This Tax Strategy Could Save You More Than Your Next Deal Makes

David Wiener: Plenty of real estate investors sell a property, cash a big check, and then watch a painful chunk of their capital gains disappear to the IRS in taxes. What they don't realize is the same money could have been rolled into the next deal, and the next, and even into their kids' future legally, by using a 1031 like-kind exchange to defer capital gains and keep 100 % of their equity working in real estate. Today I'm sitting down with 1031 exchange expert and qualified intermediary Dave Foster, founder of the 1031 investor, to break down how investors at every level can use this one strategy defer capital gains, avoid immediate tax on depreciation recapture, scale their portfolios faster, and build true generational wealth. Welcome back to the Tax Strategy Playbook. I'm David Wiener, and on this show we help real estate investors and business owners use advanced tax strategies. like cost segregation, bonus depreciation, 179D, and yes, powerful 1031 exchanges to legally reduce taxes, defer capital gains, and put more of your money back into cash-flowing real estate deals. My guest today is Dave Foster, founder of the 1031 Investor. Dave's a degreed accountant, longtime real estate investor, and nationally recognized 1031 qualified intermediary who's spent decades helping investors. use Section 1031 to defer capital gains tax, reposition their portfolios, and build long-term, even generational wealth. He's been in the 1031 exchange trenches for years with the stories, the scars I'm sure, and the step-by-step process to show you how to turn one sale into a lifetime of tax advantaged investing. Dave, welcome to the Tax Strategy Playbook. I'm excited to have you.

Dave Foster: It feels so good to be here, David. Yeah, you said it right. Sometimes it feels like been in the trenches and team on the other side swears that here to help us. But beware when someone says, I'm from the government, I'm here to help.

David Wiener: There you go. Before you became the 1031 investor, what did your life and career look like and what first pulled you into real estate in a serious way?

Dave Foster: Oh, that's an awesome, uh, yeah. Look back into history. The 1031 where we were is actually part of the story that brought us to today because in your intro, you mentioned the, that painful moment when you're writing that check for taxes. And that is exactly what happened to me. My worst real estate mistake ever was on my first property I bought And what happened was my wife and I were both, and you kind of have to set this up. My wife is a Minneapolis city girl. I'm a Kansas farm boy. We met in Denver, Colorado. Now, one thing you see in none of those places is ocean, but we decided that we would raise our kids on a sailboat. Someone just said, it'll be easy. Let's do it. And then someone else said, well, how are we going to do that? And someone said, well, we'll just become real estate investors. That's the easiest way of all. no one ever. ⁓

David Wiener: So I've heard.

Dave Foster: But because my middle name is Ready Fire Aim Dave, bought a piece of property, fixed up, put renters in it, later sold it, thinking that was going to be the start ⁓ to sail away dream. And until accountant informed me that I was going pay a $30,000 check to the government. And I said, no, this is not part of the plan. Stop what? As an I didn't know about 1031 because it was one of those voodoo things that although it had been part of the statute since 1920 was just coming out from under a 20-year lawsuit where a guy named Starker took the government to court and won. Never happens, right? But he did. And so at that point, right then in the mid-90s, folks like you and I,

David Wiener: .

Dave Foster: we're now going to be able to do this thing called a 1031 exchange. And from that moment every property we invested in, we either ⁓ in it so we could sell it and take advantage of the 121 exemption for primary residences ⁓ went the buy the boat kitty, or every investment property we had, would sell.

David Wiener: Okay.

Dave Foster: into a 1031 exchange. through that, we were able to move our portfolio over the course of 10 years from Denver to Stanford, Connecticut, to Florida, buy a 53 foot sailboat with tax free dollars and raise our children on it for 10 years while we were living off of our portfolio of investment real estate. That was the dream. The thing possible.

David Wiener: That's the dream, right?

