1031 Exchange Strategies for 2026: Defer Taxes, Protect Funds and Avoid Costly Mistakes

Bill Exeter (00:00)
If the answer is you’re happy with the property, ⁓ and don’t don’t calculate the return based on what you paid for the property. Calculate the return on the present market value and determine if you’re happy with that rate of return. And if you’re happy with all those things, don’t sell the property. Keep it. If it’s not broke, don’t fix it. And it’s amazing how many people sell and it wasn’t broke, but now it is broke.

Scott Bursey (01:56)
Welcome back to the Real Estate Pros podcast powered by Investor Fuel. I’m your host, Scott Bursey And today, pros we’re sitting down with Bill Exeter, the founder and CEO of Exeter 1031 Exchange Services. With over 42 years of experience, Bill is the driving force behind one of the few qualified intermediaries to become fully regulated. And he’s one of a handful of founders who established the Federation.

of exchange accommodators back in the late nineteen eighties. Pros expect to learn exactly how Bill has maintained industry leading standards for four decades and what that means for your future deals. Bill, welcome to the show.

Bill Exeter (02:38)
Thank you. Thank you for having me on.

Scott Bursey (02:40)
It is an honor having you here, Bill. And to help our listeners get up to speed, please give us the ninety second highlight reel, if you will, of how your career ignited and where you’re pouring your Fuel now.

Bill Exeter (02:52)
Sure. And of course, ⁓ when you get your career started, there’s always funny stories behind that. ⁓ I was controller of a bank up in Los Angeles, and the chairman decided to start a 1031 exchange qualified intermediary. ⁓ their outside counsel said, you know, do not have your escrow subsidiary run it. And he threw it at me, and I had no idea what a 1031 exchange was. That was back in the early 80s. ⁓ and then

From there my career did kind of a left turn. I got out of commercial banking and got into trust services and ten thirty one exchange services.

Scott Bursey (03:27)
Well, thank you for filling us in on that. That’s an inspiring foundation to build upon. And Bill, what really caught my attention about you was the way that you’ve been able to pioneer regulatory compliance in an industry that often feels like the Wild West. How have you been able to drive the creation of the FEA while at the same time building a firm that sets the bar for transparency?

without sacrificing speed.

Bill Exeter (03:56)
Great question. It’s it’s always a challenge when you’re regulated. you know, I was on the board of the Federation of Exchange Accommodators when we founded that back in the late eighties, and I served on that for about twelve years. And we asked ⁓ I I lost count. We asked, I don’t know, how many regulators to regulate our industry, and we always got the same answer, which is the loss ratio is not high enough to warrant regulation.

And it’s like, well, there’s been some pretty substantial losses in the industry. So to say that is kind of crazy in my opinion. But that’s the answer we were getting. So in our case, we decided if we want to take our operation to the next level, we need to be regulated. It’s better for the clients, it protects the clients better. ⁓ and it also gives us the opportunity to diversify our products and revenue streams. So that’s why we decided to do it.

Because the industry doesn’t have any licensing or regulatory capabilities, we had to decide what to do. ⁓ I ran a trust company in my prior life, so we decided to go down the same path. ⁓ so we went down through the division of banking, filed for a trust company charter, had to go through a couple of years of regulatory reviews and exams, etc., and and then obtained our own trust company charter. So Exeter 1031 Exchange Services is the qualified intermediary, does all the

documentation, paperwork, et cetera. But all the assets are held by Exeter Trust Company, which is the regulated entity. So it separates everything. It’s very clear the funds are held by a regulated licensed trust company. So they’re held as client trust funds, not corporate funds. And that’s always the risk with a qualified intermediary is are they going to be classified as corporate funds if they file for bankruptcy? So that’s kind of where we got to, why we got there, and how we did it.

Scott Bursey (05:45)
Bill, curious to know, with forty two years under your belt, what would you say is the biggest strength that has allowed Exeter to survive while other intermediaries have folded?

