April 25, 2023

Episode 252: Edward Fernandez, President & CEO of 1031 Crowdfunding

Edward Fernandez, president and CEO of 1031 Crowdfunding, has over 20 years of experience and is personally responsible for raising $800 million of equity from individuals and institutional investors through private and public real estate offerings.  Headquartered in Irvine, California, 1031 Crowdfunding is a leading real estate investing platform for 1031 exchanges and alternative investment vehicles focused on tax deferral. Ed can speak to real estate-specific topics such as 1031 exchanges, 721 UPREITs, and other investment methods. He can also provide general guidance to business owners on entrepreneurship, self-belief, perseverance, and success, as he is a self-made American who built a successful real estate business from the ground up just a few years ago.

Julian: Hey everyone. Thankyou so much for joining the Behind Company Lines podcast. Today we have EdwardFernandez, president, CEO of 1031 Crowdfunding, 1031 Crowdfunding is a leadingreal estate investing platform for 1031 exchanges and alternative investmentsvehicles focused on tax deferral. And it's so, it's so exciting, not onlychatting to you about your background and your experience, but as I was divinginto 10.

31 crowdfunding it and what you're ableto really give people in terms of a different investment vehicle, kind of newopportunities and really disrupting a lot of the mystique around ways thatpeople can actually, invest their capital and things outside of stocks and allthe other, I think we're bombarded by all these, newer investment vehicles, butthere's a lot of them that are already kind of structured in our foundationthat we're not even getting access to.

So before we get into all that, whatwere you doing before you started the company?

Edward: Boy, great question.Boy, I, I, I could tell you I used to be a produce manager at a health foodstore. So I was counting tomatoes and, and lettuce, right? And then didn't knowI was a sales guy. So then some guy approached me at church and showed me anopportunity and I started selling precious metals, gold, silver, platinum,palladium.

Then I left that. And then I startedtrading commodities. So I started trading currencies and pork bellies and sugarand cocoa and, and realized, I thought I was saving the world and gonna makeall these people kind of all kinds of money, but kind of realized, hey, it'sjust like Vegas, but without the drinks.

Yeah, right. A lot of people startedlosing a lot of money, and so I said, boy, this is a, this is, this is gonnaget me old real fast. Yeah. So, took a job on a company called CornerstoneVentures and. And that's where I cut my teeth in real estate. Was there for 14years working as a guy on the phone.

And at the end of the day when I gotdone, I was the senior VP of creating products. Yeah. And that's what actuallyhelped me understand this entire industry. And then I decided to just startdoing it on my own.  

Julian: Yeah. And, and I thinkwhat I read is Cornerstone was more in, in terms of like real estate investmentin for more commercial.

Right. And what, what, what are some ofthe different mechanics of, say, investing in more commercial versus likeresidential? What are some things that we may not be aware of outside of,obviously their, their general function, but is there any difference in the waywe, secure one of those properties that we may not be aware of?

Edward: Well, it's, it's, it'sreally different, right? So if you buy a house and you're buying a house for aninvestment, you're dealing with one tenant. In that one tenant, you're gonnaunderwrite that one tenant. Do they have a job? What's their credit score?Sure. What's their debt? The income ratio?

Can they afford the rent? Are they justgood people compared to like an apartment building? An apartment building,you're gonna go through the same thing, but you're gonna go through it 300times. Right, right. Because you may have 300 units and so it's more laborintensive Yeah. To do an apartment building compared to doing five or sixhouses.

So it's, it's apples and oranges Really.Yeah. Even though it's all real estate.  

Julian: Yeah. And just inregards to 1031, obviously, for, for the context sake, I would love for you todescribe kind of the vehicle and, and the tax code and what it really allowsyou to do, but really think about what I'm, I'm curious about is howunderutilized is something like a 1031.

For the average, say, investor who,maybe is investing in, maybe has a large pool of money, is investing inRobinhood and all these other different stock markets and exchanges. Yeah. But,there's a lot of value. There's almost undeniable value of real estate becausethere, it can't be created and it can't be reproduced.

So please for a content sake describe1031 and how underutilized it is.  

Edward: Yeah. So 1031 is an IRScode and it it and allows an investor to who has an investment property. Thathas been held for a minimum of two years or greater to sell that property anddefer your taxes. And so let's say I sold, I, I bought a property for $500,000and I sold it for 2 million.

Well, my tax bill is on the 1.5 million,but if I do a 1031 exchange, I don't pay the tax. I, I get to invest the entire2 million. And defer my taxes and I say defer because it doesn't eliminate.Yeah. The term that we use here for 1031 exchanges is you have to swap untilyou drop. Yeah. What I mean by that is you buy a property, sell one, buy aproperty, sell one, doing 1031 exchanges, and then you die.

Yeah. Well, when you die, whoever youleaving your money to gets it all tax free. That's why you see a lot of wealthyindividuals. Are really real estate people because they never realize the tax,and then when they pass away, they hand all this wealth over to their kids taxfree. So that's why 1031 exchanges is so important when it comes to the realestate segment of our economy.

