How To Minimize Capital Gains Tax & Create More Wealth With Brett Swarts (#96) — Transcript
Updated: Oct 26
THE PICTURE OF WEALTH · EPISODE 96
Dustin Serviss and Brett Swarts discuss commercial real estate, exit planning and capital gains strategies in the United States. The conversation explores how investors evaluate properties and plan for what comes after a sale.
Listen to the episode
This transcript was generated from the episode audio and lightly edited for readability. It may contain transcription or speaker-attribution errors. Refer to the recording for exact wording.
Chapters
[00:00:00] External success and what was missing
[00:03:36] Learning a different approach to exits
[00:07:58] Understanding the 1031 exchange
[00:11:38] Clarifying goals and building a team
[00:16:06] Value creation in apartment investing
[00:20:18] Cash flow and tax flow
[00:24:12] General-partner risk and incentives
[00:28:14] Finding a deal and building a partnership
[00:31:33] Learning, content and relationships
[00:35:47] Multiple income streams and enjoying wealth
Guest & resources
Related episodes
Transcript
[00:00:00] Brett Swarts: Hey. I wanted to, you know, get that degree. And so I wanted to get that basketball scholarship, and I wanted to, you know you know, get that first big job, and I wanted to close that first big deal. And it was always this external pursuit. Right? And those things all achieved. It all happened. It was great. But there's something missing. Like, what's missing? Right? And and part of that was re... You know, reestablishing my faith.
[00:00:22] Dustin Serviss: Welcome to the picture of wealth, or TPOW as we call it. I am your host, Dustin Service. That is the voice of Brett Swartz. And Brett is in California, and he is a specialist in commercial real estate, more importantly, the exit of commercial real estate. He's got a great strategy, a great business called Capital Gains Tax Solutions, and his whole strategy is around people who have got a commercial building that has grown in value, and they are gonna pay a lot of tax to get out of it. So how do you essentially not pay the tax or minimize your tax? And he breaks down the strategy on how to do this.
[00:00:58] Dustin Serviss: So for any of you who like commercial real estate, who wanna learn about the ins and outs of rental real estate and how to cash flow and how to look at properties, how to analyze properties quickly, and how to try and find good deals, this is the podcast for you. So without further ado, I I bring you Brett Schwartz, diehard forty niners fan, basketball scholarship in university, two degrees, very sharp guy, and, he's a great podcast guest. Brett Schwartz, I'm excited to have you on the show today. We're gonna be talking about, financial strategy, but more specifically, strategy
[00:01:31] Dustin Serviss: around commercial real estate, which, you know, listener, I know that's you. I know this is something that intrigues you. You know, Brett is in the US and, advising clients on certain tax strategies and also helping people as a a licensed commercial real estate agent, find, you know, multi... Was it a multifamily commercial? You're gonna unpack that. So, Brett, thanks a lot for being on the show today.
[00:01:55] Brett Swarts: Justin, pleasure to be here. Thanks for having me.
[00:01:56] Dustin Serviss: So, let's warm up with, you know, commercial real estate in the US. What what was the affinity for you in the past? Why why why why do you think it's the best investment?
[00:02:08] Brett Swarts: Yeah. I grew up in the real estate industry with my parents, so I couldn't help but fall in love with the sticks and bricks of real estate, and what it meant to be an entrepreneur, and I have cash flow and development. And so this is the Silicon Valley, Bay Air, East Bay of California. And we we just learned and loved real estate from a young age, and we just became a part of us. Fast forward, us, I mean, my brother and I, and we would drive bobcats and hammer nails and shoot, you know, nail guns and, I mean, all kinds of... Just cool stuff as a kid, you know, almost killing, you know, killing ourselves,
[00:02:36] Brett Swarts: you know, multiple times, but we survived it. And fast forward, we had a chance to study and practice multifamily investment brokerage at a place called Marcus and Millichap, which is one of the top commercial brokerages in the US. As pertains to investment real estate, and that's where we learn about ten thirty one exchanges and ways to build wealth and underwriting IRRs and cash on cash and essentially how to get some financial freedom. If you could own enough real estate, it could, you know, it could pay for your living expenses. Right? And and be... And if you don't have to work, trade time for dollars and...
[00:03:07] Brett Swarts: But that wasn't always the, best thing because we saw friends and family and clients who was half for everything in the two thousand eight crash. And so, although it started out exciting in o six, when I started there, things quickly changed when o eight hit. And I saw friends, family, and clients lose half for everything, over, the next three years. And that's when we learned that it's not just enough to have a cash flow plan, you've gotta have an exit plan. And that exit plan has gotta suit the freedoms that you're looking for. And it could be time freedom, it could be location freedom, it could be
[00:03:36] Brett Swarts: also financial retirement freedom, but that could also be entrepreneurial freedom. It could be diversification freedom. A lot of different things that, go into when you go to exit something and what it could mean for you and your family. So I just became a sponge. I started to learn from a CPA and a tax attorney who's a genius. And I just started to to just absorb what was possible. And then I started to apply that to my business because my business had gone from a little bit to, like, crash. I'm living at home with my baby and my my my wife, and we're in my brother's small condo, barely surviving, working side hustles at a place called
[00:04:09] Brett Swarts: Cheesecake Factory. And I always share that part of the story because it was a grind and a hustle before a couple years. But as we learn new strategies, we helped our clients get out of their challenges. They were losing millions, you know, I was barely surviving. But we we we quickly started to, you know, help more people, and our business started to grow. And now all I do is teach and train and coach people how to do this. This being a demand tax, strategies on the excess of crypto, business, investment real estate, or primary homes. And, and it's really fun. It's exciting to be able to to help and serve, you know, clients across
[00:04:41] Brett Swarts: the country.
