Innovative Methods for Maximizing Investment Returns While Minimizing Tax Liabilities with Brett Swarts

0:01Boom! Shake the room, Fire Nation. JLD here and welcome to Entrepreneurs on Fire. brought to you by the HubSpot Podcast Network, the audio destination for business professionals with great shows like Systems Saved Me. Today, we'll be breaking down innovative methods for maximizing investment returns while minimizing tax liabilities. To drop these value bombs, I brought Brett Swartz into EO Fire Studios. Brett is the founder of Capital Gains Tax Solutions, where he serves as a deferred sales trust trustee and has closed over half a billion in DSTs and real estate. He was the first to help Bitcoin owners exit millions of gains and to further capital gains tax using a DST.

0:39He is an author of the number one Amazon bestseller, Building a Capital Gains Tax Exit Plan. He brings a unique approach to capital gains tax exit planning using the DST, Real Estate Investment and Wealth Management. And today, we'll be talking about all of this and more as soon as we get back from thanking our sponsors. DTC Pod, hosted by Ramon Berrios and Blaine Bolas, is brought to you by the HubSpot Podcast Network, the audio destination for business professionals. DTC Pod is a podcast about all things direct to consumer. Ramon and Blaine cover everything from starting, growing, and optimizing e-commerce stores and DTC brands.

1:16If you're interested in the stories behind your favorite consumer brands, this podcast is for you. One recent episode on how the best brands are built is a must listen. Listen to DTC Pod wherever you get your podcasts. Brett, say what's up to Fire Nation and share something that you believe about becoming successful that most people disagree with? Hey, Fire Nation, what's going on? John, so grateful to be here. Thank you so much for having me. I think most people may disagree with this, that you need to work harder on yourself than you do on your job if you want to be successful. A lot of the initial onslaught of information out there is, hey, you just got to work really, really, really hard to be successful.

2:01Really, I think it's working harder on yourself. This is by Jim Rohn that I really admire over the years. And that's about building and focusing on the things that are going to move you forward with your character, your leadership, your personal development, your faith, your finance, your fitness. And I think sometimes that gets overlooked. And when I say most people, I think the entrepreneur nation knows this, but I think those that are outside, they think it's perhaps just work hard, make a lot of money, and that's how they've been successful because they've worked really hard, right? Well, that's on the job.

2:32That's one thing, but it's really focusing on building yourself. Brett, thanks for that. Much appreciated, brother. And Fire Nation, as you heard in the intro, we're talking today about innovative methods for maximizing investment returns while minimizing tax liabilities. I mean, who doesn't want to do that? Hello. That's why we have Brett here today. And it may be hard to believe from some people that heard your introduction, Brett, but you had some humble beginnings as a broke commercial real estate broker wannabe. Tell us more about that. Yeah. I always say I got in the tax game, not by choice, but by the fire of the 2008 crash.

3:10And so I was a brand new real estate wannabe working at Marcus and Miller chap, trying to help people buy and sell multifamily properties. I actually started in 06 when things were going actually really, really well. And then everything came to a crashing halt. And so I went from making a little bit of money to nothing overnight. And my wife and I, we moved with my brother to a small condo. I started working at cheesecake factory and doing the side hustles at mass basketball tournaments. And essentially I had to learn the hardest way to build wealth, um, which was, you know, a hundred percent commission, no salary, no benefits.

3:44Um, but, uh, that that's what led us to where we're at today with the company, because I saw my friends, family and clients lose half or all of their wealth in that crash. And in particular, those who had, who are multimillionaires lose everything. And I said, there's gotta be a better way for the entrepreneur who owns real estate, a better way than, than, you know, paying overpaying for properties and the typical 1031 exchange and, uh, and, and having to suffer the consequences of too much debt, non-lifiquity or diversification. And so it's during this pain full-time that we reflect it and we made progress on a better way to do it.

