Benefits of Cost Segregation with David Deshotels & Jodi Nielsen - CREPN #219
Commercial Real Estate Pro Network
Release Date: 10/24/2019
BIGGEST RISK with Vince Gethings
Commercial Real Estate Pro Network
J Darrin Gross If you're willing, I'd like to ask you, Vince Gethings, what is the BIGGEST RISK? Vince Gethings What I've seen, it'd probably be over leverage. I know it's kind of the easy answer, but a lot of the issues that I've seen of people being forced their hand is forced to take action is because they're an over leveraged position and they don't have they don't have the working capital. They don't have the liquidity to kind of weather the storm. So they're being forced to take action where a lot of kind of more seasoned investors are sitting on their hands right now, and they...
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Delinquent Tax Investing with Brian Seidensticker - CRE PN #509
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Today, my guest is Brian Seidensticker. Brian Seidensticker, he founded , TSR in 2010 and in 2017 Brian partnered with software developer SDA solutions, a comprehensive workflow management system. And in 2020 Brian launched mount North Capital, a 506 C fund, providing capital to tax deed investors. And in just a minute, we're going to speak with Brian Seidensticker about Delinquent Tax Investing.
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BIGGEST RISK with Brian Seidensticker
Commercial Real Estate Pro Network
J Darrin Gross If you're willing, I'd like to ask you, Brian Seidensticker, what is the BIGGEST RISK? Brian Seidensticker I guess, you know, as far as buying tax deeds or the fund itself, it's for you to to, for me to interpret. Well, I think it's, it's from a tax, just tax sale properties, taxes and taxes in general, the biggest risk is the underlying property value, right? That That alone addresses the you know, is this, is this lien going to am I going to be able to make a return on this lien or this deed at the end of the day, or not? And that that is your number one risk?...
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Self-Directed IRA Note Investing with Eddie Speed - CRE PN #508
Commercial Real Estate Pro Network
Today, my guest is Eddie speed. Eddie speed is the founder of Note School, and in just a minute, we're going to speak with Eddie speed about opportunities in private, note investing.
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BIGGEST RISK with Eddie Speed
Commercial Real Estate Pro Network
J Darrin Gross I'd like to ask you. Eddie Speed, what is the BIGGEST RISK? Eddie Speed Losing my money and losing my money means that I bought a note and I don't get enough recovery to go pay off my investment and still make a yield. So that could be that that could relate to non performing notes. Performing notes, it does everything down the line. It's like at the end of the day. That is why I like buying first mortgages with a cushion between what the collateral is worth and what I invested in the note. And that's the simplest form to say at the end of the day. That's my safety net,...
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Return to Office Trends on Hospitality with Sundip Patel - CRE PN #507
Commercial Real Estate Pro Network
Today, my guest is Sandeep. Patel Sundeep is the CEO and co founder of companies, an asset management and fintech firm that specializes in commercial real estate, private credit, lending and investing. And in just a minute, we're going to speak with Sundip about the impact of return to Office trends on the hospitality industry.
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BIGGEST RISK with Sundip Patel
Commercial Real Estate Pro Network
J Darrin Gross I'd like to ask you Sundip Patel, what is the BIGGEST RISK? Sundip Patel That's a great question. Darrin, by the way, so the biggest risk that I foresee, and in our business, is the underestimating of the impact of AI and to our business and everything we do, from assessing risk, evaluating risk, to, you know, funding that risk, the entire process. So we as a company have taken some bold steps to get ahead, to understand how we can apply AI and what it will mean. As as you remember when we started the conversation, my mission was to create jobs and maintain jobs. I live...
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AI in Real Estate with David Blumenfeld - CRE PN #506
Commercial Real Estate Pro Network
Today, my guest is David Blumenfeld. David is the co founder of , a Silicon Valley based consultancy dedicated to assisting traditional physical businesses and leveraging digital technologies. And in just a minute, we're going to speak with David Blumenfeld about how AI is transforming real estate.
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BIGGEST RISK with David Blumenfeld
Commercial Real Estate Pro Network
J Darrin Gross I'd like to ask you. David Blumenfeld, what is the BIGGEST RISK? David Blumenfeld We're going to answer it a couple different ways, if that's okay. So I think I mean, and this, this first one might, might seem like a self serving answer, but I think the risk for real estate companies in general for not looking at technology. And again, it doesn't have to be the biggest, you know, the biggest, the newest, the the flashiest, but if you're not incorporating technology into your your your day to day operations, whether it be from a marketing perspective, a company, a...
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Real Estate Trends with Simon Isaacs - CRE PN #505
Commercial Real Estate Pro Network
Today, my guest is Simon Isaacs. In 2015 Simon moved his family from London to West Palm Beach, Florida, where he became more involved in the local real estate market after seeing an opportunity, and in just a minute, we're going to speak with Simon Isaacs about the real estate market trends.
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]