Podcast 185. Protecting Your Wealth with a Deferred Sales Trust with Brett Swarts

Average Joe Finances:
0:00

Hey, welcome back to the Average Joe Finances podcast. I'm your host Mike Cavaggioni, and today's guest is Brett Swartz. So Brett, super excited to talk to you today. Thank you for joining me on the show.

Brett Swarts:
0:11

Mike. It's my pleasure and honor to be here. Thanks for having me.

Average Joe Finances:
0:14

Absolutely. Hey, so the first thing I'd like to ask you, I just wanna start this straight off the bat, the same way we do every episode and every guest that we have on, is we wanna know more about you. So if you could share a little bit about yourself, your story. Who is Brett Swarts?

Brett Swarts:
0:30

Yes. So I grew up in Northern California, call it Taxifornia, and this is during the MC Hammer days. My brother and I, my, my parents were building houses, mostly my parents, but we were helping out the best we could, learning how real estate works and how to cash flow and how to develop a project from ground up and fell in love with it at a young age. It was really cool. But my mom and dad had a better plan in some ways for us to go to college and to be the first one to get degrees and perhaps not work as hard with our hands, more with our minds. And that's what we did. We went to college and along the way had a chance to play some basketball and I got a scholarship in basketball college to play that was called a small private school and studied business, studied bible and theology and studied a minor in counseling psychology, but also studied in practice, multi-family brokers at a company called Marcus and Millichap. And I fell in love with 1031 exchanges and multi-family properties. And so I came right out sprinting out of co out of college, ready to get going and things really excited. This is like the 2006, 2007 timeframe. And things were hot for a little while and then they came to a screeching halt and I went from making a little bit of money to like nothing overnight. And for the first time in my life I've, all of a sudden started to feel a lot of pressure cause I was, an adult at this point. My wife and I are married. New baby on the way, and essentially I'm making zero at a commercial real estate brokerage. And so I did what every good, I guess entrepreneur or real estate wannabe does you get a side hustle. My side hustle was working at a place called Cheesecake Factory. I worked nights and weekends serving cheesecake and keeping the lights on. 70 hour weeks, my day to make cold calls, negotiate with banks and help my clients because they were going through a challenge too. They had too much debt, not enough liquidity, and they were losing half for all of their wealth, millions of dollars. We were just trying to get, hundreds of dollars to come in if he have the groceries. And so the other part of this story too is my parents were very wealthy at a young age. And then they got divorced. And so my brother and I saw two sides of wealth. The first side was my dad, who had all the money, didn't really pay any child support but he would definitely take care of us when we went over there and he had the Harleys and the boats and we went camping and the trips and all the fun stuff. So he'd spoil us when we were there. And if we ever needed anything, he would give it to us. But 90% of the time we was my mom and he didn't pay child support. And so we're living with my grandma in a in our house and trying to make every ends meet. And fast forward, I'm going, oh my gosh, I'm newly married. And all of a sudden this financial pressure's hitting right? And you went, you go, all of these fears and all of these things started to bubble up. And I never wanted finances to come in between me and my family. And that was part of my determination, I think, to work hard and get a degree and get a good job. And I'm going through this struggle, this just financial struggle. But my wife believed in what we were doing enough to live with my brother in a small condo. Me, her, and him and the baby. And to allow me to work side hustles to keep the lights going. During this time, I learned about the deferred sales trust, which we're gonna talking about here in a minute, which unlocked some freedoms for some clients and really helped them to eliminate the 1031 exchange as we learned about it, because their same problem we identified was the ability to get the freedom from the 1031 exchange. They were overpaying for properties and taking on too much debt, not enough liquidity. So I said, here's a freedom for you. If we had a chance to do this all over again, what would we do? And so fast forward, my business started to grow. I was able to retire from the Cheesecake Factory. My wife and I have five kids. We live in two places, Taxifornia about 49% of the time. And then St. Augustine, Florida about 51% of the time. And we teach and train in. People how to get freedom when exiting. Highly appreciated assets of any kind, and this is what brings us here today.

Average Joe Finances:
4:04

Brett, that, that is an awesome background. You got me cracking up over here as you're going, I'm sitting here writing notes and I, one of the things I thought that was really funny is as you're going, he's yeah, you know how. Every, when you come out to college, a lot of people, they wanna get a side hustle and figure out what they're doing. And you're talking about how your side hustle was Cheesecake Factory. Most people would say that they got their job at Cheesecake Factory and their side hustle was making these phone calls and getting into real estate. But your mindset was like, no, that's my main job. Just the side hustle is Cheesecake Factory. I'm doing that to make a little cash to pay the bills. So I really like that way of thinking. I've never heard anybody talk about it like that before, so I just wanna say that's freaking awesome. And it made me chuckle while you were doing it. I was like okay. This is pretty cool. But as you were going, you got into your background and I just wanna dive a little bit deeper into a couple things here. You got to see. Two sides of what happens, or you got to see some of the unfortunate thing that a lot of kids see when their parents get divorced is it becomes a little bit lopsided, right? With where the finances go. And, I'm glad that your father was able to take care of you guys, and all that stuff and make sure everything was good. But I understand what you're talking about when you know, when you had that struggle and had to move in with your grandmother and all that stuff like that stuff's not easy for a young man. And going through that, do you think that's some of those hardships that you faced when you were young, do you believe that's one of the things that kind of shaped your character into, that mindset that you had mentioned, like you don't want to have finances be an issue in your marriage. Do you think that's one of the things that helped shape that?

