Real Estate Investors Get 100 Percent Bonus Now!

All right, what's up, guys? So today we are talking about the new bill, big beautiful bill that just passed. And for real estate investors, what it means, any Property purchased after January 19, 2025 now gets a hundred percent bonus appreciation. If you are a real estate investor, it is critical you understand what we are talking about here today. And so Larry and I are here, we want to break down this exact topic because this is going to make a lot of investors millions of dollars. It's going to increase portfolios rapidly and more importantly, it's going to create generational wealth is what it's going to do. It's going to create a lot of opportunity for real estate. So let's dive in. Larry and I have been partnering together for a long time and we both have been investing in real estate and we have a portfolio together with our partners, over 500 million assets under management. And so this is a big deal for us. And so if anybody's wanting to get in, and the other thing about this is if you want to use capital partners to put the money in the deal, to fund the deal, you're essentially getting to write off a large portion of a deal without putting any of your own money. So it's, it's pretty insane if you couple those things, two things together. But let's just start with a basic of what is depreciation? What is that like typically look like? And Larry, you want to break that down.

Yeah. So with residential property multifamily, you can appreciate the buildings, the property itself, not the land on a 27 and a half year rate and commercial property 39 year rate. But there's always been certain aspects of the property that you could appreciate on a, on a faster schedule. 5, 10 and 15 year property. And that's elements of the property, you know, the cabinets or the irrigation system or things that are removable, different items. And I'm not a professional tax advisor, so I'll stop there. But what's so exciting about the bonus depreciation, and this was an enacted back in Trump's first term, you were allowed to take all of that 5, 10 and 15 year in one year. So that's huge. And it was 100% a few years ago. But there was a step down in the, in the old legislation and it was sad to see it go from 100 to 80 to 4 and it was down to 40 this year until this new bill came along and it puts it back to 100%. So what that means is take a $5 million property would not be Unreasonable for that, that, that those items that are eligible for bonus depreciation to make up a million dollars of that $5 million property. So before this bill was passed, you could take 40% of that $400,000. Now you can take the whole $1 million. So that's a $600,000 difference in one year, which can impact huge, you substantially and your cash flow substantially. And you know, a lot of people say the wealthy don't pay taxes, right? In some cases that's true. But you don't have to be wealthy. You just have to buy, buy a deal. You just had to buy an apartment building. And you could have, by one deal you could have, you could be a high income earner and earn $500,000 a year. With that one deal, you just wiped out your entire tax liability.

Yeah. And potentially years to come, Right?

Right. Oh yeah, it carries over. And there's some other caveats. Again, we're not tax professionals. You know, whether you can carry that over or not.

Right, yeah. And I mean, you know, so essentially, guys, simply put, you're being able to write off parts of the property that are normally written off over 5, 7, 15 years. You're able to write it all off in year one, Right. You get, you get taxed off the income of the property. Right. And so now there's certain elements of those, of those properties that the government sees, the IRS sees as they depreciate over value. But it's over how long of a period of each one of those things? So let's go through those. What are those things that, that can be written off? You know, what are the five year that are now eligible for bonus appreciation? And just give you an example. Say you have a $10 million deal, a purchase price of $10 million. Okay? Well, the land value is non depreciable. So you got to take just say 1.5 million of that 10 million is non depreciable. That's the land value, okay. The building value which is depreciable is 8.5 million. Okay? So let's take 8.5 million. And then what you do, and again, you would hire a cost seg person to come in and do a study, a cost seg study of your property and break down exactly segregation, right? Cost segregation study. And it break down exactly what you have and what category they fit in and what's eligible for the bonus. Okay? So $8.5 million in the building value. Now, the personal property is one category and typically that's from the irs. They see that as five year depreciation. Right. So five year depreciation term, that would be bonus eligible. And just suppose that's $1.5 million. Okay, so write this down. Just say that's $1.5 million on the personal property that's eligible now at a hundred percent. Right. So not 40, not a fraction of that. Now we can write off at one point now the land improvements, improvements to the land which we're going to break down in a second. You know, that's normally a 15 year schedule for depreciation. Right. And that's bonus eligible too. So imagine that's $750,000. Right. And then the building structure, which is 27 and a half year depreciable schedule, that's not bonus eligible. Right. That's not going to be eligible for the, the new bonus at 100%. That would be regular schedule. You would still write off year one's, you know, the building structure value. Right. But you wouldn't be able to bring that all into year one. So total depreciable value is 8.5. But now with the personal properties, 1.5 million and 750k with the land improvements, now that's 2.25 million dollars if you bought a 10 million dollar property. And again, we have a mastermind and we teach our students to buy it using capital partners. So in other words, if you don't want to spend a dime of your own, you can come in, pay for a property, buy a property if you can raise capital on the deal and immediately get a $2.25 million write off.