Yeah. And then in regards to underutilization, we still get phone calls that, oh, I just heard about a 1031exchange. How do you do it? I want to defer my taxes. So it's, it's for thosewho are very savvy and that have done real estate for quite some time, theyknow what a 1031 exchange is. Yeah. But the young guys, the guys that aregetting their feet wet, maybe flipping houses and doing this and that, it's notuntil they actually make a ton of money.

Let's say they bought a house for 200grand and they sell it for $3 million. Yeah. Boy, well, that's a lot of taxeson 2.8 million. And believe me, all of a sudden they realize, wow, what's this1031 exchange? Yeah. And so it's underutilized on the younger generation. Onthe older generation. They're actually been using it for many, many years.

Julian: Yeah. And, and does itreally depend on when you sell that property to when that tax is realized and,and then having to kind of swap that out in, in, what are some ways that peopleare swapping this out? Is it buying new properties? Is it buying differenttypes of investment vehicles? So like multi-family homes, what are some of thecommon ways people would swap out a property if they say flipped it and thenare getting into, putting that money and investing it somewhere else?

So they're. Can continue kind of almostlike continue growing it. It sounds like a bartering system. It's like youcontinue bartering up to a higher, value object.

Edward: Yeah. Yeah. Well, soprior to 2017, 2017, there's been some, some tax reforms. Mm-hmm. And you,prior to that, you can do 1031 exchanges in what we would call personalproperty, not just real property.

So personal property would be Planesgold, fine art. The nba, the NFL would exchange contracts between players,right? Yeah. Well, in 2017 they changed that. And there's a term called likekind and a lot of people call us about that. They read it on our website. Yeah.And prior to 2017, like kind was important.

So the reason why you would use likekind is because you couldn't go from real estate to gold. Yeah. Or gold or realestate. Well now you can't, 1031 exchange personal property. You can onlyexchange real property i e real estate. Mm-hmm. So now it's real estate to realestate. So if I sold land, I can buy an apartment building.

If, and I sold apartment building, I canbuy land and vice versa. So as long as it's real estate to real estate thatqualifies for the deferral of tax using a 1031 exchange.  

Julian: Got it. Got it. Andyou mentioned, being that it's underutilized in the younger generation, and Ifeel like there's a huge popularity, obviously with, with tv, reality TV interms of flipping homes and adding all these other kind of more entertainmentfocused kind of ways of people, earning money and making money and things likethat.

But where is the gap in terms of.Understanding when a real estate, deal is good and really evaluating property,because I think that's the biggest barrier for a lot of individuals. Maybe weknow the mechanics of increasing the value of property, but procuring thatpiece and making sure that it's, not a deep depreciating asset based on thefoundation or whatever.

But what are some ways that, people canbe more savvy in making sure that a deal is good, whether it's, from thephysical kind of property or even contractually. What are some ways that youwould suggest for people to kind of, go through that due diligence process?

Edward: Well, so when, when,when you're talking to your real estate audience, location, location, locationis key. Sure. Yeah. Right. An apartment building in Newport Beach, Californiaon the water, it's gonna be way worth more money, no offense than an apartmentbuilding in Mobile, Alabama. Right? Yeah. So location, location is key.

But that, that's changing a little bit.With the, the political stuff that's been going on for the last few years. Alot of our real estate investors are moving away from the, the coast, right?The west coast, the east coast, and they're going into the middle of thecountry. Because real estate is already riskiest po as it is, it's not risky,but you know, you have to understand what you're doing.

So when it comes to evaluating a pieceof property, location is key, number one. Number two you really want to dowhat's called a property condition report, right? You wanna make sure that theroof is okay, the air conditioning works. The plumbing works. Yeah. Right? Youdon't wanna, there's a term called buyers beware.

You don't wanna close on a piece of realestate and then all of a sudden realize, oh crap. I gotta put a new roof onthis thing and it's gonna cost me 200 grand. You don't, you don't want to runinto that stuff, right? So a property condition report is gonna kind of helpyou with that. Mm-hmm. You want to run a, a survey, right?

Yeah. A survey says, okay, well myproperty is on this line here. And a survey will say, okay, your property's onthe property line. You're good. Or a surveyor, Shea say, oh, you knew thatlittle shack that you just built? That little shack is on somebody else's propertyline. That's a big problem. Yeah. Or a title search.

You also, whether when the title's titleclean, are there any liens on it? Does. Does the guy who's selling the propertyowe the IRS money and the IRS has a lien on the property. Sure. Or he didn't payhis mechanic and the mechanic put a mechanic lean on something. You need tofind all that stuff out right away.

And if that's all clean, then it comesdown to the numbers. Right? Yeah. What. What does OC occupancy look like? Whatis that Geogra? Is that location really a location where, there's a lot ofabsorption, meaning can it fill the building? Can, there's there enoughpopulation there, are there restaurants, there, are there activities there thatare gonna keep this building full?

And, and those are the key points thatyou, you really want to focus on when you're looking at a piece of. Ofinstitutional quality real estate. Now, when it comes to a home or a house, youwanna do an inspection, right? Sure. The inspector comes in and goes, okay, isthere any termites? Is there any mold?

