Dan Ihara

20 years. I've sold over a billion dollars of real estate over 1,600 units, and I've done over 400 1031 exchanges, and I've never failed one.

Ed Mathews

If you're within three feet of me, we're probably talking about real estate, much to my family's chagrin. But here's the thing. Most people see 7% rates and freeze. I see opportunity. They're waiting for the perfect deal, and well, I've analyzed thousands of them, and perfect just doesn't exist. So I talk to operators across every asset class, flippers, multifamily syndicators, note investors, and whatever else is working. No sales pitches allowed, just real lessons from people actually doing it. I'm Ed Mathews, and this is Real Estate Underground. Greetings and salutations, Real Estate Undergrounders. It is Ed Mathews with the Real Estate Underground. Thank you so much for joining us today. Today is is a really exciting opportunity to learn from one of the, one of the big ones in this industry in Dan Ihara from Keller Williams. Dan, thank you so much for joining us today. Oh, thank you so much. I'm really excited to have this conversation.

Dan Ihara

Thanks so much for having us, Ed.

Ed Mathews

Yeah. Dan, for those folks who haven't discovered who you are, why don't you tell them a little bit about who you are and what you do, and then we'll get into it.

Dan Ihara

Cool. I'm a 62-year-old realtor in Honolulu, Hawaii. I have a team, one of the largest teams in here in the market space. I'm also a national coach and trainer. I've done this for about 20 years. I've sold over a billion dollars of real estate over 1,600 units, and I've done over 400 1031 exchanges, and I've never failed one.

Ed Mathews

That's impressive. I think you're being a little humble, too, because you also were tapped by Gary Keller to train the top 1% of Keller Williams realtors- Yeah into helping them become wealth wealth managers, basically. Yeah. And in implementing the real estate planner program. Wealth planners, excuse me. And I was wondering if you could tell us a little bit about that and let's, Then we can talk about 1031s and Delaware statutory trusts and all that fun stuff.

Dan Ihara

Yeah. Four years ago, Gary said that you should probably explain to the world what you do and how you do it, and really that's what we did. What we... When I started in real estate 20 years ago, I realized in order to be successful, I had to find listings, I had to find business. And then I realized that, and this is 2005, right? Okay. I realized that I needed to go in a market that I could solve the biggest problem they had. And so what I found is the biggest problem people with wealth and with real estate have is they're worried about the family dispute after they're gone- Yep because they don't have a plan. Yep. And they're worried about taxes, right? They're worried about capital gain taxes. Yep. So that's why I dove into the 1031 exchange and became the expert there. But four years ago, we started a community within Keller Williams. There's now 500 of them that we train twice a week in helping families build, protect, and pass on wealth. And it falls into a number of pillars. One is senior relocation. Because at some point, an older adult's home is not gonna work for them, right? And so they have questions. Where do I go? How much does it cost? What does life look like? How do I get there, and who can help me? And so I solved that problem. And remember in the times of'07,'08, and'09, two, 2007,'08, and'09, w- we were in the middle of the downturn. Yeah. And those of you who understood real estate at the time, it was a tough time for many folks. Our business kept growing, 20 to 34% every single year we grew while everyone was getting out of the business. So it was really because we solved a problem. We weren't here selling anything. Yeah. We were just identifying a problem and then solving

Ed Mathews

it. So let's talk about that problem. Yeah. Tell me all about it.

