 Welcome to Inside Hawaii Real Estate. I'm Will Tanaka. And I'm Leone Lam. We are honored to be your hosts for Inside Hawaii Real Estate. Will is a full-time Hawaii Real Estate professional and a licensed attorney. And Leone is a Hawaii Real Estate broker, a 20-year veteran in the real estate industry, and a board member of the Honolulu Board of Realtors. And our combined experience has led us to the show Inside Hawaii Real Estate. So what time is it? It's showtime, baby. Today we're going Inside Hawaii Real Estate with an inspiring guest speaker with a very timely topic. Our topic today is 1031 Exchanges. We're going to deep dive into investment properties and how you can defer your capital gains taxes. And we have with us today the Hawaii Expert on 1031 Exchanges. That's right. We love to welcome Julie Bratton. So she's the Vice President and Regional Manager of Old Republic Exchange Company, who we affectionately call OREXCO. She's been in the industry, in the Hawaii Real Estate industry for 28 years. She looks awesome. And 22 years with Old Republic Exchange Company. So I know that she pretty much launched the company from its infancy stage and just really excited to have her. So Julie, welcome. Thank you for having me. All right, there you are. Yes, I've been in the real estate industry for 28 years in Hawaii. I moved to Hawaii in 1990 from LA, actually. And I got into the real estate business in 1993. Right on. So I started selling real estate in 1993 for a short step for a few years. And then I started doing a transaction coordinator program for a real estate company, and then a title and escrow company. And then I, I fell into 1031 tax deferred exchanges. Wow. 2001. So it's been, it's, it was a good segue into 1031 Exchanges. Now knowing real estate, knowing what people need, but more importantly, why they need it has really helped me grow my business in 1031 tax deferred exchanges. Yeah, you have the trifecta you have real estate, you have title and escrow. You have the 1031 exchange. Man, you know, wow, you know, everything. I don't know. But like I tell my son, I don't need to be right all the time, but it sure feels good when I am. That's why we're so fortunate to have you on with us today. And, you know, as we get into this 1031 exchange topic, maybe we could just kind of start with a very basics. Like, what are capital gains taxes, and what is a 1031 exchange? Okay, so a 1031 exchange is a way to defer paying capital gains tax. And it's just for investment property. So if you sell an investment property, and you have gain, it's taxable. And there's a couple of ways to be taxed, there's federal, which is 15 or 20%, depending on your tax bracket. There's a state tax. Many states in the United States have taxes, a few that don't have tax, but Hawaii is one of them so seven and a quarter and above. And then you have depreciation recapture that's taxed at 25%. And then maybe the 3.8 affordable care tax so capital gains tax can really add up quickly. And that's why the 1031 exchange is such a popular tool. Instead of taking a chunk of your proceeds that you make your profit that you make from selling your investment property and paying Uncle Sam. It allows you buy this formula to reinsert it into the economy and keep your money growing for you. So I call it a free government loan. So okay we're talking about investment properties, and I want to even just take it even to the basics. So when you talk about investment properties, how would you define that. The textbook definition is in order for the property to qualify needs to be held for investment or for productive use in a business or trade. So rental income is the best proof. So, for example, if you have somebody who is renting a property for a period of time, it will most likely qualify but let's say you have your friends or your family living in these properties for free. Okay. If I owned a property and I'm letting my son live there for free while he goes to college in my mind. I'm holding it for investment because it's appreciating over these years that he's in college right now when he graduates, I would sell, you know, do an exchange of probably so I don't have to pay capital gains tax. But if I'm letting him live there for free. If I'm letting him live there for a month, am I using it for personal use, or am I using it for investment. So the IRS wants you to prove your intent to hold for investment. So it's not a requirement to rent it. But I think it's a really, it's good proof, whoever has a good paper trail of rental income and you're reporting it is probably going to be very solid. Wow. Okay, so in that situation, let's say you live in, you know, Hawaii, and then you own a condo unit near University of Hawaii. And let's say that no one's living there. So that could be considered an investment property. Yeah, you could say you're holding it for appreciation. But, you know, why aren't you renting it. So, you know, there's no rule, hard and fast rule or bright line test that says you have to hold it for investment for so many days, you have to rent it out for so many days, but you need to prove your intent to hold for investment rental income is the best proof. Okay, so