Dave Foster: because what the 1031 exchange allows you to do is to sell investment real estate that has either appreciated a lot has been highly depreciated. That's singing a song close to your heart, I know. ⁓ by following the process and buying new investment real estate, you get to indefinitely defer paying that tax. ⁓ using the tax ⁓

David Wiener: I know.

Dave Foster: for your benefit and making the return off of it.

David Wiener: Fantastic. You know, it's funny. You just answered my ⁓ question because I had heard that story and was going to ask you to walk through it. the whole of the lawsuit back in the 70s, ⁓ I don't if you're aware, that closely parallels how cost segregation came to the forefront. Because in 1997, Hospital Corporation of America took the IRS to court Because the IRS was after them for some big money and they said hey because of the provision in the tax code called cost segregation We don't owe that So they hired an engineer. They did a full 13-point engineering based cost segregation study They took the IRS to court and had all of their back taxes completely abated And that engineer then founded the company that I work with, CSSI. So I'm familiar with that type of thing and how that came to be. I was not aware the 1031s were that way. So we know how you got here and what was at stake for you personally. Let's zoom out a little bit for the uninitiated listener who's heard about the term, he doesn't really actually know what it means. So when you say 1031 exchange, what are we really talking about?

Dave Foster: Yeah. 1031 is simply the statute number for where that lives in the IRS tax code. And, you know, I mentioned it there since 1920. The reason actually parallels today really closely because the original impetus in putting it into statute was we were a nation in the 20s that was very hungry. and we needed our agricultural industry to grow because we were a growing fast nation. But the problem was that given the tax structure of the day, farmers who were trying to sell their farms to buy bigger farms were not able to do it because they had to pay tax on their profits. couldn't do it. only did that then keep them ⁓ growing,

David Wiener: Okay. Okay.

Dave Foster: But because there were no starter farms available, farmers wanting to start in the business did not have an inventory of farms to buy. So the IRS said, you know what, we can fix this. We'll simply make code 1031 that lets farmers sell their farms and buy new farms. ⁓ And get to use the tax dollars to do it. They can pay it back later. but they get into it now. So now those farmers could get bigger, young farmers could break in. Now, how much does that sound like today? Where we have investors with highly invested real estate that want to grow and grow and grow. But if they sell, they're going to pay a ton of tax. have a whole generation Z of want to be soon investors, but inventory ⁓ so low. Why? part because people are holding on to properties rather than selling pay the tax. And 1031 exchange works the exact same way today. Those people that own the properties can sell them, buy new properties and not pay tax. And like said earlier, they could do it over ⁓ and over over. And every time they keep the tax.

David Wiener: So, for somebody who's only seen 1031 on a closing meme or on a Facebook group, how do you explain how a 1031 exchange works in plain English?

Dave Foster: The beautiful thing is, it's just part of your regular process. sell a piece of property by doing what? You probably listed with a realtor. ⁓ get a contract to sell it. ⁓ goes to a title company or a closing attorney in certain parts of the company, ⁓ the country. They create what's called a ⁓ statement and money comes from the seller or from the buyer, I'm sorry, and goes you, the seller. ⁓ when those documents are executed. With the 1031 exchange, the exact same thing happens with one difference. There is mention of the settlement statements and paperwork for the 1031 process. the money goes ⁓ your account with the intermediary, because the IRS doesn't let you touch it. ⁓ So just started a 1031 exchange by doing what?

David Wiener: Okay.

Dave Foster: You just sold a piece of property like normal. What's next in your list? You're going to go buy a new piece of property. So you start shopping and this is where we get into the weeds because the IRS lost a lawsuit, remember? So they have to let us do this, but they were a little ticked off when they had to create the way. So now there's some limitations.

