hey Colorado Chris Lopez here and we have a great guest today who's going to talk about the lazy 1031 exchange so as you know you may be one of these investors that ask us we've talked to and they say hey I've got all this equity in my Denver or my color springs rental property what can I do with it to maximize it now it used to be a lot of 1031 trade-ups or refy buys well the market has shifted that's a lot tougher so that means other opportunities appear and so we're going to talk about some Advanced ways to do that plus some alternative asset classes you can 1031 into uh as you get out of your rental properties and I'm joined by my co-host Jenny bis hey Jenny hey Chris I am very excited for this podcast and thank you for teeing it up um our guest is Thomas castelli who is a real estate investor and a CPA so a fantastic combination and he's also the host of the tax smart real estate in investing podcast welcome to show Thomas uh thank you for having me it's it's a pleasure to be here with you both today yeah we're really excited and you know a couple months ago I know Jenny attended one of your podcasts or not podcast your webinars called The Lazy 1031 exchange Jenny can you fill us in on that and then why we had to have Thomas on the show yeah I I love this because um I actually inadvertently did it last year um for 2022 but I think that it's a fantastic option for people that perhaps want to take some chips off of the table and don't want to be up against time crunch that a 10:31 puts them into um and as we know that can kind of create some bad decision-making process when the when the clock is ticking so I just love that um the options that the lazy 1031 provides people is just another alternative for them to think through as they make their decisions so Thomas what is the lazy 1031 how do we even start attacking this question okay great I mean so the that that's a great question so the lazy 1031 exchange is a name for a strategy that has actually been around for since the 80s um but has thanks to bonus depreciation which I'm sure we'll dive into a little bit deeper has really gained a lot of traction and a lot of popularity over the last few years since uh since the tail end of 2017 so I guess the best way to break it down is to start with a quick overview of the passive activity rules and because that that plays the found that plays a big role so that's kind of the foundation of this strategy so I'll give the quick overview so uh back in before 1986 you were able just to buy a rental property and uh these rental properties would typically generate losses thanks to a non-cash expense called depreciation which only really exists on paper so in other words what that could allow you to do is that can allow you to have a property that you're generating positive cash flow from but yet you're telling the IRS and the state tax authorities that you're losing money and um that's thanks to this depreciation expense so then the tax reform Act of 1986 came about and uh what that did is introduced something called section 469 of the tax code the passive activity rules which made losses from rental activities Passive by default and what that meant was is that you can no longer take like before this you could just take these losses and use it to offset your W2 or perhaps your active business income really no questions but what the passive activity rules did say all rental activities are Passive by default and that means that these losses can no longer offset your active income they can only offset other passive income which for many investors is their rental income or gains on the sale of their rental properties so uh there was something called reps that would the real estate professionals that's that was later introduced that could allow people work full-time in real estate to offset their active income but if you're not working full-time in real estate State that's not really relevant so the question really becomes how can you best maximize these passive losses so what ends up happening is when you buy that rental property uh if you do something called a cost segregation study what that will do for you so let let me back up real quick and break it down like this so when you buy a property it's not just the house it's not just the walls you have all these various components within that property things like light fixtures appliances you might have land improvements like Landscaping uh pool shed sheds things of that nature and when you when you buy that property everything is lumped into one bucket it's usually 27 and a half years for residential property so that means that you the your property is effectively depreciated 127.5 so just a little bit every year and while that can help shelter a lot of your rental income from tax it's not going to usually produce sizable losses for you but now uh thanks to tax cut and jobs Act of 7 2017 we now have something called bonus depreciation which allows you to significantly accelerate depreciation on property with a class life of less than 20 years so what a cost segregation study allows you to do is it basically someone comes down to your property or sometimes software can do it for you and it's going to give you a report of the various components of your property so for residential real estate you're going to have 27 and a half years you're going to have 15-year property you might have a little bit of seven-year property or five and then fiveyear property and depending it's all property dependent Market dependent depending on where you are but usually somewhere between 20 to 30% of your property's value can be reallocated to this 5 seven and 15year bucket and bonus depreciated now here where we are in 2024 bonus depreciation is 60% so I'll give you an example that look like now in 2023 it was 80% so let's just say for example you bought a $500,000 property and let's just call let's just say that so land is never depreciated so something