Today’s guest is Frank Hanna.
Frank B. Hanna, Jr., ChFC, Private Wealth Advisor, is a leading specialist in Estate / Tax Planning, Private Real Estate Investment, and Wealth Management for a select group of individuals, executives, and privately held business owners.
Show summary:
In this podcast episode, Frank B. Hanna Jr. explains how they bridge the gap between traditional investments and real estate, offering sophisticated real estate deals to high net worth clients. Frank also educates clients on the benefits of Delaware Statutory Trusts (DSTs) for tax-deferred property exchanges. He shares his optimistic perspective on future economic opportunities, attributing it to maturing debts and banks’ reluctance to lend. The episode concludes with Sam appreciating Frank’s unique approach and valuable insights.
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Intro ([00:00:00])
Introduction of Frank B. Hanna Jr. ([00:00:52])
Frank’s background and current business ([00:01:16])
The 1031 Exchange Solution ([00:09:45])
Delaware Statutory Trust as an Alternative ([00:11:13])
Diversifying with DST Programs ([00:16:29])
The debt situation and upcoming opportunities ([00:22:00])
Taking advantage of opportunities in the market ([00:21:16])
Contact information and resources ([00:23:31])
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Connect with Frank:
Facebook- https://www.facebook.com/RevXWealth
Instagram- https://www.instagram.com/revxwealth/
LinkedIn- https://www.linkedin.com/company/revolutionx-asset-management/
Web- https://www.revxwealth.com/
Connect with Sam:
I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.
Facebook: https://www.facebook.com/HowtoscaleCRE/
LinkedIn: https://www.linkedin.com/in/samwilsonhowtoscalecre/
Email me → sam@brickeninvestmentgroup.com
SUBSCRIBE and LEAVE A RATING. Listen to How To Scale Commercial Real Estate Investing with Sam Wilson
Apple Podcasts: https://podcasts.apple.com/us/podcast/how-to-scale-commercial-real-estate/id1539979234
Spotify: https://open.spotify.com/show/4m0NWYzSvznEIjRBFtCgEL?si=e10d8e039b99475f
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Want to read the full show notes of the episode? Check it out below:
Frank Hanna ([00:00:00]) – You know, we manage north of $1 billion for clients. And, you know, when things get rough, you know, the advisor in me, you know, worries for my clients because I know they they get concerned and they get upset. But for me, as an entrepreneur and a real estate investor, I, I get excited to take advantage of some of those opportunities that are out there. And I think, I think there are going to be a ton of opportunities over the next, the next 18 or 24 months for the groups that are well positioned, that are well capitalized. And, um, you know, have, you know, the iron gut to take chances and, and, you know, pursue some of the opportunities that are out there.
Sam Wilson ([00:00:39]) – Welcome to the how to Scale commercial real estate show. Whether you are an active or passive investor, we’ll teach you how to scale your real estate investing business into something big.
Sam Wilson ([00:00:52]) – Frank B Hanna junior is a leading specialist in estate and tax planning.
Sam Wilson ([00:00:56]) – He also specializes in private real estate investment and wealth management for a select group of individuals, executives and privately held business owners. Frank, welcome to the show.
Frank Hanna ([00:01:06]) – Thanks for having me, Sam.
Sam Wilson ([00:01:07]) – Absolutely. The pleasure is mine. Frank. There are three questions I ask every guest who comes on the show in 90s or less. Can you tell me where did you start? Where are you now? And how did you get there?
Frank Hanna ([00:01:16]) – Um, I started in the, uh, hotel restaurant business. Did that for a number of years, managing, um, family owned businesses. My my family and businesses did that for, you know, 15, 20 years and got out of that and was doing a little bit of, you know, single family home construction, house flipping type stuff and, um, then diversified into some, some other sectors of real estate and, um, you know, wasn’t in love with the restaurant business, ultimately had a lot of good relationships from that and had an interest in real estate and basically packaged that into a kind of hybrid financial planning consulting business with a real estate arm.