Brett Swarts:
5:32

Yeah, a hundred percent. These are all opportunities to grow and to persevere. And I'm a believer, I have faith in God and Jesus, and I believe that he gives us opportunities to grow during these challenging times. And then that forges the grit and the resilience to, to face things in the future to help more people with whatever they're going through. And yeah, a hundred percent it was tough. At the same time, you're like, 6, 7, 8 is kinda when it happened. You start to notice about 14, 15, like really what happened? And then you start to ask the questions about like 16 and all of a sudden you're like, oh, what this is? And then you're like, you get angry. And there was two, two ways that could have went with that. Like it could have been really anger toward my dad. It could also be just love and compassion to know that, things don't work out sometimes. And how do we still keep the relationship going with the family and fortunately my mom was was kind enough. And I also a believer to tell him to love him even though there was some challenging things that he did and didn't do in the past. And yeah, it was all of those things. It was faith, it was perseverance. It's a part of who I am today and. And it's also given me a chance to relate and be empathetic with people who have gone through a divorce. My wife and I have been married 13 years, almost 14 now, and it's been amazing. But it's happens. 50% of all marriages end in divorce and kids have gone through it. But I just feel fortunate that I was, I had a lot of good coaches and. Basketball and football. And I had a lot of good youth pastors and good mentors and older brother, older cousins. So there was always really good father figures in my life. But these are the things that sometimes happen and it's our choice to make the best of them. And I was fortunate enough to have a lot of good people around me as well.

Average Joe Finances:
6:54

Yeah, Brett I just wanna say I really appreciate how deep you went on that, and sharing something so personal. So far our listeners here, that, that's just amazing, man. So it gives us a really good background of your character and who you are, right? So I definitely appreciate that. Now, As you f you know, fast forward to, when you were doing your internship with Marcus and Millichap, right? You started to see some of the things they were doing right? You learned about the 1031 exchange. You learned about how, people can save on taxes and not lose large chunks of their wealth because they made a sale of an investment property. But then you. You went a little bit deeper too, right? You talked about the deferred sales trust, right? So I'd like to dive a little bit into that. If you could share with us what is a deferred sales trust. Because I hear that and I was like, I know what a DST is, but what's a deferred sales trust?

