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You've been searching for the best way to generate passive income in your life.
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And heard that real estate is a great way to do it.
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But you're tired of all the so-called gurus who are all talked in no substance.
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Get ready to celebrate because Kevin Buck has spent 14 years successfully making it happen.
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This is the real estate investing for Cash Flow Podcast.
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Now, here's Kevin Buck.
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Hey guys, Kevin Buck here and I want to look at another episode of the real estate investing
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for Cash Flow Podcast.
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For missions to help you build and maintain massive amounts of cash flow through income
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producing real estate investments.
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And our guest for this week's show is Well Advisor and Investment Strategist, Frank
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Hanna.
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Now Frank is the founder and CEO of Revolution Exchange and advisory firm that provides consulting
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and turn key solutions to real estate owners that are considering a 1031 exchange upon
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the sale of their asset.
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Revolution Exchange generally provides clients access to pre-vetted properties, but also
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works with them to help navigate through the sometimes arduous process associated with
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a 1031 exchange.
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And so with that, guys, I'd like to welcome our guest for today's show, Frank Hanna.
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Frank, how are you doing today?
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I'm doing great, Kevin.
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How are you?
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I'm excited to have you here.
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My friend excited to have you here as we just work our way through the holidays.
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It's January 2nd.
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And we've got a fresh start here, so excited to chat about you and your business and learn
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a little bit more about what you have got, what you guys have going on over there.
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But I'd say before we go into the, you know, maybe the, you know, the deep ends right off
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the cliff into DSDs and 1031s, let's talk a little bit about your background, Frank.
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You know, I had an opportunity to read through your bio.
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You've done quite a bit over the years and you got some pretty cool things, you know,
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pretty cool things that you've done and they have happening with Revolution Exchange.
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So maybe tell us a little bit more about your background yourself and then also Revolution
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Exchange, if you would.
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Yeah, perfect.
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Thanks, Kevin.
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Yeah, so, you know, keep it high level and won't bug you down with too much information.
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But I grew up in the restaurant, hospitality, hotel space, did that for years.
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So got a good kind of crash course on, you know, that side of the business, tax planning,
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those type of asset classes and did that day to day operation for my family's restaurants,
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nightclubs, catering facilities, realized pretty quickly that I didn't want to do that
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forever and decided that I kind of wanted to segue into another aspect of the business
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and had built a lot of great relationships by doing, doing that job for years and had gotten,
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as I said, some good exposure on overall financial tax planning side of things, the benefits
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of owning real estate and basically kind of set up a side entity that was kind of a side
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job in the beginning and then allowed me to step out of the day to day operations of
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the family business and build on those relationships to be able to give, you know, the fast moving
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entrepreneur, objective, transparent, independent advice as it relates to, you know, all aspects
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of real estate investment, but ultimately, you know, taxes move the needle.
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It's not what you make.
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It's what you keep.
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So a lot of our consulting and advice we give is driven by taxes, right?
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So they started that business probably 2009 and we've grown to over a billion dollars
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and assets under management.
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I'd say almost half of it is, you know, syndicated real estate deals in a variety of different
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capacities, some of which being 1031 type deals, DSTs and the like.
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All righty, well, well, fantastic.
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So yeah, no, I appreciate that background and this curious as to, you know, making the
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pivot out of the, you know, the restaurant industry and it's not like it was generational.
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Was that was that a tough thing to get away from or was it kind of, man, I've had enough
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from moving on.
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Hey, it was tough.
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I joke and, you know, I say it took me five years to like wiggle my way out of the day
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to day operations.
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My father was like just one of those guys that was like, Hey, you're an idiot.
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If you don't take the, take the bull by the horns or run with this opportunity and, you
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know, quite frankly, he, he was really upset when I left.
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And so I managed to get out of the way, get out of the business and it was tumultuous,
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you know, six or 12 months trying to convince him that this was the right move for me.
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But I still tell him to this day, I'm like, thank God, I'm still not there running those
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operations for you.
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But yeah, it's a family owned business and we were buttonheads and, you know, I, I'm
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a big advocate and supporter for people that are successful and those type of businesses
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where it's, you know, a lot of, you know, a lot of hours and the beast never sleeps.
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That's it.
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I think that's, you know, where, where my question you'll ultimately derive from, at least
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a certain portion of it was just the, the difference of lifestyle, you know, I mean,
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I, I, yeah, the younger age, you know, I, you know, tended bars, weighted tables, things
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like that.
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I mean, you get the initial exposure to that business and, and you get to meet folks that
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have been generational in the business, right, for different places I work for and I just,
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it's tiring, you know, it's weekends aren't off, right?
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Like that's the busy time and it's, it's, it's a 12 to 14 sometime longer hour a day,
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seven days a week type endeavor.
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So anyway, just was curious there, but I'm glad to see everything worked out and you got
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some cool things happening.
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So, you know, let's talk about, yeah, let's, you know, I guess first and foremost, the,
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the, you know, you're not the, you're not the, the first intermediary out there.
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There's, there's many other different groups that, that have similar services to that
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of revolution exchange or let, you know, maybe speak more specifically to what really,
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what sets you guys apart, what, what were the, what was the challenge you saw or the opportunity
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that you saw that, that, that said, hey, I can do this a little better.
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I can, I can, I've got a better way to skin that cat.
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Yeah, exactly.
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So we, we, you know, we, we had some proven systems, you know, we started investing in real estate,
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started in like single family homes, doing flips, then we started doing, you know,
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single family home communities.
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We started doing essential retail, triple net lease, invest investment.
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We did hotels in industrial, you know, you name it.
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And ultimately, we, we felt like we were, you know, really cognitive numbers guys.
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And we, we had a system we felt, felt worked.
