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Barzal & Scotti seeks to provide its investors with several types of returns, as follows:


CASH ON CASH RETURNS

Barzal & Scotti searches for investments that it anticipates will produce tax deferred cash on cash returns of 4-6% and greater.  These cash on cash returns begin immediately upon the acquisition of the asset.  As rents increase, cash on cash returns can also be expected to increase. 

APPRECIATION

Cash on cash returns are only one type of return that our investors can anticipate in this type of real estate investment.  Appreciation is also a key component in providing investors with long-term high yield returns on their investment.  When property values increase, investors benefit from that increase in value, especially when the property is leveraged.  For example, when a property is financed with a 65% loan to value ratio, a very conservative 3% asset appreciation can result in a appreciation return of 5-7% per year over the entire holding period.  As evidenced by San Diego’s phenomenal real estate growth over the years, depending on the city and the cycle, appreciation can reach very significant levels.


DEBT REDUCTION

In addition to cash on cash returns and appreciation, when conventional financing is used, Barzal & Scotti also expects to provide long-term returns in the form of principal reduction.  The principle is reduced throughout the financing term with the cash flow produced from the asset, which is also an increasing benefit as time goes on and the existing debt is paid down with inflated dollars.  Returns in the form of principle reduction are approximately 1.5-2.5% in the beginning of the investment, and increase throughout the amortization period.  The principle reduction aspect of the investment is realized upon the refinance or sale of the building. 

 


TAX BENEFITS

In addition to the returns listed above, this type of real estate investment can yield substantial tax benefits.  Some of the benefits are as follows:

-Tax deferred cash flow
-Taxable loss used to offset other passive gains
-Inheritance tax benefits- step up in basis
-IRA dollars may be used as this is a passive investment
-Distributions from a refinance are not taxable
-Capital gains can be deferred if asset is sold and 1031 exchanged into another asset
(please consult your CPA as we are not tax professionals)