Jack Heald: Welcome back everybody to the OZExpo podcast. I'm your host, Jack Heald. It is good to have you with us. On the show today. I have Lance Growth of, I believe you are the founder of, what's it called? Growth1031.
Lance Growth: Yup. Growth1031.
Jack: Well Lance, welcome to the show.
Lance: Thank you. Thanks for having me.
Jack: All right, so I'm going to jump right in. Your last name is Growth. Is that your given last name?
Lance: Yeah, I'm from the Island of Saint Lucia. I came here when I was seven. So, Growth is a traditional name.
Jack: Oh, is it? Okay. Well, it's almost like you were destined to be in this business, Huh?
Lance: Well, big thanks to my Mama.
Jack: Well, I always ask our guests just cause we like to get to know them. First of all, you've given a little bit, but let's get a little bit more. Who are you, where did you come from? How did you get here?
Lance: I'm Lance Growth. I was born on the Island of Saint Lucia, but I was raised in Hartford, Connecticut. I came here to San Diego because I went to Thomas Jefferson School of Law. I focused in property and tax law, which led me to the area of 1031 exchanges. And now it's kind of led me to Opportunity Zone.
Jack: What compels an otherwise sane young man to go into tax law?
Lance: A lot of people, when they want to go to law school, they had their ideas. "I want to be an attorney." And you know, we kind of have a conception of what it is to be an attorney based on television, and then you get in there and you start studying different areas of law, property law, tax law, business association, wills and trusts.
And no matter what you, you learn that you're going to have an affinity to one of these areas. Now as much as I want it to be a Johnny Cochran, you know, the glove doesn't fit. I quickly realized I had a bit of affinity for our property and tax law, and it mainly stems from just my fixation with the idea of owning land.
I was just fixated with it that, you can own a piece of the earth and you can transfer that ownership to your heirs and your children and your siblings. And I was just really fixated on it, and leaving law school, I got into a bit of investing and we were all ecstatic about it.
But then we started to do our numbers, we looked at the point of sale and the point of sale triggered such an enormous taxable event. We did what we were trained to do. We searched for solutions and in searching for solutions, I found 1031. Kind of researched it a bit and then looking for a job, I found myself being an exchange officer and just lived and breathed the field and then developed into an accommodator, and then started my own company. So, it all started from just learning my affinity in law school.
Jack: What was it, why was owning a piece of the earth? Why did that, why did that matter to you so much?
Lance: If you want the honest truth. My mom used to say I had an issue of going to bed because I was scared I'd never wake up.
Jack: That is cool.
Lance: It is not, it's actually terrifying.
Jack: Well, let me explain to you why I say it's cool. You know, it's so easy for folks to come on the show and talk about what they're good at, but people trust people that they know and relate to. And for you to be able to share a genuine fear, that's cool. And that's going to connect with people out there. There are good people who will contact you, we'll call you right you. Because of what you just said. That's why that's cool. They're going to go Lance's like me. Seriously, so, go on.
Lance: I appreciate that. Yeah. I had a bit of a constant fear of not waking up, which led to this fascination with life-and-death type things. And when I went to law school and learning about, you know, land, it was just, you know, the earth was here a long since before us and long since after us. And I was fixated with the idea of owning a piece of that, having my name attached to it, being able to share with me, and my children after me. And yeah, it was just that fear of, I guess that, made me a bit fixated on the idea of owning something that extended beyond my lifespan.
Jack: I gotta tell ya, I love that, that's the kind of thing that really catches my ears. Thank you for that. Seriously. So, talk about your company and the Opportunity Zone market. What is the slot we put you in? How you serve the market? What are you looking to do?
Lance: In 1031 I'm a facilitator. I mean, the IRS letter really requires by law that you use, you know, someone that is not a party to the transaction, so accommodators filled that role. We facilitate the entire transaction. Now, Opportunity Zones operate just like 1031.
So, you defer your taxes, they're just kind of 1031 on steroids where if you stay in the investment for these certain amount of period, an amount of your taxes become exempt. With the Opportunity Zone, what we're doing is we're basically a kind of conducting the same thing except without the legal requirement. Where we're educating clients that hear about these things, but they don't know the ins and out the detail. So, we're going to educate clients, hey, “This is what Opportunity Zone is, this is how it works, this is what to look for.”
And then what we're going to do is we have a ton of guys who are already setting up funds to start these investments. so we're going to connect these clients that are interested in Opportunity Zone. There the guys who have funds that are already set up to start investing because in order to invest in Opportunity Zone, you actually have to invest into a fund and the fund invest into the Opportunity Zone areas.
So, we're kind of doing the same thing as qualified intermediaries, except it's not a required piece. But we're mainly acting as consultants where we're educating these parties and through that add education when they understand a process, we're connecting them with the right parties that can help them, you know, make proper investment choices.
