1031 Exchange? Is There A Better Way?

Full Transcript Below

Intro
Hi. My name is Rod Khleif, and I’m the host of “The Lifetime Cashflow Through Real Estate Investing” podcast. And every week, I interview Multifamily Rock Stars and we talk about how they build incredible wealth for themselves and their families through multifamily properties. So hit the “Like” and “Subscribe” buttons to get notified every Monday when a new episode comes out. Let’s get to it.

Rod
Welcome to another edition of The Lifetime Cashflow Through Real Estate Investing. I’m Rod Khleif, and I am absolutely thrilled you’re here. You’re going to get tremendous value from the gentleman I’m interviewing today. This is an unusual interview as we’ve never broached this topic before. Surprisingly, actually, it’s long overdue. His name’s Ehud Gersten and he is in the world of Delaware Statutory Trust, DSTs they’re called. And this is going to get a little deep. I’m just going to tell you, this is kind of like an alternative to the 1031 Exchange, which you’ve probably heard of. And so, you know, buckle up and I hope you enjoy this conversation with Mr. Gersten. Welcome to the show, brother.

Ehud
Thank you, Rod.

Rod
Yeah, let’s have some fun. So, you know, give us a little bit of your background because it’s pretty interesting, frankly, and wide-reaching. And then let’s get into DSTs.

Ehud
Sure. So I was skipping ahead a bit, I was and still am a licensed attorney in California, and I was a real estate litigator for about 15 years and doing a lot of real estate law, real estate litigation. And I thought I knew everything that was to know about real estate and found out that wasn’t the case. And I had a good friend that was also an attorney, and he came to me one day and asked me to help him with a 1031 exchange. In fact, he was selling the building where I was renting an office space from him.

Rod
Oh, wow.

Ehud
And he wanted me to sell the building and help him with the 1031 Exchange.

Rod
Because you’re a broker in California as well, correct?

Ehud
Exactly. I’m a broker as well. But I told him– his name’s David, and I said, David, I don’t do this. You know, I had the brokerage license, I still do, but I just used it for myself. I never used it with clients. And he said, no, I want you to help me with the 1031. So in the process of researching you know, the 1031 options for him, I was only aware of options where you can go out, you know, you sell your property, you go out, you buy another property.

Rod
You identify it, you have a certain amount of time to identify and you’ve got a certain amount of time to close.

Ehud
Exactly.

Rod
Right.

Ehud
Precisely. So, a good friend of mine, she has been a real estate broker for over 35 years. I was talking to her about trying to find something for David, and she says to me, I heard about this thing called DSTs, Delaware Statutory Trust. You know, maybe if you want, you can go read up on it. And I started digging in and researching it, and I had been looking for a way out of law for a while. I mean, being a litigator can be–

Rod
That’s brutal.

Ehud
It’s brutal.

Rod
Yeah. Nobody loves you either.

Ehud
Exactly. No one loves you.

Rod
A lot of rejection. Yeah.

Ehud
A lot of rejection, a lot of fighting with people you don’t even know necessarily. So I had been looking for a way out of litigation, but I didn’t know what I wanted to do. And so I discovered DSTs, which, you know, we can get into it, but I really– I love the concept of what it could do. So I went out, you have to have a securities license to offer DSTs. Went out, got my securities licenses, and that’s kind of from a 30,000-foot view.

Rod
That was quick. Now, where all of you lived again, as well? This just–

Ehud
So I was born in Israel and when I was four years old, moved to South Africa.

Rod
South Africa, wow.

Ehud
So when I first learned to speak English, I had a South African accent. And when I was 12, we moved to Canada and I got teased by the kids in my class for saying things strangely to–

Rod
The accent.

Ehud
The accent. So, yeah, I got rid of the South African accent, grew up in Canada, then went to the University of New Zealand. I got my first two degrees. I have a law degree from the University of Auckland in New Zealand, as well as a political science degree, graduated from the University in New Zealand, and then went and did my Master’s in Law at Boston University. Graduated from Boston University, didn’t like the cold weather, moved out to San Diego.

Rod
The rest is history.

Ehud
The rest is history.

