Breaking the Multifamily Real Estate Cap Gains Tax Challenges with Brent Sprenkle

Breaking the Multifamily Real Estate Cap Gains Tax Challenges with Brent Sprenkle

Brent Sprenkle is a Commercial Real Estate broker with a company called Berkadia. He is situated in Los Angeles. He’s been in the business for about 22 years. He primarily sells apartment buildings here and locally. He also tries to buy apartment buildings here and there when he can. He helped a lot of people avoid paying capital gains by engaging in 1031 exchanges or doing some other creative things. He also wrote a book, A Billion-Dollar Portfolio.

Brent Sprenkle is also a Math guy. He actually has a Degree in Mechanical Engineering with a Minor in Math. He worked on DirecTV satellites for about three years, it was not as exciting as it sounds and as it turns out, he wasn’t that great of an Engineer. This was his turning point. He moved on to a new career, influenced by friends to buy apartment buildings. One of the things that he believes really helped him was that he was very quick with Math. He can look at a deal and size it up to figure out what it was worth, how to evaluate it. But more importantly, as a principle for buying properties, he can pretty quickly look at a deal and determine if there’s a look halfway decent on the surface.

 

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Breaking the Multifamily Real Estate Cap Gains Tax Challenges with Brent Sprenkle

 

Brett:

I’m here with an amazing multifamily specialist Brent Sprenkle. I’m gonna let him introduce himself. So Brent, give us a little more about your story and your current focus.

Brent:

Hello, everybody, my name is Brent Sprenkle. I’m a commercial real estate broker with a company called Berkadia. I’m situated here in Los Angeles, I’ve been in this business for about 22 years. I primarily sell apartment buildings here and locally. I also try to buy apartment buildings here and there when I can. And this has been a labor of love. We’ve helped a lot of people avoid paying capital gains by engaging in 1031 exchanges or doing some other creative things. And love to tell you guys all about some of these proven strategies.

Brett:

Beautiful. Before we dive into your story and some of those strategies, I want to take our listeners another step back, and maybe go back to the University or College days or your days in High School.  I believe we’ve been given certain gifts in this life and these gifts have been given to us to be a blessing to others. Some people call them superpowers, some people call them strengths. So maybe give one or two of those gifts, Brent, that you believe you were given and how does that help how you help others today?

Brent:

Well, I’m a Math guy. So I actually have a Degree in Mechanical Engineering with a Minor in Math of all things. I graduated college, with school in East Coast at Penn State, and they moved me out here to work for Hughes. I was working on DirecTV satellites did that for about three years, it was not as exciting as it sounds, looks great. But it got really boring really fast. And it turns out, I wasn’t that great of an Engineer, so had to move on to a new career, friends of mine were buying apartment buildings. And they said, this is a really lucrative business, you should check it out and made the switch. And one of the things I believe really helped me was that I was very quick with Math. And you can look at a deal and size it up to figure out what it was worth, how to evaluate it. But more importantly, as a principle for buying properties, you can pretty quickly look at a deal and determine there’s a look halfway decent on the surface. If it does, should I dive in deeper as a really important trait that people need to have and it’s not that difficult to get good at Basic Math, which is all it really is at the end of the day.

Brett:

So having that skill set of Math, and Engineering mind. And then focusing that on multifamily investment properties on the brokerage side on the buying side has helped serves you well, is that a fair summary?

Brent:

For sure. People skills, that’s always a challenge, still working on that. But it’s really easy to look at a deal and just kind of determine face value. Does this meet the basic requirements to be a halfway decent deal on the brokerage side? You have to look at something and say, some are going to want to buy this, and why on an investor side you have to look at and say do I want to buy this? And if so how much do I want to pay for it? So those are two things that people need to really figure out. Because there are a million properties out there you can buy, and every broker is going to do their best to make every deal look super attractive. On the surface, your challenge is to be able to figure out if it is worth pursuing or not? Because if you pursue every deal, you’re never going to get anything done. Because you guys spend your entire life underwriting deals, just to find out that it’s a dog, you should have skipped it and never started on it. So you have to be able to look at the surfaces determine if something meets your criteria.

