It’s that lovely time of year again… tax season. 

Whether you’re a business owner, employee, solopreneur or anywhere in between, tax season is something we all have to navigate and everyone’s situation looks different. 

Your marital status, charitable donations, business expenses and many other factors can qualify you for legal tax write offs and benefits.

But did you know that investing in multifamily real estate can be one of those factors?

Many times when people think about investing, the primary reason they want to do it is so that they see a much greater return on their investment. 

And while yes you want to see a steady cash flow for your investments, there are a few other benefits to consider that shouldn’t be overlooked.

When you invest in multifamily properties, you can usually take advantage of a few tax benefits that you’ll thank yourself for come tax season. 

4 Major Tax Benefits for Multifamily Investing

 

  • Depreciation

One of the first and major tax benefits you can take advantage of when investing in multifamily real estate are depreciated tax losses against the gains of the property. 

Depreciation is the term used in real estate to describe the degrading condition of the property overtime.

Over the years, things will break, go out of date or simply need repaired which means the value of the property can decrease. This is completely normal and expected for any property!

The good news is that the IRS doesn’t hold that against you and instead allows you to use that depreciation amount as a tax deduction year after year for 27.5 years.

Why 27.5 years? This is the amount of time that the government rules a multifamily property to be profitable.

This means that as long as your money is invested into a property of this sort, you can reap this benefit for almost 30 years and that’s hard to find anywhere else!

  • Cost Segregation

Another option that investors can take advantage of when it comes to taxes is utilizing cost segregation which goes hand in hand with depreciation.

Essentially what this does is accelerate the depreciation of certain aspects of the property, such as appliances, cabinets, etc. inside of the units so that you qualify for a greater depreciation deduction in a single year.

The only caveat with utilizing a cost segregation study is that it only benefits you during your ownership period.

Because of this, when you decide to sell or pull your investment from the property, you can be faced with a higher tax bill… but don’t let that scare you away!

There’s another benefit for investors to contrast this and it’s called the 1031 Exchange.

  • 1031 Exchange

A 1031 exchange is an investing tool that allows you to defer your capital gains taxes by reinvesting the funds you pull out of a property and put them into another investment property of like kind.

This means that the new property must be of the same nature as the previous.

For example, if you pull your investment from an apartment complex, you can reinvest those funds into a different apartment complex and utilize the 1031 Exchange benefit in order to avoid that higher tax bill. 

This will ensure that you continue to reap the Depreciation and Cost Segregation benefits year after year!

  • Passive Income Tax Benefits

Lastly, one of the greatest tax benefits that investors can take advantage of involves passive income. 

As an investor of a multifamily property, you receive what is known as passive income. The IRS sometimes refers to this type of income as unearned income.

For a multifamily investor, your earnings come from your investments in rental properties.

Just like active income, which is money received from your job or business in which you are actively involved, passive income is also taxable, but it’s treated much differently.

To qualify for passive income tax benefits, you have to spend less than 500 hours on the business. As an investor, this is usually the case which is good news for you during tax season!

Instead of being involved in the day-to-day operations, you simply invest your money with a trusted group of professionals and they take care of the hands-on work.  

This allows you to qualify for huge tax breaks that you typically wouldn’t receive through traditional investing. 

It’s for this reason alone that many people choose to work with investment groups like XSITE Capital so that they can trust they will see an ROI, while also benefiting in other ways without having to do a lot of extra work. 

If you’re looking to increase your tax benefits for 2023, investing in multifamily real estate could be an option for you! To learn more about the process of getting involved, click here to connect

– The XSITE Capital Team

Did you know that 66% of Americans set new years goals that are directly related to their finances?

Whether it’s paying off debt, generating more savings, implementing a budget or investing, more than half of the U.S. population have made plans to adjust their finances in the new year. 

A recent study has shown that even though these financial goals are still being set in 2023, 81% of people believe that inflation and the overall state of the economy will make it much harder to meet these goals.