4:16And this is why we're here. Fire Nation, I really hope that you understand that it's through the pain, it's through the suffering, it's through the struggles that we learn things, that we understand how to become anti-fragile, that we learn that failure is not final. And that's why you're gonna be hearing today how Brett has continued on throughout that journey to provide amazing services to amazing people. Because Brett, there's a massive, and I mean massive problem facing entrepreneurs and baby boomers. And we're talking about the next 17 years plus. And if you want to get a little more specific about it, it's an$84 trillion problem.

4:55Tell us more about this. Yes. In fact, the government all has a spending problem. One thing we could all agree on is about$35 trillion to date. And that means we all have a tax problem. And so according to the American Bankers Association and Marcus Militap and all these really, really, really smart folks out there, it's about$84 trillion. Some people say over$100 trillion that's going to transfer in the next 17 years, mainly for the baby boomers, right? But these baby boomers, they own commercial real estate and they own businesses. They're the two main parts of a massive amount of wealth. And these assets are highly appreciated.

5:28it. Um, and they say now the, the, the, the, the stat is that this is likely the most amount of wealth that we were ever going to know in the future too, that's going to transfer. And so we're in what's called the reverse tea party where 240 years ago in America, we fought for the freedom to have representation with taxation now to the biggest wealth and accumulation in the planet. And the government wants to get their hands on it because they want to spend it on the things that perhaps don't make a lot of sense to us as entrepreneurs. And so the problem is entrepreneurs are stuck and they're not sure what to do if they sell because they can hit massive capital gains taxes.

6:03And they also want to maybe retire or they want to start a new business venture when they want to diversify. They want to do different things with wealth. As entrepreneurs, we have a time and a season for planting, for watering the plants and then harvesting. Right. And so when they go to harvest their businesses or their real estate or even their Bitcoin at this point, massive capital gains taxes. And this transfer is going to happen in the next 20 years. So people are going to need to sell. They're going to need to pass it to their kids. They're going to want to do planning. But if they don't sell, they don't get to get the freedoms they want.

6:34And if they do sell, they're faced with taxes. And so we're in between this transfer. That's where the taxes happen. This is what we're focused on. And it needs to be a focus, Fire Nation, because again, so many entrepreneurs, they're stuck in their business. And if they just sell their business, then they're looking at the situations that Brett is talking about here today. And, you know, listen, a lot of CPAs today, and let's just be honest, you know, they're stuck. They're stuck preparing tax returns, projecting tax bills. They're not really working on creative solutions. And, you know, this is what we're going to be talking more about today with Brett because this is where he focuses on because you have, Brett, some unique viewpoints.

7:10You believe that we need to be building a capital gains tax exit plan with the mindsets specifically of tax flow and not just cash flow. So what the heck does that mean? And can you share an example? Yeah, imagine building your business for the last five, 10, 15, 20 years, masses of millions of dollars of revenue and you poured your blood, sweat and tears, everything into this thing just for the government to take 20 to 50 % of it at closing. And so that right there should stop everyone in their tracks, right? You've spent so many thousands and thousands and thousands of hours, employers, time, tears, all this stuff, or even if you own the real estate and it's totally this trash liabilities, you poured so much into it.

7:53And you have been providing this amazing service to the people, to your tenants, to your employees, to the community, just for the government to squander it by they're going to take 20 to 50%. And that's really what I want to focus people to have a tax flow mindset, right? A lot of entrepreneurs, yeah, they get stuck on, I'm just so excited to sell my business for the five, 10, 15, 20, a hundred million dollars. And they're, they're, they're just, their outcome is I just want to sell it because I'm ready to go on to the next thing. And they've already written the check to the IRS in their mind because they know what the tax liability is going to be, right?

