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Kevin Taylor

The First 5 Benefits of Commercial Real Estate Investing

Commercial real estate investing has become a popular investment strategy for many individuals and businesses. It involves the purchase, ownership, and management of commercial properties such as office buildings, retail centers, industrial warehouses, and multifamily apartments. While the initial cost of an investment may seem high, the potential benefits of commercial real estate investing make it an attractive option for many. Here are the first 5 benefits of commercial real estate investing: The Potential Income Income potential One of the most significant benefits of commercial real estate investing is the potential for a steady income stream. Commercial properties generate rental income, which can provide investors with a regular cash flow. According to a report by the National Council of Real Estate Investment Fiduciaries (NCREIF), commercial real estate had an average annual return of 9.85% from 1990 to 2020, with most of that return coming from rental income. Capital Appreciation Appreciation Another benefit of commercial real estate investing is the potential for property appreciation. As demand for commercial properties increases, the value of those properties can increase as well. According to a report by the Urban Land Institute, commercial property values have increased by an average of 5.5% per year from 2010 to 2020. Investment Diversity Diversification Commercial real estate investing can provide diversification to an investment portfolio. Diversification helps to reduce the overall risk of a portfolio by spreading investments across different asset classes. Commercial real estate has a low correlation with traditional stocks and bonds, which means that it can provide a hedge against stock market volatility. Tax Benefits Tax benefits Commercial real estate investing can provide significant tax benefits. For example, investors can deduct expenses – such as property taxes, mortgage interest, and depreciation from their taxable income. Additionally, a 1031 exchange allows investors to defer taxes on capital gains by reinvesting the proceeds from the sale of a property into another property. Control Control Investing in commercial real estate provides investors with a greater degree of control over their investments. Unlike other investment vehicles such as mutual funds or stocks, investors have the ability to make strategic decisions about the property, such as selecting tenants, setting rental rates, and making improvements to the property to increase its value. In conclusion, commercial real estate investing offers a range of potential benefits, including a steady income stream, appreciation potential, diversification, tax benefits, and greater control over investments. As with any investment, it’s important to conduct thorough due diligence and consult with professionals before making any decisions. However, for those who are willing to put in the effort, commercial real estate can provide an attractive investment opportunity. Sources: National Council of Real Estate Investment Fiduciaries (NCREIF) Property Index Urban Land Institute, Emerging Trends in Real Estate 2021 Investopedia, “The Benefits of Investing in Commercial Real Estate” Forbes, “10 Reasons Why Commercial Real Estate Is A Great Investment”

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November 19, 2022 No Comments
Articles
Peter Locke

8 “Make or break” tax strategies for real estate agents and brokers to round out 2021