I should should mention there so we always have to allocate a land value to your property now that will be determined B usually based on the property tax card or an independent third party appraisal but for the sake of of this example we we'll assume that 80% is allocated to the actual building itself that's actually a pretty common example we see around here in Denver and springs I mean I I was actually looking at uh oral property day with with a client and her property was 79% so 80% is perfect for our audience here yeah no no it's it's a very common exam it's a very common number and sometimes it'll it align so if we go with the 80% that means you have $400,000 in the building value and let's just take right down the middle that 25% of that is going to be eligible for bonus depreciation so that's going to give you on that $400,000 property that's going to give you $100,000 as bonus appreciation eligible now we're going to go ahead and we're going to take uh we're going to take 80 60% of that excuse me we're in 2024 so that's going to give you a depreciation deduction in that first year of $60,000 now not to get too technical with a little bit of other stuff but basically uh there's going to be other com that the remaining 40% will start depreciating that you didn't take in bonus depreciation and the other in 27 and a half year 0.5 year will still start to depreciate so it's really going to come out to be around somewhere around 68.5k but that's going to be the amount that's going to be the amount of basically depreciation you're getting that first year and that's usually going to cause a sizable loss on your property so you might actually make money and that's awesome but you're going to tell the IRS you have this big loss now the question is what happens to this big loss well the P activity rulle state that it's first going to offset any passive income that you might have for the year so if you have passive rental income positive rental income that might be being thrown off of other properties it's going to help you offset that passive income so you're not paying tax on your rental income now uh if you did sell any properties it can help offset the gain that's we'll get more in that in a second that is the lazy 1031 exchange but if you're not using it if you're not using these passive losses you don't have enough passive income these losses don't just disappear uh they get suspended and carried forward to your next year's tax return and oftentimes what happens is if you're in this situation where you're you're not able to use these passive losses every year they start to accumulate they start to accumulate can I jump in here to help like because you you you are like you know Jen and I are following you and you're and this is you know knowledge we've learned a long time and I've talked a lot of clients about this I I want to like pause here to make sure people don't get lost because we get this bonus appreciation uh and let's just say it's that $60,000 to keep it simple now if I'm a rep status or I'm a real estate professional status but Jenny is not I can use all the depreciation across any income correct right if you have the real estate professional status if you spend more than 750 hours and more than half of your total working time working in real estate you can take those losses the $60,000 in losses use it to offset your W2 your active business or your other non-passive income and you would be able to use that in that case yeah yeah but then in this oh go I was just going to jump in and say most of the people listening to this podcast you know there are exceptions um they have a day job so they are not rep status so I just kind of wanted to highlight that so if you have a day job pay a special attention because this is a really cool trick that you'll be able to utilize yeah and so it's where like you know uh it's not like if you don't use it you lose it that's not the case um but that's where it depend depending on how you're categorized you may able to use it all in one year but if not this tees up into what you were saying where it'll start caring forward and I have this conversation a lot so I want people to follow along because like we see too many people leaving money on the table for to Uncle Sam yeah right right absolutely so if you're not able to use it it's going to carry forward and and the good thing about that is that it can help you shelter future rental income tax it's the first thing it does for you which is phenomenal but the second thing and often what we've seen over the last few years be really powerful is what's become known as The Lazy 1031 exchange so to preface the the 1031 so usually when you do a 1031 exchange you have to go to it qualified intermediary they have to receive the funds at at the closing table then you have a 45-day window to identify typically three properties or up to three properties that you might acquire and you have a total of 180 days just about six months or so to actually acquire the next property and that allows you to defer your capital gain down the line but those timelines are pretty tight right it's pretty tough to do that so where the lazy 10301 exchange comes in is it allows you to sell your property and then you can use the suspended passive losses that you had previously if you had any to start offsetting that capital gain on sale um if you can't if you don't have enough suspended passive losses and these can be found just by the way on form 8582 of your tax return that's where you could find your suspended passive losses now if you don't have enough what you can do is you can go and invest into another property in that same year so this is the key to this strategy it has to be in the same taxable year so for in 2024 you're looking at between the if you sell property within 2024 you need to acquire this property anywhere between 1124 and 1 uh to 1231 2024 so the same taxable year then you can go do the