Are you ready to unlock the secrets to tax-free wealth through real estate investing?
Join us as we welcome back the legendary Dave Foster, a seasoned 1031 exchange expert and author of the new book, “Lifetime Tax-Free Wealth: The Real Estate Investor’s Guide to the 1031 Exchange.”
Building on his previous insights, Dave delves deeper into the essentials of 1031 exchanges, strategies for both new and seasoned investors, and how to effectively defer capital gains taxes. They discuss the “defer, defer, die” strategy, utilizing 121 Homestead Exemption with 1031 exchanges, and preparing for retirement through smart investment planning. Whether you’re a flipper, a buy-and-hold investor, or nearing retirement, this episode is packed with invaluable insights to help you build and preserve your wealth.
Key Takeaways:
- 2:00 Guest Introduction: Dave Foster, 1031 exchange expert and author, joins the show.
- 4:03 What is a 1031 Exchange? Dave explains the basics and benefits of 1031 exchanges.
- 6:52 Deferred, Defer, Die Strategy: How to use 1031 exchanges to eliminate taxes for heirs.
- 14:35 Flipper Strategy: Adjusting fix-and-flip models to benefit from 1031 exchanges.
- 16:13 Book Overview: Insights into Dave’s new book and its educational focus.
- 19:13 Getting Started: Where to begin learning about 1031 exchanges and planning for your next move.
- 21:22 Lessons Learned: Dave shares his biggest lessons and advice for real estate investors.
- 22:47 Where to Find the Book: Information on purchasing the book and accessing more resources.
Don’t miss this opportunity to revolutionize your real estate investment strategy. Grab your copy of “Lifetime Tax-Free Wealth” today and start building your tax-free wealth legacy!
Connect with Dave:
- Website: the1031investor.com
- Dave’s LinkedIn: https://www.linkedin.com/in/davefoster1031/
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- Contact Number: 843-619-3005
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- FB Page: https://www.facebook.com/exitstrategiessc/
- Youtube: https://www.youtube.com/channel/UCxoSuynJd5c4qQ_eDXLJaZA
- Website: https://www.exitstrategiesradioshow.com
- Linkedin: https://www.linkedin.com/in/cmelette/
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EXIT Realty has a revolutionary compensation model training and technology that provides you with the tools you need to start and build your successful real estate career. Call EXIT Realty Lowcountry group today at 843-619-3005 that is 843-619-3005 or visit https://exitlowcountry.com/joinexit and make your Exit today.
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CORWYN:
Do you want something more? More meaningful moments, opportunities, deeper relationships, and memorable experiences? Do you want to make a difference? If you said yes to any of that, a career in real estate could be the opportunity you’re looking for. Guiding people through one of the most important decisions they ever made. The purchase or sale of their home can be both rewarding and lucrative. Exit Realty’s revolutionary compensation model, training, and technology provides you with the tools you need to start and build your successful real estate career. Call Exit Realty Lowcountry Group today at 843-619-3005, that’s 843-619-3005 or visit join.exitlowcountry.com and make your exit today.
Good morning and great morning to you our listeners. Welcome to another fabulous episode of Exit Strategies Radio Show. Hey, I am your host, Corwyn J. Melette, broker and owner of Exit Realty Lowcountry group in beautiful North Charleston, South Carolina. Guys, if this is your first time tuning into this show. Hey, y’all know what I say. And I mean it. You are in for a treat. Because our mission is very simple and that is to empower our community through financial literacy and real estate education. Guys, we’re legacy building that is what we do. So I’m super excited today. And before we get into my site, man, I want to say thank you to our loyal listeners, those who tune in, guys, I’m always giving you shout outs, because I’m always humbled to encounter you all in the streets, as you are listening to the show on your bleeding, good, useful, applicable information to help you on your path to financial freedom to building and creating well, to building that legacy. And guys today, today’s show lines up straight with our mission. I’m super excited you had. And we always work to have the best guests here on the show. So we had to go back in into the archives and bring a guest back today, because he has done something amazing. And he has some very good information to share with you. Those who may remember, we did a show about 1031 exchanges. We had none other back then, the infamous Dave Foster with us. Well, Dave is back with us today, guys. And Dave has written a book. And look here, we got to talk about this right here. Ready? Let’s listen. Lifetime Tax Free Wealth: The Real Estate Investors Guide to the 1031 Exchange. Dave, how you doing today?