Key points in this article: The effects of rising home prices on Real Estate Agents tax liabilities Long-term methods for reducing your overall tax exposure Compensation alternatives that save on taxes We have been meeting with several real estate professionals. Rising home prices are leading to higher commissions and greater tax liability. One common theme has been that each of them thinks, “their CPA has done everything they can to help” but very few of them have installed the tax ecosystem that will help them avoid the most taxes. While the CPAs have done what they can to help identify and capture deductions in the rearview mirror, InSight is working with these real estate professionals to get prepared for 2021 and beyond with far more lucrative options for tax mitigation and investing. Here are the eight tax conscious strategies the real estate agents need to run, not walk, to get set up by the end of the year: Self Directed IRAs – It’s no secret that Real Estate professionals love owning real estate, it’s close to home, they are fluent in the market, and often can front-run great opportunities. While we think there is value in diversity, we don’t think you should break away from something that works. The issue is, we’ve worked with several agents and brokers who see huge gains in the assets in the last decade, only to turn around and give 20%-40% back to the government in the form of capital gains taxes and depreciation recapture. Savvy brokers need to get better about working with a CFP® to make a forward-looking plan to mitigate those taxes and a Self-Directed IRA might be part of that plan.  SEPs, Corporate 401(k) or Solo 401(k) – Most of the brokers we work with are 1099 employees, and if you are, you’re going to have to be in the driver’s seat regarding what method of tax-advantaged savings vehicles you use. What’s unique for Agents we work with, is that the strategy might change from year to year. One of our clients used a SEP in 2019 then a Solo 401(k) in 2020 in order to match the changes in her personal income. This is fine, as each of these methods can work to optimize the savings rate and maximize the success rate of her plan. The key is working closely with their CFP® to know what the year is going to look like, and how best to account for the income. OZ funds – Use your capital gain proceeds from a recent sale and invest it into opportunity zone funds, real estate, or businesses. The benefit now is the ability to defer your current tax liability until 2026 while also receiving tax-free growth on your investment after holding it for 10 years. Real Estate agents often have personal assets that have accrued capital gain liabilities in the past. This is a program that allows them to mitigate the past liability and avoid some of the taxes they will owe as the new asset grows in value.  Diversity – Becoming wealthy and staying wealthy means diversifying your income streams and risk into different sectors, industries, and accounts in order to give investors flexibility with liquidity, estate planning, tax mitigation, and correlation of returns between assets. Several of the agents we work with have had fantastic success with real estate assets which in turn causes them to neglect other, more tax advantageous and growth capable vehicles.  Cash Balance Plans – Great for Real Estate owners that want to “super fund” (2021 Contribution Limit is $281,000) their retirement while simultaneously reducing their tax liability. This is an underutilized strategy for agents. Any of them will have huge years here and there and are without the tax ecosystem to get those big commission checks into a tax advantages account. A single year of being able to set aside over $200k into your tax-advantaged retirement account can make up for about 5-7  years of neglecting it.  Capital Gain Harvesting – Capture gains proactively (death and gifting will soon be realization events). Most of us have heard of tax loss harvesting but an equal and effective way to mitigate future tax liabilities can be to realize gains along the way in order to reset the basis in investments. There will be times when strategically capturing your gains and accepting your losses can help you pay lower taxes each year.  Private Placement Life Insurance – An incredible way to fund a life insurance product that gives you tax-free growth and access to the cash value. The reason Real Estate agents like using this form of tax-free growth is it gives them the freedom and flexibility to fund other real estate ventures, grow their brokerage, or find other investments.   Many of these methods can be used for most small business owners and entrepreneurs, but for real estate agents working in this climate of elevated home prices these are our “run don’t walk” ideas for getting yourself in the best possible tax position through the end of the year. 

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June 24, 2021 No Comments
risk management boulder colorado financial planners
Articles
Kevin Taylor

Mastering Risk Management: Crypto Currency Trading and Investing: A Comprehensive Guide

