March 15, 2024 • 44 mins
Unlock the secrets of successful asset sales with Chad Etmiller of JCR Settlements as we dissect the intricacies of structured installment sales. This tax maneuver, tucked neatly within Section 453 of the IRC, is a goldmine for sellers seeking ways to delay the tax man's cut from their lucrative land, property, or business deals. By moving sale proceeds into an annuity, our discussion reveals how sellers can craft their financial future, deferring taxes for potentially decades and making the most out of every dollar earned.
Ever wondered how life's curveballs can be managed with financial finesse? From the arid deserts of Arizona to Georgia's family-friendly climes, Chad's wisdom stretches far beyond tax strategies. We navigate the annuity landscape, showing how these vehicles not only comply with the IRS but also serve as life rafts in unpredictable seas. The ability to use annuities as loan collateral or to provide for family needs such as elder care or education costs emerges as a theme, presenting a robust strategy for those plotting a secure yet flexible financial course.
In the property-selling game, timing is everything, and the art of the deal often hinges on payment schedules that are as unique as the clients themselves. Within this episode, we lay out how structured installment sales can be tailored to fit the bespoke needs of each seller, whether they're looking to retire, relocate, or reinvest. The episode is peppered with insights on the pivotal role of financial experts in crafting these deals, and the significance of industry events like the RLI National Land Conference for staying at the forefront of the land consultancy field. Tune in for an episode that's as much about smart selling as it is about shaping a future on your own terms.
For contacting Chad Ettmueller directly at JCR Settlements, you can use the general contact information available on the JCR Settlements website:
Email: admin@jcrsettlements.com
Phone: +1 (800) 661-7075
Website: www.JCRSettlements.com
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:01):
This week on the American Land Seller, we're
happy to introduce you to a trueexpert in settlement planning.
Chad Etmiller is a senior vicepresident and founding partner
at JCR Settlements.
Chad brings over 20 years ofexperience to the table,
providing tailored solutions fora wide range of situations,
from medical malpracticesettlements to land sales income
(00:23):
, with a reputation fordelivering innovative options
that meet the unique needs ofall parties involved, ensuring
compliance and optimal outcomesevery step of the way.
Chad offers non-qualifiedstructure services for a variety
of scenarios, from employmentdisputes to structured
installment, sales in realestate or business transactions.
(00:46):
He's also been at the forefrontof groundbreaking initiatives,
pioneering the placement ofannuity products for student
athletes' name, image andlikeness transactions, as well
as charitable gift annuities fornonprofits and their donors.
Before diving into thestructured settlement field,
chad also served in leadershiproles at organizations like the
(01:09):
American Red Cross and theNational Safety Council, where
he gained valuable insight intothe nonprofit sector and the
importance of social impactinitiatives.
With a Bachelor's of Artsdegree and communications and a
nonprofit management certificatefrom Arizona State University,
chad is health and life licensedin all 50 states, positioning
(01:33):
himself as a go-to resource forclients nationwide.
Join us as he shares hismission to help clients achieve
their financial and personalgoals through strategic
financial planning and, asalways, we hope you take away
something from this episode.
Speaker 2 (01:53):
Welcome to the American Land Seller Podcast
with your host, kobe Richardson.
Kobe is an accredited landconsultant and multi-state land
broker with American Legacy LandCompany.
Join us each week as we exploreall things land.
We bring you fresh insights andexpert guests on sales,
marketing, regulations,economics and so much more.
Visit wwwamericanlandsellercomand find us on one of your
(02:18):
favorite podcast platforms.
Speaker 3 (02:21):
Okay Kobe and our special guests let's get started
.
Speaker 1 (02:26):
Hey everybody, welcome back to the American
Land Seller Podcast.
Super excited to get someinformation from our guests
today.
Just a totally it's amind-blowing thing that he's
going to talk to us about.
I had not considered this, butChad Etmiller from JCR
Settlements is with us today.
(02:47):
Chad, how are we doing?
I'm doing well, kobe.
How are you man?
I am just doing.
I'm just living the dream, youknow, I'm just super excited to
be visiting with you today.
So let's just dig right into it, because I know you've got a
lot of info that you can sharewith us.
Chad, you wanted to talk to ustoday about structured
(03:10):
installment sale.
What exactly is that?
Speaker 3 (03:14):
Yeah, it's a great question.
So it's a first and foremostit's tax deferral strategy,
right.
So it's an opportunity for anyindividual who's selling their
land, their property, their homeor a business that they may own
.
It gives them an opportunityunder Section 453 of the
Internal Revenue Code to takeany portion of that sale at the
(03:38):
time of sale and move it into anannuity investment product.
By doing that they avoidtaxation on the portion of the
sale that they put into theannuity and they will be taxed
in the future year or years whenthe annuity payments are
received.
Now the best part about it, kobe, is they can design payments in
(03:59):
any manner that they would like.
They can defer that firstannuity payment for 40 years if
they wanted to, and so doingthey defer their tax obligation
for that period of time.
So this is a strategy for folkswho were maybe considering a
1031 exchange and were unable tofind a property and need still
(04:22):
a tax deferral solution.
This is an opportunity for themto roll into a codified Section
453 structured installment salewith a leading life insurance
company and accomplish not onlythe tax deferral but really
amplify their net sales proceedsand if done, depending on how
(04:43):
it's done, they can receiveliterally millions of dollars
more over their lifetime thanwhat that final sales price was.
Speaker 1 (04:51):
Well, that's okay.
So that's pretty incrediblebecause a lot of times I mean
and don't get me wrong, I thinkwe talked about this before we
got going 1031 is a tool of alltools in our business.
You're not saying that that's.
We're anti that.
Speaker 3 (05:07):
No, I'm a huge fan of the 1031 exchange.
It's a fantastic strategy.
It's just that right now,inventories are low it's what
I'm hearing from your peersacross the country and it's
difficult to find a property toroll into, and so, when that's
the case, this is still a taxdeferral solution that might be
(05:29):
appropriate for your client, fora person selling the property.
Speaker 1 (05:36):
Yeah, and it's always important to point out that
once again, just like a 1031exchange, we're not advocating
for non-pale of taxes.
You know payment of taxes.
What we're saying is that wecan defer it to a date that
maybe makes more sense forpeople.
It may be in a better place tomaybe have that tax.
Speaker 3 (05:57):
Yeah, you're exactly right.
So the overarching theme hereis constructive receipt.
And the IRS says that theycannot tax the seller at the
time of sale for proceeds forwhich they have not taken
receipt of.
So just like any transactionthat you have, just like a 1031,
(06:18):
when you're sitting at theclosing table, the buyer is
going to transfer those purchasefunds into the escrow account
for the property, the ranch, thefarm, whatever the case may be,
and the seller is going todirect that a portion of that of
those proceeds will go directlyfrom the escrow account to the
life insurance company with whomthis annuity is placed.
(06:39):
And by doing that they don'ttake constructive receipt of the
funds.
And the IRS is totallycomfortable with that.
And they say listen, weunderstand you're deferring this
and that's okay, You're allowedto under section 453, but we do
want to know when we can taxyou.
You're not going to avoidtaxation here.
And so as part of the salefinal sales contract, an
(07:02):
addendum will be added to thatcontract that has the future
annuity payment scheduleattached to it, so that the IRS
knows that hey, starting in fiveyears, we can begin to tax the
seller and again, they'll onlybe taxed for the amount that
they receive in a given futureyear, and so it's a great way to
spread that tax obligation outover your lifetime if you wanted
(07:25):
to, and really create not justfinancial security for the
seller's retirement but alsocreate generational wealth for
kids, grandkids, great grandkids.
It's an opportunity to do that,if planned correctly.
Speaker 1 (07:40):
Right, so you're speaking of that.
Okay, so you're a part of yourestate planning.