DAVE:
Well, I’m a lot less tired now that the book’s done. I gotta tell you, Corwyn, we’re sitting there, I was waiting to come on. And I realized, I am like, I’ve been like your dream guest all of my life. Because my entire life has been one of looking for exit strategies. When I was two years old, I was trying to get out of eating B’s. Throughout most of my adolescent years, I was trying to exit from doing chores. And now that we’re at the HOA, say the final 50% of my wealth intact, becomes a big priority. It’s awesome. I love
CORWYN:
Well, Dave, thank you so much for that. Thank you so much for that. So Dave, like you are like the expert on 1031 exchanges. A starker exchanges is some people may know them that have been around for a while. So Dave, if you don’t mind, refresh our memories for our listeners on what a 1031 or what a stock exchange is.
DAVE:
Yeah, absolutely. So my the bulk of my life, I’ve just been a frustrated real estate junkie. That’s what I wanted to do, where I’ve lived, what I’ve done. And in real estate, as you well know, Corwin, there’s this cute little phrase that says, you make your money in real estate when you buy because the idea is you buy cheap, you’re then selling high. There’s all sorts of wisdom and smart things about that. But here’s what I discovered over time. And that is that equally important is you get to how you sell your real estate determines what you get to keep. And ultimately that’s the name of the game. It’s not just how much you make. It’s how much you get to keep at this. The 1031 Exchange is so powerful because it allows you to sell investment real estate and purchase new investment real estate without having to pay the tax, you get to use it for. So whether it’s for two years or 30 years, you get to make the money off the tax that you did never had ultimately throughout. And this is where the book came in. Because ultimately, the 1031 exchange can be used to go throughout any real estate cycle, because you can go from single family homes to multifamily to commercial to Roman, to San Francisco to New York, anywhere in the country, any type of real estate, whatever the real estate market is telling you, it can’t get tax deferred, keep it working for you. And then you can also use the 1031 anywhere in your life cycle. When you and I had more energy than we had money or break, harder, right? We value added, dude. But at a certain point in time on there. I don’t know if you are yet or not. I get tired. Because I’m tired of tenants, I’m tired of toilets. So I want to transition to something more passive, the 1031 exchange lets you do that. Retire, keeping the tax deferred. Until finally, and although we don’t like to talk about it, we’re all heading for the pine box. 1031, when used correctly, will allow you to die and give to your heirs, your real estate with the deferred tax eliminated. You don’t pay, it doesn’t pay it, your heirs don’t pay it. It truly does disappear. So I created this module called defer defer and then die, you’ll never pay tax. And that, in my mind is the ultimate exit strategy.
CORWYN:
Wow, that is impressive. So Dave, that’s hilarious! Defer, defer, and then die. And that is hilarious. So that really does get you completely out of it.
DAVE:
Here’s the caution. This is what everybody has to be very careful. If you have children looking that are close to college age to hot, tell them about the last day where if you do you might want to be careful if one of your children decides to go to medical school. Ah, they might be looking to pull the plug. What do you think
CORWYN:
That is priceless? That is hilarious. Oh, that’s hilarious. So Dave, let’s talk about the book. Last time you were all in I think you were was the beginning of the idea that was sparked. And you were trying to get it out of concept out of your head onto paper and get it articulated in a fashion that is adjustable, easily digestible by the consumer. So tell us about the book was the driving force behind it. Let’s start with that.