Frank Hanna ([00:01:59]) – And, um, I, uh, currently live outside of Philadelphia. My partner and I have been working together for, um, about 15 years. We started, uh, Revolution X years ago. We rebranded recently, and, um, you know, we’ve got a, uh, a nice footprint, um, you know, probably on East Coast primarily, but we do business across the United States.
Sam Wilson ([00:02:21]) – Wow. That’s a lot of moving. Uh, a lot of moving pieces there. You 15 or 20 years in the family business and. And how did you. I mean, it sounds like a strategic shift when you got out of the family business and said, okay, we’re going to go into wealth advising, planning all those things. Like what? What was the the evolution of that? Yeah, I’m sure there’s a lot there that I just.
Frank Hanna ([00:02:42]) – Yeah, yeah. No, it’s a great question. So yeah. Uh quick quick turn there. So I, it’s funny my um, I, I had had a little bit of background in real estate, um, through my family.
Frank Hanna ([00:02:54]) – So my father had done restaurants for years, and he had kind of taken some of his successes and, um, and, and, and wealth from that to get into real estate. So I learned a lot through him and through some of our relationships there. My partner was actually doing like high level financial planning for some recognized individuals. Um, where I was living down near Ocean City, Maryland, and he actually was calling upon my father to try to do some financial planning. So we we connected. My dad actually pawned him off on me, and we got talking and started brainstorming and said, hey, you know what? He he’s got a lot of good tools that his toolbox on the financial planning side of things. And I think, I think he can help us and help some other people. And I had a good background on, um, you know, business management, tax planning, um, you know, real estate. And we said, hey, look, let’s, let’s kind of package what we’re, what we’re both good at and see if we can, um, capture some market share and focus on a certain type of client.
Frank Hanna ([00:03:56]) – Um, and we, we started from there and, uh, you know, from the ground up. It was a tough, tough fight, but we’re, uh, we’re rolling pretty good now.
Sam Wilson ([00:04:06]) – Wow. Okay. I mean, and this is one of the things I think that we’ve see in the real estate world is that there’s people who are like, you know, I’m only real estate. That’s it. They they’re only going to invest in real estate. And then you have people that are, you know, the typical stock and bond brokers, financial planners, that that’s all they know. And the two seem to not very often intersect where you find some of the understands business and understands real estate that understands traditional kind of investing channels. Is this kind of what you’ve done, has been able to blend all of those?
Frank Hanna ([00:04:36]) – Yeah, I think so. You’re right. You’re right. So you have your you know, typically, typically most of your high net worth clients or our high net worth clients have have some wealth in real estate.
Frank Hanna ([00:04:45]) – Maybe they’re doing that on their own. Um, and but yeah, you’re right. Some people just love, love the, the thrill of kind of that real estate deal. And they put every last dollar into that segment and sometimes don’t get, um, you know, many dollars over to your more traditional investments. And then you have the other people that, you know, save into their, you know, 401 KS or the brokerage accounts. And, and that’s how they kind of grew up and, and were taught that way. And, um, ultimately those people, you know, never really, um, you know, transcend into the real estate space because they don’t really know where to start. So what we’ve done is, is taken some of those more sophisticated real estate deals and packaged them in a way where they are securitized and people can invest and get access to some of those deals. And yeah, we’ve kind of bridge that gap where you can have the best of both worlds. So most of our clients, um, you know, will typically, you know, dabble in both spaces.
Sam Wilson ([00:05:46]) – Walk us through that, like, how are you packaging those up and presenting those to your clients? I know that there’s a lot of times there’s they’re just from the. The brokers I’ve spoken to in the, in the you know, the financial planners, they say, look, you know, we can’t we can’t do this because their, their hands are typically tied, especially by the bigger shops that they work with. They just can’t simply touch that sort of thing. So how are you guys doing that.
Frank Hanna ([00:06:08]) – So so we really like so in the in the financial advisory space, you have to, uh, you know, hang your flag with a broker dealer. Right. So everybody has to have a broker dealer that, you know, supports you, um, make, you know, make sure you guys are doing things the right way and, and, yeah, some of those bigger broker dealers, they’re just, you know, like, they’re the, the massive ship moving in the night. They don’t typically want to invest the resources for all those different advisors.
