July 8, 2025 • 29 mins
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Ed Mathews (01:19):
Greetings and salutations.
Real Estate Undergrounders.
It is Ed Mathews with RealEstate Underground.
Thank you so much for making uspart of your day.
With me today is Ben Carmona ofPerch Wealth, coming from the
West Coast.
We were just playing the namegame of the folks that I know,
and it turns out we don't know alot of the same people, but all
good.
So, Ben, welcome to the show,and I'm really excited to have
(01:39):
this conversation.
Ben Carmona (01:41):
Thank you, Ed.
It's a pleasure to be here.
So your line of business issomething that I'm totally
fascinated with, because I'm oneof those people that have sold
real estate in the not toodistant past, and you know what?
I just paid taxes on it.
It was the right decision forme, but at that point, writing
the check last April was butagain, what do you do?
So then, for those folks whohaven't discovered you online or
(02:03):
know you directly, why don'tyou tell us a little bit about
who you are and what you do?
Sure, absolutely.
Yeah, I live in Rancho Mission,viejo, southern California,
orange County, married.
Two kids Went to school in SanDiego State From a very young
age.
I grew up in a real estateinvestment type of family, if
you will.
(02:23):
So I knew I wanted to be inreal estate investments.
I didn't know exactly what, butI wound up in this very.
I'm in the financial servicesindustry, so I'm a financial
advisor, I'm securities licensed, but I'm in a niche part of the
financial services industry andso, as I was sharing with you,
ed, I'm not your traditionaladvisor.
(02:45):
I don't do stocks and bonds andmutual funds and insurance and
annuities.
I don't want to do it.
All I've always been involvedin is real estate syndications
or, broadly speaking, within thealternative investment world
and alternative investments.
For a lot of investors or yourlisteners, they may not be
(03:05):
familiar and they've never heardof it.
They don't have a goodunderstanding, and that's the
case with 95% of folksnationwide.
But we help, support and guideaccredited or high worth
investors with their 1031exchange investments.
Our clients are those that are alittle bit older, that have
(03:26):
worked their tails off toacquire and accumulate and
manage real estate for all theirlives, right, 20, 30, 40 years.
And they're sitting back todayand thinking, man, they've done
well and they do not want onemore single phone call from a
tenant, they don't want to dealwith anything anymore.
And they're thinking what can Ido?
(03:48):
What are my options?
I don't know if you want totouch on 1031 exchanges a little
bit, but essentially those areour clientele.
If you're sitting back thinking, I've amassed this real estate,
it's done well, I don't want tomanage it anymore, how do I
(04:09):
move in such a way that allowsme to defer taxes If I sell?
How do I defer taxes and thenbe in a position where I'm
passive?
Right, I have to deal withtenants.
I don't have to deal with thetoilets and the termites and the
trash, whatever the triple T.
What can I do?
Those are the folks that wehelp.
Ed Mathews (04:46):
And if you want to have me go into the 1031
exchange or any other questions,so tell me the difference in
terms of how they're handled andwhen it's appropriate to do
just a straight 1031,.
When is it appropriate tocontemplate a DST?
Ben Carmona (04:53):
Absolutely so.
First I'll just say 1031exchange has been in the tax
code for a hundred years.
Right, an amazing well builder.
The 1031 exchange just for theaudience maybe it's folks that
don't know you own investmentproperty, you sell that
investment property.
The 1031 exchange just for theaudience maybe it's folks that
don't know you own investmentproperty.
You sell that investmentproperty.
The IRS says you can deferpaying taxes on the gain as long
as you take the proceeds andyou buy other, like kind or
(05:16):
other investment property.
So, generally speaking, that'swhat a 1031 exchange is.
Now.
The DST is simply a structurethat is conducive within the
1031 exchange arena.
So it's not one or the other,it's an option that qualifies
within the 1031 exchange.
So a traditional investor you,for example, ed, you buy
(05:38):
properties, you've held them,you've sold them.
If you want to do a 1031exchange, you sell your property
, you go out and buy anotherproperty on your own or with the
help of a realtor or broker.
You do have your diligence, yousecure the financing, you find
the right properties and youclose and you do the 1031
exchange.
The DST is turnkey 1031exchange, replacement property
(06:04):
solution.
So I'm just going to start fromthe top and I'll keep this brief
.
Dst is a trust Delaware StocksTorted Trust.
They were created in the 80s atthat time but it's an entity
where you have one trusteemanaging the trust on behalf of
up to 499 beneficial owners.
And so when you take this trustand you wrap it around real
estate, it creates a situationwhere you can have
(06:26):
fractionalized ownership.
You have a lot of investors owna single or multiple properties
.
In 2004, the IRS came out andvalidated this fractionalized
ownership structure as a realproperty ownership and therefore
eligible for 1031 exchangepurchases.
So that's just high level, thestructure, and I'm going to walk
(06:48):
you through.
I'll give you a real lifeexample.
So within this industry, the DSTindustry, there are sponsors or
syndicators.
Right, those are synonymous.
I'm going to name some big ones, just so the audience may.
It could be Aries, apollo,starwood, invesco, cantor,
fitzgerald.
I'm not talking.
This is not an industry that isin its infancy.
(07:10):
The big boys are here and thesesponsors or syndicators, the
big real estate platforms, theygo out and they'll buy a $100
million multifamily project inDallas, texas, $150 million
medical office campus in Orlando, florida, $50 million
self-storage property orportfolio in Raleigh, north
(07:31):
Carolina.
They go out, right, they usetheir resources, their
relationships, their capital andthey close on these assets.
The assets are stabilized,they're income producing, and
then they turn around and theyoffer ownership interests to
everyday mom and pop retailinvestors like you or I.
If little Mrs Smith is selling a$2 million duplex in Orange
(07:54):
County or LA or New Jersey, whatis she going to do?
And of course we didn't touchon this and maybe time doesn't
permit, but there arerestrictions with the 1031
exchange.
