GI280: Delaware Statutory Trusts with Ehud Gersten

GI280: Delaware Statutory Trusts with Ehud Gersten

Ehud Gersten is a licensed securities professional focusing on 1031 exchanges and Delaware Statutory Trusts (DSTs). Previously, Ehud owned and operated a successful law firm in San Diego, focusing on real estate and consumer rights. Today, he helps investors by providing expert guidance on their real estate investments as a managing partner of Perch Wealth.

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Transcript:

Charles:
Welcome to another episode of the Global Investors Podcast. I’M your host, Charles Carillo. Today, we have Ehud Gersten. He is a licensed securities professional focusing on 1031 exchanges and Delaware Statutory Trusts (DSTs). Previously, Ehud owned and operated a successful law firm in San Diego, focusing on real estate and consumer rights. Today, he helps investors by providing expert guidance on their real estate investments as a managing partner of Perch Wealth. Thank you so much for being on the show!

Ehud:
Thank you, Charles. Happy to be here.

Charles:
So you’ve, you’ve done a lot of things when I was going through your resume and your bio. Give us a, like a, a little overview on yourself, both personally and professionally prior to getting involved in real estate investing and becoming a managing partner of your current firm.

Ehud:
Sure. I’ll, I’ll, I’ll do the short version as possible. So I went to law school. I used to live in New Zealand. I went to law school in New Zealand then did my master’s in law. I did another law degree at Boston University. Enjoyed studying in Boston. Didn’t like the weather <laugh>, so a little too cold for me. So, went out to California and opened up took the bar exam in California, opened up my own law firm, practiced civil litigation for 15 years or so, and decided that I didn’t, I didn’t wanna be a lawyer anymore. So it was, I, I enjoyed it at times, but it’s, it’s a little bit yeah, there’s, there’s other things in life that I thought were better suited for me, just in terms of my enjoyment. But it was still an amazing opportunity.

Ehud:
Got to help a lot of clients. And one day one of my good friends who’s also an attorney that was retiring, he was selling his building in California, actually the office building where I was renting space from. And he asked me, I’m also a licensed real estate broker in California, and he asked me to help him with the sale. And I told him that I had the license for brokerage, but I, I never did anything with it. It was just, just to have, and, you know, for my own purchases maybe. And he said, no, please help me. I need help with the 10 31 exchange. And in that process of looking for solutions, I came across what I do today, which is the Delaware Statutory Trust. And I just thought it was incredible. And I, I couldn’t believe that I had never heard of it, even though I was in the world of real estate. I did a lot of real estate litigation. I had never heard, I’d heard about 10 30 ones I’d never heard about DSTs. So fast forward a little bit you know, got together with my business partner, Ben Carmona. We opened Perch Wealth. And yeah, it’s been, you know, several good years now that we’ve been helping a lot of clients with their 10 31 exchanges by utilizing the DST, the Delaware statutory Trust as a vehicle for doing that.

Charles:
Nice. Yeah. Before we get into the specific strategies, can you kinda give us an overview of your company? You guys have different types of investments, asset classes, and kinda like some of the solutions that you offer to some of your investors?

Ehud:
Yeah, absolutely. So we are primarily focused on real estate. So the, the, the, the, the bread and butter for our firm is really 10 31 exchanges, specifically DSTs. That’s really, really what we focus on, the DSTs. So we spend a lot of time and effort doing our due diligence, which we get into about DSTs, but really DSTs is what we focus on. In addition to that, we really wanna make sure that our clients have access to what we call alternative investments. So when people think of alternative investments, they think of, for most people, it’s anything that’s not stocks or bonds. So we do a lot of real estate through the 10 31 side. We have private credit we do structured notes which are interesting to some folks. You know, we have opportunity zone funds. Most of what we do is always gonna be centered around real estate, but things like structured notes you know, private equity investment, things like that we have access to those as well.