Is the foundation okay? You wanna do allthat stuff? And sometimes that becomes a little annoying. Yeah. But let me tellyou, once you close in that piece of real estate and you start finding all thisother stuff out later, It's your problem, right? That's why you gotta, buy orbeware. So those are the things you really want to do when you're starting tolook at a piece of real estate before you buy.

Julian: Yeah. And thinkingabout the mechanics, at least behind the swap and, and thinking about when I,in an opportunity where I purchase a certain real estate and, and able to sellit, and I try to repurpose the, the amount of money I've gained on that. WhenI'm looking at a swap, one thing I would consider is, is how much that propertyis going to appreciate and value.

And, you've said a lot of factors there,but in particular, if I am, someone who's looking to, I was looking at yourwebsite, there's a lot of different metrics on cash flow and things like that.What in particular should I look as an investor in, in, when I'm looking at anew property, is it cash flow or is it, is it level of occupancy?

Is it, is it, maintenance? Is it theenvironment? Obviously you said location. What should I really kind of thinkabout in terms of as investor, if I'm looking to take that money and help itgrow into something else without taking on too much kind of headache and, and,and what, what's corresponding?

Edward: Well, that's gonna bebased on your age, right? So someone who's 60 or older, they've already builttheir wealth, right? Yeah. They're not trying to make more money. They've builttheir wealth. They want to preserve their wealth, so they want to protect it.Yeah. So someone like that is probably gonna go by. A Walgreens, a Starbucks, aMcDonald's, a Taco Bell, something like that, where the tenant is an investmentgrade tenant on the New York Stock Exchange, and they're guaranteeing the cashflow.

Right? Mm-hmm. So you're just couponclipping. It's kind of like a bond, hey, every time you drive pie, Walgreensjust know that's just like a bond. You're just, you're, you're protecting yourprinciple and you just want the cash flow from it. Yeah. When you're younger,when you're kind of in your thirties, forties, and fifties, and you're stillgrowing your wealth, you wanna be focused on like multi-tenant type assets likeapartments or seeing your housing or self storage.

Or industrial real estate. Yeah. Where,if a tenant moves out, let's say the tenant's paying a thousand dollars amonth, all of a sudden the new tenant comes in and is paying $1,200 a month.You've got the ability to mark rents to market, and that creates value. So realestate in the multi-tenant area is really based on the cash flow it produces, themore cash flow it produces.

The more value it has compared to aWalgreens where you're negotiating a contract with Walgreens. Right? Right.They have a ticker symbol on the New York Stock Exchange, and Walgreens says,Hey, we're gonna do a 15 year contract and that 15 year contract we're only,you're only gonna raise our rents three times, and that's gonna be every fiveyears.

And every five years you're gonna onlyregs it by 5%. Yeah. Well, that can't keep up with inflation, right? Yeah.Compared to multi-tenant, which can, especially now in this environment, whichwe're in an inflationary environment, rent is through the roof, and I promiseyou those guys who own those properties and those properties are worth a lot ofmoney because of that rent.

Julian: Yeah. Yeah. Andthinking about as, as a younger investor and, and, and really, and, andunderstanding real estate and really gaining not only an understanding, but afoundation or even say if I'm working in real estate, how are you able to kindof grow and expand the network to what you have at least that 1031 where youknow, you, you have a, a bunch of homeowners, you have a bunch of individualswho come to your platform, who trust your business.

How are you able to do that in, in anindustry that say isn't necessarily on the cutting edge of technology? Meaningthat a lot of it's more of a marketplace like a Zillow or a Trulia, where it'smore like buy and sell exchange, almost like an eBay versus kind of a communityor network of people who are doing this actively.

How have you been able to build that,without, the introduction of say, a large community in technology and thingslike that?  

Edward: Well, so we, so we areunique in that way, right? What we do is we, we, we provide a solution to aproblem. Yeah, right? As long as you can provide a solution to a problem,whether you're in real estate or you're in technology, whatever it may be, ifyou're solving somebody else's problem, they're always gonna come.

Yeah, regardless of what you're doing,right? And so what we do is we solve the problem. We solve the problem forinvestors, they go, because a 1031 exchange, I didn't get into details of it,but a 1031 exchange has 45 days to try to find something. If you don't findsomething in 45 days, you automatically pay the tax, right?

And 45, it's not like, 45 days. It's 45calendar days, not business days, holidays count, weekends count, and believeme, 45 days to go get a real estate broker to go put offers on a property toget the property under contract, to do the due diligence on the property. It'shard to do. And people panic in that 45 days.

So what we do is we already buy the realestate. The property's already purchased. We've done all the due diligence onthe property, and all you gotta do is say, I like that, that, that, that, andthat. And in five days you're done. Yeah. So see, we're solving a problembecause some of these people, look, we get people that come to our website thathave 50 million exchanges.

Yeah. Their tax bill may be six, 7million. Yeah. And they got 45 days to figure this thing out. So when they callus and we go, Hey, we got a solution, we can do it in five days. They're like,oh, let's do it. That's, that's what we do. We solve that problem.  

Julian: Yeah. When does that45 days start?  

Edward: That 45 days starts assoon as you close the property.