DAVE:
Yeah, well, the driving force goes all the way back to when I started doing 1031 exchanges for myself and for others almost 30 years ago. And that was that starter, the starter case, which really made 1031s available to normal investors like you and I was a case that the IRS actually lost. So if you would just imagine a scenario where the IRS has to let you do something. But they’re ticked off, they’re not going to make it easy. And they’re certainly not going to market it for you. So I saw all along that one of the greatest tools that I could offer to people was education. So that education filled in the gaps that the IRS was not going to, because it literally is two sentences of statute at about 10,000 pages of case law. So how do we distill that down without all becoming attorneys, right. So that’s been my driving force all along. The book just became an extension of that. Because of that, I want to get something in written form that will supplement all of the modern social media that we’re using, but give it to people in a form where they can have it as a reference material. And so that’s what we did with a lot of focus on education. How did you get 1031 exchanges, what they actually do, how to use the four DS to your advantage. What was funny core was that by the end of this book, I realized that what I had not written I had not written so much how to mangle as I had written a strategy on how to, and this is beautiful for today, exit keeping your money. And that has resonated with so many people because they can take the book, and then they can take the 1031 statute and they can take their personal situation and your mix those three together. Out of that will come a roadmap for him to retire and die very well off.
CORWYN:
So let me ask a question here. And so we’re deferring taxes, those taxes that we defer will eventually have to be paid, correct?
DAVE:
No, my friend. You’ve already forgotten the fourth D.
CORWYN
That’s when you go. So we defer all the way until, okay.
DAVE:
Death. But this is what’s the, this is what’s so important that many people do not know, when you die, your heirs get your property at what is called a step up in basis. So they inherit your property, just as if they paid market value for it. So all of that deferred tax over the years goes away, you don’t pay, your estate doesn’t pay, they don’t pay tax free. So for those of us looking to do something, maybe beyond just exiting. Well, that’s a way to not only exit well, let’s also give your children, your heirs, a legacy of wealth to start. I love these people. He died after a few years, and his son inherited all of his property. Now, we didn’t see a son for a while because he inherited have to step up in basis. So there was no profit, that he had to shelter. After a few short years, his son started doing his exchanges with us. And then he passed away a few years ago, the property went to his children. And we are in just now starting to see his children again, doing 1031 exchanges. That’s three generations. And they have not paid a pity in capital gains tax to the government. Three generations. That’s generational.
CORWYN:
Yeah, that is generational wealth right there. That’s one of the things that Dave in conversations and committee, community meetings and things of that nature that I bring up. And we oftentimes approach this, we approach real estate investing with a singular focus, which is making money, but we don’t include in that, how we can shelter money, meaning you make you profitable, but you can defer these taxes, which means that’s more income, that you have remaining a profit you have remaining to reinvest into the next property. And you can accelerate your portfolio’s growth that way. And if you’re holding properties, as rentals and things now the rent money comes in tax free, as well. So that’s tax free income, capital gains tax free,
DAVE:
because your rent can be offset by things like depreciation, as well as expenses. So you’re right. It’s a way to cut down real estate ownership, in my mind is the absolute best way to make money in the world. Because the IRS gives you advantages, tax wise, not only for buying and selling, like the 1031, but also for generating income, and providing housing for people through things like depreciation. Yeah, you’re absolutely right. The greatest, I’m gonna have to tattletale on myself here. Because the greatest illustration of this is a mistake I made 30 years ago, when I sold my first piece of property. And I made enough money, I would have had a $30,000 tax bill. And I didn’t know that. So I paid $30,000 in tax, if I would have 1031 exchanged that one property and pay 10% on my money over 30 years, that’s not that difficult to do. We’d have over $500,000, just by not paying $30,000 wants, that’s how powerful that thing is. So when everybody says, well, you’re gonna have to pay anyways, why not pay it now? Well, because then you don’t have to you can die. But secondly, because every year you defer that tax, you get to make the money on it. And in my case, it would have led to over $500,000 in one transaction. So the 1031 exchange, strategically used is, I think, the absolute best wealth building tool out there.