Frank Hanna ([00:06:36]) – And and some of those type of alternative products can be somewhat sophisticated. So um, we moved away from there. We used to be with a big, large broker dealer that was not favorable. They didn’t want to do anything that was out of the, uh, you know, quote unquote vanilla or the norm. Um, and now we we work with a broker dealer, um, that their sweet spot is in the alternative space. They focus on a high end advisor, um, you know, high net worth clients, and they give us access to some of the best stuff that’s out there. So between us and them, we we basically, um, vetted the marketplace across, you know, the continental US and basically found some of the biggest players that had the most sophisticated offerings and, you know, their kind of sweet spot or asset class. And they do real estate syndicated deals. And some are some are designed for people that have cash on the sidelines and they just want to diversify or get away from, you know, some of the volatility in the stock or bond market.
Frank Hanna ([00:07:40]) – We have a lot of other deals that qualify for like 1031 exchange planning. So people will sell their hard real estate and they can’t find a replacement property. They don’t know where to go next. Or maybe they’re just over the headache of, you know, property management. So there’s there’s a solution there that a lot of people take advantage of through us. And then we have a lot of deals where we do, you know, cost segregation studies. So people that either have a large, you know, passive income or maybe they, um, qualify as a real estate professional. They’ll invest in our deals, uh, you know, not only for cash flow, but primarily for that accelerated depreciation to, um, you know, offset of their offset, some of their federal and state income taxes.
Sam Wilson ([00:08:24]) – What what I see a lot of I would put myself in this category as the deal sponsor. Like there’s they’re the people like us who are the deal sponsors. I know the deals we do. And that’s kind of where my expertise stops.
Sam Wilson ([00:08:37]) – But for you, you kind of have to take a holistic approach to people who are, you know, for me, it’s like, okay, hey, you know what, Frank? You’re you’re a accredited investor and you got $100,000. You want to invest. Okay. Come on. No, not not not a not a high hurdle. But for you, it sounds like there there’s a there’s a certain client type that really is looking for what you do. Who would you say is your kind of ideal client?
Frank Hanna ([00:09:00]) – I would say, um. You know, I kind of look at it two ways. So. So we have we’re really attractive for like, the younger entrepreneur that maybe is, is, you know, a relatively high income, you know, I’d say, you know, six figures and up a year, um, that, that is looking to enter the market and they just don’t know where to start. Right. So we can, um, you know, assuming they qualify as accredited investor and have some assets elsewhere, um, they could we get a lot of, a lot of people that are maybe a 30, 30, 40 years old that are just entering the market and they want to get their their toes wet, and they’ll get into one of our one or more of our deals, and it typically goes from there.
Frank Hanna ([00:09:45]) – So that type of client and we have some, some, you know, ultra high net worth clients that have all type of planning needs that are maybe, you know, in their 60s and 70s, 80s, and they’re looking to kind of simplify their life, or maybe get some of their financial freedom back, and they’ve started to divest of some of the holdings that they’ve had over time. Um, you know, they’re they’re obviously tax focused. Um, but we get a lot of those type of clients that say, hey, you know what? I’ve had a ton of success, but I don’t feel like managing, you know, dozens and dozens of properties anymore. I’d like to sell, but I don’t want to get whacked with, you know, massive cap gains taxes. What can I do? So we educate those type of clients on, hey, you can, you know, sell that real estate, you know, do 1031 exchange planning. And if you don’t want to go out and buy another hard piece of real estate that you want to manage, you can use, um, you know, a technique or a solution we typically use like a Delaware statutory trust.
Frank Hanna ([00:10:48]) – And, uh, it qualifies for the 1031 exchange. So we get a lot of clients that are selling real estate and using our solutions, um, to execute a 1031 exchange.
Sam Wilson ([00:10:59]) – What? And I think you’ve just mentioned one of those creative solutions, but what what are some of the, uh, and maybe you can give more detail on that if it’s relevant. But some of the creative solutions you guys feel like you’ve crafted, maybe that are kind of lacking in the marketplace.