if so let's say that you purchase as an investment property. Do you have to hold it for a certain amount from the IRS and the state government standpoint? You know, that's a great question and I get it several times a day. There is no rule or law on how long you have to hold investment property for investment. It's not right. It's not measured by days, weeks, months or years, it's all about your intent to hold for investment. I just like to say hold it for a year. Because then you can clearly show on one year's tax returns your intent. How you reported one year of income to the IRS. But honestly, you can talk to 10 people and get 10 different answers. The longer you hold for investment, the better your story. Hmm. So I'll give you an example. Okay. A few years back I had a bunch of exchangers exchange into one of the new projects in Kakako. It was launched in January. Let's just say February 1 three people called me I wanted to do exchanges. I said, well, you know, you just closed on this property, you know, three weeks ago. You did not really hold it for investment and their mindset was we did hold it for investment our money was with the developer for two and a half years. Now it's closed. It's in my name. I've made all this money, basically a flipping it. And I want to do an exchange I'm like, okay, well you can do one if you don't get out of it it works. If you don't get out of it, it probably won't because you did not hold it for investment in their minds they held it for investment, but on paper they did not. They don't bear any benefits and burdens of the taxpayer until they become one. And they had only became become one three weeks ago. So, you know, it's up to the client of what they want to do and what their level of risk is but the longer you hold for investment, the better your story. That is awesome to know. Why is it called 1031 exchange. I have no idea. The new rolling has just a bunch of numbers and they assigned 31 exchange to this one. There was a landmark federal case back in 1979 called the starker exchange so that was the first major exchange. And some I think IRS did assign it a number eventually and here we are with the 1031. Walk us through just the basics of a 1031 exchange process so you're saying you know buying and selling or selling and buying and you know for someone who might be a first time investor, or you know if you could help us walk through that process. Okay, sure. So, just so you know there's four ways to exchange. There's the delayed exchange where you sell first, and then buy. There's a reverse exchange where you buy first, and then sell. There's a simultaneous exchange where you close your sale and your purchase on the same day. And then there's a construction exchange or an improvement exchange. So there's four ways to exchange so the exchange that you're asking me to describe is pretty much the regular exchange is the easiest exchange you'll do. So if a client is selling their investment property, they don't want to pay capital gains tax. Once they get an accepted offer on their sale, they would contact me the qualified intermediary to set up the exchange. So what do I do I get a copy of the contract and the title report and I draft the exchange documents. And I get and everything gets signed but the day that transaction closes is when the clock starts ticking. Okay, and the clock is really important. That's like the black and white of exchanges. Excuse me. Yeah, let's go into that. Yeah. They have 45 days to identify in writing what they think they're going to buy. And 180 days to close on it. So the 45 days is included in the 180. They don't get 45, and then an additional 180. The clock starts the day they close and 45 days can be pretty stressful for a client, especially in this market. In those last couple of years, it's really hard to find a replacement property. There's multiple offers. There's, you know, there's not that much inventory out there. So I'm always recommending for clients to start shopping for their replacement property early on. Don't wait till you close on your sale for that clock to start. Start shopping early. And then is there a limit on the number of properties that you could identify? Yes. So when you identify, there's two ways to identify. The first way, the most common way is called the three property rule where you identify up to three properties. You know, you might only want to buy one, but a lot of people put more than one down just for peace of mind because they're not sure what they're going to get. If you wanted to identify more than three, you automatically have to use what we call the 200% rule. And that's where you can list four properties or more, but the fair market value of the entire list combined cannot exceed 200% or double of what you sell your property for. If you sold a property for 500,000 and you wanted to list more than three, so four or more. Okay, you can put the fair market value of that entire list could not exceed one penny over a million. It's almost as if the IRS doesn't want you to go out and identify an entire neighborhood and then pick one later. That's probably what somebody did and that's why we have the silly rule. So the three rule