Dan Ihara

What's gonna happen is should we all be blessed to live long enough, we're gonna need some level of care. As long as we can agree to that, then you're gonna have to figure out, okay, what's that look like? Now, we all have parents. We all have aunties and uncles. So think about that. Think about when they can't stay home, what happens? They get stuck. Yeah. They don't know where to go. They don't know what kind of... They don't even know how much it costs. So I became the expert in that. I studied it, right? And everything that I do is I focus on that solution, and I became the solution. I even started a company called Senior Move Managers and Declutter Hawaii, where I actually went in and physically removed the personal belongings that they didn't want, right? So we became that solution. We had a property management firm. Why? Because they had investment properties. Yeah. So we solved all of their problems. And in our earlier days in, in the early 2000s that was our main gig. We partnered with retirement communities, and they had problems of getting people in, and we became the solution. So they called us. But then, Ma- Ed what happened over time is we asked a simple question, and the question was,"Do you own more than one property?" And we were blown away. Most of them did. Why? Because they built wealth over time, right? And they had investment properties. They didn't call them investment properties, they called them their other property. Because in, back in the day, you know what happened is people would pass away. So I'm talking to a 70 or an 80-year-old, but their parents passed away a number of years ago. They got that one, too. They're not doing anything with it, right? It's just another vacant property that they don't know what to do. So we became that solution, right? What do you do with your other property? And in our... we... I- in that process, we realized there's questions we want to ask, right? Do you need the income from that property to sustain the life you desire, right? And if the answer was yes, we would go make them more money." We'd sell the property, re- repurpose that asset into an asset that's gonna generate more income. Most of them, though, they didn't really want it anymore. They didn't need it. They just didn't want to pay capital gains tax. So that's why we became the expert of the 1031 exchange. We partnered with an attorney, and he taught us vast number of ways you can do this. So- And-

Ed Mathews

Yeah, so let's talk about the greatest hits, right? There's 1031 exchanges. There is Delaware statutory trusts. There's stepped up basis upon, the owner dying. What are some of the things that... What are some of the considerations that that you go through and take a client through to kinda help them think through what's best for them?

Dan Ihara

Yeah. And everything we do is really about a question. So the question is, do you need the income? If the answer is no, at the... Here's my other question, is at the end of the day, when you're gone, who gets what? People don't have a plan. They just think- Oh my kids are gonna share it. The data says that 70% of families fight over real estate after their parents pass away. True statement. That's our mission. Our mission is keep the family together, keep the money in the family, prevent the family dispute and the taxes associated with that. Yeah. Failure to have proper property decisions around their assets, right? So let's say they don't need the money, right? And they said they wanted to give it to the kids. Our next question is, if you could bless them today, would you? They all say yes, but they don't know how to. So we designed this process called a pre-inheritance plan. It's an inheritance plan that you design today while you're alive, and you can even execute today, but the properties don't transfer until demise, till they pass. So you get a step up, right? But you can do a 1031 exchange. Here's one of the challenges in today's world, Ed, is that back in 1990 50% of 35-year-olds owned their own home. Today, you know what it is?

Ed Mathews

I bet it's half. 7%. Seven?

Dan Ihara

Wow. No. Only 7%. Yeah. Why is that? Because the, their income didn't rise to the level of in, in- inflation of values of real estate. They're not savers, they're spenders, right? And so they can't buy'cause they don't have a down payment. So what we're doing is we're helping older adults unlock wealth and reposition it to what matters most to them. So imagine somebody has a$2 million property and they have two kids, and the two kids don't get along already, so that's gonna be a problem they can see- Sure it's a train wreck ready to happen. So what we do is we unlock the wealth, we sell the$2 million property, and we buy two properties. We let the kids be on the selection committee for the 1031 exchange. Mom and dad still own it. Doesn't transfer yet, right? Stays in their name tax-free. The kids can even live in it. They could even invest with them. They could buy a$2 million asset, use the million as a down payment. And therefore- Prevent family disputes, prevent painful taxes. This is what we call a pre-inheritance plan. And then upon their demise, we go back to the attorney, we rewrite the trust to, to indicate this property, it goes to this person upon my demise, then you don't have a problem.

Ed Mathews

So educate me on this, and I'm not asking for legal advice, nor are you offering it, right? But the 1031, my understanding, and I've o- I've only done two in my own career but those were rental based, right? So it was a little more straightforward. How does a 1031 work if, say, for instance, mom and dad have a, an other, another property, say it's a vacation home. And they want to do the, m- use the 1031 mechanism that you're describing here. Like- what are the mechanics of that?