Let's say we're talking about Ithink we talked about this just
a little bit before too was youhave somebody that's at the
point in their life where theymay need home health, they may
need, you know, they may belooking at reverse mortgage,
(08:04):
different tools that areavailable to them.
You can set this up so that youdon't have to like when I sell
my property I know I don't wantanother one, because that's not
the point in my life where Iwant to be investing and I want
to kind of get to the pointwhere I can have the cash
available.
But I don't have to set up aplan today correct, like I can
put it move it into the annuityand then to be determined later
(08:27):
how I get my payments.
Speaker 3 (08:28):
Well, yes and no.
So again, in order to comportwith IRS guidelines, that future
payment schedule does have tobe included as an indendum to
the sales contract.
So we do have to be thoughtfulup front in designing the future
payment schedules.
But the seller has completeflexibility, complete autonomy
(08:49):
to design something unique totheir needs.
They can be paid monthly,quarterly, semi-annually,
annually.
They can have lump sums droppedin on future identified dates
and predetermined amounts ifthey wanted to, or a combination
thereof of all of those things.
And to just give you a quickexample, I had a gentleman in
(09:11):
Iowa a couple of weeks ago.
He sold his property for amillion and a half dollars.
He bought it for 500,000.
He had a million dollar capitalgains issue that he was looking
to deal with and he wanted togo ahead and be liquid.
So he kept half of that right.
So he kept his initial 500,000investment.
He kept an additional 500,000in profits.
(09:33):
He paid his taxes on that atthe time of sale.
But he put $500,000 into ourstructured installment sale
product.
He's 52 years old.
He said I don't want to be paidon this until I turn 65.
He was setting it up as kind ofa supplement to his retirement
and so he's not paying a penny'stax on that $500,000 for the
(09:55):
next 13 years and then when heturns 65, he's going to start to
draw monthly payments from age65 to age 85.
He's I'm sorry age 90.
So he selected a 25-year payoutand we anticipate that, through
the performance of the annuityindex, that his proceeds are
(10:15):
going to turn into between 3.2or to $22 million, depending on
how that annuity performs.
The historical median for hisinvestment is around $11 million
and realistically that'sprobably what he could expect is
somewhere between $3 and $11million, but still a $1.5
(10:38):
million sale he's now justturned into potentially worst
case scenario a $3 million gainfor a total of a $4.5 million
sale.
Best case scenario probably a$10 million gain over his
lifetime.
So that $1.1 million sale justcame almost a $12 million sale
(10:58):
through the growth of theannuity product and the future
payments that would be paid tohim.
So not only did he spread histax obligation out over that
entire time period, but he wasable to obviously amplify his
net return and really set up hisretirement.
The best part for this gentlemanhe was in failing health.
(11:20):
He's in failing health alreadyand his concern was that, gosh,
if I pass away before thesepayments are made.
What happens to these payments,chad?
And the great news for anybodyparticipating in this is it goes
to your designated beneficiary.
It could be your spouse, yourkids, your grandkids, your
great-grandkids, the churchWhoever it is that you want it
(11:43):
to go to.
Any remaining payments are paidto that individual.
There's no additional estatetax or inheritance tax on it.
They would pay the samedeferred capital gain tax that
the original seller would havepaid.
So it's a great, great strategyto not only secure your
financial future, but really setup generational wealth for
(12:05):
family members.
Speaker 1 (12:06):
What sounds like it.
Yeah, let's take a quick break,chad, and when we come back we
can dig into a little bit moreon that as far as the
beneficiary side.
So if you've got some time,we'll just take a quick break
and we will be right back.
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(12:30):
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(12:51):
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All right, we're back with ChadEtmore from the JCR settlements
and you're out of Scottsdale,arizona, aren't you?
Speaker 3 (13:07):
Well, our company is there.
I started our company inArizona.
I actually live in NorthGeorgia, yeah and but you were
big enough in Arizona.
Well, you know it's not a greatplace to raise a kid.
My life kept complaining thatthe kids were coming off of the
slide at nine o'clock in themorning, had burns on the back
(13:30):
of their legs by the end of May.
Nobody wants to get in theswimming pool.
It's 100 degrees and you can'tclimb a cactus.
So we decided to move to theSoutheast and let the kids be
kids.
Speaker 1 (13:45):
We lived for almost four years in Southeast Georgia
and Kingsland St Mary's areadown there, and so it's a pretty
part of the country, that's forsure.
We loved it.
We did, though, my wife and I.
I was in the Navy, but sheloved it down there because she
loves the weather, but I toldher I was like, if we're going
(14:07):
to ever go back to that part ofthe country where we lived when
I was in the Navy was betweenthe Okefenokee Swamp and Kings
Bay, which was like the justmuggiest part of the world.
Speaker 3 (14:19):
It was no like breeze hardly ever, and yeah, no, it
can feel like you're breathingpeanut butter here sometimes.
Speaker 1 (14:28):
It gets a little little thick by the time.
So you before we, before thebreak we were kind of talking
about I had asked.
The question, you know, is if Iwanted to slide my money into
something like this, can I, canI choose my payment plan later?
And you were answering that andI'm not sure you were clear on.
(14:53):
I know it was a no or notreally.
But if you can kind of just Iappreciate where you went with
that because I did learn a lot,but if you can just kind of
clear that up, I wouldappreciate that Absolutely.
Speaker 3 (15:06):
I'm happy to and I appreciate you bringing me back
to that.
You know you were asking aboutthe gentleman who might not know
what his future holds, and canhe just transfer the money into
the annuity and design hispayments down the road as he
figures out what his needs are?
And unfortunately, if there's adownside to our product, it's
(15:27):
that the future payment schedulehas to be predetermined.
The IRS again is saying hey, weunderstand you're going to
defer your tax obligation, butwe do want to know when we can
tax you in the future.
And so that that paymentschedule has to be defined and
so life can change.
I get that.
You know, and that's one of thepre minute concerns of our
clients is, gosh Chad, if I lockmyself into these payments,
(15:51):
what if my needs change?
And my best answer to that isand what a lot of folks end up
doing if they find that they doneed liquidity down the road is
that you can take that annuitycontract to your personal lender
, to your bank, and use thatcontract as collateral.
It's good as gold.
The banks are looking atcontracts for MetLife,
(16:12):
independentlife and theyrecognize all right, this is
part of a structured installmentsale.
These payments are coming andthey'll lend to you with that as
a collateral basis, and sothere, there is a way to use it
still.
Even if you miscalculate whatyour future needs are or
(16:32):
something comes out of leftfield and throws you a curveball
in life and you need somethingdifferent, there is a way to use
that and still secure theimmediate financial resources
that you need to addresswhatever might have landed on
your front porch, whether that'san illness or you know
(16:54):
something within the familywhere you need to support
somebody unexpectedly.
But you know that again, if youreally think through these
things.
One of the things that a lot offolks talk to me about is gosh
Chad.
I really want these funds tosecure my future, and I don't
(17:15):
ever want to be in a situationwhere I have to go into an
assisted living facility and alot of my clients are kind of
like-minded in that, and so theylook at this as a way that they
can retire with financialdignity and, if God forbid,
they're ever in a situationwhere they do need assistance in
(17:35):
their living arrangements orhealth assistance.
This type of an annuity productand this structured installment
sale will produce the incomethat allows somebody to come to
them, to come to their house andtake care of them, and they
have the dignity to stay intheir home rather than have to
go and find an assisted livingfacility and move into that
(17:58):
facility during the fourthquarter of their life.
Right, they've worked hard,they've earned the right to to
be in their house and stay there, and so this is a solution for
those folks as well.
Speaker 1 (18:14):
And that's very cool because, like there is, I mean,
in the insurance world, you haveall kinds of different products
, right?
So how do you know?
You know, if I go get a resthome policy or whatever you call
it, and I don't live that long,what's that look like?
(18:35):
You know, and a lot of it is,you know?
I mean, let's be honest, it'sgeared towards failure.