of the 200% rule. Oh, the 200% rule is another level of exchange that that's like advanced 1031 exchange sounds like, I mean, let's say you have a client who's selling something for $6.8 million. Okay. We'll probably go over this in a little bit, but to do to have 100% deferral, you need to buy something equal to or greater than what you sell your relinquished property for. So let's say you have a client who's selling something for $6.8 million, a commercial building, and he wants to do some estate planning. I mean, he has five kids. Let's say he sells that 6.8 property and wants to buy five houses, five single family homes, one for each kid. You'd have to use the 200% rule. So, you know, you can sell one and buy 10. You can sell five and buy one. I mean, there's so many options. So the 200% rule is really going to come into play depending on on the circumstance. It's not necessarily advanced. It's just what do they want to do with their money. It's a wealth of knowledge. This is like, this is getting exciting because I'm learning a lot already. Julie, do you know why, why would the government allow people to avoid taxes that seems like not a normal occurrence. So just kind of wondering. Well, it's a deferral of tax. It's not a getaway from paying tax forever. So people can exchange exchange exchange but once they sell the asset they're going to pay the taxes. They pay the taxes, they're going to pay taxes on what they previously deferred. So let's say they did five exchanges into an asset. If they sell it, they're toast, they're going to pay taxes on the first exchange. So they really want this money to keep working. So as long as it's working, I mean, I think that's the best answer I can give you. They wanted to keep working. Otherwise you are going to pay. I mean, what did they say death and taxes. So that is an important part to know right that this is deferred. It's not like you're avoiding taxes. Exactly. So what some people do I mean they use this as a state planning tool so let's say for the person who sells for $6.8 million and buys five condos or single family homes for each kid. If they hold on to these properties until they pass. Then their kids will inherit them. They won't have to step up in basis. They won't inherit that their dads, you know, capital gain burden they'll have to pay a state tax, but they won't have to pay taxes on what they just inherit. So it just just really depend there's so many reasons to exchange but one of them is to diversify and leverage your real estate portfolio relocate your assets you can do an exchange anywhere in the United States. You can do some estate planning I mean there's a lot so many benefits to an exchange and it's one of the last tax loopholes we have. So, so we could just be using using it. So we can keep on exchanging until we pass away. So let's say that my father you know bought a property for 200,000 investment property. Now it's worth a million dollars. And you know let's say he unfortunately passes away. Can you kind of describe how the step up in basis works so he pushes property like 30 years ago for 200,000 the market value today is worth a million dollars passes away passes on to theirs, and what happens. So it's my understanding. And you know the laws can change all the time. Yeah, I think they're actually trying to get away, get rid of the step up and basis once in a while that flies on on the shelf. Once the person passes away, you need to get an appraisal on the property and the person who inherits the property gets it at a step up in basis which is the value that it's worth at the time of death. So if you sell it right away. I'm pretty sure it's gravy for you. If you hold on to it for a couple of years, then and sell it then you'll pay taxes on the gain that you acquire during your term of ownership. Okay. So I mean people have to always talk about what their CPA what those rules are there, they're sometimes moving targets. So in that situation. If you know the person had sold it, you know from 200,000 to a million dollars that would be an $800,000 gain, and they will have to pay major taxes on that. So if they sold it, if they sold it while they're alive, but once they pass the seven basis basically if the appraisal says it's a million dollars, then then you'll get it at a million. Then, and if you sell it for a million then there's no capital gains. Correct. Interesting. There's a state tax to pay on the entire point. Yeah. Yes. Yeah, and these rules are, you know, up for negotiation these days with all the political tax stuff that's going on so be mindful that that could change or there could be a limit on it one day we don't know. Hey Julie, can you exchange or do that 1031 exchange on a personal residence. No. So an exchange is just investment property for investment property the only way that maybe you can mix it up is I'll give you a simple example let's say you're selling a duplex for 500,000. You rent out half, and you live in half. As long as you're allocating it properly on your tax returns, you can do an exchange with 50% and take your personal residence on the other 50%. But you need to be reporting it properly on your tax returns. Julie just to follow