The Benefits of Investing in Commercial Real Estate

Over the past nine years, commercial real estate has consistently out-performed stocks and bonds. If you look at when the downturns took place, commercial real estate had one quarter of the ups and downs that stocks and bonds had. For that control, for that consistency, we really like commercial real estate. I think the metric was during the last downturn, the national default rate was somewhere between four and four and a half percent for residential mortgages. The national default rate from multifamily was 0.4%, more secure, much more consistent. And that's what we're looking for. A fourth benefit tax rig.

Commercial real estate is the most tax advantage investment class that there is. There’s appreciation, which means over time we know that real estate grows. Depreciation, which means you get to write off a good percentage of the assets over a period of time, and we do some acceleration on those depreciations. Then you have your interest expenses, like your home when you get to write off your mortgage interest, it’s the same thing with commercial real estate. Kind exchanges, when you sell a property, you don't necessarily have the ability to sell a mutual fund and have a kind exchange like you do with commercial real estate. So if you take your profits from one asset and move it into another, there's some terms and timeframes that you have to abide by, but you can defer those taxes even further down the road. Speak to your CPA.

Here's our disclaimer, we do not offer tax advice, but we can tell you that historically our investors are able to write off $37,000 per hundred thousand invested in year one. That's through our cost segregation study. If you partner with us, we'll certainly be able to talk to you more about that and we'll get on the phone if you'd like with your CPA.

Here's the picture that makes me get up in the morning, what we're really looking to do is truly passive investments. The last 10 years we've dug into residential real estate and it's been great for us, it brought us to this area and we're grateful for that business because it allowed us to see the light and get us to where we're at. But it is not passive, it is a very active business. We're always buying, selling, flipping, renovating properties.

The goal with these larger assets is to be able to hire professional third party managers, meaning no clogged toilet calls if you own any single, two, three, four family or larger rentals. Plus, you're still playing landlord, we don't want to do that. We have professional third party management economies of scale which allows us to afford those and then mailbox money. Our goal is to be able to get those quarterly distributions every single quarter. Warren Buffett said that “if you don't find a way to make money while you sleep, you will work until you die”, we are interested in how this relates to retirement.

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