All Forum Posts by: Jay Hinrichs

This thread is about buying houses from distressed homeowners in foreclosure and particularly your comment was about the foreclosure rescue laws and I bet most the investors on here have no idea what they are. 

I don’t want those investors thinking that because of foreclosure rescue laws that they cannot help homeowners who are underwater (owe more than the house is worth) and make money. Yes apples and oranges but short sales are an integral and important process the banks follow.

and in over 100 short sales over the past 15 years that I have processed/negotiated,  ZERO have had the owner sign a note for the shortfall. Also, 90% have been paid $1500-$3000 at closing by the bank. 

Thank you for posting this notice. This highlights the vulnerability of borrowers who, facing financial strain, or may rush into fraudulent loan agreements without proper vetting. Scammers prey on this desperation by making appealing offers that are too good to be true, pushing individuals into predatory and abusive schemes.

• Never pay an upfront fee for a loan: A legitimate lender will never ask you to pay for a loan before it is delivered. Valid application or origination fees are typically deducted from the loan amount itself.

• Be skeptical of guaranteed approval: No matter how bad your credit history is, guaranteed approval is a scam. All legitimate lenders perform some form of underwriting to verify your ability to repay a loan.

• Do not succumb to pressure: Do not let a lender or broker pressure you into making a decision quickly. A trustworthy company will give you time to consider the offer and understand all the terms and conditions.

A scammer, often targeting those with poor credit, promises a loan but requires an upfront "processing" or "insurance" fee. Once the fee is paid, the scammer disappears without delivering the loan. This tactic offers "guaranteed approval regardless of credit history". Legitimate lenders never guarantee approval, as they must first verify a borrower's ability to repay. This claim is a ruse to collect sensitive personal and financial information.

"Seemingly, there isn't a ton of difference as long as you got a (cost seg) report."

I just finished a consultation with a rental owner that said something similar about cost seg reports and followed it up with "this stuff can't be that hard."

A couple of thoughts on this:

• Bonus depreciation is available on improvements and capital expenses with a useful life of 20 years or less. Items like Concrete generally fall into the > 20 years useful life bucket. If a real estate investor buys a property that’s already built, what skills are needed to determine how much of the purchase price should go to things like Concrete and not be eligible for bonus depreciation? If you don’t have a background/experience in construction / civil engineering / surveyor how would you know how to allocate it?
• Feels like it is important to have the experience and know how to allocate the different building components $ value between things like concrete, landscaping, etc.
• If your cost seg report underestimates or overestimates the amount of purchase price to allocate to + 20 year items. This can increase your tax savings or decrease it. If they overestimate + 20 year buckets, you loss money on tax savings. If they underestimate and you get audited, this exposes you to the risk of having some of the tax savings you received clawed back with penalties and wastes a lot of your time going back and forth with the IRS.

“But the cost seg firm provides audit support so that must mean they know what they’re doing.”

• Not exactly, and do you really want to take the risk on your tax return? If the report is inaccurate the IRS will be asking you for tax savings + penalties back, not the cost seg firm.

“An onsite visit from cost seg firm civil engineer or surveyor isn’t required by the IRS for cost seg firm to prepare the report.”

• Correct, but according to the IRS Publication 5653 Cost Segregation Audit Technique Guide this IRS prefers an “onsite” visit.
• Which study do you think has more audit defensibility? The cost seg report prepared using the IRS’ preferred method or the one that isn’t?

“The firms that provide “onsite” visits can take months to complete the report. This other firm does virtual/self-service and they can have it done in a couple days.”

• Based on the above, is “speed” something that you’re really looking for in a cost segregation report? Accuracy, audit defensibility, and experience should be a priority.
• Another example, do you want the accountant that tells you they can prepare your tax return in 5min or the one that took a day because they had it reviewed multiple times by other CPAs in their firm and took the time to make sure they included everything?
• If you work with a cost segregation firm that actually has an experienced surveyor, civil engineer, or someone with experience in construction look at the property and prepare a report, don’t you think that the report will be more accurate? Accuracy matters for the reasons I mentioned above.

"Seemingly, there isn't a ton of difference as long as you got a report."

There is a big difference. Pay the extra $500 - $1,000 to get a quality report, with high audit defensibility, where the cost seg firm took time to prepare it. This may end up saving you a lot of time, money, and sleep.

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This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice. 

Three cost segregation companies are operated by these three Bigger Pockets experts: 

@Bernard Reisz   @Yonah Weiss  @Julio Gonzalez

Reach out to any of them. And read this post to better understand how cost segregation works: https://www.biggerpockets.com/forums/51/topics/1075919-five-...

@Jay Hinrichs

of course!  I know you know just about all aspects of this cold, was just curious if you were still actually buying any yourself.