Ask investors if they would like a product that could lower their tax bills, and the answer would be a resounding yes. Tell them the product is a real estate limited partnership, and many would be out of your office faster than you can spell R-E-I-T.

When investors and advisors hear real estate limited partnership, they think of plummeting property values, S&Ls going up in flames and partially constructed buildings left abandoned like skeletal remains. But not all real estate limited partnerships are alike, say officials at Boston Capital. The company has been selling funds that invest in affordable-housing limited partnerships for decades, and investor interest has been strong, they say.

Founded in 1974 by real estate developer Herb Collins and investment manager Jack Manning, Boston Capital has made a business of turning the federal government's annual allocation of tax credits for affordable housing into an investment product individuals can use to lower their tax bills. And investors can feel like they're doing something socially responsible in the process, company officials say. The company's motto: "Doing well while doing good."

Today, Boston Capital is a major force in the tax-credit market, selling its funds to both corporations and retail investors. It is one of the only companies selling tax-credit funds to individuals and since 1988 has sold shares worth $3 billion.

Boston Capital got a lift recently when The Related Companies, its largest competitor, abandoned the retail tax-credit market to sell solely to institutions-by far, the largest buyers of tax credits. Their exit left Boston Capital with the lion's share of the retail market, says Richard DeAgazio, Boston Capital's executive vice president.

"We don't have any competition in the retail marketplace. Most of our competition decided to concentrate on corporate sales," DeAgazio says. "They decided they didn't want to have to promote the product. It's easier to sell it to major corporations like Chrysler and get $40 million to $50 million a clip."

DeAgazio says the product sells whether or not investors are making money in the stock market, as long as they have taxable income. But the IRS limits the number of tax credits an investor can use each year before the alternative minimum tax (AMT) kicks in. The AMT ensures that all individuals who receive preferential tax treatment for certain income and expenses pay at least a minimum amount of tax. For people in the highest tax bracket, for instance, the maximum number of tax credits they can use each year is about $8,700.

The retail product has been popular particularly among retirees because the annual tax credits enable them to take about $25,000 tax-free each year from their IRAs for as long as the fund exists. Most last about 12 years. But the strategy requires a $70,000 investment. "That's a very, very popular strategy. We show them how they can take $250,000 out of their IRA over 10 years, tax free," DeAgazio says. "It's very popular in Florida."

Investors prefer tax credits to tax deductions because they receive a $1 benefit for every $1 invested. Tax deductions, on the other hand, simply reduce one's taxable income, so investors only receive a benefit equal to the amount they would have been taxed on that dollar.

Jeff Losito, CFP and national sales director for MML Investors Services Inc. in Springfield, Mass, says the product is pretty popular with his firm's clients as well as its advisors.

"Our reps like it because it really diversifies a portfolio for a client," Losito says. "It also gives the registered rep an advantage in talking to the client because everyone wants to know how to lower their tax bill."

There's an added advantage for advisors in that it can help them form strategic alliances with CPAs, possibly leading to client referrals down the road, Losito says. Boston Capital conducts training sessions for CPAs so accountants know how to handle the investment on their clients' tax returns. The accountants, for their part, attend the training sessions to obtain continuing education credits in their field. MML, for one, participates in those training sessions, enabling its advisors to forge relationships with the attending CPAs.

Losito says investors and advisors should not compare Boston Capital's product to the limited partnerships of the 1980s.

"People get scared. They do. But limited partnerships are a lot different today than when the debacle happened," Losito says. "The way they're priced today makes a lot more sense."

Losito's company obviously thought so. MML's parent, the Mass Mutual Financial Group, has invested $200 million in Boston Capital's funds.

Their retail product works like this: Boston Capital finds developers across the country who are building low-income housing and have already applied to the federal government for tax credits. It creates limited partnerships to buy the properties-usually garden-style apartments-and then sells shares in a fund that invests in those partnerships. The properties for the partnership are purchased with the proceeds from the fund shares, and fund investors get the partnership's tax credits.

A fund's assets typically total between $25 million and $35 million, and its partnership investments include between12 and 30 properties. The funds usually continue for no more than 12 years because most properties only have 10 years of tax credits, and by year 12, most of those credits will have been used. The minimum investment is $5,000.

On a $10,000 investment, the tax credit usually amounts to about $1,000 a year, or approximately $11,000 over 12 calendar years, DeAgazio says. Investors also are to receive checks from Boston Capital every time a property in the partnership is sold. The hope is that they will receive their original investment back, plus appreciation, because the properties are expected to accrue in value over a decade. The reality is, Boston Capital has only sold one property to date so it is difficult to tell how much investors will get back of their original outlay. In the case of the one property-which was one of 47 properties in BCTC II Series 10-investors received 115% of the cash invested in that property.

In fact, the company's brochures warn investors: "Since there is no way to predict the future state of the real estate market, if there is no money from the sale or refinancing of the properties, then the tax credits would represent the total investment return, and may be the only material benefit."

Investors are also tying their money up for 12 to 15 years, making it a pretty illiquid investment, although DeAgazio says a secondary market does exist. "People make too much of an issue about getting their money back," says Mitch Bonnett, a planner with LPL Financial Services in Birmingham, Mich. "If they could provide a program that would continue to provide tax credits forever, I wouldn't give a damn about getting my money back at all."

Bonnett says he has been selling tax-credit partnerships for more than a decade, and he continues to suggest them to most of his clients-including his 89-year old mother in Virginia. "They're extraordinarily dependable, and it's worked exactly as advertised," Bonnett says.

Bonnett advises his clients to use the tax credits to pay for long-term-care insurance. Also, by buying more tax credits than they can use, some clients help fund Roth IRAs for their children. Those clients gift the extra tax credits to their working children, who use the credits to offset taxes they would have paid on their contributions to a Roth IRA.

The partnerships also generate passive losses that can offset passive income. Bonnett says that is an added bonus for his clients who have assets, such as rental properties, that generate passive income.

"It works very nicely," Bonnett says. "A lot of people are looking for an investment that will give them a steady return, and they feel real estate is a stable investment. And when it's a top quality real estate, there's a certain amount of security. Nothing is 100%, of course."

Not everyone is as enamored with the product. "I've never found them terribly attractive for clients," says Tim Kochis, CEO of Kochis Fitz in San Francisco. "The returns they offer, while reasonably certain, are not particularly large and don't beat the kind of returns that are available from other low-risk propositions that have a great deal more liquidity."

Kochis says some investors may be looking for a quick-fix to reduce their tax bill. "I'm not sure that should be guiding principal in making investment choices," he says.