Brett Swarts:
7:42

Yeah, we'll talk with kind of the the big view and then we'll get technical, right? So to me it's the single best way to exit highly appreciated assets and really access 10 major freedoms that we're generally financially are all looking for. And most blockbuster ways of exit planning or getting out of assets provide some of those freedoms. But likely they don't provide typically more than three, but we get to access about 10. And During that 2008 crash of 2011, that's when real estate really, took a swing there. It wasn't until the bottom of 2011 that, real estate was at the bottom. I started to actually see, feel, and touch the people who were getting hurt and hammered and crushed. And that's when you start to see it's not just 1031 freedom. It's not just financial freedom, it's also debt freedom. It's also diversification freedom. It's also location freedom. It's also obviously time freedom. It's also entrepreneurial freedom. It could be estate tax freedom it could be partnership freedom. You start to add these things up and everybody has something that they're looking for some kind of freedom. And one of the biggest things that's a barrier to these assets being sold is capital gain tax. And it's somewhere between 25% basically to up to 50%. Of all assets sold are gonna be subject to 25% to 50% capital gains tax, depending on the depreciation, recapture and the state in which you live in and all these kind of things. But that's a big amount. Right? And in fact, the American Bankers Association did a study and they found there's about 10,000 baby boomers turning 65 every single day in the us and there's 77 million in the US alone and they're retiring, right? And they are they're passing their wealth to the next generation. This is our parents to us in the next 20 years, and this is known as the largest wealth transfer in the history of the planet. So if you think about that one single concept right now, then you wanna ask yourself the next technical question. How much of that wealth is tied into high-end primary homes into Hawaii, in the Bay Area and New York and major areas, LA, San Diego, Chicago. How much is tied into commercial real estate? How much is tied into private equity or businesses? And the answer is 50%. In fact, 50% of the total net worth of America is tied to illiquid assets that are highly appreciated. And this is gonna be the biggest transfer in the history of the planet of wealth that we know of and so we've got this window here to unlock some of these freedoms. And what are some of these freedoms? People wanna retire, of course. That's part of it, right? But they also want to be able to. Maybe be entrepreneurial, maybe to separate from that partner maybe to develop that project maybe to get out of that cryptocurrency, maybe to get out of that stock. And all of these things are happening. The question is how do you defer the capital gains tax? And still be able to be passive or active. And that's the coolest thing about the Deferred Sales Trust, is that it's Netflix because it's so flexible. I mentioned Blockbuster in the beginning, that's like the 1031. You're showing up on a Friday night mic and you've got, if you're in Hawaii, maybe you're driving in the sunshine and it's not so bad. But what if you lived in Wisconsin and it's snowing outside, right? And what if you seen that thanks video at the end of the aisle and it's that cardboard box and you're about to grab it, but someone else grabs and you're like, oh, you're frustrated. Right? Netflix came out obviously, and they became it a lot more flexible. There's no 45 day requirement. There's no 180 day close. That's the deferred sales trust. There's no kind or equal or greater debt requirement to replace as well. It obviously works for more than just investment real estate. It works for primary homes. We did an 8 million deal in Palo Alto. In fact, I was just in Kona, Hawaii touring properties and making YouTube videos about telling people that if they sell these high-end homes that are worth.$10 million, $20 million, $30 million and they can defer the capital gains tax, not using a 1031 exchange. And so just understanding that concept of what actually works to unlock the freedom is is the background for the deferred sales trust. So technically now what is it? It's simply an installment sale, Mike, where if you own a property, let's say right now in Hawaii for 25 million, and let's say you bought it for 2 million. 30 years ago, right? And it's right on that cliff that oversees the best beach and it's amazing property. And if you live there right now, you're gonna be subject to a huge capital gains tax. I don't have exactly Hawaii in front of me, but I think it's one of the higher ones. So let's just use 35%, right? And so if you were to sell for 25 million minus the 2 million basis, that's a 23 million gain. And you times that by 35%, that's your capital gains tax. And so the question is, How do I defer that? The answer is the deferred sales trust. It will actually buy your asset for 25 million. And immediately sell it to the third party buyer. We're also brokers. We're luxury brokers, multi-family brokers across the country, including Hawaii, where we have people on the ground who can sell to high price, but we do the tax planning to make sure everything is locked. And secured before anything moves. And what happens at the close of escrow, instead of receiving the funds directly and paying the tax, they're you loan the funds to this trust and you get back at promissory note. And it's that separation, that delay of tax, the delay of payment, which creates what's called the deferral. It's the same way, same like a 10 31 exchange. You sent the funds to a qualified intermediary. Then you delay taking constructive receipt or actual receipt of the funds. So long story short, and these notes are structured at 10 years, typically, and every 10 years you can renew for 10 years. You can pass it to kids and most of our clients will just live off the interest payments and they'll take slow interest payments over time and they'll defer all 25 in that scenario. Put all 25 million in the trust. If it was free and clear, they'll defer all of the tax and they'll just live off the interest, right? Which is really neat. Versus paying 35% of 23 million, which would be a much lower number.

Average Joe Finances:
13:19

Yeah you would lose over $8 million if you paid the capital gains on that. So that's definitely huge. Okay, now, I want to get a little bit deeper into this, cuz you know I've had people on, we've talked about 1031 exchanges a couple times on the podcast, right? So my listeners probably, if you've listened to those episodes, you should understand that a little bit. With the 1031 exchange, you got 45 days to identify three other properties, right? And then you have 180 days to close. Now you're saying with this deferred sales trust, right? That you don't have to. There's no requirement for anything like that, right?

Brett Swarts:
13:53

Exactly. Let me tell you a deal, story to bring this to life, and this is the single reason why I started this company. There's a few, but this is like the foundational part of why I started it, and it's the story of a gentleman in 2006 who sold a commercial asset in Minnesota for 20 million near the Minnesota Vikings Stadium. This guy. Hates the stock market. Loves real estate, loves 1031 exchanges. He's if you're a real estate person you're like, all of us buy and sell real estate, love, all of that. But for the first time in 2006, he looked at his 1031 binoculars. He's this doesn't look too good. Now, he didn't know 2008 was gonna happen, but he just said, whatever it is, I'm either gonna pay my tax, but I'm not gonna overpay and chase these deals that these valuations make zero sense. And he goes, I'm gonna try this deferred sales trust thing out. Puts it into the deferred sales trust. Where are the funds sending in the bank? Sending in very conservative securities. Okay. Not subject to huge crash of 2008. There you can protect it and hedge it and protect it. We work with some of the best financial advisors in the world to help with this. Okay, so he was conservative there. And in the meantime, what happened to the property that the buyer bought? Five years later, that person got foreclosed on and the bank calls the guy who sold it up and said, the person who used the DST and said, Hey, do you wanna potentially buy back the property that you sold to that buyer? He goes, oh yeah, that 1031 buyer out to California for the high price. He said, yeah. And they go we just foreclosed on it. He goes what's the price? And they said about 60 cents on the dollar, about 40% less than what you sold it for. He goes, gimme a couple days, and he was able to structure a new LC and the trust put up the money to buy that asset at 60 cents on the dollar. But here's the key. All tax deferred. He still hasn't used a 1031. He never used a 1031. He didn't. It's a completely different tax code. By the way, this is an installment sale based upon IRC 453 versus IRC 1031. This is IRC 401k.. There's different tax codes that provide different types of tax deferral. So the way you structure it with the team is really the secret, right? And that's the nuance why it goes back 27 years, thousands of closes, billions under management. But most people don't know about it because they haven't met us yet. Although we've done lots of deals over 20, no change. IRS audits, all the states, everywhere. It's on works every single time, but it's proprietary. It's protected. But that single concept of selling high and buying low, Instead of selling high and overpaying for our property, especially right now where cap rates are still pretty, it may have gone up a little bit, but interest rates have definitely jumped, where it doesn't make much sense to buy. It just makes perfect sense. That's why the deferred sales trust is perfect for times like this, and we're just trying to get the word out to as many people as we can.