8:25That's where the CPA does do a good job of projecting what the tax is going to be. But what they don't do is they don't spend just five hours building a capital gains tax exit plan, which could net them an extra 20 to 50 % more that can to work for them, it can multiply and compound their wealth, their impact, their freedom, right? And that's really what we're here to talk about. Like you've got to have a tax flow mindset. You've got to build a capital gains tax exit plan. Just spend five hours because these strategies need to be set up prior to the close of your business. Most of them do. In fact, the biggest, the best, the best and most flexible ones do that we work with.

9:01And so that's really the key here. Just slow it down, prepare, and do a little bit of planning, and it can make a huge difference. So I don't want to get into super details of an exact example with revealing anything, but just give us like a hypothetical. Like what could this look like for a business that let's say has been in business for 15 years, is going to have an exit, let's just say of$10 million just for clean, even numbers. Like what would it look like if they did things wrong financially? And what could it look like if they did things right? Perfect. Let's use California, New Jersey, and New York as an example.

9:35We're going to use just a 40 % capital gains tax, tax basically on that amount, but it could be as high as 65. If it's a C corp, it could be a little bit lower too, but it's about 40%. So on a zero basis, you started from scratch, John, right? And you built it to 10 million. If you were to exit and not do any planning, expect about$6 million to work with, right? Well, if you do a little bit of planning, you can defer all of that amount of money, as long as you don't have any debt over the basis on this scenario. And now you have a full 10 million working for you. And this is the idea now. Think of it like an IRA or even kind of like a 401k where you can defer the tax and let the money work for you.

10:11Think of it like an interest free loan from the government. If John, if the government says, I want to give you a$4 million interest free loan, you can go invest into businesses. You can put it into the stock market. You can invest into real estate and Bitcoin. Would you want to do that? You say, of course. So you're selling your$10 million business. You can defer that tax versus just paying the tax and it's gone forever. And then we use the rule of compounding interest, which means we can earn about 7 % over any 10 years period. We can double that amount of money and we get that money working for you.

10:40And so this could be for starting the next business venture. It could be for investing into that Airbnb property. It could be for putting into some Bitcoin. It could be to put in stocks, bonds, mutual funds. And the idea here is how do we create and preserve more wealth for ourselves? But also this creates more jobs. It's a good thing for the IRS to allow this in the government because it should create more tax revenue because it creates more jobs when the money's working for you. The one thing you just can't do for a lot of these strategies is just you can't go into your primary home or your personal consumption.

11:12That's taxable. When you can, you just pay tax on that amount. And so a lot of the sellers we work with really want to maximize and compound that wealth. That's what we focus on. Fire Nation, I hope you're starting to see how these numbers will be working in your favor when you are planning ahead, when you are dealing and working with the right people. Like, don't be penny wise and pound foolish here. You need to find and hire the right individuals because you may spend X number of dollars to save hundreds, if not millions, hundreds of thousands, if not millions of dollars in the end game. And we have a lot more to talk about around this topic when we get back from thinking our sponsors.

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12:53I mean, I've definitely had some rough real estate deals. You know, I'm currently sitting on a great real estate deal right now. So I've experienced both sides of that, the pain, the agony, the excitement, the euphoria. What are some techniques for leveraging real estate if we're looking to build true lasting wealth? Yes. So number one, you've got to understand what you want the clear outcome to be for that investment, right? And when you're going into real estate, you really should have a three-dimensional view of this. Cash flow, tax flow, and debt flow. Okay. Very important. And where people get in trouble, John, and then in fact, I would encourage those who are listening, look at the deals that they have not gone well.

13:32It's because one of those were out of whack, meaning you let the 1031 exchange wag the investment dog, which you end up overpaying for the property to defer the tax. You put debt on a property that is now reset and is now through the roof. And now it's sinking the ship that you were hoping to travel safely across the ocean to the promised land. Right. And or the cash flow wasn't necessarily great. You're buying it for tax reasons. And so you've really got to be focused on buying well for the right reasons and understanding what it's about. Like, for example, if I buy a multifamily property today, I have bonus depreciation in this year.

