For those of you who are putting deals together to purchase apartments or other commercial real estate property, you know that investor relations is one of the most important components of success. Not only do your investors contribute to the overall success of the current project, but investors who are satisfied with their returns and your projects will come back to you over and over again offering to put money in your future deals. That's why it is very important to treat our investors as our "clients" and do all that we can to make sure they are receiving the maximum value from investing their money with us.
As CPAs who work extensively with both investors and syndicators, we have a unique advantage to understanding the needs and wants for both parties mentioned above. Syndicators put a lot into the deal process and should be compensated handsomely for their outstanding efforts. Investors put their trust and money in the deal team and generally get compensated nicely. But after you have done all that you can to maximize the profit on a transaction, what are some other ways that you can still increase your return on investment for both you and your investors? The answer: Look to the IRS! Keep in mind, it's not important how much money you make, rather, it's how much of it you actually get to keep. So let us share some creative tax strategies that will help you attract and retain your angel investors.
How would you like to use pre-tax money to invest in real estate deals AND not pay taxes when you receive your share of income from the deal? If you were an investor looking for a place to put your money, would you be interested in hearing more about this kind of a deal? We know from experience that a large portion of money raised for real estate deals comes from investors' retirement accounts. This strategy allows investors to invest money from their Individual Retirement Accounts (IRA's) or 401(k)'s by using pre-tax money (income which has not been taxed yet), and receive a portion of their investment tax free when they receive their return on investment. For the high net worth investors, this benefit alone could mean an additional return on their investment of up to 35% in tax savings! So consider setting up your syndications to allow for investments from people's retirement accounts.
Another way to create and develop a great relationship with your investors is to empower them with knowledge. If you are targeting a group of investors who are nearing retirement age, you should pay attention to the following advice. For individuals nearing retirement age, they will soon be required by law to begin taking money out of their retirement accounts (IRAs, Pensions, 401Ks). Those amounts, which are generally invested in stocks and mutual bonds, will be taxed - when withdrawn - at ordinary income rates, which are between 15%-35%, depending on their income levels. So for those investor clients who are nearing retirement age, let them know that it may be more beneficial for them to invest in your deals instead of making additional contributions to their retirement accounts. The income they receive from the investment may be treated as capital gains, which is generally taxed at 0-15%, depending on their income levels. So all else being equal, the investor is positioned to increase their return on investment by up to 20% in tax savings alone!
As all successful syndicators know, it always pays off to take good care of your investors. Just as you would do whatever it takes to have happy and satisfied customers, you must do the same for your investor clients. The best part of all is that these strategies require No Money out of Your Own pocket! Once investors know that you have their best interest in mind, they will come back to you over and over and will help you to create the life of your dreams! As always, work with your tax advisor to determine the proper ways to integrate these strategies to fit your transactional needs.
As CPAs who work extensively with both investors and syndicators, we have a unique advantage to understanding the needs and wants for both parties mentioned above. Syndicators put a lot into the deal process and should be compensated handsomely for their outstanding efforts. Investors put their trust and money in the deal team and generally get compensated nicely. But after you have done all that you can to maximize the profit on a transaction, what are some other ways that you can still increase your return on investment for both you and your investors? The answer: Look to the IRS! Keep in mind, it's not important how much money you make, rather, it's how much of it you actually get to keep. So let us share some creative tax strategies that will help you attract and retain your angel investors.
How would you like to use pre-tax money to invest in real estate deals AND not pay taxes when you receive your share of income from the deal? If you were an investor looking for a place to put your money, would you be interested in hearing more about this kind of a deal? We know from experience that a large portion of money raised for real estate deals comes from investors' retirement accounts. This strategy allows investors to invest money from their Individual Retirement Accounts (IRA's) or 401(k)'s by using pre-tax money (income which has not been taxed yet), and receive a portion of their investment tax free when they receive their return on investment. For the high net worth investors, this benefit alone could mean an additional return on their investment of up to 35% in tax savings! So consider setting up your syndications to allow for investments from people's retirement accounts.
Another way to create and develop a great relationship with your investors is to empower them with knowledge. If you are targeting a group of investors who are nearing retirement age, you should pay attention to the following advice. For individuals nearing retirement age, they will soon be required by law to begin taking money out of their retirement accounts (IRAs, Pensions, 401Ks). Those amounts, which are generally invested in stocks and mutual bonds, will be taxed - when withdrawn - at ordinary income rates, which are between 15%-35%, depending on their income levels. So for those investor clients who are nearing retirement age, let them know that it may be more beneficial for them to invest in your deals instead of making additional contributions to their retirement accounts. The income they receive from the investment may be treated as capital gains, which is generally taxed at 0-15%, depending on their income levels. So all else being equal, the investor is positioned to increase their return on investment by up to 20% in tax savings alone!
As all successful syndicators know, it always pays off to take good care of your investors. Just as you would do whatever it takes to have happy and satisfied customers, you must do the same for your investor clients. The best part of all is that these strategies require No Money out of Your Own pocket! Once investors know that you have their best interest in mind, they will come back to you over and over and will help you to create the life of your dreams! As always, work with your tax advisor to determine the proper ways to integrate these strategies to fit your transactional needs.
About the Author
Amanda Han is a Managing Director at Keystone CPA, Inc., a firm specializing in tax mitigation strategies for business owners and real estate investors. For complimentary top-notch tax mitigation strategies, visit www.KeystoneCPA.com and sign up for the Monthly Newsletter and Member's Library.
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