Charles:
So one of the strategies we haven’t really discussed too much on this show is the Delaware statutory trust. I mean, can you break down what the DST is and kind of how it works together with, or how it differs from maybe just a regular 10 31 exchange?

Ehud:
Sure. So, so nowadays, the, the, the two main ways to the, the, the, the two main ways to do a 10 31 exchange is either going out and, and finding a broker and buying your own piece of real estate, right? Going and acquiring your own piece of real estate. And really, DSTs have become the, the second primary option for a lot of people for doing a 10 31 exchange. And the DSTs have been around for basically in one form or another around 40 years. And Delaware created business trust law about 40 years ago. And the DSTs are, are an incredible structure because under Delaware law and the DSTs, I’ve never actually seen a property in Delaware, but they’re, they’re all formed under Delaware law, which is, is quite ironic actually. But essentially, the whole purpose of the DST is to create a trust that acquires a piece of property, a piece of real estate, whether it’s a multifamily in Dallas, Texas, or whether it’s a industrial park in somewhere in Florida, for example.

Ehud:
And they go out, they acquire these properties and maybe they buy it for 20, 30, 40, maybe a hundred million dollars. And then it allows investors that are doing a 10 31 exchange to invest on a fractional basis in these properties. So for most people, they can’t, the vast majority of people, they can’t afford to go out and buy a 20 or $30 million property, but they can sell their, you know, half a million or million dollar property, do a 10 31 exchange, and take the proceeds from that and put it into a DST. Because a DST, the minimum investment is only a hundred thousand dollars. So if you’re selling your property for a million dollars, and you wanna get into what we call institutional grade real estate, like the multifamily in Dallas, like the industrial park in Florida like the self-storage in Texas, wherever it may be, then it allows you to put in a hundred thousand dollars, maybe in one or in multiple properties on a fractional basis. And still you fall within the guidelines of a 10 31 exchange. The IRS blessed DSTs in 2004 said that it was a legitimate, viable way to do a 10 31 exchange. And yeah, I, I hope I, I threw a lot at you, but hopefully I answered your question, <laugh>.

Charles:
Yeah, no, this is great. Thank you so much. The, one of the things I had was when you are, when you’re putting it into, so I sell a property and I put into A DST, and then I can choose which types of assets it goes into. What are the kinda rules kind of go along with this, because 10 31 is just, I mean, it’s literate with rules, you know what I mean? And so how does this work and and what type of assets can I then put, you know, can I can start the whole process with selling?

Ehud:
That’s a great question. And, and, and from a 30,000 foot view, when somebody is considering do investing in a Delaware statutory trust, we’re still in the world of 10 30 ones. We’re still in the world of real estate. So I tell folks, the DST is just a, a nice acronym. It’s, it’s a term for a way to structure these investments, but we’re still, everything that applies to 10 31 exchanges in terms of the rules you know, that, that you have to fall under the IRS and everything that you, that you would normally consider when investing in a piece of real estate. Those all still apply. And so we’re, when somebody sells their property, let’s assume they want to invest in A DST, they still have 45 days to identify the replacement property or properties. They have 180 days to close. Those same rules still apply, and they want to fully defer any potential taxes.

Ehud:
They would have to you know, invest the whole amount that they have sitting with their qualified intermediary into A DST. What’s different about A DST compared to, let’s say, a traditional 10 31 exchange, whereas in a traditional 10 31 exchange, let’s assume, Charles, you’re selling your $10 million property and you, you, you sell it, and then as soon as you sell it, there’s a 45 day clock that starts ticking that you have to start identifying property, a property or property as you want to invest in. And so you would probably go out hire a real estate broker or a real estate agent and start looking at investment options. One of the things about DSTs is that, think of it like a menu. You go into Cheesecake Factory, maybe not as big a menu, but you go into Cheesecake Factory, you have a whole bunch of different offerings, different different properties that you can look at.

