Patience in Business with Jean H. Delva

Jean H. Delva delved into real estate with a curiosity that, in turn, was an extension of his own personal history. An Arts and Sciences Bachelor’s degree from Rutgers University and experience as a Real Estate professional in New York City equipped me with the skills most needed for success in this business.

He is a hands-on approach to investing reinforced By his client’s success in the Real Estate industry. With personal knowledge of the real estate market, there’s no real estate investment that he and his team can’t acquire admission to. Starting with multi-million dollar building portfolios, shopping malls, hotels, class A, b, and C buildings, and Islands, we deliver the goods.

Episode Highlights Here:

Jean:

I feel like your business, you know, you know, I feel like this is something that I can add, to my business as a tool to help my customers.

Pierce:

because this is a big problem for a lot of people, so I’m curious to get your thoughts on how are you solving the capital gains tax problem; if they go to sell,

Jean:

You know what, to be honest with you, it’s interesting that you reach out to me because I do feel like your business, in a way, is kind of, like, reminds me of some of the things that I’m doing, you know, you try to help somebody from, you know, trying to help them save money, you know, and return, you know, this is a good thing, you know, 30% 40%. So, a lot of money, and AI, and the fact that you get you to have a vehicle that you can create, to help somebody either, you know, differ that. I mean, that’s amazing, you know, I mean, 30% might be nothing too, you know, somebody who went out of money, but, you know, for some people minister since a lot of money. And

Pierce:

so what are you? What are the potential solutions that you’ve come up with?

Jean:

I mean, to be honest with you, I feel I feel like your business, you know, you know, I feel like, this is something that I can add, to, to my business, as a tool to help my customers, because this is, yeah, because this is what this is, this is what this is, what my business is about, by my business, when I like, like money-driven, the money is going to come, right, but we’re more about the solution, we almost were the solution-based type of business. And, and we try to educate people, we try to help people in many ways, in any way that we can, you know, in any ways that we can, you know, that we can do so. So, in regards to that, you know, I have clients that that, you know, don’t buy one property for me to come back and buy another one. Don’t buy multiple properties. So I think you I think they can benefit from that. So are you going from 1031? Exchange? Yeah, you know, I know about that a little bit more. But as far as like, you know, the deferred tax strategies, you know, I’m kind of going on that subject a little bit. But I think it’s interesting. I think I can benefit from that. And I think people can benefit from that, to see that you have that option.

Pierce:

So let’s, let’s get into that a little bit, because so just for just some context, right, so typically, like, so I’m a real estate agent in Newport Beach, right? And one of the things is, out here in California, right, I have super high taxes as you do in New York, right? Super high state taxes are super high. And wealthy people write that up, that have assets that are just super highly appreciated, for example, I mean, there’s a gentleman who bought, you know, two properties on the beach for like, 600 grand back in the 90s. And now they’re worth 10 12 million, right? But his basis is like 1.2 million; he’s fully depreciated them. He sells us properties for $12 million, and he’s looking at a four million-plus dollar capital gains tax is ridiculous. And so one of the strategies that I’ve implemented in my business, and this is why I do this podcast, and all kinds of stuff is because it’s kind of like the cornerstone of my competitive advantage out here is the fact that I can defer the tax on all those properties. And it’s not just real estate, I mean, it’s commercial real estate, it’s residential, primary homes, it’s Bitcoin, its stocks, its businesses, it’s anything that’s highly appreciated, you can use a deferred sales trust for so and you can, you can transfer it into any sort of asset classes. So if you know, you know, anything about a 1031 exchange, one of the problems is, you know, and this is one of the biggest frustrations with the capital gains tax on 1031, is that people have 180 days to close on a brand new property, and they only have 45 days to identify that property. And then they have to go back into the property, like, or some sort of land. So you got to sell a building, you’re going back into a building, and you got to replace the debt. And it’s hard to find those deals in a market that’s, you know, kind of going upright because you’re selling high, and 180 days later, you’re buying even higher, and your depreciation schedule travels with you. And so one of the beautiful things about the deferred sales trust is that it’s like kinda agnostic, which means you can sell it as An asset, and then you can put it into stocks, bonds, mutual funds business, you can put it into real estate when you want, though you don’t have to do it right away, you don’t have that 180-day time constraint that you do with 1031. And you don’t have that light kind of time constraint. So you get to control the timing of it. So, for example, we had a lady who had repurchased Bitcoin in, you know, 2009, of course, right? But 50 grand goes to 50 million. Okay. She, she is like, Alright, I’m gonna liquidate some of it, because I just yeah, she couldn’t figure out how to get out of it. She didn’t sell any of it because she’s like, I, you know, have this huge tax problem, right? If I saw this, plus, she would tank the markets and all this kind of stuff, right, like, so. She ended up doing a deferred sales trust; she deferred about 5 million bucks. And she put that and saved about 1.8 million in capital gains tax liability. And she put all 5 million into the DST. And she took a bunch of that and invested in her friends, like, education business for people in India. That was what she wanted to do to start her friendship. But now she’s got the other, you know, a couple million sitting in this trust, right? And now that Bitcoin has dropped to, I mean, I’m sure you know what, like, I just thought like, 28,000, like today, May 27, 2022. Right? Well, guess what, now she can buy what she sold at 54,000. Right, which at the end went to 65. So people are freaking out. But now she looks like a genius, right? Yeah, 48. But guess what she’s positioned to where she can go and buy back in low because she can control the timing of it. And so it’s like, it’s the ability to, to, I don’t want to say time the markets because never when you time the markets, but when you can to kind of control when you’re going to when you’re gonna go in, and you can sell high, suitable and buy low, you can exponentially increase your wealth. And so, the fact that it works for all of that is amazing. And you guys can learn more about that.

