$15.6M Texas Closed Deferred Sales Trust Case with Dharma Rajah

Dharma Rajah has always had a strong connection to people and land. Growing up in India and moving to the United States taught him the value of land to our freedom and opportunity. In fact, his grandfather, Harihar Dharma Rajah, was known as the “Firebrand Freedom Fighter Who The British Raj Framed For Murder” because he opposed British rule in India and participated in various protests. He fought alongside Gandhi for India’s independence, and his blood runs deep into who I am today.

His grandfather’s success in founding Vanguard Insurance Company, India’s first life insurance company, taught him about wealth at a young age. However, a series of family issues caused us to be nearly bankrupt and deeply in debt. That was when my mother started working in real estate, and he became interested in real estate and how it affects populations and economies. He didn’t get into real estate until 2005, when he was living in Bangalore working for Infosys. He worked as a tech seller during the day and as a real estate agent at night, and he loved the industry and learned a lot about Indian real estate.

He moved to the United States and worked for Deloitte for ten years, assessing enterprise-level companies’ IT spend and benefits on ERP products and implementations.

Through these experiences, he realized the link between technology and real estate.

He is currently the President of Epitome, a real estate development company that develops land, designs, and delivers real estate projects ranging from spec homes to multi-family homes, retail centers, and hospitality.

Episode Highlights Here:

Dharma Rajah:

I think the big thing for me was the flexibility that you can actually deploy it in different asset classes and also not have the time pressure.

Brett Swarts:

You were looking at a huge tax, and you’re saying, Brett, maybe this is a good fit, but take us to the moment where you’re looking at this kind of what was the problem? And what helps you to kind of get comfortable with the Deferred Sales Trust?

Dharma Rajah:

I think in general, the options in our business when you exit on a capital gains basis is you typically do 1031, or you look at the nobody really Deferred Sales Trust is not something that’s obvious that jumps out at people. And because I’ve been watching your podcast for the last year and a half, I kind of learned more about it. That made me a lot more comfortable on what the powers of it. I think the big thing for me was that the flexibility that you could actually deploy it in different asset classes and also not have the time pressure that comes with 1031 was what got me really comfortable with this. And it’s no 1031s only eligible for certain types of gambling games, whereas the Deferred Sales Trust is a little bit more flexible. So things primarily the flexibility of what it affords. And, of course, doing it for the first time is always a bit of a learning curve. And it’s not easy, but you know, once you get across, once you get over that, then things get much smoother. So you’ve seen me come along the journey.

Brett Swarts:

Yeah, it is very common, but it does feel it is a lot right to learn for the first time and even with yourself and all the development and all the history of your guys’ company, I mean, you guys have done. I’m looking at some of the stats here, which are pretty incredible. You have over 250 million under development and 800 plus acres under development; you work with over 300 accredited investors. And then you’re also building 300 Plus builder rent homes. So you guys are very active in what you’re doing. You’re experts in what you do. But what was the biggest thing that you had to overcome, as far as you know, knowing that it’s legal, it works? Take us through that process.

Dharma Rajah:

Yeah, I think I mean anything, it’s something like this, it’s just that’s just flexible, that is available for you to use as needed on-demand as needed. When you find the right opportunity, obviously, versus having to be under pressure to deploy it into an opportunity within a timeframe which forces bad decisions, any money manager, any capital allocator who’s under pressure to make you deploy a certain amount of money within a certain timeframe more often than not ends up making poor decisions. Because you are just under pressure. So I think the big thing is being able to kind of hang on to to be able to make that decision and also choose what type of investments you really want to get into is I think is a big thing. Having that flexibility of very decision-making across asset classes is huge. These were the two main things in terms of getting across any sort of concerns and pain points, and spoke you gave me the chance to speak to a lot of your current clients. I think that helped a lot. I think it’s just the communication along the process that really got me comfortable. It continues till now. As you know, I’m very happy with the decision we made.