Average Joe Finances:
16:22

Yeah. I'm hoping to help you guys get the word out. That's amazing. So with that particular situation, right? So he was able to create another LC and then have funds from the trust go to that LC to purchase that property. That's how that worked without paying any taxes on it.

Brett Swarts:
16:38

Yes, sir. Yes, sir. You got it. You nailed it.

Average Joe Finances:
16:41

That is super cool. That is super cool. Okay, cool. Yeah, so I guess I don't really know how much more I could dive into this but I wanna know more. So what is some other key benefactors that come with doing a deferred sales trust versus let's say somebody wants to put it in a Delaware statutory trust. What is cause I mean that you get like a, pretty much like a guaranteed percentage, right? Now what kind of, I hate using that G word. But what kind of like returns, like you, you said people are putting them in here and they they live off the interest. So what kind of interest rates are you guys seeing with that? Cause I know with, the DSTs you have a good idea of what you're gonna get back. But what about with this deferred sales trust?

Brett Swarts:
17:23

Yes. So typically it's between five and about 9% depending on the risk tolerance of the client. And depending on how we structure the promissory note, most of my clients are about seven or 8% based upon their risk tolerance, and that's net of the recurring fees over on average over any 10 year period of time. Not guaranteed not promise, but here's the key part, and it's one of the major difference between the Delaware slash Troy Trust is A, it's diversified. B, we don't have to buy a Delaware deal or put an interest into a deal within that 45 day identification, 180 day close, right? C, typically a lot of the funds are liquid, so we can jump on a deal when it makes sense. So by the way, we do Delaware statutory trust and they're part of the Delaware Blockbuster family. And there's definitely reasons why a 1031 exchange makes more sense or the Delaware could over a deferred sales trust. But generally speaking, most of the time it doesn't. For a couple reasons. Number one, you have an old depreciation schedule. So one of the best ways to own and build wealth is to have something that provides offset of cash flow. We call this tax flow. For every dollar of cash flow, we want some tax flow, a loss on the other side to offset it. Okay? So it washes out. Guess what? In a 1031 exchange, your old depreciation schedule travels, which means what? You have lower or no depreciation. Which means for the cashflow that's coming in, You're taxed. It's so Hawaii, New York, California, we're like the highest tax states, right? It's brutal. So you wanna make sure that you're looking at your tax slow depreciation schedules and if you wanna do a 1031 you're gonna have the old one, which is no good. The deferred sales trust, that asset that the gentleman bought back five years later with the trust by partnering with the trust to buy it back. You got a brand new depreciation schedule. You say why? Cause he didn't do a 1031 exchange. Oh, so he's outside of those rules? Yes. Okay. He bought it with a new entity, new money. And it's still tax deferred. So this is the cool thing about the deferred sales trust. Number two would be the Delaware statutory trust only works for investment real estate. It doesn't work for high-end primary homes, businesses. It doesn't work for cryptocurrency. We had a client who exited 5 million of Bitcoin before the crash. At $54,000 a coin, and she was able to diversify that equity into a business venture, a tech startup company. It's, we call it the GoFund yourself, all tax deferred. She could also went and bought a multi-family property in Hawaii on the beach. She could have. All tax deferred. And so understanding that it's super flexible with the assets that you're selling. It works for. Captive insurance. It works for public or private stock. We're doing a, we're working on a a multimillion dollar Apple stock exit right now. It works for it can also save a failing 1031 exchange. We can be a backup plan in case you do wanna do a 1031. I mentioned we're brokers, so we help people do 1031 ones all the time, too. Wonder if you have a backup plan. Wonder if you could go into a deal knowing that the seller can't be too hardball because if they are. You don't have to buy it. But as a seller who knows or doesn't know that you know about the deferred sales trust, they oftentimes use that against you and don't allow you to really negotiate the deal in case you find hair on the deal. So these are all the strategic things. So the biggest thing for people to do if they wanna take action is to have a tax flow and a cash flow mindset. And number two, make sure you have a team that understands what your options even are and even giving you the options, right? Most agents and brokers don't even know about this. It's part of why we're trying to coach and train agents on how to do this. But then number three would be to actually execute on the freedoms that you're trying to achieve. And when you actually know what's possible and you have the team and you know what the options are, we find that these deals really are getting unlocked for people and people get a lot of freedom.