The IRS has blessed us withthis ability to defer taxes, but
they don't make it easy.
So little Mrs Smith.
Here she's ona property she'sowned forever.
She's got to complete theexchange within XYZ timeline 180
(08:15):
days.
You have 45 days to identifyand then you have 135 days to
close on the properties thatyou've identified.
Little Mrs Smith either eithercan't find something or, going
back to the premise of what wedo, she doesn't want to manage
it anymore.
She could take her proceedsfrom the sale and exchange
directly into these DSTs.
(08:36):
And then let's just say I said2 million bucks, she could put
200,000 into Cantor Fitzgerald'smultifamily.
She could put 500,000 intoJones Lane DST in Orlando and
she doesn't have to worry aboutfinding or potentially not
finding replacement property.
The DST is our own stabilizedincome producing, managed by
(08:59):
these big behemoths, and shecould slide right in close
quickly a week or so, startaccruing income paid out monthly
, satisfy her exchange, deferthe taxes.
You can diversify.
Right Now you can have up to499 beneficial owners per
offering.
You can diversify and mitigaterisk.
Where are we today in thecountry, baby boomers and
(09:23):
seniors control the majority ofthe wealth in the country.
A lot of it is in private realestate that they've owned and
operated and they're tired ofactive management.
Ed Mathews (09:31):
Interesting.
Ben Carmona (09:33):
Right.
They're looking for links tonot only get out of active
management, get into a passiveposition, but also to mitigate
risk.
Two million in one location, onone property, or five million,
whatever it may be.
We could spread that out,diversify it not only by
geography, but by sector andoperator.
It's a beautiful thing.
This is gold.
Ed Mathews (09:52):
So where are we going to take it next?
Ben Carmona (09:55):
So, these same clients that we work with every
day.
You may not want to manage,you're over management, you want
to get out of management.
But it's also important to knowthat that if you've owned real
estate for 20 or 30, 40 yearsnot only chances are, unless you
are very disciplined and havekept up with market rents,
(10:15):
you're not earning a whole lotof money on the property that
you own.
Most of our clients are likelook, I don't want to deal with
anything.
Anyway, if this tenant's beenpaying for 20 years, I am
definitely not going to rock theboat to get a few extra bucks.
And I say that because what wefind eight out of 10 of our
investors they're earningbetween one and 3% income
(10:39):
relative to the values of theirproperty today.
So you may have been getting 10or 12 and 20, 30 years ago, not
today and you're getting verylittle.
And most investors don't evenknow, they don't even realize
what they're getting today, howsmall it is relative to when the
properties were today.
Sure, the folks that have ownedfor a long time.
As Ed, one of the big benefitsof investing in real estate is
(11:02):
the depreciation benefits right,you're able to shelter the
income that you're generatingfrom tax purposes.
And so these folks are not onlyearning 1% to 3% very little,
but they're also many of themhave no basis left.
They're fully depreciated.
So you're paying 100% ordinaryincome tax rates.
So I love and I'm passionate.
(11:23):
And then I'll touch on mybackground a little bit.
But I love what I do becausethe DSTs, broadly speaking, are
widely unknown the CPAsattorneys, your most
sophisticated real estateinvestors.
Like yourself, you have no ideathat these products actually
exist, and this is all I've beendoing for 20 years.
(11:45):
And so we're really able tohelp people which is number one
and take them from active topassive management, mitigate
their risk, increase theirincome, add back depreciable
basis in some cases to sheltermore and give them more time to
spend with their families or dowhat they love instead of
fielding calls from tenants.
(12:06):
So that's my in a nutshell.
That's what it is.
Ed Mathews (12:11):
And, yeah, you nailed it In terms of the math
right.
So you were talking about yourtypical baby boomers earning one
to 3% relative to the value ofthe property.
Let's explore that a little bit,because most folks would say a
lot of folks would say who areas highly educated and
experienced as you are that overthe last 30, let's say I've
owned the building for 35 yearsright Over the last 30 years my
(12:35):
income has been going up.
However, you point out somethingthat's really important, and
that is that capital, thatincome, isn't growing as much as
quickly as the value of theproperty itself, as quickly as
the value of the property itself.
So you are basically losing outon potential returns because
you have yet to unlock theoverall value appreciation of
(12:58):
the property.
You buy a property for amillion bucks and over 30 years
that property grows to be worth5 million bucks, but your rent's
only grown it at best throughthree 5% a year over that same
35-year period.
There's no way that your income, your revenue, actually has
kept up with the overall valueof the property, and thus you're
(13:19):
missing out on gettingcompounding interest on the
overall value of the property.
You're just relying on rentalincome, and that's where people
are missing out.
Can you comment on that?
Ben Carmona (13:29):
You said it you laid it out very succinctly.
That's exactly right.
Using your example, you boughta property for a million bucks
and you're getting $100,000 or10% and you're still getting.
Maybe you're getting $120,000five years later, but the
property is worth 5 millionbucks.
We could take the 5 million andget you into a diverse
portfolio.
We could take the $5 millionand get you into a diverse
(13:49):
portfolio.
Increase that.
Your income would go from$120,000 to $300,000 in that.
Ed Mathews (13:54):
So it's significant in a tax-advantaged way also.
Ben Carmona (13:58):
And so maybe we touch on that too For the client
.
You bought it for a million,you sell it for $5,000, and you
pay tax depending on where youlive.
I'm here in California, but I'mgoing to pay 40% or a little
bit more in taxes on that gain,right?
So I'm going to pay call it, 2million bucks on that sale, the
1031,.
You preserve that 2 million.
(14:21):
You don't pay tax.
You redeploy that full 5million into income producing
real estate, and that has acompounding effect.
The beautiful thing about 1031sis you swap until you drop, you
exchange and you exchange andthen you pass away.
And when you pass away,unfortunately your kids or your
(14:41):
beneficiaries inherit thoseassets at the cost basis, and
that's why real estate is soattractive as an investment
vehicle, because it's the onlystructure I don't want to say
the only but you can again defer.
