All Forum Posts by: Bonnie Griffin Kaake

@Suzanne Johnston 

I strongly recommend that no matter what CPA you choose, be sure they understand the nuances and appreciate the complexities of commercial real estate investing and the advantages available with the IRS' preferred methodology of cost segregation which is engineering-based. I work with many CPAs that can help you and minimize your tax liabilities while increasing your cash flow. Both the AICPA and the Journal of Accountancy recommend cost segregation studies. 

@Jeff S. and @John Roberts  Too funny, Jeff! There are some incredible governmental benefits available right now. They are especially lucrative for restaurants. Other businesses can benefit too if they struggled to stay open or maybe even closed during Covid. So many businesses are still struggling. The funds are available but the sad truth is that those who need it most are not aware of how to access the extra cash.  

@Mary McGinty This sounds like a great purchase. If you haven't done a cost segregation study on this property yet, you should. Especially, since you lost the two inial tenants. Conservatively, you could be looking at about $37K in federal and state taxes that you will not have to pay. Considering it is a new build, it could be considerably more. And, since you purchased this in 2022, you will be getting 100% Bonus. If you have questions or want more information let me know.  

@Account Closed When you purchased the property and listed it for occupancy is key. Depreciation has nothing to do with how old the property is unless you bought it to demolish it and build something new. Of course, if the property is in bad condition and you don't intend to rehab it, an appraisal will come in lower and the cost segregation and bonus results will also. 

That brings up another point...from a tax perspective, it is best to do any major renovation in the second calendar year of ownership and occupancy if possible.  

Quote from @Bruce May:

Kelly, one of the first properties I bought was in Indiana and had 3 mobile homes on it. We bought it for about $16,000, but even that didn't stop the bleeding. We live in San Diego so each trip to Indiana ran me about $1,000. It was hard to find a good property manager for it and in the end we sold the property for a loss after one of our tenants burned down one of the trailers and badly damaged the other two. I could go on and on about this but you get the point.

I still have out-of-state rentals, but they are single family homes and are more predictable and come with fewer issues. I agree with the comments above about getting educated first on MHP's. I'd do that and then buy a larger park with an on-site manger. That's what I'm currently working on.

The clients I work with who own larger mobile home parks do VERY well with cost segregation. You wouldn't think so, but much of what you are purchasing can be depreciated up front right now. The cash flow is incredible. Another thing to check on with mobile home parks is be sure to check the zoning. The previous owner may have been grandfathered in to have a MHP but new owners sometimes get unwanted surprises. 

@Jon Fletcher This arrangement is going to cost more for the accounting aspect. First, Unit 1 will be depreciated over 27.5 years. Unit 2 will be depreciated over 39 years. You will have to keep two sets of depreciation records. Next, the short-term rental can only be active if the owner puts in more hours than anyone else by materially participating in the management of the property. With a 50:50 ownership, it may have to remain a passive investment for you both. If one of you is a RE professional, that could make that person an active investor but even that is unlikely if either or both of you have W2 incomes. IRS red flag. Regardless, of whether either side is STR (39 years) or LTR (27.5 years), you will get the same bonus depreciation. Please contact a good CPA/EA or a tax attorney who understands the ins and outs of owning rental properties. My expertise is in the area of tax benefits and increased cash flow on commercial buildings. I work with CPAs/EAs and other tax professionals, including tax attorneys.

@John Roberts What the owner is not taking into account is that restaurants are one of the businesses most likely to fail. He may be able to get another restaurant in there but that is a risk. You may want to get an experienced commercial RE agent to help you with this negotiation by working for you. Do you have the option to continue renting and build an upgraded building in the same area? Crunch the numbers before making any commitment and as someone else said, I too would not agree to the 60-day notice to vacate.  

@Anthony Parr  Go back and read both @Greg Weik and @Nathan Gesner There are some very good comments in this thread. I will add one more, you cannot do cost segregation on a fix and flip property. You can on buy and hold properties. Therefore, if you use your wife's fix & flips to buy more fix & flips AND buy and hold rentals, you will have the best of both worlds. You can usually expect about 25-35% of the purchase price of a rental to be depreciable early and give you additional cash flow since you will not have taxes to pay or as much in taxes to pay on that rental income. That also adds to your leverage for buying additional properties. Any property purchased from September 2017 through December 2022 can take 100% of the expedited depreciation in the first year you do a cost segregation study. That percentage drops to 80% in 2023 and another 20% each year after. Cost seg will still be viable ongoingly, just not all of it in the very first year. 

@Andrew Rosenthal I am sure you know by now that mixed-use buildings are a little more challenging to get financed but well worth it. You will also do well if you get a cost segregation study done on the property or at least an estimate so you know what you will have in tax benefits and extra cash flow. Usually, 6-8% of what you pay for the property. 

@Sinath J.   Hi Sinath, Welcome to Bigger Pockets. This is a great place to network and get different points of view on RE investments. I am also in the Denver Metro Area...Lakewood. Love Colorado!!!