cost segregation study on that new property use the depreciation the losses that are generated on this new property to offset the gains on the property you just so sold and if you buy a large enough property and you have enough losses that are able to offset the gain you don't pay taxes on the gain and you don't need to use a 1031 exchange now buying a rental property is one way to do that is the one way to generate these losses um there are other ways we could dive into other ways to try generate I want to talk about those but I before we talk about that I do want to talk about some like strategy because um you know Jenny said she inadvertently did this and we have clients doing this so like you know I think a way to really you know maximize the trends especially here in Colorado is you know we're very seasonal is the best time to sell a property is the springtime we're going to get the most buyers in the door and get top dollar for your property so like if someone to do this in the springtime um like list your property in February March or April no tenant in there you know sell it to own your occupant and then the best time to buy a property is usually fall or late winter when there's the least found demand so if an investor really wants to go out there and you know sell the highest possible at the sell highest possible price and buy at the lowest possible price that's the way I one of the ways I would attack it and J I'm curious if you have any thoughts on there or if that's actually what you did so I accidentally did it because um I wasn't planning on purchasing a subsequent property so I sold one property I had about we'll say 100 in change in in gain and recapture um and then I ended up finding a multif family that I really liked um and and purchased that and did a cost tag on it um so they identified about 150k um in the ceg study so that essentially wiped out my gain uh from the prior sale so I I I liked it because I did not feel like I was on the clock um I don't like to make fast choices anyone who knows me knows that takes me forever to think through anything um so you know just H have feeling rushed that oh my gosh I'm gonna have to pay taxes on this gain like that would just lead me to make a poor decision in my my opinion that's just kind of how I am so so I liked that option of just kind of being able to be done with property a you know paid you know I essentially you know paid the gains or whatever through or I guess they went into that bucket and then um when I did the cost seg it wiped it out so I didn't actually have to write a check at the end of the year so um that's I think a pretty phenomenal strategy and then you know on top of that I think that it's also interesting if you you could essentially do a reverse lazy 1031 um as long as it's in that same calendar year so um you know I know a lot of people want to do reverse 1031 and you know we end up telling them it's like going to be very very complicated um just the logistics of a reverse 10 1031 is not fun so if you are able to take down that property before selling your other property you have all year to do it if you want to start in January so and Tom before we go into some of these alter alternatives to 1031 um you know I know we already have people thinking hey is Thomas or is Thomas's firm take on new clients for CPAs one of the hardest referrals we have are are CPAs at no real estate and then CPAs at no real estate here taking on clients so can you tell us like a little bit about your about your practice and what type of clients you are or not taking on because I know we have a lot of investors out there asking that question yeah yeah absolutely and I appreciate the question so we uh we're we're CPA we're a firm that's across the United States we have a lot of clients in Colorado and what we do is we basically work exclusively with Real Estate Investors some of our clients have as little as one property and our biggest clients are funds of hundreds and hundreds of properties so we kind of see everything across the gamut if you will uh we work with long-term and short-term rental investors and primarily what we do is uh we take a little bit of a different approach than a lot of other CPA firms do so one of the biggest complaints we have from from our clients is that our prior CPA never told us any of this never told us how to use the lazy 1030 exchange or never told us how to do anything to reduce taxes so we we take a very proactive approach with our clients and many of our clients start with tax advisory where we're sitting down with them we're learning about their tax and financial situation their goals for the future and giving them a road map or a blueprint rather uh of the strategies that are available to them to reduce their taxes so that's that's the first way that that that we work with clients of course we do do tax preparation so filing tax returns and we have clients who Outsource their accounting they're bookkeeping to us as well um as for our we taking on clients uh we are we are always taking on clients so we're a we're a growing CPA firm and we have a phenomenal um recruiting uh system we recruiting pipeline to continue adding to our team we have a lot of accounts who want to work for our firm so we are always uh we are always taking on clients um having said that though we do have a cut off for 2023 tax preparation and that usually comes somewhere around marchish where we where we'll stop taking on clients for 2023 and we're then working with them on 2024 and Beyond uh so that's a little bit in a nutshell um how we work that's awesome thank you all right let's get into these alternative 1031 strategies because you know we' talked about this briefly before we got in the podcast and you know an interest rates were low man it was always no Brer just 1031 sell the house buy the fourplex right that was the the example we saw and keep trading up now with high interest rates and