David Wiener: Yeah Okay. you

Dave Foster: You've only got 45 days to go find your new property, but you get 180 days to close on But what you're going to do is the exact same thing you would normally do. Go find a new piece of property or several properties, put them under contract, set up an escrow with a title company, then the settlement statements are created. And time the money that's sitting in your QI account comes in to buy the properties and goes to the seller. And as as you ⁓ purchase least as much investment real estate as you sold and as long as you use all the proceeds from the sale in your or purchases you will defer all tax. Voila! At the end of this you did a 1031 exchange and you know what it probably involved maybe two minutes of your time extra.

David Wiener: That's great. That's great.

Dave Foster: But how powerful is that?

David Wiener: Okay, you mentioned the 45-day identification window, the 180-day closing window. What other non-negotiable rules do investors have to understand and where do you see people getting tripped up most often?

Dave Foster: I would say the single biggest issue, I gotta tell you David, it's actually more perception than reality, but still that fear can grip us, ⁓ in the 45 day period. Because that's not negotiable. Your list with the property that you're gonna buy has to be in place by mid-down on day 45. ⁓ people will say, Dave, we can't do that, that's so tight. How are we gonna find a property? Well, don't wait until... ⁓ your old property closes. Why not start ahead of time? can even go into contract for your new property before your old property closes. So this idea of 45 days yacht might be scary, but there's so many ways to overcome it. When you get a contract for your sale, make sure that it gives you an extended closing period to be able to locate your new property. ⁓ ⁓ you find the right new property, Get an extended closing period on that you can make sure and close the sale of your old property. Lots of ways to massage that to get rid of that perceptual fear. The second area where we see people not understanding ⁓ in the reinvestment requirements. Purchasing at least as much as you sell and using all of the proceeds. People want to say, Well, but Dave, I put $20,000 down on this property to buy it. I bought the property for $100,000. I'm selling it for $500,000. I don't have to pay tax on that $100,000, do I? And the answer is no, you don't. But because you're doing a 1031 exchange, because the IRS was ticked off, they choose to say that any amount you buy less than you sell or

David Wiener: .

Dave Foster: any amount of cash you take out is considered taking profit. So I would say, well, I'm going to take my original 20,000 out. That's not taxable. The IRS says, yeah, you can take 20,000 out, but you're taking profit. And people say, how can that be fair? And I mean, I don't know about you, but I rarely see fair and the government used in the same sentence. They don't collide very well.

David Wiener: That's absolutely true. Now, explain like-kind property because it has to be like-kind property, right?

Dave Foster: Great question. And again, people get caught into this thinking it's going to be so restrictive, but in fact, it's the furthest thing from it. The IRS actually uses two phrases to explain what it is that you're going to be buying. They use like kind, but all that means is that it is real estate. So any type of real estate can be sold and exchanged for any other type. of real estate, including some weird things you might not necessarily think of, like oil and natural gas resources. Those are considered real estate. Go figure, but they are. So that's okay. The other phrase that the Irish uses is qualified use. use means ⁓ you are using the real estate for investment purposes. Now, not inventory, like in a fix and flip model or a car dealer model, but actual kind of use the phrase buy and hold, buy and hold investment use. So kind of property qualifies? Any kind of real estate, anywhere in the country, as long as it's being used for investment.

David Wiener: So if I had a rental home,

Dave Foster: What that does, go ahead.

David Wiener: And I wanted to do, I wanted to buy some land on which to build another, another building. You could do a 1031 exchange that way.

Dave Foster: Absolutely, absolutely. As long as the valuations are correct. can't imagine how powerful ⁓ has been for our clients over the decades. Particularly as estate has become a much more homogenized right? ⁓ It's no I only know what's happening in my zip code. I can buy real estate all over the country by clicking a button. So real estate where I'm at, let's say I'm in the Bay Area, San Jose in 2014, and real estate's gone through the roof because of the latest internet boom, but it's now topping out, rents no make sense, and I'd like to kind of get into a cashflow model where I'm actually making money ⁓ other than Hey, wait a minute. There's this little town called Austin where there's this guy named Elon I know who's buying up all kinds of stuff. So I'm gonna sell highly appreciated real estate in San Jose and I'm gonna buy dirt cheap, small single family homes Austin, Texas. Tell me what happened to those people over the last decade.

