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E262 - The 1031 Exchange Strategy with Syndications - Steven Pesavento

Episode Summary

Steven delves into the phenomenal topic of 1031 Exchanges and how powerful it can be to move into syndicated real estate. The 1031 exchange offers some great advantages to you as an investor, so listen in to the episode to learn how to make the most out of this strategy.

Episode Notes

Steven delves into the phenomenal topic of 1031 Exchanges and how powerful it can be to move into syndicated real estate. The 1031 exchange offers some great advantages to you as an investor, so listen in to the episode to learn how to make the most out of this strategy. 

Key Takeaways:

  1. A 1031 Exchange allows you to sell your current properties to purchase others in order to continue to grow your investment in a tax-deferred manner
  2. How a third party qualified intermediary is needed for this strategy and how it works to your benefit
  3. The benefits of syndication and private equity investing
  4. Opportunities and support that VonFinch can offer for a 1031 exchange

Resources Mentioned

Connect with the VonFinch Capital Network to learn more at http://www.vonfinch.com/network

Establish your relationship with VonFinch now for exclusive invite-only opportunities. Schedule an introductory call now at http://www.vonfinch.com/call.

Episode Transcription

Steven Pesavento  00:00

Investors Welcome back to the Investor Mindset podcast. I'm your host Stephen Pesavento. And each week, we share mindset tips, and real estate investing strategies to help you take your business and your investment portfolio to the next level. And today is no different, we're going to get into a phenomenal topic 1031 exchanges and how powerful they can be exchanging into syndicated real estate. We're gonna talk about how you can do that, we're going to talk about why it's valuable. And we're going to give you some tips and tricks along the way, so you're gonna want to listen up. So let's dive right into it.

 

Steven Pesavento  00:41

This is the Investor Mindset podcasts. And I'm Steven Pesavento. For as long as I can remember, I've been obsessed with understanding how we can think better, how we can be better, and how we can do better. And each episode, we explore lessons on motivation and mindset for the most successful real estate investors and entrepreneurs in the nation.

 

Steven Pesavento  01:07

With that said, if you're just joining us, I encourage you to hit that subscribe button, so you never miss another episode from us. And if you've been listening for any amount of time, and you like what we're sharing, think about sharing this with a friend, someone else who might get some value, and go over to your favorite podcasting app and drop that five star review that written review. We read all of them, and they help us reach so many more people, it tells the algorithm that tells Apple Spotify, all of these platforms that this is content people want and we want to be able to reach more people with it. So thank you so much for doing that. And let's get right into it. So the 1031 exchange, what is it? And why is it important? What is it? And why is it important strategy that you can execute and use in your business? Well, first and foremost, a 1031 is part of the tax code. And essentially what it means in layman's terms is that we are have the opportunity to exchange like kind property for one another. What does that mean really well, when it comes down to is investors have the ability to sell a property owner their personal residence, and they have the option to exchange that into another like kind piece of property. So the way that this ends up working is in the real estate space, someone is able to sell their rental property or their their ownership in a syndication their apartment building their commercial property, their land, whatever that might be, they're able to sell that physical property. And they're able to go through a process that allows them to take the the profit the gains, as well as the depreciation and exchange that into the next property. What this does is it defers the taxable event, it prevents a taxable event from happening so that we're able to and you're able to continue to grow your investment in a tax deferred manner. What does that end up doing? Well, that allows you to essentially compound those returns if you're making a 15 to 20% return. And you're able to do that on an additional 20% of your money by not paying taxes or potentially even more, if you're paying back that depreciation, some of those other benefits that you've been taken advantage of depending on how long you've owned the property, it can make a huge difference. 

 

Steven Pesavento  03:25

So if you're somebody who owns a handful of single family rental properties, or you own a large commercial building, or you are a part of another syndication, you might be in a position where you can leverage the 1031 exchange. And so it's important to understand what it is. And I encourage you to use this as an inspirational moment to go on Google and start reading up on 1031. And, and get familiar with some of the details of this process because that is where the rubber is going to meet the road for you. But from a high level, essentially, the way that it works is you sell your property. And you work with a Qualified Intermediary. This is a third party who is going to take on all those funds. And you are going to then have 45 days to select a new property or a set of properties that you're going to invest that funds or those funds into. And then from that day of identification, you have 180 days for that opportunity to close. So those are some important times and guidelines. Once you receive the money into your own bank account. It's too late. You cannot attend 31 Exchange. You want to do this prior to receiving any of those funds. It's important that you you never personally receive them. That's why this intermediary comes into play. So you'll want to find a great intermediary reach out to us we're happy to make a recommendation. But where we're going to go from here is you're going to go and find a property. 