Ehud:
And that’s what we bring to our clients. So, for example, we might have a multi different multifamilies. We might have self storage, we might have industrial properties triple net retail. And so, and they’re located in different parts of the country. And so when an investor comes to us, for example, and says, I wanna, I, I want to you, you come to us, say, I wanna invest my $10 million exchange in DSTs, we will build out for you a portfolio that’s specific to you that says, okay, here are your options, Charles. You can invest a million dollars in this multifamily in Texas. You can invest in this industrial property in North Carolina, where wherever you, you decide is best for you, obviously with our guidance and our help, and then you can take that $10 million investment, and rather than going out and potentially buying only one, maybe two, maybe three properties by buying direct with the DST, you can buy more, a lot more than that because the minimum is only a hundred thousand.

Ehud:
So one of the benefits of that is that you’re mitigating your risk, you’re diversifying your investments over multiple DSTs and those investments, that real estate is some of the best real estate you’re gonna find in, in, in the country, right? These, these types of investments are outta reach for most people, but on a regular basis if they went out to try to buy them. But they, but they, but sorry, but they are available to, to folks you know, by doing a DST investment. So the process is still the 10 31 process, right? We’re still in the world of 10 30 ones, but now you have many more options you know, to, to choose from. So rather than going to a restaurant that only has three items or two items on the menu, you’re not, you’re now a cheesecake with like 30 or 40 pages.

Charles:
Alright? So if, when it’s, it’s gonna be one of the options I’m gonna have, I’m gonna identify as gonna be a DST, does it have to be a specific investment? I have to identify right away. So if you have a self-storage complex in Georgia that you’re doing, do I have to say, okay, this a hundred thousand dollars is going into that, or do I have, say, it’s just going into the DST and then I’ll figure out where I’m gonna put it, you know, going from there.

Ehud:
That’s an excellent question, and, and it really depends on, on when you start talking with us or when you decide you wanna do as DST. Many of our clients, for example let’s say you’ve got the property you’re looking to sell, or you are already under contract and you know, you’re gonna close, let’s say in a week or two weeks or a month’s time, you can start the process already you know, identifying DSTs that, that make the most sense to you. So by the time you close on, on your property, the down, the, the Downlight property, the one you’re selling, you could be invested in your DSTs of choice in as little as five business days. And so now you’re done with the exchange. Now let’s assume that you are already in your 45 days and you’re looking at options. You’ve, you’ve sold your, your, your property.

Ehud:
Now you’re, you’re trying to find options to, that might make the most sense for you, and you want it to go direct, but now you’re running outta time or you’re running out of options. You can look at DSTs and say, okay, here’s a backup. Just in case, if you still wanna do the direct purchase, you can still use the DSTs as a backup identified within the 45 days, right? So that way, in case your other deals don’t go through the ones that you’re planning on buying direct, you have the DST as a backup, or you’re in your 45 days, or you’re on day 43, right? And you just haven’t found what you’re looking for, and you say, and you just found out about DSTs, you can say, okay, I want to go into these DSTs and you identify them, and you can, you close on ’em, like I said, fairly quickly.

Ehud:
Now you still have the 180 day time limit to close on a, on a piece of property on A DST. But the reality is that when you identify A DST, the equity in these DSTs, for most of them, not all of them, tends to move very quickly. So most of the time, if you identify A DST, we tell our clients, you know, that there’s the sponsor, the companies that put these things together, these DSTs, we call ’em sponsors if they have a lot of demand and a lot of requests to go into that DST you’re not, you’re not gonna have 180 days to decide, right? You can, you can identify it and say, okay, I wanna go into this investment.

Charles:
So what are some of the fees associated with investors utilizing A DST? ’cause For 10 31, they’re pretty minimal as I understand it. So what do you see for kind of when people are adding in the DST?

