Build Wealth Without Losing Your Freedom

Brett Swarts (00:00)
you can’t find ⁓ earthly temporary things that when, I believe we’re eternal, right? It’s so much more than just what this earth can provide. It’s just a glimpse of eternity, right? And so if our intention in our hearts are for what we think that’s external or temporary, that’s going to provide ultimate purpose and meaning.

Micah Johnson (01:56)
everyone. Welcome to the Real Estate Pros Podcast. I’m your host, Micah Johnson. And today I’m joined by Brett Swarts who’s been making some serious moves in real estate investing now for the past two decades. Brett, welcome in, man. Glad to have you.

Brett Swarts (02:07)
Micah Micah, great for to be here. Thank you for having me.

Micah Johnson (02:10)
Absolutely, man. I’m excited for our talk today. You’ve been at this for a little while now and it’s led you to a unique mindset that you take to approach it. And I’m really excited to dig in with that with folks today. So let’s dive in, man, for folks who aren’t familiar with what you’re doing yet, you know, tell us a more about yourself and what your main focus is right now.

Brett Swarts (02:29)
Yeah. created a company in order to really to help people unlock truly passive income when they exited highly appreciated assets started in real estate, I guess, game and investing really from a young age, building properties with my parents in the Bay area, but started to practice it professionally at Marcus and Millichap in 2006 with multifamily investing in brokerage in Sacramento. And, you know, quickly learned that, you know, tax flow, cash flow and debt flow. ⁓

needs to be focused on. At the time it was still mostly cash flow, but the marketplace crashed in 08 to 011 there. And we saw a lot of people get hurt financially because they didn’t have a great strategy or mindset and made some mistakes leading up to that. And that taught us that we needed to be sharper and better and prepared for the next go around. And so we really kind of combined it, ways to exit, ways to invest and try to combine tax flow and cash flow.

as a way to make a bigger impact for families and individuals who are trying to help other clients exit in a good way. so personally married five kids, almost 17 years married now. And we live here in ⁓ Jacksonville, but our offices are St. Augustine, Florida, where you’re at. ⁓ But mostly from tax, is where I grew up and kind of learned the business of tax and investing in real estate.

Micah Johnson (03:52)
love that man. I like the two other flows that you’re bringing out because cash flows, the one we always hear, right? That’s like the number one thing that gets out there, but these other two, they kind of complete the triangle. And you said it earlier in the prerecording, like they help you see it in 3D versus in one dimensional. So take us into what you mean by those terms. If you don’t mind, you know, that learning experience and what that actually does for you.

Brett Swarts (04:17)
Yeah. And so we have a, we have a saying, in fact, can you see my shirt? It says tax flow, not just cash flow. And really it’s, it’s understanding that you don’t want, you’ve heard this said before, Micah, I don’t let the tax tail wag the investment dog. Right. So it starts with even just a simple 10 31 exchange that puts people in these, these tight windows to have to buy. And when you have to do something generally that can put you in a compromised position. So you’re, you’re really buying because of this tax liability that you want to defer.

And that’s not great. And you may or may not want to go into that asset. And we’re seeing it with multifamily for those who bought in 2021, 2022 that are losing the properties, all of the capital calls, a lot of them who bought in that timeframe because these interest rates have adjusted. In other

they had a mindset of trying to get some cash flow, but they didn’t really account for or at least prepare enough for the debt flow adjustment of the interest rates.

and perhaps they even bought because of the capital gains tax they wanted to defer. And so these things are always all happening at once, but the question is, are you aware of that? And the mistake most people have is they’re not. They’re just saying, well, if I can buy it for here and yeah, I’ll have to some property tax and I’ll have to, I get to defer my capital gains tax and maybe I can do this cost study to offset. And they’re thinking, they’re thinking well about this, but oftentimes it’s putting them in a compromised position, right?

