Lesson · Facts First
Multifamily Real Estate
Multifamily is a business wrapped around real estate: cash flow pays the debt, operations create the value, the tax code rewards holding.
The facts
- 01Residential rental property depreciates over 27.5 years (commercial 39) - a non-cash deduction that frequently turns positive cash flow into a tax loss on paper (IRC 168(c)).
- 02Cost segregation can move portions of a building into 5/7/15-year property; bonus depreciation under the 2017 law phased down by statute (40% for property placed in service in 2026) - verify the current percentage for your placed-in-service year.
- 03The passive activity rules (IRC 469) gate losses against your wages - real estate professional status or material participation determines whether paper losses are usable now.
- 04Exit strategy is tax strategy: a 1031 exchange rolls gains forward, and the Section 121 exclusion shelters $250,000/$500,000 of gain on a qualifying primary residence.
Sources
- IRC Sections 168, 469, 121
- IRS: Residential Rental Property (Pub 527)
- Bonus depreciation phase-down schedule (TCJA)
Educational content only — not tax, legal, investment, or VA-benefits advice. Figures verified against the cited sources for 2026; confirm your own situation with a qualified professional before acting.
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