flattening Rents It makes it tougher to 1031 to a 40 or 50% down payment type situation so what are some Alternatives people can do outside like buying another rental property right that's a great question so the best part about this strategy is that there's other way there's other businesses that generate passive losses so if you're not actively involved in the business it's typically going to be passive for you and specifically here what I'm talking about is Partnerships like limited partnership interests for the most part so for example you can go invest in a Syndicate uh real estate Syndicate a multif family or commercial and while this is still in the rental realm or in the real estate realm uh you don't necessarily have to do the work you have there's usually professional uh Property Management professional sponsors who do this day-to-day operating the property and they'll usually do cost segregation studies and then pass the losses back to their investors so one alternative rather than buying the property yourself is going and investing in a Syndicate or fund who's going to pass the losses back to you so that's one option then there's other asset classes you could look at one of them is ATM machines very popular for this exact purpose uh for the lazy 1031 exchange and that's because ATM machines are five-year property so the so when you invest in ATM machine fund they're all every your entire investment is pretty much eligible for bonus depreciation let me cl when I say your entire investment what I mean is um all the property that you're buying pretty much the ATM machines are eligible so you can get substantial losses passed back from ATM fund machine Investments same thing oh is that why so many ATM funds okay that I didn't realize so just the way because they're fiveyear since they fiveyear um life cycles or fiveyear Vehicles you can basically depreciate all that in year one is that what you're saying right well well appreciation with bonus appreciation yeah okay yeah that makes a lot more sense yeah so there could be quite sizable losses from ATM machines and they usually pay you um it's usually with ATM machines is a cash flow play so you're making cash flow while you're getting this uh these large losses in the first few years um Now with uh the next one is car washes Self Storage these are all asset classes that typically generate large losses for you thanks to the depreciation so those are just some Alternatives another one is um well we we'll maybe get to that in a second I was going to say mineral rights but you you have to 1031 exchange into them but those are the ones if you wanted to use the lazy 1031 exchange method you're going to invest into these other businesses or or real estate as a limited partner and they'll be able to generate sizable losses for you yeah so you're to make sure I'm understand this correctly you're saying hey the same principle The Lazy 1031 sell a property don't do 1031 and then invest in another asset frontload laot of depreciation through cost segregation whether it's a rental uh multif family syndication or ATM fund do a lazy 1031 in that manner across any of those assets right yeah absolutely absolutely I'll just throw one one one thing out there with the good thing about ATM machines you don't have to do the cost seg with an ATM machine because it's already identified as five-year property but principle applies basically okay that's really cool thank you all right I do want to talk about Minor rights though because I've heard people I but in with one more lazy uh 1031 question so Thomas um I know the other alternative is if you've been an investor for you know probably many years um and you've had that day job the whole time you you know you've never been able to be considered reps um so everyone I guess that maybe falls into that bucket they should you you know you mentioned the form 8582 they should really go check out that line item that suspended passive losses to see if they even need to purchase uh a subsequent asset right um to wipe out their gains oh yeah that that's that's a fantastic Point um for that that's such an essential form form 8582 because you might already have a substantial amount of passive losses you might even have enough passive losses to offset the gain on the property you already sold and you might not even know it so before you run out and say oh I need to go grab a new property and you might want to do that for investment purposes but if you're just doing it for the tax or primarily for tax go look at that form8 582 first it'll be on your prior tax return so chances are when you're listening to this probably going to be your 2022 tax return I have to imagine um and uh you go pull up that form see how much how many passive losses you still have left and if it's enough to offset your estimated gain on sale you might not need to do anything at all and still be able to use the lazy 1031 exchange perfect great all right minor rights I am so curious about this out of everything we've talked about this is why I know the least amount and I've had a couple clients do 1031 A Min rights and I've just been completely fascinated by it so explain a way please yeah absolutely so um we we've actually Dove deep deep into this relatively recently with with a gentleman named Troy but uh basically the way it works is when you're when you're doing mineral rights you're 1031 exchanging into pretty much the land or to the property and then you're basically selling off the mineral rights or licensing out the mineral rights for a lack of a better word for it um where then you're receiving a royalty so the basically the way it works is you're you're you have your property that you might have been managing you execute the 1030 exchange you now have this other property that's basically someone someone else is coming and drilling on that property right someone else is taking the mineral rights drilling say like Exxon for