Here's a real-world example from a project we structured in Miami, FL.

A client raised $9,000,000 from investors.
Then financed $11.75M with a local bank.
They developed 80 unit as part of the Bayline Commons project.

Total project cost: $20.75M

Upon completion, investors are projected to receive approximately $5.8M in bonus depreciation.

That's a paper loss equal to ~65% of the original equity invested.

And that paper loss can be used to offset $5.8M of other income, materially reducing investors' current tax exposure.

Here's the mechanics.

Multifamily assets are typically depreciated over 27.5 years.

However, through a Cost Segregation Study, an engineering-based analysis that breaks the property into its component parts we can accelerate a large portion of those deductions into Year 1.

Items like:
- Flooring
- Electrical and lighting
- Appliances and certain mechanical systems

These components have shorter depreciable lives, allowing investors to recognize deductions immediately instead of waiting decades.

In effect, years of depreciation are pulled forward into the first year.

This isn't aggressive accounting.
It's simply the tax code applied with precision.

Who benefits?
Investors can use these losses to offset income elsewhere. Any unused losses carry forward into future years.

But depreciation usually comes with a trade-off: recapture at sale.

Unless you structure ahead.

You can defer recapture via a 1031 exchange or eliminate it entirely through an Opportunity Zone structure.

That's where this becomes transformational.

When development is executed inside a properly structured Opportunity Zone fund and held for 10+ years:

- No tax on appreciation
- No depreciation recapture

Those ~$5.8M in paper losses become a permanent tax benefit.

And all future appreciation on the $20.75M development is tax-free.

This isn't academic.

It's how Bayline Commons in Miami was structured intentionally, from day one.