Tax Strategies for Multifamily Investing with Sunil Chillar

He is the owner and broker of EXIT Realty Urban Living located in Downtown Jersey City. After receiving his bachelor’s degree in finance and economics from what is now known as New Jersey City University, he worked his way up to the Assistant Vice President position of a large American stock brokerage and asset management firm. Feeling unfulfilled in his career, Sunil decided to delve into the field of real estate, Since becoming a licensed agent in 2002, he has worked with property investors, assisting them in purchases of over 5,500 units throughout the United States. He has managed over 100 units as a property manager and has gained over 18 years of experience overseeing construction crews and renovation projects for his clients.

Episode Highlights Here:

Sunil:

It’s in a DST, let’s make the assumption that you know what you needed cash and you wanted $200,000 You could actually in an installment contract, you could actually get that $200,000. Obviously, you’ll pay taxes on it.

Pierce:

How are you handling the exit with the capital gains tax?

Sunil:

The exit strategy or Exit Realty.

Pierce:

The exit strategy. So you sell the property right. And you, you, I’m assuming you probably syndicate a lot of these deals.

Sunil:

Correct. We do a whole lot of syndications, one of the things that are beneficial to our investors would be cost segregation, of course, you know, the funny thing is, you know, not a lot of people and this is what attracts investors, it typically takes about 27 and a half year to depreciate your home. And with these types of investments with these assets, you’re able to depreciate it in year number one. So we pass those depreciation benefits to our investors. So from a tax consequence, they’re really reaping the benefits here. So investors number one, love that. And, you know, the only thing we love to hear from our, from our investors is what next? Where can I park my money? Next? Yeah,

Pierce:

absolutely. So when so you guys will acquire property? Right, you’ll add your add the value, you know, do some improvements. You’ll do a cost sex study, you know, pass that along to your investors. Correct? What happens when you sell?

Sunil:

Well, what are we so when we start to rinse and repeat? Yes, a process over? Yeah, one of the other things that I should also mention with respect to core sag is 1031. Exchanges. Obviously, these things have been around, and the investors just eat this up, is just a way of, you know, kicking the can down the road when it comes to taxes. Or we also what was funny, and not a lot of people always been around, really don’t tend to use it, which is deferred sales trust. BSTs. So we have started working with those as well. But for the most part 1031 exchanges, we do have a lot of those in play right now.

Pierce:

So why would you guys use a deferred sales trust over a teddy 110s? Anyone? Yes.

Sunil:

What a 10-to-one exchange, you have that certain amount of time period before you could deploy those monies? Or Uncle Sam will be having that conversation with you. Right? Yeah, the difference would attend to anyone versus a DST is you do not have that time constraint anymore. So once there is that intermediary, you know, that holds on to that money, and that does not touch your account. You’re safe. Now, in addition to that, with the DSTS. Let’s make the assumption right now. The property was sold and the profits to you as an investor. Let’s use nice round numbers. A million dollars. Yep. So you made a million-dollar profit. It’s in a DST, let’s make the assumption that you know what you needed cash and you wanted $200,000. You could actually in an installment contract, you could actually get that $200,000. Obviously, you’ll pay taxes on it. However, the $800,000 That’s still sitting there. sits there a year, tax-free. So that’s the major benefit from a 10 to one versus a DST.

Pierce:

What’s also interesting is that with a DST you can invest it agnostically across different asset classes.