3 ms·

This is not true at all. Corporate loan rates are generally pretty damn high, only exceptionally can they borrow for low rates. Mortages however are a special c

by zipy124 10mo ago

This is not true at all. Corporate loan rates are generally pretty damn high, only exceptionally can they borrow for low rates. Mortages however are a special case since they are basically mandated to be low and safe by most governments in exchange for letting banks exist. Or in the US explicitily guaranteed through freddie mac and fannie may.

roboror 10mo ago
>This is not true at all. Corporate loan rates are generally pretty damn high, only exceptionally can they borrow for low rates. Are these companies going to banks and applying for a loan? I'd think they are privately backed and invested in.
- Havoc 10mo ago
  Privately backed isn't necessarily cheaper. In fact PE funds often have a big fat bank loan on their books because it pushes down the average cost
CGMthrowaway 10mo ago
You whiffed on the point (note the word "but" in parent comment). The depreciation strategies are where the real benefit is. PE buyers use 60% bonus depreciation and cost segregation studies to create a $70-80K writeoff on a $120K asset, which often larger than the check they cut for the property in the first place The final phase is to exit via UPREIT for OP units rather than cash, with the REIT getting a step up in basis that can be depreciated again, while still not triggering any capital gains for you until you convert
- JumpCrisscross 10mo ago
  > PE buyers use 60% bonus depreciation and cost segregation studies to create a $70-80K writeoff on a $120K asset Source? That looks like a juicy target for state taxation…
  - BeetleB 10mo ago
    Bonus Depreciation: https://tax.thomsonreuters.com/en/glossary/bonus-depreciation https://tax.thomsonreuters.com/en/glossary/bonus-depreciatio... Cost Segregation: https://warrenaverett.com/insights/what-is-cost-segregation/ https://warrenaverett.com/insights/what-is-cost-segregation/ I believe bonus depreciation is time limited (unless Congress renews it).
    - gamblor956 10mo ago
      Residential rental property does not qualify for bonus depreciation.
      - CGMthrowaway 10mo ago
        The building shell does not. But 5 7 and 15 year components (appliances, cabinets, carpet, site utilities, landscaping, fence, sidewalks, etc) are eligible, that is the point of cost seg
- PopAlongKid 10mo ago
  >create a $70-80K writeoff on a $120K asset, which often larger than the check they cut for the property in the first place They're only deferring the tax on $70-80K, correct?
  - BeetleB 10mo ago
    > They're only deferring the tax on $70-80K, correct? Yes, if they sell normally. But usually capital gains tax is lower than that on the income so overall they're saving. To be explicit: They use the $70-80K depreciation to offset their rental income (which often means they pay no tax on the income for that year and several years after). They'll pay it eventually when they sell, but at a (usually) lower tax rate. There are tricks like 1031 exchange to avoid paying taxes when they sell, but I don't know how depreciation benefits factor in to those.
    - gamblor956 10mo ago
      This is almost completely wrong. First, depreciation on real property is about 27 years. 80k annual depreciation indicates a 2.2m purchase price. Corporate capital gains don't get a special rate. They're taxed the same as regular corporate income. The 1031 like kind exchange is also very difficult to achieve as the bar is very high even under the Trump admin.
      - BeetleB 10mo ago
        > First, depreciation on real property is about 27 years. That's straight line depreciation. Look elsewhere in the thread and you'll see cost segregation and bonus depreciation. To give you an idea, I once invested $50K in a multifamily property and my depreciation for the first year was $18K. I never paid taxes on any of my income (but did pay more taxes when it was sold due to the lowered cost basis).

by zipy124 10mo ago

roboror 10mo ago

>This is not true at all. Corporate loan rates are generally pretty damn high, only exceptionally can they borrow for low rates. Are these companies going to banks and applying for a loan? I'd think they are privately backed and invested in.

Havoc 10mo ago
Privately backed isn't necessarily cheaper. In fact PE funds often have a big fat bank loan on their books because it pushes down the average cost

CGMthrowaway 10mo ago

You whiffed on the point (note the word "but" in parent comment). The depreciation strategies are where the real benefit is. PE buyers use 60% bonus depreciation and cost segregation studies to create a $70-80K writeoff on a $120K asset, which often larger than the check they cut for the property in the first place The final phase is to exit via UPREIT for OP units rather than cash, with the REIT getting a step up in basis that can be depreciated again, while still not triggering any capital gains for you until you convert

JumpCrisscross 10mo ago
> PE buyers use 60% bonus depreciation and cost segregation studies to create a $70-80K writeoff on a $120K asset Source? That looks like a juicy target for state taxation…
- BeetleB 10mo ago
  Bonus Depreciation: https://tax.thomsonreuters.com/en/glossary/bonus-depreciation https://tax.thomsonreuters.com/en/glossary/bonus-depreciatio... Cost Segregation: https://warrenaverett.com/insights/what-is-cost-segregation/ https://warrenaverett.com/insights/what-is-cost-segregation/ I believe bonus depreciation is time limited (unless Congress renews it).
  - gamblor956 10mo ago
    Residential rental property does not qualify for bonus depreciation.
    - CGMthrowaway 10mo ago
      The building shell does not. But 5 7 and 15 year components (appliances, cabinets, carpet, site utilities, landscaping, fence, sidewalks, etc) are eligible, that is the point of cost seg
PopAlongKid 10mo ago
>create a $70-80K writeoff on a $120K asset, which often larger than the check they cut for the property in the first place They're only deferring the tax on $70-80K, correct?
- BeetleB 10mo ago
  > They're only deferring the tax on $70-80K, correct? Yes, if they sell normally. But usually capital gains tax is lower than that on the income so overall they're saving. To be explicit: They use the $70-80K depreciation to offset their rental income (which often means they pay no tax on the income for that year and several years after). They'll pay it eventually when they sell, but at a (usually) lower tax rate. There are tricks like 1031 exchange to avoid paying taxes when they sell, but I don't know how depreciation benefits factor in to those.
  - gamblor956 10mo ago
    This is almost completely wrong. First, depreciation on real property is about 27 years. 80k annual depreciation indicates a 2.2m purchase price. Corporate capital gains don't get a special rate. They're taxed the same as regular corporate income. The 1031 like kind exchange is also very difficult to achieve as the bar is very high even under the Trump admin.
    - BeetleB 10mo ago
      > First, depreciation on real property is about 27 years. That's straight line depreciation. Look elsewhere in the thread and you'll see cost segregation and bonus depreciation. To give you an idea, I once invested $50K in a multifamily property and my depreciation for the first year was $18K. I never paid taxes on any of my income (but did pay more taxes when it was sold due to the lowered cost basis).