Dan Ihara

Sure. Number one, if it's a vacation home, they cannot have resided in that home for greater than 14 days. Number one. Okay. If they did, y- you're gonna d- get disqualified. Okay. It's gonna be, But if they have not lived in it for, or resided in it within 14 days, now it's a true investment property. What they wanna make sure they want, did is they pay the tax on that income, right? So the IR- anytime the IRS gets income tax money, c- what do they think? You got an investment property, right? What else do they think? So now they know they have an investment property. You sell that, do a 1031 exchange, buy another property, right? That you do not live

Ed Mathews

in.

Dan Ihara

And you pay the tax on the income from there as well.

Ed Mathews

Yeah. Okay. Understood. A- and so when you're looking at a potential management situation, right? Or a planning situation, and you're looking at it from, what's the best vehicle when you look at a 1031 kind of along the lines of what you just described versus a Delaware statutory trust or another vehicle, what are the things that you consider when you're asking these questions? What are some of the things that need to be considered?

Dan Ihara

So it's really simple. Do you need the income? It's, if it's yes, we're gonna go make them more money. If it's no, we're gonna bless their family. But here's the other thing is some people say,"Ah, I don't need the income, but I appreciate it." My next question then is, would you like to be an active investor or passive one? When they're over the age of 60, my age and older you don't wanna be an active investor. You don't need to be. 50 as well. You don't, you wanna be passive, and that's where the DST shows up, Delaware Statutory Trust. Because in many markets, in our market alone, I can't get them 5%. The DSTs now are producing that. No headaches, no hassles. That's a net number. It just show... it's like an annuity, right? Just shows up every month. That's what they, that's what they desire. I would say more than half of our older adults, they go in that direction.

Ed Mathews

Interesting. Interesting. And then, y- in terms of the other types of vehicles that you help customers with, can you tell me a little bit more about that?

Dan Ihara

I- in our market, you've got long-term rentals and short-term rentals. Yeah. So short-term rentals, you're gonna get about 2 to 3% higher rate of return, right? You can go to other parts of the country. I own a couple properties in Alabama and in Georgia. I got a bunch of properties. I'm getting 14% there, right? Yeah. And so you could do that depending on the level of risk tolerance, right? So are you the type of person that is concerned you need to drive by and see it all the time? If the answer is yes, I'm not gonna even offer that Al- Alabama-

Ed Mathews

alabama is out of the

Dan Ihara

question, in my market, right? But if they say,"I just wanna generate more money," then I ask them if you'd like to consider that. And if they do we have some people that we partner with all over the country, because we sell properties all over the country to help them do that. You can do oil and gas. There's pros and cons with that, right? Yeah. You can do trailer parks and homes. You could do that as well. Most of our clients are not doing that because they're older. They want simple. They don't want... They want low risk. They want stable income, and that's why the DST has been our most go-to asset class. But the problem with the DST is that when it matures, you gotta do another 1031 exchange, right? That thing's gonna mature three, five, seven, 10 years. We don't know. We... And we don't even offer the DST if we ask, when we ask one simple question, do you believe you need to touch the principal in your lifetime? If the answer is yes, I'm not even gonna bring up the DST. Why? Because I can't promise they can get access to it. Yeah. And so they say I'm never gonna need to touch it, but I don't wanna do another 1031 exchange," then we look at the 721 UPREIT as that solution. Okay. So- Because once you own- Tell me more about that So the 721 Up- 721 is the tax code. The REIT is the actual product. But in order to get to that REIT, you can't go directly from a 1031 exchange into that. You have to go to the UPREIT process, which is you buy into a DST that is predetermined to be purchased by a REIT at some future point in time. You can't control that. The good process and the reason why our clients are doing that is they don't wanna do a 1031 exchange again. And once you go t- from the DST to the REIT- You'll never do one. It stays there until your demise. The other reason why it's good is upon your demise, your kids just send them a death certificate, and then they're gonna- y- you get a stepped up basis, and within 90 days you get all the money tax-free. The other pro- benefit of the UPREIT is you have access to 30, 40, to 40% of the equity, and it tax-free. So liquidity quickly upon your demise, little bit of access, and you never have to do a 1031 exchange again. That's why we have some clients who are going that path.