That 1 million that you startedwith 30 years ago could be 50
million today, and if you passedout and didn't do an exchange,
(15:02):
your liability may be 20 million, but you pass away and your
children or your charities, orwhatever it may be, inherit that
asset at 50 million.
So for those folks that don'tunderstand stepped up basis.
Ed Mathews (15:16):
basically, Ben did a good job explaining it, but I'd
like to drill into it a littlefurther.
So, basically, if an asset isworth 50 million bucks, to use
Ben's example, today, and it'smy asset and I go to the great
beyond today I originally boughtthat property for, say, 5
million bucks 30 years ago.
My children and my wife are notpaying taxes on that growth.
(15:39):
My heirs, my two girls and mywife are basically the asset.
The value of that asset is thevalue it was the day I died.
So today, and so all of thedeferred taxes, recapture of all
the depreciation, all of thatgoes away.
You pay $0 on all of that andyou basically pay taxes on what
(16:06):
it's worth the day I died versuswhat it's worth the day you
sell it.
And hopefully my family issmart enough to put it on the
market.
45 seconds after I've done it,there's two phone calls, one to
the funeral home and one to thebroke.
Just go, get rid of it.
And, yeah, it's a tremendousopportunity for you to grow
(16:26):
wealth without having to paytaxes along the way.
And then, when it's time tomeet the great beyond, it's a
great way for your heirs, yourfamily, your beneficiaries, to
avoid taxes and live on thefruits of your hard work over
the last however many decades.
It's a really interesting thing.
(16:49):
Now let's talk about why thisexists.
We always talk about tax policyand is designed to cause or
elicit specific behaviors.
Why does the government want orallow?
Ben Carmona (17:03):
this to occur.
Like so many vehicles orstructures, it's to promote
investment in real estate, right, it's just like REITs, right,
REITs?
They set up the REIT structurereal estate investment structure
to avoid the double taxation ofcorporations.
And you can avoid the doubletaxation as long as you invest
(17:23):
75% of the money that you takein into real estate and you
distribute 90% of the income toinvestors.
So they set up all thesevehicles, right, it's not just
real estate.
There's other structures, butessentially what it comes down
to is to promote investmentwithin our country, within real
estate, within other businesses,right, and that's really the
reason behind the 1031 exchange.
(17:45):
You want to go deeper back?
It's probably because some ofthe founding fathers were
politicians put a bunch of realestate.
Ed Mathews (17:55):
I agree with everything you just said.
I would add to it that it'salso the government incenting
people like you and me and thefolks listening here to create
housing for the rest of thepopulation.
And because the government ifyou go through a city and you
look at how the government runshousing, they're not really good
at it, right?
(18:15):
And so I think part of the 1031exchange, part of the Delaware
Statutory Trust and all theother tax advantages that the
government provides are so thatfolks like you and me will go
out there and provide good,clean housing for other folks to
live in.
Hey, man, right, man cool, allright, man.
Hey, I have really enjoyed thisconversation, but I think I
(18:37):
want people to talk about that.
My feedback has been that I cantalk for days about this stuff
and they're not wrong, right?
So let's keep the train on thetracks and let's move over to
the final five.
Sure, all right.
So let's talk about what getsyou out of bed on Monday morning
.
Typically successful peoplelike you the mortgages paid, the
car payments if you even havethem are taken care of, kids'
(18:58):
college is all set, butnevertheless you get up and you
go to work on Monday, right?
So that, to me, is purpose.
So I'm curious what is yourpurpose?
What gets you out of bed?
Ben Carmona (19:07):
Yeah, Helping people, frankly Awesome.
That's short and sweet, justgood A little bit Okay.
Ed Mathews (19:12):
I'm a simple guy.
Simple's good.
I'm a simple guy.
All right, let's also talkabout your mentors along the way
.
Obviously, you've been in thisbusiness a long time.
I'm sure you've had bosses andcolleagues and other folks who
have helped you along the way,so I'm curious about the best
advice you ever got, and whogave it to you Best advice I
ever got, and who gave it to me.
Ben Carmona (19:35):
I've been blessed to have many people give me
advice throughout, one From aninvestment standpoint.
One thing Mr Short, a collegeprofessor and I remember this
clear as day and I don'tremember a lot of things he said
it's not hard to make money.
All you need to do is followdemographic trends.
At the time I was I don't know,2004, 2005 in college he said
(19:57):
look, today, in 10 years, theneed or demand for healthcare is
going to go through the roof.
And it's all in the spirit ofshort and simple, because I can
go on a tangent.
That's something for theaudience, maybe the younger
audience, to keep in mind Alignyourself based on demographic
trends, understand thatcommunity and whether you're in
tech or real estate or whatever,that was a powerful state.
Ed Mathews (20:20):
Yeah, right now we're experiencing probably the
largest transfer of wealth overthe next 20 years.
Some people have called it thesilver tsunami.
Right, it's all the babyboomers my parents and maybe not
yours because you're youngerthan I am, but they're getting
to or have already retired.
For instance, one of the bigtrends all my venture capital
(20:40):
buddies have gotten into theprivate equity world and are now
buying up baby boomerbusinesses, services businesses,
and it's a massive opportunity,right?
The only way you detect ifthat's coming is that 76 million
people over the next 30 yearsare going to be retiring and
ultimately passing away, andthat presents them, the baby
(21:02):
boomers, with an opportunity tosell and, for the younger
generations, an opportunity tobuy and continue to grow those
businesses and maybe even rollthem up.
It's a dynamic that has becomea really big opportunity just
because of the size of thatgeneration.
When the Gen Xers people likeme get to that point in the next
(21:23):
what 10, 15, 20 years?
There'll be other opportunities.
And I always talk about patternrecognition.
Right, and very similar to yourprofessor, you want to pay
attention to demographics andother patterns and as they start
to present themselves, thereally smart people are figuring
out how they can solve problemsfor that next generation and
(21:44):
they're making a lot of money onit and other things, right.