As you set your own goals for the new year, maybe you can relate.

You might wonder how you’re going to generate extra money to pay off debt. You may worry that you won’t be able to stay within your budget due to the high costs of everyday living.

You might think that investing isn’t an option because you need every extra dollar after expenses to go towards your savings. Or you might just be overwhelmed with finances in general and aren’t sure which actions to even take.

If this is you, you’re in the right place! At XSITE Capital, our mission is to educate and encourage people to make decisions that are best for them, specifically when it comes to multifamily real estate investing. 

We believe that everyone deserves the opportunity to learn and take action on the things that will better their present life and future dreams.

Last month on the blog, we addressed how interest rates, inflation and a possible recession can impact your commercial real estate investments so you can know what to expect with the ongoing economic changes. 

With that, we also want to share three main reasons why commercial real estate IS still a good investment in 2023 so that you can take confident action as you work toward your financial goals this year!

3 Reasons Commercial Real Estate Is Still a good investment in 2023

  • Commercial Real Estate is Recession Resistant 

The talk of a recession has been going on for a few months now and with a recession people tend to become very cautious about where they put their money.

This is totally understandable because you want to make sure you’re putting your money somewhere that is safe and will produce a quality return for you in the future.

While it’s true that a recession can negatively affect your investments, the good news is that when you invest in multifamily properties, you can rest easy knowing that your investment is protected. 

Historically, multifamily assets have shown to be recession resistant because, at the end of the day, people always need a place to stay.

When a recession hits, there’s typically an influx of people selling their homes that they can no longer afford, which means that the demand for apartment rentals or other multifamily properties will see a significant increase.

This is good news for you as an investor in multifamily properties as this can boost the cash flow that you receive thanks to more tenants occupying the property. 

Whether or not a recession will actually hit in 2023, we aren’t sure, but what we do know is that people are already taking precautions which means that the demand for rentals is already happening and now is a great time to get involved with investments of this type.

  • Commercial Real Estate is More Stable Than the Stock Market

Many times when people think about investing, they jump straight to the stock market because they haven’t been properly educated on how real estate can be a quality investment as well.

The only real problem with solely investing in the stock market is that it can be very unpredictable and can take a massive hit at any given time, especially during economic downturns or world events.

Commercial real estate on the other hand has proven to be trustworthy decades after decades and remains fairly stable regardless of the economic state. 

The main reason for this is because housing is and always will be a basic necessity that all people need. Because of this, you can trust that multifamily properties will continue to appreciate in value which ultimately means that you will receive more return on your investment.

This isn’t to say that investing in the stock market is bad. We encourage that too, but more than anything you want to make sure that your investments are diversified – meaning you have money in multiple places – so that if one takes a negative hit, you have the other to fall back on. 

  • Commercial Real Estate Has An Easier Financing Process

One of the biggest challenges that people often face in real estate in general is the ability to receive the funds they need to purchase or invest in a property.

This can become even more difficult when the economy is in a downturn because banks become more strict with their loan process and have more requirements than you might typically see.

While this can cause difficulty for you if you were to purchase a single-family home, there is a much easier financing process when it comes to commercial real estate.

Banks can confidently predict that the cash flow of a multifamily property with multiple tenants will be consistent and steady versus a property that only houses an individual or one family.

What this means for you as an investor is that the bank doesn’t look at solely your income to grant you the loan. Instead, they will look at the details, history and projections for the property so they can accurately gauge the return. 

This is why getting involved in deals that have been thoroughly researched and scouted for you is so important and is the very reason that we take our property selection process so seriously at XSITE Capital.

Linking arms with an investment group that takes the time to ensure a property will be lucrative is your best bet to receive a healthy ROI and that’s exactly what we do through our Investor’s Club!

So, if you have big financial goals in 2023 and are looking for ways to make them come to life with ease, we invite you to join us. 

