Benefits of Cost Segregation with David Deshotels & Jodi Nielsen - CREPN #219
Commercial Real Estate Pro Network
Release Date: 10/24/2019
Commercial Real Estate Owners Operations Challenges with Rob Finlay - CRE PN #456
Commercial Real Estate Pro Network
Today, my guest is Rob Finlay. Rob Finlay is a certified property manager and is a commercial real estate expert with a broad portfolio of success stories developed through hands on work and multigenerational industry experience with decades of experience in every facet of care from analytics to acquisitions, operations, to finance and more. Rob's insights are derived from real world wins and cutting edge industry innovation. And in just a minute, we're gonna speak with Rob Finlay about strategy changes needed for commercial real estate owners and asset managers in the shifting markets.
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BIGGEST RISK with Rob Finlay
Commercial Real Estate Pro Network
J Darrin Gross: I'd like to ask you, Rob Finlay, what is the BIGGEST RISK? Rob Finlay: So not sure if there's one specific one and just so you know, hopefully, I I can give you one right now, that is top of mind for me, right? Because insurances. Property Insurance is property insurance that has been spoken about and and fortunately, we have people like you that help us, real estate owners get through that through that mess. The one thing that that property insurance people aren't going to help us with is what I see as this great risk is compliance and corporate risk. There is this...
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Multifamily Marketplace Data Prices and Distress with Neal Bawa - CRE PN #455
Commercial Real Estate Pro Network
Today my guest is Neal Bawa. Neal is the founder of Grow Capitis an online multifamily investor education platform, experienced syndicator, developer and his attention to the data has earned him the moniker "The Mad Scientist of Multifamily". And in just a minute, we're going to speak with Neal Bawa about the Upcoming Multifamily Distress in the Marketplace.
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BIGGEST RISK with Neal Bawa
Commercial Real Estate Pro Network
J Darrin Gross I'd like to ask you, Neal Bawa, what is the BIGGST RISK? Neal Bawa So I'll give you two risks that affect insurance prices, and all other forms of prices in the United States. So one is a bigger, sort of more, you know, overarching risk. The second one is, is well known to us this. So the first one is climate change, we are continuing to see devastating impacts of climate change in many markets. It is a political, you know, issue where, you know, half of America doesn't want to acknowledge what is happening in markets like Florida and Texas and many other markets, like...
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Innovative Flood Insurance Solutions with DJ McClure - CRE PN #454
Commercial Real Estate Pro Network
Today, my guest is DJ McClure. DJ McClure is the VP of sales and business development at National Flood Experts driving strategic growth through partnerships and tailored cost saving solutions. And in just a minute, we're going to speak with DJ McClure about innovative flood insurance solutions.
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BIGGEST RISK with DJ McClure
Commercial Real Estate Pro Network
J Darrin Gross: I'd like to ask you, DJ McClure. What is the BIGGEST RISK? DJ McClure: I think right now, one of the BIGGEST RISK that I see among many is the number of properties that are, you know, approaching a debt restructure, you know, there's a lot of short term bridge that for a lot of properties that's coming due. And so one or two things are going to happen, obviously, they're going to be able to, if they're able to put together the funds to structure a refinance, you know, it's likely going to be into a different loan structure or excuse me a loan program, predominantly, your...
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Commercial Office Space Post Covid with Joey Kline - CRE PN #453
Commercial Real Estate Pro Network
Today, my guest is Joey Klein. Joey is the host of Tech Talk podcast or the Tech Talk podcast. Joey is a seasoned commercial real estate broker focusing on representation of corporate tenants across a range of industries. based in Atlanta, he is deeply involved in urban focused developments, and transit expansion advocacy, particularly in Georgia and the Southeast.
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BIGGEST RISK with Joey Kline
Commercial Real Estate Pro Network
J Darrin Gross: I'd like to ask you, Joey Klein, what is the biggest risk? Joe Kline: Sure. I don't have an insurance related answer. So that's, that's good. I have to say, I do think that your industry is a very fascinating one. And I think if we had more time, I'd love to throw some of these back at you. Because insurance is a very rapidly changing industry over the past couple of years as well. I look, I think that any Anyone, anyone who makes their money solely via Commission has to constantly be thinking about risk. And if you're not, you probably won't be doing it for...
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Invest in Flex Industrial Commercial Real Estate with Jeremy Friedman - CRE PN #452
Commercial Real Estate Pro Network
Today, my guest is Jeremy Friedman. Jeremy is with Stoic Equity Partners. And they have a portfolio of 10 Self Storage Flex Industrial assets in the southeast, totaling $48.8 million assets under management and 500,000 square feet located in Georgia, Mississippi, Florida, Alabama, and Arkansas. And in just a minute, we're going to speak with Jeremy Friedman about Why Invest in Flex Industrial Real Estate.