They're also contributing tothe greater good and a whole
bunch of other things, but itpresents opportunities for sure.
All right.
So let's talk about mistakes.
I fully believe in the way werun things here at Clark Street.
No one gets in trouble formaking mistakes once right.
Where you get to have aconversation with me is the
third, fourth time, second,third, fourth time that same
(22:05):
mistake right, which reallydoesn't happen that often.
I think you learn a lot fromthose mistakes because and I
think, you learn a lot more frommistakes than you do from
successes.
So let's talk about a decisionor a mistake, something that
you'd love to have that back.
What was it professionally andhow did you recover, if you were
able to?
Ben Carmona (22:23):
Yeah, and, like you said, mistakes, as long as you
learn from your mistakes, youmake adjustments, they're
valuable.
I will say, right out of school, when I got into this business,
it was 2006, 2007, and I was onthe sales side of spring
chicken.
I didn't know what I was doing,but I was having fun.
So much business.
Our biggest problem was keepingpaper in the fax machine
(22:45):
because it was coming throughsomething.
But 2008, 2009 hits right.
Everything crumbled.
And in our business theyweren't DSTs at that time, but
there were real estatesyndications and people got
crushed.
And here, yes, I was a springchicken.
I didn't know what I was doing.
I can hide behind that, butthat changed my life, frankly,
(23:05):
because here you go again,serving baby boomers and seniors
.
These folks have worked alltheir lives to run what they've
had and they're losing.
It was a wake up call for me Ineed to know what I am selling,
and so I transitioned from beinga salesman to an analyst at
heart and so I guess it would be.
(23:26):
You need to understand, reallyunderstand, what you're offering
in investors.
And that was a mistake.
Yes, it was early on, and I'vemade many other mistakes beyond
that, but that was a pivotalmoment in my time and I'm
blessed and thankful that ithappened so early.
Ed Mathews (23:44):
And the list of mistakes I've made are longer
than both my legs right.
It's crazy.
Not without mistakes hereeither.
I'm always fascinated by howleaders like yourself take in
information.
Some people read books, otherpeople listen to podcasts.
I'm curious about how do youkeep up with the market and who
are you paying attention tothese days?
Ben Carmona (24:03):
Sure, I told you on the front end.
Sometimes I'm almostembarrassed to sit.
I'm not a big book reader, notbecause I'm not.
I love learning daily.
There's different ways toemerge in real estate and
investments and odd business.
Whether I'm talking to CantorFitzgerald, the executives there
, or investors myself, orbrokers across the country or
(24:24):
qualified intermediaries aboutwhat their flow is like, I am
emerged with, I would say, theground level, so I couldn't give
you data points on every market, but I have a pretty darn good
sense on what is going on at anygiven time based on the
plethora of professionals invarious capacities that I speak
(24:45):
to.
So that's where I digest mostof my information.
I don't have time with twoyoung kids and a wife.
Ed Mathews (24:52):
One of my favorite books I'm going back probably
about 20 years was a bookwritten by Pete Ferrazzi.
It's called Never Eat Alone,and it was one of the things
that I learned from that it was.
The one thing I learned fromthat book is that you should
never listen to the title.
You shouldn't be eating alone.
You should be networking andusing that half an hour to learn
(25:13):
about your industry.
Create new relationships.
As they say, dig the wellbefore you're thirsty.
I meet with realtors and brokersall the time, not because I'm
necessarily buying In fact, wehaven't bought a property in
seven or eight months now but Ialways want to hear about what's
going on in the market.
I want to understand what theysee, and the reason being is I
(25:34):
see my little world, but I don't.
The beauty of being in asales-oriented position is you
don't see one deal, you see allthe deals, and so Ben's over
here doing this kind of stuff,ed's over here doing this kind
of stuff, tim's over there doingthat kind of stuff, and it's
amazing what you can learn overa cup of coffee or a hand
sandwich.
Right, absolutely, yeah, allright, man, I'm interested in
(25:57):
how you define success in yourown life.
Ben Carmona (25:59):
Yeah, it used to be different.
Today is a healthy and happyfamily and peace within, knowing
that I'm serving a purpose andhelping people.
That is what success is to me.
Ed Mathews (26:10):
Yeah, man, it's amazing what the arrival of a
significant other, and, morespecifically, children, does to
your perspective, isn't it?
100%?
As I tell people, having kidsis literally the best thing
you'll ever do.
So, speaking of that, when youare not saving the world from
making huge tax mistakes intheir real estate portfolios,
what do you like to do for fun?
How do you spend your time?
Pickleball, okay.
Ben Carmona (26:32):
You're one of those guys, all right, you can
already see it in your eyes thatyou're thinking well, I'm a
pickleball, you lose.
I play tennis.
Yeah, oh, you do.
Okay, I love pickleball.
It's how I try to maintain myhealth and secure from stress.
It's a great game, it's fastpaced and I love it.
Ed Mathews (26:50):
Pickleball is what I love.
Excellent, and so, Ben, I'vereally enjoyed this conversation
.
If people want to learn more,get to know you, or learn more
about Perch Wealth or any of theother things you're doing,
what's the best way to get intouch?
Ben Carmona (27:01):
Absolutely, and I didn't even talk about my team,
but perchwealthcom, right.
perchwealth.
com, p-e-r-c-h.
Wealthcom.
I always give out my cell phonenumber and you feel please call
me.
I'm all about education Now.
I will definitely call you back, but I have 10 advisors on my
team as well, throughout thecountry, so we're nationwide.
(27:21):
So you can find them on thewebsite.
You can call me.
My cell phone is 818-269-4972.
Again, 818-269-4972.
Love to talk to you.
I don't care where.
If you're thinking aboutselling, curious about 1031
exchanges, curious about DSTs,we're happy to speak to you.
Ed Mathews (27:41):
Excellent, Ben Carmona, thank you very much.
It's a pleasure to meet you andcongratulations on the success
of your business, and I lookforward to hearing more in the
future.