Rod
Yeah. I love it. Yeah. I would take San Diego. Listen, I love Boston, don’t get me wrong, but I can’t do the weather either. So DSTs. Okay, so why don’t you describe for those of you– there’s a few of the– I’m sure don’t know what a 1031 Exchange is. Just real quick, high level. What’s the exchange? Why are there limitations? And then why a DST might make sense?

Ehud
Absolutely. So a 1031 Exchange has actually been around in one form or another since 1921.

Rod
Now, I know Biden is trying to get rid of it, so there is that as well. But sorry to interrupt. Please continue.

Ehud
No, it’s okay. Yeah. They’re currently thinking about getting rid of it. It’s not the first time that a President has thought about getting rid of it. It’s been around for 102 years. So it’s a very successful piece of legislation. And the reason it’s been so successful is that if you’re doing a 1031 Exchange, if you sell a property, an investment property, and you take the proceeds from that property and within certain timelines, you invested in another piece of real estate, then you can defer paying the capital gains on that, which could be pretty significant.

Rod
Sure.

Ehud
So the 1031 Exchange, it’s called 1031, by the way, because it’s Section 1031 of the IRS Code. So that’s the reason. And so, the 1031 has been around for a long time. It’s very successful and it helps people not only maintain their wealth but potentially grow their wealth over a period of time because they’re constantly–

Rod
Kicking that can down the curb. You know, they’re kicking that tax down the curb. So talk about the limitations of it because it has some limitations.

Ehud
Of 1031 Exchanges?

Rod
Yeah.

Ehud
So, yeah, one of the limitations– well, first of all, let’s talk about the timing, right?

Rod
That’s what I meant by limitations, frankly, is the timing.

Ehud
The timing. You have a very short time to identify. So you have [inaudible] So once you sell your property that you want to exchange the money from into another property, you’ve got 45 days, a month and a half to figure out where you’re going to place that money. You got to identify. Now you have 180 days to close.

Rod
180?

Ehud
180. Yeah.

Rod
After the 45 or 180 from the start, day one.

Ehud
Inclusive from day one. Yeah.

Rod
Okay, so 180 days to close, six months to close. But you’ve got to identify. Now, I know you can identify multiple properties even if you don’t take them all, but you’ve got to find the ones you need. And that’s been a real challenge over the last few years. And, you know, I think people have been desperate with their 1031 money trying to place it and maybe even done deals maybe they shouldn’t have because they were so desperate to place it. Right? Now, I know the timing is not the only limitation. There are also limitations around debt. Without going too far in the weeds, do you want to give us a quick overview on that piece?

Ehud
Yeah.

Rod
Okay.

Ehud
Absolutely. I’ll give you a very basic example. If you sell a property for a million dollars and you’ve got 500,000 of equity, 500,000 that you owe to a bank, right, that you need to pay off. When you sell that property, the bank is going to get paid first, they get their half million first. You need to then take that half million in order to fully defer, you have to find a property that’s equal or greater value. So you have to find a property that’s a million or more because that’s what you sold. But the problem is, especially in today’s environment with rates being so high, you need to figure out what you’re going to do with the debt component because you have only $500,000 to invest. So that could be pretty significant nowadays because you’re either going to have to take money out of your pocket to cover the debt portion or you’re going to have to go get a loan.

Rod
Right.

Ehud
So for a lot of people, it’s very difficult. And you have to identify and do this in a very, very short period of time.

Rod
You got to move quick. Okay. All right. That’s 1031, guys. So now, let’s talk about a DST and why you love it.

Ehud
A variety of reasons. The DST just from a 30,000-foot view, they’ve been around since the 80s. The reason it’s called the Delaware Statutory Trust, it’s simply because it’s set up under Delaware law. But the actual offerings, the investments, I don’t think I’ve ever seen an offer in Delaware.

Rod
Aren’t they federal?

Ehud
They’re federal. Yeah.

Rod
They’re federal. Now, Delaware is awesome. We love Delaware. I have almost all my LLCs there because they have really good anti-creditor laws and anonymity in some cases as well.

Ehud
Yeah.

Rod
I mean, obviously, there’s Wyoming as well and there’s Nevada as well. But I think Delaware is kind of the cream of the crop as far as asset protection, yes?