[00:04:42] Dustin Serviss: Oh, man. Listen, there. I... Where do you want me to go with that? He just opened up the door to, so many different avenues. But I'm gonna stick with... Maybe we'll come back to crypto later because it's often a big head scratcher for a lot of people. But commercial real estate. So what are we talking about? Is this... You know, Grant Cardone, if you're a commercial real estate person, it's like, you know, minimum buy a thirty two unit thing. Is it... Are you prescribing to the same thing or are we talking, you know, right down a duplex? Like, is that what you're helping people buy or advising?
[00:05:13] Brett Swarts: Oh, good question. So our... In in the beginning, yes. It was a lot of smaller properties, but, but also, you know, we just helped the client sell a seven point seven million dollar property in Sacramento. And they decided to do a ten thirty one exchange. We helped a another client. He just sold a a mobile... Five mobile home parks in Moscow, Idaho, which is a little bit closer to closer to you guys. And this was Gary Lester. He shared his whole story, dollars ten million, and he was looking for time freedom. He had financial freedom, but he didn't have time and energy freedom. And so he shared his whole story.
[00:05:45] Brett Swarts: This is a a land deal for a client named Tom.
[00:05:48] Dustin Serviss: Your whole... So he's holding up, a a brochure. Is that the brochure for the mobile homes? Or what what...
[00:05:54] Brett Swarts: This one was. Yeah. This is actually Gary right here. If you... If you're watching this on video, see if it's gonna focus here. This is Gary. He shares his whole story, and you can share my YouTube channel. But, yeah, Gary is a guy who who wants some financial freedom. Right? And he's just like, you know what? I'm gonna get mobile home park investing. Right? He was kind of an entrepreneur, but also kinda working at the the w two. He was hustling. And he goes to a seminar conference, and he goes, okay, I'm buying one this year for sure. Right? Takes action, massive action, and then he buys two, three, four, five.
[00:06:21] Brett Swarts: And all of a sudden, the values shoot up to ten million dollars, and he's like, man, I got all this cash flow, but I don't have my time and energy freedom. And he goes, life is short. He goes, COVID has taught us a cute couple of things. Number one, life is short. Number two, go out and live live what you wanna do. Don't wait for it. Right? Like, we were talking before the the the thing. And this is this is Gary's story. So... But he doesn't wanna do a ten thirty one and trade five mobile home parks for ten mobile home parks. He's like, that doesn't make any sense. I don't... I have ten... I have five problems right now.
[00:06:49] Brett Swarts: I don't need ten problems. Right? And he goes, guess what? The deferred sales trust is what we specialize in. I can exit. I can defer my tax. I can also keep getting tax... Cash flow, but I can be passive. I can be active. Right? So the key, what we really do is we just help people unlock the freedom with their capital. And sometimes that means buying a duplex or house hacking that. We have a real estate team across the country. Sometimes that means syndicating deals and putting money into one of our one of our multifamily prop... Properties and projects. Sometimes it means exiting that business. We said a ten million dollar...
[00:07:21] Brett Swarts: Or, I'm sorry, it's a seventeen million dollar exit. The client had seven million into the trust. And so he... The business sold for a big amount. His portion was seven million. And for him, it's like he wants to move to Tennessee out of out of California and be a little more retired. But he's still pretty young. He probably wants to do some entrepreneurial stuff. So everyone's a little bit different, but our key is just to try to figure out how to help them get from where they wanna be, which is where... Is a b, and a is where they're at. And that involves multifamily investing, that involves tax referral and exits, that involves,
[00:07:53] Brett Swarts: also, we work with financial advisors. Sometimes it's, you know, securities and and investments in that in that sense.
[00:07:58] Dustin Serviss: Oh, so beep beep beep. That's the truck backing up. And I have to ask, what is... For a Canadian, what's a ten thirty one? And for listener in the US, I'm sorry if you already know what this is, but I think it's important for you to unpack this strategy that you're actually talking about.
[00:08:12] Brett Swarts: Yeah. So ten thirty one exchange, if in... By the way, anyone can use this no matter where they're from. If you have assets in the US, you you can use a ten thirty one exchange. So if you... If you're Canadian, if you buy something in, you know, Washington for, a million bucks and you sell it for five million, you're gonna have a four million dollar gain, and the government's gonna tax that typically twenty five to fifty percent US government. At least Canadian could be a whole another part of that... Side of the story there. I think it could be double sometimes. It's a huge tax. And so what you do is instead of paying that tax, you can defer
[00:08:43] Brett Swarts: it as long as you buy a property, let's say, a five million or greater at that point. So it's basically trading your one equity of million that went to five, and you're moving into another piece of property, ten thirty one exchanging it into a bigger property, and deferring that tax and keeping the money working for you.
[00:09:00] Dustin Serviss: Okay. So let's use, mister Mobile Home Park. He had five mobile homes. Is in that article... Does it talk about numbers or no?