Thank you, Ed.
Greetings and salutations.
Real Estate Undergrounders.
It is Ed Mathews with RealEstate Underground.
Thank you so much for making uspart of your day.
With me today is Ben Carmona ofPerch Wealth, coming from the
West Coast.
We were just playing the namegame of the folks that I know,
and it turns out we don't know alot of the same people, but all
good.
So, Ben, welcome to the show,and I'm really excited to have
(01:39):
this conversation.
Ben Carmona (01:41):
Thank you, Ed.
It's a pleasure to be here.
So your line of business issomething that I'm totally
fascinated with, because I'm oneof those people that have sold
real estate in the not toodistant past, and you know what?
I just paid taxes on it.
It was the right decision forme, but at that point, writing
the check last April was butagain, what do you do?
So then, for those folks whohaven't discovered you online or
(02:03):
know you directly, why don'tyou tell us a little bit about
who you are and what you do?
Sure, absolutely.
Yeah, I live in Rancho Mission,viejo, southern California,
orange County, married.
Two kids Went to school in SanDiego State From a very young
age.
I grew up in a real estateinvestment type of family, if
you will.
(02:23):
So I knew I wanted to be inreal estate investments.
I didn't know exactly what, butI wound up in this very.
I'm in the financial servicesindustry, so I'm a financial
advisor, I'm securities licensed, but I'm in a niche part of the
financial services industry andso, as I was sharing with you,
ed, I'm not your traditionaladvisor.
(02:45):
I don't do stocks and bonds andmutual funds and insurance and
annuities.
I don't want to do it.
All I've always been involvedin is real estate syndications
or, broadly speaking, within thealternative investment world
and alternative investments.
For a lot of investors or yourlisteners, they may not be
(03:05):
familiar and they've never heardof it.
They don't have a goodunderstanding, and that's the
case with 95% of folksnationwide.
But we help, support and guideaccredited or high worth
investors with their 1031exchange investments.
Our clients are those that are alittle bit older, that have
(03:26):
worked their tails off toacquire and accumulate and
manage real estate for all theirlives, right, 20, 30, 40 years.
And they're sitting back todayand thinking, man, they've done
well and they do not want onemore single phone call from a
tenant, they don't want to dealwith anything anymore.
And they're thinking what can Ido?
(03:48):
What are my options?
I don't know if you want totouch on 1031 exchanges a little
bit, but essentially those areour clientele.
If you're sitting back thinking, I've amassed this real estate,
it's done well, I don't want tomanage it anymore, how do I
(04:09):
move in such a way that allowsme to defer taxes If I sell?
How do I defer taxes and thenbe in a position where I'm
passive?
Right, I have to deal withtenants.
I don't have to deal with thetoilets and the termites and the
trash, whatever the triple T.
What can I do?
Those are the folks that wehelp.
Ed Mathews (04:46):
And if you want to have me go into the 1031
exchange or any other questions,so tell me the difference in
terms of how they're handled andwhen it's appropriate to do
just a straight 1031,.
When is it appropriate tocontemplate a DST?
Ben Carmona (04:53):
Absolutely so.
First I'll just say 1031exchange has been in the tax
code for a hundred years.
Right, an amazing well builder.
The 1031 exchange just for theaudience maybe it's folks that
don't know you own investmentproperty, you sell that
investment property.
The 1031 exchange just for theaudience maybe it's folks that
don't know you own investmentproperty.
You sell that investmentproperty.
The IRS says you can deferpaying taxes on the gain as long
as you take the proceeds andyou buy other, like kind or
(05:16):
other investment property.
So, generally speaking, that'swhat a 1031 exchange is.
Now.
The DST is simply a structurethat is conducive within the
1031 exchange arena.
So it's not one or the other,it's an option that qualifies
within the 1031 exchange.
So a traditional investor you,for example, ed, you buy
(05:38):
properties, you've held them,you've sold them.
If you want to do a 1031exchange, you sell your property
, you go out and buy anotherproperty on your own or with the
help of a realtor or broker.
You do have your diligence, yousecure the financing, you find
the right properties and youclose and you do the 1031
exchange.
The DST is turnkey 1031exchange, replacement property
(06:04):
solution.
So I'm just going to start fromthe top and I'll keep this brief
.
Dst is a trust Delaware StocksTorted Trust.
They were created in the 80s atthat time but it's an entity
where you have one trusteemanaging the trust on behalf of
up to 499 beneficial owners.
And so when you take this trustand you wrap it around real
estate, it creates a situationwhere you can have
(06:26):
fractionalized ownership.
You have a lot of investors owna single or multiple properties
.
In 2004, the IRS came out andvalidated this fractionalized
ownership structure as a realproperty ownership and therefore
eligible for 1031 exchangepurchases.
So that's just high level, thestructure, and I'm going to walk
(06:48):
you through.
I'll give you a real lifeexample.
So within this industry, the DSTindustry, there are sponsors or
syndicators.
Right, those are synonymous.
I'm going to name some big ones, just so the audience may.
It could be Aries, apollo,starwood, invesco, cantor,
fitzgerald.
I'm not talking.
This is not an industry that isin its infancy.
(07:10):
The big boys are here and thesesponsors or syndicators, the
big real estate platforms, theygo out and they'll buy a $100
million multifamily project inDallas, texas, $150 million
medical office campus in Orlando, florida, $50 million
self-storage property orportfolio in Raleigh, north
(07:31):
Carolina.
They go out, right, they usetheir resources, their
relationships, their capital andthey close on these assets.
The assets are stabilized,they're income producing, and
then they turn around and theyoffer ownership interests to
everyday mom and pop retailinvestors like you or I.
If little Mrs Smith is selling a$2 million duplex in Orange
(07:54):
County or LA or New Jersey, whatis she going to do?
And of course we didn't touchon this and maybe time doesn't
permit, but there arerestrictions with the 1031
exchange.
The IRS has blessed us withthis ability to defer taxes, but
they don't make it easy.
