About this episodeBen Malena discusses his strategy for navigating a $15 million potential tax bill through 1031 exchanges and r…AI summary
Ben Malena discusses his strategy for navigating a $15 million potential tax bill through 1031 exchanges and reverse 1031s, while predicting a market correction driven by high interest rates and commercial real estate distress. He emphasizes that finding deals with upside is the primary driver of wealth, advocates for multifamily investments over retail or office, and shares his philosophy on building a family business by giving his children early responsibility.
Key takeaways 9
Tax Basis and 1031 Exchanges: Deferred taxes from previous 1031 exchanges lower your cost basis. For example, if you bought for $10M but deferred $2M in taxes, your basis is $8M. Selling without a replacement triggers recapture of these deferred taxes.
Reverse 1031 Strategy: If you find a replacement property before selling your current one, you can use a reverse 1031 (or loan against the new property) to secure the deal, then sell the old property within the 6-month window to complete the exchange.
Market Distress Prediction: Malena predicts distress in the market starting with 'dogs' (overpriced, problematic properties) and those who bought during the low-rate era. Banks are currently delaying foreclosures to avoid recognizing losses on their balance sheets, but this will eventually lead to mass selloffs.
Retail Investment Strategy: The only way to make money in retail is to buy properties with vacant space. You buy based on current income (cap rate), but the value comes from leasing the empty space, effectively getting 'free real estate' and instant equity.
Avoid Office and Mall Investments: Malena avoids office space entirely due to remote work trends and structural decline. He also avoids malls, citing flawed designs (e.g., second/third-floor retail is undesirable) and the burden of common area maintenance (CAM) expenses.
Family Business Success: Malena attributes his success to involving his children early. He forced his son Ben Jr. to take over a 150-unit property at age 19 after seeing him party in college, which accelerated his learning curve and helped the business.
Tax-Free Income via Mun Bonds: Malena recommends tax-free municipal bonds as a safe way to preserve wealth. He explains that borrowing money (debt) creates tax deductions, which can be offset by investing the proceeds in tax-free mun bonds, effectively eliminating tax liability on that portion of income.
Florida Real Estate Challenges: Florida faces issues with rising insurance costs due to hurricanes and declining condo values (down ~20% from peak). High interest rates make renting cheaper than buying for many average buyers.
AI in Real Estate: AI is useful for contract review and underwriting assistance but cannot yet replace the human element of finding off-market deals or navigating complex negotiations with corporate tenants.
Notable quotes 5AI-generated: wording and quote attribution may be wrong. Use the play link to verify.
“The next deal is what solves all my problems. It defers my taxes and it creates more wealth. That's it. It's all about finding a deal with upside.”
▶ 0:19Malena explains his primary motivation for continuing to invest despite having significant wealth.
“You don't wait till you sell. You start looking when you think you know you're going to sell... If you find the right deal and you didn't sell yet, take out a loan. You could do a reverse 1031.”
▶ 3:42Advice on managing the timeline for 1031 exchanges to avoid tax recapture.
“The only way I've ever seen anybody make money in retail is renting empty space... You get free real estate because you're only buying based on the income it's generating.”
▶ 31:09Malena's specific strategy for generating returns in retail real estate.
“I'm done. Done. What made you realize you were done? Cuz I'd done enough... I want my kids to grow... I just want to retire.”
Malena discusses his decision to step back from active development and focus on preserving wealth for his family.
“If you buy a seven cap, you strong guys that buy shopping... could borrow in the low sixes... So basically they make a point spread on the bank and they'll make 7% on their return on their down payment.”
▶ 13:28Explaining how investors can still find cash flow in retail despite high interest rates by leveraging the spread between cap rates and debt service.
