Adam Stern shares with us a strategy that is used commercially to depreciate separate parts of a property, from electricity to plumbing to roofing, they can all be depreciated separately.
After having the sections of a property split up, there can be savings on taxes by depreciating them separating.
Mike: Welcome back to the FlipNerd.com REI Classroom, where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.
Adam: Hi, this is Adam Stern. I’m the President of OwnAmerica, a national single-family rental portfolio private training platform. I’m here to talk to you today as part of the REI Classroom about cost segregation and tax strategies for single-family rental property owners.
Mike: This show was sponsored by passiverental.com.
Adam: Now, cost segregation, as it’s called, has been a widely used strategy in the commercial realm for years. It’s basically the process by which an engineer can take a property, whether it’s commercial or residential, and break down the various components of that property – the lighting fixtures, the walls, the lights, the electrical, the plumbing, and depreciate those systems over a much shorter period of time.
Don’t forget, the normal depreciation schedule for a piece of real estate is 27 and a half years. So being able to take that depreciation and squeeze it down into a much shorter period of time creates a lot more tax sheltering for a property owner. So again, it’s been done pretty widely in the commercial realm where engineers can go into a property and go through it and look at the various systems which can vary widely from commercial property to commercial property, and the tax savings that you would enjoy over 27 and a half years can very well be squeezed down into a period of a few years or several years, increasing that tax benefit.
We just found out about this not too long ago as an option for rental property owners and single family, which for an engineer is a little bit easier because single family properties are . . . I mean, they are all different, but the systems are generally going to be the same – the plumbing, the electrical, from those systems to the HVAC, and the fixtures, and the actual property. Not a whole lot of variation in terms of the actual system.
So what we found is by taking a large portfolio if you own one or a few or even hundreds of properties, being able to take those systems and squeeze the depreciation over much shorter period of time can mean a cost savings and a tax savings of thousands of dollars for single property. Or if you own hundreds of properties, you’re talking about a tax savings of maybe a million dollars or more.
So if this kind of thing interests you, check out online resources, and keywords such as cost segregation or tax engineering services, and what you’ll find is a bunch of companies that are geared toward this very thing. I can recommend you to one locally here in Charlotte, which is my home base. It’s called Engineered Tax Services. That’s Engineered Tax Services, one of the best in the industry, and very knowledgeable guys.
So without getting too much in-depth, because I’m not an accountant, I’m not an engineer, I just want to give you the heads up about this very useful tax strategy. And if you’d like to find out more, feel free to look online, [inaudible 00:03:42] OwnAmerica, HYPERLINK “http://www.ownamerica.com” www.ownamerica.com, and we’ll be happy to help. Thanks a lot for watching.
Mike: Passiverental.com is your source for turnkey, done-for-you rental properties. If you’d like to be an investor and not a landlord, please visit passiverental.com to learn how to purchase cash flowing, professionally managed rental properties in the hottest rental markets across the country. We can also help connect you with financing for your next property. Invest the easy way today, and get started by visiting PassiveRental.com.
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