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So when we're absolutely not the only game in town that utilizes, you know, tax solutions
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like Delaware statutory trusts, but I think any real estate, your deal you're in is dependent
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on the quality of the underlying asset, right?
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And the absolutely new diligence you do and putting together the deal.
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So, you know, in my business, you, you kind of, when you're in the financial services space,
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you affiliate with a broker dealer and although most probably give you access to some of
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these type of deals, you know, it doesn't mean that they're the right deal for you.
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So we invested a ton of time, money and energy, kind of vetting the marketplace across the
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country and applied our systems to the deals that were out there.
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And basically created what I feel is the most conservative, robust menu of options that are
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out there. We do have, you know, at any given time, probably 15 or 20 Delaware statutory
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trusts deals that meet the 1031 exchange criteria and we have our asset classes that we
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really like. And they're, you know, they're in pretty high demand for somebody that's coming
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out of a 1031 exchange and can't find the right property and sometimes it's the right fit,
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but it's not always the right fit for the investor.
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Yeah, let's, you just brought up an interesting point. I'd like to hit on just, you know,
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I, and we don't need to go through the basics of what a 1031 exchange is. I think most folks
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that are tuning in here have a general understanding of what that is and when to, you know,
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to take advantage of it. And so I guess more specifically, you know, what are,
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what are some of the advantages of a Delaware statutory trust over a, you know, a single property
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1031 exchange. So instead of selling my house, my rental property and, and, you know,
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doing a light kind exchange into it, maybe a, you know, maybe a duplex or try, you know,
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another similar type of residential property that I'm going to run and manage.
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I mean, what's, where's some of the pros and cons of going to DSD route?
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Yeah, well, I would say the pros are again, it will provide you a complete tax deferred exchange,
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just like a traditional 1031 exchange, but it'll give you access to potentially some higher
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quality institutional grade assets that, you know, you and me might not be able to purchase
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ourselves outright. So it allows investors to pull their money into these syndicated
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deals and essentially get passive tax favored monthly income. So you get a lot of the benefits
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that you would normally, but you give up the property management responsibilities, which is
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typically one of the more appealing options, right? So these deals, I'd say, you know, are more
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popular with the 50 and up crowd, people that have made some, or created some wealth in real estate
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and are just trying to simplify things. So you can get rid of, you know, the tenants, the toilets
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and the taxes, and you can get passive tax favored income and the ability to
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participate in appreciation of the asset, typically where the rubber meets the road and we,
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we, you know, determine whether this is the right type of fit for the investor is one. If
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you're a control investor, you like managing it, the property, and you want the, you know,
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ability to be able to sell at any given point in time, you know, the passive DST or Delaware
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Sash George Trust option is not always the best option because you're stuck in kind of riding
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shotgun with us throughout the life of the deal, which has a projected holding period,
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but it's not set in stone, right? So you, you might be with us for four, five, six, seven years,
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depending on when we feel the best opportunity to exit the program is. So there's certainly a lack
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of liquidity, which you need to be aware of. But again, with our deals, you can typically go in as
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little as 50,000. So you can, you can achieve incredible diversification. So when somebody comes back
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and says, Hey, Frank, you know, I don't necessarily want to be hanging in one deal for, you know,
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that length of time, we have different types of deals that are staggered and projected length.
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And what, what ends up happening is we kind of have like a mirrored bond portfolio. If that makes
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sense, Kevin. So if we put in, you know, a million dollars, we might put, we might diversify that
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across three, four, five deals. And then typically, once we get to year three or year four, it's not
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uncommon for us to contact the investor. And so hey, you know, we page a, you know, five, six
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percent along the way, we are exiting and selling, whether you like it or not, and you have the
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opportunity to do another tax deferred exchange into hard real estate. You could do another Delaware
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statutory trust with us, or somebody else, or you can cash out and pay the taxes. So I think
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it accomplishes most of the benefits of a traditional exchange, but the, you know, the major drawback
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is you give up, you know, control and decision making responsibilities. So yeah, if you enjoy
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dealing with, you know, the, you know, late payments, handing out notices, showing up for an
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eviction court, you know, you know, the conduit between all the handyman and repairman and vendors
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that need to come fixture unit. Then if you enjoy that, then this might not be a good fit for you.
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Yeah. Yeah. I think I think there's an evolution that most investors go through. You know, they,
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I went through the same thing, you know, two decades ago and ran a, you know, build up a portfolio
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of single-family properties and got to the point where I had about 35 of them where it was like,
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what the hell am I? I mean, like it just, it was way too much. It was overwhelming. Didn't have
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a lot of good systems in place and got burned out pretty quick. All right, some good people,
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but then realized that like it was just, there was a better way to do it, you know, property
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management is not a sexy game. It's not even all that profitable of a game, you know, it's, it's,
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yeah, I like to refer to as a necessary evil. You know, we have a fairly large property management
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company today, but it's because of our own portfolio, but it's not, yeah, it's definitely not the
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the bright shiny object of the of the company. Yeah, yeah, very, very similar. We sold off our entire
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single-family home portfolio and, and kind of scaled up in some bigger, bigger opportunities
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just to make it make sense because yeah, whether you've got a small, you know,
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community of a dozen homes or a hundred, it's the same, same type of headaches and responsibilities,
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but that's right. Yeah. So what's the average length of your typical DST investment? I mean,
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is there, is there an end all be all like term to where, you know, these things run their course,
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or is it all so great answer in the deal itself? Yeah, it depends on the sponsor. We have partners
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that will potentially buy out investors if they need to be, you know, fit into a certain spot.