So little Mrs Smith.
Here she's ona property she'sowned forever.
She's got to complete theexchange within XYZ timeline 180
(08:15):
days.
You have 45 days to identifyand then you have 135 days to
close on the properties thatyou've identified.
Little Mrs Smith either eithercan't find something or, going
back to the premise of what wedo, she doesn't want to manage
it anymore.
She could take her proceedsfrom the sale and exchange
directly into these DSTs.
(08:36):
And then let's just say I said2 million bucks, she could put
200,000 into Cantor Fitzgerald'smultifamily.
She could put 500,000 intoJones Lane DST in Orlando and
she doesn't have to worry aboutfinding or potentially not
finding replacement property.
The DST is our own stabilizedincome producing, managed by
(08:59):
these big behemoths, and shecould slide right in close
quickly a week or so, startaccruing income paid out monthly
, satisfy her exchange, deferthe taxes.
You can diversify.
Right Now you can have up to499 beneficial owners per
offering.
You can diversify and mitigaterisk.
Where are we today in thecountry, baby boomers and
(09:23):
seniors control the majority ofthe wealth in the country.
A lot of it is in private realestate that they've owned and
operated and they're tired ofactive management.
Ed Mathews (09:31):
Interesting.
Ben Carmona (09:33):
Right.
They're looking for links tonot only get out of active
management, get into a passiveposition, but also to mitigate
risk.
Two million in one location, onone property, or five million,
whatever it may be.
We could spread that out,diversify it not only by
geography, but by sector andoperator.
It's a beautiful thing.
This is gold.
Ed Mathews (09:52):
So where are we going to take it next?
Ben Carmona (09:55):
So, these same clients that we work with every
day.
You may not want to manage,you're over management, you want
to get out of management.
But it's also important to knowthat that if you've owned real
estate for 20 or 30, 40 yearsnot only chances are, unless you
are very disciplined and havekept up with market rents,
(10:15):
you're not earning a whole lotof money on the property that
you own.
Most of our clients are likelook, I don't want to deal with
anything.
Anyway, if this tenant's beenpaying for 20 years, I am
definitely not going to rock theboat to get a few extra bucks.
And I say that because what wefind eight out of 10 of our
investors they're earningbetween one and 3% income
(10:39):
relative to the values of theirproperty today.
So you may have been getting 10or 12 and 20, 30 years ago, not
today and you're getting verylittle.
And most investors don't evenknow, they don't even realize
what they're getting today, howsmall it is relative to when the
properties were today.
Sure, the folks that have ownedfor a long time.
As Ed, one of the big benefitsof investing in real estate is
(11:02):
the depreciation benefits right,you're able to shelter the
income that you're generatingfrom tax purposes.
And so these folks are not onlyearning 1% to 3% very little,
but they're also many of themhave no basis left.
They're fully depreciated.
So you're paying 100% ordinaryincome tax rates.
So I love and I'm passionate.
(11:23):
And then I'll touch on mybackground a little bit.
But I love what I do becausethe DSTs, broadly speaking, are
widely unknown the CPAsattorneys, your most
sophisticated real estateinvestors.
Like yourself, you have no ideathat these products actually
exist, and this is all I've beendoing for 20 years.
(11:45):
And so we're really able tohelp people which is number one
and take them from active topassive management, mitigate
their risk, increase theirincome, add back depreciable
basis in some cases to sheltermore and give them more time to
spend with their families or dowhat they love instead of
fielding calls from tenants.
(12:06):
So that's my in a nutshell.
That's what it is.
Ed Mathews (12:11):
And, yeah, you nailed it In terms of the math
right.
So you were talking about yourtypical baby boomers earning one
to 3% relative to the value ofthe property.
Let's explore that a little bit,because most folks would say a
lot of folks would say who areas highly educated and
experienced as you are that overthe last 30, let's say I've
owned the building for 35 yearsright Over the last 30 years my
(12:35):
income has been going up.
However, you point out somethingthat's really important, and
that is that capital, thatincome, isn't growing as much as
quickly as the value of theproperty itself, as quickly as
the value of the property itself.
So you are basically losing outon potential returns because
you have yet to unlock theoverall value appreciation of
(12:58):
the property.
You buy a property for amillion bucks and over 30 years
that property grows to be worth5 million bucks, but your rent's
only grown it at best throughthree 5% a year over that same
35-year period.
There's no way that your income, your revenue, actually has
kept up with the overall valueof the property, and thus you're
(13:19):
missing out on gettingcompounding interest on the
overall value of the property.
You're just relying on rentalincome, and that's where people
are missing out.
Can you comment on that?
Ben Carmona (13:29):
You said it you laid it out very succinctly.
That's exactly right.
Using your example, you boughta property for a million bucks
and you're getting $100,000 or10% and you're still getting.
Maybe you're getting $120,000five years later, but the
property is worth 5 millionbucks.
We could take the 5 million andget you into a diverse
portfolio.
We could take the $5 millionand get you into a diverse
(13:49):
portfolio.
Increase that.
Your income would go from$120,000 to $300,000 in that.
Ed Mathews (13:54):
So it's significant in a tax-advantaged way also.
Ben Carmona (13:58):
And so maybe we touch on that too For the client
.
You bought it for a million,you sell it for $5,000, and you
pay tax depending on where youlive.
I'm here in California, but I'mgoing to pay 40% or a little
bit more in taxes on that gain,right?
So I'm going to pay call it, 2million bucks on that sale, the
1031,.
You preserve that 2 million.
(14:21):
You don't pay tax.
You redeploy that full 5million into income producing
real estate, and that has acompounding effect.
The beautiful thing about 1031sis you swap until you drop, you
exchange and you exchange andthen you pass away.
And when you pass away,unfortunately your kids or your
(14:41):
beneficiaries inherit thoseassets at the cost basis, and
that's why real estate is soattractive as an investment
vehicle, because it's the onlystructure I don't want to say
the only but you can again defer.