[00:09:08] Brett Swarts: Yeah. It's a ten million dollar asset. I mean, all of them collectively are about ten million dollars. There are five mobile home parks, so big parks, and collectively selling to one buyer for ten million dollars. I think his basis was right around... We estimated to be right around, like, two million. They had about a eight million dollar gain. Right? And so, you have the state of Idaho. You have the federal tax. You have the Obamacare. We estimated about thirty... At least thirty percent of that eight million would have been wiped out by capital gains taxes. So he's like, I'm not in the business of just getting crushed by tax.
[00:09:41] Brett Swarts: I'm in the business of building wealth, but I'm also not in the business of overpaying for property, especially with cap rates that are going lower and interest rates are going higher. Cap rates aren't necessarily going lower. Maybe they're flat, but definitely interest rates are going higher. And so he's like, this is crazy, like... And I have... And I... He also has a debt on the property too. So he's like, I'm in debt. I I don't have my time and my energy. I have some financial freedom, but he goes, this isn't serving where I really wanna be. Right? I wanna be out. The deferred sales trust is the debt free plan. He got out of his debt.
[00:10:11] Brett Swarts: Right? He diversified his equity, and he got his time back, which is this... His biggest thing that he was trying to achieve.
[00:10:17] Dustin Serviss: Then he leveled up. So what did he take the the... Say he got ten million. He had a million in debt, so he got nine. What... So then you have some sort of structure that that nine goes into, and then he bought an apartment building that's a lot simpler? Or what
[00:10:33] Brett Swarts: is it? Good question. Yeah. So so far
[00:10:35] Dustin Serviss: the money is just sitting in the
[00:10:35] Brett Swarts: bank, and it's in in, I think, like, US treasury bills right now, and and maybe in a little bit of stock. Like, we we just go to... This one just closed two weeks ago. And this is the coolest part about the deferred sales trust, is you don't have any time restrictions. Like, you don't have to rush around and make investments. So we eliminate that whole, you know, shotgun wedding. Right? We all have the friends that got married really young or really quick. You're like, well, we hope that works out for you. Right? But ten thirty one exchange can feel like that where you're selling something and rushing around to buy something.
[00:11:03] Brett Swarts: In this scenario, we can sell. We can be quiet and calm and just wait and look for opportunities and dollar cost average. We can put some of it into the stock market, some of it into US treasury bills, some of it into multifamily projects, some of it into a business venture, some of it into crypto, some of it into lending funds. Right? Essentially, you could diversify and be passive, be active. And this is where you have entrepreneurial freedom or retirement freedom. And so that's the key. Like, what freedom are you looking for right now? If you are listening to this and you have a highly appreciated asset, what
[00:11:38] Brett Swarts: is it that you're trying to do? Where are you trying to go? Question is, once you clarify that, well, what's the tool to help you get you there? And what's the team to help you get there? Right? Because we don't need more money. We need more people. Right? The people have all the money or the people have all of the ideas to unlock the freighters we're trying to seek. Okay? And these are the things that are really important. If you can build that dream team to help you with whatever it is that you're trying to achieve, then the... It's really the sky's the limit. This is why you wanna listen to these types of podcast, but you can
[00:12:06] Brett Swarts: be obviously encouraged and challenged and and and push forward to go find that team to help you execute.
[00:12:12] Dustin Serviss: Yeah. That is, that is great, knowledge there. So I wanna flip to the other side of whatever you wanna call it, the volleyball court, the tennis court, and think of somebody now. So right now, we're we're got... We're building a portfolio. And you mentioned the cap rates. Again, when I look at... You know, I... I'm an owner of real estate, commercial real estate. I follow it, even though I'm, you know, I'm passionate about the market as well. I I am a real estate supporter, and I I can't make the numbers work for a lot of them. And so either the ones that hit the market are... They shouldn't have hit the market.
[00:12:47] Dustin Serviss: You try and find them sooner, unless they don't hit the market. But I'm always thinking in the market, there's a buyer and there's a seller. So there's someone selling thinking, I gotta get out. And then there's buyers thinking, I gotta get in. So in your case, when you've got, like, a three percent cap rate... And, listener, if you're... You want a quick tutorial, it's like what you collect in rent in simple terms versus what you pay creates a number, a percentage. We'll call it cap rate. That's a really simple analogy. But it's a quick way to go, okay. How much rent do I collect? How much are you gonna pay?
[00:13:19] Dustin Serviss: That's a number, and you could compare another property by doing that. Right now in in our region, you know, say, Western Canada, you've got cap rates of three percent. You've got foreign buyer. In residential real estate, we've got the Airbnb craze going on in our region where people seem to think that those numbers make sense. But how do we how do we vet properties quick enough and find a good deal?
[00:13:45] Brett Swarts: Yeah. Good question. And I think it... I'll make it even simpler for those who are running what a cap rate is. Your cap rate is your unleveraged rate of return. So for example, if I buy something for a million dollars and it has a three percent cap rate, Right? My cash on cash is three percent. My cap rate is three percent. It's the same thing as the unleveraged rate of return. So it's thirty thousand dollars. Right? Thirty thousand dollars. So the question is, what are other investments paying right now? That's the first thing we always look at. Like, are you gonna buy this million dollar?