So we know what cashflow is, right? That’s income minus expenses. You can do after tax, before tax. And then debt flow is important as well because there are times when you want to be out of debt, right? When you feel like the market is high. It’s almost like Warren Buffett, right? Be cautious when everyone’s greedy, be greedy when everyone else is cautious kind of thing. And that’s really the name of what I’m trying to practice and learn through these multiple downturns, 08 to 011.

And then really kind of what we’ve seen here in the real estate market the last couple of years. And how do you bring these things together? And that’s kind of what we should talk about here.

Micah Johnson (07:06)
No, man. love that dive into it. Cause that’s one thing I value about people have been in real estate long enough is you’ve seen the cycles and you don’t survive them unless you learn that that’s what I’ve seen. And when you do survive them, they make you the best. That’s what rises to the top out of every single cycle or the folks that applied themselves became the best. And I think this is a lesson directly tied to why you’re still around, man. So would love to dig in on that. Where do you, where do you think we should get started? Where’s the best place to begin that conversation?

Brett Swarts (07:35)
think the first place is just allocation and understanding, you know, know, what, how billionaires are allocating their investments. And I’m biased. grew up in real estate. I love building real estate. I love investing into it. I love being a passive investor. I love, you know, adding value to deals. And there is a sense of like, Hey, I can control my destiny here. But there’s also the other side of it too, where you say, you know, what percentage of the top in the world, how are they investing?

in a ⁓ way that is adjusted for risk, gives them liquidity, gets them out of debt, gives them opportunity to go into real estate. But maybe real estate is more like, know, you know, debt investing versus just equity investing at different times during different flows and rhythms and seasons of investing. And so I think that allocation percentages and actually having a plan so that you’re not over-concentrated in single assets or illiquid assets or, you know,

because the market’s changed, it’s always changing. The question is, are you prepared ⁓ to be able to weather those storms, have those reserves, have the ability to access cash? So I think that’s something that is a good place to start. The second place is just due diligence, like the level of due diligence to do on deals and people and processes and leadership and business models and how those two combine ⁓ asset allocation with the level of due diligence.

⁓ can help you create a framework. And so I’m studying a couple of different gentlemen and one of them’s name’s ⁓ Jim Baker. And he talks about, is it a course I’m taking called Wealth with God. And it’s cool because he takes approach for those who are believers and have faith. And for me, I’m a Christian. So he’s like, hey, start with like actually praying and asking the Lord about like this next investment opportunity. Like what that looks like and the people behind it and the leadership, right?

I think as entrepreneurs or investors, sometimes we get excited and we can move really fast and we’re not actually stopping to think and process. Number two, ⁓ go to outside group. Do you have an investment committee or group that you can bounce off? Hey, this investment I’m looking at, what am I missing? Right? Even the smartest folks need to have another set of eyes for all of our deals. Like there’s wisdom in counsel. So like,

What’s that next layer? And then diving into the due diligence of the numbers. think too often we get this reversed, right? Or we don’t even pray at all. We don’t even even consider wisdom from the Lord.

Number two, we don’t necessarily have an investment committee that we’re bouncing the ideas off of. And we’re just jumping straight into the numbers and the details. And we’re maybe moving ⁓ too quickly. And so just, I think having a mindset and a practice of some kind of system, whether it be allocation percentages, A,

be being prayerful, looking outside counsel, then doing the numbers, right? And realizing that the smartest investors and people who build wealth, they’re going to say no 99 % of the time, right? I think about Shark Tank, And Mark Cuban and Kevin Harrington from Shark Tank, like he, they’re sitting there and they’re seeing people, you all the pitches of all the deals and they’re saying no, no, no, no. mean, the majority, you know, more than the majority of the time. And it’s, and then it’s the few pitches that they’re swinging at.

to hit. ⁓ But that’s a process too, if that makes sense.

