Benefits of Cost Segregation with David Deshotels & Jodi Nielsen - CREPN #219
Commercial Real Estate Pro Network
Release Date: 10/24/2019
Industrial Outdoor Storage Investment Strategy with Blake Rodgers - CRE PN #521
Commercial Real Estate Pro Network
Today, my guest is Blake Rogers. Blake Rogers is the co founder at Steel Peak Properties. Steel Peak is a Southern California based real estate investment firm focused on acquiring and improving industrial outdoor storage assets throughout the western US, and in just a minute, we're going to speak with Blake Rogers about outdoor storage properties.
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BIGGEST RISK with Blake Rogers
Commercial Real Estate Pro Network
J Darrin Gross I'd like to ask you. Blake Rogers, What is the BIGGEST RISK? Blake Rodgers Sure. So I think in in our space, we say this all the time to to our investors, because they ask us this question as well, what? What's, what do you think the biggest risk is here, guys with this asset class? For us, it's really, since we're buying single tenant deals. I think it's the single tenant nature of these deals. We're buying vacant sites a lot of the time. So the risk for us is you either lease it or you don't, and you either do it in the amount of time that you said you would or you...
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Commercial Real Estate Financing Options with George Otel - CRE PN #520
Commercial Real Estate Pro Network
Today, my guest is George Otel. George is the seasoned entrepreneur with over 10 years of experience in real estate and finance, and in just a minute, we're going to speak with George Otel about business finance.
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BIGGEST RISK with George Otel
Commercial Real Estate Pro Network
J Darrin Gross If you're willing, I'd like to ask you, George Otel, what is the BIGGEST RISK? George Otel The biggest risk when it comes to funding, is not looking for funding early enough, because the biggest risk is when people call me that they need funding yesterday. So it's I tell people you always have to look for funding, even if you don't need it, because when you need it, you may not find it where you may be. Tweaks. Expensive because of your situation. Let's say you got to look for funding when you're doing good, when you're doing great, because the lenders see less risk in...
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Virtual Assistants for Real Estate Focused Businesses with Pete Neubig - CRE PN #519
Commercial Real Estate Pro Network
Today, my guest is Pete Neubig. Pete is the co founder and CEO of VPM solutions, and in just a minute, we're going to speak with Pete Neubig about the Benefits of Hiring a Remote Team.
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BIGGEST RISK with Pete Neubig
Commercial Real Estate Pro Network
J Darrin Gross If you're willing, I'd like to ask you. Pete Neubig, what is the BIGGEST RISK? Pete Neubig So the biggest risk for VPM, well, I would say for us, the biggest risk is, at the end of the day, we're a payment processor, okay? You know, even though we have all these whistles and bells where you have this marketplace and you have these searches and you have this training, you have this video, if I can't pay people, I'm out of business. And so my biggest risk is that we are connected to stripe, and if stripe decides to cancel or go belly up. You know that I cannot process...
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Interior Design Space Planning for Multifamily Housing with Marcy Sagel - CRE PN #518
Commercial Real Estate Pro Network
Today, my guest is Marcy Sagel. She's the founder and principal of MSA interiors, with over 30 years of experience shaping multifamily housing, student living and senior housing and more. And in just a minute, we're going to speak with Marcy Sagel about From Blueprints to Brilliance, designing multi family spaces that rent.
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BIGGEST RISK with Marcy Sagel
Commercial Real Estate Pro Network
J Darrin Gross I'd like to ask you, Marcy Sagel, what is the BIGGEST RISK? Marcy Sagel I'm going to answer that in a few parts, because there's different aspects of the job that can be different risks. So when we pick materials for a project, we have to make sure we're working with tried and true materials, okay, materials that are not going to fail on a job, for instance, in the units, if we select a, you know, vinyl plank flooring, we want to make sure it's going to last. So we only work with manufacturers that we know are going to give us a solid product, not we're not trying to test...
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Workforce Housing Community Development with Lissette Calderon - CRE PN #517
Commercial Real Estate Pro Network
Today, my guest is Lissette Calderon. Lissette is the founder and CEO of Neology Group, a vertically integrated, lifestyle driven residential and commercial real estate firm that specializes in transforming undervalued neighborhoods into sought after communities, and in just a minute, we're going to speak with Lissette Calderon about solving for housing's greatest need, a focus on workforce communities.
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BIGGEST RISK with Lissette Calderon
Commercial Real Estate Pro Network
J Darrin Gross If you're willing, I'd like to ask you. Lissette Calderon, What is the BIGGEST RISK? Lissette Calderon Well, I think in today's world, probably the biggest risk you have is uncertainty. And how do you underwrite uncertainty? You know what happens next? How do you underwrite whether it's Harris insurance numbers, construction costs, what does that uncertainly look like, and what, how do you underwrite that? So, you know, how do we do it? You know, we really can't avoid it because, you know, we're developers. So of course, our job is, you know, we really think about a how...
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]