up on that so can you rent like one room in a single family home. But it's your you'll have if you got audited. You'd have to prove your intent that it was a legitimate rental. Okay, so if you're letting your friends and family and kids live there for free, or a dollar a month, it's probably not going to fly. Okay, Shax, we were hoping that we could, you know, get our teenage. I know with all your kids. Big message I'm hearing is it's a lot about intent and your risk tolerance, you know, in terms of like making sure that you're able to declare that it's a rental and you have rental income and, and all that so I mean that's really important there's time frames involved right that that are super critical to select or selection or identifying the properties that you're intending to exchange for and all of that so intent time frames and there's there's ways around certain things but I guess yeah you have to make sure your intent is clear. I mean every once in a while I'll have a client call me and say well I did this before I did that before and it worked and my response to that is, you know, everything works if you don't get audited if you get audited this might be your problem and I really like to, to kind of go down that rabbit hole with the client just so they understand what the gray area is and then exactly what you said what's their risk tolerance. I mean I'm not going to let them do anything illegal. Okay, you know, but if they're doing something behind the scenes I won't know like move into it right away like you and I wouldn't know that. Yeah, yeah. And a lot of these things don't trigger an audit. There are red flag in an audit. So almost everything is arguable and it's my understanding that you know random audits are random. They don't put you in a special stack because you didn't exchange unless you're on some list probably, but they don't really know you didn't exchange until they open your books, but I do like to talk to clients about the gray area. I don't understand that if they got audited this might be their problem they should be prepared for that. I mean you guys don't give tax advice I don't give tax advice we walk a fine line. So we just have to, you know, be careful how we give our message. And we always advise them to check with their CPA. And you know what CPAs are great I mean obviously they're the ones who are going to give tax advice but they do taxes every day but they don't do exchanges every day so sometimes they might be a little bit fuzzy. So I always you know my my door is open call email anytime if you need a little extra information to give to the CPA so they can best or better advise their clients I'm happy to do that. So have you seen situations just kind of going back to depending you know, each individual circumstance, if you know for if they had to move due to military orders, or divorces or they lost their job. If they have to move for military orders. I think they get a lot of exceptions, but I'm not sure if those exceptions translate into investment properties. I think it's more than residents. Those investments are passive that's not forced to sell those but they're forced to move their personal residents. So I think that that has their. That's the lane for military. Yes, when people get divorced and they separate the property I usually have to ask them is the divorce final or if it's final, then usually the property becomes tenants in common. The wife gets 50 the husband gets 50 they with their separate ways. So, you know how people hold title matters than an exchange. So divorces sometimes are sticky sometimes they they're not divorced yet and they're together and they own a property and a multi member LLC or they own it in a family trust. So in those situations, the entity owns the property not the two of them so they cannot separate is easily as they'd like to. So yes, I've, I haven't seen it all but I feel like I have some coming around the corner. And then, so what happens if you can't identify, at least one property, or within the 45 days, is it a done deal. It's a done deal or a toast. There's a lot of other expressions but we'll use toast today. Identify what you're going to buy on or before the 45th day, which yeah we should finish the 1031 process so you have to identify we give the clients identification notice that they have to complete. And when they fill it out it needs to be complete addresses, you know street number street name street Avenue Boulevard if it's a condo it needs to be a specific unit number. I mean it really needs to be the complete address. And they can make as many changes to this list as they want when they're in the 45 days but on the 45th day I need the final list of what they think they're going to buy. No changes after the 45 days so if they don't identify anything in 45 days, because they just can't find anything then their toast, they're going to pay taxes, and they'll get their money back on the 46th day. If they identify property and it's after the 45 days, and they decide they can't get it or it falls out, then they have a failed exchange as well. And then they'd have to wait till their 181st day to get their funds back. So, you know we have restrictions