Frank Hanna ([00:11:13]) – So I think, um, you know, the I’ll, I’ll just start on that Delaware statutory trust. So that’s that’s nothing new. But for whatever reason, a lot of people are unaware that it’s out there as a, as an alternative to a traditional 1031 exchange. Um, or, you know, there’s misunderstandings of how they operate. Um, you know, it really has nothing to do with Delaware. But, um, essentially we we take a lot of our deals and I’ll use the Delaware, uh, statutory trust tax wrapper just for those 1031 exchange dollars.
Frank Hanna ([00:11:47]) – And those people that need, need, have that need. Um, so the Delaware statutory trust is a trust where you can, you know, utilize, sell, sell your hard piece of real estate and do a complete tax deferred exchange into one or more offerings, um, and get a tax favored monthly income. We do a lot of deals and, and a variety of different asset classes, um, you know, multifamily, self-storage, industrial, student housing, you know, everything under the sun. We’re focused in, you know, markets that are, you know, high growth. They have a good story behind them. They’re pro-business, tax favored. And, um, you can, you know, again, uh, relinquish the property management responsibilities and go into our deals. And, um, you know, the length of length of our deals are typically, I don’t know, 3 to 6, 4 to 7 years hold. And again, when those deals sell, you can do another 1031 exchange on the back end as well.
Sam Wilson ([00:12:50]) – No, I love that. That’s, uh, and that’s one step more sophisticated. I would, I would imagine, than just a straight 1031.
Frank Hanna ([00:12:58]) – It’s, it’s a it’s actually, um, you go through the same process as the 1031 exchange. So you’re going to have your you have to hire a qualified intermediary to be your, like third, third party, unaffiliated, um, individual. That would be the middle man in the in the terms of a 1031 exchange. And then, you know, when you typically would follow that guideline of 45 days to identify and a total of 180 days needed to purchase that new replacement property. Um, our deals are already prepackaged. They’re approved. They’re ready to go at any given time. We probably have 15 different Delaware statutory trust programs that are available. Um, and you can list them right on your ID sheet and invest those dollars. There’s no closing costs. We can settle in 3 to 5 days. So, um, you know, it’s it’s a little bit of a sophisticated product, but it’s once you understand it, it’s super easy.
Frank Hanna ([00:13:55]) – Um, and I, I’d argue it’s easier than you know, negotiating and, you know, settling in a hard piece of real estate so we can move quickly. We always have inventory, some really attractive deals. Um, so that’s I’d say that’s a huge part of our business. I, I’d say that was maybe 5 or 10% of our business. Um, five, six years ago, it was probably 50% of our business this year.
Sam Wilson ([00:14:18]) – Wow. Wow. No, that sounds really powerful because people are looking for those types of things where one they can push the easy button. Yeah. Okay. You got 15 DST, DST programs that you can pick from. That’s pretty impressive because then it’s like, well, it just it’s just a menu. Which one do I like? And then you’re not responsible for it once you do that. Yeah. I mean, that’s, uh, that’s pretty powerful. I guess I got this just probably get into the weeds here a little bit. And so if it’s too far in the weeds, tell me to just stop and part of it.
Sam Wilson ([00:14:44]) – But it’s in those in those DST programs you guys have, you guys are then going out and working with operators, deal sponsors, people that are actually boots on the ground doing, you know, the deals themselves. Unless you guys are running all of these yourselves, which I would be thoroughly.
Frank Hanna ([00:14:58]) – Yeah. So so yeah. So we have some several layers of due diligence so we understand the deals. Um, so we have, you know, a number of partners that we’ve got some sort of track record with. Um, but we don’t rubber stamp, you know, any deal just because of who’s bringing it to the table. So we typically, um, you know, get word either that, hey, this is this is coming to market, or they’re thinking about putting this deal together. And then we have our team do a very thorough analysis of the program. We visit the property through, you know, every type of study imaginable and look at the financials and say, hey, this is a deal that we think, um, has a high probability of success.