And that's very typical, 15 to 25% of the purchase price. You'll have some cost segregation consultants, maybe a little more aggressive, some less aggressive, but would highly recommend you hiring a reputable cost segregation firm to do it because should you get audited, they're going to be the ones to 100%, but, but a pretty darn good investment of a few thousand to get a $2 million write off.

Yeah. So, and that carries over again. So it's pretty insane. But the, the things that apply in personal property, just give you some examples. Right? These are items that are not permanently attached to, to the structure and can be removed or replaced without damaging the building. Okay. They wear out faster and the IRS lets you depreciate them quicker. Okay. So usually over five years. So carpet and vinyl flooring would be one, you know, appliances, refrigerators, ovens, dishwashers, ceiling fans and window AC units, cabinets and countertops, furniture and furnish units. And also you know, there's going to be different rules that happen again. You would want to have a cost seg. So some of these things may be, you know, again there's, there's different rules like, you know, it can be removed or replaced without damaging the building. Right, that's, that's obvious. You know, some of these things may or may not apply, but furniture in furnished units or common areas, light fixtures, things like that. Right. So that's five year schedule land improvements would be a 15 year depreciation schedule. Right. And so that's improvements made on the land, but not part of the building itself. Okay. So landscaping and irrigation systems, fencing and retaining walls, sidewalks and driveways, parking lots and carports, outdoor lighting, swimming pools, playgrounds, equipment, etc. Okay. And then obviously the building structures, everything else, that's a 27 and a half year appreciation schedule. So pretty killer. This is insane. For those that want to buy apartments right now, or those that want to be able to grow your wealth long term, this is an opportunity to get in at a, at a very opportune time in 2025.

Yeah. And first, and for the passive investors out there also just looking to invest in a deal or in a syndication, you can still get some of these depreciation benefits. When you syndicate and purchase apartments. You can carve that up any way you would like or any way the syndicator desires to. And so they can give more of those depreciation benefits to even limited partners who may be looking for some tax savings.

Right, right. Yeah. So if you're somebody that wants to learn to really scale in apartments or scale your real estate portfolio, we were in single family for a long time and realized that's the much slower route. These apartment buildings, not only are they receiving such a massive bonus here and such a big incentive, these apartment buildings are in high demand and they are the quickest way in real estate to really scale. So if you're looking to grow your income quickly and despite what you know where you're at in your investment, we recommend using capital partners so you can scale much faster instead of trying to save and use your own capital. So if that's something you are interested in, we'd love to chat with you later. But we're actually doing a free training tomorrow if you want to attend that. We're going to be talking about this bonus appreciation. We're going to be talking about getting in there, finding deals, funding them, getting them to the closing table, understanding how to assess these big deals, because you need to know you can you can get a lot of money in taxes back, but if you don't make income, Right. Then it's not going to matter. Right. So you gotta know what you're doing and make sure that it's positioned in, in a place that can really scale and grow your wealth. So that's something you want to attend. We're going to drop a description in the link below. Would love to connect with you. All right. God bless. Thanks so much for attending.

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