Jack: What are you seeing in the San Diego area in terms of Opportunity Zone activity? I know there's a lot of fund creation.
Jack: Are there shovels going in the ground yet.
Lance: I haven't seen too many shovels going in the ground. I'll say San Diego, a bit, slightly hesitant mainly because of all the ambiguity's and uncertainties and the actual code. You know, that the second round of regulations just got released about four or five days ago. So, they haven't, I haven't seen any actual shovels in the ground, but I've seen a lot of formation.
I've seen a lot of guys forming funds, getting ready to start moving and people are kind of just gearing up to start actually advertising to potential investors and just start actually accepting capital. So, haven't seen a shovel move yet, but definitely seen people gear up in preparation to start acquisition, building and getting things gone.
Jack: Is your customer base coming to you? Do they know about this without the advertising yet or is it something that we're, we're still in the evangelism stage for?
Lance: Yeah, we're still incorporating growth opportunities probably about a month ago. Within a week, our website it's going to be up, but the reason we did that is because Opportunity Zones is just another tax deferral program. So, we have about 16,000 people in our database, which we, on a regular shootout information. Hey, this is what's going on in the tax area, this is about investing, here is some information with 1031.
When the opportunity presented itself, we just put in the subject line, hey, also in this email is information on Opportunity Zones. So, once that occurred, once we put that in there, literally almost 20% of our calls now are questions about Opportunity Zones.
And so we realize we needed to be able to handle it, which is why we incorporated Growth opportunities. So, right now we're kind of all geared up for the big Las Vegas, Opportunity Zone Expo, to speak and share information. But from that point on we're going to be full-fledged, educating clients and trying our best to connect them to funds that we feel kind of meet some of the good requirements and proper business practices.
Jack: What are the criteria that you're using to judge and to vet, funds and fund managers?
Lance: Oh, that's easy. I'm actually just going straight off the IRS code cause the actual letter ruling doesn't make it a requirement. You know, anyone can self-certify and become an Opportunity Zone fund, but it gives good best practices like simple thing. Hey, if you're gonna invest in a fund, make sure those guys have a financial advisor on staff. Make sure they have a tax guy on staff. Make sure they had their going in real estate.
Make sure they have X experienced real estate developers and then people with that type of background. So, what we're doing is just making sure any by that we connect with that has a fund, that you know, they have the resources to handle not just the investment, not just a real estate portion, but the tax implications and finance implications that surround this thing.
Jack: Are you seeing any activity in terms of ongoing businesses? And I want to know is what are ongoing businesses doing in terms of taking advantage of the Opportunity Zone program, new stuff, whether that's moving, whether you know what's happening?
Lance: Well, I couldn't tell you in businesses because the difference with the Opportunity Zone what differentiates it from 1031 is 1031 as of 2000 as it a new tax cut and job act that passed in 2017. It made one minor change where it says, you know, 1031 now is only specific to real property, which limits to real estate. Now Opportunity Zones, that thing is just a blanket tax benefit to capital gains tax in general. So, that's business interest, you can defer your gains on stock, it's more than just real estate. Now, I couldn't speak towards what the business community is doing, because my lane really is real estate and I make it a point to stay in my lane.
Jack: Okay, fair enough.
Lance: Yeah. So, I can tell you what the real estate, but in terms of what people are doing in business, I haven't seen anything, but that's also a slightly biased because I make it a point to focus on real estate.
Jack: I think you just touched on something that is a significant difference between the 1031 and the Opportunity Zone program. Beyond the obvious differences, are there criteria that specifically will drive you to recommend Opportunity Zone investment over 1031 investment for a particular type of investor?
Lance: Yeah, absolutely. One type of guy that always comes to us, and I swear I saw who it is literally a 7-11 owner or a gas station, just so almost gas station guys where they want to sell the business and the real estate, but they don't look at it as individual entities. You know that normally the business also owns a real estate. And I always have to tell them, “Hey, I can only do the purchase contract for the real estate, the value of the business you have to go somewhere else.”
And I'll tell them, you know, “Go and see guys who do corporate filings and businesses associations.” But now with Opportunity Zone, I no longer have to tell them, “Alright, the sale of the businesses is segregated from the sale of the real estate.” Now you can tell him, “Hey, the capital gains tax and total for the sale of the business and a real estate can now all be deferred through this one option.” So, those types of investors who run businesses within the real estate they own, now they have a new option.
Jack: What are you most concerned about going forward with the Opportunity Zone? The guidance we got from Treasury last week helps a lot.
Lance: I have two concerns. One, there is an enormity of conversations around the technical application of this. Well, what if a person wants to move in and out? Okay, well what if they want to borrow against? Like all the technicalities. But I hear little conversation about kind of the spirit of why this thing was created. You know, cause this thing was built for the fact that during periods of recovery, certain areas receive a lot more attention.