You know, if I don't have topay out the insurance, you know,
that's kind of the name of thegame for the insurance people.
Speaker 3 (18:47):
Yeah.
Speaker 1 (18:48):
You know, and so this is like one of those deals
where you have the money and thefreedom to do whatever If you
don't need, if you don't needthe, you know, the in-home
health till you're in your mid90s, then you can do something
else with it.
Yeah, it becomes an annualvacation fund.
Speaker 3 (19:05):
Then.
Or you know, a lot of folkswill say, hey, I wanna help my
grandkids or my great grandkidswith their college tuition, and
so they'll set up four years ofannual payments to coincide with
when those kids are going tocollege.
They may say, hey, mygranddaughter's gonna probably
get married in the next 10 years.
(19:26):
I wanna lump some seven yearsfrom now so that we'll have some
cash on hand to help puttogether a wedding for her.
You know, whatever needs aperson has, we can address it
through this product.
There's really nothing thatsomebody can throw at me that I
(19:47):
can't accomplish for them.
One of the most interestingcalls I had a gentleman in
Oklahoma.
He's 87 years old and he ownsliterally thousands of pieces of
property in small businessesand he was worried about the
estate tax burden.
He was gonna leave his threeadult children when he passed
(20:08):
away and he heard about ourproduct and he said, hey, listen
, what's the latest that I candefer payment?
And it's 40 years.
He said, all right, I wannasell these five parcels of land
and I wanna get a single lumpsum 40 years from now.
And I kinda looked at him andhe said I know, I know, I'm
gonna be 127 years old.
I'm gonna be long dead, right,I said.
(20:29):
But what I wanna do is I wannaput a commutation writer on that
insurance policy, which meanswhen he passes away, that future
lump sum can be immediatelyaccelerated.
There's a small penalty to payassociated with that because the
insurance company didn't holdon to the money as long as they
were anticipating.
But he was smart enough torealize, hey, I can.
(20:52):
If I die 10 years from now, mykids can accelerate that future
lump sum and they can use thoselump sums to pay the rest of the
estate tax burden that I'mleaving them on the other
properties so that they can keepthat and they don't have to end
up selling those properties.
That can all stay within thefamily and stay in house.
(21:13):
So there's a lot of creativitythat can be utilized when you
look at this product, and thefact that you have complete
flexibility is really, I think,what's so attractive to this
product is when you add to thatKobe.
There's no fees for this.
This is completely free ofcharge.
(21:34):
There are never any feesassociated with this act,
closing or in the future.
I'm paid a one-time commissionby the insurance company with
whom the annuity is placed andthat's baked into the returns
that the insurance company paysme.
So the buyer, the seller, theagents nobody's ever gonna get a
(21:54):
bill from us.
So my very biased opinion, then, would be that it makes sense
to at least consider this inevery sale right, and at least
weigh what we can do for youagainst a 1031 exchange or
deferred sales trust or someother type of financial
instrument that they may beconsidering.
Speaker 1 (22:13):
Well, and that's a yeah, that's a no-brainer,
because, I mean, again, it'spart of the idea behind this is
that part of the money that'sinto this is it's the returns on
the initial investment that areshared, you know, like that are
shared with the insurancecompanies that make it make
sense, right, right, yep, it'snot an all or nothing scenario,
(22:34):
right, I mean they can.
Speaker 3 (22:36):
somebody could take half of their net sales proceeds
and put it into this product,and they could take the other
half and put it into a 1031.
It's not an all or nothingscenario, and I think that's
kind of an attractive realityabout this, to two folks as well
.
That's very cool.
Speaker 1 (22:59):
Yeah, let's take another break, and you've got
another segment in you.
I do, I would appreciate it,and we will be right back.
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Hey everybody, we're back withChad et mealer from JCR
settlements.
There, company is based out ofScottsdale, arizona, but Chad is
based out of, as we talkedabout before, from Georgia.
So multi-state company, I guess, wouldn't it?
Speaker 3 (24:04):
Yeah, we're a national company, so we operate
in all 50 states.
Speaker 1 (24:08):
Yeah, I was gonna say you should do your own ornion.
That's not an easy thing to do,is it?
It's not.
Speaker 3 (24:14):
There's a lot of licensing involved in that and a
lot of continuing educationthat's involved in that.
Speaker 1 (24:21):
I was gonna say is there a way to get I'm
multi-state land broker right?
So I'm in nine, 10 states thatI have my license in and there
are some continuing ed that Ican find.
That is all the states, or mostof the states will take it.
Speaker 3 (24:39):
Yeah, fortunately there is a lot of reciprocal
arrangement, but there's a fewhonoree states out there where
we have to go through theprocess with them uniquely.
Speaker 1 (24:48):
so yeah, that's the same with real estate.
It's brutal, but all right.
So, man, let's go back andlet's just reiterate this is not
like we were talking about thisduring the break.
It's not an all or nothingpolicy, right, like there's.
(25:08):
There's a couple of facets thatI just wanted you to maybe
clarify for people, first of allbeing what happens if I am like
one of the things we weretalking about this for is
because of the fact that, hey, I, there's not a lot for sale.
So if I sell a big ranch and mywhole whole point is like I'm
selling a big chunk of propertyin a certain part of a
(25:30):
geographical region and I wantto move my investment to a
different part of the country,which a lot of people do,
surprisingly enough, I've seenpeople sell 20,000 acre ranches
and then they go divest thatinto like a five, six thousand
acre or irrigated farm.
What's my, what's my penalties?
(25:51):
Like, can I do that?
Can I like change you know?
Like, yeah, we know that's myplan, can I?
Can I plan that out?
Speaker 3 (25:59):
Yeah, it's a great question, and so I mean we've
touched on it earlier right,inventory is low, finding a
property.
I think a lot of people rightnow feel like they're kind of
shoe-horn themselves into aproperty and convincing
themselves that this is aproperty they want to roll into.
And what a lot of folks aredetermining is, no, I don't want
(26:21):
to do that, I still want todefer my tax obligation.
And so they're going ahead andputting in whatever portion of
their sale that they want tointo the structured installment
sale and they're setting it upso that the future payments back
to them might be a single lumpsum in three years or five years
(26:41):
or seven years, and they knowexactly what that amount is.
That's coming back to them inthree years, five years, seven
years, and so it gives themenough runway to work with the
real estate professional toidentify what that next purchase
is right.
And so I'm not shoe-horningmyself into what's available to
me today at the time of my sale.
(27:03):
There may be some moreattractive properties that come
available in the next three,five, seven years.
Maybe not only is inventorybetter, but prices may come down
a little bit.
There's always that pendulumthat's swinging in this, this
market and so a lot of folks areusing, they're pivoting from
the 1031 and they're puttingtheir eggs into the short-term
(27:27):
basket of I don't want tocompletely jump out of the 1031
game, but I need to jump out ofit right now, defer my taxes and
then know what I'm gettingthree years, five years, seven
years from now, so that can workwith Koby and find that next
property.
So that's where I see a lot ofapplication for folks who enjoy
(27:49):
the 1031 process but just can'tfind a property right now that
they want to want to pull thetrigger on.
Speaker 1 (27:56):
But depending on who you ask, on that too, I mean,
this might be a good tool,because a lot of my guys that
are doing what you're talkingabout they'll look at a
five-year Delaware land trust orthey'll look at, like, putting
it into a re or something likethat, that they have an exit
ramp in so many years and theycan either decide to reinvest or
(28:16):
whatever after that.
So this would just be a littlebit, I mean, less stressful way
of doing.
That is as you can.
Well, a couple of things areright it's.
Speaker 3 (28:25):
It is less stressful, it's certainly less expensive
because you don't have the theexpense of setting up the trust
and managing the trust andthere's a definite end right.
You know exactly what thedollar yield amount is in three
years, in five years, in sevenyears with the deferred sales
(28:45):
trust or Delaware sales trust,you kind of have a sense of what
that number may be, but youdon't know definitively.