David Wiener: So it doesn't have to be one for one.

Dave Foster: correct. And that's where you do, you can use what I call the ebb and flow because I'm a sailor. It's the tide thing, right? The ebb and flow. you are starting you're younger, you're more energetic, then you will probably want to where you're more risk-tolerant. You will want to sell your real estate and 1031 exchange maximize what you can buy. So instead of selling one and buying one, you would sell one and split the proceeds as down payments on a couple or three or four. And then you do that again. And it doesn't take too awful long And all of a sudden you wake up one day and you're so tired, David. Why am I so tired? I'm exhausted. And then you realize I'm on my fifth tenant call of the day. I got more properties than Davey Crockett. They're all causing me problems. I want out. It's time to relax. So you sell five hundred thousand dollar properties go buy one five hundred thousand dollar property and start to simplify your life. ⁓ you move from cheaper assets into more expensive assets like Airbnbs, vacation rentals, the move from residential

David Wiener: Okay.

Dave Foster: to commercial is that same kind of move. It's perfect for consolidation you start to grow older. ⁓ this really an example of the 1031 exchange, being able to accommodate wherever the real estate cycle is to go where it calls you. But also will accommodate wherever you are in your personal cycle.

David Wiener: Perfect. That's kind of a great transition from the basics into strategy. So if we get the basics right, we know the timelines, we have the structure, the fact that we can't ever touch the money, then the real magic is what we do with that structure. So talk a little bit about how smart investors are using as a long-term strategy instead of just a one-time fix. ⁓ When you look at the investors who've used 1031s really well, and I'm sure you know a lot of them, what patterns do you see in how they use exchanges to trade up from single family into small multifamily than into larger commercial or more passive deals?

Dave Foster: Oh yeah, well, and that is exactly right. Those people who look at 1031 as a quick fix, they're still maybe gonna get some benefit from it, but not nearly what they would have by thinking of it as a long-term directional forward-looking strategy.

David Wiener: Some people are just looking to kick the can down the road. And there's something to be said for that, right? But a serious investor or somebody who wants to go from a investor to build a real estate business can use it strategically to actually build that business and move into larger properties and

Dave Foster: I thought the road was out here. Yeah. ⁓ you're going to get, we actually do a, for people who are first onboarding them talking about their strategy, ⁓ do an example with them. It's just a, ⁓ can create these on your spreadsheet, on your Excel sheet as well. We're in four transactions over 20 years. We're not talking buying and selling everywhere, everything. Four only. The comparison between one investor who takes his $100,000 profit on his first sale and does a 1031 exchange, which allows him to buy with 20 % down a $500,000 property, right? That's all just pretty easy math. The investor who pays the tax at 20 % capital gains rate only has $80,000. So they can only buy a $400,000 piece of property. That's transaction one. Transaction two is down the road five years. Transaction three is five more. Transaction four is year 20. And the only thing that's different is that the same investor is gonna do 1031s all four times. at the end of those four years, ⁓ transactions, that owns $12 million in real estate.

David Wiener: I can see people's eyes getting big when you talk about that.

Dave Foster: It's insane. You would never believe it unless you look at it on paper, but it works and I've seen it work. The other investor has about three and a half million. I mean, so who's going to cry for him, right? But which would you rather be? Absolutely. I tell people, how long would it take you just using cashflow from your NOI of 10 % to pay off that $500,000 tax bill?

David Wiener: I take the 12 million myself. It's true.

