What would you recommend to a high income wealthy client looking for the tax deferred real estate investments?

This specific individual has annual earnings exceeding $5M per year and wants to consider investment opportunities that will give him good returns but most interested in tax benefits. I've already walked him through pros and cons of apartment complexes and future 1031 exchanges for tax deferment but wanted to give him some suggestions from other professionals that probably know much more than I do. Thanks for your comments and recommendations.
In Buying Property - Asked by Scot K. - Feb 3, 2011
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David K.
Schaumburg, IL

A wealthy investor, say a doctor for example, should be looking for higher appreciation (usually found in better located properties) versus high cashflow. A less wealthy investor, say a policeman or teacher, should be looking for higher cash flows (plus some degree of appreciation). Read my article in the Box application on my LinkedIn profile for more.

Feb 3, 2011
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Rob B.
Chandler, AZ

Scott.... This type of individual should look toward well located, Class A or B+ properties. He or she might also look toward this type of property that has a value added component, such as adding additional rental space, rehabilation of deferred maintenance, increasing some amenity to attract higher rents or partial vacancies that can be filled. An individual like this may also want to integrate some high cap rate purchases on improvements with long term land leases of 35 years or more. This type of property will give him 100% write off of the improvements, but he or she may have to forego some sales appreciation. This type of property should be purchased for a longer hold. For example if it has a 10% cap rate, it could be held for 10 years and 100% of the initial capital would have been recovered. All years after that the cash flow is nearly all profit. Lastly, a high-income individual should still borrow as much of his investment as he or she can, as long as the rate of the loan leaves a margin of cash on cash from the income. Leverage works extremely well with this type of investor. Personally, I always welcome this type of investor and I am sure you do as well. Good luck Scot.....Rob Baird, CA RE License #544165 (One of the oldest, active licenses in CA) 951 515-5855 Email: rob@capratecommercial.com

Feb 3, 2011
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Devin C. G.
Irvine, CA

Scot - There are many aspects of the tax code that can be advangted by chooisng one RE invetment over another, but all are highlhy technical and if in fact your client is making that kind of income, I imagine he or she has a very qualified TAX ATTORNEY, advising them on strategies. Usually, when asked a question like this, by a potential client I am considering working with, I reccommend we sit down with their tax professional and collaborate.
What works for one portfolio and type of income stream, often times does not work for another. Goals and obejctives need to be outlined and planned then implemented. Anything else is conjecture as to "what type". The opions are only limited by the process of constructing the portfolio(s) correctly.

Feb 5, 2011
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