And so with this product, youknow absolutely, the day you
sell that property, you signthat contract, that in three
years you're going to get a lumpsum for this amount.
You know exactly what thatamount is and it allows you, as
(29:06):
the real estate professional, touse that amount to go and find
that next property to get into.
Speaker 1 (29:12):
But just to clarify, we're still and again I'm the
slow kid, so that's why we justto clarify, we do need to put,
like that, that structure oftime on it, correct.
So we can't just say, hey, I'mgoing to throw this in for 20
years and tomorrow I find a, youknow, a farm that I want.
Speaker 3 (29:30):
You know, we just put that 24 month, you know, yeah,
no you're exactly right thatpayment date has to be defined
and it's coming.
Well, whether you find thatproperty or not, that payment's
going to come in three years andfive years, whenever it is that
you've defined as the date thatthat payment is coming.
(29:52):
So it will be coming and but itjust gives you, rather than the
90 days, 120 days to find thatproperty.
It's giving you 36 months.
It's giving you 60 months tofind that property.
Really do your due diligenceand and get into a piece of
property or an investment thatyou want to get into, rather
(30:14):
than scurrying about and justsettling for something that
you're not real excited about.
Speaker 1 (30:19):
And we're continuing the deferment on that.
Correct, You're exactly right.
Right, okay, yeah, that'sincredible.
So, and again, like whathappens if we get to the 24
months or the six year orwhatever you know, we decide we
put that rule in place and wedecide, hey, we're not going to
buy land, we just want to keepit.
We can just keep it.
Speaker 3 (30:42):
You're exactly right.
You keep it, you pay yourdeferred tax obligation on it in
that calendar year and the restis yours.
So it's a winning scenario,regardless of the outcome,
you've successfully deferredtaxes at the time of sale and
you've amplified the investmentthrough the annuity.
(31:05):
And I want to mention realquick there's two annuity
options.
There's a fixed annuity productthat's got a yield right now
about four and a half to fiveand a quarter percent, and then
there's an index to annuityoption that has yields as high
as 12% right now depending onthe payment schedule how long
that first payment's deferred.
(31:26):
So you know it's a prettysubstantial return on investment
right now.
Nice.
Speaker 1 (31:34):
All right.
So I'm going to get greedybecause I'm a land broker and I
want to just kind of make surethat I understand how this works
.
I'm dealing with a seller, ordoes this work for my buyers too
?
What's that look like?
Is there any benefit to whenI'm a buyer's agent?
Speaker 3 (31:52):
Yeah, I'm so glad you asked that because a lot of the
phone calls I'm getting rightnow are actually from buyer's
reps and they're using our toolto enhance their offer.
Right and especially incompetitive situation where
there's multiple bids and bidsover asking price, this is a way
(32:15):
that they can amplify theiroffer significantly.
Not only am I going to give youthis, but there's a combination
of tax savings and futureannuity growth.
You're going to get this, andit really allows them to put
their offer in front of theseller and really distinguish
(32:35):
their offer from anybody else.
So we're seeing that happen alot and I'm also having a lot of
real estate professionals callme with properties that they're
considering lowering the priceon.
It just hasn't sold, and sothey're saying, gosh, I need
something to cushion the blowwith my client, because I have
(32:59):
to go to him or go to her andsay, hey, look, we need to drop
the asking price by $300,000 onthis property.
How can I show them where wecan make that up?
And this is a perfect productto do that, so you can soften
the blow.
If you're not fielding offers atlist price, you can go to your
(33:21):
client and say, listen, I knowwe're asking $1.5 million for
this property.
I know the best offer we'vegotten is $900,000.
That's okay.
We can accept that $900,000offer.
You can be done with this and,through the combination of tax
savings and the future annuitygrowth, you're going to get well
(33:41):
more than the $1.5 that welisted at.
You're going to getmulti-millions of dollars, and
so when they see that and theyunderstand what in real life can
happen for them, they will bemore willing to consider the
offers that are coming in lowerthan what that list price is.
So in theory, whether you're onthe buyer side or the seller
(34:02):
side, it should help you.
This product should help you,as a real estate professional,
close your listings in a moreefficient and cost effective
manner.
Speaker 1 (34:12):
Well and I mean it's at the very least the phone call
to you, chad, to talk to youabout what my options are or
what my clients options are.
Yeah, it seems like it shouldbe something that happens, and I
guess the more like this issomething fairly new to me.
I guess I know there's guys outthere that are using the heck
out of you, and I think I'veseen you at the National Land
(34:36):
Conference before Yep.
I just haven't had a chance toshare some time with you, but I
mean, that's to me, it's again.
It may not be the right thingfor the situation, but it's at
least another thing to it'sanother.
When you come to the fork inthe road, it's another fork for
you.
Now let's take a look at andsee if this may be something
(34:58):
that's going to work best forour clients.
Speaker 3 (34:59):
You're exactly right, you can never have too many
options, and this is just that.
It's an option.
It may not be the panacea for agiven circumstance but again,
as we mentioned before, there'svirtually nothing that a seller
could throw at me that I can'tdesign a payment schedule around
to address what their needs are.
(35:21):
So it's at least worthexploring on nearly every
transaction.
Speaker 1 (35:25):
Yeah Well, and my brain's already whirling on.
Can I put this in my?
Can I put something about thisin my listing presentation book
or something like this?
Just remind me when I'm goingthrough stuff that hey, here's
some of the options that we have, because I already have 1031
option stuff in there.
But again, like there's like wetalked about this at the very
(35:46):
beginning, before we evenstarted.
Like I joke around about my dad.
He's got a piece of propertythat he calls Restome Quarter or
whatever, and so that's one ofthose things where, if it's
really what he wants to do, youknow, like that's just another
option is to make sure that,depending on a person's time in
(36:07):
their life, that they may, thismay be the best thing for them.
Speaker 3 (36:10):
Yeah, it gives them options, which is a great thing.
And you mentioned the LANconference will be there again
this year, here a couple ofweeks, again next month in
Louisville.
So we'd love to talk to youfurther and explore some options
for your clients.
Speaker 1 (36:29):
Yeah, no, we'll definitely catch up with you
down there.
It's a great.
I tell people outside I'm not asuper big fan of like what do
you call it?
The conventions and stuff likethat, but man, I don't miss this
one.
This one has so much goodinformation and it's just,
you're surrounded by the toppeople in the industry.
(36:50):
That's the top 15,.
20% of the land brokers in thecountry are there.
Speaker 3 (36:56):
Yeah, you're exactly right.
I've been to hundreds, hundredsand hundreds of conferences and
conventions.
The quality of professional atthe RLI National Land Conference
is second to none and it's just, it's good to be around folks
who have similar values.
And you know we will be thereand we're excited to be there
(37:20):
again, and in the middle ofbourbon country too.
So you can't go wrong that wayeither.
Speaker 1 (37:25):
So Taking an extra bag.
So, yeah, I think we can findthat stuff home now, so you
don't have to take, you don'thave to smuggle it on the plane.
Yeah, let's just finish it uphere, let's just do a little.
When is it the best time for meto get your folks involved in
the process?
Speaker 3 (37:43):
Yeah, well, I that's a good question and my answer is
always it's never too early,right?
If you're representing theseller, we want to be talking
with them, you know, if notbefore you list, right, when you
do list, so that they have asense of what can be
accomplished for them.
We can run different scenariosso that as they begin to field
(38:07):
offers, they know what thattranslates into right and they
know that, okay, if we acceptthis offer and we put this much
into the structured installmentsale, it's going to turn into
this.
So never too soon to get usinvolved, in my opinion.
We always like to have a finaldecision on the payment schedule
(38:29):
, ideally two weeks prior toclosing, because we want to
provide the addendum to thesales contract to all parties in
advance of closing so that whenyou sit down at the closing
table, everybody knows exactlywhat we require to finalize the
(38:51):
installment sale.