CORWYN:
I can’t agree with you more, Dave. I mean, it definitely is for someone who, against sees the long ball game within the industry, or looking at the long ball game, because you intend to make it profitable. I mean, we have guests on all the time that are in some made mention of this as a part of their strategy. They’re doing flips and acquiring other properties. And as they’re doing this, they’re sticking in doing 1031 and all that stuff and moving things around the short version is they are definitely working to defer to that way they’re able to keep more money to be able to invest more money into the next
DAVE:
Absolutely. Matter of fact, so that’s the second we’ll talk about flips would you like to because I’ve actually got a chapter on flips in my book. Oh, wow. Very interesting strategy. Flips themselves do not qualify for 1031 exchange it just because like you said the 1031 exchange has to be the long game. So when your intent is simply to buy it, fix it and sell it, you can’t do a 1031 exchange. But the strategy that I lay out is to slow it down a little bit. And instead of buying it, fixing it, flipping it, you buy it, you fix it, you rent it, and then you refinance it. Because refinance is not taxable. So a lot of people will say, Wait, can I see money, if I’ve got a 1031, all that money’s going forward into the new property? Periodically, you do a cash out refinance. And that money you can use for anything that you want, in the case of a flipper, because they’ve got that a driller need, right, they need the fix, of fixing the property and sell it, they use the cash out refinance, to go buy their next flip. But again, we’re gonna flip it, they’re gonna fix it, or rent it, refinance it, and then take that money to go buy their next one. And literally in about 24 months, they can have as many properties percolating on a 1031 Exchange, as they would have by simply fixing and flipping and pay the world tax. Without a tax, that’s
the thing.
CORWYN:
That is awesome. So you mentioned it as a chapter within the book. What are some of the other subjects you pick up by chapter as you go through the book.
DAVE:
So the first section of the book is laid out as a, how to do them. A bit of history, but then all the nuts and bolts, because one of the things it’s so important is that you have to have a Qualified Intermediary involved. They remember, you don’t want to have to sort through 10,000 pages of case law. So there’s a section on how to do them, then we go to the section on how to use them strategically, how to adjust your fix and flip model. How to this is a lovely one, there’s a whole section on when it’s time for retirement, how to convert a former rental into your new primary residence, because the primary residence rule was actually let you sell that property and take some of the gain tax free. So there’s strategies like that. And then I ended with a several case studies, because that’s how I learned the best time to look at others and say, Man, if Michael Jordan learned to dunk by sticking his tongue out of it, I could do that too. Okay, well. But I do learn best from watching others. And so the studies are actual clients of ours, that they have, it’s taking their journey. And now they use 1031 exchanges throughout their life journey to keep the tax man away. That
is awesome.
CORWYN:
That’s awesome. So Dave, someone looking to get started or get a better understanding of stock exchanges, 1031s, where should they go? What should they do? What would you advise them to consider as a move to move forward?
DAVE:
Now, Corwyn, The book is obviously a great start. And I really appreciate you taking some time for us to talk about it today. Because it is such one of my mentors once described it as going two miles deep in a two foot wide creek. And you got to be like half insane even want to do this as an intermediary. But that’s where I am. That’s where I live. So because you have to use a Qualified Intermediary. And we have to be so incredibly well versed. The idea is to plan well before you’re gonna sell a piece of property. We’ve developed a whole educational website at the1031investor.com, where there’s a YouTube channel. By the way, please go there and subscribe to all those things that as a boomer, I’ve been waiting to ask all my life and 47 videos, I think, again, counting because there’s new strategies coming up all the time. And you’ve just got to start your education now. Because it’s just like trying to find the perfect gas station off the interstate. You don’t want to reach it and see it right at the same time you’re at the off ramp, you’d like to be able to plan a little bit where you’re going to take what my children refer to as the crazy day of exit. So planning is so key. And you’re right, find a good experience QI, holler at us, use YouTube that vet what you read on you see on YouTube and educate sooner rather than later.