Brett:

100%, I’m excited to kind of nerd out with you here. This is one of the most I think it’s not the most critical thing to investment real estate on the brokerage side or on the principal side, which is underwriting right and figuring out what’s a real number, what’s a real cap rate, what’s real expenses, what’s a real vacancy factor? What’s obviously making sure you’re adjusting for property tax on the new purchase price, you’re doing all of these things to make sure that you’re buying on based upon real numbers, I have to say have a high conviction for the NOI, have a high conviction for your NOI. So let’s dive right into that, Brent. When you’re looking at a deal for the first time, and you’re trying to underwrite it, what’s the first secret to making sure you’re underwriting it correctly?

Brent:

I wouldn’t say there’s really any secret but you need to kind of know the product type. If you’re looking at an apartment building, and let’s just say the building’s primarily one-bedrooms, you need to have a good idea of what market rents are in the area. I’ve gotten burned on this many times, including even recently, where someone tells you you’re gonna be able to get $1500 for these rents. And then you find out later that they’re only worth $1300. And then you just wait alot of time. So the first thing is to understand the market. And that’s a little bit of a challenge. But that’s why I tell people, it’s not always such a great idea to go really far out of your comfort zone, a lot of people are leaving, for instance, California going to Phoenix or Texas, or they’re going to areas that they just they don’t understand it as well. And they’re going to make mistakes going into those markets, it just naturally happens. So the first thing is you need to understand the market, what our rents going to be, what our expense is going to be property taxes, insurance, management, fees, utilities, things of that nature because if you don’t have a good understanding for them, and you’re relying on the broker, give you that information or the seller, you might make some mistakes.

Brett:

So let’s dive right into understanding the rents when I started out Marcus and Millichap selling multi-million properties in 2006, one of the first things we learned for a proper rent survey was first, you would maybe call the property manager or call the owner and ask him what they’re receiving. And then would go on-site and to actually get inside the unit to do a tour, act like you’re a tenant, a fake prospective tenant, and touch and feel and ask questions beyond just what are you renting for,  what are the rubs charges?  what are the concessions if any, but getting into the units and figuring out washers and dryers? Are those washers and dryers full size? Are they stackable? Are they small? Who’s paying for the hot water? Who’s paying for the utilities? What does the rent include? What I received doesn’t include parking? Does include pet rent? Does include a carport? does it have garage storage? And so getting intimate on the property with the property management on-site, that you can really understand what the rental can become. Because you’re right, someone might say I have a $1300 unit that can definitely be $1600. But what they don’t realize is that $1600 place there, they’re including,  washers and dryers in the unit, they’re including a carport there including maybe it’s a fitness center, right? And so you’ve got to make sure that you’re doing apples to apples. Any thoughts on that?

Brent:

I just went through this last week. So I’m supposed to be buying an apartment building in San Diego and my Property Manager who’s also brokering me the deal said these one-bedrooms were 1650. All-day long. We manage buildings, the area there was 1650. And the average rent in a building was like $1200. So on the surface, it looks like this amazing amount of upside. So go down there we check the property out units are big the central air, there are dishwashers, they have good layouts, great parking, it checks all the boxes for a solid building. It’s like I can rent these units. Then I start driving around and I start writing down phone numbers and calling. It just kind of like what you said in your glory days. Mmm. Hi, I’m looking for a one-bedroom apartment. Or like, we have one right now. $1200 called next place. Yeah, we have 1250 I’m like, wait for a second, how am I gonna get 1550 when right down the street, there are $1200. So immediately wipe off lashes, we have an issue here. So that was a bit of a challenge because it’s an area that I don’t have as much market knowledge in. I’m up in LA, this is in San Diego. So once again, I’m in a situation where maybe I overreacted a bit making this assumption that you’re in escrow on a property, you have a contingency period, you can always exit the deal we can get your deposit back provided to you did the contract correctly. So you have to do your due diligence. You can’t rely on people, the property manager made a mistake and he was copying out institutional-grade properties with tennis courts and swimming pools and Jacuzzis and a fitness center. And he later realized that he didn’t have all the research for the buildings literally right next door because that’s what tenants are going to do. They’re going to drive around the street and they’re going to like look for rent and they’re going to say okay, this is a one-bedroom with parking is 1250. This is whatever parking and AC is 1300. This is a one-bedroom with no AC, no parking is 1150 which one do I want. And if you’re 1450 and you have no swimming pool, but you do have parking, you’re probably not going to get that tenant to rent your apartment. You got to just be it is sometimes people say they want to be the lowest rent on the market. Because that keeps your unit full, that keeps your building full. Eliminating vacancies is really important for operations if you can keep the building full and not have to expense for turnover, but there’s a vacancy, leasing expenses, etc. It’s all about operations at the end of the day.

Brett:

Yeah, 100%. Spot on there. It’s vital that you understand your expenses. So we and your income or your true income stream and your true pro forma, not just a broker’s pro forma, but I just call it a realistic achievable already achieved pro forma and the way I like to underwrite is say, okay, you have a two-bedroom, two-bath that’s going for 1500 right now, and you have that same two-bedroom, two baths that’s at 1200. And you haven’t quite may be done as many upgrades, maybe the countertops, maybe the flooring. So I think that’s a realistic story that we can tell because you already achieved it, right assuming that that tenant By the way, here’s also Another thing, they weren’t just slammed in there, right? They are a poor credit tenant who wasn’t qualified and the owner just to bounce up their NOI slammed a bad tenant in there who may or may not be paid in six months, okay, and may not have a,  maybe the two and a half to three times the income requirement. But they slammed in there to do a folk,  our fake pro forma. Does that make sense there?

Brent:

Yeah, you got to do your homework. So COVID has caused a lot of operational challenges that we haven’t seen in decades. And one of them is something called rent collections. There are tenants living in apartments all throughout the United States, especially in California that is not paying rent, and they’re not being evicted, they’re sitting there, they might even have a job, they might even be making more money than they made a year ago. But they’re not paying rent, because they can get away with it. There’s a moratorium on evictions. And they know it and there’s nothing that we landlords can do about it. So you want to see a collection report, a monthly month by month report. And what it’s going to look like is let’s just say 10 grand a month in January 10 grand a month in February, and in March, probably 10 grand a month. But then let’s just say this is for 2020, it’s probably going to start going down from 10, to nine to eight to seven from March, April, May, June of last year, because of what happened with COVID. That is normal, it’s natural, but you just want to see where the tenants are. Now, if half the buildings aren’t paying rent, you’ve probably got a disaster there, you need to have a conversation with the owner about maybe a price reduction or guaranteeing some rents or something of that nature. But you have to be careful. So it’s important just to check if you’re looking at a rent roll, and two-thirds of building turnover in six months, that’s an issue. If you look at a building and see that it’s been very steady only one or two tenants moving in a year, that’s really great for operations, maybe that means are under renting the units. If you look at a building and there’s constant turnover, that means either the rents are too high, so it’s not sustainable. Or there’s something else going on in the area of the economy or they’re just renting out the bad tenants. A lot of people remember they sell buildings because the buildings are performing and they’re gonna make it look as good as possible to lure investors to take a run into the property. Most people sell buildings half the time because it doesn’t fit their criteria more and they want to move on take a profit.