Micah Johnson (11:37)
It does. reminds me of one of the groups that I’m in. We practice a strategy called, well, I’m not going to say strategy that’s in the word, but it’s an acronym called CASE, where you collect data, analyze data, strategize and execute. And you nailed it. High performers and entrepreneurs were really good at the strategy and execution. It’s actually our favorite part. We love to get, don’t give us a good reason to go in motion, but that collect and analyze data phase, that one lasts a while. Like that one has

What I’ve learned the more I’ve practiced it is when you do it well, and I’m sure you’re experiencing this too, one, the allocation starts to make more sense that due diligence preparation creates confidence where your strategy becomes almost obvious and when to do it follows right on its tail. Like when you spend that time preparing where, you know, it’s, you actually getting closer to the life you want? Are you just building more? Are you just doing more? Like

A lot of us got trapped in that more phase just cause we can, but it didn’t actually take us where we wanted to go.

Brett Swarts (12:38)
You nailed it, right? And that’s where we define truly passive income is to your freedom and impact as compounding interest is to your money. Most people get caught on the illusion of passive income, right? I just need to do the rich dad poor dad just buy some of these houses or these apartment complexes. Well, once I get 50 units, then I can get 100. And if I get 100, I get 250 and three. And if I can get this full-time property manager and if I can just get these.

these 25 homes that are producing $500 or rent, like then it’ll finally be passable. I get to that fourth quadrant, but I think the illusion is most stick is stuck in two and three. And then they find themselves, gosh, like this is really, really, really what it, right? Or do I want to be spending more time with my kids? Do I want to be spending more time with the passion and my unique calling? So even backing up even further, I think most people are not pursuing and understanding the personal life mission statement, their family mission core values and.

and their unique calling on their lives. I believe that true freedom is unlocked when you’ve discovered, it’s like the moment, the two most important days in your life when you’re born and the day you find out why, right? But that why is what is your unique calling and not only that, your unique work that God’s called you to do. And how do you connect those two to earning and being able to bless your family and bless others?

That’s the sweet spot, right? And that’s not easy. It’s not easy. But if you’re not even asking the question, if you’re not even praying or thinking about it, if you’re not pursuing wisdom from outside counsel, how do you even, how do you, how are you even aimed at all? Right? How are you even being intentional at all? You could be building a ladder for the next 10, 20, 30, 40 years. And you look up and you’re like, I built it on the wrong wall. It was that wall over there. gosh, I missed it. Right. And so, I mean, this is, this is kind of core to the fundamental. So how

How do we get here versus taxable, cashable, debtful? Well, backing up, if you have that unique calling, if you have your family mission, vision, values, and then as you’re going through investments, I think you’ve got to aim for, I know what most of our clients are aiming for and myself is that truly passive income. It’s that 10, 20, 30, 40, $50,000 per month that’s consistent, that’s durable, that I have certainty of execution and the team that’s helping to execute the plan on the investments, I can sleep well at night, and that the income is showing up without.

⁓ you know, major time, energy stress,

right? It’s, it’s, it’s there and it’s not having to be something that’s, that’s pulling me in that direction. It’s really unlocking this freedom and this impact. Right. And so how do you get there? Well, we find it’s mostly people who are exiting, you know, five to a hundred million dollar exits of a large business, large piece of Bitcoin, large piece of real estate. have, you know, millions of gains. So they have this big tax bill. So they’re combining some capital gains tax planning.

and they’re combining it with a team to execute into investments they have certainty of execution on, right? And they combine it all in this big exit and they’re truly walking, you getting away from that asset, right? At least for right now. And now that this new, and we use trust to do this, this trust is gonna pay them over time, but this trust is gonna be able to invest in passive investments, right? So that’s kind of our model and what we teach advisors and M &A brokers and business brokers, because

Micah Johnson (16:31)
Gotcha.

Brett Swarts (16:37)
The clients really want that, but a lot of times they don’t have the team or the structure or the plan in place to execute on it. Or they don’t even, they don’t even aware that it’s possible. Most just think, I’ll just 10 31 and swap until I drop, right? Just get a stepped up basis. Just keep this thing rolling. But it’s like, but what matters most to you right now? And they’re like, I want to spend time with my family. I want to travel the world. I want to, I want to go pursue this new business venture. And like, okay, well, well, how are you going to get there if you’re not walking away or leaving all of what’s.

like all the real estate deals or all the business stuff. And that’s the thing. And by the way, if the real estate and the business stuff is your calling right now and your purpose, by no means don’t exit that. But if you’ve made a significant gain, don’t let it stop you from going to where you think the next season of life is for you, for your unique calling.

