All Forum Posts by: Bonnie Griffin Kaake

@Jeremy Mitchell  Student housing purchases can be very profitable and, may require some upgrades as well. I have investor clients who are investing a lot in these college towns. Some are buying properties in deplorable condition that are very close to campus, putting the capital into renovations and leasing them at greatly increased rates. Cost segregation studies upon purchase can give you a good amount of cash flow with the great tax benefits to make those renovations. The existence of newer properties will increase the value of the older ones if you do the needed remodeling. Do keep in mind that you may go months without tenants during breaks and when students graduate. It is a good time to do remodeling, painting or appliance replacements. 

@Jonathan Stevens I cannot give you any advice on ownership or analyzing a campground. What I can recommend you do is get a good engineering-based cost segregation estimate so you know how much you will have in taxes you can depreciate right away so you can minimize or eliminate your tax liability. STRs, RV sites and trailer parks tend to have great tax benefits that the owners are not usually aware of upon purchase.  Estimates are at no cost and and can be worth a lot in tax benefits and cash flow. 

@Anthony Patel   What you are describing is a complex situation. The short answer is yes, you most likely will be able to do cost segregation on the property. First, you will have to determine the square footage to each unit in the triplex. You cannot do cost seg on the unit you live in. The long-term unit will need to be depreciated over 27.5 years and the short-term unit will get depreciated over 39 years. The only one that will qualify to be used against your W2 income is the short-term unit if you are materially participating in the management of it. Whether or not it is worth doing a cost segregation study on it or not depends primarily on your purchase price, the size of each unit and your tax rate.

@Donny Dormady Considering the fact that you live in Alaska and the entryway will be exposed to moisture, I would go with a good commercial-grade vinyl plank as @Nathan Gesner suggested. The concrete floors tend to be slippery when wet from my experience. And, there is a better tax benefit with vinyl flooring ;-). 

@Ronald McDonald The best way to decide if a cost segregation study will be of benefit to you is to get a no-cost estimate from a company that provides engineering-based studies, the IRS' preferred methodology. Then, you and your CPA/tax professional can make the best decision based on your specific tax situation. The majority of CPAs/tax professionals will use straight-line depreciation because it is the quickest and easiest for the tax pro. It is not usually the best option for real estate investors. Not all CPAs/tax professionals can be or are knowledgeable about cost segregation or the special tax benefits available to RE investors. It is not their responsibility to be your tax strategist. Some are and those of us in this niche know them well and refer clients their direction. 

In most cases, if you purchased a property for $250K or more, cost segregation is of benefit. There are circumstances where it simply is not of value: you don't have taxes to pay, you plan to sell the property within 2 years, and a couple other reasons that may be specific to your tax situation. 

@Amer Nassar Think about it this way...CPAs and tax professionals rarely, if ever, do cost segregation studies for clients. It is a specialty area of tax law, very complex and calculation intensive. It takes an engineer and a person well-versed in construction and real estate tax law to do it right. The difference in cost to do a study is insignificant if you compare it to the cost of an audit. 

The more you know or learn about real estate, the more you realize you need an expert team to help you through the process. It is common knowledge in RE that no two properties anywhere are alike. 

@Charles Roy The biggest problems come when you are trying to go from residential to commercial. Check with your zoning department. They will give you the best answer and what you will need to do if you want to change the zoning. You may not have to. It looks like residential is already in place with the apartments on the top story. Also, consider a cost segregation study and get a no-cost estimate. It may give you the extra cash flow you need to do all or some of the renovations you will need to do. 

@Tony Aliatim You are moving in the right direction and cash flow is king. Second, only to cash flow is leverage. Explore cost segregation when you make your next purchase or before. It can give you considerable tax benefits and cash flow to then reinvest. Apartments are great for ROI and even the RV parks are better than most know for increasing your cash flow with cost segregation. Think about all those concrete pads and utility hook ups and landscaping.

@Sarah Akin You are going to do well with your investing from the story you tell here. That was a smart way you approached finding this off-market property. It does help to ask the right questions. Good job! Now, you need to consider cost segregation to reduce your tax liability up-front so you can do more renovations as needed. 

@Suzanne Johnston You are talking to the wrong CPAs. There are CPAs that know the benefits of helping new investors and understand real estate. Every heavy-hitter investor started somewhere. Let me know if I can help.