Bill Exeter (06:45)
I think a big part is integrity. ⁓ the way you do business, and that comes through. And over the years, people realize you’ve got integrity and that you’re gonna stand behind your product. And I think we further supported that by getting the trust company charter. So we just keep going down that integrity role. ⁓ a lot of the qualified intermediaries try to say we’re not fiduciaries, because you know that that’s you know, that could mean something different in our world.

In reality, we’re fiduciaries. We’re holding cash for clients. And however you want to categorize that, we’re still fiduciaries. So we’ve always taken that approach. We’ve always done what’s right for the client. ⁓ unfortunately, not all qualified intermediaries do that.

Scott Bursey (07:26)
And on that note, Bill, is that strength something a younger operator can replicate today?

Bill Exeter (07:33)
They can, although it’s difficult. I mean, getting regulated is tough. ⁓ it costs a lot of money, a lot of resources. ⁓ it you know, you can’t do it overnight, takes a couple of years. ⁓ if it’s a trust company or bank, the regulators are not going to approve somebody who has no trust or banking experience. So you’re gonna have to bring on somebody who’s got that background. ⁓ so it’s you know, there’s some barriers to entry, but it is possible. It just it’s not easy.

Scott Bursey (07:59)
Looking at the current regulatory environment, what do you see as the biggest weakness in how most real estate investors currently handle their ten thirty one liquidity?

Bill Exeter (08:10)
Great question. The you know, today, as you know, it’s a kind of a crazy market. You’ve got higher interest rates, although historically they’re not that bad, but you know, a lot of the folks are saying, wow, that’s really high rates. I’m gonna wait till they come down. I think in that respect, that’s one of the biggest issues is they’re waiting. And what happens is you wait, rates come down, and then all the buyers jump into the market. Now you don’t have interest rate issues to worry about, but you’ve got competition.

So I think today one of the issues is now’s the time to buy. Yes, you’re going to pay a higher interest rate, but you can refi in a year or two. So that’s that’s certainly one of the issues to worry about. ⁓ a lot of them don’t do their homework and don’t have their team in place and don’t ask their advisors for guidance, and they get themselves backed in a corner and they have issues. So that’s one of the big issues. W no matter what type of market you have, that’s always an issue. You gotta have your team in place.

make sure you talk to your advisors before you proceed. ⁓ you know, a couple hundred dollars ⁓ f on an attorney or CPA is well worth it to make sure you’re doing the right thing.

Scott Bursey (09:14)
Where do you see the most significant opportunity for investors to leverage 1031 exchanges in today’s volatile interest rate market?

Bill Exeter (09:24)
That’s a great question. I I think ⁓ I think the answer is it depends. I think investors need to focus on what they know, what they know best, what their skill sets are. ⁓ I’ve seen folks who’ve exchanged out of something and gone into something bigger because that was the thing to do, but it was way over their head. ⁓ so you have to know what you’re getting involved with. ⁓ I think that’s the overriding ⁓ guideline.

here in California, we see a lot of folks leaving California because of all the regulatory issues, the legislative issues. ⁓ it’s becoming really tough in certain areas. California is one, New York is one, New Jersey is another. There’s a few others where it’s very difficult to be a landlord. So that could be another issue is exchanging out of states that are difficult to deal with, difficult to do business in, and getting estates that are a lot more regulatory or business friendly.

Scott Bursey (10:18)
What specific asset class are you most excited about in twenty six?

Bill Exeter (10:26)
Yeah, personally, ⁓ I like multifamily and I also like storage. ⁓ those are probably my two favorites. ⁓ storage for one is if they don’t pay the bill, your foreclosure is easy. You click the lock, move them out, and you’re done.

Scott Bursey (10:42)
Bill, if you could give us some insight into in in your view, what is the most under discussed threat to the ten thirty one exchange legislation that investors are completely ignoring right now?