Nobody's caught off guard.
The last thing you want to dois throw a curveball at folks at
the closing table.
That's the surest way to kill adeal.
So ideally as soon as possible.
Worst case scenario we'd liketo be involved a couple of weeks
prior to closing Nice.
Speaker 1 (39:09):
At the very latest.
Right yeah, earlier the better,correct, okay.
And you had mentioned beforethe no preparation costs.
Nothing like that for people.
Speaker 3 (39:23):
Yeah, because it's an insurance.
This week on the American Land Seller, we're
happy to introduce you to a trueexpert in settlement planning.
Chad Etmiller is a senior vicepresident and founding partner
at JCR Settlements.
Chad brings over 20 years ofexperience to the table,
providing tailored solutions fora wide range of situations,
from medical malpracticesettlements to land sales income
(00:23):
, with a reputation fordelivering innovative options
that meet the unique needs ofall parties involved, ensuring
compliance and optimal outcomesevery step of the way.
Chad offers non-qualifiedstructure services for a variety
of scenarios, from employmentdisputes to structured
installment, sales in realestate or business transactions.
(00:46):
He's also been at the forefrontof groundbreaking initiatives,
pioneering the placement ofannuity products for student
athletes' name, image andlikeness transactions, as well
as charitable gift annuities fornonprofits and their donors.
Before diving into thestructured settlement field,
chad also served in leadershiproles at organizations like the
(01:09):
American Red Cross and theNational Safety Council, where
he gained valuable insight intothe nonprofit sector and the
importance of social impactinitiatives.
With a Bachelor's of Artsdegree and communications and a
nonprofit management certificatefrom Arizona State University,
chad is health and life licensedin all 50 states, positioning
(01:33):
himself as a go-to resource forclients nationwide.
Join us as he shares hismission to help clients achieve
their financial and personalgoals through strategic
financial planning and, asalways, we hope you take away
something from this episode.
Speaker 2 (01:53):
Welcome to the American Land Seller Podcast
with your host, kobe Richardson.
Kobe is an accredited landconsultant and multi-state land
broker with American Legacy LandCompany.
Join us each week as we exploreall things land.
We bring you fresh insights andexpert guests on sales,
marketing, regulations,economics and so much more.
Visit wwwamericanlandsellercomand find us on one of your
(02:18):
favorite podcast platforms.
Speaker 3 (02:21):
Okay Kobe and our special guests let's get started
.
Speaker 1 (02:26):
Hey everybody, welcome back to the American
Land Seller Podcast.
Super excited to get someinformation from our guests
today.
Just a totally it's amind-blowing thing that he's
going to talk to us about.
I had not considered this, butChad Etmiller from JCR
Settlements is with us today.
(02:47):
Chad, how are we doing?
I'm doing well, kobe.
How are you man?
I am just doing.
I'm just living the dream, youknow, I'm just super excited to
be visiting with you today.
So let's just dig right into it, because I know you've got a
lot of info that you can sharewith us.
Chad, you wanted to talk to ustoday about structured
(03:10):
installment sale.
What exactly is that?
Speaker 3 (03:14):
Yeah, it's a great question.
So it's a first and foremostit's tax deferral strategy,
right.
So it's an opportunity for anyindividual who's selling their
land, their property, their homeor a business that they may own
.
It gives them an opportunityunder Section 453 of the
Internal Revenue Code to takeany portion of that sale at the
(03:38):
time of sale and move it into anannuity investment product.
By doing that they avoidtaxation on the portion of the
sale that they put into theannuity and they will be taxed
in the future year or years whenthe annuity payments are
received.
Now the best part about it, kobe, is they can design payments in
(03:59):
any manner that they would like.
They can defer that firstannuity payment for 40 years if
they wanted to, and so doingthey defer their tax obligation
for that period of time.
So this is a strategy for folkswho were maybe considering a
1031 exchange and were unable tofind a property and need still
(04:22):
a tax deferral solution.
This is an opportunity for themto roll into a codified Section
453 structured installment salewith a leading life insurance
company and accomplish not onlythe tax deferral but really
amplify their net sales proceedsand if done, depending on how
(04:43):
it's done, they can receiveliterally millions of dollars
more over their lifetime thanwhat that final sales price was.
Speaker 1 (04:51):
Well, that's okay.
So that's pretty incrediblebecause a lot of times I mean
and don't get me wrong, I thinkwe talked about this before we
got going 1031 is a tool of alltools in our business.
You're not saying that that's.
We're anti that.
Speaker 3 (05:07):
No, I'm a huge fan of the 1031 exchange.
It's a fantastic strategy.
It's just that right now,inventories are low it's what
I'm hearing from your peersacross the country and it's
difficult to find a property toroll into, and so, when that's
the case, this is still a taxdeferral solution that might be
(05:29):
appropriate for your client, fora person selling the property.
Speaker 1 (05:36):
Yeah, and it's always important to point out that
once again, just like a 1031exchange, we're not advocating
for non-pale of taxes.
You know payment of taxes.
What we're saying is that wecan defer it to a date that
maybe makes more sense forpeople.
It may be in a better place tomaybe have that tax.
Speaker 3 (05:57):
Yeah, you're exactly right.
So the overarching theme hereis constructive receipt.
And the IRS says that theycannot tax the seller at the
time of sale for proceeds forwhich they have not taken
receipt of.
So just like any transactionthat you have, just like a 1031,
(06:18):
when you're sitting at theclosing table, the buyer is
going to transfer those purchasefunds into the escrow account
for the property, the ranch, thefarm, whatever the case may be,
and the seller is going todirect that a portion of that of
those proceeds will go directlyfrom the escrow account to the
life insurance company with whomthis annuity is placed.
(06:39):
And by doing that they don'ttake constructive receipt of the
funds.
And the IRS is totallycomfortable with that.
And they say listen, weunderstand you're deferring this
and that's okay, You're allowedto under section 453, but we do
want to know when we can taxyou.
You're not going to avoidtaxation here.
And so as part of the salefinal sales contract, an
(07:02):
addendum will be added to thatcontract that has the future
annuity payment scheduleattached to it, so that the IRS
knows that hey, starting in fiveyears, we can begin to tax the
seller and again, they'll onlybe taxed for the amount that
they receive in a given futureyear, and so it's a great way to
spread that tax obligation outover your lifetime if you wanted
(07:25):
to, and really create not justfinancial security for the
seller's retirement but alsocreate generational wealth for
kids, grandkids, great grandkids.
It's an opportunity to do that,if planned correctly.
Speaker 1 (07:40):
Right, so you're speaking of that.
Okay, so you're a part of yourestate planning.
Let's say we're talking about Ithink we talked about this just
a little bit before too was youhave somebody that's at the
point in their life where theymay need home health, they may
need, you know, they may belooking at reverse mortgage,
(08:04):
different tools that areavailable to them.
You can set this up so that youdon't have to like when I sell
my property I know I don't wantanother one, because that's not
the point in my life where Iwant to be investing and I want
to kind of get to the pointwhere I can have the cash
available.
But I don't have to set up aplan today correct, like I can
put it move it into the annuityand then to be determined later
(08:27):
how I get my payments.
Speaker 3 (08:28):
Well, yes and no.
So again, in order to comportwith IRS guidelines, that future
payment schedule does have tobe included as an indendum to
the sales contract.
So we do have to be thoughtfulup front in designing the future
payment schedules.
But the seller has completeflexibility, complete autonomy
(08:49):
to design something unique totheir needs.
They can be paid monthly,quarterly, semi-annually,
annually.
They can have lump sums droppedin on future identified dates
and predetermined amounts ifthey wanted to, or a combination
thereof of all of those things.
And to just give you a quickexample, I had a gentleman in
(09:11):
Iowa a couple of weeks ago.
He sold his property for amillion and a half dollars.