When you join the XSITE Investor’s Club, you will receive:

  • Monthly meetup replays from all months prior (so you can continue growing your mind while growing your wealth)
  • 15 minute calls with our Investor Relations team (to answer your questions so you feel empowered to take action)
  • First look at new deals (so you can beat the competition and easily jump into the deals that you really want)

Overall, we’re here to empower and support you in your personal journey!

Here’s to 2023. 🎉

– The XSITE Capital Team

Interest rates, inflation and a recession have been the talk of the country for a large portion of 2022 and as a commercial real estate investor, it’s important that you know what each of these economic hits can mean for you and your investments. 

As an investor, interest rates, inflation and a recession all play a huge role in your current and future investments so it’s important that you understand the basics of each and how exactly they all work together so you can remain confident in how you handle your money.

First things first, let’s talk about interest rates.

Throughout the year, interest rates have been ebbing and flowing and each week it seems like we’re seeing something different.

The Fed introduced its first rate hike in March of 2022 and they have continued to raise the rate from there.

As an investor, it’s important to pay attention to interest rates because they directly affect how much money you can borrow and ultimately determine how much you will end up paying back in the future.

Simply put, the interest rate is the amount you are ultimately charged for borrowing money and it’s shown as a percentage of the total amount of the loan.

This is why when interest rates are low, people are typically more quick to invest. When interest rates are high, on the other hand, people tend to become a bit more wary and start to consider if the investment is worth the extra amount of money they’ll owe towards their loans. 

So, what exactly causes interest rates to rise?

The main cause of rising interest rates is inflation and inflation happens whenever there’s a high demand for products and services from consumers. This demand causes prices to rise and this concept is commonly referred to as demand-pull.

Another reason that inflation can occur is what they call cost-push. This is when supply costs to create products or deliver services forces prices to rise.

When inflation occurs, we typically see a few things start to happen:

  • job layoffs
  • fewer job availability
  • decreased consumer spending
  • people start to sell their assets in order to boost their income and save cash

Inflation is also directly linked to a recession, which means that people become very wary of where their money is going.

The good news for you as a commercial real estate investor is that your investment is typically recession resistant in this industry.

The reason being is because one of the main things to go for people during a recession is their expensive mortgage, especially if they’re living far above their means, which means that the demand for apartment rentals or other multifamily properties will see a significant increase.

Additionally, recessions can also make it more difficult for people to receive proper loans that they need to buy a house, so many people will be forced to continue renting.

In fact, history has shown that even though the housing market as a whole tends to take a hit during economic downturns, rental markets remain steady and even outperform other investments. 

Essentially, rising interest rates, inflation and a recession can actually boost the cash flow that you receive from your current commercial real estate investments thanks to more tenants occupying the property. 

So, what does this mean for your future investments?

Now that you know how your current commercial real estate investments can be affected by interest rates, inflation and a recession, you might be wondering how those three things can affect your future investments, as well. 

The biggest challenge that high interest rates can cause for new commercial real estate deals is that the supply can decrease during economic downturns.

It’s for this reason that we always encourage investors to join a trusted Investor’s Club like XSITE Capital’s so that you aren’t having to do the up front research for new deals on your own.

Instead, you can sit back and know that other people are doing that work for you so that you can invest your money into a deal that has been heavily researched and you can trust that you will see a healthy ROI. 

Another challenge that high interest rates and inflation can present for new investments is that the financing process may be a bit more difficult than usual. 

Generally speaking, the financing process for commercial real estate is much more simple than if you were to invest in single-family properties because these investments aren’t as risky for banks.

The reason for this is because banks can confidently predict that the cash flow will be consistent and steady for a property with multiple tenants versus a property that only houses an individual or one family.

However, during economic downturns banks can become a bit more wary with how they loan their money, so you can expect the financing process to be a bit more challenging during tough economic times. 

With that, you still have a much greater chance of getting approved for what you need for commercial real estate investments versus single family properties, so don’t let this challenge steer you away. 