Bill Exeter (11:31)
Great question. The ⁓ probably the biggest threat is the fact that legislators don’t really understand 1031 exchanges. And they look at different things they want to do, which cost money. And then they look at revenue raisers. ⁓ you know, how can I raise the money to pay for ⁓ what I want to do? And we call them pay fors. ⁓ and 1031s are one of those topics that always seems to come up. It

It was put in all sorts of legislation in the past, so it’s easy for a legislator to cut and paste and insert into their current proposal. And the problem is they don’t understand it. With 1031 exchanges, they look at it as if if we delete or erase section 1031, look at all the capital gain taxes we’re going to collect. In reality, ⁓ that’s not what happens. ⁓ if the investors had to pay taxes, they just wouldn’t sell.

And not all, but most would just not sell. And so now you’ve got a scenario where the market just kind of contracts. You’ve got sellers who won’t sell, you’ve got people who say, I’m not gonna pay those taxes, which means there’s no sale, so there’s no real estate commission, there’s no escrow fee, there’s no title fee, there’s no exchange fee, et cetera, and so forth. It just it’s a domino effect, and it actually ends up being a revenue loser for the government. So

That’s the message. We have to make sure that they understand how it works ⁓ and the benefits that it provides and the tax revenue it actually does generate by leaving it in the code and how much they would lose if they didn’t. And usually once we’ve had those conversations, they immediately back off. But you know, it’s just one of those conversations we have to keep our eyes open, keep our ears open. And when we hear something coming down the pike, we need to get back to Washington.

Scott Bursey (13:13)
Thank you for bringing that to our attention. Bill, beyond the technical side, what do you think is the biggest personal strength an investor needs to navigate and exchange in high inflation environments?

Bill Exeter (13:28)
You know, I from my perspective, it’s education. Get educated on what you’re doing. ⁓ don’t go into something blindly. you have to understand what you’re doing. So you, you know, the first thing we always say is talk to your tax advisor, find out what your tax consequences are going to be. Most people just don’t do that. And that is a huge mistake because stuff happens and later they say, I shouldn’t have done it. Well, it’s too late. You did it. ⁓ always have your legal advisors involved.

Because you just don’t know what you don’t know, and there may be something you’re missing. always talk to us as the qualified intermediary and say, here’s what I’m doing, here’s my contract. Do you see any problem with it? Well, we’re not CPAs, we’re not attorneys, but we’ve been doing this a long time, and we can point out issues, weaknesses, potential problems, and refer you back to somebody who can solve the problem. So it’s education, understanding what you’re doing, going in eyes wide open, having your team together and in place.

asking the right questions and say, I don’t know, what about this? ⁓ otherwise you if you just jump into it, that’s when problems happen.

Scott Bursey (14:33)
Understood. And Bill, let’s look at the next twelve to twenty four months as it pertains to Exeter ten thirty one exchange services. What ⁓ what do you see on the horizon?

Bill Exeter (14:45)
I you know, we’re we’re we have a proactive and positive outlook on the next to say two, two and a half years. ⁓ for example, we just opened our first Texas regional office. ⁓ we’re investing in the future. We’re gonna hire some more folks. we think the next year or two, maybe even three years, should be really good. ⁓ you know, there’s a lot of volatility out there, a lot of unknown, et cetera. But we really think as it unfolds, it’s gonna be a good couple of years.

Scott Bursey (15:13)
Appreciate you highlighting that. And curious to know if if you could take us down this path, what does your professional network look like right now?

Bill Exeter (15:22)
it it’s a pretty wide net, ⁓ only because we’ve been doing this for so long. ⁓ you know, there’s a lot of qualified intermediaries are very ⁓ micro focused, if you will, on geographic areas. You know, they’re located in one city or one county and that’s where they do business. I think that’s a huge risk because in today’s world, if that market happens to go through a serious downturn, there’s nothing to offset that. where we’re national.