Ehud
Absolutely. And the other reason that Delaware is so popular is that they have a very solid– and this is the lawyer part of me speaking. Historically, their case law has been very consistent. So, investors and syndicators, they want to know that you know, if they are doing something that it’s very likely to be upheld by a court because it’s been done before it upheld.

Rod
Yeah, we’ve done, you know, big multimillion dollars loans and the lenders have insisted on our operating agreement and ownership entities being in Delaware. I mean, they’ve actually insisted on it rather than the state the asset was purchased in.

Ehud
Yeah, I don’t doubt–

Rod
All right. So anyway, I derail it for a minute.

Ehud
No, it’s all right. No problem. So it’s structured under Delaware law. And in 2004, the IRS came out with the revenue ruling. It’s a revenue ruling 2004-86.

Rod
Okay.

Ehud
In that revenue ruling, they said that DSTs qualify for 1031 Exchanges subject to certain rules, but they qualify as a vehicle for doing a 1031 Exchange. So you could do a 1031 Exchange utilizing a Delaware–

Rod
And go right into a DST.

Ehud
They can go right into a DST. So the same–

Rod
Or multiple DSTs. So we can talk about that in a minute, too.

Ehud
Absolutely.

Rod
Okay.

Ehud
And that’s one of the great benefits about– you asked me what I love about DSTs is– let me explain before I get into it. So the minimum investment in a DST is $100,000. The reason that becomes really important is because– let’s assume the same example we had before. You’re selling a property for a million dollars. Let’s assume you’ve got no debt for now. You sell a property for a million dollars, you need to allocate that. Well, you can technically invest in ten different DSTs because the minimum is $100,000. And so what you’re doing is you’re diversifying your investment. So rather than having concentrated risk where you sell one property and then you’re just buying another property, now you can be in multiple properties, in multiple geographies, in multiple asset classes. So you’re not eliminating risk. You know, we’re in the world of securities.

Rod
Sure.

Ehud
Past performance is no guarantee of future risk.

Rod
Right.

Ehud
I have to–

Rod
Disclaimer. Disclaimer.

Ehud
Exactly.

Rod
Right. But you burst over something really quickly there. So you can be in also multiple asset classes as well. Not just all– I mean, this is a multifamily podcast, but you can be in self-storage. I wouldn’t be office right now. Please don’t do office.

Ehud
No. No, office.

Rod
But, you know, self-storage, mobile home parks, you know, industrial office warehouse, flex space. You know, there are a lot of asset classes that are still killing it right now. I’m not even sure about retail. Be careful there, too. But that’s kind of cool, too, that you could diversify into other asset classes with those funds.

Ehud
Absolutely.

Rod
Yeah.

Ehud
I mean, a lot of people don’t know this, but we even have oil and gas, mineral rights.

Rod
Okay.

Ehud
So that qualifies for 1031, subterranean mineral rights. We have in Florida, we have manufactured housing, we have self-storage, we have multifamily where you’re a specialist in. We have industrial, life sciences. So you really have the entire gamut of–

Rod
What life sciences?

Ehud
Usually, typically, you’ll see things like pharmaceutical companies.

Rod
Okay.

Ehud
So they’re the tenant, so technically it’s a–

Rod
Okay, so it’s single-tenant, retail, or something like that. Okay, so it’s retail or office, but it’s in life sciences. A tenant. Got it.

Ehud
Exactly.

Rod
Sorry, I thought I was missing something. Okay. So benefits are the fact that you can diversify your assets, the fact that you can put 100,000 in multiple things, and 100,000 is not a tremendous amount of money in our world. So you can really diversify and you can do, yeah, other asset classes, any other benefits to it?

Ehud
Yeah. Well, one of the big ones in the example, again, used before. You’re selling your property for a million dollars, you have a half million dollars loan.

Rod
Right.

Ehud
If you were to go out and buy direct, you have to figure out where you’re going to get those funds.

Rod
You got to borrow the money yourself, too.

Ehud
You got to borrow the money. With DSTs, many of the DSTs come with leverage or a debt already on it. The investor gets the benefit of that debt but doesn’t have to qualify for that debt and it’s non-recourse to them.