Yeah. So when the property close andtitle changes, let's say I sold it to you and all of a sudden, Julian, sendyour name. Mm-hmm. Tick, tick, tick, tick, tick that 45 days start. Yeah. Andpeople start panicking. Yeah. We get phone calls. I got 10 days left, I gotseven days left, I got five days left. Wow. I got two days left.

Yeah. And right. And they're panicked.Yeah. So we solve that problem and as long as you, you're a problem solver.People are always gonna come.  

Julian: Yeah. Yeah. Yeah. What,what is it in terms of, I don't know if this is too in the weeds, but when I'mholding say that, amount of liquidity, how, where do I typically hold that asan investor?

Say, it's a 20 million property. I've,I've made 18 million on it. I have this huge tax bill. Where do I hold thatmoney? And then how does that exchange of money through the transaction of anew property, how does that process work?

Edward: Good question. That'sa great question. So in order to do a 1031 exchange, one of the most importantthings, if your listeners don't get anything out of this whole thing, put thisin your pocket.

When you sell a property and you want todo a 1031 exchange, do not allow the money from the sale of the property to gointo a bank account. You control. Yeah, if that happens, you automatically paythe tax. So you have to use what's called a qualified intermediary. It's athird party. It could be your attorney who has a trust account.

Yeah. It could be companies like I P Xor Asset Preservation or FinTech. They act as a third party. And so what you dois you open an account with this third party, and that's gonna cost youanywhere between 800 bucks to maybe $2,500, depending on who you go with.Mm-hmm. And once you open that account, you give that information to escrow.

Right, and then all of a sudden theproperty settles and escrow's starting to send all the money out. Escrow sendsthat money into that account on your behalf. Yeah. Now you're in a 1031exchange, and so you have 45 days to try to find something to replace, and thenyou have an additional 135 days to close on what you're trying to buy for atotal of 180 days or six months.

If you do all that, you've, you'vesatisfied the requirements, you deferred your taxes. But what is the tricky partis in that 45 day period, your qualified intermediary is gonna give you a form.Yeah. And that form is called your identification form your ID form. And onthat form you're gonna put 1 23 Main Street, 4 56 Main Street.

Sure. 5 67 Main Street. When you turnthat form in on day 45. Day 46 comes, you better buy something that's on thatform. Yeah. If you don't close on what is on that form, you pay the tax. Andthat's the tricky part, right? How do you know you're gonna close on thatproperty? That's on that form? You're just crossing your fingers.

God, I hope I can close on one of thesethings. Yeah, so that's where we come in. We solve that problem, right? We gotall kinds of stuff on the website. We can close you in five days. The form isnot an issue.  

Julian: yeah. Tell us a littlebit more for the audience. The traction that you've seen at 1031, what's beenexciting up to this moment where things are, but obviously with the landscapechanging in real estate and we're going through another cycle of, of justmassive, rates and changing and, and so, so much that people are having toconsider as home buyers and even property buyers in general.

What's exciting about the next part ofthe journey? What kind of do you think about in the next phase of growth for1031?  

Edward: That's a great, that'sa really good question. So, with this economy changing the way it is, we gottakind of, I've been doing a lot of studying. I, I, I study what the home marketindex it's called, the hmi, the cpi, the job markets, mortgage applications.

You gotta really do your research tokind of, kind of get a feel from where the market is gonna go. And, and sobecause of the change of this market, before I'll use analogies. I like to usestories so your viewers can understand. Yeah. Before, there's a fruit tree andeveryone had baskets and they were picking the fruit up off the ground.

Right. Easy making money, right? Yeah.No big deal. Now there's no fruit on the ground. Interest rates have changed.The ones that can climb the tree the highest and pick the fruit from the verytop are the ones that are continuing to thrive and do business. Yeah. So whatwe've seen in our business is that we've gathered market share where the littleguys have kind of run off and the ones that have, have a brand and have a, anaudience and a space have taken up that market share.

Yeah. So what we see in the future is,if this was January of 2023, literally, I don't know, four months ago, I, I sayin 18 months we're gonna start seeing things coming back to normality. Yeah.But I think all this change in the real estate market is a healthy thing. Yeah.Millennials cannot afford homes right now.

There's no way. Yeah. That the youngmillennials can afford a home. You cannot put 3% down on a property and thenleverage 97% on the property at 7% interest rates. Yeah. That's why themillennials are bar, they're renting, they're going in, living with their mom.They've got roommates. Yeah. They just can't afford to buy a home, so we needthe home prices to come down.

Right. So that the young people can goand buy a house. Yeah. Right. That's, that's gonna keep a healthy market. But Isee that happening in the next 18 months or no. Or so where the real estatemarket's gonna change. Yeah. For us as far as 1031 Crowdfunding. We're gonnalaunch a reit, a real estate investment trust.

We're launching an app so that the youngkids, the younger, I say kids, I'm 55 years old, so you know, everybody lessthan me as a kid, right? So the young people can actually go ahead, go on anapp and go, you know what? I want a, I want a core plus portfolio. I want acore portfolio. You know what? I'm gonna take a little bit more risk.

I wanna value add. They click, click,click, click, click. Yeah. Their money moves in, and now they're invested in a,in a portfolio of real estate. To help them start learning how to invest inreal estate. So those are the things that are coming up in the future.  

