REAL ESTATE LPS & LLCS
REAL ESTATE LPS & LLCS
Unlike your home, investment properties trade at prices based primarily on capitalization rates ("cap rates")—the average net operating income ("NOI") that buyers expect to receive as a percentage of purchase price.
Cap rates for any type of property change over time, a function of three important variables: interest rates, available market capital and perceived operating risk. If a specific building maintains a flat NOI, its future value is entirely dependent on how these forces move the applicable cap rate for such a property.
If prevailing cap rates go up, a property's NOI must increase proportionally to maintain its value, notwithstanding transaction costs. To appreciate, NOI must outpace any upward trend in cap rates.
For properties with long-term leases and predetermined rental revenues, it may be algebraically impossible to achieve appreciation if cap rates rise. Investors should consider where to invest along the lease spectrum.
HOW IT WORKS
LP/LLC investors receive pass-through benefits of depreciation. In construction or redevelopment programs, accelerated depreciation of new fixtures and equipment may provide greater up-front tax benefits.
Investors are considered partners for IRS purposes and therefore receive K-1 forms rather than 1099 tax forms.
TAXATION FOR LP/LLC INVESTORS
This is for informational purposes only and does not constitute an offer to purchase or sell securitized real estate investments. An Intermediary Sales Installment is a complex strategy that should be carefully evaluated with qualified tax and legal professionals. There are material risks associated with such arrangements including tax law changes, administration issues, and investment risks.
1031 Capital Solutions
Securities offered through Concorde Investment Services, LLC (CIS), member FINRA/SIPC. Advisory services through Concorde Asset Management, LLC (CAM), an SEC-registered investment adviser. 1031 Capital Solutions is independent of CIS and CAM.