Navigating Real Estate Investment: Tax Strategies and Investor Mindsets

This chapter explores the intricacies of Internal Rate of Return (IRR) in real estate, highlighting the contrasting views of institutional versus individual investors. It addresses tax implications, investment strategies, and the challenges of engaging investors in long-term capital ventures.

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Moses Kagan has a unique take on real estate development and investing – and he’s influenced my thinking substantially over the past couple of years.

He is a highly successful syndicator, investor and developer with over $200 million in assets under management. He runs Adaptive Realty, having renovated over 100 multi-family buildings in Los Angeles, managing them in-house while specializing in the "indefinite hold” strategy for long-term wealth building.

He is the Co-Founder of ReSeed, a platform offering long-term GP and LP capital, along with mentorship for emerging real estate operators nationwide. He also hosts Reconvene, a highly regarded annual “unconference” for real estate operators and passive investors to connect and share knowledge. I attended last year, and it was awesome!

And lastly, he is a Twitter personality and avid blogger, sharing valuable insights on real estate and business. I highly recommend you follow him.

This is an excellent conversation about practical investment and real estate development philosophy, and I hope this conversation has as big of an impact on you as meeting Moses has on me!

TAKEAWAYS

Holding real estate indefinitely often leads to better investment outcomes than IRR-driven flipping.

Traditional real estate models incentivize risky short-term decisions, while sustainable strategies benefit both investors and communities.

Investors should focus on post-tax returns rather than pre-tax IRR, as tax considerations play a crucial role in long-term profitability.

Wealthy families and patient capital partners are more aligned with indefinite hold strategies than institutional investors.

Unlevered yield on cost and all-in price per square foot are key financial indicators for long-term real estate success.

Building direct relationships and trust at scale is essential for securing capital, especially for indefinite hold investments.

CHAPTERS

00:00 Introduction to Real Estate Development Philosophy

06:06 Understanding IRR and Its Implications

11:55 The Importance of Long-Term Thinking in Real Estate

17:59 Finding the Right Investors for Long-Term Strategies