Investing During Economic Downturns is a Smart Move

Overall, investing in commercial real estate specifically during economic downturns is still a smart move.

In fact, it’s been said that most millionaires are MADE during recessions and the reason for that is because when most people become fearful and stop spending their money, other people use this time as an opportunity to invest their money into places that will perform higher when the economy returns to normal.

While investing during economic downturns is encouraged, it’s important to remember that not all investment opportunities are created equal. For example, the stock market can be a bit unpredictable during this time, but commercial real estate on the other hand has proven to be trustworthy decades after decades and remains fairly stable regardless of the economic state. 

The reason for this is because housing will always be a basic necessity and properties will continue to appreciate in value. This is great news for you as an investor and can give you peace of mind when it comes to where you’re putting your money. 

As you continue to navigate the economic changes, we encourage you to join the XSITE Capital Investors Club so you can be among the first to get access to new commercial real estate deals and be among the few who use this time as an opportunity to thrive rather than just survive. 

We’re here to support you along the way!

– The XSITE Capital Team

Did you know that 90% of the world’s millionaires have built their wealth by investing in real estate? 

At some point in your life, you’ve probably heard it said that real estate is one of the best things to invest in because on both sides, commercial and residential, you’re investing in something with the confident expectation that you will receive more money back later down the road. 

While it’s true that real estate can be one of the best ways to grow your wealth, the problem is that many people are missing the information and education to really do it well.

And that’s where we come in! Our mission at XSITE Capital is to educate and encourage all who qualify to passively invest in multifamily real estate so they can take advantage of the benefits that this asset has to offer. 

Regardless of your race, current resources or access, we believe that everyone deserves the opportunity to learn and take action on the things that will better their present life and future dreams. 

We ultimately believe that through proper education, exposure and encouragement, our investors will have an equal opportunity to grow their mind and grow their wealth, which will positively impact generations to come. 

Wherever you come from, you are welcome here!

Meet Your Teachers

Like anything in life, you want to make sure you’re learning from people who yes, have knowledge and expertise in the area, but also from those who continue to practice what they preach.

That’s what truly makes the XSITE Capital team so special and is why you can trust that the education you receive is coming from a place of knowledge, experience and current practice.

Our Co-Founders, Julius Oni, Leslie Awasom and Tenny Tolofari joined their passions together to help busy professionals like them reach financial freedom by investing in multifamily real estate. 

Julius is the CEO and Co-Founder and primarily focuses on Investor Relations. Prior to XSITE Capital, Julius’ investment focus was single family real estate and angel investing. Over the past several years, Julius has invested in over 50 start-ups, and currently sits on the advisory board of four healthcare-related start-ups.

Within the last 2 years, Julius led the acquisition of XSITE Capital’s fast-growing portfolio of more than $100M. He was also acknowledged as a Forbes Business Council member in 2021.

Leslie is the Director of Operations and Co-founder who manages the company operations, market/data analysis, cash flow and budget analysis. In 2017, Leslie bought his first investment property and transitioned to multifamily investing in 2019.

Lastly, Tenny is the Director of Acquisition and Co-founder. Prior to forming XSITE Capital, Tenny spent several years leading a major sales team in one of the fastest growing financial services companies in America. He is also a Global Cyber Security professional, supporting the likes of Boeing and Deloitte.

The three of them together host a rapidly growing multifamily-focused meetup in Maryland where they provide resources and add value to individuals interested in growing their wealth and changing their financial future.

On a daily basis, Julius, Leslie and Tenny strive to provide the information and education that they believe everyone should have access to in order to grow their mind and simultaneously grow their wealth.

Your Learning Opportunities

To ensure that you receive the information and education that you need to feel confident about taking action on a real estate endeavor, our team at XSITE Capital makes it a priority for you to have a constant line up of opportunities to choose from. 