CORWYN:
Dave, a couple more things for you. Number one, I want to make sure we get your contact information out where can people get in contact with you? Where can they find you? Phone number, whatever, website whatever?
DAVE:
Yeah, that’s what it gets. Yes. Is that the1031investor.com, t-h-e 31 investor.com. And you can access our booking schedule, you can start an exchange. There are calculators for the nerdish folk who want to actually get into the math of these things. And that there’s access like I said to the YouTube channel as well. We’ve tried to make this education because some people have to learn what the 1031 could do for them. Some people have to decide whether the 1031 exchange is right. It may not be in certain circles. stances are the cheerleader for what it’s done for me. But I gotta tell you, I would not hesitate to not do a 1031 exchange, if it’s not going to benefit me, you know, there’s another old saying out there that it’s not the deal that you don’t get that kills you, it’s the deal that you get that you shouldn’t have that which is great. Like, that’s one exchange, there’s no penalty for starting and not completing a 1031. So you really need some good guidance, while you’re going through that, to make sure that you’re not getting that deal that’s gonna kill you.
CORWYN:
Well, interesting. That is very good to know. So two more things for you, Dave. And you may remember this from before, when we talked about it, but what are referred to as our is a high side question 20/20, you turn around, it’s always clear to always ask this question, I like to ask this question. Because sometimes, when we look and see where we are, we realized, oh, man, if I’ve known this way back over here, I would have been way down the road somewhere much further now. So for you, what is that knowledge? Or what is it you gleaned that over these years that if you want to know this back in the very beginning, or some time facility earlier, if you will, in your career would have catapulted you so far beyond where you are now?
DAVE:
Yeah, I think there’s two things. The first one really just harks back to my first mistake, whenever we talked about, if I would have known about 1031 exchanges, then I’d be five or $600,000 richer today. So that’s number one. Number two, though, is I think that we live in a microwave age, and real estate is a slow cooker. And we get impatient. And we listen to these folks out there that want to churn you. And they’re talking about the markets change. It’s a new paradigm, it’s going to be different from now on, you got to buy now you got to sell now. Now, real estate has always been and will always be some would say the Titanic. But let’s just say a really big ship. It does not turn on a dime. It is cyclical. And if you are patient, one of the beautiful things was that all of my clients in 2008, that did not have to sell their real estate are many times over millionaires now. Because what happened to real estate, he always comes back. And if you can be patient, you will benefit from the cycles, trying to time it will kill you.
CORWYN:
That’s a really good answer. You’re exactly right about that at the travel time I’m looking at you probably will pass out of spazzed out otherwise. So your ex you’re absolutely correct about that. So Dave, where can people get the book?
DAVE:
Best place is to go to Amazon? And you could Google up 1031 book Dave Foster lifetime tax free wealth, the 1031 Investors Guide or the Real Estate Investors Guide to the 1031 Exchange. We’re still on Amazon. We don’t even had a yet on our website. But it’s coming.
CORWYN:
And that website is the103Investor. Correct? Exactly. Yeah. Perfect. So far. Listen, guys, y’all please, let’s go get the book. We talk on this show all the time, about building, creating wealth, cetera. So in the creation and the building of it, guys, this is a tool that accelerates that building. This doesn’t help you necessarily begin that process of creating them. But what it does do is catapult you, it basically is a shopping bag and you just stuffed in it, so to speak with additional money. I mean, that’s really a way to look at it, you’re able to squirrel away saying unable to move forward. So listen, guys, please go buy this book. Please make sure that you’re tagging and touching in with a 1031 investor. So you can get more resources, more access to how you can build wealth and create legacy for you and your family as well. They thank you again so much for being on the show with us today.
DAVE:
It’s always great to be here Corwyn.
CORWYN:
Appreciate it. So look for our listeners, guys. Y’all know what I do, y’all know how I do it. Y’all know what I say about it? And y’all know always put those things because I’m real about it, which is I love you. I love you. I love you guys. And we gon’ see you guys out there in those streets.