In terms of absolute deals? Yes. In terms of dollar value? Not even close, commercial property far exceeds residential property.
But then the tenant is paying correspondingly less rent, which means less taxable income to the property owner. It's a wash either way.
Generally, no. That's not how triple-net leases work. Tenant pays market value, and maintenance costs on top of that.
It's one of the two options.
In your hypothetical, sure. But in the real world, you don't make enough money in rent from one property to use to pay a down payment on the other, and actual real estate investment companies don't pay down the loans; they take out balloon mortgages and just pay interest on the loans until they sell (or refinance before the balloon). I've done this for enough real property investor clients to know how they actually think.
That's evidence of what I'm saying -- when corporate taxes are high, people move investment from businesses to real estate. Making improvements to real estate is investing in real estate. Lower taxes and they stop because they make more to invest the same money in other businesses.
No, it's not. Because all businesses make more investments in their businesses during periods of high taxes. And specifically in my example, I wasn't referring to real estate investors, but companies that actually manage buildings with the intent of being landlords and making their money from commercial leases, not from selling their buildings.
Or large apartment complexes. But isn't that where most real estate investing goes? Detached single family homes are mostly owner-occupied.
> Generally, no. Under a triple-net lease, they would not get to deduct these costs because they're not paying them. Most commercial properties are leased on a triple-net basis, so the tenant is paying maintenance costs.
But then the tenant is paying correspondingly less rent, which means less taxable income to the property owner. It's a wash either way.
> Also, I'm not sure if you are aware of this but an S-Corp does not pay corporate income taxes
You're right, I meant C-Corp.
My point being that if the investor is a "corporation" in the sense that it's paying corporate income tax itself, that has little to do with the thing it's investing in. If it buys ownership of a REIT and the REIT itself doesn't pay corporate income tax, and the corporate tax rate is high, that's more advantageous than the same corporate investor buying shares of Union Pacific, whether or not the entity doing the investing then pays corporate income tax on the income it receives from the investment.
> Yes, that's the point, but more to the point, that's the entire point of real estate investing.
It's one of the two options. Option one, you zero out your taxable income while building equity, and then sell to liquidate. Option two, you zero out your taxable income while building equity, then once the loan is paid off you get to keep the rental income, which can be used as down payment on additional properties if you prefer to invest further rather than pay the tax and spend the money.
> Right, but the flip side of you divesting is someone else investing, at appreciated costs from you paid.
The point being that high turnover during periods of low taxation isn't a result of people wanting to get into the real estate market, it's a result of people wanting to get out. So it tends to cause housing to become more affordable rather than inflating a bubble because people hold who would rather sell if not for selling incurring a major tax bill.
> They have actual businesses, and correspondingly tend to spend more on upgrades during periods of higher taxes.
That's evidence of what I'm saying -- when corporate taxes are high, people move investment from businesses to real estate. Making improvements to real estate is investing in real estate. Lower taxes and they stop because they make more to invest the same money in other businesses.