Should I Do a Cost Segregation on My Single Family Property?

Question

I'm currently in a single family house hack I am about to move out of. Can I do a cost segregation on a property I didn't purchase as an investment property but plan to use that way? Does it make sense to run a cost segregation study on a $350k property? Would it be worth it, and how do I go about finding someone to complete the study?

Thank you for your time!

John Malone · Answer

It never hurts to get a free feasibility analysis and then run it by your tax advisor as well.

Stanley J Black · Answer

Hi Jilyan. I would check with @Jeff Nash

Julio Gonzalez · Answer

@Jillyan MacMorris It's definitely worth looking into. We've seen properties with a purchase price as low as $150,000 benefit from a cost segregation study. Most cost segregation companies will provide you with a free cost/benefit analysis quote so you can get an estimate as to the tax benefits you could get from doing the study.

Jeff Nash · Answer

More information would be needed like what is your tax situation (REP or not, AGI), when did you originally buy the property, what is it's value now versus when you bought it - how much it has appreciated (maybe you sell it?), are you converting it now into just a straight-up long-term rental,  what are your goals? Depending on your answers to these types of questions, getting a cost seg done on an SFR might be justified.  It doesn't always have to be a higher cost multi-family or commercial property to benefit you, but some preliminary analysis is needed. I'll connect with you.

Chris McCormack · Answer

The cost seg engineers will give you a free analysis and it would help meeting with a real estate specific tax planning CPA to weigh all the costs and benefits. Sometimes it might look good on paper but you find out later that you didn't qualify for all of the savings. Better to find that out ahead of time.

Jillyan MacMorris · Answer

Thank you @Julio Gonzalez! I looked into the cost of a study, so I'll reach back out to them to ask for that analysis!

Jillyan MacMorris · Answer

Thank you!

Bonnie Griffin Kaake · Answer

Hi Jillyan, There are a few questions that you will need to answer to get a realistic no-cost estimate of what you can expect for tax benefits and added cash flow on this property. Jeff Nash listed some above. We do studies on properties with purchase prices of between $200K and $2.5 Billion. Let me know if I can help.

Steve Vaughan · Answer

@Jillyan MacMorris I'd say a single isn't worth it, especially if it was your primary.

It'll probably cost $5k and the best tax benefit of all is tax-free gain if you sell within 3 yrs of renting it out.

Jillyan MacMorris · Answer

Thank you both, @John Malone and @Chris McCormack! That's very helpful. I'll check in with my CPA.

Should I Do a Cost Segregation on My Single Family Property?

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