Ehud:
Also, a great question. And, and you will see higher fees with DSTs only because it does take money to bring these things to market. So typ some of the typical fees you’re gonna see operational and fees for putting these deals together. So, legal, accounting, marketing those sorts of fees are what we call, they’re baked into the offering price. So that’s one of the fees. See, fee sets, you’re gonna see there’s going to be fees for us, for example, you know, just like you would pay a, a, a real estate agent or a real estate broker for helping you, there’s commissions that are paid to people that do what we do, right? To the DST brokers. You’re also gonna see asset management fees, for example, that the DST sponsor is charging for managing all of this. And one of the other fees which it’s technically a fee but really what it’s designed to do, it’s a reserve account.

Ehud:
So some of the money, every, some of the money that goes into DSTs will be allocated towards a reserve account, which is held for, it’s essentially a, a rainy day fund. And if something happens, the trustee can access those funds on behalf of investors. You know, if something happens that’s, you know, they need to have the money because with DSTs, you can’t do capital calls to investors. Once you’ve invested, let’s say I’m a DST sponsor and you’ve put in a hundred thousand dollars with me, and I need more money to, to operate the facility, I, I can’t come back to you and say, Hey, Charles, I need another 10 grand. I can’t do that. So, so I have to prepare and plan ahead by having some of those funds in the reserve account ahead of time.

Charles:
Wow. That’s, yeah, a lot of great information there. What types of investors and investments make most sense for utilizing A DST? I mean, you talked about you guys have a lot of different asset classes available for DST investors, but what kind of investors utilize this? Is this going to be just for retail investors or I mean family offices? How does this go usually?

Ehud:
Yeah. Well, both and, and, you know, most of our clients tend to be baby boomers or seniors that are retiring. And, you know, one of the, one of the greatest benefits of DSTs is that it’s a hands-off investment, meaning these are passive investments that allow investors to invest in them without having to manage anything. So for a lot of our, our clients, you know, they’ve bought property, they’ve managed property for, you know, maybe decades sometimes, and they’re tired of dealing with tenants. They don’t wanna manage properties anymore. So they can invest in A DST, you know, doing a 10 31 into A DST, and they don’t have to, to, to manage any properties. You know, they get paid you know, on a monthly basis, right? The, we call it mailbox money, where, you know, the, you get a distribution every month. Of course, there’s never any guarantee, I have to say that we live in the world of investments and securities, so there’s always a risk of loss, but everything is going as planned.

Ehud:
Then the investor is, is going to be typically getting monthly distributions. So a lot of our clients are they’re older because they don’t want to deal with the management side of it you know, if they’re younger. And, you know, if someone’s in their thirties, for the most part, they’re not a client that, that wants to do it. Not ’cause they don’t see the value, but because they want the action, they want to go and buy and sell themselves, you know? So I’m, I’m, I’m becoming more of the, the, the former category than the latter category.

Charles:
Yeah, that’s interesting. Yeah, no, I, I sold the portfolio properties a couple years back and I put a lot of the gains into different QOZ properties. So I was probably young for what I was doing, but you know, I used the capital for other, other active deals, but yeah, no, it’s, so it’s just one of those, it’s there’s, there’s many different ways, and I, I can see that with older people would probably want to have less hassle and kinda a little easier, less headaches, because we all know how managing property goes.

Ehud:
Yeah, absolutely. And I’ll give you another example, which a lot of people don’t often think about is couples that are divorcing. So if they’re, if they’re divorcing and they own real estate, an investment property or properties together, well, many times, you know, they’re, they will sell the property because they just want to go their separate ways. They don’t want deal with one another. The problem is that if they sell it and they don’t do a 10 31, they’re, they’re both parties are gonna get hit with a, usually a pretty big capital gains tax. So how do you deal with that? How do you go your separate ways while still deferring the taxes? So the DSTs can be a good solution because they, let’s say they sell a property for a million dollars, half a million goes into 1D ST, half a million goes into another, and in a separation agreement, each spouse gets their own DST as, by way of example.