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I'd say in the low end, we have deals that are targeted for three years. That's kind of like our
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shortest deal. And then if you get into, you know, more diversified triple, and at least type 10
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it with long term leases, those will go out a little longer. So those might be a seven to eight
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year type deal, but I'm glad you brought that up, Kevin. So as we can all relate, you know, the real
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estate industry is kind of an uncharted territory, right, with, with compressed cap rates,
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rapidly rising interest rates, lack of inventory. So what we are seeing is people that otherwise
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might not be a candidate for a DST saying, hey, I've got an opportunity to sell my asset at a premium
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right now, right? I absolutely do not want to pay the capital gains taxes, but I can't find
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an asset to do a 1031 exchange. So what they're doing is using our short term deals, kind of as like
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a landing spot, you know, I'll sell a premium, let the market adjust and let some of these sellers,
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you know, come back down to earth with what they think their properties are worth, then reassess the
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market in the next couple of years. And their plan of action is to go back out into hard real estate.
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So I don't, you know, we've got a ton of deals this year, which I think if if there was a hard
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asset out there that made sense that fit what they were looking for, they probably would have gone
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in that direction, but they're kind of looking at us as a landing spot, parking spot, whatever you
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want to call it, just to preserve the step up and basis. Yeah, well, it talked to me about some of the,
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you know, what asset class is really hot right now? I mean, it's a multi-family, you know,
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that in industry, or are they still too like darling asset classes? Yeah, I think I think
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industrials cool a little bit with, you know, simply high inflationary environment, multi-family,
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I think even though cap rates have affected that, I think the cost of home purchasing right now
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is so high and I think that's spread between the average cost of rent versus the annual,
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or I'm sorry, the monthly cost of rent versus the monthly cost of a mortgage for the same exact
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size property is over a thousand dollars a month. It's never been higher. So it's it's
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pricing people out of the market. So I do think in the right markets, multi-families
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going to continue to be hot. You know, I like, you know, self storage, you know, in the right
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market, it's a pretty recession-proof asset class. I think, you know, office is definitely out
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in, I would say, you know, hotel, we do a lot in the hotel space. I think they, you know,
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they obviously took it on the chin during COVID, but I think, I think there's still some real good
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opportunities out there to be able to get a decent price, you know, for that type of asset class.
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And I love, I was looking at your website. I love module housing communities in the right,
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right markets. And I love build for rent. So build for rent, I guess, is still multi-family,
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but a different, you know, kind of niche there. Yeah. So yeah, exactly. You know, give you a little
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give you a little yard to take your dog out. And now, so that I would say there's build for rent,
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you know, modular housing. I guess any any facet of multi-family, we're still big on. And I
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still think industrial is going to be good long-term. And then hospitality and self-storage,
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I still think give right opportunities or solid. The these investments, do they typically have debt
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tied to them? Or they are most of the time they all cash, cash equity. Yeah, I'd say maybe half
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and half. So some of our deals have, you know, fixed rate financing, we're not doing floating rate
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stuff. So we're getting pretty favorable financing opportunities. I would say what has changed
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over the last few years is the loan to value. So we're not borrowing as much on these deals.
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It's relatively conservative. So I would say that's, you know, on the DST, you kind of have to go in
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with with fixed financing and you can't adjust that, you know, mortgage long term on some of our
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deals that are not DSTs and they're more, you know, limited partnerships or LLCs where people
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can come in with cash, you know, again, same thing. Some of them, we're not financing. Some of them
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we are, you know, we've got a few deals where people come in and we kind of use investors capital
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is kind of like a bridge loan, so to speak, to get some short term relief and give the investors
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a nice return and then basically use that fixed financing to come in and take out the preferred
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investors. So we've got a lot of good options, all shapes and sizes and different timelines,
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because, you know, the common pushback on most deals is, you know, nobody knows what the future holds
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and they don't necessarily want to be hanging out five, six, seven, ten years.
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Right, right now, absolutely. You know, I think you had you had answered my question, you know,
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at the end of a particular DST investment sponsored sides to sell the asset, do I have the option
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to 1031 my proceeds again? Can I keep rolling that into other DSTs? Okay. Yeah, so you have all
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the same decisions that you had coming out as you did going in, right? So you can do a complete
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tax deferred exchange into another Delaware statutory trust program or a hardware real estate.
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And again, the kind of running joke is swap to your drop or. Yeah, that's a good point.
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Is there is there another strategy outside of swap to your drop? Like I wouldn't ask the question,
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you just brought it up before I had a chance to. So are there? Yeah, I mean, is there other strategies
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outside of like, you know, I'm going through my third exchange. I just I really, you know,
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for whatever reason, I just don't want to exchange to another, you know, hard real estate asset.
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But ultimately now I've got this massive tax burden that's been following me along for
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these many, many years. What's what's the alternative options? Yeah, great question. So I'd say,
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I'd say, you know, high level, we're really the only two opportunities or some level of like
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tax harvesting rate. So if you're going to sell out of a asset that's going to create capital gains,
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you know, and you don't want to pay the tax, you know, potentially you might have capital
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losses elsewhere that you can kind of tax harvest and offset that. You know, there's there's
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other investments that are out there, qualified opportunity zones where you essentially can take
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instead of having to roll the entire investment and doing a traditional 1031 exchange,
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you can just take the gain and, you know, typically a fraction of the total dollar amount.