Average Joe Finances:
20:56

Yeah. Brett, that is phenomenal. As you're describing this whole thing, I'm just like, how come more people don't know about this? And I was checking out your website earlier. I was creeping on you guys, seeing what you guys had going on. And I did see some of the reviews and testimonials you have, right? And I actually recognized a lot of big names and multi-family real estate talking about your services. So I was like, okay, so this is like the real deal. Now, I wanted to ask you I wanna go back to that deal you were describing before, because you had mentioned how, when you do a 1031 exchange right? That depreciation schedule follows, right? So it's always gonna follow to the next deal, to the next deal, to the next deal. And then you have nothing left. So you're paying full taxes on that asset at that point. Now I know that because this doesn't fall under that same rule set, but how does somebody like, how did that guy actually go and take the money out to the trust to put it into the new LC without there being some type of tax burden in that transaction? You know what I'm saying? Cuz he's moving it to a new entity, right?

Brett Swarts:
21:57

Yeah.

Average Joe Finances:
21:58

So wouldn't that create some type of burden?

Brett Swarts:
22:01

Yeah. The answer is he didn't take it out. The answer is the trust joint venture partnered with him in an LLC. He's a managing member. He's putting the sweat equity, he found the deal, he sourced the deal. He's putting it all together and like a sign joint venture partner that he might get the money from Mike or Brett. He could also get it from the trust that owes him the money. So the key is he doesn't own the trust. If he owned the trust, he just sold it to himself. It'd be taxable. It's part of where our role comes in. If people might be curious about who the players are. Third party unrelated trustee. Hi, that's me. My name is Brett Swarts so I'm a deferred sales trust expert and we're the trustee and we provide the services at Capital Gains tax Solutions, and that's what our role is to be that third party unrelated trustee. This trust only does business with him or her or a married couple, only with that family. And but they don't own the trust that they own to be taxable, but they also have all the rights and protections of a creditor, right? And they approve of the investments. There can also be co-trustees too. They can have a co-trustee as a CPA or something as a backup and extra transparency and all that stuff. So these are the things that we help work through people with how to do it. By the way, this isn't unlike a 1031 exchange. A third party qualified intermediary is where the funds are sent, and you have to follow their rules and you give up some control during that time period. This deferred sales trust is like that too. You give up some control, you don't give up all control. The funds do get paid back to you, and you pay tax slowly, but you work with a third party to be able to unlock these freedoms for you and your family. And yeah that's the main answer to that one, Michael.

Average Joe Finances:
23:29

No I appreciate that. I was just trying to dive a little bit deeper to really, deepen my understanding of how this works cuz that's amazing, Brett, I really, I'm really enjoying this and learning a lot, so I definitely appreciate that and I think it's important that, for my listeners here, that they get a good understanding of how this works cause a lot of them might, be in a situation where they're getting ready to exit a very large deal and they're like, Hey I don't know if I wanna do a 1031 exchange. Now they're listening to this and Hey, maybe I should do a deferred sales trust. That's awesome. Now, what made you so when you retired from Cheesecake Factory, right? What made you decide to start this organization?