Ehud:
So they’re, they’re a great tool not just for people that are older that don’t wanna manage, but they’re also good, for example, for couples that are divorcing or for example folks that have kids or grandkids, and maybe they think their kids or grandkids are not gonna be able to manage, you know, their one property together because they may not agree on how to manage it. So they sell their, their property, they go into DSTs, every child or grandchild gets their own DST, and it’s, it’s, you can do estate planning pretty straightforward, pretty easily, in a way that doesn’t involve in fighting sometimes you know.

Charles:
Yeah, that makes perfect sense. I guess it could be any partnership. So if you have a JV with a couple partners and you sell property going, you know, each going their own way, and this is a great exit strategy, what happens if my partners don’t wanna go that way, though? That becomes an issue. Everybody has to agree.

Ehud:
Typically, yes. You know, we won’t dig too deep into the weeds <laugh>, but there is, there is a way to do what’s known as a drop in swap. We’ve, we’ve had those occurrences before where people, you know, two business partners, they own a piece of real estate together maybe in an LLC, maybe in some other you know, maybe in a corporation. And they want to go their separate ways and they own it jointly. So there’s ways to do a drop in swap, which is basically, you know, you, you’re, you’re bifurcating their, their ownership interest, right? They’re each getting their own ownership interest. That’s, that’s more of a legal process that you wanna plan ahead of before you even list the property and preferably, and you do a 10 31 exchange. But there are ways to, to separate ahead of time. And if you plan it right, like anything, then, then it can be done. But we’ve had a few clients that have done that where one partner wants to do a 10 31 exchange, the other one does not wanna do a 10 31 exchange. So, and if they only join jointly own the property, then there’s a way for them to, to, to each go their separate way.

Charles:
Yeah, that, that makes a lot of sense on on that. One of the things when you’re getting into the different tax strategies like this, and it’s really understanding if there is an exit strategy, because the, the 10 31, the exits, I mean, kind of pretty much death, right? You keep on 10 30 wanting and, you know, start with a half million dollar property and hopefully 30 years, 40 years later, you end up with $5 million worth of property and a 400, $4.5 million gain or something. So the thing that was that, what what is the exit strategy on something like this? So if DST, if someone passes away or if you wanna remove money from DST, like kind of how does that whole process work?

Ehud:
Yeah, absolutely. One of the things that’s important to remember with DSTs is that, like, like all real estate, it’s not a liquid investment. And so when somebody invests in A DST, they, they should anticipate being in that investment typically anywhere from five to seven years. So the exit is really determined by the DST sponsor, the company that’s managing that investment. So, for example, if you decide to invest in a self-storage facility in Texas, and you put in a hundred thousand dollars once you’ve invested, you really need to wait for the DST sponsor to determine when is the optimal time to sell. So typically, that happens in anywhere between year five to seven, and that determination is really made based on two things that might happen. Usually it’s either the sponsor says this is a good time to sell, we can get a good return for our clients, our investors, they sell it or they get an unsolicited offer to, to purchase their property.

Ehud:
But people need to understand that there’s no secondary market for DSTs. It’s not like a stock where you can, you know, trade it multiple times a day and they’re not liquid. So when you invest you know, it’s the other side of the coin, it is passive investments, you know you know, you get your monthly distributions, but on the other side of the coin, you’re not in control. So that’s one of the reasons I think as well that for a lot of the younger folks that wanna invest, they, they, because they’re giving up that control, then they don’t want to do it. But for us, the, the, the older clients that we have, or the more senior clients that we have, they’ve been doing this for so long that they just don’t want to deal with it anymore.

Charles:
Yeah, no, I, I imagine so what you’re dealing with different investors, I imagine you’ll have some that have a, you know, some in their company and they have a big gain. I mean, what happens there if they don’t have a property how does that work? What other, what kind of tax efficient solutions are, are available for someone like that?

