Message From the CEO
One of the many advantages of real estate ownership is the tax benefits.
Syndications establish a business owned by the managing partners and investors. This structure creates tax advantages that reduce taxable income, effectively increasing the rate of return for investors without affecting the profitability of the investment.
Depreciation is one of these valuable tax advantages because it allows us to deduct property expenses and improvement costs. Businesses typically subtract 100% of operating costs and depreciate capital expenditures, which includes all property expected to last more than a year. Depending on the asset, deprecation can last up to 39 years.
In 2015, the Tax Cuts and Jobs Act expanded Bonus Depreciation to 100% of the purchase price on qualified assets. The ability to fully depreciate property in the first year of ownership benefits investors because of the shorter hold period. The depreciation schedule falls to 80% as of January 1, 2023, and declines further until 2027, when the bonus depreciation provision ends.
At McKee Capital Group, we maximize bonus depreciation by conducting a cost segregation study on our properties. We can then deduct individual components of the multifamily complex that qualify for the bonus depreciation, giving us a significantly larger depreciation deduction in the first year of ownership.
We can apply the 100% bonus depreciation to any purchase closed by December 31, 2022. In late September, we will buy our last multifamily complex for 2022, giving investors one final opportunity to benefit from the 100% bonus depreciation tax benefit.
Financing Options for Multifamily Real Estate Transactions
There are two major roadblocks to buying and owning commercial real estate. The first is coming up with the required down payment, and the second is financing. Real estate syndications effectively address the first issue by creating a company that pools resources with other like-minded investors. The second is trickier. Our most recent blog explores multiple ways managing partners finance multifamily properties. Read More
Financial Metrics Used to Vet Commercial Real Estate Properties
When it comes to real estate, the mantra is location, location, location. While a property’s address is an essential consideration, financial metrics play a prominent role in deciding which deals are worthy of your capital. The financials, based on projections, demonstrate the long-term profitability of a project and establish the returns you can expect. Learn more about the most critical financial metrics used when vetting multifamily commercial real estate. Read More
Commercial Real Estate Multifamily Investment Terms You Need to Know
Understanding frequently used terms in multifamily commercial real estate can be confusing because many are not used in everyday interactions. If you are perplexed by some of the terms used in real estate syndication discussions, we are here to help. Our most recent blog defines standard terms used when discussing multifamily real estate syndications. Read More
How Sponsors and General Partners Structure Real Estate Syndications
Commercial syndications allow everyday investors to participate in multimillion-dollar real estate deals. The business structure protects investors from losses. But how managing partners and investors get paid directly impacts the profit potential of any investment. We break down typical fee and payout structures, providing insight into management costs and profit distributions. Read More