He bought it for 500,000.
He had a million dollar capitalgains issue that he was looking
to deal with and he wanted togo ahead and be liquid.
So he kept half of that right.
So he kept his initial 500,000investment.
He kept an additional 500,000in profits.
(09:33):
He paid his taxes on that atthe time of sale.
But he put $500,000 into ourstructured installment sale
product.
He's 52 years old.
He said I don't want to be paidon this until I turn 65.
He was setting it up as kind ofa supplement to his retirement
and so he's not paying a penny'stax on that $500,000 for the
(09:55):
next 13 years and then when heturns 65, he's going to start to
draw monthly payments from age65 to age 85.
He's I'm sorry age 90.
So he selected a 25-year payoutand we anticipate that, through
the performance of the annuityindex, that his proceeds are
(10:15):
going to turn into between 3.2or to $22 million, depending on
how that annuity performs.
The historical median for hisinvestment is around $11 million
and realistically that'sprobably what he could expect is
somewhere between $3 and $11million, but still a $1.5
(10:38):
million sale he's now justturned into potentially worst
case scenario a $3 million gainfor a total of a $4.5 million
sale.
Best case scenario probably a$10 million gain over his
lifetime.
So that $1.1 million sale justcame almost a $12 million sale
(10:58):
through the growth of theannuity product and the future
payments that would be paid tohim.
So not only did he spread histax obligation out over that
entire time period, but he wasable to obviously amplify his
net return and really set up hisretirement.
The best part for this gentlemanhe was in failing health.
(11:20):
He's in failing health alreadyand his concern was that, gosh,
if I pass away before thesepayments are made.
What happens to these payments,chad?
And the great news for anybodyparticipating in this is it goes
to your designated beneficiary.
It could be your spouse, yourkids, your grandkids, your
great-grandkids, the churchWhoever it is that you want it
(11:43):
to go to.
Any remaining payments are paidto that individual.
There's no additional estatetax or inheritance tax on it.
They would pay the samedeferred capital gain tax that
the original seller would havepaid.
So it's a great, great strategyto not only secure your
financial future, but really setup generational wealth for
(12:05):
family members.
Speaker 1 (12:06):
What sounds like it.
Yeah, let's take a quick break,chad, and when we come back we
can dig into a little bit moreon that as far as the
beneficiary side.
So if you've got some time,we'll just take a quick break
and we will be right back.
The American Land Sellerpodcast is brought to you in
(12:30):
part by landhubcom.
Join us today and experiencethe expertise of Landhub's land
marketing professionals, whetheryou're buying or selling.
Let us show you the way in theever-evolving world of land
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Visit landhubcom and discoverwhat the future of land
(12:51):
marketing looks like.
Landhubcom where your landjourney begins.
All right, we're back with ChadEtmore from the JCR settlements
and you're out of Scottsdale,arizona, aren't you?
Speaker 3 (13:07):
Well, our company is there.
I started our company inArizona.
I actually live in NorthGeorgia, yeah and but you were
big enough in Arizona.
Well, you know it's not a greatplace to raise a kid.
My life kept complaining thatthe kids were coming off of the
slide at nine o'clock in themorning, had burns on the back
(13:30):
of their legs by the end of May.
Nobody wants to get in theswimming pool.
It's 100 degrees and you can'tclimb a cactus.
So we decided to move to theSoutheast and let the kids be
kids.
Speaker 1 (13:45):
We lived for almost four years in Southeast Georgia
and Kingsland St Mary's areadown there, and so it's a pretty
part of the country, that's forsure.
We loved it.
We did, though, my wife and I.
I was in the Navy, but sheloved it down there because she
loves the weather, but I toldher I was like, if we're going
(14:07):
to ever go back to that part ofthe country where we lived when
I was in the Navy was betweenthe Okefenokee Swamp and Kings
Bay, which was like the justmuggiest part of the world.
Speaker 3 (14:19):
It was no like breeze hardly ever, and yeah, no, it
can feel like you're breathingpeanut butter here sometimes.
Speaker 1 (14:28):
It gets a little little thick by the time.
So you before we, before thebreak we were kind of talking
about I had asked.
The question, you know, is if Iwanted to slide my money into
something like this, can I, canI choose my payment plan later?
And you were answering that andI'm not sure you were clear on.
(14:53):
I know it was a no or notreally.
But if you can kind of just Iappreciate where you went with
that because I did learn a lot,but if you can just kind of
clear that up, I wouldappreciate that Absolutely.
Speaker 3 (15:06):
I'm happy to and I appreciate you bringing me back
to that.
You know you were asking aboutthe gentleman who might not know
what his future holds, and canhe just transfer the money into
the annuity and design hispayments down the road as he
figures out what his needs are?
And unfortunately, if there's adownside to our product, it's
(15:27):
that the future payment schedulehas to be predetermined.
The IRS again is saying hey, weunderstand you're going to
defer your tax obligation, butwe do want to know when we can
tax you in the future.
And so that that paymentschedule has to be defined and
so life can change.
I get that.
You know, and that's one of thepre minute concerns of our
clients is, gosh Chad, if I lockmyself into these payments,
(15:51):
what if my needs change?
And my best answer to that isand what a lot of folks end up
doing if they find that they doneed liquidity down the road is
that you can take that annuitycontract to your personal lender
, to your bank, and use thatcontract as collateral.
It's good as gold.
The banks are looking atcontracts for MetLife,
(16:12):
independentlife and theyrecognize all right, this is
part of a structured installmentsale.
These payments are coming andthey'll lend to you with that as
a collateral basis, and sothere, there is a way to use it
still.
Even if you miscalculate whatyour future needs are or
(16:32):
something comes out of leftfield and throws you a curveball
in life and you need somethingdifferent, there is a way to use
that and still secure theimmediate financial resources
that you need to addresswhatever might have landed on
your front porch, whether that'san illness or you know
(16:54):
something within the familywhere you need to support
somebody unexpectedly.
But you know that again, if youreally think through these
things.
One of the things that a lot offolks talk to me about is gosh
Chad.
I really want these funds tosecure my future, and I don't
(17:15):
ever want to be in a situationwhere I have to go into an
assisted living facility and alot of my clients are kind of
like-minded in that, and so theylook at this as a way that they
can retire with financialdignity and, if God forbid,
they're ever in a situationwhere they do need assistance in
(17:35):
their living arrangements orhealth assistance.
This type of an annuity productand this structured installment
sale will produce the incomethat allows somebody to come to
them, to come to their house andtake care of them, and they
have the dignity to stay intheir home rather than have to
go and find an assisted livingfacility and move into that
(17:58):
facility during the fourthquarter of their life.
Right, they've worked hard,they've earned the right to to
be in their house and stay there, and so this is a solution for
those folks as well.
Speaker 1 (18:14):
And that's very cool because, like there is, I mean,
in the insurance world, you haveall kinds of different products
, right?
So how do you know?
You know, if I go get a resthome policy or whatever you call
it, and I don't live that long,what's that look like?
(18:35):
You know, and a lot of it is,you know?
I mean, let's be honest, it'sgeared towards failure.
You know, if I don't have topay out the insurance, you know,
that's kind of the name of thegame for the insurance people.
Speaker 3 (18:47):
Yeah.
Speaker 1 (18:48):
You know, and so this is like one of those deals
where you have the money and thefreedom to do whatever If you
don't need, if you don't needthe, you know, the in-home
health till you're in your mid90s, then you can do something
else with it.
Yeah, it becomes an annualvacation fund.
Speaker 3 (19:05):
Then.
Or you know, a lot of folkswill say, hey, I wanna help my
grandkids or my great grandkidswith their college tuition, and
so they'll set up four years ofannual payments to coincide with
when those kids are going tocollege.
They may say, hey, mygranddaughter's gonna probably
get married in the next 10 years.
(19:26):
I wanna lump some seven yearsfrom now so that we'll have some
cash on hand to help puttogether a wedding for her.
