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Spot on. Taxes have been missing from this entire HN discussion. A primary reason for investing directly in real estate (even in a syndication as a passive inve
by porter 9y ago
Spot on. Taxes have been missing from this entire HN discussion. A primary reason for investing directly in real estate (even in a syndication as a passive investor) is to get the tax benefits. For example, with the "eREITS" from fundrise mentioned above, these are just like public non-traded REITS (ie no depreciation, interest deduction, or 1031 exchange).
Often with a strong commercial real estate project you can show taxable losses but still get positive cash flow. Why? Because of generous IRS depreciation treatment of the improvements. Then, when you get to the end of the investment and you can sell it, you can just defer the capital gains taxes indefinitely by using a 1031 exchange. This can be done until you die, when your heirs will get your property with a "Stepped up basis", effectively eliminating the capital gains tax altogether.
You can't get this with REITS. Doesn't matter if they are publicly traded, non-traded, private, or the new fad eREITS.
- astura 9y agoThis is true, however, it has been missing from this discussion because its not on topic. The question wasn't "why is investing directly in real estate better than REITs?" it was not "why are eREITs better than a diversified REIT mutual fund or ETF?"
- porter 9y agoThere have been many questions about how these crowdfunding sites compare to a vanguard REIT index. Taxes haven't been mentioned. Don't be so pedantic.
- buxtehude 9y agoThe REIT, though it may not have the tax advantages you mention it is diversified. However, the tax angle is interesting. How easy is it to diversify with real estate syndication? Or so called real estate crowdfunding - which I assume are more or less the same thing?