Real Estate Consultant · Denver, CO · Member since 2021 · 661 posts · 389 votes
3y
@Phil Shelton The IRS' recommended methodology is an engineering-based study. Yes, these do require a site review inside and outside. There are other methods of doing cost segregation studies and many cost seg companies use them because they cost less for the companies doing them. They are more likely to have errors that can get the attention of the IRS but if your only concern is how much you pay for the study, it is your choice. Most, if not all of the other less detailed studies don't offer audit defense at no cost with the study.
Depending on what company your CPA is using, you may want to get a competitive estimate. Just remember that you need to know what you are getting for what you are paying. If someone asked me "what will a car cost" and I give them the lowest priced car to get their business, maybe a used car, that would be quite different than a new BMW or Lexus with all the bells and whistles. Know the questions to ask before agreeing to pay money for the study.
Real Estate Consultant · Denver, CO · Member since 2021 · 661 posts · 389 votes
3y
@Phil Shelton The IRS' recommended methodology is an engineering-based study. Yes, these do require a site review inside and outside. There are other methods of doing cost segregation studies and many cost seg companies use them because they cost less for the companies doing them. They are more likely to have errors that can get the attention of the IRS but if your only concern is how much you pay for the study, it is your choice. Most, if not all of the other less detailed studies don't offer audit defense at no cost with the study.
Depending on what company your CPA is using, you may want to get a competitive estimate. Just remember that you need to know what you are getting for what you are paying. If someone asked me "what will a car cost" and I give them the lowest priced car to get their business, maybe a used car, that would be quite different than a new BMW or Lexus with all the bells and whistles. Know the questions to ask before agreeing to pay money for the study.
Real Estate Broker · New York, NY · Member since 2020 · 2k+ posts · 1k+ votes
3y
Hey @Phil Shelton - I've never personally ordered a cost segregation study before, but my instinct whenever I'm collecting quotes is to collect estimates from at least 3 different vendors.
Your CPA's recommendation might be the best especially if they've worked with this company in the past. It may make it the smoothest for tax purposes.
Specialist · West Palm Beach, FL · Member since 2008 · 4k+ posts · 1k+ votes
3y
@Phil Shelton Here's an article that outlines what the IRS considers to be a "quality" cost segregation study which includes a site visit by an engineer. As Bonnie mentioned, it's not required by the IRS, but it is their preference. I agree with Mohammed, I find it's always a great idea to get multiple quotes from multiple companies. Most cost segregation study companies will offer a free cost/benefit analysis quote. So you can not only compare the cost, but also the tax benefits estimated by each company.