You know, whatever needs aperson has, we can address it
through this product.
There's really nothing thatsomebody can throw at me that I
(19:47):
can't accomplish for them.
One of the most interestingcalls I had a gentleman in
Oklahoma.
He's 87 years old and he ownsliterally thousands of pieces of
property in small businessesand he was worried about the
estate tax burden.
He was gonna leave his threeadult children when he passed
(20:08):
away and he heard about ourproduct and he said, hey, listen
, what's the latest that I candefer payment?
And it's 40 years.
He said, all right, I wannasell these five parcels of land
and I wanna get a single lumpsum 40 years from now.
And I kinda looked at him andhe said I know, I know, I'm
gonna be 127 years old.
I'm gonna be long dead, right,I said.
(20:29):
But what I wanna do is I wannaput a commutation writer on that
insurance policy, which meanswhen he passes away, that future
lump sum can be immediatelyaccelerated.
There's a small penalty to payassociated with that because the
insurance company didn't holdon to the money as long as they
were anticipating.
But he was smart enough torealize, hey, I can.
(20:52):
If I die 10 years from now, mykids can accelerate that future
lump sum and they can use thoselump sums to pay the rest of the
estate tax burden that I'mleaving them on the other
properties so that they can keepthat and they don't have to end
up selling those properties.
That can all stay within thefamily and stay in house.
(21:13):
So there's a lot of creativitythat can be utilized when you
look at this product, and thefact that you have complete
flexibility is really, I think,what's so attractive to this
product is when you add to thatKobe.
There's no fees for this.
This is completely free ofcharge.
(21:34):
There are never any feesassociated with this act,
closing or in the future.
I'm paid a one-time commissionby the insurance company with
whom the annuity is placed andthat's baked into the returns
that the insurance company paysme.
So the buyer, the seller, theagents nobody's ever gonna get a
(21:54):
bill from us.
So my very biased opinion, then, would be that it makes sense
to at least consider this inevery sale right, and at least
weigh what we can do for youagainst a 1031 exchange or
deferred sales trust or someother type of financial
instrument that they may beconsidering.
Speaker 1 (22:13):
Well, and that's a yeah, that's a no-brainer,
because, I mean, again, it'spart of the idea behind this is
that part of the money that'sinto this is it's the returns on
the initial investment that areshared, you know, like that are
shared with the insurancecompanies that make it make
sense, right, right, yep, it'snot an all or nothing scenario,
(22:34):
right, I mean they can.
Speaker 3 (22:36):
somebody could take half of their net sales proceeds
and put it into this product,and they could take the other
half and put it into a 1031.
It's not an all or nothingscenario, and I think that's
kind of an attractive realityabout this, to two folks as well
.
That's very cool.
Speaker 1 (22:59):
Yeah, let's take another break, and you've got
another segment in you.
I do, I would appreciate it,and we will be right back.
The American Land Sellerpodcast is brought to you in
part by American Legacy LandCompany.
At American Legacy, ourseasoned agents set us apart,
providing unmatched service witha personal touch that goes
(23:21):
beyond expectation.
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the land that defines yourlegacy.
Hey everybody, we're back withChad et mealer from JCR
settlements.
There, company is based out ofScottsdale, arizona, but Chad is
based out of, as we talkedabout before, from Georgia.
So multi-state company, I guess, wouldn't it?
Speaker 3 (24:04):
Yeah, we're a national company, so we operate
in all 50 states.
Speaker 1 (24:08):
Yeah, I was gonna say you should do your own ornion.
That's not an easy thing to do,is it?
It's not.
Speaker 3 (24:14):
There's a lot of licensing involved in that and a
lot of continuing educationthat's involved in that.
Speaker 1 (24:21):
I was gonna say is there a way to get I'm
multi-state land broker right?
So I'm in nine, 10 states thatI have my license in and there
are some continuing ed that Ican find.
That is all the states, or mostof the states will take it.
Speaker 3 (24:39):
Yeah, fortunately there is a lot of reciprocal
arrangement, but there's a fewhonoree states out there where
we have to go through theprocess with them uniquely.
Speaker 1 (24:48):
so yeah, that's the same with real estate.
It's brutal, but all right.
So, man, let's go back andlet's just reiterate this is not
like we were talking about thisduring the break.
It's not an all or nothingpolicy, right, like there's.
(25:08):
There's a couple of facets thatI just wanted you to maybe
clarify for people, first of allbeing what happens if I am like
one of the things we weretalking about this for is
because of the fact that, hey, I, there's not a lot for sale.
So if I sell a big ranch and mywhole whole point is like I'm
selling a big chunk of propertyin a certain part of a
(25:30):
geographical region and I wantto move my investment to a
different part of the country,which a lot of people do,
surprisingly enough, I've seenpeople sell 20,000 acre ranches
and then they go divest thatinto like a five, six thousand
acre or irrigated farm.
What's my, what's my penalties?
(25:51):
Like, can I do that?
Can I like change you know?
Like, yeah, we know that's myplan, can I?
Can I plan that out?
Speaker 3 (25:59):
Yeah, it's a great question, and so I mean we've
touched on it earlier right,inventory is low, finding a
property.
I think a lot of people rightnow feel like they're kind of
shoe-horn themselves into aproperty and convincing
themselves that this is aproperty they want to roll into.
And what a lot of folks aredetermining is, no, I don't want
(26:21):
to do that, I still want todefer my tax obligation.
And so they're going ahead andputting in whatever portion of
their sale that they want tointo the structured installment
sale and they're setting it upso that the future payments back
to them might be a single lumpsum in three years or five years
(26:41):
or seven years, and they knowexactly what that amount is.
That's coming back to them inthree years, five years, seven
years, and so it gives themenough runway to work with the
real estate professional toidentify what that next purchase
is right.
And so I'm not shoe-horningmyself into what's available to
me today at the time of my sale.
(27:03):
There may be some moreattractive properties that come
available in the next three,five, seven years.
Maybe not only is inventorybetter, but prices may come down
a little bit.
There's always that pendulumthat's swinging in this, this
market and so a lot of folks areusing, they're pivoting from
the 1031 and they're puttingtheir eggs into the short-term
(27:27):
basket of I don't want tocompletely jump out of the 1031
game, but I need to jump out ofit right now, defer my taxes and
then know what I'm gettingthree years, five years, seven
years from now, so that can workwith Koby and find that next
property.
So that's where I see a lot ofapplication for folks who enjoy
(27:49):
the 1031 process but just can'tfind a property right now that
they want to want to pull thetrigger on.
Speaker 1 (27:56):
But depending on who you ask, on that too, I mean,
this might be a good tool,because a lot of my guys that
are doing what you're talkingabout they'll look at a
five-year Delaware land trust orthey'll look at, like, putting
it into a re or something likethat, that they have an exit
ramp in so many years and theycan either decide to reinvest or
(28:16):
whatever after that.
So this would just be a littlebit, I mean, less stressful way
of doing.
That is as you can.
Well, a couple of things areright it's.
Speaker 3 (28:25):
It is less stressful, it's certainly less expensive
because you don't have the theexpense of setting up the trust
and managing the trust andthere's a definite end right.
You know exactly what thedollar yield amount is in three
years, in five years, in sevenyears with the deferred sales
(28:45):
trust or Delaware sales trust,you kind of have a sense of what
that number may be, but youdon't know definitively.
And so with this product, youknow absolutely, the day you
sell that property, you signthat contract, that in three
years you're going to get a lumpsum for this amount.
You know exactly what thatamount is and it allows you, as
(29:06):
the real estate professional, touse that amount to go and find
that next property to get into.
Speaker 1 (29:12):
But just to clarify, we're still and again I'm the
slow kid, so that's why we justto clarify, we do need to put,
like that, that structure oftime on it, correct.