Micah Johnson (17:27)
Man, I love that because it’s not getting the cart before the horse. And I think that’s what us, I’m in my early 40s. We saw it. We’ve seen what happens when you just build business to earn profit, not pay tax, all the things it does technically, but you sacrificed yourself to do it. And that’s what none, I don’t want to do that. I’ve seen enough of it where, okay, that’s not why I’m willing to trade.

And it made us go further into the problem. Like you’re saying, well, what’s the question before that? What’s the question before that? And one of the heaviest questions to sit down with, cause you cannot answer it in a day. You have to reflect on it is what do you want? What, what do you actually want? Like, what do you want for you? What do you want for your kids? Those are really important things. Cause they’re steering the rest of that ship. If you really look, that’s your rudder. And if you don’t,

Man, you just wander. That’s where I saw see folks get trapped in more swap until you drop. Like it’s not that you’re doing the quote unquote wrong thing. It’s just it may be at the wrong time and the right thing at the wrong time is still the wrong thing. Like what are we doing?

Brett Swarts (18:36)
Yeah, and 100 % and what matters to you the most? Most people stop with what matters. Okay, what matters to me? Well, there’s probably a hundred things that matters to you, but what matters to you the most? Okay, well that helps to clarify it down and maybe even more so what are the two most impactful things for your health, your family, your fitness, your faith, your finances, your personal development, your leadership like.

these major areas of our life, what matters to you the most, and then taking that lens with your personal life mission statement, with your family mission core values and your family vision statement, and combining that and then taking the wealth of the financial, the business piece, right? And making sure that’s in that order. And I can’t emphasize prayer and why it’s counsel enough. Again, if you’re a believer in your faith, like why?

⁓ what is it gonna take to bring that into the daily, right? To help with these things. And so, yeah, those are some of the things that have been on my heart and my mind recently. it’s an interesting market to say the least, right? Those last couple of years in real estate. And we’re not quite sure where this thing is going ⁓ with interest rates. I think most would say in a year from now, it’s gonna be probably stronger than it is today.

but there’s just been a lot of change, a lot of uncertainty still. ⁓ I think we have some momentum, I don’t know what your take is on that, but even more, it’s always important to not trade what’s priceless for what’s profitable. And it’s so true even today, right? With time is short, I’ve been watching and listening to Billy Graham, it’s a five minute motivational on YouTube, you can listen to, time is short, it’s great. He gives like this five minute ⁓ clip of a sermon.

where he’s talking about time and how precious it is, right? And how short we have on this earth and it’s this side of earth. And so the question is, know, ⁓ what are we doing with it, right? And how are we gonna make sure that, you know, again, you’re living your life mission statement, you’re not looking back with regrets. You know, the number one regret, if you look up the top regrets of people dying at their deathbed, they surveyed this across the world with all different nationalities, different people. And the top regret is not living authentically to who they felt they were called to be.

versus living for others’ expectations, right? This is the number one regret. And so these are the things that helps me to try to stay aligned to like, what are some of the biggest regrets that people have, right? What’s my personal life mission statement? Am I being prayerful about this? Am I being intentional and at least aiming for that, right? But if it’s not written down, if you’re not reflecting, you’re looking at these things, then we just get caught in like the tactical, back to what you said, the executing and the strategy, right?

Micah Johnson (21:01)
Right.

Brett Swarts (21:17)
we’re not actually, in this scenario, collecting and analyzing our personal lives and collecting and analyzing where, and having others speak into that, right? To see what we can’t see ourselves.