Dave Foster: ⁓ like seven months. And then I've still got $12 million in real estate. So the 1031 is good as a stand in the gap, fill the gap kind of thing. But the power ⁓ in how long you keep it deferred because every you keep it deferred, ⁓ the return that day goes into your pocket. And that's what try to teach people. ⁓ So ⁓

David Wiener: you

Dave Foster: We do a concept called the four Ds of 1031 investing. the first one is D, ⁓ with a deferral. Get that money working for you. The second D is because the 1031 is gonna let you grow as a estate investor wherever the real market tells you to go. So many people will start out as what I would call accidental landlords. You ever heard that phrase? Yeah, know, we get married later in life and I've got a house and she's got a house and dirty so we move into hers ⁓ and put a renter in mine. Well, we just became landlords and we to like the Kool-Aid and that rent. So a years later we go, why don't we do this again? So we sell.

David Wiener: All the time.

Dave Foster: But this time we buy two. So we start to diversify. then we realize that the market where we're at is a little bit topped out. So, and we could make a lot more money if we were doing multifamily in City. So we those two or three or four homes and we buy in Kansas City. And then this magical ⁓ called the third D comes into play. And I'll bet you know what the third D is, don't you David?

David Wiener: Let me guess, defer?

Dave Foster: Voila! And this is because just like you can react to wherever the cycle's at, you can react to wherever you're at personally. Do you have more energy than you do brains or money? Go buy a house and pick up a hammer. If it's an electrical problem, grab a bigger hammer and start out, make it happen. But at some point in time, you're going to realize that you've got more money than you do time. So it's time to start changing your investing from these value add, fix and hold projects something where it could be more passive. ⁓ can hire management or might be, this is a beautiful transition that a bunch of our folks are doing now, particularly because of what you do. And that that when it comes time to have children and start to family memories. They'll sell investment properties and go buy vacation rentals. where they can use them some themselves to start to build family memories and generate cashflow to supplement what they're doing. So when you're at that stage and there's one other big thing, what is it David that they get to do? They go, yeah, see how that all dovetails together. It just all comes together so well. then ⁓ you grow older,

David Wiener: cost segregation. Bonus depreciation.

Dave Foster: it becomes time to simplify more. again, where are you at in your life cycle? ⁓ it time to retire? Well, this is where there's two incredible hacks. The first one is to start to convert. So ⁓ of your retirement, you want to go live in Sarasota, Florida. Well, move your real estate portfolio down there using the 1031 exchange. And you're ready to retire, ⁓ sell your primary residence in Cincinnati or wherever you're at. That money's tax free, right? Because it was your primary residence. Where are you going to move? Well, you could buy a new property, but instead, why don't you keep the 500 and convert one of your investment properties into your next primary residence? Perfectly legal to do, as long as you've used it for investment for a couple years. But what you did was you just gave yourself a tax free place to live without taking a penny out of your pocket.

David Wiener: Well, and 1031 exchanges also fit into a bigger picture planning, things like retiring on real estate ⁓ designing an estate plan that takes advantage of the step up in basis and that swap till you drop idea.

Dave Foster: See, you just almost said what the fourth D of 1031 investing is, but it's not deferred.

David Wiener: it die? ⁓

Dave Foster: In his ⁓ ⁓ swap you drop, defer and die. ⁓ It's all same thing ⁓ because that's what it refers to is the idea when you die, your heirs get that step up in basis. And what that means no matter how the property has been depreciated, no matter how much it has appreciated your heirs get it. as if they paid market value for it on the day you die. So you never pay the tax, your estate never pays the tax, your heirs never pay the tax, the IRS never gets the tax. Put that as a slogan on your casket. What the heck? actually, David, I've actually got a family in Stanford, Connecticut, we are working with right now these days on third

David Wiener: Amen. Hahaha.

Dave Foster: generation. It's gen three. It started when I was first new it was grandpa who was to start doing 1031 exchanges with us. When he passed away, ⁓ his portfolio went to his son. Now ⁓ his got them tax free, right? So we didn't hear from son for several years. But then all of a sudden, all of son's tax free properties started to have new profit. due to depreciation and he started doing 1031 exchanges again. And he passed away about seven years ago. And we are now doing 1031s for his children. They have not paid a penny in tax in 30 years.