Julian: Yeah, well describethat investment vehicle.

It's almost like fractional ownership ofthese different properties. And where do you see, is it when the property isthen per or, or sold that you kind of, earn the value that you, that that'sappreciated? And what do you do as an investor? Say I put in, $50,000. I get a returnof a hundred thousand, that's a, return or return of 50,000 on top of that,initial principle.

Now, do I have to essentially opt intothis exchange program? And but is, is that a benefit to perpetuate the, thegrowth of that initial investment? What is that Yeah. I guess experience ofthat?  

Edward: Yeah. Yeah,absolutely. Think about it. So if you put $50,000 down, Right. And you're, I'mjust gonna use easy, nu easy numbers.

And you're owning, you're earning 10%,which is unrealistic. So, or $5,000 a month, a year in cash flow, and all of asudden now your 50,000 turns to a hundred thousand. Right. And now you're own,you're still earning 10% on that money. Yeah. Right? Instead of owning 5,000,oh, making 5,000 a year. Now you're making 10,000 a year.

That works when you do an exchange.Because see, most people, when they say taxes, here's what they. Think itmeans, and it's 100% not correct. They only think about capital gains. They go,okay, well the capital gains taxes X. Well, in stocks, that's true, right? Instocks, bonds, that's true. In real estate, that's not true.

In real estate, you have four differenttaxes, right? You have federal tax cap gains. Yeah. You have state cap gains.If you're in a state that does have cap gains tax, Then you have depreciation,recapture, and then you have net investment income tax. Huh? So federal is 15to 20. If you're in California, state is 13, so that's what, 28?

Yeah. Then you've got depreciationrecapture tax, which is 25%. Then you've got net investment income tax, whichis Obamacare, which is 3.8%. You could be as high as 55% in taxes. So if I solda property for 10 million, I'm giving the federal government 5.5 million of my10 million. Why wouldn't you do a 1031 exchange?

Julian: Yeah. Why do, why dopeople typically not do it? Is it, is it a timing thing typically?  

Edward: Well, no, most peopledon't know. They're not educated enough to realize what the tax bill is. Yeah.So every time somebody calls me and says, I'm thinking about paying the tax,but I really want to understand the 1031 exchange.

And I said, okay, well help meunderstand what you mean. The tax. Yeah. First thing that comes out of theirmouth, capital gains. And I tell 'em, well, you're wrong. And then I startsaying this and this and this. And then they go, holy crap. Okay, I wanna do anexchange. Yeah. Right. Yeah. And I say, go talk to your cpa.

He's gonna confirm it. So it's just alack of education. Mm-hmm. Because people are normally selling stock or bonds.And stock and bonds are just capital gains tax, right? Yeah. 15 to 20%.No-brainer. When it comes to real estate, it's a whole different ballgame.  

Julian: Yeah. Thinking aboutthe company, just more broadly, what are outside of, the market changes andhaving to stay up to date there, what are some of the biggest risks that yousee?

1031, taking on, whether it's today orin the near future?  

Edward: Legislation risk.Yeah. Stroke of a pen. Right. Yeah. The current administration right now isalways going after 1031 exchanges, right? They're, they're saying, Hey, thewealthy is the wealthy, and we're gonna, we're gonna stop these guys fromswapping until they're dropping and we want to get rid of 1031 exchanges.

That's, that's the risk we have islegislation risk, and no one can quantify that. Right. I can put risk into aspreadsheet and easily assess whether it's something I want to do or not, but astroke or a pen, you can't. Yeah, and the, and the funny thing is that if 1031exchanges went away, We would lose 350,000 jobs like that.

Really? Right. Not good for the economy.Yeah. Yeah, because think about it. Think about it. What's involved in a 1031exchange? Okay, well you've got a real estate broker. Mm-hmm. Right? You've gotescrow, you've got title, you've got third party reports. Mm-hmm. Right? Yougot mortgage brokers, right? That's all these jobs that are involved.

You've got qualified intermediaries. Yougot guys like me. Yeah. Right. These are all jobs that are tied and intertwinedinto 1031 exchanges. Yeah. And if you get rid of exchanges, those jobs aregone. Yeah. And that's not good for the economy. So you just gotta educate. Yougotta educate the, the, the senators.

And once you educate the senators, theygo, oh, we don't want to do this. They're always trying to get rid of 1031exchanges. But to answer your question, it's really legislation's risk.  

Julian: Yeah, well it seems asthough the, the problem isn't necessarily, limiting the ability of a 1031, butit's mainly giving more access ramps and on, on ramps to being able to, beinvolved in this type of exchange ecosystem.

Because it really kind of then, I thinkwhat function at the vehicle that, that they're meaning to, which is.Distributing wealth to, to a majority of people, but it really is the onrampingthat is the biggest barrier, rather than the limitations at, at least from,from what I'm, from my perspective, I'm, I'm not sure if you have a differenceof opinion there.

