Prop Taxes + Rental Income Taxes - is CRE a Losing Proposition?
Property tax, plus taxes on rental income....how does one come out ahead?

How is real estate a great investment again?
[{"id": "hsfyzgy", "text": "Depreciation and hopefully appreciation in your asset(s)", "replies": [], "depth": 1}, {"id": "hsfzu4k", "text": "Rent is more than property tax.\n\nMarginal tax rates never exceed 100% so you will always pay less than $1 in income tax on each $1 in income. Rental income is calculated net of expenses.", "replies": [], "depth": 1}, {"id": "hsg05ms", "text": "100% bonus depreciation and interest only loans", "replies": [], "depth": 1}, {"id": "hsg3gh8", "text": "In your post 3 days ago (which is now apparently deleted) you quite confidently assured everyone you could not only afford the real estate tax bill, but that the property was cash flow positive.   You also admitted you might have overpaid by 25%.  If you overpay 25%, it's going to be real hard to turn a profit in any business.  If you own CRE that's not stabilized, there's a chance you might be cash flow negative.  It's part of the business.", "replies": [{"id": "hsg47oy", "text": "O. It's that guy again.", "replies": [{"id": "hsg5c15", "text": "I can tell what sort of value you add or create.", "replies": [], "depth": 3}], "depth": 2}, {"id": "hsg4pw4", "text": "I didn't delete. It shows up in my feed. These are just general questions. I come from an ibanking and trading back ground. Its a world where the speed of gains will make your head spin. \n\nThe speed at which my gains are made out pace most investment. Try trading commodity derivatives.\n\nMy point was to better understand why CRE as an asset class is viewed as the pinnacle of asset classes. To be honest I'd rather take my wealth and continue trading nat gas vs trading buildings. \n\nThis is for conversation sake only. All the Karen's please stay away.", "replies": [], "depth": 2}, {"id": "hsg52w0", "text": "To be granular, I may have overpaid by 10-15%.\n\nWhat I make in liquid cash is mutually exclusive of my acquisition.\n\nI'm looking at my acquisition and comparing it with the different ways I grow capital and or preserve it. And the effort it takes to do that. Real estate from my lens isn't the best investment vehicle out there.\n\nFull disclosure, I also don't own a home, but I do own a building.", "replies": [], "depth": 2}], "depth": 1}, {"id": "hsg9qf2", "text": "Is this a rhetorical question? \n\nIt\u2019s leveraged investment where cash on cash returns - especially on a successfully executed value add play - can consistently be in the 25%-50%+ range, and total ROI can be significantly above that. \n\nBut it\u2019s not a \u201cget rich quick\u201d scheme. It\u2019s a \u201cget gloriously rich slow\u201d sort of game. \n\nIn your other comments you seem to be comparing real estate to iBanking and commodities trading. There couldn\u2019t be a more stark opposite to the world of CRE.  \n\nAnd if you\u2019re paying property taxes you\u2019re doing it wrong. That\u2019s what triple net leases are for. \n\nWhere the real money in real estate is made on the BUY. Meaning finding under-valued assets and transforming them into something phenomenally better. If you\u2019re overpaying for assets, even by 10-15%, you will always lose. Every time. \n\nFind assets others don\u2019t see the value in, pay below market, apply a system, extract the value, refinance your capital out. \n\nThat is the \u201csecret\u201d of CRE. Do that successfully  and you will never want to go back to your previous gig again.", "replies": [{"id": "hsgadfo", "text": "Interesting thought provoking explanation.\n\nD", "replies": [], "depth": 2}, {"id": "hsge7ol", "text": "How much do you believe in back end value? The fact that all valuations comes down to the income stream it produces\n\nThe lack of liquidity compared to what im used to, is hard to adjust to. Lack of price discovery is a good thing in a way, bc it makes deal sourcing a creative practice and youbhave to get creative to find true value.", "replies": [{"id": "hsgftqv", "text": "That is literally the primary way I see value when it comes to CRE. The way stabilized CRE trades is and should almost entirely be based upon the value today of the future cash flow. \n\nAnd asymmetrical access to information or knowledge (ie, someone who knows how to navigate the rezoning process versus someone who doesn\u2019t) can make a big difference on how two people value the same land. \n\nCase in point: we just bought two separate residential land assemblies with existing single family homes on them to develop into apartment buildings. We bought them at a slight premium to their residential value, but at a discount to their developable land value assuming we can get the density achievable within this area on the OCP. \n\nIf we get what we expect to get, we will be able to build an asset that will be worth enough at completion that we\u2019ll be able to refinance all of our capital out. Meaning we will have two brand new cash flowing assets with none of our equity left in them - functionally \u201cfree\u201d $8M and $22M buildings. \n\nBut we know how to do that, and the current owner doesn\u2019t. Knowledge asymmetry is where the value is created.", "replies": [{"id": "hsgj0lg", "text": "So why does paying a 10 to 15% premium matter that much if I can add value and create value on the back end?\n\nThe way I know finance is through capturing delta with as little risk as possible and gaining an edge over the other guy.\n\nCRE is a different world of finance that I need to wrap my head around.\n\nI'll have to dig in deeper into what you just laid out.", "replies": [{"id": "hsgkhl9", "text": "Short answer is that unless you\u2019ve got a plan for how you\u2019re going to realize that value, you\u2019ve just overpaid. \n\nIf you\u2019ve got a plan laid out on how you\u2019ll get there, you may (once everything is said and done) have underpaid. \n\nBut execution isn\u2019t easy. Simple, but not easy.\n\nFinding delta with minimal risk is the goal here too. Get yourself a low enough price and you will have multiple exits.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hsge3p3", "text": "Depreciation, interest deduction, a good DSCR, how could you not be positive unless you dont know how to do proper DD?", "replies": [], "depth": 1}, {"id": "hsgfnf9", "text": "Net leases will take care of property taxes. Large depreciation and interest deductions will reduce income tax.", "replies": [{"id": "hsgjgm6", "text": "Are triple N leases even a thing in office space?\n\nMy building is 60% occupied, money coming in immediately out of the gate. Majority are paying 15/ft, I'm pulling in new tenants at 27/ft with small escalators.\n\n\nMost of my small offices are all occupied, offices under 200ft.\n\nI'm left filling in the spaces ranging from 1000-6000 ft. Thats where a bulk of my earnings will come.in from.\n\nI'll need to leave legacy tenants there so that cash flow won't be disturbed. They've been tenants for over 5yrs, mostly gen x.\n\nMillennial are paying up with less head aches.", "replies": [], "depth": 2}], "depth": 1}, {"id": "hshjm0h", "text": "Every business has both income tax and property taxes to pay lol. Every homeowner has both income tax and property tax to pay too. \ud83e\udd26\u200d\u2642\ufe0f", "replies": [], "depth": 1}]