David Wiener: Fantastic. That's the way I want to go. of that sounds really powerful and I know that it is, but I also know every powerful strategy comes with landmines. So let's ⁓ the coin a little bit and talk about the ways this can go wrong when somebody doesn't plan or doesn't have the right team. ⁓ are the biggest deal killer mistakes you see investors make with 1031? Things that either blow up the exchange or a nasty surprise tax bill.

Dave Foster: Yeah, well, it's, and I'm going to break this into, I got to make a caveat first. And that is these really can be incredibly low risk, zero risk ventures. Now, why do I say that? Because ultimately there is no penalty for starting and not completing an exchange. People have to understand that and they don't. They get so worried. Oh my gosh, if I had a nickel for every time I heard someone say, but I don't want to have to buy a property I don't want. Well, then don't buy a property you don't want. As a matter of fact, never buy a property you don't want. You know, the deal that kills you, David, it's not the property you lose out on. The deal that always comes back and bites you in the foot is the deal you got. that you shouldn't have. So don't ever buy a property just to complete a 1031 exchange. You'll pay the same tax at the same time you would have. So if that's the worst thing that happens, there's no difference between trying a 1031 or just selling and paying the tax, except that there's the potential.

David Wiener: I'm sure that's true.

Dave Foster: that this thing could work for you like crazy. So remember, there's no reason to buy a bad property. Let it go. Nobody who ever went broke, ever went broke in the history of man by paying tax your profit. You just keep less profit.

David Wiener: It's just distasteful though. father was a CPA and he always told me and I've adopted this as a slogan for the podcast, tax evasion is a crime but tax avoidance is mandatory. And I love it.

Dave Foster: ⁓ we hate it. You and I hate it. Yeah, it is totally. Absolutely. Absolutely. I like that a lot. So yeah, so with that caveat being said, that these really aren't high risk. That where we see people trip up the most, we're where we're going to see them end up paying the tax first of all, if they're not planning ahead. You know, if you want to execute a 30 year strategy, you don't do it starting out one day in May.

David Wiener: I can see that.

Dave Foster: You start to plan way ahead of that. Don't be ready, fire, aim, Dave because you'll pay a price. Fortunately, we recovered and we've done well with it. But being focused during the 1031 exchange is extremely critical as well. So once you decide to go on this path, you're going to be making every decision in your real estate investing based on the opportunity cost analysis if I sell this property and pay the tax, how many years will it take me to recoup that tax if invest in an alternative investment? You've got to do that analysis because many times it's 10, 15 years. And why would you want to make that trade?

David Wiener: And I hear from people too who I hear from people too who say Hey, I sold a property and I then I heard about this 1031 thing can you think I could do it and and they sold the property 30 days ago and I thought no

Dave Foster: Yeah, I get those calls all the time, once a month, probably, and I just cry with them because it's got to be started before the closing of the sale. Do we have some extra cuts?

David Wiener: And also people who try to do it themselves. ⁓ They don't realize you can't do it yourself. You have to have a qualified intermediary.

Dave Foster: Can't do that either. Yeah, if you're on it you will pay the tax. That's it. End of But again, that leads that, that, you know, talks about the planning that's needed for that. Now, the other thing about that planning is that the QI, the qualified intermediary, that person like us that has to do your exchanges for you, we're also the ones that know about it. know the pitfalls. We know the roadmap. We're your guide. We're kind of like Gandalf. We're your guide through the mines of Moria to make sure you stay out of trouble. so earlier rather than later planning laser during the I can just about guarantee that if someone comes to me at day 30 and says, Dave, do you have any other ideas for me? Got any advice? Because I really like the multifamily market in San Diego. But man. I got friends in New York that are telling me, commercial's awesome, and the Smokey Mountains have been killing it for vacation rentals. Dude, that person is toast. They just don't know it yet. Paralysis with too much to analyze. And that's where they're gonna be.