Rod
Yeah. Before we started recording, you gave me an example of this. So let’s say a big outfit you gave a name, well, Cantor, I think you said.

Ehud
Cantor Fitzgerald.

Rod
Cantor Fitzgerald, a huge firm. You know, buys an asset for 50 million. They put a $25 million loan on it. Very common. Okay? Then they’re signed on that loan. They’ve got non-recourse debt there, but you’re getting the benefit of the higher returns because there’s debt. Okay? Because the more debt, the higher return you’re going to have. That’s just the way it works. The returns are based on the amount of equity in a deal, the amount of cash in a deal. So you’re getting the benefit of that, but you’re not signing on the debt.

Ehud
Not only that, you also get the benefit of depreciation.

Rod
Oh, yeah.

Ehud
So you get the benefit of depreciating the asset and you’re not on the hook for the debt. And typically, the rates we were talking before, the rates that a company like Cantor, to use an example, will get on a long-term 10-year loan, for example, is much better than I could get, for example.

Rod
Right.

Ehud
I mean, especially nowadays, it’s significant.

Rod
Right.

Ehud
So they get all the benefits of the debt without having the downside of the debt.

Rod
So just out of curiosity. By the way, guys, I asked him some questions ahead of the interview because I don’t want to sound like a complete moron because I’m not that familiar with these. Okay? I should be and I’m not. So this is educating me as well as you guys. But, you know, you say they get the benefits of depreciation. Do you see cost segregation and things and bonus coming up in these things?

Ehud
Absolutely.

Rod
You do? Okay.

Ehud
Any of these DSTs will come with the cost segregation analysis, which investors can then utilize–

Rod
Benefit from.

Ehud
Benefit from, exactly.

Rod
And we still got 80% bonus depreciation still going on so they’d be able to share, be able to use that as well.

Ehud
The same rules that apply for regular– it’s still real estate.

Rod
The same as the syndication.

Ehud
Exactly.

Rod
Basically, same, same. Okay.

Ehud
Exactly.

Rod
Okay. Now, I’m guessing, you know, you’ve got to leave your money in until the deal is done. You’re not going to get taken out of the deal until the deal has had a liquidation event of some sort. Is the liquidation event always a sale or is it sometimes a refinance?

Ehud
Very good question. It has to be a sale.

Rod
It has to be a sale.

Ehud
Because when the IRS– it’s a very good question. So when the IRS blessed DSTs in 2004, one of the requirements was that you cannot do capital calls to investors and you cannot do a refinance. So you have to sell the asset. So typically, what will happen, let’s say, five to six, seven years, the asset sells, the asset manager that’s managing this asset on investors’ behalf, they’ll sell the asset. And then at that point in time, they’ll notify the investors and investors can do one of three things. They can either cash out, they can roll it over to a new DST if they wanted to.

Rod
So when they cash out– I’m sorry, when that DST sells, they don’t have to take the money and pay tax on it.

Ehud
No.

Rod
You can help them identify some other DSTs and reallocate.

Ehud
Or buy direct.

Rod
Or they can buy direct.

Ehud
Or they can buy direct, yeah.

Rod
All right. Now, your firm is called Perch Wealth.

Ehud
Perch Wealth.

Rod
Okay. And this is what you guys do. You basically broker these DSTs for lack of a better way to put it.

Ehud
Correct. Yeah. This is what we focus on. We’re specialists in this area, and this is what we do day in and day out.

Rod
And so do you counsel someone? Let’s say someone’s selling an asset, and so they reach out and say, hey, I’m thinking about, you know, doing this 1031 to a DST, and you help facilitate that.

Ehud
We help facilitate that.

Rod
Okay.

Ehud
And really, our job is to act as a counsel. Wise counsel.

Rod
Consultant. Yeah.

Ehud
Consultant. As advisors. And what we do– I have to be very careful because there’s a legal term for financial, but we are advisors.

Rod
Right.

Ehud
But we’re helping people. We’re consulting to them and telling them based on our experience where we think there’s a highest probability that they will actually– there are no guarantees, but the highest probability of that being a successful investment.