on when we can give the money back to the client depends where they are in the timeline of their exchange. And then basically they get their money back but then they'll have to end up paying capital gains taxes. Right, so let's finish up with that process so they identify property with me and 45 days. Once they open up escrow on what they're going to buy. I need to know about it. I need to get a copy of the contract and the title report again, and I draft exchange documents for that leg. The only thing that I'm holding from their sale is the down payment for their new property, and they come up with cash again a mortgage for the difference. And they have to just close it 180 days. So let's say a client was selling one property and wanted to buy three. Yeah, and they identify three properties, let's say I'm holding $300,000 they can tell me how much money to put on each property. $100,000 on property one $100,000 on property two $100,000 on property three. And as long as they use all their exchange proceeds and bring it get another mortgage or bring in cash to make up the difference for their purchase and they close these properties in 180 days. They'll have 100% to fall. Even if there's like extreme circumstances whether it's military or like a death or you know someone passes away there's no exceptions to 45 day identification period, or 180 day period to close. I don't like it anymore. The developer left town the dog ate my own mark. No. We are a victim of the natural disaster that the federal government recognizes. We're lucky we don't have any, but you know, it's got lots of extensions gone right now. Okay, so that will be the only exception natural disasters, which let me bring this up to its business it's it's calendar days so at the 45th day lands on Easter Sunday they still have to identify to me by midnight Easter Sunday. If 180 days lands on Christmas, then they have to close on maybe the 179th day or the 178th day. So that is really important so especially when clients are buying new projects, they need to be really and if they're really coming close to their 180 days they really need to be mindful that they can close on 180 days. And Julie. So if they're, let's say we're an escrow to sell the investors home, but they're not sure they want to do a 1030 one exchange. Can they tell the escrow company at the 11th hour. Oh, I want to do a 1031 exchange. Yes, they can. 20 minutes if I have to, but I do need to get a copy of that contract and title report and those documents need to be signed before closing. It can be the day before closing but they have to be signed like they can't close on Friday and have cocktail party conversation over the weekend and say oh yeah you know maybe I should do an exchange. I'll call Julie on Monday and set it up. I didn't touch the money yet. It would be too late to enter it in have to enter into the agreement before our closes. And then for anyone you know who might be interested in doing an exchange. Are you able to give a range of costs and prices. Sure. So the regular exchange, we break up the fee in a regular exchange. So the relinquished property fee is either depending on the sales price usually 950, 1250 or 1500. Okay. And the replacement property fee is $575. Oh okay so. Reinquished is the property that you're selling. Yes, thank you. And the replacement is what you're buying. Got it got it. So you pay as you go. So if you don't buy anything obviously we're not going to charge you the 575. Well that sounds reasonable. There is a. There are people out just general people out there that you know they go online and they read about the process of the exchange. And they come out with, you know I need to use an exchange company I'm not allowed to touch the money, they hold it. But there is so much work that goes on orchestration that goes on in an exchange that they don't see like the consultation with the real estate agent, the client the organization with escrow, we're reviewing entity documents contracts title reports, closing statements. Yes, we're holding the money. We are. We're going to handle the identification notices and audit those files, then the replacement property, we're talking to a whole nother set of escrow companies, maybe another agent throw a lender in the mix. You know there's so much or orchestration that goes on I think people aren't aware of what happens behind the scenes. So, thank you for letting us know. That is why we have to set up the and then the setting it up is a lot more work. A reverse exchange when you buy first, and then sell. Yeah, then the price starts going up. I mean it starts at $8500 to do a reverse exchange. Okay, can you just go over so we kind of discuss the process for you sell investment property first and then buy. Can you just go into the basics of a reverse 1031 exchange. Okay, so a reverse is let's say you have a client or somebody just falls in love with a piece of property and they would love to have it. But they have something else to buy it. That is a reverse exchange you can buy first and then sell. There's two kickers and a reverse exchange. When you buy remember in a regular exchange the money I'm holding is the down payment for the