example and then just paying you a royalty so it's it's it's it's a way to generate a substantial amount of income with basically doing little work because once you 10301 Exchange in that property that mineral rights is going to pay you out sometimes for decades so it's uh it's it's another alternative that if you can identify especially if you can identify the property first even before you're about to sell it can make it really easy for you to not have to go through the headache of that 1031 exchange timeline or make it make it a lot easier for you so for these Investments it sounds like it's a very high cash on cash return essentially by right yeah buying and selling mineral lights are you getting depreciation Debt Pay down or appreciation typically or is it mostly just cash flow yeah so typically with the mineral rights you're getting a lot of the cash flow from it the benefit of it you're getting depletion which is which is it's basically like depreciation but for the the the minerals themselves right every time you mine the minerals you're depleting the mineral source and you get basically 15% uh 15% right exactly exactly how it works up the top of my head but you're basically a 15% deduction of the from the income that you're gener thanks to thanks to depletion the real power of this comes from being able to defer your capital gain uh into this from your property using the 10301 exchange into this basically this asset class that you have to do virtually no work on and you're just getting a stream of cash flow so a lot of people will use this towards the end when they're ready to uh like retire essentially they'll say you know what uh what can I do should I use a DST should I should I do something else or can I go into mineral rights so mineral rights is a great cash flow play for somebody who's ready to pretty much retire can you give oh go Ahad Jenny oh sorry I was just going to ask how does that work so if if you have you know a a piece of land that depletes um you know on that schedule that you mentioned so let's say at the end of uh you know eight years or whatever it's essentially worthless because all the minerals are gone what what are typically the next plays at that point um because now you just own like just regular land right or I guess land with holes all over it um I I didn't know what the next stage would be for that case yeah yeah that that that's a great that that's a great question um that that's a great question and to tell you the truth I don't have the great a great answer for it um really do at that place what You' want to do with most of these cash flow plays is you you recoup your investment through the cash flow so like basically when at the end like for example with the ATM machine's very similar uh at the end of the ATM machine fund like when you're done with the term of your investment there's no uh salvage value there's no residual value it's zero but you recouped a substantial return on your investment through the cash flow so um I've not gotten that far yet into into the mineral rights to say what happens when it's done but what I say is that you're going to generate you're going to generate your return on investment through the cash flow so by the time you get to the end that the residual value in the property is it is not of of major concern if you if you invested in the right type of if you invest in the right opportunity so if you're 10:30 wanting from something into that and now then it's essentially useless at the end you could essentially just leave it be right and then you don't have any tax implications assuming you're going to stay alive for the next you know however many years um yeah that that that's a great question and I gonna be up front I don't have a great answer sure sure a great answer for that okay um one last question on here and this this might be out of what you know from these deals I'm curious like for mineraloids like what type of cash on cash return do people see I'm trying to put like real estate terms I get hey a majority of my investment back will be through cash flow but do you know is like a 10% 20% or is that outside of your purview yeah so so from from from what I've seen it's upwards of 20% so you might be getting that's that's that's what that's why these plays that's how these that's what makes these plays work is that you're you're you're getting such a high cash onh return that the the residual value of the property at the end is is not is not of major consequence it's not it's like you you've already made your money through the cash flow oh I think I'll be going down some gole rabbit ho next couple weeks this is awesome thank you um all right let's talk about dsts here because this is a very common question we get from Real Estate Investors either you know selling and doing 1031 straight away or sometimes they kind of keep a DS in the back pocket for like hey my 1031 failed I'll roll into DST so first off like can you explain what DST is the process of it I've got a couple questions I want to pick your brain on about it yeah absolutely so when you have a 1031 exchange you have to exchange real property for real property so it has to be another piece of real estate and um that means that if you wanted to 1030 own exchange into a Syndicate it's usually not possible there's a lot of workarounds that are costly from a legal perspective to do um but basically with the DST does is the DST is what the IRS blessed this vehicle this Delaware statutory trust as a 1031 exchange alternative so you can take the well not alternative but a vehicle that you can 10301 exchange into so usually the DST is run by professional manager or sponsor as they might call it and they're buying properties like institutional grade properties for the most part things like Walgreens or they might buy a Best Buy or a Dollar General um things of that nature or industrial properties and some cases and what you're doing is you're 1030 