Headlines are loud. Every new piece of legislation comes with a laundry list of political hot takes and market speculation.
The One Big Beautiful Bill Act (OBBBA), signed in July 2025, is not just political noise; it is a direct alteration to the financial mechanics of real estate ownership. It reshapes tax treatment, construction incentives, and financing conditions that flow straight through to multifamily underwriting models.
But for multifamily real estate operators, the fundamental questions remain simple:
• How does this affect my after-tax cash flow?
• What does it do to build costs?
• How does it alter the price of debt?
The best operators are focused on translating the noise into numbers, and adjusting their strategies with discipline.
OBBBA's Real Estate Financial Tailwinds
Multifamily operators are not politicians; we are risk managers and asset improvers.
We focus on resident satisfaction, operational efficiency, and long-term capital preservation and returns.
Policy matters only when it shifts these core drivers, and the truth is the OBBBA is overwhelmingly favorable to real estate investors.
Here is a summary of the most impactful provisions for our industry:
100% Bonus Depreciation Made Permanent:
The scheduled phase-out was eliminated. Instead, 100% expensing for qualifying property, typically identified through cost segregation studies, is permanently restored for property placed in service after January 19, 2025. This is a massive win for accelerating near-term cash flow.
QBI Deduction Permanent:
The popular 20% deduction for pass-through entities (like LLCs and partnerships) under Section 199A is permanently extended and enhanced, preventing a scheduled tax hike.
Interest Deduction Expanded:
The limit on business interest deductions reverts to the more taxpayer-favorable 30% of EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) calculation, effective for tax years beginning after December 31, 2024. This generally increases the amount of deductible interest.
Tax Shield Acceleration: The 100% Expensing Effect
The difference between a 40% bonus depreciation year (the pre-Act rate for 2025 acquisitions) and the new 100% rate is significant to an investor’s cash flow. This provides a clear path to stable cash flow.
Case Example: Midwest B-Class Acquisition:
Let's look at a High Net Worth (HNW) investor in the new, permanent 37% top individual tax bracket who is allocated passive tax losses from a $15 million Midwest B-Class asset.
We'll assume the cost segregation study identifies $1.5 million in eligible property (qualified improvement property and personal property).
Pre-OBBBA Tax Savings (40% Bonus Dep. Rule):
• The total first-year bonus loss was calculated as $600,000 ($1,500,000 x 40%).
• The hypothetical investor's allocated loss of $100,000 resulted in an estimated tax savings of $37,000 ($100,000 x 37%).
Post-OBBBA Tax Savings (100% Bonus Dep. Rule):
• The total first-year bonus loss increases to $1,500,000 ($1,500,000 x 100%).
• The investor's allocated loss increases to $250,000, resulting in a direct tax savings of $92,500 ($250,000 x 37%).
Increased Value: The permanent change results in an increase of $55,500 in first-year tax savings for this hypothetical investor.
The permanent 100% bonus depreciation is the single largest tax tailwind for improving near-term cash flow and attracting high-quality capital. It provides a massive front-loaded tax shield that makes disciplined multifamily ownership even more compelling.
Cost & Credit Reality: Superior Downside Protection
Tax relief is welcome, but it does not solve the fundamental challenges of cost and credit. Our approach is to prioritize superior downside protection against these market forces.
Construction Costs Remain Sticky:
Nonresidential construction costs nationally rose +6.60% over the 12 months leading up to Q3 2025. While supply chains are stabilizing, costs for key scopes like reinforcing steel are still elevated.
Lending Spreads are Still a Reality:
Multifamily borrowing saw a 27% year-over-year increase in loan volume, but a conservative lending spread of 250 basis points over the benchmark rate is still advisable in underwriting to account for the persistent volatility.
The Midwest Advantage:
The region has outpaced the national average for rent growth in Q3 2025 (Midwest at 3.2% vs. national at 1.5% YOY) and has the lowest new-supply burden. This resilience is our structural
defense.
Reality Shapes Investing Strategy
We focus on operational excellence to drive NOI, building liquidity reserves, and underwriting with a high exit cap rate (a margin of safety).
It’s important to remember that while policy cycles are temporary; real estate fundamentals endure. A good tax break won't save a bad deal.
Our promise to our investors remains unchanged.
We deliver stable cash flow, ensure superior downside protection, and focus on improving lives through disciplined execution.
The new tax law is a powerful tool to be leveraged, not a reason for whiplash. By translating policy into clear, quantitative action, we ensure our investors feel the benefit of tax reform without suffering the hangover of market speculation.
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SOURCES:
Goodwin Law: One Big Beautiful Bill Act — Tax Highlights Related to Real Estate Investors
U.S. Bank: New tax laws 2025: Tax brackets and deductions
Turner Construction Company: Building Costs Continue to Increase in the Third Quarter of 2025
Mortgage Bankers Association (MBA): Commercial/Multifamily Borrowing Increased 36 Percent in the Third Quarter of 2025
Cushman & Wakefield: U.S. Multifamily MarketBeat Q3 2025
