Invest Real Estate

A Triple Net (NNN) Lease is a commercial lease agreement where the tenant is responsible for not just the rent but also three additional costs: property taxes, insurance, and maintenance expenses. This lease structure provides landlords with a predictable and stable income stream, as tenants bear the operational costs of the property. NNN properties are typically long-term, low-risk investments, often involving retail or industrial properties with strong tenants, making them attractive to investors seeking passive income. 

A Delaware Statutory Trust (DST) is a legal entity that allows multiple investors to pool their capital together to invest in large, institutional-quality commercial real estate. DSTs are commonly used for 1031 exchanges, enabling investors to defer capital gains taxes when reinvesting in properties. Each investor owns a fractional share of the property, receiving proportional income from rents and potential property value appreciation. DSTs are often used for passive real estate investments, providing diversification and professional management without the hands-on involvement of the investor. 

Real Estate Syndications involve a group of investors pooling resources to invest in larger commercial properties, typically under the guidance of a sponsor or syndicator who manages the investment. Syndications are usually structured to allow investors to share in the income and potential appreciation of the property. Investors contribute capital, while the sponsor manages the property and operations. These investments can be ideal for individuals who want to invest in larger properties but lack the capital or expertise to do so on their own. Syndications offer access to properties like office buildings, shopping centers, or apartment complexes. 

1031 Exchange

is a tax strategy that allows real estate investors to defer paying capital gains taxes on an investment property when it is sold, as long as the proceeds are reinvested into a "like-kind" property of equal or greater value. This mechanism, named after Section 1031 of the U.S. Internal Revenue Code, enables investors to defer taxes on the sale of real estate while continuing to grow their investment portfolio. The exchange must meet specific criteria, including a strict timeline for identifying and closing on the replacement property. 1031 exchanges are commonly used to build wealth through real estate by allowing investors to leverage gains without paying immediate taxes. 

Bonus Depreciation

One of the major provisions in the Tax Cuts and Jobs Act was the expansion of bonus depreciation. The law allowed for a 100% bonus depreciation on eligible property purchased and placed in service after September 27, 2017, through the end of 2022. This means businesses and investors could deduct the full cost of qualifying assets (such as commercial property improvements, equipment, and certain other property types) in the year they were placed in service, rather than over several years.

However, this 100% bonus depreciation is gradually phased down:

• 2023: 80% bonus depreciation

• 2024: 60%

• 2025: 40%

• 2026: 20%

• After 2026, the bonus depreciation is expected to revert to 0%, unless new legislation is enacted to extend or modify it.

Qualified Improvement Property (QIP)

The TCJA also corrected a significant technical issue with Qualified Improvement Property (QIP). Originally, QIP (which includes improvements to the interior of nonresidential properties) was mistakenly classified as 39-year property instead of a 15-year property. This would have resulted in slower depreciation deductions. However, the correction allows QIP to be eligible for 15-year depreciation and, importantly, bonus depreciation. As a result, owners of commercial properties that make interior improvements can now potentially take a large deduction for those improvements in the year they are made.

Section 179 Expensing

Section 179 allows businesses to expense certain property and equipment purchases rather than depreciate them over time. Under the TCJA, the Section 179 deduction limit was significantly increased, allowing businesses to deduct up to $1 million of the cost of qualifying property in the year it is placed in service (as long as the total cost of qualifying property does not exceed $2.5 million). This provision applies to both tangible property (like furniture and equipment) and certain improvements to commercial properties.

Corporate tax rate 

TCJA also reduced the corporate tax rate from 35% to 21%, which had an indirect benefit for businesses owning commercial real estate. Lower corporate tax rates meant that businesses could keep more of their income, making investments in commercial real estate more financially appealing.