Investor · SF Bay Area · Member since 2021 · 4 posts · 4 votes
I'm wondering if anyone has any experience with using the platforms from KBKG, DIYcostseg, or titan echo. I'm going to try one of the three on one of my recently purchased multifamily properties.
I've already gone through all the tax analysis for my particular situation, and know that it will be quite beneficial with a reasonable discounted after-tax cash flow model. However, I'm trying to see if anyone has any particular experience using any of these 3 options, or even better, if anyone has used more than one and can offer some comparison.
I have a whole portfolio that I need to do retroactive cost seg on, but want to use this first property as a test run. I did get a quote from KBKG to do the whole thing for me, but it seems unnecessary to pay 4x the price when it appears all they will do is essentially use the same estimation software and then fill out the tax forms.
This is not tax or legal advice, just what I have personally done. I have used KBKG and DIY. I only use DIY now. Why? Because if you make an error you can email the owner and he'll fix it for you. Feel free to DM me for a discount code with DIY. I am personally a huge fan of algorithm-based cost seg studies on props under 1M.
This is not tax or legal advice, just what I have personally done. I have used KBKG and DIY. I only use DIY now. Why? Because if you make an error you can email the owner and he'll fix it for you. Feel free to DM me for a discount code with DIY. I am personally a huge fan of algorithm-based cost seg studies on props under 1M.
Thanks for the comparison. I did the "free" estimates on KBKG and DIYcostseg, and got very different results. I expected something (from everything I've read) on the order of maybe 15-25% of the total improvement value to be able to be moved to faster depreciation schedules. KBKG came up with something in that range, while DIYcostseg came up with 42%. That seemed really high to me. It's an older 5 unit multifamily, and the 42% equates to about $250k. I'm pretty sure I could gut and remodel almost all the stuff that would qualify for faster depreciation for about $150k, and that's replacement cost.
From your experience did the valuations sanity check? Did you see any big differences between the different platforms?
Anybody have any experience with Titan Echo? That one seems to be maybe more complicated than the other two, as they seem to want you to sign up for some sort of learning module first, and I don't find their website very clear. So I'm wondering if it's much more involved (which could be good or bad). It seems to be cheaper ($500) for larger properties (>$500k basis), whereas DIYcostseg jumps to $1300 over 4 units. KBKG claims to support only up to $500k basis, although they indicated to me that might be a little flexible.
@Jody Greenberg I personally would only use DIY because you can correct errors. My rule of thumb is 20-25% can be taken in Y1. Not tax or legal advice, consult professionals, just my personal opinion.
Yeah, well 20-25% of total basis that can be depreciated faster generally sanity checks for multifamily residential when you go through the ballpark costs of the items in the building. That's why the 42% seemed like a red flag. Anyway, I sent them an email to see if they could explain that result.
yeah, sort of. The explanation was a bit hand-wavy, and not super convincing. But I did end up using them to do the cost segregation on 2 smaller buildings, and they made manual corrections to make the totals more reasonable, so their customer service was good.
My thoughts after doing a couple are: I don't have that much faith in these database based cost seg studies. The fact that manual corrections are necessary tells me that the automated database method can't be that accurate. They are basically just an insurance policy in case you get audited. I could probably do just as accurate of a rough estimate of 5 and 15 year property totals...in fact probably even better because I know much more detail about the buildings than they take into their analysis. However, you get a sheet of paper that says this is based on XYZ, etc., and an outside party to back you up. What are the odds you get audited? I have no idea, so I don't know if paying for these "insurance policies" is worth it or not. I'm going to use Titan Echo for a full cost seg on a larger 8 unit building, as the cost difference for using the automated version and doing a full engineering analysis (as long as I do the onsite data collection myself) is not that different. I will then be able to compare those results and that process to the automated version. I expect it should be much more meaningful.
With the automated analyses, you only get useful totals of 5 year and 15 year property. So if you want to be able to depreciate items independently, and write off retired/disposed items, then you need the full detailed study. But for small multifamily, that's not necessary, so it seems fine.
@Jody Greenberg - thanks for the quick response. I was comparing KBKG and DIYCostSeg... I'm thinking about KBKG just because they seem bigger and I was referred to them. I do like that DIYCostSeg allows changes after the fact... KBKG is clear that they do not allow those changes without buying a second report.
yeah, sort of. The explanation was a bit hand-wavy, and not super convincing. But I did end up using them to do the cost segregation on 2 smaller buildings, and they made manual corrections to make the totals more reasonable, so their customer service was good.
My thoughts after doing a couple are: I don't have that much faith in these database based cost seg studies. The fact that manual corrections are necessary tells me that the automated database method can't be that accurate. They are basically just an insurance policy in case you get audited. I could probably do just as accurate of a rough estimate of 5 and 15 year property totals...in fact probably even better because I know much more detail about the buildings than they take into their analysis. However, you get a sheet of paper that says this is based on XYZ, etc., and an outside party to back you up. What are the odds you get audited? I have no idea, so I don't know if paying for these "insurance policies" is worth it or not. I'm going to use Titan Echo for a full cost seg on a larger 8 unit building, as the cost difference for using the automated version and doing a full engineering analysis (as long as I do the onsite data collection myself) is not that different. I will then be able to compare those results and that process to the automated version. I expect it should be much more meaningful.
With the automated analyses, you only get useful totals of 5 year and 15 year property. So if you want to be able to depreciate items independently, and write off retired/disposed items, then you need the full detailed study. But for small multifamily, that's not necessary, so it seems fine.
I purchased a primary residence in 2015. In 2018 it was turned into a rental. Depreciation has been $5300 a year since. A quick test on DIY (thank you @Lee Ripma) shows a possible $9k deduction.
Can I use a cost segregation depreciation now even though it's been years since I purchased the property?
Is this bonus depreciation to be used in conjunction with current depreciation (1/27.5)?
I purchased a primary residence in 2015. In 2018 it was turned into a rental. Depreciation has been $5300 a year since. A quick test on DIY (thank you @Lee Ripma) shows a possible $9k deduction.
Can I use a cost segregation depreciation now even though it's been years since I purchased the property?
Is this bonus depreciation to be used in conjunction with current depreciation (1/27.5)?
Thanks!
@Doug Wilkes you'll need to file a Form 3115 Application for Change in Accounting Method with the IRS if you change from a 27.5 MACRS to an different depreciation method/schedule. That should not be a red flag, but I've been advised (I'm not an advisor, so not advising, just sharing) that these things can/may trigger IRS AI algorithms for further scrutiny. I have no idea what that means in terms of attention or likelihood.
You may find better answers on that if you ask a CPA directly: I recommend tagging @Nicholas Aiola in his thread "Ask me (a CPA) anything about taxes relating to real estate" thread here: https://www.biggerpockets.com/...
DIY cost segregation seems appealing at first glance, especially when the price is right. But cost seg studies based on templates, AI software, or general rules of thumb often don’t hold up. The IRS isn’t interested in rough estimates; they'll want detailed, engineering analysis, a clear methodology, and comprehensive documentation. This is where many DIY providers miss the mark.
If you want to sleep better at night it’s definitely worth collaborating with an ASCSP certified engineer for your report.
ASCSP is a trade association, not an IRS requirement. Nothing in the Cost Segregation Audit Techniques Guide mandates it.
What the ATG actually asks for is engineering-based methodology, component classification, and reconciliation to purchase price. That can come from a 6 week onsite study or a remote one using detailed data. Same MACRS rules under Rev. Proc. 87-56 either way.
Agree that template studies/DIY and rule of thumb percentages are a real problem. But engineering based remote analysis isn't the same thing as either. (But then again I'm biased! ;) )