Cryptocurrency trading and investing offer speculative opportunities for wealth accumulation, but they also come with inherent risks. To navigate this volatile landscape successfully, it is crucial to implement robust risk management practices. In this blog post, we will delve into the best risk management practices in crypto trading and investing, including due diligence on housing your crypto and wallets, legal considerations, country party risks, and tax planning and mitigation expectations. Due Diligence on Housing Your Crypto and Wallets Choose Secure Wallets: Ensure you store your cryptocurrencies in secure wallets, such as hardware wallets or reputable software wallets. Research the features, security measures, and user reviews of different wallet options to find the most reliable and suitable solution for your needs. Implement Strong Security Measures: Protect your wallets and crypto assets by utilizing two-factor authentication (2FA), complex passwords, and encryption. Regularly update your software and firmware to benefit from the latest security enhancements. Backup Your Wallets: Create backups of your wallets and store them securely offline. This precautionary step helps safeguard your assets against hardware failures, loss, or theft. Legal Issues with Cryptocurrency Understand Regulatory Frameworks: Stay informed about the legal and regulatory landscape surrounding cryptocurrencies in your country or jurisdiction. Be aware of any licensing requirements, tax obligations, and reporting regulations applicable to cryptocurrency trading and investing. Comply with AML/KYC Procedures: Adhere to Anti-Money Laundering (AML) and Know Your Customer (KYC) procedures when dealing with cryptocurrency exchanges or platforms. These protocols help prevent illegal activities and protect the integrity of the financial system. Seek Professional Advice: If you are unsure about the legal aspects of crypto trading or the tax implications, consult with a qualified legal professional or tax advisor specializing in cryptocurrencies. Counterparty Risks Research Exchanges and Platforms: When engaging in crypto trading, carefully research and choose reputable exchanges and platforms. Look for exchanges with a proven track record, strong security measures, and transparent operations. Consider factors such as liquidity, user reviews, and the exchange’s history of handling security breaches or hacks. Understand Custodial Risks: If you choose to hold your cryptocurrencies on exchanges or with custodial services, be aware of the counterparty risks involved. In such cases, you are relying on the exchange or custodian to safeguard your assets. Assess their security protocols, insurance coverage, and measures for protecting against theft or loss. Consider Decentralized Exchanges (DEX): DEXs offer an alternative to centralized exchanges, as they allow for peer-to-peer trading without relying on a central authority to hold your funds. However, be mindful of the risks associated with using DEXs, such as smart contract vulnerabilities and potential scams. Thoroughly research DEX’s reputation and audit reports before engaging in transactions. Diversify Across Exchanges: Spread your holdings across multiple exchanges to mitigate counterparty risks. By doing so, you reduce the impact of a potential security breach or insolvency of a single exchange. However, remember to conduct thorough due diligence on each exchange to ensure they meet the necessary security standards. Tax Planning and Mitigation Expectations Understand Tax Obligations: Familiarize yourself with the tax laws and regulations related to cryptocurrencies in your country. Understand how capital gains, income from mining, and other crypto-related activities are taxed. Keep Accurate Records: Maintain detailed records of all your cryptocurrency transactions, including purchases, sales, and exchanges. This information will be crucial for accurate tax reporting and potential audits. Seek Professional Tax Advice: Consult with a knowledgeable tax professional experienced in cryptocurrency taxation to optimize your tax planning strategies, take advantage of available deductions, and ensure compliance with tax laws. Regulatory and Legal Changes Stay Informed and Educated: Regularly educate yourself about the regulatory environment surrounding cryptocurrencies. Stay updated on proposed regulations, regulatory guidelines, and changes in legislation that impact the crypto industry. Follow reliable news sources, join relevant communities, and engage with industry experts to gain insights into regulatory developments. Research and Understand Local Laws: Thoroughly research and understand the laws and regulations governing cryptocurrencies in your country or jurisdiction. Each region may have its own set of rules regarding trading, taxation, licensing, and reporting requirements. Familiarize yourself with these regulations to ensure compliance and avoid potential legal issues. Engage Legal Professionals: Consider seeking advice from legal professionals specializing in cryptocurrencies. Lawyers experienced in the crypto field can provide valuable insights into regulatory requirements and potential risks. They can help you navigate the legal landscape, ensure compliance, and provide guidance on adapting your strategies to regulatory changes. Monitor Regulatory Agencies: Keep an eye on regulatory agencies responsible for overseeing cryptocurrencies in your jurisdiction. Understand their roles, mandates, and any public statements they issue. By monitoring regulatory agencies, you can gain insights into their stance on cryptocurrencies and potential regulatory directions. Participate in Industry Discussions and Advocacy: Engage with crypto communities and industry associations that advocate for fair and favorable regulations. By participating in discussions and supporting industry initiatives, you can stay informed about regulatory developments and have a voice in shaping the regulatory environment. Collaboration and collective action can positively influence the regulatory landscape. Diversify Across Jurisdictions: Consider diversifying your crypto activities across different jurisdictions with favorable regulatory frameworks. By operating in multiple regions, you can spread regulatory risk and potentially benefit from more crypto-friendly environments. However, always conduct thorough research and comply with the laws and regulations of each jurisdiction. Maintain Compliance and Documentation: Adhere to all applicable regulations, including registration, reporting, and tax obligations. Keep accurate records of your crypto transactions, trades, and investments. Maintain detailed documentation of your compliance efforts, as this will be valuable in demonstrating your commitment to regulatory compliance. Plan for Adaptability: Understand that the regulatory landscape is subject to change. Develop a flexible and adaptable trading strategy that can accommodate potential regulatory shifts. Stay proactive in assessing the impact of regulatory changes on your trading practices, risk management strategies, and tax planning. Regularly review and update your approach to ensure ongoing compliance.   To succeed in crypto trading and investing, effective risk management practices are paramount. Conduct due diligence on securing your crypto and wallets, stay informed

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June 3, 2023 No Comments

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