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And there's still some tax benefits to that type of strategy. But I would say yet, you know,
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the common, you know, for the for the wealthier people that don't need the money, you know,
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almost always they decide to continue to defer. And again, if they pass away with the asset,
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their errors can can sell the asset after the day to death and get that complete step up
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in basis. So the tax is completely minimal. One other thing I'll add is, you know, Delaware statutory
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trusts can be helpful for a state planning, right? So if you've got a hard piece of land,
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you leave it to your three kids, they ultimately have to come to an agreement on what they're
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going to do with that asset, right? One of them might want to keep the asset, one of them might
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want to sell it, might want one might be indifferent, but it can create, you know, tension between
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the kids. If they pass away, they get fractional shares of the DST asset. So one could say, hey,
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Frank, this has been a great experience. I'm going to do another 1031 DST with you. You know,
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the sister could say, you know what? I'm going to, I'm going to do a 1031, but I want to go buy a
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hard piece of real estate on my own. And the third sibling could say, hey, you know what? I'm going to
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cash out and go, you know, invest in something else on the run. So it is, it is, you know, simpler,
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I guess, from an inherited standpoint on that type of program. Got it, got it.
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Are there any, you know, speaking to like any regulatory risk associated with, you know, 1031s,
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with that, you know, that section of IRS code changing? Is there any, I know that that was some
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chatter when the current administration got in the office and it just kind of, I don't know,
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I haven't, I haven't really followed it too much. It's still here, it's still around, but I mean,
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obviously you would know much, much more than I as far as, you know, are there any, you know, risk
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coming down the pike that we're aware of? I don't think so. I feel a lot better today than I
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did a few years ago when they were hot on it. So the 1031 exchange has been around for over 100
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years. It's been on the docket for a number of administrations to cap it, limit it, take it away.
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I think of all the administrations that are out there and the bipartisanship of, you know,
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different, you know, parties that are out there, everybody typically has some amount of wealth
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and real estate. And I think they've acknowledged that capping that, taking that away would
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completely create the real estate industry. So even your, you know, hardest pro-tax legislators that
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are out there, I think they realize that that's not a smart move and that's not going to help things.
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So although they were hot on that, they've created some other language in these type programs
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that really came, came to light, you know, a few years ago, the first time it was going around,
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but I'm not worried about it. I think we're, we're good to go, but I would tell investors,
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I did have investors that cashed out paid a ton of taxes because they just thought, hey,
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they might take it away. So I'm just going to do it anyway, which they've kind of got egg on
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their face on now, now that they extended it. Yeah, yeah, that's interesting. I would not have
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expected there would have been like a frenzy of folks cashing out. I would have thought that maybe
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it just, you know, kind of let it set and, you know, ultimately if it goes away, it goes away,
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it just means they've got to figure out an alternative solution. Yeah, I wouldn't say it was a frenzy,
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but I did have some people that just, you know, dooms, doomsdayers that are, you know,
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worlds going to end and I'd rather, I'd rather cash out pay my tax and bury the remainder in my
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backyard. So I would say that was not the majority, but some people were just, they get hung up on
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the unknown of what's going to happen next and I can't plan for the future because I don't know
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what the laws are going to be. We're a big advocate of taking current law and planning for today.
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Is there any way to do a, like a reverse 1031 buy something now that ultimately, well, I guess buy
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into a DST now before I've sold my exchange property and then just basically do it in reverse.
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I know 1031 exists, but like can you also factor in a DST? Yeah, you can still do it. You know,
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again, we're not, we're not, I'm not a qualified intermediate area. So the qualified intermediate
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area is that unaffiliated third party individual that holds, holds the funds in that transaction.
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So we're more on the replacement side of things, but you certainly can do a reverse 1031 exchange
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where you purchase the property that you want now and then go to sell the asset. It's definitely
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a little more complicated maneuver and it's a little bit more costly when you go to the qualified
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intermediary. And that's where I think it's, it's critical to get the right firm that knows what
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they're doing because there's a lot of intermediaries out there and a lot don't know what they're doing
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on the reverse exchange side of things. So if any of your listeners are contemplating that,
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even though we're not intermediaries, I could certainly guide them in the right direction to
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the right people to make sure that that works out. Okay. Frank, is there anything else that we
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haven't maybe touched on the day that you feel is relevant of importance for our listeners to know
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about you, your group, what does you guys do? Anything that comes to your mind? Yeah, now I appreciate it.
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Yeah, I think, I honestly think we're a really incredible resource hub, even if you're not in
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the market for a DST or you're not in the middle of a 1031 exchange. Maybe you're just looking
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to find capital. You know, we're a great market maker for relationships for people that are either
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looking to borrow, buy or sell. And above and beyond that, outside of the 1031, you know, DST
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business, we do a substantial amount of, you know, accelerated depreciation, tax favor, tax
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deductible type opportunities. So you and I, Kevin, are probably think alike on a lot of fronts
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and even though we're, you know, probably doing some of the same type of deals confident that we
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could be a great resource for somebody that is just looking for a little guidance regardless
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of where they are on either side of the transaction. Yeah, with that, I mean, for those that want to
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learn more about you or reach out to, where's the best place to track you down? Yes, so our website is
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r-e-v is invigorated.x is an x-ray wealth.com. So r-e-v-x wealth.com, feel free to email me. It's
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Frank F-R-A-N-K-H-A-N-N-A at r-e-v-x wealth.com. If you go to our website, you can see some sample
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deals that are on there. Get some quality information on different things that we're working on,
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but happy to, you know, send out a list of opportunities if somebody contacts me directly.
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All righty. Well, fantastic. Well, Frank, I appreciate you joining us here. It's been a lot
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of fun having you and pleasure meeting you as well. Yeah, Kevin, thanks. Enjoy the weather down in
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Tampa from jealous. We'll do. We'll do. Okay, guys, thanks for joining us here today. That's
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all we have for this week's show. So until we meet again next week, this is your host Kevin
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Bup wishing you a huge success. Take care now.
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Congratulations. Now you've got more of the best tricks of the trade in building massive
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amounts of passive income from real estate. For more amazing resources, visit real estate
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investing for cashflow.com. We'll see you next Monday morning.