And then the kind of the lower, rundown areas received minimal attention. And this was just a brilliant way to drive the best to target low income areas to help revitalize those areas. So, I'm kind of missing this, I hear about the amazing tax benefits and all the money that's going to be made.
But I don't hear so much of the jobs that’s going to be created, the communities that's going to be able to benefit, the impact that this could have on an area that's normally ignored. So, as one area that, concerns.
Lance: Yeah. So, the second are, that is, you know, self-certification is a little scary. I got guys that I connect with and work with like Morgan Stanley who has an entire army of attorneys, CPAs, tax guys. They have a large war chest of resources that are setting up funds.
But then you just have a random guy who reads an article setting up funds, maybe just flips one or two houses a year and now he can become an Opportunity Zone fund and I think it's going to be pretty scary where if he made a couple mistakes in year one, but goes to get the tax benefit in year 10 and 10 years later the investors that he got in year one are unable to obtain that benefit because of errors that he may have made in the beginning. So it's a little scary.
Jack: How do you manage around that? Well, I mean, you in particular, what are you doing to manage around that?
Lance: Oh, well, one we make it a point to tell, like we're mainly about educating clients and exposing them to the different options they have. We were, we make it a point like, “Hey, listen, we're going to educate you about this Opportunity Zone, but if you start looking for investing, it's up to you to do your due diligence.”
Now we actually shared information of fund guys. We're gonna do our best to do our own due diligence, but kind of add like an extra layer. Hey, we did our best to do our due diligence, make sure these guys are up to par, but we ask you to do the same, should you move forward and actually start investing.
So it’s basically adding a second layer of, research and, pretty much dig in deep into understanding these different funds. So, that's our thing is just making sure we do our research. And then when clients, you know, it's their time, they're actually serious about moving forward, encouraged to do their own due diligence as well.
Jack: Any big surprises that you've had so far as you've gotten into this business? By business, I'm talking about Opportunity Zones in particular.
Lance: The recent appointment of the new director? That was a big surprise.
Jack: Is Scott Turner who you're talking about?
Lance: Yeah, it shows that they're trying to put some measure of oversight because, I spoke in the expo in Los Angeles at Stable Center. And I remember the guy next to me and his field, he's big on compliance and then somebody from the audience asked them like, hey, so who's overseeing this?
Like, oh, you know, who's the compliance people? And he just said, I do not know. They're like, is it a SEC? Is it this is? Is it that? He was like, I don't know. I don't know. I do not know. And he was very honest about that. And it looks like they're starting to put some good systems and compliance regulatory rules around things to calm the fury of investors that are just seeing that amazing tax benefit.
Jack: So, let's step outside of business and just talk about Lance Grove. What other things are important in your life? Married? Have kids? Drive fast cars? Ride a skateboard?
Lance: That's funny. That's, you kinda just hit everything. One not married, two don't have a kid. Three, yes I do ride a skateboard.
Jack: Do you really?
Lance: Yeah. I'm staring at it right now. If this was on video, I would just turn the camera and you'd see it right in my…
Jack: Oh, That's cool. I assure you that that the Venn Diagram between people who ride skateboards and tax attorneys is very small.
Lance: Yeah. I grew up, riding motorcycles, so I always have a Yamaha R1000. You know, it's taken on the back roads when I need to clear my head. And, probably the biggest thing about me is I was a boxer before kind of the academic career. I was a state champion.
Jack: Really, a boxer. Ah.
Lance: Heavyweight 178 in Connecticut, 2006.
Jack: There's a different background. And the Venn Diagram just got smaller. Boxing, skate boarding tax accountants. Yeah. You may be the only one in the world.
Lance: I'll take it.
Jack: So, what are you best at? Let's think outside of business?
Lance: Uh, I'm best at connecting people, getting people together to work for a common good. I've noticed that.
Jack: That makes sense.
Lance: Yeah, I do a lot in philanthropy. A big part of my story is I grew up boxing, but front row all boxing matches were always businessmen and attorneys, one businessman was frustrated to see a lot of young African American males always only doing athletics or getting into trouble. So, you made an offer to me and said, you know, if you apply to college, I'll pay for it. He didn't think I would, but.
Lance: Yeah, I did. And then, you know, from a life of fighting, I go to, Tuggle College in Jackson, Mississippi to get my undergrad in political science. I go to Thomas Jefferson School of Law to get my law degree, you know, and now I'm here. So, that's probably a big piece of me.
Jack: I'm glad I scratch beneath the surface because that is, that's fascinating.
Lance: Oh, a little bit
Jack: It really is, I know as someone who's a connector, you recognize this intuitively, but the interpersonal things that really are what make, not just business, but life in general work. And we, so often, particularly when we're dealing in a technical area like investing like tax, it's really easy to forget that, mere expertise isn't enough to get the job done.