Ehud:
Well, it’s, it’s what you did. They, you know, you can invest in a QOZ. So if you, if you’re, if you’re, if you’re in the world of real estate, if you sell real estate, I think that the, the best way to defer taxes is doing a 10 31 exchange. I think that’s, that’s really the optimal way of doing it. And A DSC, if it’s for that person, then that’s a, a really good way to do it too. But as a general proposition, 10 31 exchanges are amazing. That’s the reason it’s, it’s been around since basically 1921. I mean, this is a, a very old piece of legislation in one form or another. But let’s assume you sold a business and you have to pay capital gains on the business, and it doesn’t have any real estate associated with it, then what do you do with the, that, that money? So you can, you can invest in a, in an opportunity zone, excuse me. And that’s another way to defer taxes, at least temporarily. It doesn’t have the same strength as a 10 31 exchange where you can keep deferring indefinitely or, you know, or if the person dies and, you know, step up. But it does have the benefit of deferring the taxes using a QOZ. Those are really the two primary ways, I think, nowadays for dealing with the tax situation.

Charles:
Yeah, yeah. As I understand with QOZ, it’s pretty much you’re investing into it. You’re gonna pay your taxes years down the road. There’s about 8,000 of these QOZ zones around the United States. And the goal is finding one that’s not really in an area that has ability of growing. And so you pay your taxes a few years later, and then you can hold these, I guess, up to 25 years or something and taking money out of that, like when it sells at the end, I believe that’s tax free. So it’s really just it’s pretty much kind of putting your money into some sort of almost Roth investment at that point, right? Where it comes out the other end, it’s, it’s tax free.

Ehud:
Yeah, no, and that’s a good point. So the QC is the way it is right now. The other great thing about the QOE is when you’re doing a 10, 10 31 exchange, in order to fully defer the taxes, you have to reinvest not only the equity that you got, but you have to cover the debt value as well. With a, with an opportunity zone, with only have to reinvest any gain that you made. You don’t have to cover the, the debt component if you, if you had a debt on the property on or whatever you sold, right? And then but the taxes are due, at least the way the laws are in right now, it’s due in April, 2027. If you hold the investment for more than 10 years, you don’t pay any taxes on any growth. So, for example, if you bought the, if you invested a million dollars in the property, you held it for 10 years, and in 15 years, or, you know, 15 years, whatever, let’s say in 10 years, that property is now worth $2 million. You don’t owe taxes on the growth from a million to 2 million. You owe it on the first million, which you would’ve paid in April, 2027, but nothing on the growth.

Charles:
Yeah. And usually how they try to structure it is that they try to, you know, during that window before you have to pay your taxes, there’s a construction period and lease up period. And hopefully, you know, you’re getting funds back out the payer taxes when they move to, you know, from construction to permanent financing. And that’s where you’re kind of getting that refinancing enough money. That’s how the whole plan is supposed to work, where you can then pay your taxes. So but very interesting structures and definitely, you know, different control obviously at 10 31 has most control. So that makes perfect sense what you’re saying if you’re active, but also the QOZ and the DST are are perfect examples of other solutions. So moving forward a little bit, I, one thing I found interesting with your firm is the number of different opportunities and asset classes that you guys offer and work with from student housing, oil and gas, I mean, self storage, multifamily, industrial. With that, I imagine, you know, you alluded to this before, you have strong partnerships which are crucial to your success. I mean, and you have, and especially with these sponsors, I mean, what advice do you go and how does your firm really successfully vet these partners and sponsors that you’re ultimately putting your investors’ money alongside?