[00:14:22] Brett Swarts: You're gonna put a million dollars down, right, to go buy this asset. It's only paying you thirty thousand dollars a year. How long would it take you to get this thirty... Your million dollars back? Now part of real estate is to leverage. So maybe you're putting a million down, you're buying a three million dollar asset. Right? But now you have debt. Now that debt is around maybe six, six and a half percent. Not also ideal. Right? But now you're in a what's called a negative leverage event where two of your three million is costing you six and a half and your one million is, only on the thirty thousand. Right? Or on the... It's on the...
[00:15:01] Brett Swarts: Still on the full three million, depending what you bought it for. Right? It's the cap rate. So that one that scenario would be ninety thousand. Right? But it is not looking great. Right? Whereas a year ago, we could buy something, let's say, a a three percent interest rate, and maybe a four or five cap. And by the way, hopefully, you're not buying three caps. That's... It's just crazy in itself. But the only way people make sense of these kind of things, Dustin, is what's called a value add appreciation play. A value add appreciation play. So there's really kinda two things I'm really looking at. I'm always looking at cash on cash return.
[00:15:31] Brett Swarts: Like, if I put money in today, what am I getting tomorrow? Like, immediate. Number two, how quickly can I grow my NOI, my net operating income, right, to? Instead of a three cap to a four or five or six. Is there a way that I can do that through what's called forced depreciation, Which is basically when you come in and you renovate a unit, you add the washer dryer, you do the landscaping, you you clean up the place, the old tenants are out. Those are hard to find. And then you raise the rent, let's say it's a thousand a month to fifteen hundred dollars a month. And you do that across a hundred units. Right?
[00:16:06] Brett Swarts: I don't mind if I'm buying it at a three or four cap. Right? Depending on what I can borrow at. Because if I... If there's no rent control and I can get the tenants out quickly, then I can I could carry it for a year, maybe a year and a half? And every time I can knock out a tenant, and I can get an extra five hundred dollars per tenant across a hundred units, now all of a sudden my cash on cash goes from three or four to maybe five, six, seven, or eight, or nine. And if I leverage it correctly, my appreciation skyrockets, and then I could sell. So that's the name of the game. So it's not a simple answer. Of course, there's demographics.
[00:16:41] Brett Swarts: Of course, there's... If it's a pro growth, pro business, place. Of course, what are the rent comps? What are the schools in the area? Would you wanna live there? These are all these, you know, general things you see. What are the utility costs? What are the insurance costs? Is it in a fireplace or a flood place? Like, there's so many there's so many nuances there, but that would be my suggestion to you, Dustin, if you're... If that answers the question.
[00:17:05] Dustin Serviss: No. It... For sure did. I'm happy that you sort of broke that down further. So is there... You know, you're in California. Is there deals in California?
[00:17:15] Brett Swarts: Taxifornia is tough to make sense of. Right? Because it's so expensive. So let me tell you, there's deals everywhere in every market at all times. The question is, are you looking at enough deals, underwriting enough deals, making offers on enough deals, touring enough deals to actually know what a deal is? Right? So we get to study and practice the art of buying, negotiating, refinancing, exiting properties. And that's why... That's what a good broker does, because they're studying and practicing in on behalf of all their clients so they can help you do that. So now it becomes, what is a good deal? Well, it's like anything.
[00:17:51] Brett Swarts: If you go shopping for a car, you go shopping for, whatever, if you can see a hundred cars in a, you know, in ten different dealerships, you could probably go, okay. Well, based upon this pattern, I see a deal. Right? There's a deal. So what are... What are you studying and practicing? Right? And and then, do you have the capital available? Do you have the expertise to take it down? Do you have the broker relationships? Are you direct to owner? I mean, these are all the things that you gotta have a team. You know, it's it's just... It's it's tough. You know, if you wanna... Jenny, it started somewhere. So some of that means buying the duplex.
[00:18:23] Brett Swarts: None of that means buying the ten unit. You know, if you can get a hundred units, that's really powerful. Right? And and if you do that with the team, that's even better. And then you can scale that. I recommend just going big right away if you can to building that team, doing it with some partners. You know, seventy five or a hundred units minimum. Ideally, two or three hundred units at a time. And... But it's... Yeah. Everyone's in a different spot.
[00:18:47] Dustin Serviss: So in, so in... So give us the latest example in your portfolio or in your recent, advice, a multi unit. What are you paying for something like a seventy five unit building? Like, what's the... Or or give us your recent example of one that's a multi multi...
[00:19:06] Brett Swarts: Yeah. So there's one right now working with, working with, I'm a small GP in, and and I brought in some investors and stuff. And it's, it's, like, two hundred units. It's Texas. And it's it's, it's a it's... If... That's what I call a semi value add and that it's... Most of it's already... A lot of the value's already been added. A lot of the owner put a lot of money into the deal. And the rents that we're looking to achieve, though, still have a gap between right around two hundred dollars. As the units turn and maybe some light renovations, you can raise it by about two hundred dollars.
[00:19:44] Brett Swarts: So within three to five years, we hope if you put a hundred thousand in there, we're hoping to get your hundred back plus maybe sixty or seventy thousand dollars in addition to that, which is pretty good. Right? Right. And and in the meantime, you get cash flow about six percent or so. So... But you also... What's called depreciation to offset the income. And collectively, a lot of different investors, a lot of LPs, just a couple of GPs. And and then it's rinse, wash, repeat, you know. We say, okay, we put a hundred in, we can get, you know, two hundred would be great, if we get two hundred back, at the end of three to five years.