So we can't just say, hey, I'mgoing to throw this in for 20
years and tomorrow I find a, youknow, a farm that I want.
Speaker 3 (29:30):
You know, we just put that 24 month, you know, yeah,
no you're exactly right thatpayment date has to be defined
and it's coming.
Well, whether you find thatproperty or not, that payment's
going to come in three years andfive years, whenever it is that
you've defined as the date thatthat payment is coming.
(29:52):
So it will be coming and but itjust gives you, rather than the
90 days, 120 days to find thatproperty.
It's giving you 36 months.
It's giving you 60 months tofind that property.
Really do your due diligenceand and get into a piece of
property or an investment thatyou want to get into, rather
(30:14):
than scurrying about and justsettling for something that
you're not real excited about.
Speaker 1 (30:19):
And we're continuing the deferment on that.
Correct, You're exactly right.
Right, okay, yeah, that'sincredible.
So, and again, like whathappens if we get to the 24
months or the six year orwhatever you know, we decide we
put that rule in place and wedecide, hey, we're not going to
buy land, we just want to keepit.
We can just keep it.
Speaker 3 (30:42):
You're exactly right.
You keep it, you pay yourdeferred tax obligation on it in
that calendar year and the restis yours.
So it's a winning scenario,regardless of the outcome,
you've successfully deferredtaxes at the time of sale and
you've amplified the investmentthrough the annuity.
(31:05):
And I want to mention realquick there's two annuity
options.
There's a fixed annuity productthat's got a yield right now
about four and a half to fiveand a quarter percent, and then
there's an index to annuityoption that has yields as high
as 12% right now depending onthe payment schedule how long
that first payment's deferred.
(31:26):
So you know it's a prettysubstantial return on investment
right now.
Nice.
Speaker 1 (31:34):
All right.
So I'm going to get greedybecause I'm a land broker and I
want to just kind of make surethat I understand how this works
.
I'm dealing with a seller, ordoes this work for my buyers too
?
What's that look like?
Is there any benefit to whenI'm a buyer's agent?
Speaker 3 (31:52):
Yeah, I'm so glad you asked that because a lot of the
phone calls I'm getting rightnow are actually from buyer's
reps and they're using our toolto enhance their offer.
Right and especially incompetitive situation where
there's multiple bids and bidsover asking price, this is a way
(32:15):
that they can amplify theiroffer significantly.
Not only am I going to give youthis, but there's a combination
of tax savings and futureannuity growth.
You're going to get this, andit really allows them to put
their offer in front of theseller and really distinguish
(32:35):
their offer from anybody else.
So we're seeing that happen alot and I'm also having a lot of
real estate professionals callme with properties that they're
considering lowering the priceon.
It just hasn't sold, and sothey're saying, gosh, I need
something to cushion the blowwith my client, because I have
(32:59):
to go to him or go to her andsay, hey, look, we need to drop
the asking price by $300,000 onthis property.
How can I show them where wecan make that up?
And this is a perfect productto do that, so you can soften
the blow.
If you're not fielding offers atlist price, you can go to your
(33:21):
client and say, listen, I knowwe're asking $1.5 million for
this property.
I know the best offer we'vegotten is $900,000.
That's okay.
We can accept that $900,000offer.
You can be done with this and,through the combination of tax
savings and the future annuitygrowth, you're going to get well
(33:41):
more than the $1.5 that welisted at.
You're going to getmulti-millions of dollars, and
so when they see that and theyunderstand what in real life can
happen for them, they will bemore willing to consider the
offers that are coming in lowerthan what that list price is.
So in theory, whether you're onthe buyer side or the seller
(34:02):
side, it should help you.
This product should help you,as a real estate professional,
close your listings in a moreefficient and cost effective
manner.
Speaker 1 (34:12):
Well and I mean it's at the very least the phone call
to you, chad, to talk to youabout what my options are or
what my clients options are.
Yeah, it seems like it shouldbe something that happens, and I
guess the more like this issomething fairly new to me.
I guess I know there's guys outthere that are using the heck
out of you, and I think I'veseen you at the National Land
(34:36):
Conference before Yep.
I just haven't had a chance toshare some time with you, but I
mean, that's to me, it's again.
It may not be the right thingfor the situation, but it's at
least another thing to it'sanother.
When you come to the fork inthe road, it's another fork for
you.
Now let's take a look at andsee if this may be something
(34:58):
that's going to work best forour clients.
Speaker 3 (34:59):
You're exactly right, you can never have too many
options, and this is just that.
It's an option.
It may not be the panacea for agiven circumstance but again,
as we mentioned before, there'svirtually nothing that a seller
could throw at me that I can'tdesign a payment schedule around
to address what their needs are.
(35:21):
So it's at least worthexploring on nearly every
transaction.
Speaker 1 (35:25):
Yeah Well, and my brain's already whirling on.
Can I put this in my?
Can I put something about thisin my listing presentation book
or something like this?
Just remind me when I'm goingthrough stuff that hey, here's
some of the options that we have, because I already have 1031
option stuff in there.
But again, like there's like wetalked about this at the very
(35:46):
beginning, before we evenstarted.
Like I joke around about my dad.
He's got a piece of propertythat he calls Restome Quarter or
whatever, and so that's one ofthose things where, if it's
really what he wants to do, youknow, like that's just another
option is to make sure that,depending on a person's time in
(36:07):
their life, that they may, thismay be the best thing for them.
Speaker 3 (36:10):
Yeah, it gives them options, which is a great thing.
And you mentioned the LANconference will be there again
this year, here a couple ofweeks, again next month in
Louisville.
So we'd love to talk to youfurther and explore some options
for your clients.
Speaker 1 (36:29):
Yeah, no, we'll definitely catch up with you
down there.
It's a great.
I tell people outside I'm not asuper big fan of like what do
you call it?
The conventions and stuff likethat, but man, I don't miss this
one.
This one has so much goodinformation and it's just,
you're surrounded by the toppeople in the industry.
(36:50):
That's the top 15,.
20% of the land brokers in thecountry are there.
Speaker 3 (36:56):
Yeah, you're exactly right.
I've been to hundreds, hundredsand hundreds of conferences and
conventions.
The quality of professional atthe RLI National Land Conference
is second to none and it's just, it's good to be around folks
who have similar values.
And you know we will be thereand we're excited to be there
(37:20):
again, and in the middle ofbourbon country too.
So you can't go wrong that wayeither.
Speaker 1 (37:25):
So Taking an extra bag.
So, yeah, I think we can findthat stuff home now, so you
don't have to take, you don'thave to smuggle it on the plane.
Yeah, let's just finish it uphere, let's just do a little.
When is it the best time for meto get your folks involved in
the process?
Speaker 3 (37:43):
Yeah, well, I that's a good question and my answer is
always it's never too early,right?
If you're representing theseller, we want to be talking
with them, you know, if notbefore you list, right, when you
do list, so that they have asense of what can be
accomplished for them.
We can run different scenariosso that as they begin to field
(38:07):
offers, they know what thattranslates into right and they
know that, okay, if we acceptthis offer and we put this much
into the structured installmentsale, it's going to turn into
this.
So never too soon to get usinvolved, in my opinion.
We always like to have a finaldecision on the payment schedule
(38:29):
, ideally two weeks prior toclosing, because we want to
provide the addendum to thesales contract to all parties in
advance of closing so that whenyou sit down at the closing
table, everybody knows exactlywhat we require to finalize the
(38:51):
installment sale.
Nobody's caught off guard.
The last thing you want to dois throw a curveball at folks at
the closing table.
That's the surest way to kill adeal.
So ideally as soon as possible.
Worst case scenario we'd liketo be involved a couple of weeks
prior to closing Nice.
Speaker 1 (39:09):
At the very latest.
Right yeah, earlier the better,correct, okay.
And you had mentioned beforethe no preparation costs.
Nothing like that for people.
Speaker 3 (39:23):
Yeah, because it's an insurance.
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