Ehud:
Well, that, that’s the, that’s the not the $64,000 question. That’s the the billion dollar question, right? Because you, you’re, you’re, you hit the nail on the head that whoever’s managing the asset is, is it’s paramount. For example, you could have the best piece of real estate. You can own a building in Times Square or Madison Avenue, you know, some of the hottest real estate in the country. But if you’ve got a management team that doesn’t know what they’re doing, it, it won’t matter on the, on the contrary, you know, you, you, you could have a property that’s not in a great location but you have a good property manager or asset manager that, that can, can make it better, so to speak. So one of the things that we do is we spend a tremendous amount of time with the sponsors that we work with.

Ehud:
We, we, we’ve worked with quite a few of them actually for a very long period of time. So we know them, we know their, their management team, we know how their underwriting department works, we know their due diligence process. And those things are really critical because when you’re gonna invest, you’re, ’cause remember, you’re not investing with Perch, you’re not investing with our company. We’re here to act as consultants and advisors to you in determining which company to invest with. But if you’re investing, for example Cantor Fitzgerald, then, then we, you know, that’s a company that we work with because we believe, you know, at least historically, that they’ve done a very good job in their underwriting process, in their evaluation process for these pieces of real estate. And just like you mentioned, Charles, there’s a lot of different asset classes you can pick from, like the oil and gas one, I’ll use that as an example.

Ehud:
Most people don’t know that you can 10 31 exchange into oil and gas mineral rights. And so that brings up an entire asset where now you’re not just involved in the underlying real estate, but now you’re essentially involved in the commodity investing, right? So even though you don’t own the actual oil and gas, you’re not buying oil and gas, but you own the mineral rights for that oil and gas. So depending on the price of oil and gas, you can make money there multifamily, you know self-storage, triple net retail. And, and again, going back to my previous point with the DST, you can, you can diversify though your investment into these different asset classes. So you’re, you’re not in, you’re not just in one asset class, in one geographic location, you’re spreading your risk.

Charles:
Yeah. Yeah. That’s, that’s great information. What would, I mean, you’re obviously have access to more resources, you’re putting investors money with this you’re, you’re gonna have a different type of due diligence versus maybe that passive investor that’s going to any sponsor, maybe not just with your firm or anybody where they’re going. I mean, what are some advice that you would give maybe if you were passively investing into someone’s deal that you would look at that someone on that retail front could could do themself?

Ehud:
Absolutely. Well, I have invested personally in DST, so I can, I can tell you from my, my perspective it’s any, it’s, it’s just like any other investment. The one thing you wanna know is who’s the sponsor? What’s their track record? It should be pretty verifiable, right? They should be able to provide you with hi, their historical performance. So that’s number one. You wanna know who the sponsor is, like how have they done, obviously, their past performance is not a guarantee in how they’re going to perform in the future, but again, you know, success leaves spread crumbs, right? That old saying, so you wanna look for success. And, and look, even if they’ve had a miss, for example, during covid, you know, some sponsors got hurt by, you know, they weren’t getting, collecting rent, and therefore some investors were not getting paid. You, you, you wanna look at what were the circumstances, if they did lose, why did they lose?

Ehud:
What was the circumstances surrounding that? So the sponsors, number one, the other thing you wanna look at is where is the investment located? So if it’s in a growing area, right? If it’s in a growing area with a large growing population, and you’re investing in multifamily, you need to understand what is, what is gonna make sure that there’s still demand for these, for these apartments, right? For these this multifamily complex, what’s the competition around there? Is there any competition? Is there new competition that’s slated to come online? So these are things that, that, that we look at. We also look at the geographic location, right? I mean, if we look at things, I’ll give you an example. We, we look at things like the taxes, right? In, in there’s some counties, for example in Texas that are notorious for, for going after landlords, for raising their taxes. So, and there’s some really good places to invest, but you wanna make sure you understand that going in. But it goes back to the sponsor, because if the sponsor is a good sponsor and knows what they’re doing, then everything else has already fallen into place because they would’ve done their due diligence before they bought the property to begin with.