[00:20:18] Brett Swarts: But in the meantime, we clicked it about six percent. We got depreciation on this side to offset our cash flow. Right? We call this tax flow. That's that's a powerful way to do it. Does that make sense?
[00:20:29] Dustin Serviss: Yeah. So, I'm gonna back up again and get you to unpack two things, GPs and LPs, what what that actually means. And...
[00:20:38] Brett Swarts: General... Yeah.
[00:20:39] Dustin Serviss: Okay. Okay. Go for it. You can know...
[00:20:41] Brett Swarts: Yeah. General partner and limited partner. Right? So general partner, basically, is the is the active owner or active partner that's doing the work. Buying the deal, negotiating the deal, hiring the property management is the property management, managing the operations, managing the debt stack, managing the investor relations. Like, it's everything that has to do with actually doing the work. The LP or limited partner, like silent partners, they typically just put up capital, and then they just go keep doing their day job. Right? But they get a percentage of the ownership. Typically, it could be like a seventy thirty.
[00:21:18] Brett Swarts: The LPs put up majority of the money. They get seventy percent of the ownership. The GPs, let's say, get thirty percent of the ownership, but they they do... It's called sweat equity. They're doing the work to earn that. They typically get an asset management fee of a a one percent or so. Right? And then and then they get their payday typically at the end. You know, they still get some cash flow as part of the part of the ownership. Right? But at the end, if they achieve, let's say, you bought it for ten million, it goes to fifteen million, they may have put no dollars in and put all the sweat equity in.
[00:21:49] Brett Swarts: Well, that extra five million would just be split seventy thirty after the preferred return is paid back to the investors. Preferred returns are between, like, six and eight percent typically to the LPs. But it's a win win because the LPs, like, I don't have the time or the energy to do it or the expertise. I have the money that I wanna do it. And the GP says, I have the time and the energy, and they may or may not have the money where they have a lot of deals going. But they're like, look, let's scale this business across, you know, ten or twenty, thirty properties. Let's do all the work. Let's earn the sweat equity on the exits.
[00:22:18] Brett Swarts: And that's where we come in as well. We say, okay. When you exit, we set a forty eight million dollar deal in Las Vegas for a g... Two GPs. This is their fifth deal they did with us. See if I can pull up the picture for us here. And in this scenario, you know, they have millions of dollars. This is a thirty three million dollar deal in Vegas right there. And you can watch David tell his story on this. And this one, he was GP on... Residential? Yeah. It's a multifamily. Yeah. Multifamily project there.
[00:22:43] Dustin Serviss: Low rise multifamily. Right?
[00:22:44] Brett Swarts: Yeah. Yeah. Yeah. Yeah. And so Las Vegas. And so, a thirty three million, they they they crushed it. And so he and his other GP partner, and also the LB partner, all ended up going into the deferred sales trust to further tax. And, and that's when they can move that into their next deal, all tax deferred. Right? So this is the cool way that we're doing all the exit planning and the strategic investments.
[00:23:08] Dustin Serviss: On on the LPGP. So here's here's a personal story. You know, for a couple years ago, I was approached, you know, a pitchman, whatever you wanna call it, a guy who had an idea, and it was a retirement home about four hours from where we are. So there there is no retirement home there. Get all the specs and the demographic. It was about a thirty million dollar build. And so multifamily... You know, multi... It's not a not a a nursing home, but a... Assisted living or
[00:23:39] Brett Swarts: or memory care. Yeah. Uh-huh.
[00:23:41] Dustin Serviss: Yes. So Yeah. Great idea. And that demographic around there would kinda fit that. Would they pay the rates he was talking... I don't know. But, you know, his minimum investment was five hundred as sort of these tranches of of investments. So that's fine. When I asked him about how much he was putting in of his own money, so a client of mine always... You know, he'll laugh because he's a listener. Skin in the game. And I said, how much skin in the game do you have? Well, he said, you know, I don't have lots of money. Or now I got, you know, two hundred thousand that I'm gonna put in my own money. And it was like a...
[00:24:12] Dustin Serviss: I thanked him for the meeting. It it was exciting. And he left. And I kinda scratched my head after, and I... Maybe I'm jaded. Maybe, hopefully, you can correct my beliefs that his risk is pretty low for taking on... You know, I'm considering myself. I'm considering bringing clients in and introducing him to this idea. And if it doesn't work out, meh, he's out two hundred k. So how do you... To handle that, or how do you... How does the GP have such little... I get the sweat equity, but he's gotta still do it when I've written the check as the LP and it's gone.
[00:24:44] Brett Swarts: Yeah. It's a great question, and I think it's good insight. And so... Especially on a thirty million dollar ground up development, assisted living, memory care, or anything that has to do with senior housing, that's even more complex. So the first thing you're always gonna ask in a sponsor is track record. Right? Track record. So, okay. So two hundred thousand is your is your... All you're in for. Yes. I'm curious. How many of these have you done before? How many thirty million dollar builds from the ground up? Excellent. Can I see these? How much money did you put into those ones? How are they performing now?
[00:25:18] Brett Swarts: May I speak with ten of the investors that were in that deal? If he hesitates or says no or doesn't have it, then you shouldn't even have the meeting in the first place. Right? So, now I I also invest in senior housing, memory care facilities, right, as an LP. And what's cool about the way he does it, the the GP, he puts fifty percent of his own money in.