Rod
Okay.

Ehud
So our job is really to understand the environment. So we know the sponsors, we know their executive teams, we know the due diligence they’re doing, we know the underwriting that they’re doing.

Rod
Okay.

Ehud
Then one of the things we’ll look at is we’ll look at the appraisal reports, we’ll look at the area. If it’s multifamily, for example, we look at things like what’s the competition around there?

Rod
You do some due diligence on the asset as well.

Ehud
Yeah, because our clients rely on us.

Rod
Right.

Ehud
Yeah.

Rod
I was glad to hear that.

Ehud
Yeah.

Rod
And when you just said appraisal, I’m like, oh, that’s not enough. You got to go deeper than that. So you’re actually checking comps and everything else?

Ehud
We’re checking everything. In the same way that a sophisticated investor will go out and buy something by themselves?

Rod
Right.

Ehud
Now, mind you, the asset managers, the companies like Cantor, to use them as an example, they’ve already done their own due diligence.

Rod
Sure.

Ehud
And they’re very good.

Rod
Yeah, and you’re reviewing what they’ve done, basically. Is that an accurate statement?

Ehud
We’re reviewing what they’ve done, and we also– you know, old Ronald Reagan quote, “Trust but verify”. So, yeah.

Rod
Yeah. Good. And you said something that surprised me, and that was that at any given time, there’s only about 44 or so of these DSTs going. Is there a reason there’s so few?

Ehud
You know, it’s still–

Rod
It’s still fairly new.

Ehud
It’s new and it’s not new.

Rod
Okay.

Ehud
It’s interesting because as an industry, last year, maybe eight to ten billion of DST placements, which is a lot of money. But when you look at the overall amount of money that’s gone into 1031s, it’s a smaller amount of– that’s just last year. So there’s a lot of what I do and a lot of what my partner does, my business partner Ben, and a lot of what our team does is we’re educating a lot. We’re talking to–

Rod
That’s why you’re here. You’re here in my studio, educating.

Ehud
Exactly. But we’re educating attorneys, real estate attorneys, tax attorneys, CPAs, real estate brokers. Many don’t know this exists as an option, including, of course, investors.

Rod
Well, I’ve heard about it, as I told you before we started recording. I’ve heard about it for a long time. You know, you approach me and I liked what I heard and what I saw. And this is something you guys should know. You should know about this as an alternative. You know, if you’ve relied on 1031 Exchanges in the past, for example. Now, let me ask you this, I hate to go negative here, but, you know, the environment is changing and there’s 75% year-over-year decline first quarter of this year, at least in the multifamily space. There’s a lot of commercial real estate debt that’s in trouble. We only talk about office. Office is a train heading towards a brick wall. But, you know, a third of all commercial debt is adjustable. We know what’s happened with the rates. I mean, rate caps are insane. I saw an article about the difference in the rate caps in 2020 to today, and I can give you an example, guys. If you got a rate cap, which caps your interest rate on an adjustable rate loan, if you got a rate cap of $100 million in 2020, 3%, so the rate wouldn’t go more than 3% for three years, okay? That was $23,000 in 2020. That same rate cap today for 100 million, 3% for one year is 2.3 million. Yeah. You know, people are really going to have a tough time either refinancing or selling. And so, you know, I see the market shifting dramatically over the next couple of years. There’s 1.6 trillion in commercial debt coming due by the end of next year. I mean, I’m telling all my peeps there’s going to be an opportunity and there is going to be an opportunity. And so if there were ever a time to learn this business, it is right freaking now because there’s definitely going to be an opportunity. It’s going to be a lot of pain, too. So I don’t know. Do you got any thoughts on that? Do you got any feedback on that? I’d love to hear it.

Ehud
Yeah, absolutely. I agree with you 100%. And if you spoke to my partner Ben, I mean, he’s been extremely bearish and pessimistic for a long time.

Rod
Right.

Ehud
That’s one of the reasons we’re in this industry, though, because if someone’s doing a 1031, they need to find a solution.

Rod
Right.

Ehud
Otherwise, they’re going to pay a lot in taxes, especially if they live in a place like California where they’re potentially 50% you know, what– it’s crazy.

