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What is I.D.E.A.L.?


While it would be a stretch to say that any investment opportunity is “perfect,” we are confident in stating that its goals for every investor are “I.D.E.A.L.” “That’s a clever acronym that we use to demonstrate the five different ways that we can grow an investment simultaneously,” Jason Kjellson, Executive Vice President said.

Kjellson laid out those five core benefits during the fourth segment of blog series, designed to explain the company’s business model and to address common questions from investors.

“I” Is for Income

By investing in properties that have high occupancy rates year in and year out, thanks to the anchor of a major university and the steady influx of students that provides, the company is able to benefit from a consistently reliable cash flow. That stability leads to a consistent income for investors.

“Most of our properties procure a monthly income that we pay out to investors on the 15th of every month,” Kjellson said.

The monthly payments also help separate our company from the typical real estate investment trust, which pays dividends quarterly.

“D” Is for Depreciation

This accounting technique spreads the cost (and depreciation deductions) of residential real estate over 27.5 years, the amount of time the IRS considers to be the “useful life” of a rental property. As Investopedia notes, depreciation can be a valuable tool if you invest in rental properties because it allows you to spread out the cost of buying the property over decades, thereby reducing each year’s tax obligation.
For student housing properties, this depreciation schedule, set by the IRS, can often end up shielding 60 percent to 70 percent of the investment income from taxes, Kjellson says.

“One of the advantages of owning a brick-and-mortar building is that we’re able to write off the wear and tear and usage of the building and use that loss to shelter a lot of the income from taxes,” Kjellson said. “So it’s just a great way to enhance the net cash that you are receiving.”

“E” Is for Equity Growth

This is where we introduce the concept of amortization, which is a process that’s easily relatable to anyone who’s ever taken out a mortgage. It means that every monthly loan payment includes both principal and interest, so every payment helps to pay down the principal of the loan.
In the case of an investment in student housing properties, the tenants are, in essence, paying off the loan while investors’ equity in the property grows.

“For a lot of our properties, every month we’re not just paying off the mortgage but we’re also paying down loan principal, so it’s just another way to organically use cash flow from the operation to organically pay off the equity of the property,” Kjellson said.

“A” Is for Appreciation

While student housing properties historically have appreciated over time faster than the rate of inflation, there are also things that can be done to accelerate the rate of appreciation, such a remodel or renovation. We have our own construction management team, so it can take control of those costs to maximize the benefits.

Accelerated appreciation is accomplished through the due diligence of seeking out well-located, low-expense properties in strong rental markets. We have been able to check off all those boxes by focusing on student housing.

“We’re not going to buy a property without some sort of strategy designed to grow the value of the property so that when we sell it, whether it’s three years, four years or five years down the road, we want your value to appreciate and grow over time,” Kjellson said.

“L” Is for Lifetime

“That’s a lifetime of capital gains tax deferral,” Kjellson said. “What makes real estate so unique is that we have the ability to do a 1031 Exchange. It’s one of the only places outside of an IRA where you can defer capital gains taxes and even depreciation-recapture taxes indefinitely. And when you pass away, you pass along to your heirs on a stepped-up basis.

“That’s what the L stands for – using the 1031 Exchange to constantly keep that money working and growing for you, rather than writing off a big check to Uncle Sam every time you realize a capital gain.”

We’ll talk much more about 1031 Exchanges and how depreciation works in the next installments of the blog series.

Offering Disclosure:
The contents of this communication: (i) do not constitute an offer of securities or a solicitation of an offer to buy securities, (ii) offers can be made only by the confidential Private Placement Memorandum (the “PPM”) which is available upon request, (iii) do not and cannot replace the PPM and is qualified in its entirety by the PPM, and (iv) may not be relied upon in making an investment decision related to any investment offering by an issuer, or any affiliate, or partner thereof (“Issuer”). All potential investors must read the PPM and no person may invest without acknowledging receipt and complete review of the PPM. With respect to any “targeted” goals and performance levels outlined herein, these do not constitute a promise of performance, nor is there any assurance that the investment objectives of any program will be attained. All investments carry the risk of loss of some or all of the principal invested. These “targeted” factors are based upon reasonable assumptions more fully outlined in the Offering Documents/ PPM for the respective offering. Consult the PPM for investment conditions, risk factors, minimum requirements, fees and expenses and other pertinent information with respect to any investment. These investment opportunities have not been registered under the Securities Act of 1933 and are being offered pursuant to an exemption therefrom and from applicable state securities laws. All offerings are intended only for accredited investors unless otherwise specified. Past performance are no guarantee of future results. All information is subject to change. You should always consult a tax professional prior to investing. Investment offerings and investment decisions may only be made on the basis of a confidential private placement memorandum issued by Issuer, or one of its partner/issuers. Issuer does not warrant the accuracy or completeness of the information contained herein. Thank you for your cooperation.

Securities offered through Wealthforge, LLC Member: FINRA/SIPC. Only available in states whereWealthforge, LLC is registered. Wealthforge is not affiliated with any other entities identified in this communication.

Real Estate Risk Disclosure:
  • There is no guarantee that any strategy will be successful or achieve investment objectives including, among other things, profits, distributions, tax benefits, exit strategy, etc.;
  • Potential for property value loss – All real estate investments have the potential to lose value during the life of the investments;
  • Change of tax status – The income stream and depreciation schedule for any investment property may affect the property owner’s income bracket and/or tax status. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities;
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  • Reduction or Elimination of Monthly Cash Flow Distributions – Like any investment in real estate, if a property unexpectedly loses tenants or sustains substantial damage, there is potential for suspension of cash flow distributions;
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