Brett:

Yeah, very well said I had a recent guest Gurpreet product and he talked about his about 2 million square feet of multifamily industrial office space. And he talked to me he’s a doctor too. And he talked about a good analogy. I’m curious what you think about it. He said the building itself right the components, that’s like a sector body he anatomy is like the body and the lifeblood of it is the capital that’s flowing in and out. And so a good underwriter a good broker, or good multifamily owner, or any anyone who’s an understanding investment, real estate, they’re going to look at how is the blood flowing. Let’s do some blood tests. Let’s find out. How’s it been doing the last 12 months? It may have been doing great a year ago. But that’s pre-color or a little more than that and now, how’s it coming in and out? What’s it look like? How consistent is it? What’s the blood flow going? What’s happening there? Is that a fair summary, Brent?

Brent:

Yeah, as mentioned, the last 12 months have been really unusual, because there are properties that have run amazingly well, that also is not performing retail office and even apartments to a certain sense. They’re just not tenants who are paying rent. I mean, as retail properties as strip centers where there’s like one tenant in there paying rent, and everyone else is just not either the building is shut down, because the businesses are boarded up. So there are definitely challenges out there.

Brett:

So that was our topic here. It’s actually Breaking Multifamily Real Estate Capital Gains Tax challenges. So, a lot of clients, feel trapped by capital gains tax when it comes to selling, especially in situations where that are may be less landlord-friendly, especially like California or New York, and they want to relocate and maybe move that equity to another state or another property type and get some cash flow going. So in your situation, Brent, with your clients, what’s the biggest frustration when it comes to the 1031 exchange or trying to find deals right now?

 

Breaking the Multifamily Real Estate Cap Gains Tax Challenges with Brent Sprenkle

Breaking the Multifamily Real Estate Cap Gains Tax Challenges: “Now, one thing I tell everyone is learn about real estate. Repeat after me: real estate provides the highest returns, the greatest values and the least risk. ” – Armstrong Williams

 

Brent:

Well, the 1031 exchange, just on the surface is fairly poorly written this whole 45 day identification period. I don’t know who came up with that I heard it was one politician who has put it in there as a placeholder and they never changed it. The way it works is you’re supposed to 45 days after you sell your downline property, the property you’re selling. You have to tell your temporary one accommodator. 45 days no later than 45 days, what you’re playing and buy it. You could give them one building, you can give them 20. But you’re supposed to let them know within 45 days, and if one of those properties is not on the list, and you decide to buy it well then technically speaking, that nullifies your 1031 exchange and then you’re going to go property taxes. So that is the most frustrating thing is people say I want to sell my building. I want to do an exchange but I’m Afraid of mocking vilifying up like, or I’m afraid I’m not going to find up like in a suitable period of time. So that is definitely a concern that people have, you got to be active, you can’t just expect an amazing deal to pop up in your inbox, you’ve got to be out looking, you have to have a good sense of where you’re going to by establishing relationships with brokers in these towns or cities or states that you want to go to and be ready to pounce on top you when it comes up. But then you also have to be ready to get your deal sold that you’re going to be getting rid of, if you’re going to be selling an apartment building in Sacramento, all of a sudden, an amazing deal pops up in Texas, you want to buy it, the Texas broker is not going to be like, okay, let’s wait around for six months for you to get that deal listed and get it sold, they’re not going to want to wait. So you’ve got to be ready to roll on getting your deal sold, and then buying the next property, you got to be active, this can’t be a passive move that you’re making. So you got to do some planning, you’ve got to do some preparation, you have to be ready, get your deal sold, and you have to be ready to pounce on a deal you’re going to buy you have to have a lender lined up management companies and a good sense of what you want to buy. That’s so important. The people that are successful at doing 1031 exchanges are people that do extensive planning upfront

Brett:

100%. And that’s why you also want to get with a great broker like Brent Sprenkle in the Los Angeles area for your multifamily selling needs. So you can find maybe quality up like that could be off-market or has good solid relationships throughout the nation, other cities, I just established a new relationship with a gentleman out of Kansas City, he’s a broker. His name’s Logan Freeman and the guy’s great. He finds off-market deals. And he finds other opportunities for clients that are looking to stay and invest in real estate and do 1031. That being said, Brent, I’m curious about your thoughts on the deferred sales trust, as it pertains to saving a failed 1031 exchange, if you had heard of it before, we just did a deal in Georgia as a $7.6 million multifamily sale. And we saved his failed 1031. And he was able to defer all of his tax and then move it into passive multifamily deals that he doesn’t have to actively manage. But he could. But he can also go back into real estate actively if he wants to whenever he wants. So it’s not a Delaware Statutory Trust, it is a deferred sales trust. So have you heard about that and what are your thoughts on that?

Brent:

I’ve heard of this, where you sell your down leg, and then you put money into a fund that effectively satisfies all your 1031 requirements. A lot of people have issues with that because they like owning and operating their own buildings. And now all of a sudden, they’re with another group, they don’t have the same control. But if you’re going to go out of state anyways, you’re going to have to give up a lot of control, because you’re going to have to turn over the operations to a management company. That’s how to state is not going to be down the road, five minutes, or you can drive down look at it. So I kind of look at and say,  if you like what they’re going to invest in, and you’re comfortable in the areas and the returns, it’s not that much different than just buying a deal at a state where you don’t necessarily know the market. Like I mentioned, I know San Diego is an hour and 45-minute drive from where I am and I completely messed up on the rents. I can’t imagine trying to buy a deal in Houston, Texas. I’d have no idea where they are. So I do think that it has some serious advantages. But yes, you’re giving up some level of control. A lot of people are also doing opportunity’s own investing to defer capital gains, that’s even trickier. And you still do have to pay some of the capital gains. So there are a few ways to do it. But this trust thing that you’re getting at, does like it for some people. It’s not for everybody. But I do think it’s a great alternative.

Brett:

Yeah. And just to clarify, so the Delaware Statutory Trust is different than Deferred Sales Trust and the Delaware, you give 100% control to an operator, typically triple net deals, one or two or three deals, and you’re buying into a portfolio, institutional quality, a lot of stuff, but it’s like 10 years, you’re just mailbox money, you’re walking away. Great. That’s Delaware. That’s the TIC. Now, this is a deferred sales trust. What’s cool about the deferred sales trust. So we did another deal in Alabama, they sold a $2.6 million business, move into the deferred sales trust, and then they use the funds Two months later to go build an active multifamily building, 72 units, all tax-deferred, not using a 1031 exchange. And so it gives you the ability to sell high and buy low, all tax-deferred not using a 1031 exchange. So that is the deferred sales trust. 

Brent:

I heard of it but I haven’t seen somebody perform one here. I’ve heard of it and it sounds amazing if that’s something that people can simply do, then it’s definitely something that everybody should be exploring, provided that they’re willing to be creative and what they want to do but a lot of people do want to go into development deals. And a development deal is not easy a temporary one exchange into Because you got to buy the land, and then you got to have construction costs involved. And it’s, it’s not always going to be a simple 1031 exchange unless you’re just selling a $3 million apartment building, and then you’re going to go buy a $3 million piece of land. But then where’s the rest of the funds going to come from for the construct for the construction? So it gets challenging. So what you’re bringing up is an amazing alternative for that situation that I just laid out there. Yeah. And the tenant common thing is something that was really popular in Oh, 60708. Some of those things, obviously, the economy didn’t work out all that great, no, eight, some of those things didn’t work out that well. But the ones that I understand that have gone through over the last five years have worked out wonderfully for most people. So there are definitely other alternatives out there than the standard 1031 exchange. But a 1031 exchange, obviously, because of the simplicity and how familiar people are with it remains obviously the most popular one.