Rod
Don’t give me a start on that. I just saw– never mind, that was a gun thing. Never mind. I just saw something. News was pushing– but never mind. Sorry, I was going to go down that–

Ehud
No, that’s all right.

Rod
Political rabbit hole.

Ehud
No, no.

Rod
That’s the only thing I couldn’t live with. I love San Diego, but anyway. Please continue.

Ehud
So that’s one of the reasons that I love DSTs, because, again, you’re not going to eliminate risk by investing in DSTs, but you’re going to help mitigate it by diversifying your investment. So there’s no guarantee that one investment is going to– or all of them are going to work. But if you’ve taken your money that you’ve worked very hard for your entire life– by the way, I should also say most of our investors tend to be baby boomers. Right? They’ve worked their entire lives.

Rod
They’re retiring.

Ehud
They’re retiring. They’re tired of managing tenants. They don’t want to deal with phone calls in the middle of the night that the toilet’s broken, the roof’s leaking. So for them, this is passive income.

Rod
Sure.

Ehud
But they can spread out that risk by investing in multiple assets.

Rod
Yeah. I like that. You know, I can tell you, in 2019, office was like the Primo La Primo asset class, and nobody knew what was going to happen in 2020. And now it’s been decimated. Nobody wants to work in an office anymore. So you never know what could happen in any of these different asset classes in real estate or real estate in general. And so that is attractive. That diversification is attracting for sure. You know, I think the issue is going to be whether or not they can sell. That’s going to– to be able to have money to diversify, but, you know, time will tell on all that. I’m speaking at a big conference next week and it’ll be interesting to see what a lot of my contemporaries feel about– you know, I’m super bearish. I’ve been bearish for a long time. In fact, I thought Covid was going to be the catalyst. It wasn’t, of course. But the good thing about multifamily is other asset classes didn’t get help with Covid. I mean, you know, office didn’t get help, retail didn’t get help, you know industrial didn’t get help. We got hundreds of thousands of dollars in tenant assistance. We love multifamily. Are you doing anything else besides DSTs or is that pretty much it right now for you?

Ehud
I would say that 99% of our business is DSTs. We do opportunity zones occasionally.

Rod
Let’s speak to that for a second. In what regard?

Ehud
So the opportunity zones, sometimes someone has a blown exchange at 1031, so they don’t want to have to pay or they want to defer their taxes. It’s not necessarily the first option, but it’s another option. Or let’s say you’re selling a business and it doesn’t qualify for a 1031 Exchange, or you’re selling stocks that have appreciated. I have a buddy that’s sitting on Apple stock, I think he’s had it for like 20 some old years. If he sells that, he’s going to take a big tax hit.

Rod
Right.

Ehud
So an opportunity zone is potentially an option for him to do that.

Rod
So he can divert that profit into an OZ and defer the tax?

Ehud
Absolutely.

Rod
I didn’t know that.

Ehud
Defer until 2027, beginning of 2027. There’s apparently talk– I actually talked to one of the opportunity zone sponsors yesterday. There’s talk about extending that. I don’t know if they’ll extend it. So we do a little bit of opportunity zones.

Rod
Interesting.

Ehud
We have other types of cash investments, investors that they just have money sitting in the bank and they want to invest it somewhere. Everything we do is real estate pretty much, ground-up development work, things like that. But the DSTs is really our bread and butter. It’s really our niche.

Rod
Got it.

Ehud
And, you know, going back to what’s coming, I agree with you. I’m extremely bearish as well. And I actually don’t think that most people understand this tsunami that’s headed toward us.

Rod
They don’t.

Ehud
Yeah.

Rod
I mean, I’m forecasting a whole lot of bank failures, you know. And then the question begs, are they going to prop it up and print more money? And if they do, what does that do to inflation? And, I mean, it’s just like a double-edged sword. So, you know, are they going to let the banks fail or are they going to let the banks fail, or are going to prop them up? It’d be a real interesting question to answer. But I do believe that we’re going to have a catalyst here in the near future. Something’s going to pop and we’re going to see some serious pain and opportunity. With crisis comes opportunity.