Edward: Yeah. Well, so I, I'lltell you a little bit about myself. I, I, I grew up, I grew up poor. Yeah. Igrew up with food stamps, government cheese, and powdered milk. I know what itis to be poor and on welfare. I, I know that. But you know, it, it, it, youhave to, you have to choose whether you're gonna stay there or not.

That that's the bottom line. Sure.Right. Are you gonna stay there or are you gonna do something? And I chose todo something and, and here I am today, but I understand what it is not to have,and I understand what it is to have. Right. And then there's people in themiddle. Right. And, we can go into all kinds of other stuff, but that's not forthis show.

But I, I think it's just as anentrepreneur, you really, it's scary, right? It's scary to take risk and itreally is. It's not for the week. I mean, you cannot be an entrepreneur and beweak. It's just not gonna happen because you don't know if you're going to eat.You don't know. No one's writing.

No one's writing a paycheck for me.Yeah. I'm not coming in office and expect somebody to pay me. Yeah. I'm payingmyself. Right, right. Then I got, I got 29 families that I'm. Responsible for,and I gotta make sure I write the check for them. So, I, I get it. I know it'sthe onramping and, and, and, and it, it is an opportunity.

Look, there are guys out there thatshould have opportunities that don't. And so one of the focuses for ourcompanies to actually give those opportunities. Yeah. Right. Educate thoseyoung people, let them know, hey, it is possible. Yeah. You can do this. Yeah.You are smart. Yeah. Because just because you have a college degree doesn'tmean you're automatically gonna get a good job.

Yeah. It doesn't mean that. Right.Right. So we, we actually go out and like for me, I hire kids right outta highschool. Yeah. I don't expect them to have a degree and. And all that otherstuff. Yeah. For me it doesn't mean anything. Are you a hard worker and do youwant to learn? So I've got kids here, 18 years old, right outta high school,get 'em security license and they start crushing it.

Yeah. Because they want to makesomething of themselves.  

Julian: Yeah, it's definitelypersonality traits, quality. It's, it's a lot of the vision, the value, it'sthe motivation. There's so much that incorporates the entrepreneurial mindsetin, in, in, in, in the ability to, I guess, not let risk affect the emotional stateas you're moving forward.

Right? Like, yeah, that's the biggest,that's for me at least, that's been the biggest hurdle. And I, and I think forothers as well. If everything goes well, what's the long term vision for1031?  

Edward: God long term vision.We're looking at the billions here, but the, we're, that's what we're lookingat.

We're looking I'm, I've got an office inTexas. The next one is we're gonna offer an office in Miami or Coral Gablesand, we're gonna go, the Latinos need to understand what this is all about aswell, right? Yeah, yeah. Miami is the, is the, is the gate to the Latino world,right?

Yeah. So I have, I have my son, mydaughter, my nieces, my nephew, my wife, they all work here. Right. And a lotof them are fluent in Spanish. We're converting our website into Spanish, sothat, if somebody types in 1031 exchanges in Espan, they can see it in Spanish.Right. We're gonna have Spanish people, people picking up the phone.

Right. So that we're, we wanna broadenthe scope of who can get involved in this wealth creation. Yeah. By utilizingthe tax rules. And a lot of Latinos don't know that, so Yeah. So that's what'sin the future. Right. It's the future for that, the Latinos, the, theminorities, the minorities don't really understand how to create wealth, and myjob is to help them understand that.

Julian: Yeah. Yeah. I lovethat. And, and I, I'm, this is going to move into my next section, I call it myfounder faq. So I'm gonna hit you with some rapid fire questions, and we'll seeif we're gonna go, and I have something for that, but I'm, I'm gonna wait onthat one. The first question, the first question I'd like to always open it upis, what's particularly hard about your job?

Edward: Woo. That's a greatquestion. What's hard about my job is I juggle so many balls in the air. That,and I'm such a control freak. What's so hard is to delegate. Yeah, right. Hey,you're good at this. Let me give you that. You're good at this. You're good atthat. That's why my wife is the coo. Yeah. And she does that very, very well.

Yeah. Right. So what's hard for me is todelegate. So I trust her. I give her all the stuff, and then she delegates itfor me. But delegation for control freak very difficult.  

Julian: Yeah. Yeah. I can, Ican definitely see that being, being a challenge, myself included. Justthinking about, you talk about Latinos needing, just like, I think it's, forme, it's, it's a barrier of access of resources and information because outsideof that, the mechanics, the discipline, the work ethic, all that has reallyjust ingrained a lot of intru.

The culture of, of, I think, I mean, Myfamily included. And, but also I, I think, my counterparts as well, my peers,but how much of the tax code is underutilized not only in a 1031 cents, but Iguess in a broader sense of how much we're not understanding the implicationsof what certain tax laws can actually benefit, the money that we're making orthe money that we're distributing.

Or even just like, one thing I learnedrecently is hiring family to be a caretaker if they're, someone that can'tnecessarily physically work in, in a nine to five environment, but using that,As, as a way to maintain the wealth in your ecosystem. How much of those taxlaws are being underutilized and what's something that we can take now, and,and start implementing at least proactively rather than at the end of the yearwhen our taxes are due?