Brett:

Yeah, absolutely. The other thing I’ll touch on is just a Brand New Depreciation Schedule. So a lot of our multifamily owners we’re working with, in fact, I’m working with one right now. I’m going to list they’re about a two and a half million dollar property, $2.6 million property. And they’re basically fully depreciating and so they’re sitting on basically no debt on this property, no depreciation, so all of the cash was being taxed. If they do 1031, guess what, they’re all depreciation scheduled travels, so not good. However, they’re decided for the first time and they’re 30 years of investing to do and they traded out of Manhattan Beach multifamily deal into this deal up here in Sacramento. 

Brent:

I live in Manhattan Beach.

Brett:

Yeah, yeah, that’s where they originally own. So they had their old schedule traveled all the way there. Now it’s at zero. So they’re looking at this, and they’re like, “I get a brand new depreciation schedule with a deferred sales trust versus doing the traditional 1031”. And all of a sudden, a light bulb goes off and says, “Wow, that’s powerful” So, Brent, what does a brand new depreciation schedule mean for maybe some of your clients?

Brent:

It’s such an important thing. I mean, I remember Donald Sterling, the owner of the LA Clippers, one of the biggest landlords in Los Angeles, I sat down with him about six, seven years ago, he wanted to buy a building I had for sale, and Donald Sterling never ever sold. He was just buying and hold. He’d refi, he’d raised money, and he’d keep buying. And I remember asking him, I just said, very frankly, to him, Donald, like, it’s amazing how many buildings you’ve acquired. The why more, I mean, what what’s to drive you to keep buying more buildings. And he very quietly said, my Accountant, said, I needed appreciation. So even this guy is like a billionaire was continuing to go out and try to buy 3 million $10 million seminar apartment buildings to pick up more depreciation. This is a guy with all the money in the world at this time. But he wanted depreciation. So look how important it is. For him to want to do that just to get more depreciation means that if you can do an exchange or some other way to trade property, and pick up additional depreciation, additional write-offs, that’s a no-brainer. I mean, depreciation should be able to basically offset almost any taxable gain you have from cash flow. So if you can pick up more of it, that’s a no-brainer. Absolutely. All-day long.

Brett:

Yeah, we call that the power of a transformational exit plan, right? When you can get a brand new depreciation schedule versus an old depreciation schedule, like the old way we found and Brent, I’m curious what you think the old way we call it the blockbuster way, you remember going in on blockbuster on a Friday night, and you want it that movie, and we saw behind the cardboard, right? but so did two other people want that movie, and they get to you right before, but even if you got that movie Three days later, you have to return it. Right? And if you didn’t return it within a certain time, you got the fee, and then you had to pay that? Well, we liken that to the 1031 exchange, right? It’s under tight timelines. It’s you have to drive maybe if you’re in the snow in Texas, this last week, you’re having to drive in the snow to try to get that movie. Well, there’s a thing called Netflix right now, if you heard about it, right. But you get a brand new depreciation schedule, you can rent the movie whenever you want. It’s never sold out. And the deferred sales price you can buy whenever you want. And you can diversify, you don’t have to give it all up to one operator who controls it all. So it’s kind of a little pitch here,  for what we do at capital gains tax solutions, I try to coach and teach other multifamily brokers, what it is and how it works. So I love having you on and having your level of expertise. What questions would you have if your client were asking? I’d even heard of this thing before and, and what would you say about it?

Brent:

They’re gonna want to know the steps that they have to take. They’re going to want to know what they’re going to be purchasing. And they’re going to want to know how that’s going to be different and more beneficial than a 1031 exchange. I mean, 1031 exchanges. I mean, it’s fairly straightforward. You sell a building, let’s just say you sell a $10 million building. You have a $6 million loan on it. You pulled out 4 million of equity, you got to buy something at least 10 million, put down a lease to $4 million of cash you pulled out. That’s pretty straightforward. So they’re going to want to know what’s different about what you’re doing and what the advantages are. And they’re going to also want to try to figure out what the downside risk is.