purchase. And they come up with cash or get a mortgage for the difference in a reverse. They don't have that down payment because the relinquished property did not sell yet. So the kicker is the client has to raise that down payment in cash. So sometimes they don't have that kind of money laying around even though they'll get it back as soon as that relinquished property sells they don't have the money to come up with. So sometimes people can't do the reverse but let's say they can. Yeah. So first in it at the IRS says they cannot own what they're selling and they're buying at the same time so we the exchange company need to take title to one of the properties, either the one they're selling or the one that they're buying. So once we determine which one that is the clock is another the same clock ticking, but the clock is in reverse 45 days usually doesn't matter we know what they're going to sell. They're going to sell that relinquished property in 180 days. Oh, okay. Wait, can we just go back real quick. You said, so you get title to the property under Julie Bratton. No, no, no, no. My company takes title. We have an LLC. Wow, that would be fun. That we put properties in or they can have their own LLC depending on the situation where we park the properties. We're just on title for the benefit of the exchanger so when we're on title to a property, they're still collecting the rent maintaining the property and the condition it needs to be in there negotiating the contract with the new buyers. They're paying their mortgage if there's a mortgage on I mean they're doing everything as if they're the owners we're just on title for the benefit of the exchanger. So it's more expensive because because we're taking title to a property we know nothing about. We put it into an LLC that we pay state and federal taxes on. There's an extra escrow involved. We need to be added on as additionally insured so the plot really thickens on a reverse. None of that has to happen on a regular exchange. So from a fee perspective, if a client can sell first and then buy that's ideal. I have found that we have been doing a lot more reverse exchanges these days just because the replacement properties are harder to to get under contract, because they always know they can sell their relinquish property. They're like let's just find the property first and we'll, we'll just pay the price to do the reverse, because they don't want to be stressed out about 45 days. And with any investment property that you're buying to save money on the capital gains taxes or and to defer that it would be totally worth it to do the reverse exchange. Right, I mean people get personal yes again from the fee perspective if you can sell first and then buy. Do it, but on a reverse exchange when people go, gosh, $500 I have to ask them what's your gain on your relinquish property. $500 could probably be a drop in the bucket compared to what they're going to pay in taxes. That's right. And if they find a property that's to die for and they have to have it they should just at least know about a reverse exchange I mean they don't have to do it but it is out there for them. And that's just more complicated to do, but it's doable, you just have to sell that relinquish property and 180 days. Now, if it doesn't sell in 180 days. The good news is, there's no tax consequence. It didn't sell. Two properties you're servicing. And you pay the fees to try to do it. So people ask me every once in a while is there a discount if I don't sell it in 180 days. And I'm gonna on that I'm going to say no because all of the same work is done it's just at the end of the day, we're doing a deed. Are we doing the deed to are we doing the deed to the exchanger or are we dropping a deed to the new buyer of the relinquish property. So there's no less work done. So, people know how to sell it in time 180 days. Everybody knows how to do that. They don't even have a sale on this market. I was just curious, like what happens if you change your mind and you decide, like, hey, I want to live in this replacement property, then what happens. So hopefully they can rent it out for at least a year actually rented out the better and then move into I mean no one says you have to rent it forever. But you want to maintain the integrity of the exchange if you can so they should just talk to their accountant and find out how long, because again there's no rule it's the same question like how long. Do I have to own it as an investment before I sell it move into it change its use give it to my kids add people on time. I mean, there's just no rule. If you're going to do an exchange and buy a piece of property that you eventually want to live in, if you want to make it your ever home fine, you pass and the kids inherited of a step up, right. But if you are going to do an exchange by a property that you eventually want to live in and then sell it so you can take your 250 or your 500,000. You can do that but there's, you're not going to get the whole 250 and 500, and there's extra layer of rules to that. And Julie, you know we hear about the like kind exchange. Can you sell like, you know, a vacant lot and buy a condo or buy a, you know, sell your