Charles:
Yeah. Yeah. That’s a lot of great information. It’s also the property manager, I found if, like you said, and you spoke about this before, it’s that property manager can make or break the property and to sponsor that’s really gonna be overseeing that property manager. And and it’s, you know, those two working together really decide whether that property is gonna be successful or whether that property is going to, is gonna fail. What I’ve found in my my experience over the years,

Ehud:
A hundred percent that, and that’s the thing, so in the same assessment that you, that you do or, or any other investor would do before investing in, in a passive investment not just real estate, any sort of passive investment, if I’m gonna go buy any investment or invest in any investment, I wanna know who’s managing my money, because that’s ultimately, you know, ’cause we, you know, I, we, we don’t invest just in companies. We invest in, in the people that are managing that, right? So we, we have to make sure that the human beings, the brains that are running this operation have a clear understanding of what their objective is and that they have a clear understanding or, and, you know they can deliver that to their, to their investors.

Charles:
Right. Right. No, that’s a lot of great information. So how can our listeners learn more about you and your firm?

Ehud:
Well first of all our company’s name is Perch Wealth. They can go to Perch Wealth Perch, like a, like a bird perched on a tree, P-E-R-C-H wealth.com. They can email me. My name is Hoot Gersten, it’s E gersten@perchwealth.com. They can call our main line. We have our website. We have a, a pretty strong presence on social media. If you have any questions or interests. We’ve, we put out a lot of content, educational content for our clients. We spend a lot of time making sure that investors that invest with us and even people that are curious, that just wanna learn more about DSTs and how it might be a solution for them, they can go to our website. That’s really probably the best way to, to learn more. We have a YouTube channel, so just type in perch wealth and yeah, we’d be happy to help.

Charles:
Yeah, it’s a lot of great information. Thank you so much. Yeah. Your website is very informative. I was on it yesterday in preparation for this episode. So if anybody, I mean, the thing though I found with preparing to make a tax efficient kind of activity when you sold the property is to do that months and months in advance and figure out exactly where the money’s gonna go. So if you have any kind of future that you’re gonna be selling something or coming into any kind of capital that way, it’s it’s important to find different sponsors and different groups that you can work with to make it as tax efficient as possible. So thank you so much for coming on today and yeah, looking forward to meeting with you sometime here in the near future.

Ehud:
Likewise, I, I really appreciate the opportunity, Charles, and thank you. Thank you again.

Links and Contact Information Mentioned In The Episode:

About Ehud Gersten

Perch Wealth Managing Partner Ehud Gersten is committed to helping investors, providing them with expert guidance on their real estate investments. Ehud is a licensed securities professional, focusing on 1031 exchanges and Delaware Statutory Trusts (DSTs). He holds Financial Industry Regulatory Authority (FINRA) series 3, 7, 66, and 63 registrations.

While he no longer practices law, Ehud is still a licensed California attorney. He is also a licensed California real estate broker. For more than a decade, Ehud owned and operated a highly successful law firm in San Diego, focusing on real estate and consumer rights. He has advocated on behalf of many clients, including homeowners’ associations (HOAs), real estate developers, and investment property owners, in both California state and federal courts. He is also admitted to practice before the U.S. Supreme Court.

Ehud was repeatedly recognized by his legal peers as one of the top litigators in San Diego County, featured multiple times in both SuperLawyers magazine and San Diego’s “Best of the Bar.” He has been interviewed and featured for his national real estate work by Bloomberg, the L.A. Times, the New York Times, and HousingWire magazine.

Ehud’s educational background includes two degrees from the University of Auckland in New Zealand – a Bachelor of Arts (BA) in political science and a law degree (LLB). He furthered his legal education with a Master of Laws and Letters (LLM) degree from Boston University, specializing in intellectual property.

Ehud has previously served and is currently on the board of several non-profit organizations, including the Commercial Real Estate Alliance of San Diego. He also participated on the planning committee for the Commercial Real Estate Symposium, organized by the Real Estate Section of the State Bar of California.

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