exchanging into the DST and now you own a fraction or a portion of of this larger property that's operated by a professional property manager and professional manager asset managers so that you're not your your hands off that point so you basically you've you taken your asset that you owned and controlled you 1031 exchanged into this larger asset that you have a fractional ownership in that you no longer control but you no longer have to manage it so that's the DST in a nutshell so with dsts I um I don't know if you have opinion on here but like I have never been like I I love the idea of like hey I can 1031 into it right hey that sounds really good for me I defer taxes now but where I've not been super uh excited about dsts is returns have been you know on the lower side and I also feel like there's usually heavy fees um can you comment on just kind of return profile or fee profile if you have if you've seen enough of these deals yourself yeah the returns are pretty low usually in a single digits and the fees can be quite quite High um and that's one of the major downsides of the DST is it's just it's not um it the the the sponsors to put these things together they do take a fee out of it and then on top of that the returns are lower because you're buying these higher high high grade like Class A institutional grade assets that don't that don't have a major return it's just very similar to a syndicator fund you know with a syndicator fund you're usually making a lot of money through a value ad strategy where you're buying a property that might have deferred maintenance or might need to be repositioned you're putting a substantial amount of capital into it pushing the asset up its value up and then selling it right so you're making a lot of the money typically in these deals off of the appreciation however with the DST uh you're buying the class a property so there's not much value to be added in the first place and then you have uh usually a triple net lease so the cash flow is not is not very substantial um comparatively to other asset classes you might be able to invest in and that that's that's where you most people go to dsts because they don't want to manage property anymore and they want the safety uh they want the safety of a Class A like institutional grade asset that they know they'll get their their smaller yield on their smaller cash flow but uh they're they're more comfortable that their wealth is safe like the the equity that they accumulated over the years is safe yeah I've the few clients I've had who've done dsts they've been more like the older retiree side where they're not so much in growth mode but like asset preservation more just income mode is that generally what you've seen with your clients yeah no absolutely that's like that's okay that's that's pretty much the exact profile for the DST if you're in growth mode most people in growth mode don't want to a give up control um of their assets uh to like a sponsor for example and then they don't and also they they want to continue the equity accumulation play so this is really DST is the most appropriate once you've already accumulated uh your your wealth and now you're looking to kind of just step back from the dayto day and you want to almost preserve your wealth okay great that that's very helpful mhm what about 721 exchanges I feel like at least for me like I 18 months ago two years ago I started seeing a lot 721 exchange offerings um can you tell us what those are and tell us how they play into this role of potential 1031 like options yeah yeah absolutely so uh the 721 exchange allows you to contribute a property to a partnership and when you contribute your property to the partnership you will receive a partnership interest in exchange for for your contribution of your property and usually what you're doing is when the 10:30 with the 7:21 you're contributing into a partnership that owns a lot of other properties so what happens happens is you contribute your your your property you get your partnership interest now you're basically invested in a pool of other Investments and when you this contribution is taxfree so it's it's you're deferring it it's similar to a 1031 exchange not quite the same but similar and then like as you start selling off your partnership interests that you you acquired that's when you start paying the capital gains tax that you would have paid had you sold your property so that's kind of the 1031 exchange in a nutshell again just to summarize that you're contributing your property to a partnership you're deferring the capital gains tax you're getting a partnership interest and presumably most in most cases the T the the partnership you're investing into has a lot of properties so you're diversifying um now these are also know as uat transactions so depending on the depending on the entity that or the investment company or investment uh vehicle that you go with it you could invest in a like highgrade institu tional grade assets or some some Pro some companies have been doing this on a smaller scale recently and you've been able to basically get into a pool of of diversify assets for example it's One Fund that I know they'll accept single family properties into their 721 they'll accept Office Buildings they'll accept multif Family Properties they'll accept a diverse array of assets into their into their fund which makes it easy for you to go ahead and and and contribute to it while also diversifying now uh for if the way these have traditionally worked in the past is that you'd have to typically 1031 exchange into a larger asset so for example most of these most of these funds wouldn't accept they wouldn't accept a single family house but they might accept a Class A office building so you might 10301 exchange into a Class A office building perhaps through a DST that's not uncommon and then later on that is contributed into the into the fund and they're accepting this larger