Lance: Oh, absolutely. Passion is the new currency.
Jack: All right, so what is it, what's something that drives you absolutely out of your mind?
Lance: The thing that drives me absolutely out of my mind, probably, just cause I'm sitting in my office is how real estate agents and brokers treat purchase contracts.
Jack: Talk more about that.
Lance: Well in law school, we quickly get debunked of what the contract is. Most people think of contract as piece of paper that, you know, documents an agreement. But you know, a contract is mainly an offer and acceptance by an offeree what we call them. And then that exchanges consideration, meaning, in their legal term, that's a meaning something of value. So, when we see these, these purchase contracts come across our desk and you know, they mess up the person's name and they don't have that amount correct. Or they don't have the date correct.
We have to remind him, “Hey, this is a legal binding document. This isn't, you know, a napkin for notes, it is a legal document that, that goes into their file and, and notarized for public record.” So, sometimes that can drive me a bit insane, especially when you see a client and you see a name is D. Tarell, and they spell it Dee Tarell, but the client's name is actually Daniel. If you're like, hey, this stuff is going to go on their title, I need you to spell this man's name. Right. I'm begging you.
Jack: That's good. Is this a quality that, that you were born with? And I'm just talking specifically about this attention to detail and…
Jack: Really, okay.
Lance: Yeah. I actually can openly tell you I am, I'm not that detail oriented. I am actually, I run a few companies and my brands sometimes scattered. My skill is that, when I went to law school, it is, you go in there, you can't work and you have to shut out the world. So, I quickly learned that once I'm, I don't have any distractions, I will overachieve. In a class of 180 I finished first, now because I can consolidate all my energy into one area.
When I focus, I'm, you know, I'm, I'm normally excessively better than the rest of the field. It's when I learned that, but when I get back out in kind of the real world and you have so many things coming at you, what I learned in building a company, is you have to put those pieces in place to offset, you know, any deficiencies you have.
So my team, they're extremely detailed and you know, I've trained them on what to look for and how to go about looking for, but personally it is definitely not a scale that I was born with. I just found the importance of that skill in law school, mainly because of a passion I had for this area.
They have this story about how a client had to pay $1 million because of a missed comma. And I remember how much that terrified me. So, I focused on detail on the importance of detail and law school. But, in our company procedures, I made sure that all the, you know, my exchange officers, my assistant, everyone has that naturally built into them. So...
Jack: What skills did you, did you take into this boxing ring that translate into this business?
Lance: That's an easy one. I'm used to an inhumane amount of pain to get what I want. So, tough times aren't really that tough for me. I stay calm under all types of pressure. It's actually the biggest thing. I know how to shut down my emotions mechanically to deal with problems I deal with. And we were always taught emotions is what make you expend energy at the wrong time. Like being in boxing, especially you fighting 12 rounds, three minutes with another man trying to literally render you unconscious.
You learn to breathe properly. You learn to understand his movement, understand what's he's trying to say in terms of his aggression. Is he tired? So, boxing taught me, to have endurance. It taught me, that pain is coming and you shouldn't be fearful of it. You should just learn how to adapt and move in a sea of pain while it's coming. And that those lessons I can tell you is probably the number one thing that makes me able to operate my business at the level that I do.
Jack: Well Lance, this has been really good. I appreciate it. Particularly kind of a peak under the covers under the person that Lance Growth is.
Lance: I appreciate that.
Jack: Before we sign off, if folks want to get a hold of you, find out more about how you can help them with Opportunity Zone investing. Um, what's the best way for them to do that?
Lance: Well, they can call our phone number. It's, we're located in California, so it's 619-991-1031.
Lance: And they can always go to our website, which is really simple. It's growth1031.com.
Jack: Very good. And I want to remind our listeners that as always, the contact information for our guests and all the contacts that we talk about on the show will be available on the podcast website. Well, Lance, any last words?
Lance: Uh, to everybody out there thinking about investing in Opportunity Zones. I say I please get moving. It's a once in a lifetime opportunity, I hate that word.
Lance: And to all the investors that they have, the guys who are setting up funds. as, as part of our, motto, what we're trying to do is always remind them that this thing is meant to benefit low-income communities. So, it may not be in any regulations in the code to require people to hire local people when they go in there and invest to give some value to the communities that they're going to invest in. But, once they dial in and as to how they're going to make money, make sure they segregate some time to benefit the communities that they're going into.
Jack: Well, thank you Lance. Um, I can I echo and second that well on behalf of Lance Growth with Growth1031, I am Jack Heald for the OZExpo podcast. Thanks for listening and we will talk to you next time.Announcer: This podcast is for informational purposes only and does not constitute legal tax or investment advice. For specific recommendations, please consult with your financial, legal, or tax professional.
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