Brett:

So let’s, let’s answer that real fast. One of them, you have to buy it within the strict 45 days, we call it the shotgun wedding. The other one, there are no timing restrictions. So you can literally park the money in the bank. In fact, one of the best deal stories was for a general who bought in 2006, he sold actually in 2006, in Minnesota, for a $20 million asset that guy’s worth,  a couple of 100 million bucks. And he put the money into the deferred sales trust for the first time, and it sat there and he put it into stocks, bonds, mutual funds, other investments, okay. Five years liquid investments. Five years later, this property was foreclosed on, right, the bank foreclosed on it. They called him as, hey, that property is sold five years ago. Would you like to buy it back? He said, well, maybe what’s the price, he said 60 cents on the dollar. So he used the funds, he sold out of the liquid investments, he put it into an LLC, and he bought that old property back with a brand new depreciation schedule, all tax-deferred, not using 1031. So I heard that story for the first time, Brent, my mind was like 1031 was the only way. And I said, my business partner, Robert said, tell me that again. He told me it again, told me it again. I said, Bob, I said, this will change everything if people don’t understand how to do it. And he says, Yeah, this is why we’re doing what we’re doing. And this is why I launched my company to walk people through step by step on how it works. So that is the answer. Essentially, instead of the funds going to the company, the funds go to the trust. And since we’re not doing a 1031, we don’t have to follow the blockbuster rules, we go to the trust, we can follow the Netflix.

Brent:

So it doesn’t have to go to the accommodator, goes through the trust?

Brett:

Exactly. And it’s 453. We’re not doing a 1031. It’s an installment sale. So what you’re doing their Brent is your client is carrying back paper. And now they’re on I call it the yellow brick road that leads to a blue ocean of freedom versus the 1031 red road, it leads to a brick wall sometimes, especially if there’s no inventory, low-interest rates, and prices are through the roof. And so when you walk people through this road, you go, okay, you have some differences, you got to get used to it, you’ll learn who the players are. But we’ve done thousands of deals now over a 25-year track record, billions under management. And we keep closing more and more deals. But it’s still so brand new, right? People still don’t know about it, because they haven’t met somebody who’s walked him through it. So part of our vision is to equip brokers like yourself and other highly appreciated owners of real estate, on how to do it. Because guess what, 25, 30 years ago, Brent, people didn’t know about the 1031. Right? They were learning about it for the first time. And it really didn’t become popular until the 90s and 2000s. Like really popular, right? So and by the way, Biden might take it away. So what are your thoughts on any of that I just said and any feedback from me?

Brent:

Well, the 1031 exchange, potentially going away is a huge concern. I mean, whether or not he could actually get that push through. Who knows, but they do control the majority now. So if they really feel it’s a good idea, they’re going to go for it. And that would be detrimental to the business that I’m in. So if that goes through, I can’t even imagine what the fallout is going to be. We need to be optimistic. But they’d be a lot more people calling you than to do what you have in mind because that’s the alternative to the 1031 going away. So I feel better knowing that this is out there. And I feel less scared now about 1031 going away. But if Biden does get rid of that it’s going to make things challenging. But guess what, Brett is going to make you super busy because everyone’s going to be calling you to take care of their issue, which is how do they defer taxes?

Brett:

Thank you, Brent, and I’ll be calling you and we’ll work together to help them sell their properties and different tax because I have to say we’re on the front lines here in California. I’m in Northern California, Brent’s in Southern California. So, if you’re looking to sell your multifamily properties, we can help you do that defer the tax to a 1031 or to a deferred sales trust. That being said, You can learn more about that at capitalgainstaxsolutions.com. Brent, are you ready for the lightning round?

Brent:

Yes, go.

Brett:

All right, knowing what you know now if you can go back to your 25-year-old self, what’s the one Golden Nugget that you would make sure that you would tell yourself to do?