[00:25:39] Dustin Serviss: Love it.
[00:25:39] Brett Swarts: The other thing is he is he is, he is signing on all the debt. So so sometimes the GP can be the key... The the key principle, and they're putting their debt in their name. And so this particular key principle... By the way, the group that I work with, fifty years in the business, his parents did it. They have over, thirty projects in eight states. They have an amazing track record of performance. Right? I mean, it's just in their first class, in their communications, their culture, their leadership. I remember because I actually representing them on the buy side. They all flew down in a in a jet and, they jump in these
[00:26:15] Brett Swarts: these minivans for the renter cars, and they have eight guys. And I... I'm the broker representing them to buy the land. I hadn't met the guys. They're actually from Washington, and they're flying down to California. And they land in Sacramento, and they get out, and I meet them at the property, and we're going through it. And it's like these worker bees. They all, like, land in these little cars, and they all go out. And the guys on laptops, I'm just watching all this happen. And then I hop in the van with them, and they're, like, just just, like, going. And I'm, like... And I just... I was around, like, the machine of it all. Right? Like...
[00:26:44] Brett Swarts: And this is, like... This guy's worth, you know... I don't know. This guy could be worth, like, a billion dollars to one guy. Right? He's he's a guy. He's he's driving the car. He's driving the van. It's a minivan. Right? And they just allowed me, and I actually came in for a smaller amount. Their minimum is typically two hundred. We got in for fifty ks. And, so that's the point. So our... What's the track record? Right? What's their performance? And then you're right. How much is in the money? Now if the guy... If... For example, this guy who does put fifty percent of his own money in
[00:27:24] Brett Swarts: and sign on the debt, and he's been doing it for fifty years with his family and all this stuff, and has all this success. If he came to me and said, Brett, fifty three, I'm only putting a two hundred in. But I built, you know, twenty projects in the past thirty six months, you know, between fifteen and thirty million dollars, and they've all been successful, I probably wouldn't be as concerned about that. Right?
[00:27:47] Dustin Serviss: Yeah.
[00:27:47] Brett Swarts: Right? But if he doesn't have that, then you're right. I would stop right away and be like, this is too much risk for anybody. Or even if he said I put fifty percent up, I mean, go to the flip side. Yeah. I'm gonna put up fifteen million dollars of my own money. Wow. That's pretty amazing. How'd you get that fifteen million? Where did it come from? Right? How did you earn that? And why are you willing to risk that on this? And by the way, how many projects have you done? And if he hasn't done the projects, I don't care if he puts up fifteen million or two hundred thousand. Does that make sense?
[00:28:14] Dustin Serviss: Yeah. No. That's great. So can you help, you know, listener get their head around how you find a deal? And is it realistic that a, like, common person never done a deal could put a partnership together to do something? Or should they seek a, you know, a closed fund? Or should they seek to learn? Or... You know where I'm going with that question?
[00:28:41] Brett Swarts: Yeah. I think it's all of the above. You gotta study and practice between a GP and an LP. The top GPs I know are all LPs as well. Then they're going to other people's funds. They're going to other people's deals. They're seeing their communications. They're seeing their underwriting. They're seeing their deals or opportunities. Like, it's just... It really... It's investing in your education. When I became a broker at Marcus and Millichap, our goal is to get on the other side of the phone, which meant become the owner of the real estate that we were trying to help people sell. And really, it was an investment into our education.
[00:29:09] Brett Swarts: We got to sit and listen to people that are millionaires, ten millionaires, a billionaire. Right? When you get to sit and talk and learn, that... Our minds and our opportunity is is limitless. Right? Really. Right? To the extent that God gives us certain things, we all have different gifts. Right? But that's that's the key. So if we can if we can connect and be with around and learning from all of these others, the better. And then, yeah, take action. Right? What does that mean? It could mean for... Start start raising capital. Could mean start building broker relationships. Could mean buying your own deal.
[00:29:40] Brett Swarts: What is it the gift that you've been given? Right? And how does it best serve and help other people? What value are you gonna bring to the GP relationship? Are you gonna be the guy who finds the deals, negotiates the deals, ties the deal up? You're the guy who raised the capital, who raises the debt, or even the operations. You wanna be behind the scenes and just manage the assets. Right? Like, what part do you wanna be in? And then find other GPs that are as passionate about you and values driven as you are, align with them, and... Because we can't all do all of it really well.
[00:30:11] Brett Swarts: In fact, that's that's that's that's the that's the hardest thing. Right? If you wanna if you wanna go far, right, go with others. If you wanna go if you wanna go fast, you can go alone. But that's the only thing too. How you gonna how you gonna raise all the capital? You're gonna take all the debt on yourself. There's a lot there. So I really I really would recommend aligning with people that align with your values and then who have this, a complimentary skill set to you.
[00:30:34] Dustin Serviss: Where do limited partners and general partners hang out? Is there, websites that they... You know, we could do Tinder, basically, like swipe right for apartment building.