Edward: Yeah, a ton. Look, aton, man. It, it's a, it's sad. To see that Latinos minorities are really notthat educated. Yeah. And there are a lot of ways for, for especially number oneW2 wages versus 10 99. Yeah. Right. W2 wages. Here's what you're doing. The IRSis taking money outta your paycheck every week or every two weeks or whatever.

Right. They're taking your money andthey're doing something with it. Right. They're not just holding it, they'redoing something with it. Right, right. And then at the end of the year, yourealize, oh, the IRS goes, I take too much money from you. Here's some back.Right. That's why you get your check. Right.

Everybody gets happy. Oh yeah, I got, Igot my tax returns back. Yeah. Well, I mean, it's silly because. They took toomuch money from you. So they're returning it back to you. Yeah, right. But as a10 99 person, let's say you create an llc, right? You create an llc, you openup an LLC bank account, you get a debit card under that llc, and you, you usethat debit card for your gas, you go eat food, right?

You start writing all that stuff off,and all of a sudden, let's say you make $50,000 a year. And all of a sudden yousay you, you, you, you expensed 20,000 a year. Yeah. Through your llc. Well,you're only paying taxes on $30,000. Yeah. Right. Not 50. Right. But if on a W2you're paying on the 50 and I never file my taxes until October 15th.

Yeah. You know why? Because I am notgonna let the IRS use my money. Yeah. Right. I'm gonna wait and say, well, Mr.Irs, I am going to pay you only what I owe you. Yeah. And here's your money.Right. So the lack of knowledge, there's a lot of things that people can do tohelp save. Money from taxes, especially if you live in California, New York andNew Jersey.

Mm-hmm. Chicago. I mean, the taxes arethrough the roof. So you gotta real, you gotta really educate yourself onbusiness. Start an llc. Open up an LLC bank account. Get a debit card underyour llc. Get a credit card under your llc. And your llc. Could be a singlemember's llc. It could be you. Julian, Julian Torres, llc.

Well, You know what? What's yourbusiness? Oh, my business is I do podcasts. Yeah, yeah, yeah. Well, okay. Whatdo I gotta buy? Headphones. I gotta buy a new computer. I gotta get good wifi.I need. Write all that stuff off and by the end of the year, you're gonna payless taxes than if you were w2. Yeah. I mean, that's simple, right?

But most people don't understand thatstuff.  

Julian: Yeah. But how doesthat, I, what are the implications of that? When you say, go to purchase ahouse and need to be qualified for, a loan and, and say you expense all thisand now you're. Income looks way less than than it was. What are some things,maybe even programs that help kind of bridge the gap between not allowing, allyour income to go towards taxes, then get paid back at the end of the year whenit's really not valuable at that point in time?

It's really valuable incrementally. Sure.What are the implications of that and how much should you be aware, whe whetherit's getting resources like a CPA or programs out there to help kind of, bridgethat gap between the actual realized income you've made and securing a loan toactually bring yourself into purchasing a property if, if you're not able towith the, with the liquidity sense?

Edward: That's a greatquestion. So, you know what I. Before I do any transactions that are bigtransactions or any type of tax strategy that I think is a good one, I alwaysconsult with my, my tax professionals, right? And, and that, that takes money,right? Unfortunately, h and r Block Turbo Tax is really like what people reallyuse, but there's a value when you use a cpa, right?

So let's say, hey, Julian, I want to, Iwant to, I wanna buy a house. I'm thinking about doing this llc. How would youthink, how would you want me to expense things so that I can have a debt tocoverage debt to income coverage ratio so that I can qualify for an home?Right? So if you get educated, then that strategy, you're gonna startimplementing that strategy, and then you won't have those issues when it comesto buying a house, right?

Yeah. But. Having a job. I mean, it'sokay. Okay. A job is okay. I'm not saying it's bad, but a job creates aceiling. Right. You can only get so high on a job. Right? Right. And so if youdon't wanna have a ceiling, then be a job creator. Yeah. Not a job taker. Yeah.And then, Qualifying for a loan is not an issue.

Yeah. Cause you just buy it all cashcause you're making all kinds of money.  

Julian: Right, right, right,right. Thinking about your journey and, and being that you've worked with somany different types of, whether it's commodities out real estate what's beenone of the maybe more surprising kind of being that now you're buildingtechnology and creating a platform, what's been a hurdle that you've had toovercome as a founder when, integrating technology into your, your company and,and the process that you've created?

Because a lot of founders say, we'llstart to build nice tools and with fancy things for it to look good versus.Actually solving a problem whi, which is really the antithesis of goodtechnology and good user experience. What's been like a hurdle or a surprise inthat learning curve of, of starting to build technology and implement it into1031 crowdfunding.

Edward: So, if we, we use theterm technology, my IT department always has to tell, always tells me I needthis, this, this, this, and this. Sure. And I need everything. Right. Yeah.Well, As, as the leader, the ceo, the president of this organization, I've gotto quantify what is actual, what's actually practical.

Yeah. Right. I always put myself in theuser experience and so, and, and do I want all these bells and whistles and isit, is it a pain in the butt to do something if it's a pain in the butt to dosomething, yeah. I don't want to do it. And so that's the hard part, when itcomes to technology for 1031 Crowdfunding is that, What is gonna be practicalfor somebody to use?