David Wiener: . So if somebody's thinking to themselves, I might sell a property this year. What are the first two or three moves you want them to make before they list or accept an offer so they don't end up calling you too late?

Dave Foster: So number one would be ask yourself the question, why? That's critical. If you don't already have an answer for it, you and I are gonna spend a few minutes on the phone figuring it out because you should never sell a property unless there's a why. If there's no reason to sell it, why sell it? But there's got to be a why and there will be. Are you... trying to change sectors, trying to change locations, trying to depreciation, trying to plan for retirement. What's the why? ⁓ you have a new roof that might be coming up in the next couple of years? Man, one new roof takes away five or six years of operating So figure out the why. Then call a QI and talk to them. and say, I'm thinking to sell this in a year. we talk about what it's gonna look like? Here's why I wanna sell it. Does this work? What might some options be for me?

David Wiener: So I would assume it's better to bring you in early than to bring you in late.

Dave Foster: Absolutely, because we can operate as quickly as you need. mean, my gosh, the fastest exchange we've ever done was 22 minutes. The other side of the table for our buyer said, what's this guy doing here? And my client said, well, he's my QI. We're doing a 1031. We're not having to pay the tax. They looked at their realtor and said, can he really do that? And the realtor said, well, yeah. And so then they looked at the realtor and said, well, you're fired. Now they were joking. They were joking, but they asked if they could do it right then. And we sure we did. So yeah, we're back. Where did I digress from on that one? We can operate as quickly as you want, but the more time we have, the more opportunity you have to explore options the better decisions you'll make.

David Wiener: Well, I think we've scared people enough just to take this seriously, and we've shown them the upside if they do it right. Let's bring it home a little bit with some concrete action steps they can take because this is the playbook after all. For an investor who's never done a 1031, what does a simple 90-day action plan look like to get educated, line up the right team, and be ready before they'd sell?

Dave Foster: So the beautiful thing about the 1031 is it's an added on process to everything else you're already doing. So all those normal steps you would do, find a realtor, get the property ready for sale, get it appraised at least for comparative market value. All that stuff you're doing anyways. Find the title company you're gonna use when you get a contract. All that you're gonna do anyways. Find out the why of why you're selling. Find out the where of where you're gonna buy your new property. Find out the how in terms of finance, if there's gonna be any finance needed. those questions and all those are things you're gonna do anyways. Cause you're gonna be researching where, ⁓ gonna be looking at your mechanism, ⁓ gonna be talking to lenders. And the last would be in that 90 days, talk to the QI ⁓ and that ready to go. I can't speak for all QIs, but we do not charge for helping you plan your 1031. You know, it's part of what we do. And so you don't not call a QI just because you're scared. They're going to start charging you from day one. Just about every QI, that's a good one that I know, charges you when you close the sale of your property.

David Wiener: Yes. very similar to the way I work with my clients. They call me all the time for questions and to plan and to understand cost seg and bonus depreciation and a little better. There's no charge for any of that. I enjoy working with them. ⁓ ⁓ a listener is thinking about it, what are the questions that they should be asking a potential QI or their CPA or an attorney to make sure they're working with somebody who really understands exchanges?

Dave Foster: Yeah. Okay, yep, absolutely. So first of all, let's deal with it backwards. of all, ⁓ remember if you ask an attorney, you're paying a bill and it's probably every six minutes. an attorney ⁓ can do 1031 but your attorney can't. So you don't tend to to talk to your attorney about it. ⁓ The key players in this, ⁓ are going to be the QI and your accountant. Talk to your accountant though. Find out what the real story is. A few times a year I'll have people that they're all hot to do their 1031. They're ready to go. We've got the paperwork ready. And then their accountant says, are you doing this? You're not going to avoid anybody. You've got these pent up losses. Don't worry about it. OK. So don't do the 1031, but see if they would have talked to them early. Yeah. It wouldn't say if you ever had a little bit of trouble. So you want to talk to your QI to find out the true impact of selling. Then you're going to talk to the QI and here's what you want to know from your QI. First of all, how long you've been doing this? Because right now it's as easy to throw out a website and a TikTok channel and become a QI.

