LPs vs. REITs
When you invest in real estate via a Limited Partnership, you are investing in real property. In other words, you own a portion of the asset itself. Most REITs are simply a mutual fund that invests in real estate. You buy shares of the fund, and the fund owns the property. Because Investors in Real Estate Partnerships actually own the property, investors can use the US tax code to their potential advantage.
The IRS allows investors in real estate investment property to expense a portion of the purchase price and capital improvements made to the property through depreciation expense. Consult with your tax advisor, but typically this depreciation adjustment allows investors to reduce taxable investment income, more often to an amount below that of cash flow paid to them during the year.
Further, when an investment property ultimately is sold, investors are generally taxed at a lower capital gains tax rate. Investors can then often take advantage of another tax benefit called a 1031 Exchange, and postpone paying taxes altogether!
Most partnerships are created by General Partners who put the project together, take responsibility for the management and upkeep of the property, and assume most of the risk. A majority of the investment is then sold to the Limited Partners. Limited partners are not active in the management of the asset, yet receive the investment benefits of real, income-producing property.
MQ VENTURES invests in all of our projects as a General Partner AND a Limited Partner. We are invested in every project right alongside you.
real estate limited partnerships