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You've been searching for the best way to generate passive income in your life.
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And heard that real estate is a great way to do it.
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But you're tired of all the so-called gurus who are all talked in no substance.
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Get ready to celebrate because Kevin Buck has spent 14 years successfully making it happen.
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This is the real estate investing for Cash Flow Podcast.
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Now, here's Kevin Buck.
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Hey guys, Kevin Buck here and I want to look at another episode of the real estate investing
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for Cash Flow Podcast.
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For missions to help you build and maintain massive amounts of cash flow through income
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producing real estate investments.
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And our guest for this week's show is Well Advisor and Investment Strategist, Frank
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Hanna.
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Now Frank is the founder and CEO of Revolution Exchange and advisory firm that provides consulting
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and turn key solutions to real estate owners that are considering a 1031 exchange upon
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the sale of their asset.
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Revolution Exchange generally provides clients access to pre-vetted properties, but also
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works with them to help navigate through the sometimes arduous process associated with
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a 1031 exchange.
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And so with that, guys, I'd like to welcome our guest for today's show, Frank Hanna.
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Frank, how are you doing today?
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I'm doing great, Kevin.
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How are you?
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I'm excited to have you here.
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My friend excited to have you here as we just work our way through the holidays.
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It's January 2nd.
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And we've got a fresh start here, so excited to chat about you and your business and learn
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a little bit more about what you have got, what you guys have going on over there.
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But I'd say before we go into the, you know, maybe the, you know, the deep ends right off
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the cliff into DSDs and 1031s, let's talk a little bit about your background, Frank.
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You know, I had an opportunity to read through your bio.
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You've done quite a bit over the years and you got some pretty cool things, you know,
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pretty cool things that you've done and they have happening with Revolution Exchange.
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So maybe tell us a little bit more about your background yourself and then also Revolution
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Exchange, if you would.
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Yeah, perfect.
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Thanks, Kevin.
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Yeah, so, you know, keep it high level and won't bug you down with too much information.
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But I grew up in the restaurant, hospitality, hotel space, did that for years.
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So got a good kind of crash course on, you know, that side of the business, tax planning,
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those type of asset classes and did that day to day operation for my family's restaurants,
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nightclubs, catering facilities, realized pretty quickly that I didn't want to do that
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forever and decided that I kind of wanted to segue into another aspect of the business
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and had built a lot of great relationships by doing, doing that job for years and had gotten,
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as I said, some good exposure on overall financial tax planning side of things, the benefits
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of owning real estate and basically kind of set up a side entity that was kind of a side
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job in the beginning and then allowed me to step out of the day to day operations of
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the family business and build on those relationships to be able to give, you know, the fast moving
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entrepreneur, objective, transparent, independent advice as it relates to, you know, all aspects
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of real estate investment, but ultimately, you know, taxes move the needle.
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It's not what you make.
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It's what you keep.
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So a lot of our consulting and advice we give is driven by taxes, right?
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So they started that business probably 2009 and we've grown to over a billion dollars
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and assets under management.
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I'd say almost half of it is, you know, syndicated real estate deals in a variety of different
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capacities, some of which being 1031 type deals, DSTs and the like.
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All righty, well, well, fantastic.
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So yeah, no, I appreciate that background and this curious as to, you know, making the
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pivot out of the, you know, the restaurant industry and it's not like it was generational.
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Was that was that a tough thing to get away from or was it kind of, man, I've had enough
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from moving on.
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Hey, it was tough.
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I joke and, you know, I say it took me five years to like wiggle my way out of the day
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to day operations.
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My father was like just one of those guys that was like, Hey, you're an idiot.
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If you don't take the, take the bull by the horns or run with this opportunity and, you
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know, quite frankly, he, he was really upset when I left.
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And so I managed to get out of the way, get out of the business and it was tumultuous,
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you know, six or 12 months trying to convince him that this was the right move for me.
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But I still tell him to this day, I'm like, thank God, I'm still not there running those
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operations for you.
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But yeah, it's a family owned business and we were buttonheads and, you know, I, I'm
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a big advocate and supporter for people that are successful and those type of businesses
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where it's, you know, a lot of, you know, a lot of hours and the beast never sleeps.
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That's it.
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I think that's, you know, where, where my question you'll ultimately derive from, at least
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a certain portion of it was just the, the difference of lifestyle, you know, I mean,
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I, I, yeah, the younger age, you know, I, you know, tended bars, weighted tables, things
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like that.
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I mean, you get the initial exposure to that business and, and you get to meet folks that
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have been generational in the business, right, for different places I work for and I just,
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it's tiring, you know, it's weekends aren't off, right?
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Like that's the busy time and it's, it's, it's a 12 to 14 sometime longer hour a day,
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seven days a week type endeavor.
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So anyway, just was curious there, but I'm glad to see everything worked out and you got
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some cool things happening.
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So, you know, let's talk about, yeah, let's, you know, I guess first and foremost, the,
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the, you know, you're not the, you're not the, the first intermediary out there.
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There's, there's many other different groups that, that have similar services to that
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of revolution exchange or let, you know, maybe speak more specifically to what really,
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what sets you guys apart, what, what were the, what was the challenge you saw or the opportunity
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that you saw that, that, that said, hey, I can do this a little better.
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I can, I can, I've got a better way to skin that cat.
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Yeah, exactly.
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So we, we, you know, we, we had some proven systems, you know, we started investing in real estate,
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started in like single family homes, doing flips, then we started doing, you know,
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single family home communities.
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We started doing essential retail, triple net lease, invest investment.
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We did hotels in industrial, you know, you name it.
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And ultimately, we, we felt like we were, you know, really cognitive numbers guys.
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And we, we had a system we felt, felt worked.