Jean:

So, she could use that same tax-deferred money to reinvest. Yeah, and then and then whatever income she makes, you can pay the pin tax and

Pierce:

she could pay the taxes, and or she doesn’t have to. She can let that compound if she doesn’t need the revenue. Is that some limit to that? So we work on, so we structure it’s what happens is as you become a lender at that point, so quick mechanics, right? You have a buyer that’s gonna buy a piece of property, right? And let’s say this guy’s gonna buy it for a million bucks, okay? And we bought it for a million, right? He’s gonna sell it for five. And his tax, you know, is gonna be around, I don’t know, a million dollars. Okay, so what happens is, is you guys line up the transaction right before you close. We talked with the client, and we got their risk tolerance, questionnaire, and everything all squared away. And then what happens is you, seller, right, sell the property to the trust, that’s capital gains tax solutions, they sell it to the trust, okay. And then the trust turns around and immediately sells to the ultimate buyer. Okay, the ultimate buyer will fund the trust, whether it’s cash or financing, or whatever it is, right? They will fund the trust; they’ll take the title, and they’ll walk away. And then the trust is left with all the capital; they’ll pay off the debt, okay? But then that money is sitting there in a pot, and then they turn around, they write you a note, and they write you a note for, you know, the 5 million bucks, right, or $4 million after you pay off your debt or whatever it is, right? A preferred rate of return based upon the risk tolerance that we talked about before, and then you and then we structure those notes, typically in about 10 years, but they’re flexible; you can do seven or five or whatever. So what ends up happening is at the end of 10 years, right, you can have a couple of options. You can take the money out and pay your tax, and whatever you have made interest-wise, you’ll pay ordinary income tax on anything that you have left in there for the principle of the gain will be taxed at the capital gains rate. But you don’t have to; you can just renew the note. And what’s cool is that you can use it as a self-directed IRA account.

Almost you know, it’s a business trust that only does business with you, but you can invest in any property or anything you want, right? Do most people just renew it? Because they’re like, why am I going to bring this money back and pay the tax on it when I can just continue to invest it in whatever I want? So we had a gentleman sell a $2.6 million business. He ended up deferring about six or $700,000 in capital gains tax turns around and put it into a 72-unit multifamily development deal, a year and a half later. So he’s, he’s, he can, you know, do this is, you know, to control it, he can invest whatever he wants. It’s, so why it also moves assets outside the taxable state? So for those people in that $22 million range, and you’re over that, you know, you’re gonna have a significant tax to the heirs of the estate tax, and it moves assets outside of the tax will stay for that. So it’s a phenomenal state planning tool as well.