That 1 million that you startedwith 30 years ago could be 50
million today, and if you passedout and didn't do an exchange,
(15:02):
your liability may be 20 million, but you pass away and your
children or your charities, orwhatever it may be, inherit that
asset at 50 million.
So for those folks that don'tunderstand stepped up basis.
Ed Mathews (15:16):
basically, Ben did a good job explaining it, but I'd
like to drill into it a littlefurther.
So, basically, if an asset isworth 50 million bucks, to use
Ben's example, today, and it'smy asset and I go to the great
beyond today I originally boughtthat property for, say, 5
million bucks 30 years ago.
My children and my wife are notpaying taxes on that growth.
(15:39):
My heirs, my two girls and mywife are basically the asset.
The value of that asset is thevalue it was the day I died.
So today, and so all of thedeferred taxes, recapture of all
the depreciation, all of thatgoes away.
You pay $0 on all of that andyou basically pay taxes on what
(16:06):
it's worth the day I died versuswhat it's worth the day you
sell it.
And hopefully my family issmart enough to put it on the
market.
45 seconds after I've done it,there's two phone calls, one to
the funeral home and one to thebroke.
Just go, get rid of it.
And, yeah, it's a tremendousopportunity for you to grow
(16:26):
wealth without having to paytaxes along the way.
And then, when it's time tomeet the great beyond, it's a
great way for your heirs, yourfamily, your beneficiaries, to
avoid taxes and live on thefruits of your hard work over
the last however many decades.
It's a really interesting thing.
(16:49):
Now let's talk about why thisexists.
We always talk about tax policyand is designed to cause or
elicit specific behaviors.
Why does the government want orallow?
Ben Carmona (17:03):
this to occur.
Like so many vehicles orstructures, it's to promote
investment in real estate, right, it's just like REITs, right,
REITs?
They set up the REIT structurereal estate investment structure
to avoid the double taxation ofcorporations.
And you can avoid the doubletaxation as long as you invest
(17:23):
75% of the money that you takein into real estate and you
distribute 90% of the income toinvestors.
So they set up all thesevehicles, right, it's not just
real estate.
There's other structures, butessentially what it comes down
to is to promote investmentwithin our country, within real
estate, within other businesses,right, and that's really the
reason behind the 1031 exchange.
(17:45):
You want to go deeper back?
It's probably because some ofthe founding fathers were
politicians put a bunch of realestate.
Ed Mathews (17:55):
I agree with everything you just said.
I would add to it that it'salso the government incenting
people like you and me and thefolks listening here to create
housing for the rest of thepopulation.
And because the government ifyou go through a city and you
look at how the government runshousing, they're not really good
at it, right?
(18:15):
And so I think part of the 1031exchange, part of the Delaware
Statutory Trust and all theother tax advantages that the
government provides are so thatfolks like you and me will go
out there and provide good,clean housing for other folks to
live in.
Hey, man, right, man cool, allright, man.
Hey, I have really enjoyed thisconversation, but I think I
(18:37):
want people to talk about that.
My feedback has been that I cantalk for days about this stuff
and they're not wrong, right?
So let's keep the train on thetracks and let's move over to
the final five.
Sure, all right.
So let's talk about what getsyou out of bed on Monday morning
.
Typically successful peoplelike you the mortgages paid, the
car payments if you even havethem are taken care of, kids'
(18:58):
college is all set, butnevertheless you get up and you
go to work on Monday, right?
So that, to me, is purpose.
So I'm curious what is yourpurpose?
What gets you out of bed?
Ben Carmona (19:07):
Yeah, Helping people, frankly Awesome.
That's short and sweet, justgood A little bit Okay.
Ed Mathews (19:12):
I'm a simple guy.
Simple's good.
I'm a simple guy.
All right, let's also talkabout your mentors along the way
.
Obviously, you've been in thisbusiness a long time.
I'm sure you've had bosses andcolleagues and other folks who
have helped you along the way,so I'm curious about the best
advice you ever got, and whogave it to you Best advice I
ever got, and who gave it to me.
Ben Carmona (19:35):
I've been blessed to have many people give me
advice throughout, one From aninvestment standpoint.
One thing Mr Short, a collegeprofessor and I remember this
clear as day and I don'tremember a lot of things he said
it's not hard to make money.
All you need to do is followdemographic trends.
At the time I was I don't know,2004, 2005 in college he said
(19:57):
look, today, in 10 years, theneed or demand for healthcare is
going to go through the roof.
And it's all in the spirit ofshort and simple, because I can
go on a tangent.
That's something for theaudience, maybe the younger
audience, to keep in mind Alignyourself based on demographic
trends, understand thatcommunity and whether you're in
tech or real estate or whatever,that was a powerful state.
Ed Mathews (20:20):
Yeah, right now we're experiencing probably the
largest transfer of wealth overthe next 20 years.
Some people have called it thesilver tsunami.
Right, it's all the babyboomers my parents and maybe not
yours because you're youngerthan I am, but they're getting
to or have already retired.
For instance, one of the bigtrends all my venture capital
(20:40):
buddies have gotten into theprivate equity world and are now
buying up baby boomerbusinesses, services businesses,
and it's a massive opportunity,right?
The only way you detect ifthat's coming is that 76 million
people over the next 30 yearsare going to be retiring and
ultimately passing away, andthat presents them, the baby
(21:02):
boomers, with an opportunity tosell and, for the younger
generations, an opportunity tobuy and continue to grow those
businesses and maybe even rollthem up.
It's a dynamic that has becomea really big opportunity just
because of the size of thatgeneration.
When the Gen Xers people likeme get to that point in the next
(21:23):
what 10, 15, 20 years?
There'll be other opportunities.
And I always talk about patternrecognition.
Right, and very similar to yourprofessor, you want to pay
attention to demographics andother patterns and as they start
to present themselves, thereally smart people are figuring
out how they can solve problemsfor that next generation and
(21:44):
they're making a lot of money onit and other things, right.