Is it easy for me to use? And if it'seasy to me for use, I'm going to use it all the time. But sometimes it's, it'sdifficult to take very tech complicated technology and simplify it. Yeah. Andthat's the challenge. The challenge is communicating with my ID department,here's what I want. And my developers and all that other stuff, and making surethat the communication is tight mm-hmm.

So that we're all on the same page, andsometimes we lose that communication. Sure. And that makes it very tough.  

Julian: Yeah. What's somethingthat you're good at now as a founder that you wish you were better at earlieron in your career?  

Edward: Oh, man. Wisdom.Wisdom. I got a little bit of, I got some gray hair, right.

So, so, so I wish I had the gray hair.Yeah. Yeah. Many, many years ago. Yeah. Because gray hair. Says you've beenthrough some things. Yeah. You, you, you've, you've, you're not, nowadays youhit crypto and you're a billionaire and you haven't been through anything.Right. Right. But gray hair gives you wisdom and wisdom.

People could always appreciate you beingwise Yeah. In, in suggestions. So that, that to me has been the big deal. Iwish I had that when I was younger.  

Julian: Yeah. Yeah. I always liketo ask this question because I love how founders extract knowledge out ofanything that they ingest. Whether it's early in your career or now, what booksor people have influenced you the most?

Edward: Oh man. Hold on. Let'ssee here. So, yeah, I, I do audible cuz I'm always driving. Yeah. So I don'treally like, read a lot of books, but I listen. So, a book that I just finishedright now, how to Invest by David Rubenstein. Hmm. Right. He's the, the creativeof the Carlisle group. Yeah, yeah.

Right. So he has a bunch of billionaireson there, and all those billionaires are talking about how they started, whatwere their challenges. And you ask a billionaire, Hey, who invests your money?You know what billionaires say? I invest my own money. Yeah. I don't allowanybody to invest my money.

That's something that was really cool.Another book called Shut Up and Listen by Tillman. Fertita. Yeah. He's theowner of the Houston Rockets. Yeah. Mastros. That was a good book and anothergood book I just finished called Woke Inc. Yeah. About the woke culture andthis and that. So these are some of the books that I've just finished thatactually have, and another book, the Infinite Game.

I think The Infinite Game was the most,the biggest book that actually gave me some revelation. I'm always wanting towin. I always want to beat you. I want to put my foot on your neck. Yeah. Butwhat I realize is that if I. If my competitors are not competitors, but they'rerivals. Yeah. Right. A rival will make me better and if I can outlive a rival,if I'm here 50 years and you're only here 10 years, yeah.

By default I win. Right, right. Thatbook, the Infinite Game, actually gave me a lot of revelation of how to. Run mycompany.  

Julian: Yeah. You, you're,you're the second founder who's out of the 200 that I've interviewed who,who've been able to, or who have suggested that book and really was just aboutthat, that whole mindset of like, there's sometimes never an end goal orthere's never like, a bookmark to, to finish a chapter.

You almost have to like create thissystem in your head to continue pushing yourself to. To keep producing and, andalmost create an, an artificial environment for you to, to, to see success. Soit, it's all I love. I love that. One, I, I'm gonna dive into that and, and Ilove asking that question cause I love sharing it with our audience and theyhave a really cool comprehensive reading list.

But last little bit, I know we're alittle bit over time, but I had such a fun time chatting with you, so Iappreciate you taking the time. Last little bit is, did we No problem. Did weleave anything on the table? Is there any question I didn't ask you that Ishould have? Anything that we didn't talk about that.

You wanted to chat about anything thatwe left on the table here today, Ed?  

Edward: No. I, I just want tosay, thank you for taking the time. You're a young guy, you look like you'redoing your thing. Appreciate and for your listeners, you know what all I cansay is this. Do not allow anyone to tell you you cannot do something.

Yeah. Because the impossible ispossible. Yeah. All you gotta do is put your head down and do it.  

Julian: Yeah. I love that.It's a, it's a great final sentiment. And last little bit, ed, is where can wefind you as a founder? Where can we, give you support, be a fan, give us yourLinkedIns, your Twitters, where can we be a fan of not only you, but also 1031crowdfunding and, and and what you're building today.

Edward: Yeah, so you can go to1031crowdfunding.com, right? Call 8 4 4 5 3 3 1031. I don't do social media,right? I learned a long time. A breaching whale is easily harpooned, right? SoI want to stay on the dl, right? So I don't do social media, but my marketingteam, we have. We have Twitter and IG and all that other stuff.

Just go to 1031 crowdfund and you'llfind us.  

Julian: Amazing. Ed, it's beensuch a pleasure chatting about your background, learning more about you andyour experience, but really all the things that we can use as maybe, investorslooking to break in, or people who currently own properties and what they'retrying to do with it to make sure they're, making their money grow and, andreally expand upon their initial investment that they've seen and and made.

And I'm so excited to see what you'vebuilt now, but. Where things are going to the future. So thank you again forbeing on the show and I appreciate you taking the time and I hope you enjoyedyourself today.  

Edward: No problem, Julian.Thank you so much for having me, brother.

Julian: Of course.

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