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BIGGEST RISK with Jeremy Friedman
Commercial Real Estate Pro Network
J Darrin Gross 0:00 And I'd like to ask you, Jeremy Friedman, what is the BIGGEST RISK? Jeremy Friedman 0:05 But as we discussed before the call, that's actually the one largest risk item that we that does keep us up at night and that we're working diligently on at the moment is our insurance. And I think it's so this is not to be clear to your listeners, you did not prompt me for that at all this is this is our biggest risk at the moment, as we see it. We being located on the coast, the Gulf Coast of Alabama, and we have several coastal...
info_outlineCost Segregation is a tool given by the tax code to real estate investors that improves cash flow instantly.
Jodi Nielsen, National Senior Account Manager & David Deshotels, Executive Vice President of Cost Segregation Services Inc provide real estate investors with the how and why they can utilize the tax code to lower their taxes, save money, improve cash flow.
FREE: TAX SAVINGS COST ANALYSIS
Cost Segregation Study
Cost Segregation Study takes an engineering approach to determine what the components of the building are. Then, it breaks the whole building into its components parts. These component parts are then categorized as personal property, and assigned a life expectancy of 5, 7 or 15 years.
Depreciation
Depreciation is the accounting of a portion of the whole that has been used up, and is loss. This loss reduces its value and is accounted for annually when filing income taxes. It is an expense against income. Subtracting this depreciation expense from income reduces your taxable income.
Straight line vs Accelerated
Start with a value of $100,000
Pre Tax income of $20,000
Straight line:
27.5 years: $100,000 / 27.5 = $3,636 annual depreciation expense.
Taxable income: $20,000
Depreciation: - $3,636
Taxable Income: $16,364
Accelerated Depreciation:
5 years: $100,000 / 5 = $20,000 annual depreciation expense.
Taxable income: $20,000
Depreciation: -$20,000
Taxable Income: $ 0
This shorter timeline accelerates the depreciation and increases the depreciation expense, which lowers the Taxable Income and increases cash flow.
The net result can be tax free income for the real estate investor. This is especially true in the early years of ownership. This is one of the primary incentives for investors to hold real estate.
Bonus Depreciation
Bonus Depreciation used to be available only for buyer or builder of a new property. The new tax laws allow you an additional 100% depreciate any eligible property if it is new to you. This adds to the value of a cost segregation study.
Partial Asset Disposition
Partial asset disposition allows you to take into account and write off the loss of the unused property when you replace elements of your building. For instance, if you buy a building and have to replace the carpet. If you expense the cost of the new carpet, you will get to record the expense of the new item, but will not get the benefit of the unused property that you tossed in the dumpster.
Additionally, if you have not done a Cost Segregation study, you will miss out on the additional depreciation allowed in the 2017 tax act. Bonus Depreciation provides an additional amount of depreciation for qualifying property in year one of purchase.
Tax Payor Status
Your tax payor status will determine how much depreciation you are allowed to use.
Real Estate Professional
For those investors who are full time investors and do not have a W2 job, they can utilize the depreciation against 100% of their gross income.
Passive Real Estate Investor
If you are a passive investor, and have a W2 job, you are allowed to deduct up to the amount of passive income received. If you have more deductions than you can take, the deductions will be carried forward for future use. This can be used to offset the taxable gain when you sell the property.
Misconceptions of Cost Segregation
There are some common misconceptions around cost segregation. Following are a few:
Misconception: I can’t do a cost segregation study on my old building.
FACTS: This is not true. As long as the building is new to you, you are eligible to utilize cost segregation.
Misconception: My building is not worth enough to utilize cost segregation.
FACTS: As long as your building is worth $150,000, cost segregation may be of benefit to you.
When Not to Use a Cost Segregation Study
A cost segregation study will not work for you if you are a non profit that does not pay taxes. Additionally, if you are looking to flip a property in less than 3 years, it may not be worth doing a study.
The recapture rate of Personal Property can be negated if planned for properly. If you exchange into a new building, the Personal property recaptured, will be calculated at a higher rate than the permanent structure. However, if you do a cost segregation study on the new property, you will have a new schedule of depreciation plus the bonus depreciation in year one.
BIGGEST RISK
Each week I ask my guest, “What is the Biggest Risk Real Estate Investors face?”
BIGGEST RISK:
Per Jodi: The biggest risk is you're sitting basically if you own a building you definitely owe it to yourself op to look at. Because you're sitting on cash that you don't have to sell another widget. You don't have to make another widget. You don't have to find another contract. It's your money that you're just basically sitting on by owning a building that you could use now. And so why not at least look at the look at the numbers to see if it makes sense for you at this time instead of letting more time go by just straight lining. And then also with the partial asset disposition I would say it's very important to take advantage of it.
Per David: We've had plenty of companies that have called us back years after having done their study. And they suffered catastrophic loss be it a tornado or fire or whatever it is and they won't say, do you guys still have those 500 pictures of my building that you took when you did the study? It's like sure we've got those and it's so we have they're building just completely documented from top to bottom one in the other. We'll come out and take hundreds and hundreds of pictures depending on the size of the property to completely document that. So if there is catastrophic loss it's it's a documentation to say hey here's what the building was. Here's all the furniture fixtures and so forth. And it's been very helpful to people in times of crisis.
For more go to:
Jodi Nielsen
Phone: 651-210-1921
Email: [email protected]
David Deshotels
Email: [email protected]