Tax Reform a CRE & 1031 Game Changer with Brandon Burns

Brandon Burns is a Senior Vice President at Investors 1031 Exchange with a focus on sales and marketing for the company. Brandon is a very experienced commercial real estate executive who has served on the investment committees over several real estate capital firms throughout his career. He has been involved in over one billion dollars of real estate development and acquisitions and has helped acquire 64 projects that have gone full cycle across many asset classes.

He has raised over $600M in equity for various real estate projects and was instrumental in successfully issuing $180M of debt on the Tel Aviv Stock. Brandon has undergraduate degrees in real estate, as well as finance; from Baylor University.

Watch the episode here:

Brett:

Hey, I’m excited about our next guest. He’s out of the great city of San Diego, and he’s a senior vice president at Investors 1031 Exchange with a focus on sales and marketing for the company. He’s a very experienced commercial real estate executive who has served on the investment committees over several real estate capital firms throughout his career. And he has been involved in over $1 billion of real estate development and acquisitions and has helped acquire 64 projects that have gone full cycle across many asset classes. He has raised over $600 million in equity for various Real Estate projects. And it was very instrumental in successfully issuing $108 million of debt on the Tel Aviv stock. Our guest has an undergraduate degree in real estate, as well as finance from Baylor University, please welcome to show me, Brandon Burns. Hey, Brandon, how you doing, sir?

Brandon:

Brett. It’s a pleasure to be here. Thanks for taking the time and giving me the opportunity to join you here.

Brett:

Absolutely. And for our listeners to get to know for the first time would you give us a little bit more about your story and your current focus?

Brandon:

Absolutely. So today, I’m a Qualified Intermediary. So my firm facilitates 1031 exchanges, helping clients fully defer all of their taxes at the time of sale. Prior to that I worked for a number of real estate investment groups, developer, family office developer, sat on the Investment Committee, and was honored to be a part of some great transactions. But nothing makes me happier today than helping my clients fully avoid paying taxes. It’s just the worst when you have to give up money to Uncle Sam.

Brett:

Yeah, absolutely. That’s been in California, and on the front lines of, let’s say, high appreciation and also high taxes, we definitely share that value. And before we dive into, the potential tax reform tax rate that’s on the table, and the potential changes in commercial real estate in the center of the 1031 exchange, I want to take one step back, Brandon, and help our listeners and myself get to know you a little bit better. You know, I believe we’ve all been given certain gifts in this life. Some people call them superpowers or strengths. And I believe the God-given gifts they gave to us to be a blessing and help to others. So I want you to go back maybe to your high school days, university days at Baylor, and maybe help us understand maybe one or two gifts that you believe your big you’ve been given? And how does it help how you help it bless people today?

Brandon:

Yeah, absolutely. So it’s interesting to me when I was a young college student, my father owns an accounting firm, and I thought that I potentially could follow in his footsteps. And after taking some detailed accounting courses, I realized that if I spent my entire life looking at the past, then I didn’t know that that would make me happy. So I was fortunate enough to take a real estate finance class, and then dual major in finance and real estate. And you know, it’s just, it’s, it’s really awesome to me to be able to look and say, Okay, I can essentially do insider trading with real estate, right? If if you invest in the stock market, and you know, more than someone else, and you trade on that information, that’s illegal. That’s the definition of insider trading. In real estate, if you know more than other people, and you make moves based on that information, you make money. And that’s something that I really think is powerful about real estate, I think that’s powerful about investing, you know, being able to remove, you know, some of the risks, and, you know, have more information than other people just makes me more comfortable as I invest my dollars.

Brett:

So the idea of forward-looking and being able to take the information and see those things that other people may not see or be willing to do the work to uncover right with real estate. And then helping others act on that information. Is that a fair summary?

Brandon:

Absolutely. That’s very fair.

Brett:

Love it. Beautiful. So now let’s dive right into, big challenges that are in the room for commercial real estate, the 1031 exchange, and that’s tax reform. So buying has come out. And it said a few different things right about the 1031 exchange, potentially limiting it and also the stepped-up basis, potentially limiting or eliminating that. So let’s just start with the big macro. What what are you seeing in the 1031 world, what concerns you, and then let’s dive into maybe You know, what’s the outcome of these things?

Brandon:

Great question. I think there’s a number of headwinds that are facing real estate investment investors today, both at the local and federal level. Everyone has a different local level. So I don’t want to dive into that too much. But at a high level, you know, California or other places that are facing housing issues are trying to figure out how to regulate some of the Airbnb putting some restrictive controls around that other states are trying to put rent control in place. And so that’s one headwind, but at the federal level, you know, Biden has come out the Biden administration, they need to figure out how to fund some of the things that they want to fund. Many people don’t know, but the amount of money in circulation went up by approximately 40%. In 2020. The St. Louis Federal Reserve actually tracks that they discontinued their tracking because it went up so dramatically recently. That I’m not sure exactly what the rationale was behind that. But that where they stopped tracking it, there was 40% more money out there. So, you know, that was issued by the government for the most part, right. Secondly, the Biden administration wants to do some some some really, potentially cool and interesting things, where, you know, eliminating student loans, for some folks going in and making healthcare more affordable than it already is making it more available than it already is. But the real question is, at some point, you have to figure out how to pay for that. Right? So the Biden administration is facing this, this, this large, looming question of how do we pay for all these programs? And how do we figure out how to slow down the deficit that has recently been created. So there’s, they’ve come out and, and had some language around different parts of, of the taxation, I’ve paid primary attention to things that affect real estate investors. So the kind of key things that affect real estate investors today, first of all, Biden recently came out and said, he wants to increase the long-term capital gains rate to be higher than the highest short-term marginal tax rate. He said he wants to increase it, they’re going to propose, which they haven’t yet said, He’s going to propose a long, high highest tax bracket long term Federal Capital gains of 43.6%. So that’ll raise taxes on long-term real estate investors or any long-term investors by approximately 23%. So that can be aggressive. Secondly, Biden has said he wants to potentially limit or, or, or remove 1031 exchanges for people. He originally came out about this time last year and said he’s going to remove it completely. He then came out last September, and said, He’s going to remove it for anyone who makes over $400,000 a year adjusted gross income on their tax return. And then most recently, last month, he came out and said, he wants it to be ineligible for anyone who makes over $500,000. So again, you know, these aren’t things that happen, these are things that are potentially going to be proposed. And there may be some loopholes. You know, how do you define a profit of $500,000? Right, you know, you cut your property up into multiple properties Do you potentially be able to play with debt, and I’m not sure how that’s going to be defined. But I do think it’s potentially going to be a little bit more challenging in the future to do a 1031 exchange. So, you know, one of the things that I talk about with people that come and ask me for advisors, their planning is, you know, we don’t know exactly what’s going to happen. However, if you’re looking to potentially do a 1031 exchange, in the next, you know, one to five years, it probably makes sense to evaluate accelerating that timeline. Because the worst-case situation that no one wants to be and is to turn around need to sell the real estate asset that you’ve deferred taxes on for 15 2030 years, suddenly be in a situation where 1031 may not be eligible for you. And you’re looking at, you know, a really aggressive taxable event. If if you’re in a tax bracket of 43%, long-term Federal Capital Gains, then you’re also in a state that charges you no state income tax, California is about 10. Colorado is about for many other states to have some type of, of, you know, state taxes.

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