Ehud
A 100%.

Rod
How come you don’t invest?

Ehud
I do.

Rod
Oh, you do?

Ehud
I do invest. Yeah. I’ve been personally invested in DSTs.

Rod
No assets yourself, just all DST investments.

Ehud
Well, I like the diversification and I like the passive–

Rod
When you believe in what you’re doing, I mean, invest in it. Okay. Fair enough.

Ehud
Yeah.

Rod
Fair enough. That speaks to how you feel about it. So, just to confirm, this investment, this DST investment is pretty much like investing passively in any syndication or, you know, where you’re investing passively. You’re giving up control, obviously, because the General Partners have the control. Same situation. And it’s not liquid. Your money’s got to stay in there until they have a liquidation event of some sort, just like a syndication.

Ehud
Correct.

Rod
Well, liquidation is sale. They have to sell. Right? In the syndication, they can refi or sell. That’s our model is we buy, we refi, get our investors their money back, and stay in it, legacy. So they sell and then you can reinvest in another DST. Right?

Ehud
Right. Yeah. Or cash out if you want.

Rod
Or cash out, of course, and then you can pay some tax.

Ehud
The other thing I’ll mention that I didn’t mention is sometimes people say, well, I want to buy my own property. Right? I sold my property for a million dollars and I like to maintain control. I’m originally from Israel and Israeli clients, in particular, they’re averse to–

Rod
Anyway, I’m a control freak, too.

Ehud
Yeah, exactly.

Rod
So is there a solution?

Ehud
Well, so they’ll come to me and they’ll say, okay, so you sell your property for a million dollars and you find your dream property, but it’s only 800,000.

Rod
Okay.

Ehud
So you’ve got $200,000 left to boot that you otherwise have to pay taxes on, you could take that 200,000 and put it into a DST.

Rod
So you could split it. You could do a 1031 for that 800,000 property. Whatever’s left over can go into a DST.

Ehud
Exactly.

Rod
I’m really glad that you brought that up because I was going to ask that and I forgot earlier. Okay.

Ehud
DSTs are another arrow in your quiver.

Rod
Right.

Ehud
It’s very malleable. You know, you can use it to your advantage. And I just think it’s a great option for people to know about.

Rod
Love it. Love it. Ehud, I appreciate you coming out here. I know you’re living on the other side of the state. You told me your wife’s having fun shopping here in Sarasota. A lot of great shopping.

Ehud
Fiancee.

Rod
Your fiancée.

Ehud
Yeah. No, she’s on the route.

Rod
Congratulations there. Ehud, I appreciate it, it’s a pleasure to meet you, my friend.

Ehud
Likewise. Thank you.

Rod
Alright. Thank you.

Outro
One other quick thing. We encounter so many people that are frankly frustrated. They’re looking in the mirror and they’re frustrated that they haven’t been able to escape the rat race. They haven’t been able to build cash flow to the point where they’re able to have financial and time freedom with their families and maybe they see other people buying real estate and creating incredible cash flow and they think, well, it’s just scary. You know, buying apartments is intimidating. And I get it. See, that’s why we created our Warrior Mentorship Program. They’re our coaching students and they’ve had extraordinary results. My students, I’ve been teaching about five years and they own upwards of 140,000 units now that we know of. Right? And we feel like it’s just getting going. Now, we’re looking to grow this group and really take it to the next level and honestly believe that the greatest transfer of wealth could be upon us right now with this current economic environment. Everything’s going on sale. So we’re looking for people who want to follow a proven framework, really like a blueprint or a map, literally, step by step. And then they’re able to leverage our systems and our incredible network to raise money and equity. To find deals and close those deals and build partnerships, really nationwide. So if you’re interested in finding out more about how you can become more in our incredible network and take advantage of the unbelievable opportunities that are upon us, you can apply to my Warrior Mentorship Program by texting the word “CRUSH” to “72345”, or you can go to “MentorWithRod.com” and what we’ll do is we’ll set up a call so you can check us out and we can check you out and see if it’s a fit. Now, again, you can go to “MentorWithRod.com” or text the word “CRUSH” to “72345” to apply and we will speak soon.