeper on and and yeah, we could have you on another day and and talk about that stuff.
• 36:39
  Mike Swenson: Thank you so much, Ashley, for coming on, uh sharing just a ton of information.
• 36:44
  Mike Swenson: Obviously, if people have you know much, much deeper questions, they can reach out to you.
• 36:48
  Mike Swenson: So, uh, how can people do that if they want to learn more or they want to get a hold of you?
• 36:52
  SPEAKER_01: Yeah, so uh my phone number is the best way, 949-235-5606.
• 37:00
  SPEAKER_01: You will get me directly.
• 37:01
  SPEAKER_01: I love to talk about real estate strategies with investors.
• 37:05
  SPEAKER_01: Um company website, gca1031.com.
• 37:10
  SPEAKER_01: You can visit there.
• 37:11
  SPEAKER_01: All my contact information is there as well.
• 37:13
  SPEAKER_01: And like I said, we work with investors on the um real estate exit analysis, helping them understand what their position is and where they should move next.
• 37:22
  Mike Swenson: Well, thank you so much, Ashley, for coming on and sharing.
• 37:25
  Mike Swenson: Certainly helping a lot of people out.
• 37:26
  Mike Swenson: And for people that are interested, reach out to you.
• 37:29
  Mike Swenson: And uh thank you so much for being on the show.
• 37:31
  SPEAKER_01: Thank you, Mike.