Brent:

Take more risks, take more chances and not spend so much time worrying about things

Breaking the Multifamily Real Estate Cap Gains Tax Challenges with Brent Sprenkle

Brett:

Excellent. Love that. What’s the one book you’ve recommended or gifted the most in the past year?

Brent:

 

Well, I wrote a book, A Billion-Dollar Portfolio. So of course, I love my own book. But if it’s just a sales book, I love Dale Carnegie books. I just love them. They are timeless. It’s just wisdom and it makes perfect sense. just basic human 101 social skills.

 

Brett:

Excellent. What’s the one leadership quote or theme that you strive to live by? 

Brent:

Well, I always say, you can put a dog in the fight, but you can’t put the fight in a dog. And what that essentially means is this, some people are just they’re never going to be successful because they don’t have it in them to try. And then there are some people that just are motivated, they’re going to get up in the morning and go every day, go into the office, and they get beat down every day, they’re going to come back the next day, those are the people that succeed in every business. 

Brett:

Beautiful. What are you curious about right now? 

Brent:

Well, I’m curious to see how long it’s gonna take us to get out of this COVID mess and for people to start paying rent, and for this eviction moratorium to go away so we can get back to doing normal business again.

Brett:

This is the last question, Brent. Given the challenges that are going on and all your success, how do you stay centered in your values and how do you stay encouraged to reach for new goals or new heights?

Brent:

You have to always set goals, whether it’s a sales job, investment plans, you have to just set a goal and I’ve written about this in my book. Where do you want to be in 10 years? How are you going to get there? How are you going to take the money that you have now? and use that to buy more real estate? How are you going to buy real estate with the money that you don’t even have now? How are you going to leverage your resources? So it’s all about goal setting and figuring out a way to move mountains with the little amount of money that you have at your disposal.

Brett:

Amazing. Well, Brent, I want to thank you for being on the show. For our listeners again, who want to reach out to you and find you, would you remind them one last time, what’s the best place for them to connect with you?

Brent:

Well, they can call me at 310-621-8221. They can email me at  sprenkleapartments@gmail.com 

Brett:

Thank you for being on the show sharing so much wisdom with us given your feedback on the deferred sales trust and the 1031 exchanges. The state of the multifamily market, how to underwrite property, we covered so much in a short period of time. And for our listeners, I want to encourage you to break free from capital gains tax once and for all by going to capitalgainstaxsolutions.com. Are you struggling with a 1031 exchange? You don’t have to worry about it anymore. We got a backup plan as an alternative for you. By the way, it works for highly appreciated public stock, private stock, and primary homes. It also works for cryptocurrency and business sales. So just keep that in mind for your friends and family. We appreciate your support. If you could Rate, Review and Subscribe to this channel, go to YouTube as well. We have new content every day with amazing guests like Brent Sprenkle. With that, thank you everybody. Have a great rest of your day. Bye.

 

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About Brent Sprenkle

Breaking the Multifamily Real Estate Cap Gains Tax Challenges with Brent SprenkleBrent Sprenkle is a Commercial Real Estate broker with a company called Berkadia. He is situated in Los Angeles. He’s been in the business for about 22 years. He primarily sells apartment buildings here and locally. He also tries to buy apartment buildings here and there when he can. He helped a lot of people avoid paying capital gains by engaging in 1031 exchanges or doing some other creative things. He also wrote a book, A Billion-Dollar Portfolio.

Brent Sprenkle is also a Math guy. He actually has a Degree in Mechanical Engineering with a Minor in Math. He worked on DirecTV satellites for about three years, it was not as exciting as it sounds and as it turns out, he wasn’t that great of an Engineer. This was his turning point. He moved on to a new career, influenced by friends to buy apartment buildings. One of the things that he believes really helped him was that he was very quick with Math. He can look at a deal and size it up to figure out what it was worth, how to evaluate it. But more importantly, as a principle for buying properties, he can pretty quickly look at a deal and determine if there’s a look halfway decent on the surface.

 

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