Ed Mathews

Okay. So how do you access that equity? Is it a, Are you borrowing against the asset, or is there some other way?

Dan Ihara

Oh no. You're just selling something and you're putting all the proceeds into... Most of our clients, they don't have a mortgage. Okay. They're older. They've had the property a long time. They're debt-free. If they have a mortgage, there are some small percentage of these DSTs that have leverage DSTs non-recourse loans on them- Yeah so we do that as well so that their mortgage completely goes away.

Ed Mathews

Interesting. Interesting. A- and y- when you look at the various types of ways to help folks, and obviously in our audience we probably have a wide range of folks who are paying attention here. A lot of them, I suspect, are the kids of these parents, not necessarily the parents. Not a lot of 80-year-olds listen to podcasts as far as I'm su- as far as I can tell. Definitely not this one. And the, so I- I'm curious about how to educate... f- let me give you an example. So when my grandparents were getting up into their late 70s and early 80s, my grandfather pulled me aside and said,"Okay, hey..." Now, I'm the e- eldest grandson, or grandchild, right? And my mom didn't wanna have anything to do with the estate. And so he pulled me aside and he said,"Hey, when we pass, here's what I want." And I stopped him and I said,"Look, unless it's in writing, there's nothing I can do to help you." And through a conversation over a cup of coffee realized they didn't have a will, and they had... they had a house and retirement and all that, and they were still very healthy, both of them. And so I introduced them to an attorney and said,"Okay, attorney, these are my grandparents. Take good care of them." And I got up and walked out and let them have a conversation. And s- six, seven, eight years later when they passed is when I reviewed the documents that they had they had created. But that story- when I've told that story in the past, I get a lot of people going,"Yeah, I'm in the exact same situation," right? We have parents or even grandparents who have y- my grandparents were era folks, right? So- the way that they passed on assets was they added my mom to their checkbook. Which, yeah,

Dan Ihara

You can name a beneficiary to a bank account. But if you own real estate, and if it's not in a tru- see, the will's not gonna help you if you don't have a trust. If it's, if your assets are not in a trust, it's gonna go through probate. What is probate? It's a legal court process. A judge will make a decision. All of your assets become public. It's very expensive, tens of thousands of dollars in many markets, and months of time for the person you love the most.

Ed Mathews

Right.

Dan Ihara

That's the problem. So we always strongly recommend after you buy a home, if you're gonna get a mortgage, you gotta keep it in your name,'cause they won't... The lender won't let you buy it in a trust, the name of the trust. But after you close, transfer that into the trust, right? Because a trust is the only way it'll protect it from probate. The other way you can protect it from probate is a transfer on death deed, a TOD.

Ed Mathews

Yep.

Dan Ihara

If you name your asset in the name of a beneficiary transfer on death, then you're safe as well. But those are the two main ways to prevent probate. If you have some level of wealth, if you own a$50,000 house, yeah, do a TOD. But if you've got millions of assets and millions of dollars of assets, you're not gonna want a TOD. You're gonna wanna have a formal trust. You're gonna have a lot of trust attorney. But you also wanna consider, when you start building real wealth estate taxes, right? There are federal and state limits to this, that upon those limits, you're paying 40% cap- estate tax. Significant. Yeah. So many of our clients have significant wealth. We're talking north of$30 million of wealth. Yeah, y- you better plan that well,'cause otherwise your family's not gonna see that money. In fact, what's gonna happen, it's gonna put a burden to their family,'cause they're gonna have to... They're gonna require to sell something to pay the tax-'cause they're not gonna have the money to do it.

Ed Mathews

Yeah. And writing a check to the state or federal government for$12 million hurts a lot. Yeah.

Dan Ihara

Oh, yeah.