office building so depending on the opportunity you could find out there you might be able to contribute your property directly to the 721 directly to the partnership right off the bat if they if they'll accept it or sometimes you might have to go through a 720 excuse me a 10:30 when exchanged and then that asset would be then later 720 when exchanged into the partnership I love all the workarounds that uh that investors and professionals come up with so we can minimize the tax burden and yeah that's been one of the things I I I got uh enamored for a bit with 7201 exchange like wow this looks like an amazing way to go out there and you know and kind of like you know have your cake and eat it too but a couple of the ones I saw that did accept like single family rentals directly um they often had such like a small buy box criteria a lot of times like properties like I had or clients it wouldn't fit the buy box and I've seen a lot from my perspective a lot better opportunities with like hey sell that sell your property on your own and then 1031 into like a bigger asset where they a lot of times like we have hey we have this open for a couple months anyone wants to hop in here go into here and then we'll then we'll roll it over or whatever the proper term is into the the uat um I'm curious from the deals you've seen um have you seen it sounds like you've seen a lot more go towards like the bigger asset then be absorbed versus like the single family being directly absorbed by the 721 yeah yeah so that's that's tradition that's like for the most most part like like 90% of what we see there is this one fund that I'm aware of actually I told him about the 721 exchange like two years later um they come back they open up a fund that now accepts other properties and they'll accept like single families so they'll accept smaller properties and then they'll either sell the properties or they'll put debt on the properties they have different strategies they use to monetize those properties within their portfolio um but I think as as this information becomes more more accessible like typically to find out about a 721 exchange you'd have to go to an attorney or really experienced accountant they'd have to tell you how to do it and then for you to actually pull it off you'd usually be a pretty sizable uh yeah a Prett sizable fund or perhaps even a reate but now as like this information becomes more and more democratized I guess you could say or widespread uh you're seeing other fund you seeing other funds you starting to utilize the strategy in different ways than we've previously seen it done yeah uh yeah great explanation um so Thomas we went through Minal rights dsts 721 exchanges on top of options for the lazy 1031 of selling and buying a rental and cost siging selling and buying a fund with heavy depreciation any other strategies that you want to leave our listeners before we wrap up for this episode I think we cover I think we covered a lot here today I mean there's there's so much that I could go into um I would say if you're going to be selling your properties you definitely want to explore these various options the sooner uh that you realize you're going to sell your property or you're contemplating selling your property the sooner you can explore these strategies the more flexibility and more options you're likely to have so I would probably just leave it I'd probably just leave it there I I would say one that's you know just let's just leave it there I don't want to go yeah let's just leave it there for today all right well you're you're leaving door open for a part two episode I love it because I know we'll get a lot of questions from here and you know like the the devils in the details um and to highlight one thing that Thomas said about like hey the sooner you start discussing it the better uh don't be like hey I sold my property can I do a 1031 no Jen and I have gotten calls like that I'm sure Thomas has as well and no if it's if it's sold you're kind of you're out of luck for additional 1031 but you can do a lazy 1031 but man the second you start thinking I might sell a property uh start analyzing your opportunity cost for other Investments out there but also most importantly sit down and talk with your tax strategist or if you need one talk to Thomas and his uh you know his company and see what your options are on there and as a friendly disclaimer reminder you know we are not giving Financial Accounting or legal advice on here um we are just giving you some ideas and strategies make sure you talk with your professional team or if you need referrals we're happy to refer you out to them but we're just sharing education for everyone to go out there and hopefully percolate ideas go out there and uh make more money and pay less taxes going forward so Thomas thank you so much and then what is the best way people can find your podcast and also find about your find out about your accounting firm yeah absolutely so you could find the podcast is out on all all basically all podcast platforms Apple Google Spotify the taxmart REI podcast you can just search it you you'll find it um and then if you want to learn more about our firm it's it would be the real estate cpa.com Thomas that's my personal page over there and from there you can learn more about how we work and if you want to request a consultation uh we'd love to learn more about your situation how we could help awesome well Thomas thank you so much we appreciate your time and your expertise and uh Jen as always amazing job on teing up a great guest another fun show to co-host with you so thank you thanks Chris thanks Thomas for coming on we really appreciate it thanks for having me it's been a pleasure all right everyone if you have if you need any help analyzing your options come talk to us this is the stuff we do ourselves day and day out we're investors ourselves we also love talk and Shop thanks a lot [Music] everyone