Chapters & Sections (76)▼
0:00Navigating Tax Implications in Real Estate Investingchapter3
0:00Real Estate Market Predictions and Tax Strategies
2:35Challenges in Real Estate Investment and Pricing
3:49Real Estate 1031 Exchange Process Explained
6:11Determining Worth of Properties for Salechapter2
6:11Determining Worth of Properties for Sale
8:43Banking System and Loan Risks Explained
10:43Commercial Real Estate Market Crash Predictionchapter3
10:43Commercial Real Estate Market Crisis Looms
12:28Predicting Market Trends and Real Estate Values
13:46Predicting Market Downturn and Distressed Properties
15:37High Interest Rates and Housing Affordabilitychapter2
15:37High Interest Rates and Inflation Concerns
18:05US Unemployment and Manufacturing Economy
19:54Real Estate Investing Strategies and Loan Optionschapter3
19:54Investing Strategies for Liquid Assets
21:17Optimizing Renovation ROI for Maximum NOI
22:50Real Estate Investment Strategy and Risk Assessment
24:13Investing in Undervalued Commercial Propertieschapter3
24:13Investing in Undervalued Commercial Real Estate
26:12Abandoned Malls and Revitalization Strategies
27:27Struggling Malls and Retail Spaces in America
29:35Making Money in Retail Real Estatechapter3
29:35Making Money in Retail Real Estate
31:22Real Estate Investing Strategies and Corporate Challenges
32:41Developer Tricks in Real Estate Contracts
33:51Managing Business Growth and Hiring Freelancerschapter4
33:51Managing Business Growth and Hiring Freelancers
36:27Real Estate Market Trends and Valuations
37:46Strategies for Selling a High-Value Luxury Property
39:03Downsizing and Lifestyle Adjustments in Home Ownership
40:18Living Arrangements and Unconventional Housing Solutionschapter2
40:18Living Arrangements and Unconventional Housing Solutions
42:30Retirement Goals and Financial Freedom Strategies
44:30Preparing for a Potential Market Downturnchapter2
44:30Preparing for a Potential Market Downturn
46:47Real Estate Pricing Strategies and Negotiation Tactics
48:46Benefits of Exiting Real Estate Investmentschapter3
48:46Challenges of Long-Distance Property Ownership
50:04Investing in Bonds for Financial Security
51:23Importance of Planning for Retirement
52:59Importance of Family Involvement in Businesschapter2
52:59Benefits of Family Involvement in Business
54:58Importance of Involving Children in Business
58:20Benefits of Dropping Out of High Schoolchapter2
58:20Benefits of Dropping Out of High School
1:00:22Parenting and Raising Children on a Limited Budget
1:03:38Benefits of Outsourcing Business Operationschapter3
1:03:38Importance of Efficient Business Operations
1:05:23Simplifying Business Operations with Payroll Software
1:06:38Criticism of Politicians Without Business Experience
1:09:14Impact of AI on Real Estate Dealschapter3
1:09:14AI's Role in Real Estate Deal Finding
1:10:58DIY Renovation Cost Savings Strategies
1:12:18Storage Unit Economics and Market Dynamics
1:13:34Storage Unit Auctions and Mortgage Regulationschapter3
1:13:34Storage Unit Auctions and Mortgage Options
1:15:00Mortgage Terms and Long-Term Property Leases
1:16:36Land Leases and Property Tax Implications
1:18:30Property Tax Burden and Economic Stagnationchapter3
1:18:30Property Tax Burden and Economic Stagnation
1:20:28Defining Quality of Life and Wealth Protection
1:21:51Challenges of Real Estate Investing and Management
1:23:14Tax Implications of Real Estate Investingchapter3
1:23:14Tax Implications of Real Estate Investing
1:24:34Real Estate Investing Strategies and Deal Making
1:26:30Real Estate Investment Strategies and Asset Management
1:27:59The Benefits of Owning a Luxury Yachtchapter2
1:27:59The Benefits of Owning a Luxury Yacht
1:29:59Luxury Boat Ownership and Lifestyle Preferences
1:32:29The Benefits of Borrowing for Tax Savingschapter5
1:32:29The Cost of Gas and Wealth Perception
1:33:47Tax Benefits of Leveraging Real Estate Investments
1:35:32Tax Reduction Strategies for High Earners
1:37:02Real Estate Investment Advice and Consultation
1h 59m⏭ 3
2h 20m⏭ 4
1h 38m⏭ 5
1h 30m⏭ 3
2h 34m⏭ 4
2h 7m⏭ 3
1h 50m⏭ 4
2h 10m⏭ 3
1h 44m
2h 11m⏭ 3
1h 46m⏭ 1
1h 56m⏭ 5
1h 7m
1h 12m
1h 0m⏭ 2
3h 16m
46m
1h 22m⏭ 1
2h 14m⏭ 2
1h 9m⏭ 1
54m
1h 37m
2h 48m⏭ 4
2h 9m⏭ 5
1h 43m⏭ 4
11h 54m
1h 0m⏭ 1
11h 54m⏭ 8
6h 26m
3h 59m⏭ 5
33m
3h 54m⏭ 7
9h 11m
3h 15m⏭ 1
7h 50m
46m