So that helps us kind of balance it out as one market’s down, another market is up and and things like that. ⁓ so our our network has all sorts of folks in it. We do a lot of trade shows and conferences. ⁓ we’ll speak to anybody who will listen. So you know, we’ve got a ton of escrow people and title people who know us. We’ve got a ton of realtors who know us. ⁓ we do a lot of networking with CPAs and attorneys. so we just have a very wide net with a lot of ⁓

A lot of a huge network, if you will, of all those folks.

Scott Bursey (17:02)
That’s a fascinating way to look at your circle. thank you for sharing that. And Bill, let’s shift gears for a moment. If you had to advise an investor on the one money move they should make in the next, let’s say, 90 days to maximize their tax deferral strategy, what would it be?

Bill Exeter (17:20)
Great question. I think the first thing is you want to look at the property you currently have. Ask yourself the question, are you happy with it? ⁓ and that means a lot of things to a lot of people. Are you happy with the cash flow? Are you happy with the potential appreciation? ⁓ are you happy with the geographic location? ⁓ are you diversified? all sorts of things you might look at. maybe quality of property. Is it A quality? Is it a C quality?

So there’s lots of things to look at. If the answer is you’re happy with the property, ⁓ and don’t don’t calculate the return based on what you paid for the property. Calculate the return on the present market value and determine if you’re happy with that rate of return. And if you’re happy with all those things, don’t sell the property. Keep it. If it’s not broke, don’t fix it. And it’s amazing how many people sell and it wasn’t broke, but now it is broke. So

You know, be careful. But if you’re not happy with the property, then now’s the time, I think, to make a move. Even though rates are higher, ⁓ you could probably get a good deal. You can negotiate the purchase price down. That helps your property tax cost basis. You’ll have a lot fewer competitors out there. ⁓ you could probably get a good property at a fairly good price and then refinance a year or two from now. So I I think that’s what I would tell them.

But be careful, just don’t sell. It’s amazing how many people call us and say, I sold and it’s in escrow or it’s going through closing and I I kind of think I shouldn’t have done it. And at that point it’s probably too late.

Scott Bursey (18:55)
Thank you for providing that level of clarity, Bill. And Bill, you have provided a lot of clarity for our listeners today. But is there any additional advice that you could give our pros ⁓ through your forty two years of experience?

Bill Exeter (19:10)
Yeah, you know, they’re pros, so they probably already have their team, but I want to re-emphasize that the team is critical. You know, have your real estate attorney, have your tax advisors, have the the escrow entitle people who really understand 1031 exchanges. ⁓ make sure your real estate agent really understands that. If you got the right team, it makes things a lot easier. Cause when problems come up, they help you solve the problem. ⁓ so the pros.

probably already know that, I’ve already done that. But if not, that’s what I would say. That’s my advice. ⁓ just be prepared for the unknown. As you know things happen. As they say stuff happens. And ⁓ it does.

Scott Bursey (19:46)
Great advice. And Bill, for those of our listeners that want to keep this conversation moving, stay in your lane or collaborate with you in any fashion, what’s the best way for them to reach you?

Bill Exeter (19:56)
They can ⁓ reach me a number of different ways. So they’re more than welcome to call. ⁓ our I’m in the San Diego headquarters office, and our phone number here is area code 619-239-3091. So again, that is 619-239-3091. ⁓ they can email me at my email address and it comes right to me, and that’s [email protected]. So that’s W E X.

E-T-E-R at EXET E R C O .com. That’s a lot of ease in there.

Scott Bursey (20:35)
⁓ Bill, thank you for joining us today on the Real Estate Pros podcast.

Bill Exeter (20:41)
My pleasure, Scott. Thank you for having us.

Scott Bursey (20:43)
It has been just an outstanding conversation. And to our listeners, we appreciate you. If you receive value from today’s episode, please subscribe. We’ll be filling your tanks with the lineup of Elite Guest, just like Bill Exeter, who are accelerating and setting the pace for the rest of the industry. Until next time, keep your standards high and your vision clear. We’ll see you in the next episode, everyone.