Micah Johnson (21:31)
And that’s just it. Every human being has a blind spot. I mean, you’re nailing the things you have to do, whether it’s prayer in your world, whether it’s meditation in your world, whether it’s reflection in your world, sitting and actively thinking about what’s actually happening. What are you doing in life? Like getting acquainted.

with reality. What’s you know, I say, are you willing to accept self honesty? That’s the first question I asked myself every morning. Are you willing to look at what really is because that’s where the real decisions are made. And then the next step, are you surrounding yourself with people who can help you see what you cannot see? That’s why my mentors exists. Why I love to work with guys in like their late 60s. Tell me what’s around the corner, man. What have you seen?

You know, Solomon said there’s nothing new under the sun. This thing keeps repeating over and over. What are you noticing? How can I avoid pitfalls that, you know, I don’t need to go through? And that’s the beauty of having those folks around you. And that’s what Lee, like that little mechanism.

Apply it everywhere. My mentor calls it role based living, right? He’s really big on understand which version you are right now. Like we’re in work mode. So fully be in work mode when you’re dad mode fully be dad when your husband fully be husband don’t get stuck in these in betweens. That’s where we find you know, not happiness. why was I saying that ADHD got me anyways. ⁓

but just the overall, just surrounding yourself with people. That’s the first mechanism, then apply it to business, apply it everywhere. Because if you’re not being intentional, if you’re not aiming, you’re just not going anywhere. You’re gonna end up somewhere and maybe it’ll be where you wanna be, most likely not. And then you’re gonna end up with that regret. And it’s not big, it’s small little intentional choices every day.

Each day waking up and thinking about it. Cause I know as I’ve gotten into my turn in 40, I feel different as a human being. I think different as a human being, as cliche as it is. One of my coaches, he has a big thing about that of paying attention to the decade you’re in. We just naturally change. You have to actively think about it. It’s not something that just goes away. You don’t set it and forget it. Just like investments. You can’t just turn your eyes away. You got to inspect what you expect. And man.

I get jived about these kinds, because it’s the, I love the behind the scenes stuff. Like it’s really, I tell folks, you know, if you want to be a good human being, get good at being human. There’s a skillset to it. It’s, it requires us to be intentional and participate, but it unlocks life. And, yeah, man, anyways.

Brett Swarts (24:12)
Amen. Amen. Amen. I couldn’t agree with you more. Yeah.

Micah Johnson (24:16)
It gets me pumped up man. it’s a, and I love the fact, I love speaking with other successful people that have walked the road too. Cause you start to realize that I keep this statue of Jim Carrey behind me. Cause one of my favorite quotes of his is I wish everybody could get rich and famous to find out that ain’t it. That’s not the thing that does it for you. It’s something else because that’s the reality. It’s how I’ve noticed how many people have I’ve seen get the business part right and the money part right, but they’re completely miserable.

They’re miserable. And it’s like, okay, I want to solve that other one first then. That’s been my life mission. How can I get good at being human and let all this other stuff follow along? that’s

Brett Swarts (24:56)
you can’t find ⁓ earthly temporary things that when, I believe we’re eternal, right? It’s so much more than just what this earth can provide. It’s just a glimpse of eternity, right? And so if our intention in our hearts are for what we think that’s external or temporary, that’s going to provide ultimate purpose and meaning.

we’re going to miss it every single time, right? Because it’s by definition, temporary and external, right? And so to me it’s internal and it’s eternal, right? And so for me, it’s my faith, it’s my Christian walk, it’s the word of God, it’s Jesus like that. That to me has been when everything else is going haywire, right? If I’m connected with the Lord and I’m at peace, right? And the opposite, could, you know, the external things keep going great, but I’m like, gosh,

like kind of the Jim Carrey part, like, what’s, is there something off here? Well, I mean, it may not be connected and in tune with what the Lord’s calling me to do that unique season of my life. And so to me, that’s core to why I believe what I believe. it’s core to, it doesn’t necessarily mean life’s gonna be easy. It doesn’t necessarily mean it’s gonna be pain-free. In fact, it’s probably the opposite. It’s gonna require a level of…

intensity and a level of trust in God to move through these challenging times that you’re going through, right? Parents got divorced when I was young. And I remember ⁓ praying and thinking about like my dad and like what happened. And like when you’re 12 and 13, you start asking questions. You figure out like, gosh, this didn’t go so well. And I remember my mom saying, pray for your dad and love your dad. Made some mistakes, it didn’t work out for us, but pray for him.