Brett Swarts:
24:09

Yeah. So I think the biggest thing is just seeing the transformation for my clients and seeing the freedom that it unlocks and honestly it's a challenging, challenging sale, if you will. I was selling commercial real estate and I was doing 10 w one exchanges in Delawares, and those are all very common, and I've always liked a challenge. I had two degrees in a minor, played basketball in college, and, did, and did all of that while doing the doing the internship at Marcus of Millichap. My wife and I have five kids married almost 14 years. And, I've always liked the challenge of something, I'm just, I've been competitive and I like working with people and so I fell in love with the ability to help my clients and then the challenge of this, I would always like going to the away basketball games, those were my favorite because the crowd was against you. And they were talking trash and they'd, be pulling your shorts and you're taking'em out, taking the ball out of bound and girls would be whistling and guys, same. And I always liked it. I don't like, drove me to be better. And we would we won all of our championships in, in high school and stuff, which was really cool. And went to Columbus to the state final game in California. Really cool stuff. But the point was, I love the kind of the underdog, if you will. In fact, when I was, I looked about this at Marcus and Millichap, this is another part of the inside story, Mike, which is funny. There was 30 of us in 2009 who actually saw and learned about this one of, one of our strategic alliances at the time. And and all of a sudden like we're going, whoa, this is real. Too good to be true. We thought we were the ninjas of 1031 exchanges and like the Marcus and Millichap from the best in the country and the best training and all this stuff. And a lot of us sat there saying, too good to be true. But a couple of us said, oh, I'm curious enough to say if this is true, this will change everything. And that began the journey of studying and practicing it. And then meeting the genius behind it. And I think he's like the Elon Musk of tax. His name is Todd and he's one of our strategic alliances and he does the tax work. Legal work, the IRS audits, all of that stuff, right? Which is great. This is so important. The most important I. I'm not the CPA. I'm not the tax guy. And so part of it was I didn't study to be that. I was just an entrepreneur, real estate person who fell in love with it. And part of that I think, helps my clients too, to know that they don't have to be the CPA Brainiac. We have that person to provide that. But you have someone who's been in their shoes, who's an entrepreneur, who's has their own business, whose own real estate help people sell and transact. So all of the, all the things came together, honestly. And yeah, we're very passionate about, about helping a lot of people, and that's the story here.

Average Joe Finances:
26:27

Yeah. I love that, Brett. Speaking of that, it sounds like, you put a really good team together, right? You found the right people to s to put in the right spots. So what does your organization look like today?

Brett Swarts:
26:39

Yeah, so multiple team members and growing rapidly up to eight with multiple strategic alliances. So eight, like direct with the team and then we try to work and partner, strategic align with is a better way. The best financial advisors, CPAs, tax attorneys. Luxury real estate agents commercial real estate brokers, M&A attorneys. And so part of our vision is to train and coach and align with the 10 top 10,000 across America of all of the ultra high net worth advisors. So all of the people I talked about so that they understand and can unlock the deferred sales trust for their clients. And we'll do the heavy lifting. It's just a matter of having the awareness. The awareness of it and what's actually possible, overcoming the false beliefs, that it's too good to be true. I would've known about it. How's known, it's legal. All the stuff that comes up from everyone who looks at it. And then they actually look at it and actually talk to us and they go, oh my gosh, this actually is real. It's true. It's still batting a thousand, by the way. And all the IRS audits, it's perfect. Multiple audits in California and across the country and federal and stuff. So that is That is our ever growing network, if you will. It's not just our internal team, it's the network. And that's also part of the integrity of the trust, by the way too. It's not all in one house that this, the tax, the financial advisor, the trustee, in fact, they all need to be separate to keep the integrity and also the transparency for everything that's going on.

Average Joe Finances:
28:00

I definitely appreciate that, and I appreciate the transparency as well, because that's one of the things that kind of separates you from, your competitors, right? Because here you are you're providing the service, but you also have these third parties that are a part of it, but keep the, that whole cycle going smoothly, right? And everyone else that's, essentially a third party has their own opinion, right? And can. Can ask those questions that you know, somebody that was in the house might not ask. Because they're not, they don't essentially work for you.

Brett Swarts:
28:31

It's a great point. Honestly, it's one of the most key points because, once you understand that there's, in order for something to go wrong, there's gotta be a lot of people that go wrong. And the, and then we also have a third party tax payer who's providing all the tax returns. We have a 54, 5 year old CPA firm for another reference. We have, national law firms that have done reviews and there's just a ton of body of evidence there that. Given enough, I would say give people, give me five hours, one hour to meet with me, to get to know you, understand your needs, your challenges, your problems, your desires, your ambitions. One hour with the tax attorney to get technical and legal one hour with our with our clients, talking with references. One hour of the actual financial plan itself and then one hour with your deal and literally it can change your entire family legacy for wealth. One thing you mentioned before, like what else could it separate from the Delaware and the 1031 by the part of the challenge part one of the good things at 1031 at Delaware. Is that it maintains a stepped up basis in the deferred sales trust. You lose the stepped up basis because you're going in an installment, which is a downside for sure, right? But here's the other upside of the deferred sales trust plus we can get funds outside the taxable estate and we can eliminate what's called a 40% debt tax, which has nothing to do with the stepped up basis. In fact, you can either have one or the other. You can have a stepped up basis, or you can get it outside your taxable estate, but you can't have both. And so we walk people through how to do this legally without having to give it all away to charity, without having to have 50 kids and gifted away without having to buy a bunch of life insurance. Really nice way upon an exit to just be done with that challenge. And it's helping people understand that and seeing the professionals that are involved to everyone to work as a team, right? It's not just one person. And that's why it is a bit complex because there's multiple parties. But when all of the puzzle pieces come together and there's just a few and people, once they spend time with us and then it clicks, they're like, okay, this is great. I'm all in. And then they're referring us all to business and we grow that way. And that's our favorite way to grow is through word of mouth.