Ed Mathews

Oh, yeah. Yeah all right. Dan let's get into the final five, and let's talk about how y- how your head works. Obviously you've been very successful both in corporate America and here working for the Keller Williams organization. And, I suspect that you're not re- hopping in your car and driving to work every Monday morning because you need the gig, right? You do it for another reason. And I'm curious about that purpose. What gets you out of bed on Monday morning?

Dan Ihara

We're financially stable. You're right, I don't need to work, but I enjoy it, and I really believe God's put me on this planet to change the lives of those I touch. How do we do that? By preventing that family dispute, keeping their family together.'Cause when I ask older adults"Do you have a plan such that when you're gone your kids don't fight?" Nobody says yes. And so we're on a national mission to change that. We're on a national mission to change that statistic of 70% of families fighting by keeping their wealth in their family and c- creating a plan such that it's gonna accomplish this goal at the end of the day. There- there's two guarantees that we give folks. Is there's, the first guarantee is I guarantee you there will be a day and time that you and I, we're gonna leave this planet. We're gonna die. That's a guarantee. The second guarantee is I guarantee you there, that's the date of transfer of wealth, when the last person, survivor, dies. And if that's the case, and it's, you know it's gonna happen, what's your plan? So for those of you who are younger, think about your parents, your aunties, your uncles, what's their plan? If they don't have one, they may wanna consider looking into that. Yeah. We, that's why we wrote the book Property Decisions: Avoiding Feen- Feen- Avoiding Family Disputes and Paying Full Taxes to Create a Legacy that Lasts.

Ed Mathews

Yeah, so that's coming out in February, so we're recording this right at the end of January. Can you tell me a little bit about that book?

Dan Ihara

Yeah. We're really blessed. Gary Keller's been my mentor, and he encouraged me to write the book, and we did. And fortunately, he wrote the forward in it. It's a page and a half in our book. He's on our cover. And I, and if we got time, I could read you some of that. But it's so powerful because this guy had the front seat, front row seats to f- five decades of this happening, and yet this is the first time the solution has come out to the world. And so he's encouraging people to grab ahold of the book. It's available now in pre-orders through Kindle. It'll launch on February 23rd, 99 cents for an e-book. We're not here to make money on this. We're here to change the world, make this as easy as possible for people to understand that you can prevent your families from fighting if you make good property decisions.

Ed Mathews

Excellent. All right. And so you mentioned Gary has been one of your mentors. I'm curious about... And it doesn't necessarily have to be from Gary, but I'm curious about the best advice you ever got and who did give it to you.

Dan Ihara

I think that and it sounds simple, but the best advice is stop being the judge of life. Come from curiosity over judgment. See, we all become a judge of something, and it could be from not only your client, but it could be from a sibling, it could be from your parent, could be from a spouse. We become a judge of what we see. Sure. But we don't really know what's behind that. And so over the last 10 years or so, my, my life and my mind and how I show up is quite different. I ask a lot of questions because I'm curious. I cannot be the judge. And when I ask questions, I learn something, and I help people self-discover what they want, not what I wanna tell them they want-

Ed Mathews

But

Dan Ihara

what they truly want. And you know what? Here's the funny thing, Ed, most people don't know, so I keep digging until they do know, and they appreciate that.

Ed Mathews

I learned something from one of my mentors actually asking the seven whys, right? And it's... are you familiar with the exercise? No. So basically you ask a basic question,"Why do you wanna retire?" And they'll answer the question, and then you ask, based on their answer,"why is that? Why do you want that?" And you go down to the seventh why, and by the seventh why, that is the core typically of, six, seven, eight. That's the core of what's really driving them, right? That's- that's what we're trying to get at. That's the juice, so they say. And it's... I couldn't agree more. I tell my kids every day everybody's dealing with something, right?

Dan Ihara

Yeah. So my, my, my methodology is a little different. Similar, but a little different, but...'cause I change, I take the word why out. Why makes people defensive. Yeah. How come? What is a forward asking question, right? So what's causing you to do this? And the, there's always a cause. So words matter, right? What's causing you to do this? They're open to tell you. But if you ask your kid,"Why did you do that?" They're, they,"I didn't do that." It's like- right? But what's causing you is,"I had a reason of doing this, you just, I didn't ever, you never asked me the right question." And so that's why my, my model is what's causing you.