 

Steven Pesavento  04:51

And one of the big benefits of investing in syndication investing in private equity investing In the types of private multifamily opportunities that we do is that these are all professionally managed, expertly selected and expertly operated. So you're able to be in 100%, completely passive position from day one. So if you're coming out of an active role where you're owning and dealing with a manager, or maybe you own a triple net lease or something, and you want to move that into some syndicated real estate, great, phenomenal opportunity to do so. So what you're going to want to do in this situation is you're going to let your sponsor know, you're gonna want to reach out directly to us at Vaughn Finch. And if you're interested in getting involved, and you potentially have a 1031, I'm gonna encourage you to head over to vonfinch.com/network. That's vonfinch.com/network, we'll include that in the show notes below. And on the podcast page, vonfinch.com/network  so that you can get registered as an investor in our system and make sure to put a little indication that you have some property, you're thinking about 1030 wanting, and we can help kind of support through that process and let you know what you need. Because what you're going to want to do is you're going to want to plan that sale, or you're going to want to find property that you can then exchange into. So we work with folks, we have minimums and limits of what kind of dollars we can receive. 

 

Steven Pesavento  06:19

So you're gonna definitely want to reach out to find out a little bit more about that. Because this process is complex. On our end, it's important that we're working with folks that it's a large enough gain. And so what that ends up looking like is, you'll let your sponsor know, you'll let Vaughn Finch know that you're interested in exchanging some property that you've got a 1031 exchange, and you want to place it, and then what, what you'll do is you'll identify the property within that 45 days you with your intermediary, you'll write down one of the target properties that that we have, maybe you'll have some other options, maybe you want to split up this 1031 into different buckets, depending on the size of your investment, that's going to make a lot of sense. If you have a smaller investment, it probably won't be possible because of those minimums that we'll be able to talk about. So as you're going through this process, it's important upfront, you're going to do your due diligence, when you're in that selecting phase, you're going to learn about the property, you're going to understand the business plan, you're going to understand who's operating who's managing, you're going to understand what the agreements are that are going to be in place and who's going to be making those day to day decisions. This is all information you want to make upfront, when you're making that commitment. And then the next step is a commitment agreement. So you'll sign a commitment agreement that you're going to commit to invest that 1031 Exchange funds. And we will commit to receiving those exchange funds so that we can put you in a good position. And you can put us in a good position to make sure that together we can close and then you'll send over a deposit. And we we talk about all of this as part of the process as well. So it's a very smooth process from here. But then this is where things get fun. As we move towards closing, we put together all of the offering documents, you have the same rights as a passive investor. And you come in, in a tenant in common relationships. 

 

Steven Pesavento  08:13

So a tech as it's often called, this is the the term that is it's an industry term that's used that tick, tick investor. And so you'll come in as a 10 in common and then from there, eventually, you'll be exchanged into the opportunity as a full limited partner. So it's phenomenal to be able to do this because it puts you in that passive position to be able to start receiving those phenomenal returns. And you are able to do so in a tax deferred way. And this is where things get really fun is then on the outset. A lot of the opportunities that Vaughn Finch is doing today is we're actually looking to 1031 exchange our own properties into the next opportunity. So as an investor you have, you'll have the option in select investments for us to go out and find a new property that we identify that we're going to execute a similar business plan to the first one or a different type of business plan, you'll have that option to say hey, yes, I would like to go along for this next investment. I'd like to take the funds from this investment and I'd like to place them I'd like to 1031 exchange them into that next opportunity. Now, in some circumstances, investors will want to return of their capital, and we're able to accommodate that as well. So that's part of the process. We work through that well in advance. But it's phenomenal because it can allow you to continue to grow your investment in a tax deferred manner and take advantage of all these benefits of real estate while compounding your wealth creating that cash flow, creating that overall equity growth and taking advantage of depreciation some new depreciation in that property. So there's a lot to this, I encourage you if you haven't done so already, head over to Vaughn Finch comm slash network to get registered and join us invest your network so that you can get involved investing alongside of us and with us in partnership in these kinds of opportunities. And if you've already done that, then you already have our contact information you're already able to reach out, I encourage you to just respond or set up a call so that we can dive right in. Of course, you can go to Vaughn Finch comm slash call if you want to schedule a 15 minute call. And on that call, we'll be able to talk through, you know, how can you leverage this 1031 option, and specifically in a situation where you're ready to go forward and do that where you're ready to make that investment. So thank you for joining us. We appreciate it. We're so glad to be able to serve you week after week, month after month you guys have allowed us to be one of the top 200 Business Podcast consistently to continue to make that list. And one of the reasons is because of sharing and reviews and all the things you guys do so thank you so much. We appreciate it. We'll see you guys on the next episode.

 

Steven Pesavento  10:56

Thank you for listening to the Investor Mindset podcast. If you like what you heard, make sure to rate review, subscribe and share with a friend. Head over to the investor mindset.com to join the insider Club, where we share tools and strategies from the top investors and entrepreneurs and how to take it to the next level.