[00:30:43] Brett Swarts: Yeah. Good question. Yeah. So the people that approach us that wanna invest with us, and we create a lot of content on it like you do, like a podcast, and we just... We speak at events and get to know people. And we just show them our deals. Like, I mean, I just... You know, we did a thirteen million dollar deal in in in San Diego, and then and then we did a, a twenty nine million dollar in Texas,
[00:31:03] Dustin Serviss: and then we had a two
[00:31:04] Brett Swarts: point two million dollar deal in in Walnut Creek, and here's one in in Georgia for seven point seven. So what I found is just a a lot of people you can talk and talk and talk. I think you guys have a saying up there in Canada. Right? You know, don't... Just give me the steak. I don't need any of the sizzle. Right? Just literally just show the stuff that you're doing. Right? Or introduce them to people that are already doing the thing. And, like, this is what I've done. This is what I've done. This is another one I just closed. We closed five deals in in, in in, in, this month in December. December. We're in January now.
[00:31:33] Brett Swarts: And so that's really it. Create content, serve people, add value. People are naturally gonna be attracted to that. Write blogs, go to BiggerPockets, go to Facebook groups, go to real estate meetups, read the books, buy the books, get into masterminds, go to the conferences. I mean, we already know all this stuff. It's just a lot of work, and it takes a lot of time. But if you're passionate enough, you could do it.
[00:31:57] Dustin Serviss: Brett, I did... You know, and people can look up your bio and look up your success online and and figure out that you're you're doing well and kicking ass. But what do you do in your own world? I'm not asking for specific numbers, but how do you balance... And listener, Brett's got five children. So, how do you balance your own world of, like, you make good money. Okay. What do you got? What do you got? Okay. I see your family. What does it say?
[00:32:22] Brett Swarts: Oh, go. Keep going. I was just... You keep talking. I was just showing for people who wanna see the family.
[00:32:26] Dustin Serviss: Yeah. So we got a great family. How do you manage where you spend your own money? Do you make decisions with your spouse? Do you allocate all your own money into real estate? Because that's, you know, that's obviously your, what we call, wealth edge. You're you're good at that. Your risk is lower that you're focused on that. But is there a a strategy, or is it pretty much at your age, just go go hard business, reinvest in the business, and take as little out as possible? I've got a good question there.
[00:32:57] Brett Swarts: It's a good question. It's a couple different parts. Right? So first thing is I I try I try to practice the habit of working harder on myself than I do on my job. And it's a it's a quote from a guy named Jim Rohn, and and the and the quote continues to say, if you work hard on your job, you'll make a living, and there's nothing wrong with that. That's fine. But if you work harder on yourself, you'll make a fortune. And the idea is not just to make a bunch of money. Although, that's really cool because you can help a lot of people and have a lot of fun. Right? The idea is to become everything we were created to be.
[00:33:32] Brett Swarts: So that's our health, our finances, our fitness, our family, our, our our personal development and leadership, our faith. Right? These things are all so, so important, right? And if you could focus on working harder on that, like a lot of us, like, especially with me, I know my story was, hey, I wanted to, you know, get that degree. And so I wanted to get that basketball scholarship, and I wanted to, you know, you know, get that first big job, and I wanted to close that first big deal. And it was always this external pursuit. Right? And those things all achieved. It all happened. It was great. But there's something missing.
[00:34:10] Brett Swarts: Like, what's missing? Right? And part of that was reestablishing my faith. And that changed, you know, no matter what was going on on the outside externally, I was centered in my faith. And for me, it's Jesus. I'm a Christian, right? Like, it didn't matter if everything else was going wild and crazy. I'm at peace. I can't explain it. Okay? Spiritual thing. The other thing could be opposite, right? Everything could be going amazing out there externally on the world kind of stuff. But internally, I wasn't focused or, you know, you know, connected with with with Jesus in an intimate way, like something's missing. I can't explain it, you know.
[00:34:47] Brett Swarts: My dad is wasn't a believer. He's still not... We're praying for him. He's still not... My mom is. And so I had both sides growing up with the public schools, heard all this stuff, you know. And so for me, it starts right there at the foundation of my faith. Now that that moves out into our family, right, with my wife. Wife and I married thirteen years. It's it's our money, right? It's her money. In fact, I have to tell her, hey, this is your decision too. Like, you can't just, you know, tell me to make all the financial decisions. Like, this is your... Our decision collectively. Okay?
[00:35:14] Brett Swarts: So we wanna practice, you know, in the beginning, it was Dave Ramsey, like, paying off all the debt. Right? Getting a clear budget. Right? It's like getting in shape. We paid off sixty four thousand coming out of college of credit card debt, a little bit of student loans and, like, it was it was kind of a mess. But for twenty six months, we buckled down. We lived in a hundred and thirty five thousand dollar house and just, you know, just paid it all off and it was great. And then fast forward as we built the wealth, we just try to study and practice, ratios. We give we give, we give about ten percent away, to causes we believe in.
[00:35:47] Brett Swarts: We we try to invest and save a good percentage, and we also enjoy our wealth as well. It's all of these things. Now, we also try to get seven different income streams, right, is our goal. Right. The average millionaire has seven different income streams. And so as you get multiple income streams, especially if they're passive, guess what? It takes a lot of pressure off of that, just that one income stream. And so these are all connected and steps. And I think that answers the question, but I don't know. Dustin, what are you thinking?