Average Joe Finances:
30:23

Awesome. Fantastic. All right, so Brett, I have one more question I want to ask you before we transition this to the final round. Okay. And it's a simple question, but you've, you do so much, right? Like you, you've been able to grow so much from where you first started. And I want to know what is your why are you doing what you're doing?

Brett Swarts:
30:42

Yeah. I would say it's there's really. Two main ones. It's my faith in my family, right? My faith and believing that I've been given certain gifts and these gifts have been given to me to be a blessing and help to others. And it's my responsibility to maximize these gifts and to bless as many people as I can with the gifts and know that there's a higher purpose for these. And as a part of that higher purpose is the battle for the wealth of America. In fact, it's happening right now back to the biggest wealth chance in history of the planet. If you think about this, if people don't know about these legal tax deferral ways to grow your wealth there's 32 trillion is the estimation that's gonna transfer from the baby boom to the millennials. And if that 32 trillion, I believe, if it's with the government, no matter what side you vote for, it's gonna be wasted away. They've already proven to us that they don't do a good job of managing capital or investments or being good stewards with capital. It's really a sad thing, especially these last 10 years and being from Taxifornia and seeing, what's happened the last 30 years of the state being kind of dismantled financially and on so many other ways too. It's a great opportunity to fight for that freedom because if that 32 trillion in a legal way can be with the entrepreneurs, the families, and the people who are creating jobs and providing housing. Guess what? There's more freedom for everybody. But if that 32 trillions on the other side of people either selling assets or just paying a bunch of tax and not knowing about these kind of things, then the freedom's taken away. And so it literally is the battle and it's behind the scenes, it's tax. You're not thinking about just the voting for this, voting for that. It's like now this is the tax dollars. This is 32 trillion. So that's a big part of it, and that's part of the higher calling piece of it to be a part of something really big. And then the next one is my family, right? So I love my children, my wife, and the ability to be a great example for them to to show them I have an opportunity to help a lot of people and they can do the same thing. My wife stays home full-time with our kids. As part of our vision and our goal, she's been able to do it full-time. She's living her dream of homeschooling our kids, which has been amazing, and being able to adventure and be halftime in Florida, halftime in California. Part of that vision is living a thousand days in a hundred different locations with the family doing something a, adventurous or something new. So we're really focused on not just growing our wealth and our finances, but our wealth with our relationships and our family. So those are my two big wives.

Average Joe Finances:
33:04

That's awesome. I appreciate that. We all, we also homeschool our kids too, so that's pretty awesome. We have that in common. Okay. I'm gonna go ahead and transfer this over now, or transition this over to the final round. It's where I'm gonna ask you the same four questions I ask everybody that comes on the show. And it gives us a better idea of how Brett is under pressure with some pretty tough questions, even though they're not that bad. So you ready to go?

Brett Swarts:
33:24

Ready.

Average Joe Finances:
33:25

All right, let's do it. So first question is, what is the biggest mistake you've made in real estate or business?

Brett Swarts:
33:33

Moving too fast without reading all of the contract. It's not so much I didn't read the contract, it's that I didn't get third party eyes on the contract. And let's just say, trusting my gut too much. I'm pretty good at trusting my gut. But for sure, at least a contractor two, I probably, was taking action too quickly. My personality type is a driver personality, and I take action and I go probably should have slowed down on that, had someone review the writing and not just trust the relationship that it would all just work out. So that would be my, I say my biggest mistake for business.

Average Joe Finances:
34:07

Okay. Awesome. I appreciate that. All right, Brett, what is something that you've learned that you wish you knew when you first started?

Brett Swarts:
34:16

I think when you say first started, I would go back to high school. I think that's when I got somewhat more serious about life college for sure. You start to really think about oh, what am I gonna do here after high school? And I would say, I wish I would've had someone teach me the concept of learning to work harder on yourself than you do on your job during high school. It was about getting the A's and the B's. It was about making the teams and the, trying to get a scholarship. It was about trying to get, be on the starting team and being the most valuable player or whatever that external thing was, right? And those things were fine. There's nothing wrong with those things or, going, getting into college. These are all good things, but They were the minor things. They really were, the major things were working harder on myself. And someone would've explained the concept of personal development and leadership. The concept of even more so with cash flow and building businesses like Rich Dad, poor Dad, the we had a good mom who taught us faith and so that was definitely amazing. No, no complaints there. But it would've been more about personal development and leadership and development and working harder, learning to work harder on those things. Faith, finances, fitness, personal development rather than just the job. And the job at that point was get the degree or get, graduate from high school, getting to college. That was, make the team, which was, just more temporary stuff.

Average Joe Finances:
35:38

Okay. Awesome. Definitely appreciate that. This next question, Brett, ties into that last one actually, it ties into the last two, and that is, do you have any tips or tricks that you would recommend to someone that is just getting started out today?

Brett Swarts:
35:52

Let's clarify. Start out in what? I'll just take the one as like an entrepreneur.