David Wiener: Surprise!

Dave Foster: but I'm not sure that I would trust that. So you really want to find a company that's got some longevity. You want to find a company with third party recommendations. You know, we create, and AI is gonna do it even more, the smoothest, they're even handsomer than you. The smoothest, most handsome sales guys in the world.

David Wiener: Preach it, brother.

Dave Foster: We're going to convince you to do anything. yet behind that facade is little of the law. So you want to talk to people who've actually done exchanges with those QIs. Google ratings are great. know, references places like ⁓ Reddit or social bigger pockets, all those kinds of will speak to the qualifications. Thirdly, ⁓ there needs to be an understanding of who you are. I can go 1031 law forward and back, but if I don't understand what you're trying to do, I'm gonna steer you the wrong way. Or I might. It's that fit that says, yes, my QI gets me. So yes, I feel comfortable going this way because I know this is gonna work. And my accountant. agrees. You want a QI that's got all those kinds of experience. I guess it's like the Goldilocks approach. want one that's big enough to have the experience and economies of scale so they're not outrageously expensive, but you one small enough ⁓ that you actually talk to the accommodator ⁓ and not a sales and marketing rep. That makes sense?

David Wiener: As Goldilocks said, you want one that is just right.

Dave Foster: That's right. And there's one other really big thing. People freak out about the fact that they can't touch their own money. And I totally get that. But you can't in a 1031. And it does not happen very often. But because our world loves bad news, every time some QI does go off the rails, Every eight or nine or 10 years, it steals $500 million. Everybody hears about it everybody freaks out about it. But there's a very simple way to solve that, that very few QIs are doing. We do. And it's called, instead of creating a pooled account that I can have access to by myself, we put every exchange into own FDIC insured account the name ⁓ the client ⁓ us. They are what's called dual signatory, which money cannot move from that account without ⁓ our That protects the client from the IRS. ⁓ And protects the client from ⁓ us.

David Wiener: but it also can't move out without their signature. Absolutely. That's great.

Dave Foster: So those are the biggest questions I would ask.

David Wiener: Dave, this has been fantastic. We've covered what a 1031 exchange really is, why the qualified intermediary is so critical, how the 45 and 180 day rules actually work in the real world and how investors can use exchanges to trade up, reposition their portfolios, even think about generational wealth instead of one-off tax bills. If you're listening and you're thinking about selling a property this year, don't wait until you're at the closing table. Talk with your team now. talk with a qualified intermediary like Dave's team, make sure you understand what your options are before you sign anything. Dave, for anybody who wants to learn more or may have potential 1031 on the horizon or questions, what's the best place for them to find you online and get in touch with you and plug into your education?

Dave Foster: Yeah, we're pretty easy to locate. YouTube channel, education series, calculators, opportunities to talk to us personally. It's right there.

David Wiener: Fantastic and I will put Dave's contact information into the show notes. It's also on our guest page at tax strategy playbook.com. For those of you who are watching or listening, if this episode helped you or answered some questions for you, do two quick things for me. First, subscribe to the tax strategy playbook so you don't miss future episodes on all kinds of topics that can save you more of your cash flow. And then secondly, Share this episode with one other investor who you know is thinking about selling a property or talking to their CPA about taxes this year. The single conversation could save them a massive check to the IRS and change how they invest going forward. And if you want to explore how strategies like cost segregation, bonus depreciation, and 1031 exchanges might fit into your own portfolio, you can find me and my team at the Tax Strategy Playbook. My links are in the show notes as well. I'm David Wiener Mr. Cash Flow, thanks for spending your time with us today and I'll see you on the next episode of the Tax Strategy Playbook.