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So when we're absolutely not the only game in town that utilizes, you know, tax solutions
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like Delaware statutory trusts, but I think any real estate, your deal you're in is dependent
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on the quality of the underlying asset, right?
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And the absolutely new diligence you do and putting together the deal.
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So, you know, in my business, you, you kind of, when you're in the financial services space,
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you affiliate with a broker dealer and although most probably give you access to some of
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these type of deals, you know, it doesn't mean that they're the right deal for you.
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So we invested a ton of time, money and energy, kind of vetting the marketplace across the
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country and applied our systems to the deals that were out there.
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And basically created what I feel is the most conservative, robust menu of options that are
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out there. We do have, you know, at any given time, probably 15 or 20 Delaware statutory
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trusts deals that meet the 1031 exchange criteria and we have our asset classes that we
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really like. And they're, you know, they're in pretty high demand for somebody that's coming
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out of a 1031 exchange and can't find the right property and sometimes it's the right fit,
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but it's not always the right fit for the investor.
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Yeah, let's, you just brought up an interesting point. I'd like to hit on just, you know,
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I, and we don't need to go through the basics of what a 1031 exchange is. I think most folks
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that are tuning in here have a general understanding of what that is and when to, you know,
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to take advantage of it. And so I guess more specifically, you know, what are,
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what are some of the advantages of a Delaware statutory trust over a, you know, a single property
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1031 exchange. So instead of selling my house, my rental property and, and, you know,
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doing a light kind exchange into it, maybe a, you know, maybe a duplex or try, you know,
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another similar type of residential property that I'm going to run and manage.
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I mean, what's, where's some of the pros and cons of going to DSD route?
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Yeah, well, I would say the pros are again, it will provide you a complete tax deferred exchange,
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just like a traditional 1031 exchange, but it'll give you access to potentially some higher
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quality institutional grade assets that, you know, you and me might not be able to purchase
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ourselves outright. So it allows investors to pull their money into these syndicated
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deals and essentially get passive tax favored monthly income. So you get a lot of the benefits
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that you would normally, but you give up the property management responsibilities, which is
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typically one of the more appealing options, right? So these deals, I'd say, you know, are more
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popular with the 50 and up crowd, people that have made some, or created some wealth in real estate
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and are just trying to simplify things. So you can get rid of, you know, the tenants, the toilets
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and the taxes, and you can get passive tax favored income and the ability to
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participate in appreciation of the asset, typically where the rubber meets the road and we,
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we, you know, determine whether this is the right type of fit for the investor is one. If
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you're a control investor, you like managing it, the property, and you want the, you know,
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ability to be able to sell at any given point in time, you know, the passive DST or Delaware
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Sash George Trust option is not always the best option because you're stuck in kind of riding
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shotgun with us throughout the life of the deal, which has a projected holding period,
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but it's not set in stone, right? So you, you might be with us for four, five, six, seven years,
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depending on when we feel the best opportunity to exit the program is. So there's certainly a lack
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of liquidity, which you need to be aware of. But again, with our deals, you can typically go in as
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little as 50,000. So you can, you can achieve incredible diversification. So when somebody comes back
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and says, Hey, Frank, you know, I don't necessarily want to be hanging in one deal for, you know,
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that length of time, we have different types of deals that are staggered and projected length.
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And what, what ends up happening is we kind of have like a mirrored bond portfolio. If that makes
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sense, Kevin. So if we put in, you know, a million dollars, we might put, we might diversify that
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across three, four, five deals. And then typically, once we get to year three or year four, it's not
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uncommon for us to contact the investor. And so hey, you know, we page a, you know, five, six
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percent along the way, we are exiting and selling, whether you like it or not, and you have the
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opportunity to do another tax deferred exchange into hard real estate. You could do another Delaware
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statutory trust with us, or somebody else, or you can cash out and pay the taxes. So I think
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it accomplishes most of the benefits of a traditional exchange, but the, you know, the major drawback
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is you give up, you know, control and decision making responsibilities. So yeah, if you enjoy
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dealing with, you know, the, you know, late payments, handing out notices, showing up for an
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eviction court, you know, you know, the conduit between all the handyman and repairman and vendors
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that need to come fixture unit. Then if you enjoy that, then this might not be a good fit for you.
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Yeah. Yeah. I think I think there's an evolution that most investors go through. You know, they,
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I went through the same thing, you know, two decades ago and ran a, you know, build up a portfolio
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of single-family properties and got to the point where I had about 35 of them where it was like,
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what the hell am I? I mean, like it just, it was way too much. It was overwhelming. Didn't have
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a lot of good systems in place and got burned out pretty quick. All right, some good people,
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but then realized that like it was just, there was a better way to do it, you know, property
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management is not a sexy game. It's not even all that profitable of a game, you know, it's, it's,
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yeah, I like to refer to as a necessary evil. You know, we have a fairly large property management
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company today, but it's because of our own portfolio, but it's not, yeah, it's definitely not the
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the bright shiny object of the of the company. Yeah, yeah, very, very similar. We sold off our entire
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single-family home portfolio and, and kind of scaled up in some bigger, bigger opportunities
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just to make it make sense because yeah, whether you've got a small, you know,
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community of a dozen homes or a hundred, it's the same, same type of headaches and responsibilities,
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but that's right. Yeah. So what's the average length of your typical DST investment? I mean,
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is there, is there an end all be all like term to where, you know, these things run their course,
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or is it all so great answer in the deal itself? Yeah, it depends on the sponsor. We have partners
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that will potentially buy out investors if they need to be, you know, fit into a certain spot.