Ed Mathews

I like that. I'm gonna borrow that.

Dan Ihara

Yeah. Absolutely.

Ed Mathews

Thank you. Obviously you've been doing this for quite some time and you're not perfect. No one is. I'm curious about a decision that, as you look back on your business career, you look back on, on the decisions that you've made and I have my, I have a list as long as my leg of decisions I would love to have back. And I'm curious about a, a decision that you made along the way that, knowing what you know now, you look back and go,"Man, I'd love to have that one back."

Dan Ihara

I, I've been really blessed. A lot of things have worked for me in my life. I'm more cautious than o- not, but I think the biggest problem, and it goes back to the same thing we talked about earlier, is I made the judge of people, and I was wrong, right? I, my, my judgment was wrong'cause I didn't ask the right question. I didn't... It's almost like I didn't care, but I did, I just didn't know how to ask it. And as I started learning that, I always asked my question, myself this question,"What's the question I didn't ask that I should have?" And when I started doing that, I realized, wow, I can ask myself better questions. That means that if I can ask myself better questions, that means I can ask other humans better questions.

Ed Mathews

Yeah. That is profound advice. That's wonderful. So I'm curious how you take in information and, obviously you're someone who continues to learn. So what's the book on your nightstand? Who are you paying attention to these days?

Dan Ihara

There's a number of folks that I'd say Gary's one of them, obviously,'cause he's written a number of books. Sure. John Maxwell, I'm a fan of him. And Mel Robbins. I listen to a lot of podcasts'cause I have a sa- I have an infrared sauna that I sit in every day for 20 minutes, so I can listen to pod- I listen to yours. Thank you. And and that's kinda how I take it in. I do read, not as often as I want to. But I read'cause I travel a lot, and I, and on, on an airplane a lot, and I'm in the most remote place on the planet. So I got at least five hours. Yeah. So I do read on the airplane.

Ed Mathews

Excellent. And okay. And then I'm curious about how you define success in your own life.

Dan Ihara

To me, it's pretty simple. Success is I get to do what I wanna do, when I wanna do it, with whom I wanna do it with. I feel like I've arrived there because I, I... Last year we cut down, two years ago I was traveling 167 days. This last year I traveled only 112 days. Only. Cut it back because it was, I, I've been around the planet 45 times. And I, a lot of that's for fun. I surf in Mexico three times a year. I snowboard in Japan once a year, and I'm traveling and teaching all over the country. And so yeah I have a, in my world, a dream life. I got a beautiful home. I've got a wellness center in my backyard where I have a swimming pool, jacuzzi, infrared sauna, and a cold plunge.

Ed Mathews

Wonderful. Sounds nice. Thank you.

Dan Ihara

The other way I define it is I watch every sunrise and sunset till I die, and surf every day till I can't.

Ed Mathews

That's great so Dan, when you're not talking about real estate, I have a feeling how you're gonna... I have a feeling I know how you're gonna answer this, but when you're not talking about real estate what else do you like to do for fun?

Dan Ihara

I'm a water guy. I live on an island. I feel like my body needs salt water every day, and my body needs to see the sun every day. So again, I g- what I have a simple life. I work from maybe 8:00 to 4:00 or 5:00 and I'll watch the sun rise and the sun set. It's five minutes from my house and it just brings me peace.

Ed Mathews

Wonderful. And so Dan if someone wants to learn more about you or your business what's the best way to do that?

Dan Ihara

You can look me up. You just put Danny Har anywhere, you'll find me. Google me. There will be a site coming up now, it'll be called dannyhar.com, where you'll have access to free training for consumers, and certified training for professionals and access to, to buy the books.

Ed Mathews

Wonderful. Dan, thank you so much for joining us today. It's really a pleasure and an honor to have you on the show. Thank you again.

Dan Ihara

Thanks so much, and I appreciate it.