From Active to Passive: The 1031 Exchange Revolution with Ben Carmona

Ben Carmona started his career in 2006 and 2007 selling real estate syndications. The biggest operational problem he and his team had was keeping paper in the fax machine because the new business was coming through so fast. Then 2008 and 2009 happened, the syndications cratered, and baby boomers who had worked their entire lives to accumulate real estate watched it evaporate. Ben was a spring chicken on the sales side, and he could have hidden behind that. He didn't. He moved to the analyst side of the business and never went back. "I need to know what I am selling" is how he describes the turn. Twenty years later, that lesson is still the operating principle behind everything Perch Wealth does. Today Ben runs a niche financial advisory practice — securities-licensed, but he doesn't touch stocks, bonds, mutual funds, insurance, or annuities. All Perch Wealth does is help accredited investors who built real estate portfolios over 20, 30, or 40 years get out of active management without writing a tax check that wipes out a decade of appreciation. Ten advisors nationwide. "They've done well, and they do not want one more single phone call from a tenant." The conversation walks through 1031 exchanges and Delaware Statutory Trusts — a structure that most CPAs, attorneys, and sophisticated real estate investors have still never heard of. What landed in this conversation: The 1% to 3% problem. Eight out of ten of Ben's prospects are earning between 1% and 3% in current income relative to today's property value. They bought a building for $1M, it's worth $5M today, rent grew at 3% to 5% a year and never kept pace with the value. They're also fully depreciated, so they're paying full ordinary income tax on what little yield is left. Move that same $5M into a diversified DST portfolio and income can jump from $120K to $300K — with the depreciable basis reset, so the cash flow is tax-advantaged again. DST mechanics in plain English. A Delaware Statutory Trust is a single trustee holding fractional ownership for up to 499 beneficial owners. Created in the 1980s; the IRS validated the structure in 2004 as eligible for 1031 exchange purposes. The sponsors are not boutique shops — Apollo, Starwood, Invesco, Cantor Fitzgerald. They go out and close on $100M multifamily projects in Dallas, $50M medical office campuses in Orlando, $50M self-storage portfolios in Raleigh. They stabilize the asset, then offer fractional ownership to retail investors. "This is not an industry that is in its infancy. The big boys are here." The 45 and 180 day reality that breaks traditional 1031s. Once an investment property sells, the seller has 45 days to identify a replacement property and 180 days total to close. For a seller who is over active management, that timeline is brutal. With DSTs, Mrs. Smith who just sold a $2M Orange County duplex can split her exchange — $200K into Cantor Fitzgerald multifamily, $500K into a Jones Lang DST in Orlando, and so on. Each leg closes in about a week, distributes monthly, satisfies her exchange, and spreads her risk across geography, sector, and operator. She never has to chase a property she doesn't want. Swap till you drop. Defer the gain through life, exchange forever, and the heirs inherit at the stepped-up basis on the date of death. The entire deferred liability evaporates. Ben's example: a $1M property compounded across 30 years of exchanges becomes a $50M portfolio. The would-be tax bill might be $20M. The heirs pay $0 on the gain. This is the wealth-preservation math estate planners build around — and it exists in the tax code on purpose, because the government wants private operators (not the government) providing housing. The advice from Ben's college professor, Mr. Short, that has stayed with him for twenty years: "It's not hard to make money. All you need to do is follow demographic trends." The silver tsunami — 76 million boomers retiring and ultimately passing wealth down over the next 30 years — is the trend Ben built his entire practice to serve. Get in touch: perchwealth.com or call Ben directly at 818-269-4972. Perch Wealth has 10 advisors nationwide and Ben does free education calls regardless of whether you're ready to move. Real Estate Underground with Ed Mathews. 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