Keep More of Your Hard-Earned Money with Multifamily Investing

Screenshot 2022 12 20 at 11.12.09 AM

If you’re a successful entrepreneur, professional or influencer and making a lot of money in America, that’s fantastic, but it’s not so great when a big chunk of the money evaporates with your first tax bill.

This is what happened to Ola Dantis, owner of the private equity real estate firm Dwellynn. “I earned a lot of cash and realized that I had to give a relatively big part of those earnings to the government”, says Ola.

Dwellynn helps investors build legacy wealth through multifamily investing and property acquisitions. They work with passive investors who want the benefits of investing in a multifamily property without the time commitment—opportunities that appeal to those with the capital to invest but not the time to manage or handle the administrative side.

With the continued growth of the multifamily housing market in the U.S., there’s been a correlating increase in those interested in investing in multifamily assets but aren’t sure if it’s the right fit for them.

A 2022 analysis by Arbor revealed:

The U.S. multifamily market continued to expand during the third quarter of 2022, although at a more modest pace. Moody’s Analytics CRE reported that rent growth remained strong, climbing 10.7% year-over-year, yet down from the second quarter’s skyrocketing rate of 17.7%. The vacancy further improved to 4.4%, reaching a new five-year low.

The Houston-based real estate investment firm that specializes in multifamily assets across Texas encourages investing in multifamily properties for several reasons, one of the biggest being tax breaks.

According to a Forbes article on the tax benefits of multifamily investing:

When modeling the potential profitability of a multifamily investment, there is a common tendency to focus only on the return generated by a property’s cash flow as measured by metrics such as internal rate of return or cash-on-cash return. This isn’t necessarily wrong, but it doesn’t tell the whole story. It ignores the tax benefits associated with a multifamily investment, which can be a major component of total returns.

The tax laws around real estate investing can be confusing, so it’s always best to consult a tax attorney for specific guidelines.

For those interested in multifamily investments, Dwellynn recommends that passive investors (those whose activity with the rental property is passive) consider the following tax-related basics to get started.

Income and Losses

The IRS requires that all rental and rental-related income be reported. Besides rent, some examples of rental-related income include security deposits, tenant-paid expenses, and cancellation fees. If there are any passive losses, they can only offset passive income.

Property Tax Deductions

Depreciation – According to the IRS, depreciation is “the recovery of the cost of the property over a number of years. You deduct a part of the cost each year until you fully recover its cost.” Depreciation covers the tax deduction allowed for the breakdown of property. According to the IRS, to be depreciable, it must meet the following requirements:

  1. It must be property you own.
  2. It must be used in a business or income-producing activity.
  3. It must have a determinable useful life.
  4. It must be expected to last more than one year.
  5. It must not be excepted property.

Mortgage Interest – Any interest accrued on money borrowed for a rental property can be deducted.

Maintenance and Repairs – The cost for maintenance and repairs, as well as certain associated materials and supplies, can be deducted.

Property Taxes – Although there are limitations on property tax deductions, they can still be included.

Travel – Expenses associated with traveling to a rental property to collect rent or maintenance of the property is deductible.

Advertising – Property advertising is considered a necessary expense by the IRS, so it is tax deductible.

Insurance – premiums for rental property insurance are deductible.

Utilities – utilities like heating, gas and trash removal can be deducted as long as they are not reimbursed by the tenant.

Beyond the tax benefits, investing with Dwellynn also provides:

  • the opportunity to see tax-adjusted better than market returns on multifamily investments for capital partners
  • the implementation of detailed investment strategies that improve operational efficiencies of investment properties and increase cash flow
  • ongoing quarterly cash flow disbursements and significant cash payout during the property disposition phase
  • alignment with a vertically integrated firm with property acquisitions, redevelopment, and property management strategically focused on mixed-use, garden-style, low and high-rise projects

When choosing a multifamily property to invest in, it’s important to be well informed. This includes partnering with a firm that not only understands the real estate business but also guides investors in the right direction to build legacy wealth for themselves and their families.

To learn more about Dwellynn and investing in multifamily properties, visit their website.

Advertising disclosure: We may receive compensation for some of the links in our stories. Thank you for supporting LA Weekly and our advertisers.