The Next Steps on Your Journey to Wealth Creation Through Real Estate Investing

About the author. Himanshu Caplash is a Senior Product Manager of Access Controls at LiftMaster® with over 12 years of experience building real estate technology and consumer electronics across startups and big companies, such as Latch, Intel, and ARM. He holds a BS in Electrical Engineering and an MBA in Marketing & Strategy.

How Technology and Tax Deductions Improve Results, Part 2

Real estate investors can buy a smart video intercom access control solution consisting of tax-deductible cloud software and connected hardware, and accessories. For example, when property owners buy a smart video intercom access control solution, they can write off up to 80% of the cost of the hardware in the year it is purchased. Companion cloud software, which is a monthly subscription, can be deducted as a monthly operating expense when calculating income.

Exterior row of apartment buildingsPart one of this series discussed two secrets to accelerating wealth creation through real estate investing. In part two, we will dive deeper into how to reduce your taxes and increase demand from tenants. We’re joined in this effort by Tom Wheelwright®, CPA, a global expert in wealth and tax strategies. Wheelwright’s best-selling books —Tax-Free Wealth and The Win-Win Wealth Strategy: 7 Investments the Government Will Pay You to Make — transform the way readers think about taxes, helping them shift from fear and loathing to clarity and, believe it or not, fun.

“The way to reduce your taxes is not to work on a bigger tax refund,” says Wheelwright, who is CEO of Tempe, Arizona-based WealthAbility®. “It’s to build wealth in ways that reduce your taxes, and real estate investing is one of the best ways to do that.”


Utilizing Depreciation for Maximum Tax Reduction

The biggest deduction available to real estate investors — and one Wheelwright says many investors miss — is depreciation, Taxes Keyboard Image essentially a deduction for the wear and tear on your property over time.


When you invest in multifamily real estate, you are generally buying four assets:

  1. The land where your apartment complex sits.
  2. Landscaping and other improvements to the land.
  3. The building or buildings themselves.
  4. The contents of the buildings, such as ceiling fans, cabinets, carpet, and window coverings.
Mail boxes in apartment building corridor


Each of these elements wears out — or depreciates — at varying rates. For example, land typically doesn’t wear out, so the depreciation rate on residential rental real estate is 0%. Landscaping and other improvements on the land usually last 10 to 20 years, while buildings typically last 20 to 40 years. The components inside a building may last 5 to 10 years.

To determine an accurate deduction each year given the complexities around depreciation, cost segregation comes into play. This process involves an accountant and engineer working together to find an appropriate schedule for depreciating your asset’s value. With their help, you can accurately calculate depreciation, which will often enable large deductions during the first few years of ownership.

“You want to work with a CPA who has a proven system for permanent tax reduction,” Wheelwright said. “Your CPA should be a trusted advisor who proactively comes to you with ideas on how to build wealth faster.”


Leverage Technology to Boost Tenant Retention and Demand

At LiftMaster®, the biggest area of opportunity we see for multifamily real estate investors is in increasing tenant demand and retention by adding more technology to properties.

Today’s renters grew up with technology in the palm of their hand. Now between the ages of 19 -25, Gen Z is the fastest-growing demographic group and the only generation to record an increase in renting activity in 2020 compared to 2019. When the smartphone launched in 2007, the oldest Gen Zers were 10. myQ Community smartphone appBy the time they were in their teens, Gen Zers connected to the web through mobile devices, wi-fi, and high-bandwidth cellular service. They grew up with social media, constant connectivity, and on-demand entertainment. And they expect these smart amenities in the places they choose to live.

Adding smart access control technology to your property is a great way to improve the customer experience for this generation of renters. These systems use cloud software and hardware to enable various features. Some of the most popular video intercom features are those that allow tenants to screen and admit guests remotely and systems that monitor access points around the property, such as a package delivery room or fitness center.

Woman of color in front of apartment buildingReal estate investors can buy a complete access control solution consisting of cloud software and hardware. There are even tax incentives for making this type of investment and this is worth repeating. Property owners can deduct up to 80% of the cost of smart video intercom technology in the year it is purchased. And companion cloud software monthly subscription would be recorded as a monthly operating expense, another type of tax write-off.

At LiftMaster®, the biggest area of opportunity we see for multifamily real estate investors is in increasing tenant demand and retention by adding more technology to properties.

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