apartment building and buy a single family home. That's a great question because like kind is a very misunderstood term in this industry. So like kind, although condo for condo single family for single family vacant land for vacant land are all perfect examples. It's really any combination of real property. So you can sell a single family home and buy a commercial building you can sell a commercial building and buy a condo. Any kind of real property qualifies any combination. Two things I like to point out with like kind is when you go from depreciable property like a single family home or condo depreciable property and you want to buy vacant land as a replacement. You'll defer paying all the capital gains tax but you'll have depreciation recapture to pay, and that's taxed at 25%. So if you won't if you own that really rich property a short time it's probably not going to be significant but if you've owned it for 15 years it could be. And also our state we have a lot of leasehold leasehold property has to have 30 years or more remaining on the lease to qualify for an exchange. That's a great point. So 30 years or more so you can remember anything just remember leasehold property as issues, make sure it qualifies before a client gets excited about selling or buying it in an exchange. I had earlier this year, a client it was, it was so sad he identified he sold his relinquished property. He identified his replacement. Perfect perfect lovely ID notice. After the 45 days I get a copy of the contract and the title reporting at less. It was leasehold it was less than 30 years. And he didn't identify any backups. So not only does he have a failed exchange I can't give him his money back until December 28. Wow. I mean, it's on our instructions to I mean but I mean I, he identified the property didn't identify a leasehold interest I mean I would have not I didn't know. Yikes. So just kind of be mindful of leasehold property and sometimes leasehold property is attractive to buyers because of the lower sales point sales. Of course, of course, yes we get those increase all the time. So, we have to know that it 30 years or more has to have 30 years or more. And Julie this has been like beyond 1031 exchange 101. I mean wealth of knowledge, and we could go on for probably hours. Like, you know if this was like Facebook live or something or YouTube live man you would get a lot of questions. Your callers or viewers can call or email me anytime. Oh, okay we might have to put that up. Yeah. Awesome. Any other final words about 1031 exchanges. Well, you know it's a. It's one of the last tax loopholes we have, you know, and it's a great way to move your money around defer paying capital gains tax hope, hopefully you're getting into a better more a better producing income property producing property. Remember you can do an exchange anywhere in the United States the US Virgin Islands and Guam just not Puerto Rico and I have no idea why, but all the properties need to be within the United States. Well, two other things I wanted to mention really can I talk about Harpta and for real quick. Sure, absolutely. Harpta is the Hawaii state non resident selling non residents selling property in Hawaii are subject to Harpta, which is seven and a quarter of the sales but if they do an exchange they're exempt. Wow, non resident sellers on this call should know that and foreign sellers can sell property but they're subject to furpta and furpta. They'll be exempt, but they're not exempt until the exemption comes in. So it takes longer to get that back so escrow will collect the furpta. Until that exemption comes in so that's another topic, we need more time on a little bit but I wanted to bring it up because I'm sure we have both on this call and now as countries are opening up and they're going to become in Hawaii to check out their properties. They're probably going to want to sell and furpta might be a topic of discussion. I mean, yeah, and you know, just one exchange, we have brokers on the call one exchange a month that you generate that's like 24 transactions a year. They have to buy something to sell something and buy something within a specific period of time but it's a really great estate planning tool and way to move your money around into veteran companies and property. You are amazing. Thank you so very much. Thank you too. Thanks for having me. VP and regional manager of all Republic Exchange Company. She is the go to person for 1031 exchanges in Hawaii and beyond. I have one more fun fact. Yes, the Republic Exchange was incorporated in 1993 so it's almost 30 years next year this coming year will be 30 years. We have an exchange over public exchange for 22 of them, but we can say not we have not had an exchange fail on an audit for something that we have done. So we're very proud of that. Yes, and you should be. Thank you. Thank you so much again, Julie for being a guest on our show inside Hawaii Real Estate. You know that's, I mean the one on one and beyond of 1031 exchanges. Thank you so much. Thanks for having me guys. Thank you, Julie. Thank you for making the time. Absolutely anytime. We'll see you again soon. Yes, we will. Very soon. We'll see you again soon.