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I'd say in the low end, we have deals that are targeted for three years. That's kind of like our
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shortest deal. And then if you get into, you know, more diversified triple, and at least type 10
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it with long term leases, those will go out a little longer. So those might be a seven to eight
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year type deal, but I'm glad you brought that up, Kevin. So as we can all relate, you know, the real
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estate industry is kind of an uncharted territory, right, with, with compressed cap rates,
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rapidly rising interest rates, lack of inventory. So what we are seeing is people that otherwise
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might not be a candidate for a DST saying, hey, I've got an opportunity to sell my asset at a premium
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right now, right? I absolutely do not want to pay the capital gains taxes, but I can't find
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an asset to do a 1031 exchange. So what they're doing is using our short term deals, kind of as like
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a landing spot, you know, I'll sell a premium, let the market adjust and let some of these sellers,
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you know, come back down to earth with what they think their properties are worth, then reassess the
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market in the next couple of years. And their plan of action is to go back out into hard real estate.
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So I don't, you know, we've got a ton of deals this year, which I think if if there was a hard
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asset out there that made sense that fit what they were looking for, they probably would have gone
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in that direction, but they're kind of looking at us as a landing spot, parking spot, whatever you
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want to call it, just to preserve the step up and basis. Yeah, well, it talked to me about some of the,
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you know, what asset class is really hot right now? I mean, it's a multi-family, you know,
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that in industry, or are they still too like darling asset classes? Yeah, I think I think
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industrials cool a little bit with, you know, simply high inflationary environment, multi-family,
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I think even though cap rates have affected that, I think the cost of home purchasing right now
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is so high and I think that's spread between the average cost of rent versus the annual,
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or I'm sorry, the monthly cost of rent versus the monthly cost of a mortgage for the same exact
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size property is over a thousand dollars a month. It's never been higher. So it's it's
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pricing people out of the market. So I do think in the right markets, multi-families
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going to continue to be hot. You know, I like, you know, self storage, you know, in the right
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market, it's a pretty recession-proof asset class. I think, you know, office is definitely out
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in, I would say, you know, hotel, we do a lot in the hotel space. I think they, you know,
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they obviously took it on the chin during COVID, but I think, I think there's still some real good
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opportunities out there to be able to get a decent price, you know, for that type of asset class.
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And I love, I was looking at your website. I love module housing communities in the right,
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right markets. And I love build for rent. So build for rent, I guess, is still multi-family,
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but a different, you know, kind of niche there. Yeah. So yeah, exactly. You know, give you a little
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give you a little yard to take your dog out. And now, so that I would say there's build for rent,
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you know, modular housing. I guess any any facet of multi-family, we're still big on. And I
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still think industrial is going to be good long-term. And then hospitality and self-storage,
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I still think give right opportunities or solid. The these investments, do they typically have debt
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tied to them? Or they are most of the time they all cash, cash equity. Yeah, I'd say maybe half
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and half. So some of our deals have, you know, fixed rate financing, we're not doing floating rate
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stuff. So we're getting pretty favorable financing opportunities. I would say what has changed
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over the last few years is the loan to value. So we're not borrowing as much on these deals.
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It's relatively conservative. So I would say that's, you know, on the DST, you kind of have to go in
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with with fixed financing and you can't adjust that, you know, mortgage long term on some of our
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deals that are not DSTs and they're more, you know, limited partnerships or LLCs where people
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can come in with cash, you know, again, same thing. Some of them, we're not financing. Some of them
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we are, you know, we've got a few deals where people come in and we kind of use investors capital
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is kind of like a bridge loan, so to speak, to get some short term relief and give the investors
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a nice return and then basically use that fixed financing to come in and take out the preferred
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investors. So we've got a lot of good options, all shapes and sizes and different timelines,
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because, you know, the common pushback on most deals is, you know, nobody knows what the future holds
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and they don't necessarily want to be hanging out five, six, seven, ten years.
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Right, right now, absolutely. You know, I think you had you had answered my question, you know,
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at the end of a particular DST investment sponsored sides to sell the asset, do I have the option
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to 1031 my proceeds again? Can I keep rolling that into other DSTs? Okay. Yeah, so you have all
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the same decisions that you had coming out as you did going in, right? So you can do a complete
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tax deferred exchange into another Delaware statutory trust program or a hardware real estate.
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And again, the kind of running joke is swap to your drop or. Yeah, that's a good point.
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Is there is there another strategy outside of swap to your drop? Like I wouldn't ask the question,
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you just brought it up before I had a chance to. So are there? Yeah, I mean, is there other strategies
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outside of like, you know, I'm going through my third exchange. I just I really, you know,
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for whatever reason, I just don't want to exchange to another, you know, hard real estate asset.
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But ultimately now I've got this massive tax burden that's been following me along for
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these many, many years. What's what's the alternative options? Yeah, great question. So I'd say,
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I'd say, you know, high level, we're really the only two opportunities or some level of like
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tax harvesting rate. So if you're going to sell out of a asset that's going to create capital gains,
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you know, and you don't want to pay the tax, you know, potentially you might have capital
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losses elsewhere that you can kind of tax harvest and offset that. You know, there's there's
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other investments that are out there, qualified opportunity zones where you essentially can take
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instead of having to roll the entire investment and doing a traditional 1031 exchange,
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you can just take the gain and, you know, typically a fraction of the total dollar amount.
