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New real estate syndications experience the same tax issues. We know because we have helped hundreds of general partners through their first few deals.

This video provides you with three high-level tax tips to use for your syndicated real estate deals to better optimize for taxes. We cover developing a general tax plan, using cost segregation, and the business interest limitations.

If you are a general partner and wanting to learn more, join us for a FREE Virtual Workshop tailored to deal sponsors: https://www.therealestatecpa.com/synd...

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Transcript

Are you syndicating real estate deals? If one of your prospective investors came up to you and asked you how you plan to mitigate the Business Interest Limitations, would you be able to answer them confidently?

I'm Brandon Hall, CEO of The Real Estate CPA and today I'm gonna give you three tips on how you can talk more confidently to your investors about taxes and ultimately raise more capital.

Before we get started, check us out on YouTube, subscribe to our channel, you'll get notified whenever we produce new content and if you like what you're hearing, check us out on a virtual workshop at www.therealestatecpa.com/virtual-workshop.

Alright so tip number one is to always have a tax plan. I know that that sounds silly, but we work with so many syndicates that come to us after they're purchased their deals and they don't have a clue as to what they need to do with their taxes. So, the very first thing to do is to get with a CPA and make sure that you have a tax plan in place so that you can talk to your investors about exactly what you're gonna do to mitigate their tax bills.

Tip number two is to use cost segregation studies. If you've used a cost segregation study in the past, comment below with yes. If not, comment no. This will help me produce better content in the future. A cost segregation study is the practice of assigning value to all of the property's components. Generally speaking, when you buy a property, you depreciate it all over 27 and a half years for residential or 39 years for commercial property. That's a long time to recover the cost of some of the components of the property that are gonna wear out way before 27 and a half years or 39 years. So a cost segregation study takes some of that purchase price and it allocates it to five year, seven year and 15 year property. Five year property is personal property and 15 year property is land improvements. After that allocation is done, you actually depreciate your property over that time frame.

So in the first five years after you have a cost segregation study performed, your depreciation annually is way higher than it would have been had you just depreciated everything over 27 and a half years. And there's one big added benefit for cost segregation studies, thanks to the 2017 Tax Cuts and Jobs Act and that's 100% Bonus Depreciation on any component with a useful life of less than 20 years. So if the point of a cost segregation study is to identify and assign value to five year, seven year and 15 year property and then you can use 100% Bonus Depreciation in the very first year to immediately write off all property with a useful life of less than 20 years, you can see that a cost segregation study can be extremely valuable for any multi-family syndicate.

Tip number three is to have a plan for the Business Interest Limitations. If you're standard syndicate, most likely more than 35% of your entity is owned by limited partners. In any year that you have passive losses, you're gonna be considered a tax shelter, which will automatically make you subject to the Business Interest Limitations. The Business Interest Limitations significantly limit what you can deduct of your mortgage interest. So it's a really good idea to have a plan in place to mitigate the potential downsides of the Business Interest Limitations.

Thanks for watching. Make sure that you comment, like, subscribe, share this video with everyone. I really appreciate it.