They're also contributing tothe greater good and a whole
bunch of other things, but itpresents opportunities for sure.
All right.
So let's talk about mistakes.
I fully believe in the way werun things here at Clark Street.
No one gets in trouble formaking mistakes once right.
Where you get to have aconversation with me is the
third, fourth time, second,third, fourth time that same
(22:05):
mistake right, which reallydoesn't happen that often.
I think you learn a lot fromthose mistakes because and I
think, you learn a lot more frommistakes than you do from
successes.
So let's talk about a decisionor a mistake, something that
you'd love to have that back.
What was it professionally andhow did you recover, if you were
able to?
Ben Carmona (22:23):
Yeah, and, like you said, mistakes, as long as you
learn from your mistakes, youmake adjustments, they're
valuable.
I will say, right out of school, when I got into this business,
it was 2006, 2007, and I was onthe sales side of spring
chicken.
I didn't know what I was doing,but I was having fun.
So much business.
Our biggest problem was keepingpaper in the fax machine
(22:45):
because it was coming throughsomething.
But 2008, 2009 hits right.
Everything crumbled.
And in our business theyweren't DSTs at that time, but
there were real estatesyndications and people got
crushed.
And here, yes, I was a springchicken.
I didn't know what I was doing.
I can hide behind that, butthat changed my life, frankly,
(23:05):
because here you go again,serving baby boomers and seniors
.
These folks have worked alltheir lives to run what they've
had and they're losing.
It was a wake up call for me Ineed to know what I am selling,
and so I transitioned from beinga salesman to an analyst at
heart and so I guess it would be.
(23:26):
You need to understand, reallyunderstand, what you're offering
in investors.
And that was a mistake.
Yes, it was early on, and I'vemade many other mistakes beyond
that, but that was a pivotalmoment in my time and I'm
blessed and thankful that ithappened so early.
Ed Mathews (23:44):
And the list of mistakes I've made are longer
than both my legs right.
It's crazy.
Not without mistakes hereeither.
I'm always fascinated by howleaders like yourself take in
information.
Some people read books, otherpeople listen to podcasts.
I'm curious about how do youkeep up with the market and who
are you paying attention tothese days?
Ben Carmona (24:03):
Sure, I told you on the front end.
Sometimes I'm almostembarrassed to sit.
I'm not a big book reader, notbecause I'm not.
I love learning daily.
There's different ways toemerge in real estate and
investments and odd business.
Whether I'm talking to CantorFitzgerald, the executives there
, or investors myself, orbrokers across the country or
(24:24):
qualified intermediaries aboutwhat their flow is like, I am
emerged with, I would say, theground level, so I couldn't give
you data points on every market, but I have a pretty darn good
sense on what is going on at anygiven time based on the
plethora of professionals invarious capacities that I speak
(24:45):
to.
So that's where I digest mostof my information.
I don't have time with twoyoung kids and a wife.
Ed Mathews (24:52):
One of my favorite books I'm going back probably
about 20 years was a bookwritten by Pete Ferrazzi.
It's called Never Eat Alone,and it was one of the things
that I learned from that it was.
The one thing I learned fromthat book is that you should
never listen to the title.
You shouldn't be eating alone.
You should be networking andusing that half an hour to learn
(25:13):
about your industry.
Create new relationships.
As they say, dig the wellbefore you're thirsty.
I meet with realtors and brokersall the time, not because I'm
necessarily buying In fact, wehaven't bought a property in
seven or eight months now but Ialways want to hear about what's
going on in the market.
I want to understand what theysee, and the reason being is I
(25:34):
see my little world, but I don't.
The beauty of being in asales-oriented position is you
don't see one deal, you see allthe deals, and so Ben's over
here doing this kind of stuff,ed's over here doing this kind
of stuff, tim's over there doingthat kind of stuff, and it's
amazing what you can learn overa cup of coffee or a hand
sandwich.
Right, absolutely, yeah, allright, man, I'm interested in
(25:57):
how you define success in yourown life.
Ben Carmona (25:59):
Yeah, it used to be different.
Today is a healthy and happyfamily and peace within, knowing
that I'm serving a purpose andhelping people.
That is what success is to me.
Ed Mathews (26:10):
Yeah, man, it's amazing what the arrival of a
significant other, and, morespecifically, children, does to
your perspective, isn't it?
100%?
As I tell people, having kidsis literally the best thing
you'll ever do.
So, speaking of that, when youare not saving the world from
making huge tax mistakes intheir real estate portfolios,
what do you like to do for fun?
How do you spend your time?
Pickleball, okay.
Ben Carmona (26:32):
You're one of those guys, all right, you can
already see it in your eyes thatyou're thinking well, I'm a
pickleball, you lose.
I play tennis.
Yeah, oh, you do.
Okay, I love pickleball.
It's how I try to maintain myhealth and secure from stress.
It's a great game, it's fastpaced and I love it.
Ed Mathews (26:50):
Pickleball is what I love.
Excellent, and so, Ben, I'vereally enjoyed this conversation
.
If people want to learn more,get to know you, or learn more
about Perch Wealth or any of theother things you're doing,
what's the best way to get intouch?
Ben Carmona (27:01):
Absolutely, and I didn't even talk about my team,
but perchwealthcom, right.
perchwealth.
com, p-e-r-c-h.
Wealthcom.
I always give out my cell phonenumber and you feel please call
me.
I'm all about education Now.
I will definitely call you back, but I have 10 advisors on my
team as well, throughout thecountry, so we're nationwide.
(27:21):
So you can find them on thewebsite.
You can call me.
My cell phone is 818-269-4972.
Again, 818-269-4972.
Love to talk to you.
I don't care where.
If you're thinking aboutselling, curious about 1031
exchanges, curious about DSTs,we're happy to speak to you.
Ed Mathews (27:41):
Excellent, Ben Carmona, thank you very much.
It's a pleasure to meet you andcongratulations on the success
of your business, and I lookforward to hearing more in the
future.
Thank you, Ed.
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