Here’s what those opportunities look like:

  • Monthly Blog Posts

Every month on the blog, you can find a new blog post that answers the questions that many people don’t talk about when it comes to investing in commercial real estate. Our goal is to make things as simple as possible for you so that you can easily understand the benefits waiting for you on the other side.

Upcoming blog topics include: 

  1. How Rising Interest Rates Can Impact Your Commercial Real Estate Investments
  2. Why Commercial Real Estate is Still a Good Investment in 2023
  3. Your Ultimate Guide to Commercial Real Estate Investing
  • Monthly Meetups

In addition to the blog posts each month, we like to get face to face with you and provide valuable, free education. Monthly meetups feature talks from the XSITE founders in addition to other trusted and highly sought after industry leaders to educate on various topics.

Past meetup topics have included:

  • Using Your Retirement Funds to Invest in Commercial Real Estate
  • Mind Over Matter To Scale Big with Multifamily Real Estate
  • Commercial Real Estate Loans and The Impact of Rising Interest Rates

All monthly meetups are totally free and anyone is welcome to join! For all monthly meetup information, join the XSITE Investors Club!

  • Monthly Newsletter

We treat all Investor Club members like insiders which means you get the closest look into what’s going on at XSITE Capital, including what the team is working on and new deals that are available to you.

  • What We’re Reading Emails

Just like we encourage you to consistently be learning, we do the same. We firmly believe that knowledge is a key part of wealth, so each month we share articles, books and research that we’re currently reading that’s relevant to real estate, investing and personal growth. 

  • Annual E-books

Our annual e-book is another free resource that all Investor Club members receive that aims to dive deeper into one topic regarding investing in commercial real estate.

The 2022 annual e-book is coming soon, so make sure you join the club so you don’t miss out!

Overall, we are committed to providing relevant and valuable information and education for those who are interested in experiencing financial freedom and creating legacy wealth through multifamily real estate investing. 

We are glad you’re here!

– The XSITE Capital Team

Did you know that not all apartment investments are created equal?

In this post, we discuss why investing in multifamily apartments is so valuable, but it’s important to know that there are different commercial real estate asset classes and you want to make sure you’re choosing to invest in the class that’s best for YOU specifically!

Keep reading to learn about the different classes of multifamily apartment investments so you can strategically add to your investment portfolio.

Class A Properties

Class A apartments are newer (<20 years old) and they offer high-end finishes like granite countertops, stainless steel appliances, and hardwood floors.

With this class of properties, maintenance is also performed immediately.

Class A properties are conveniently located in cities near mass transit or downtown hot spots that typically attract affluent renters with high price tags.

Bottom Line: Class A Properties typically have low cash flow compared to high initial investment. The cash flow is highly sensitive to recessions (when tenants will often move to Class B or Class C Apartments). Traditionally, only accessible to Institutional Buyers.

Class B Properties

Class B apartments are between 20-40 years old and offer standard furnishings like laminate countertops and black/white appliances.

With this class of properties, there is often some deferred maintenance.

Bottom Line: Class B Properties typically have Cap Rates of 5%-6% and there’s a higher cash flow than Class A. Open to Private Buyers as well as some Institutional Buyers.

Class C Properties

Class C apartments are typically much older than the other two classes – at least 35 years old.

These type of properties are in constant need of maintenance and are often located in less desirable locations.

Bottom Line: Class C properties typically have Cap rates between 6%-8%. With these, there are lots of value-add opportunity for investors and there are high cash flows due to low initial investment, but lower cash flow in the long run.

Note: We do not recommend Class D / Warzone Apartments, which are often risky and have very heavy management load.

Double-digit returns are quite common for multifamily investments, as long as you choose the right opportunity for your liquidity requirements, cash flow needs, and available investment capital. It is important to work with your financial advisors and investing team to make sure potential investments are a good match for you.

Are you ready to join a community of knowledgeable investors? Click here to join the XSITE Investor’s Club!