Benefit 1: Private Real Estate Generates High Absolute Returns
Private real estate offers investors the ability to generate high absolute returns. An absolute return takes into account appreciation, depreciation, and cash flows to measure the amount of money an investment earns over time, and is expressed as a percentage gain or loss on the initial investment.
Benefit 2: Private Real Estate has Low Correlation to other Asset Classes
The goal of every portfolio is to create the highest total return with the least amount of volatility. Most investors are comfortable with a mix of stocks and bonds in their investment portfolios. Private real estate helps investors temper the volatility in their portfolios because it’s immune to the daily shocks of trading.
The value of a private real estate fund is based on the actual value of property held by the fund. Private real estate values don’t move much on a daily basis but rather appreciate slowly over time, which is why private investments are less volatile than their public counterparts.
Benefit #3: Private Real Estate is Tax Efficient
Investors who focus solely on an investment’s underlying returns and ignore its after-tax yields don’t recognize a big benefit of real estate investing. Income generated by properties is generally shielded through depreciation, providing investors with the long-term benefits of substantial cash flow and very little tax burden.
IRS rules allow owners to take annual losses in the form of depreciation to smooth out eventual capital expenditures as buildings age. However, only the physical elements of a property are subject to depreciation.
Another tax benefit of real estate is the ability to defer taxes indefinitely through a 1031 exchange. The 1031 exchange tax provision allows real estate owners to sell a property and buy another property without incurring capital gains taxes. In theory, an investor could buy and sell properties without ever paying taxes on the gains. The ability to defer taxes into the future is one of the greatest attributes of owning real estate directly.
Because private equity real estate is typically held in an LLC, which is considered a pass-through entity by the IRS, 100% of income, losses and expenses pass through to the owners.
This is why you need Mindful Capital Group. In 2003, Jeffrey Pechter created Mindful Capital Group following a successful, experienced career in commercial real estate. Just as the name implies, Mindful manages with the philosophy of what is good for their partners is good for them. A combined 50 years in the property management business taught the principals what it takes to operate in various economic conditions, create value within those conditions, and most importantly, not only to accept change, but to create it.
If you’re looking for a company to take care of your asset management, check out Mindful Capital! They are waiting to hear from you and to take the reigns over for your property.
Mindful Capital Group is a premier private real estate firm in South Florida. We assist in many private real estate ventures. You may be asking, what is the benefit to private real estate investing? Here we will go over this.
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