Average Joe Finances:
35:55

Start starting out As an entrepreneur or a real estate investor.

Brett Swarts:
35:57

Yeah. Yeah. So as quickly as you can hire an assistant. It could be virtual, it could be. It could be local, whatever, to do the things that aren't your natural gifts and strengths and to take off of your plate so that you can go maximize your potential. So I wish I would've done that way earlier. I did too many things solopreneur for too long, and I'm so grateful for my team now and what we're building and the culture and the community and just the power of amazing people and know that. As entrepreneurs, we think we can do it all the best by ourselves, but you're never gonna grow, beyond yourself and your leadership capacity to grow other people as leaders. And so I would've just gone that earlier even then, if I couldn't afford it or didn't think I could afford it or all of the excuses or the fear or the time or whatever. Just go hire and bring in great talent, mentor, coach them and delegate the things that aren't your natural strengths.

Average Joe Finances:
36:59

Absolutely love that answer. Delegation, outsourcing, all of those things are huge. I know as soon as I hired my first assistant, it almost it changed my life honestly. I was able to, free up a lot of time that I didn't realize how much time I was wasting on certain things as a solopreneur, like you were saying. So that's definitely fantastic advice. I appreciate that. All right, Brett, final question of the final round, and that is, do you have a favorite business? Investing or real estate related book or podcast or both?

Brett Swarts:
37:30

Yes. Right now the favorite book and more so the masterclass on the book is by Chris Voss. Never Split the Difference. The masterclass is called The Power of Negotiation, I believe. And by far it's so deep, so rich, and also so practical to everyday communication. Everyday relationships. So I've listened to that masterclass probably 30 times in the past four months. Read the book the first time a couple years ago, listened to the audiobook again. But watching it on video and seeing like the live masterclass, so I'd highly recommend going beyond just the book getting the masterclass. It's like an app. You can download, I think it's $170. Literally. It's the only masterclass I've watched. Oh, there was the second one I watched on there. It was Steph Curry. I play basketball, so I watched the Steph Curry, which is good too. But I just keep going back to that and I just try to apply those practices that he teaches that are masterful. So check that one out.

Average Joe Finances:
38:38

Awesome. Definitely appreciate that. Great recommendations, great book. So definitely appreciate that. All right, Brett, that is it for the final round. You survived. Pat yourself on the back. Wasn't that bad, right? Told you it was good. Hey okay, so I do have one more question for you though, because, and this is the most important one of of all because we're sitting here having this. Awesome conversation. I know I learned a lot about the deferred sales trust, right? And I know my listeners are like, Hey, we also learned a lot and we wanna know more. So where can people find more information about you or the deferred sales trust, the service that your team provides. You have a website you could share with us, any social media, anything like that.

Brett Swarts:
39:15

Yeah, it all starts at capitalgainstaxsolutions.com. And if you also search Capital Gains Tax Solutions on YouTube, iTunes, Spotify, you can find the podcast. YouTube has a ton of playlist. 1031 Exchange versus the Deferred Sales Trust, the Delaware's Statutory trust versus the Deferred Sales Trust client deal stories, testimonials, the how to Breaking it all down. It's all there. Just go to my YouTube channel and then you can download our free Ebook by going to capital gains tax solutions.com. We have a new book coming out in it's actually this is the pre-copy. It's actually gonna be called Building a Capital Gains Tax Exit Plan. We've changed it to make it a little more specific. It's kinda a long title, but we have. Kevin Harrington from Shark Tank in the book, which is really cool. Mike, they said they get in room with people that are really smarter than you. So I got in the book with Kevin and a few other really smart multifamily syndicates, financial advisors in the book. And this whole book is really for you if you're looking to unlock your ideal wealth plan. When selling assets of any kind for yourself or your clients. Also my story to the DST, kinda like DST inner circle secrets. A lot of great content. We leave it all out in the book here, so you're gonna be excited to pick up one of those. Come on Amazon in about 30 days. And then the last thing I'll extend to is a consultation with myself for one of my team members. If you are selling an asset of $1 million of net proceeds or net game and net game then you qualify, anything smaller than that is too small, unless you have two at $500,000 each. And then we can, then you can qualify and you can go to capital gains tax news.com to get that free consultation. And that's all I have. Those are the main places, Mike.

Average Joe Finances:
40:49

Awesome. Thank you so much, Brett. This was amazing. I had a great time talking with you again. I learned so much and I greatly appreciate you taking the time to talk with me today, man. This was fantastic.

Brett Swarts:
41:00

My pleasure. Thanks for having me.

Average Joe Finances:
41:01

Hey, awesome. And hey, to my listeners, thank you so much for joining me and our special guest, Brett Swarts on the Average Joe Finances podcast. Go leave us a five star review and tell us what you liked about today's episode with Brett. Aloha from Hawaii and have a great rest of your day.