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And there's still some tax benefits to that type of strategy. But I would say yet, you know,
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the common, you know, for the for the wealthier people that don't need the money, you know,
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almost always they decide to continue to defer. And again, if they pass away with the asset,
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their errors can can sell the asset after the day to death and get that complete step up
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in basis. So the tax is completely minimal. One other thing I'll add is, you know, Delaware statutory
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trusts can be helpful for a state planning, right? So if you've got a hard piece of land,
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you leave it to your three kids, they ultimately have to come to an agreement on what they're
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going to do with that asset, right? One of them might want to keep the asset, one of them might
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want to sell it, might want one might be indifferent, but it can create, you know, tension between
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the kids. If they pass away, they get fractional shares of the DST asset. So one could say, hey,
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Frank, this has been a great experience. I'm going to do another 1031 DST with you. You know,
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the sister could say, you know what? I'm going to, I'm going to do a 1031, but I want to go buy a
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hard piece of real estate on my own. And the third sibling could say, hey, you know what? I'm going to
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cash out and go, you know, invest in something else on the run. So it is, it is, you know, simpler,
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I guess, from an inherited standpoint on that type of program. Got it, got it.
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Are there any, you know, speaking to like any regulatory risk associated with, you know, 1031s,
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with that, you know, that section of IRS code changing? Is there any, I know that that was some
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chatter when the current administration got in the office and it just kind of, I don't know,
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I haven't, I haven't really followed it too much. It's still here, it's still around, but I mean,
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obviously you would know much, much more than I as far as, you know, are there any, you know, risk
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coming down the pike that we're aware of? I don't think so. I feel a lot better today than I
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did a few years ago when they were hot on it. So the 1031 exchange has been around for over 100
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years. It's been on the docket for a number of administrations to cap it, limit it, take it away.
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I think of all the administrations that are out there and the bipartisanship of, you know,
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different, you know, parties that are out there, everybody typically has some amount of wealth
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and real estate. And I think they've acknowledged that capping that, taking that away would
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completely create the real estate industry. So even your, you know, hardest pro-tax legislators that
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are out there, I think they realize that that's not a smart move and that's not going to help things.
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So although they were hot on that, they've created some other language in these type programs
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that really came, came to light, you know, a few years ago, the first time it was going around,
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but I'm not worried about it. I think we're, we're good to go, but I would tell investors,
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I did have investors that cashed out paid a ton of taxes because they just thought, hey,
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they might take it away. So I'm just going to do it anyway, which they've kind of got egg on
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their face on now, now that they extended it. Yeah, yeah, that's interesting. I would not have
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expected there would have been like a frenzy of folks cashing out. I would have thought that maybe
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it just, you know, kind of let it set and, you know, ultimately if it goes away, it goes away,
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it just means they've got to figure out an alternative solution. Yeah, I wouldn't say it was a frenzy,
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but I did have some people that just, you know, dooms, doomsdayers that are, you know,
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worlds going to end and I'd rather, I'd rather cash out pay my tax and bury the remainder in my
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backyard. So I would say that was not the majority, but some people were just, they get hung up on
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the unknown of what's going to happen next and I can't plan for the future because I don't know
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what the laws are going to be. We're a big advocate of taking current law and planning for today.
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Is there any way to do a, like a reverse 1031 buy something now that ultimately, well, I guess buy
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into a DST now before I've sold my exchange property and then just basically do it in reverse.
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I know 1031 exists, but like can you also factor in a DST? Yeah, you can still do it. You know,
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again, we're not, we're not, I'm not a qualified intermediate area. So the qualified intermediate
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area is that unaffiliated third party individual that holds, holds the funds in that transaction.
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So we're more on the replacement side of things, but you certainly can do a reverse 1031 exchange
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where you purchase the property that you want now and then go to sell the asset. It's definitely
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a little more complicated maneuver and it's a little bit more costly when you go to the qualified
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intermediary. And that's where I think it's, it's critical to get the right firm that knows what
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they're doing because there's a lot of intermediaries out there and a lot don't know what they're doing
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on the reverse exchange side of things. So if any of your listeners are contemplating that,
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even though we're not intermediaries, I could certainly guide them in the right direction to
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the right people to make sure that that works out. Okay. Frank, is there anything else that we
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haven't maybe touched on the day that you feel is relevant of importance for our listeners to know
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about you, your group, what does you guys do? Anything that comes to your mind? Yeah, now I appreciate it.
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Yeah, I think, I honestly think we're a really incredible resource hub, even if you're not in
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the market for a DST or you're not in the middle of a 1031 exchange. Maybe you're just looking
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to find capital. You know, we're a great market maker for relationships for people that are either
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looking to borrow, buy or sell. And above and beyond that, outside of the 1031, you know, DST
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business, we do a substantial amount of, you know, accelerated depreciation, tax favor, tax
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deductible type opportunities. So you and I, Kevin, are probably think alike on a lot of fronts
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and even though we're, you know, probably doing some of the same type of deals confident that we
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could be a great resource for somebody that is just looking for a little guidance regardless
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of where they are on either side of the transaction. Yeah, with that, I mean, for those that want to
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learn more about you or reach out to, where's the best place to track you down? Yes, so our website is
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r-e-v is invigorated.x is an x-ray wealth.com. So r-e-v-x wealth.com, feel free to email me. It's
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Frank F-R-A-N-K-H-A-N-N-A at r-e-v-x wealth.com. If you go to our website, you can see some sample
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deals that are on there. Get some quality information on different things that we're working on,
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but happy to, you know, send out a list of opportunities if somebody contacts me directly.
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All righty. Well, fantastic. Well, Frank, I appreciate you joining us here. It's been a lot
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of fun having you and pleasure meeting you as well. Yeah, Kevin, thanks. Enjoy the weather down in
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Tampa from jealous. We'll do. We'll do. Okay, guys, thanks for joining us here today. That's
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all we have for this week's show. So until we meet again next week, this is your host Kevin
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Bup wishing you a huge success. Take care now.
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Congratulations. Now you've got more of the best tricks of the trade in building massive
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amounts of passive income from real estate. For more amazing resources, visit real estate
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investing for cashflow.com. We'll see you next Monday morning.