[00:36:13] Dustin Serviss: No. It's, it's a great... Because everyone does it different. And, as an entrepreneur, and especially if you're successful, it can feel lonely sometimes. And, you might not feel open enough to share with, you know, other people or... You know, unless you're part of mastermind groups or confidential places. You know, so it's always nice to to kind of... And I... I'm grateful, and thank you for sharing that with us, so kind of a deeper dive. But I, I had a lot of fun. Is there, one thing that you're most excited about in the real estate space or or crypto or, you know, this will be your your your chance to to enlighten us on what are you,
[00:36:52] Dustin Serviss: based on all of your experience and knowledge, most excited about in, you know, the the commercial or wealth space, as as you see the interesting economy and world that we live in now?
[00:37:04] Brett Swarts: Yeah. So we're in the largest wealth transfer in the history of the planet that's happening right now, Dustin. Okay? In the history of the world, there's never been more wealth transferred ever. And in fact, there's about thirty two trillion is the estimate that's passing from the baby boomers, these are our parents, right, to us in the next twenty years, thirty two trillion. Think about that. Right? And fifty percent of all of that wealth is tied to high end primary homes, businesses, and commercial real estate, and they're illiquid assets that have... Are subject to huge estate tax and capital gains tax.
[00:37:38] Brett Swarts: And so it's our opportunity and actually our our, our responsibility to educate people on how to exit and move funds outside of the taxable state and or defer capital gains tax so that the wealth stays with the people versus going to a government that will waste it away in about ten seconds. Okay? And so the freedom of... Really... And this I'm speaking for America right now. The freedom of America is directly tied to who controls this thirty two trillion. And to mean that we can give it to the causes we believe in. Now the good news is if we use advanced tax strategies that we have,
[00:38:18] Brett Swarts: capital gains tax and estate tax strategies, when they exit, the funds actually create more tax revenue because the funds need to go into businesses or investments and create housing and all these really cool things. Everybody wins. Government wins too. People who don't know about them and don't execute them, don't have a team, gone forever. K. So there's ten thousand baby boomers during sixty five every single day, and there's over seventy seven million in the US alone. Now, this also applies to Canadians Canadians as well if you have properties, especially... Actually, it's even more so to you guys. Okay?
[00:38:48] Brett Swarts: Because if you have properties, let's say in Washington or tax of foreign or anywhere in the US, k, you are subject to... You only have a sixty eight thousand dollars approximately a state tax exemption. So let's imagine you're worth fifty million dollars. Okay? Dustin, and you own... And it's... All of it's in, a New York apartment complex, and you live in Canada. If you do not exit and move it into something like a deferred sales trust plus, you are subject to forty percent of that fifty million being wiped out by the US government. And nobody wants that. Right? And so instead, you as a Canadian citizen, or if you're in Europe or
[00:39:21] Brett Swarts: wherever you're at, you sell, you can move it outside. You can eliminate that forty percent debt tax. And this is such a powerful thing that we're on a mission to train and coach ten thousand business professionals across the US that know how to do this and are aware of it. Otherwise, they're gonna get wiped out. And it's it's gonna be brutal. Okay? So that's that's the biggest thing. Just just... It... It's not about cash flow anymore. I mean, it is, but if you're a multimillionaire, you probably already figured the cash flow thing out. It's about tax flow. Tax flow. Because guess what? Government spinning is out of control.
[00:39:54] Brett Swarts: Inflation is out of control. Thirty one trillion alone in the US for debt. So you've gotta focus your attention from your cash flow to your tax flow.
[00:40:04] Dustin Serviss: Tax flow and, you've you've, if we only had another hour to debate, sort of the the world, the economy, but that could be another podcast and, the transfer wealth. And I love how you put it that it is a win win for the government. And so, listener, again, can't stress enough the power of a team. I can't stress enough the power of, you know, ETFs were a big thing back, you know, four or five years ago. Low fees, low fees. Do it yourself. Do it yourself. Advisors are shit. Well, guess what? You know, the wealthiest people in the world usually don't do it themselves. So Brett, give us a summary of where people can find you online.
[00:40:42] Brett Swarts: Yeah. I think go to capital gains tax solutions dot com. You can also search that on YouTube or iTunes or Spotify. It's Capital Gains Tax Solutions. Our Our YouTube channel, by the way, is filled with an amazing amount of playlist that break down the ten thirty one exchange versus the deferred sales trust and kinda helping people unlock, what's possible with exit planning. You can also look at the new book that's coming out. It's called building a Tax Deferred Exit Strategy. Kevin Harrington from Shark Tank's in the book. And this is the proven playbook for unlocking your ideal well plan on selling
[00:41:13] Brett Swarts: assets of any kind for yourself or for your clients. It's called Building a Tax for Extra. It's gonna be on Amazon here shortly. So look for that as well.
[00:41:20] Dustin Serviss: Awesome, Brett. Thanks a lot. Thanks. Thank you for tuning in to this episode. If you enjoyed the show, please like and rate the show, share with a friend, or use your new knowledge in your next conversation. If during the show something gave you a pang of inspiration, motivation, or sense of uncertainty, act on it now. Get the clarity you're looking for. Find the permission you seek. Go to service wealth dot com to discover how others are learning how to take Fridays off or buying a recreation property or spending more money. If you're an organizer of an event where you believe my philosophy on finance
[00:41:51] Dustin Serviss: lifestyle design would be applicable, go to service wealth dot com and book me as a speaker at your next event. If you want a copy of our new book coming out soon, send me a message on Instagram or Facebook, and we will be sure to get you a first copy.