Frank Hanna ([00:15:37]) – We’re going to approve it and put it on our platform. Um, or we’ll look at that deal and say, hey, it’s not for us and we’re not going to approve it. But, you know, we invest in almost all our own deals. So if it gets if it gets to our platform, we feel really good about it. Um, and then we can offer it to the market or relationships that we have that are, that maybe have that 1031 exchange need. Um, but it’s yeah, it’s nice. We can kind of layer that out, diversify the client. And, you know, it almost acts like a laddered bond portfolio where, you know, if you if you had $1 million deal and you invested in, you know, 3 or 4 DSPs, you know, once we get out to year three, it’s it’s rare that, you know, we’re not calling you once a year and saying, hey, Sam, good news. Uh, one of your deals is going full cycle, and you have to make another choice.
Frank Hanna ([00:16:29]) – Are you going to cash out, pay your taxes, do another DST with us or somebody else? Or you can actually go back into hard real estate. Um, and there’s typically, you know, a nice income, some degree of appreciation. Um, but it’s flexible. So we have a lot of people that, um, are using us now, maybe because of the, you know, rough lending environment and low inventory and deals are hard to come by. And, and, you know, all the factors that are headwinds right now for us, people are still selling real estate. You know, where they say, hey, I can capture a premium. I definitely don’t want to pay the taxes, but I don’t want to just buy something else that I have to manage that’s not as attractive as the property I’m selling, and I don’t want to pay top dollar for that. What can I do? Well, you could park it in a DST with us for a handful of years, let the market in a reset and then go back into hard real estate.
Frank Hanna ([00:17:26]) – Um, you know, in some time.
Sam Wilson ([00:17:29]) – That makes a lot of sense. And I was going to ask that question when it comes to in order to keep 15 different DST programs that you have may be open, you got to keep your pipeline full of opportunity inside of those. If those are single asset syndications, I mean, those are typically time bounds. So it seems like you’d have a lot of I mean, a lot of deals coming in and out. And I was going to just ask, how do you keep track of that? You know, if there’s that many. You know, deals all at once.
Frank Hanna ([00:17:57]) – Yeah. So so we’ve got, um, you know, again, we’re not doing everything ourselves. So those, those sponsor companies that we’re working with. Um, you know, they, they do the day to day management opportunity or responsibilities. And then our broker dealer, um, you know, has another layer of, of responsibility on that too. And then we have a team of, you know, a couple dozen people that focus on all these deals.
Frank Hanna ([00:18:24]) – And, um, you know, we we have our kind of expected timeline and then, you know, that can change with different circumstances. But yeah, it’s, you know, there’s a lot of moving parts to it, but we’ve got that kind of sweet spot or size that I think enables us to be really proficient, um, with, you know, with the type of clients we have, we’re not, you know, we kind of stay right in that space where we feel like, hey, we’ve got plenty, we’ve got good inventory, we’ve got good deals. We don’t have. You know, too little where we can’t meet the need, but we’re not approving. You know, much more than that just because, uh, there’s, you know, there’s not a need there. So we we feel good about our business model and the support and the partners that we have to help manage that. But, um, yeah, you know, having it can change over time. I’d say fifteen’s around what we typically have, some of them can be a handful of assets.
Frank Hanna ([00:19:19]) – Some of them are single assets. But all depends.
Sam Wilson ([00:19:22]) – Got it. Very, very good. I want to shift gears here just, uh, slightly when you’re talking to your ultra high net worth investors, what what is your kind of subjective opinion of how they’re view and set market sentiment? I guess you will. How they view the market. How has that changed in the last 12 to 18 months? And I guess if you can give us that insight, that would be helpful.
Frank Hanna ([00:19:46]) – Yeah, I’d say, um, you know, it’s it’s a it’s a blend. You know, I have some clients that say, hey, you know what? This is as bad as I’ve seen it. You know, whether it’s the economy or whether it’s, uh, you know, just what’s going on with, um, you know, federal circumstances. And then I have others that say, you know what? I’ve been through 4 or 5 crashes and market corrections and the worst of the worst. And I’ve survived every one of them.
