All Forum Posts by: Bonnie Griffin Kaake

@Lisa Loesel   Did you do cost segregation studies on all of your STRs? Why or why not? 

@Jack Martin  Don't forget that even if an investor successfully does a 1031 exchange, cost segregation is still a valuable service for reducing the federal and state taxes on the new property. Also, the property used in the exchange may benefit from a look-back with a good Tangible Property Regulations review of the relinquished property's depreciation schedule. You may have items that can be expensed that were previously capitalized. This then reduces your basis in the original property and increases your tax benefit.

@Brittany Guimond   Hi Brittany, Welcome! I am also in the Denver Metro Area. Congratulations on taking that BIG next step with your duplex and residential rental. You may be leaving some cash flow on the table. If you want more information, follow me here, or hopefully, you and I will meet at one of the upcoming meetups in Denver.  

@Nebiyu Shukur There are no city regulations specific to depreciation that I am aware of. Nevertheless, more and more cities are not allowing STR (Airbnb, VRBO) type properties. Before you get too far down the road, you are best advised to check with the city. We offer this kind of consulting on-going to our clients. If you need a second estimate, let me know.

Quote from @Nebiyu Shukur:

First, Thank you for your time in reading this and responding 

For anyone that got some experience in using the short-term rental loophole 

I got my first House Hack. I'm using the walk-out basement (900sqft) for myself and renting out the upstairs (1900sqft) as an STR.

I have 2 questions I would like to get help in understanding.  

1.  Can I use cost segregation for the portion that I'm renting out to capture the depreciation? (I'll be renting it out for 7 days or less and doing material participation and so it should be counted as an active income) ?

2.  I read that since I'm using more than 50% of my primary residence as a short-term rental it is considered commercial property by the IRS and the regular depreciation must be 39 years instead of the 27.5 years for residential properties would this mean I would have to separate the (900sqft) that I'm living in as a 27.5 year and the portion I'm renting out as a 39 year or would it be all 39 years?

This is a great question and one that is becoming more and more common. Since the largest part of the property is for STR, the depreciation needs to be over 39 years and you must be actively participating for it to qualify as an active investment. On the other hand, you will have to subtract out the portion you are living in because it cannot be depreciated...it is considered your personal residence. If you need more information, let me know. Also, be sure you are not in violation of any city or county regulations and HOA (if the housing area is under an HOA). These can be challenging areas to navigate.

Quote from @Derek Brawders:

Good evening,
Just getting started with rental property ownership, purchased my first condo (new const) back in June working to get it filled and will be looking into additional properties as time and resources allow. Goal is to have a short term rental for the next project to help fund the addition growth of a portfolio. Thank you in advance for advice and guidance!

Derek

 Congrats on your purchase! You are off to a good start. Now, be sure you get a cost segregation estimate on every property you invest in, including condos. The tax benefits and extra cash flow can't be beat. 

@Jon Martin   Your answers above tell me you must add these improvements to your basis. Then, with a cost segregation study, you will be able to expedite the depreciation with 100% bonus on anything that we can segregate (5, 7 & 15 years) up front for 2022. Let me know if you need an estimate. 

Quote from @Eric W.:

I live in TX but have family in the area so am up in co a lot. I’m thinking about making my first investment property in Colorado. I wanted to see if anyone could provide me with any tips or advice for an initial investment property. 

I’m working with about 100-125k should I try to find something smaller and simple and stay as close to possible as that as I can ie higher down payment? 

Or should I find something a little more pricey but in a more desirable neighborhood? 

Or Should I wait a few months before even looking and let the market keep cooling? 

What are some things that you believe a first time investor should know or do when selecting a property in Colorado?

thanks! 

@Wala Habiby  Hopefully, you have done or are considering doing cost segregation on every property you own or are a partner in. Yes, even those residential rentals. Next, on the storage facility, you will be amazed at what you will be able to depreciate upfront with a good engineering-based cost segregation study. Too many people think of storage facilities as big warehouses. All those doors can be depreciated in the first year of ownership and so much more. At the very least, get estimates on all your properties so you can take advantage of the tax savings and extra cash flow. It may help you to invest in even more commercial properties. Let me know if you have more questions. 

Quote from @Jon Martin:

Quote from @Kevin Chubet:

Assuming it is an STR that you materially participate in then yes.

Now it comes down to what the improvements are and when the property is placed in service. If it is furnishing the property, land improvements, ect. then utilize 39 year. I usually function aggressively in the depreciation space because over 39 years with time value of money that deduction honestly is terrible

Yes this would be an STR.

One other thing I'm confused about. As we transition into 80% bonus depreciation in 2023 (and 60% in 2024, 40% 2025 etc assuming no action by congress), what happens with the remaining 20% of that allowed expense that I cannot write off for 2023? Does that get divided over the remaining years of depreciation allowed for that type of expense? 

Example: If I spend $10K in furnishings in 2023 and the depreciation cycle is 5 years, would I deduct $8K in 2023 then $5K/year for the next 4 years?

Big thanks! @Kevin Chubet

Cost segregation was valuable even when we did not have bonus depreciation. The tangible property was still separated into 5, 7, 15 years and 27.5 or 39 for the structure and building systems. Then, the benefits were taken over that accelerated time for each classification. The bonus just allows you to take whatever percentage of the identified 5, 7 & 15 year in the first year the study is done. The rest would be depreciated ongoingly for the remainder of the 5, 7, 15 years and of course, the 27.5 or 39 years. I hope that further clarifies your question.