And I remember God giving me a peace and a forgiveness for him, even though he didn’t necessarily ask for it. But that freed me from that bitterness and those challenges. And it’s like, that’s the kind of thing I’m talking about here, like practically speaking, right? Like, like coming from and how can that change someone’s life for yourself or for others? And, find that, that, that, you know, that peace ⁓ that surpasses understanding. And that’s, that’s, that’s what I would hope for everyone who’s listening, right? Like.

We’re talking about income and taxes and wealth and passive income and stuff, but more it’s like, are the freedom and impact you’re looking to make? Well, starts in your heart, it starts in your purpose, it starts in looking and reflecting and asking these tougher questions.

Micah Johnson (27:26)
I couldn’t agree more, man. I really appreciate you bringing that point to light today. These aren’t the subjects that often get talked about. It usually sticks to the numbers and things, but I think they’re so important for people to hear because we only get this life a day at a time and we walk it out. We live out the scenarios and the experience and it comes with all the emotions and all the things like the real life part where there’s all the book knowledge we have and there’s what it looks like living it out and just living in that where

Each day is practice for the next is what I truly believe. If you’re looking at it and like you’re saying, it’s not supposed to be pain-free. It’s not supposed to be those things. It wouldn’t feel good if it didn’t feel bad sometimes. That’s the counterintuitive nature of life, this opposite thing, where even how Jesus said it, the first shall be last. He has all these examples of these counterintuitive concepts, but that’s really the way it is. And when you get here right,

You survive anything out here. And then that thing in here, like you’re talking about, when you start to feel that turn in your system and like that, I feel like sands in my gears a little bit. That’s an indicator to me now. It’s not push, it’s whoa, what’s changed? What’s changed where the consistent things I normally do have created this new experience. Now I need to sit for a while and see, because that’s the growth part. Because our mission does change in life.

our callings as we grow, we are capable of doing more and different things. that’s, ⁓ that’s what makes living fun. That’s what to me, it just, you never really do know what’s next as long as you keep going. The opportunities that come around. So, Brett, man, I really appreciate your time today. I appreciate your story, your perspective. Thanks for sharing that just the gold nuggets you did. For those that are listening in that want to find about, find more out about you, what you have going on. What’s the best way for them to do that?

Brett Swarts (29:20)
Yeah, kind of two ways. If you have a large exit, a million dollar plus gain, million dollar net proceeds, so larger exit of a business, Bitcoin, real estate, and you have lots of tax that you’re looking to defer, we build capital gains tax exit plans, eliminate the need for the 1031 exchange. You can go to capitalgainstaxsolutions.com. If you’re looking to just, know, my life and what we’re doing and the thought leadership.

brettswarts.com, gives you access to, you know, can look at our book that we have and our Instagram and our Facebook and LinkedIn profile, all kind of that stuff. So brettswarts.com or capitalgainstaxsolutions.com.

Micah Johnson (29:54)
Excellent, man. Thanks for sharing those. If you’re watching and listening in, check our show notes. We’re have all of Brett’s links there. Like you hear me say all the time here on the show, we’re not just bringing random people in. These are professionals that live out what they talk about. They’re in the gritty of it every day. And those are the people that you wanna reach out to. The ones who understand, who know real estate’s a living thing. It’s always on the move. So work with those kind of folks. If anything today hits you, if you have that exit, check those websites out.

Brett again, thanks man for being here. I really appreciate your time. Thank you everybody out there for listening and watching in with us. If you got value out of today’s episode, please like this episode, share it with someone else you think you get value out of it. And if you’re not a subscriber yet, you know what to do. Click that button, follow along. We’ve got more conversations coming with operators just like Brett. Folks out there building a real business in the industry. Thanks for being with us today. We’ll see y’all in the next episode.

Brett Swarts (30:27)
Thank you,