14:08It's about 60 percent. And I can use this as a way to offset some active income because I'm a real estate professional status for a way that I report in my hours. OK, so understanding that concept doesn't mean I buy a poor property, but understand that it can offset massive tax on active income. And so that's a tax flow mindset. But that's my gravy to it. I'm not buying it just because of that. And that's where people got in trouble here the last couple of years before things really shifted. And so you've got to really understand what you're going into and then be able to lock that debt in. Now, if you can buy a deal and lock the debt in for a longer term.

14:44Great. Understand that's going to help on your downside there. And so I think that that's number one. And I think number two is you've got to find something where you can add value to, where you could hold some of the keys to the control. Like you're not just giving up the ability to build the wealth by getting your hands to get in there, to manage the property, to improve the property, or at least have the team members or the local expertise to do that. Where people get in trouble so they don't have the who, right? They just try to be all of themselves the how and they get frustrated, right? Right.

15:12So, by the way, sometimes that means investing passively with those who are experts in passive mobile home park, multifamily, industrial office lending, you know, in commercial real estate. And that's that's kind of what I found. Personally, I built my business focusing on capital gains tax solutions. My real estate holdings are all with passive operators. Right. I don't want to be active in it. And part of that was from tax reform. It's one of the highly regulated rent control, challenging places to own real estate. And so I've found that if I can invest into places that are job growing and a huge, massive migration, especially multifamily, that to me has made a whole lot of sense.

15:50And so we invest with some of the best in the world, we believe, at doing what they do, have proven track records and let them do all the scaling, them do all that. And we become passive investors. So that's a little bit of my feedback for those who are listening. Cash flow, tax flow, debt flow. Think about it, Fire Nation. Understand it. implement it. Now, Brett, I love practical tips because that turns into realistic implementation for our listeners. You've been sharing a bunch of those today so far, of course, but give us one practical tip for our listeners who are looking to navigate complex tax landscapes.

16:28What would you tell them? Yeah, you got to hire the who don't be the how and realize that sometimes your CPA is not the who all the way. I mean, they may be your traditional family practitioner who gives you the flu shot, who checks up on your blood work, they've done your tax returns, they've done your P &Ls and your bookkeeping, but they're not necessarily going to solve the massive capital gains tax or some other real strategies that are out there that can help you with the large excess. So that's what I found is you've got to find, it doesn't mean you replace them. It just means you add to the team.

16:59You really want to have a dream team mindset, right? You want to have the, think of like the shark tank and having, you know, John as a part of the Shark Tank and four others that can give you great wisdom on these massive decisions. And sometimes they're smaller decisions, right? But how are you growing your mindset and your education and growing your inner circle to help you with this? Because the government is continuing to increase in spend and means our taxes are likely to go higher and higher. And they want to take a lot of this away, right? And so we've got to be proactive. We've got to plan.

17:32We've got to have the team members, but you also got to be willing to go outside of your, sometimes your traditional team that's there and add to the team. And so that would be my practical step for this is hire the who, doesn't necessarily replace the who, but hire the who and go ahead and build out your dream team. So Brett, you have a unique approach that combines the financial strategies with real estate expertise and provides this comprehensive view on wealth building. So can you leave us with some actionable advice, and this is for both novice and experienced investors, because we have that whole area covered on the listenership here, that's going to optimize our investment strategies.

18:13What would your recommendation be? Don't forget the basics, right? The humble beginnings of making no money, being broke, living my brother in a small condo, working the side hustles. We had the budget, we did the Dave Ramsey, we got out of debt, We did all of that. And then we grew, you know, into millions of revenue. And then we started, you know, invest it and all in the W2 jobs and side hustles in between. Like, it's definitely a journey, right? It's definitely a journey. And I would say a couple things as you're, as you're scaling and as you're building, you've got to find out a way to buy back your time because there's different seasons of the entrepreneur.

