Benefits of Cost Segregation with David Deshotels & Jodi Nielsen - CREPN #219
Commercial Real Estate Pro Network
Release Date: 10/24/2019
Multifamily Value Add Underwriting with Ashley Garner - CRE PN #535
Commercial Real Estate Pro Network
Today, my guest is Ashley Garner. Ashley is a seasoned real estate entrepreneur and founder of ABG and Associates with over 30 years of experience, he combines analytical rigor and hands on property management to consistently deliver strong, cash flowing returns to his investors. And in just a minute, we're going to speak with Ashley Garner about value add, deal making, real world stories and lessons from transforming underperforming properties into profitable, high yield investments.
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BIGGEST RISK with Ashley Garner
Commercial Real Estate Pro Network
J Darrin Gross If you're willing, I'd like to ask you, Ashley Garner, what is the BIGGEST RISK? Ashley Garner I think the biggest risk is to be under capitalized and and ultimately, you know, a property can go up in value, or the the P and L can show a profit, but if you don't have enough cash flow to pay the bills or make the repairs that you need to make, or make the improvements you need to make, then you you're in a tight spot, and that puts everything at risk, and that's an avoidable risk to not be under capitalized. But the temptation is so great a lot of times to say, I'm...
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Short Term Rentals Real Estate Investments with Kenny Bedwell - CRE PN #534
Commercial Real Estate Pro Network
Today, my guest is Kenny Bedwell. Kenny Bedwell is a seasoned real estate investor and entrepreneur known for helping high income professionals identify and acquire short term rental properties that generate strong cash flow. And in just a minute, we're going to speak with Kenny Bedwell about short term rentals versus boutique hotels.
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BIGGEST RISK with Kenny Bedwell
Commercial Real Estate Pro Network
J Darrin Gross I'd like to ask you. Kenny Bedwell, what is the BIGGEST RISK? Kenny Bedwell So you know, I the biggest risk. I think that this the answer I was going to give you originally, and I kind of talked about it, so I'll move on from it, but it's regulation. Regulation changes. You're in trouble that is a huge risk to any investment. But the risk that I don't really hear often talked about. In our space is actually safety, guest safety. So I'll give you a stat. This is a real stat by there's a there's a guy Justin Ford, he's a safety expert in a short term rental space, and...
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Pro Storage Commercial Real Estate with Joe Downs - CRE PN #533
Commercial Real Estate Pro Network
Today, my guest is Joe. Downs. Joe is a lifelong entrepreneur with business ventures spanning securities, mortgage, hospitality and real estate industries. He co founded the bell Rose group to pursue opportunities within the niche Self Storage sector of commercial real estate, and in just a minute, we're going to speak with Joe downs about pro storage. What is it and why we need it.
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BIGGEST RISK with Joe Downs
Commercial Real Estate Pro Network
J Darrin Gross If you're willing, I'd like to ask you, Joe downs, what is the BIGGEST RISK? Joe Downs To me, it's, I'll give you, I'll give you, all right, you just want the biggest I'm gonna go right to base. To me, it's change. It's sort of what I just alluded to, if we were, if, if we still thought, because we weren't out there interviewing and investigating other third party management companies. If we refuse to do all that and just head in the sand, we would probably start falling behind other storage facilities, other competitors, who are managing their facilities better than we...
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Multifamily Leasing Strategy Training Courses with Peter Roisman - CRE PN #532
Commercial Real Estate Pro Network
Today, my guest is Peter Roisman. Peter Roisman is the CO founding principal, President and CEO of REV, the multifamily leasing company, a Houston based venture established in 2019. Under his leadership, REV has become a trailblazer in multifamily leasing management and training, and in just a minute, we're going to speak with Peter Roisman about leveraging data for improved multifamily leasing results.
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BIGGEST RISK with Peter Roisman
Commercial Real Estate Pro Network
J Darrin Gross If you're willing, I'd like to ask you, Peter Roisman, what is the BIGGEST RISK? Peter Roisman Well, the biggest risk, in my mind, for besides physical property itself, is the occupancy and and and the rental rates. So if you have an underperforming leasing team. And your occupancy drops into the 80s, you know. And at one point, 15% of the properties in Houston were under 85% you're at risk. That is, that is a high risk, too. So in to flip that, to address that risk, you have to be high performing at leasing, which, which means you're not at risk at all. You're lowering...
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Infinite Banking Money Multiplier Method with Brent Kessler - CRE PN #531
Commercial Real Estate Pro Network
Today, my guest is Brent Kessler. Brent Kessler was a chiropractor, and after implementing the money multiplier method, Brent paid off $984,711 in third party debt in 39 months, he became so passionate about how powerful this concept was, he began sharing it with others, and in just a minute, we're going to talk with Brent Kessler about Infinite Banking through the Money Multiplier Method.
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BIGGEST RISK with Brent Kessler
Commercial Real Estate Pro Network
J Darrin Gross And so if you're willing, I'd like to ask you. Brent Kessler, what is the biggest risk? Brent Kessler Yeah, well, let me answer it a couple different ways on there. But so as far as a risk, okay, as far as in our business, and what we do when you have this type of policy, I tell people all the time, there is no risk at all, because nobody's ever lost money in a whole life insurance policy. But then I stop, and I say, wait a minute, there is one risk. The risk is you, the risk is you the client and how you use the policy. So you're the only one that can screw this up. You...
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: jodi.nielsen@costsegregationservices.com
David Deshotels