Frank Hanna ([00:20:13]) – So I’m I’m ready, and I’m going to take advantage of, uh, the opportunities that present themselves. Present themselves. Um, assuming, you know, things get worse before they get better. So it’s funny because I, you get total totally different sentiments on that. Um, but I think we are in unchartered territory with what’s going on in the world, and, uh, you know.
Sam Wilson ([00:20:40]) – Yeah. Who who who actually knows? Has there been any strategic shift in the way investors invest?
Frank Hanna ([00:20:47]) – I don’t think so. I think um, I think again, the, the ultra conservative and the doomsday buyers and the clients like that, that I have to stay that way. And I don’t try to change their mind. Um, but they’re, they’re those people that are out there. And then there’s the others that, hey, they just keep operating. Um, you know, assuming there’s going to be a tomorrow and they’ve had success and, you know, it’s it’s funny because, you know, we manage north of $1 billion for clients.
Frank Hanna ([00:21:16]) – And, you know, when things get rough, you know, the, the advisor in me, you know, worries for my clients because I know they they get concerned and they get upset. But for me, as an entrepreneur and a real estate investor, I, I get excited to take advantage of some of those opportunities that are out there. And I think, I think there are going to be a ton of opportunities over the next, the next 18 or 24 months for the groups that are well positioned, that are well capitalized. And, um, you know, have, you know, the iron gut to take chances and, and, you know, pursue some of the opportunities that are out there. So, yeah, two sides of it, I look at it that way. But I do think there’s going to be a lot of really good opportunities that are going to come available soon.
Sam Wilson ([00:22:00]) – Yeah. Would you would you base that um, that feeling just upon the the amount of debt that’s maturing? Yeah.
Sam Wilson ([00:22:07]) – I think.
Frank Hanna ([00:22:08]) – Yeah. The debt situation, there’s just substantial amount of debt that’s all maturing in the next couple of years. And you’ve got banks that don’t want to lend on a variety of different asset classes. Um, so I think, again, the people that are well positioned that they’re that are well capitalized are going to be able to really, you know, swing the bat and get well positioned on a lot of those deals. And we have like a lending arm to. So we’re in a position where, you know, if we feel like the collateral is good, um, we can make a really nice spread on those loans and, and play, you know, more defensive positions. So we’re not always, you know, on the equity side of things.
Sam Wilson ([00:22:50]) – Right.
Sam Wilson ([00:22:50]) – Right. Now that makes a lot of sense. And I think there’s some other people out there with that kind of same idea where it’s like, hey, you know what? If we can we can come in, uh, you know, with some rescue capital, take some things over, you know, to, you know, at a discount to market, then, um, like you said, you just got to be ready for that.
Sam Wilson ([00:23:05]) – So. Yeah. Very cool. Frank, I have thoroughly enjoyed our conversation today. I love what you guys are doing. I love your, uh, kind of unique approach to, uh, tying real estate and investments and tax strategy. I think you guys run a very unique shop there to something we don’t see a lot of. So I appreciate what you guys do. Thank you sir. Certainly learned a lot from you here today. If our listeners want to get in touch with you and learn more about you, what is the best way to do that?
Frank Hanna ([00:23:31]) – Uh, check out our website. Um, our Rev X Wealth comm. So Rev X wealth.com. Um, you can inquire contact all our contact information’s on there. If you want to get Ahold of us ask a question that rev wealth is all over social media to. If you want to search, follow us. There’s a lot of good content out there that we put out, um, from, you know, the ultra sophisticated maneuvers to just really good basics to follow.
Frank Hanna ([00:23:57]) – Um, but, yeah, happy to talk to anybody that’s out there. Answer questions, confident you get value out of a brief conference. Uh, conversation with us.
Sam Wilson ([00:24:05]) – Awesome. Frank, thank you again for the time today. I certainly appreciate it.
Frank Hanna ([00:24:08]) – Yeah. Thank you. Sam.
Sam Wilson ([00:24:09]) – Hey, thanks for listening to the How to Scale Commercial Real Estate podcast. If you can do me a.
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