18:48And, and to me, it's, you know, I have five children, my wife and I, we moved from California to Florida is where we're at now. And we really started looking at like, what's the most important thing to us in this period of time? And it was spending valuable time with our kids, building into them, doing missions trips, doing the things that are going to make the big difference for their long term future. and then centering our life around that, right, and our cash flow around that and our time that we're in the business around that. And so that's what I would say. I think where you really excel and where we've excelled is when we could hire the team members to do the things that, you know, we weren't great at doing and or are just the lower cost types of things.

19:27These are all the practical things, but you've got to plan intentionally and then go do the thing, right? Don't give up because that first virtual assistant didn't work out. Don't give up because that first real estate deal didn't work out or don't give up because, you know, whatever the thing that stopped you, you've got to continually to, uh, you know, have the grit, continue to grow and continue to, uh, to build the life that you want. You can achieve it. You can achieve it. Um, sometimes that means moving across the country. Sometimes that means, you know, switching out and getting multiple side hustles, right.

19:55To, to, to increase your income, starting that business, starting that podcast, like whatever that next step is, I encourage people to take that and look at the longterm view on this, but take small steps along the way. Brett, if Fire Nation is loving the content you're bringing down here, they're just consuming these value bombs, they're loving it and they wanna learn more, they wanna connect with you, what is your call to action for our listeners today? Yeah, first I want you to know that if you're an entrepreneur and you are moving, know that you are a big part of the future of America and of your family because you're creating jobs, You're creating revenue.

20:34You're doing things that are going to be outside the box that can change the world. Right. The government's never going to solve anything by taxing the people. In fact, that makes it worse and worse and worse, taxing too much of the people. Right. And so you've got to know that with information and what you're calling is like I grow and don't take it for granted. Right. Being very, very intentional about everything. One of the big things that I'm working on is being more intentional with my planning. you know there's a saying that most people have the will to win like we all really want to win the game or win in business but but few people have uh the will to prepare to win right and it's an intentional planning it's the it's what we're talking about with capital gains tax when you exit your bitcoin real estate you know business but it's also the intentional planning for your life right you know most people spend more time spending you know with their vacation planning than they do on their life.

21:25And so I just really am focused on intentional living, planning things out, putting things on the calendar well in advance. I think that just makes a huge difference for the way that we can compound our impact in our life. Fire Nation, you are the average of the five people you spend the most time with. You've been hanging out with BS and JLD today, so can you keep up that heat? For links to everything we talked about, visit eofire.com. Just type Brett, B-R-E-T-T in the search bar and the show notes page will pop right up. And Brett, Fire Nation, if they want to take action, they want to connect with you, follow you, what is your call to action for our listeners today?

22:01CapitalGainstaxSolutions.com for anything you're talking about, like massive million dollar exits, right? Bitcoin, real estate, that kind of thing. And then BrettSwartz.com for a number of different things, for our YouTube channel, for our bestselling book on Amazon, for Instagram, for all the handles on social. So brettswartz.com, B-R-E-T-T-S-W-A-R-T-S.com and capitalgainstaxsolutions.com. You can also check out the podcast, which hopefully one day John will be on. It'll be amazing. It's called Build It to Billions Podcast so you can give more or all of it away. And it's our focus and our journey on stewardship over ownership.

22:36We've had some amazing billionaires on the show so far and millionaires and entrepreneurs called Build It to Billions Podcast. One last time, the Capital Gains URL. Tell us that one.

22:49CapitalGainstaxSolutions.com. Brett, thank you for sharing your truth, your knowledge, your value with Fire Nation today. For that, we salute your brother and we'll catch you on the flip side. Thanks, John. Hey, Fire Nation, a huge thank you to our sponsors and Brett for sponsoring today's episode and Fire Nation. Successful entrepreneurs accomplish big goals, huge goals. That is why I created the Freedom Journal to guide you in accomplishing your number one goal in a hundred days. And we're talking step-by-step. So visit thefreedomjournal.com. I will catch you there or on the flippity flip side.