Property overview (high level): Stand-alone commercial buildingLarger and more functional interior layout than the prior locationFully built-out commercial kitchen (hood, suppression, bar, etc.)Adjacent outdoor patio space already set up for dining (big upside)Comes with all FF&E includedNo residential component — pure commercial use  Deal structure (seller carry): Purchase price written at $1.2M~$1.0M attributed to real estate~$200k attributed to FF&E (included in the sale) Seller financing on $900kBuyer cash in at closing: ~$275kInterest-only period initially (no balloon language currently in the contract)Target hold: 5 years, then refinance into a 25-year commercial loan  Business context: The restaurant historically did ~$950k/year in revenueWe are owner-operatorsConservative projections show the business can remain profitable even with slower $1k days mixed inGoal is consistency, margin cleanup, and NOI growth — not aggressive expansion  What I’m hoping to get feedback on: Does this structure make sense from a commercial real estate perspective?

There are 2 important components here to consider.. 1) What qualifies for bonus depreciation when house hacking? 

Even if you gave them a small equity component that does not mean that the architect has a skill to manage a construction project 

Keep up the good work.Most importantly, run a cash flow analysis and understand how to assess the life-left in the property's components (or assess projected CapEx expenses) based upon your findings on any subject property.Outside of operations, running numbers is essential to your success.

The majority of our building component is the club house and underground utilities so we're able to maximize 15 year components.  

So yeah, interestingly, if I cut out the 2 year old comp (only one) it brings all comps within 6 months and increases the average significantly in my favor.

Typically these firms have some type of interior design component to them as well. 

Sure there will be a finance and numbers component but from the limited development experience I have, the devil is always in the details and its always solved via relationships at the local level.  

Short-term flips may make the recapture hit outweigh the benefit.Recapture Is Real:Depreciation claimed isn’t free—when you sell, the IRS recaptures depreciation at 25% (for residential property).So, cost segregation is a timing strategy, not a permanent tax break.Professional Study Required:The IRS expects a detailed engineering-based allocation to separate land, building, and personal property components; this protects against audits.conclusion: Cost segregation improves short-term cash flow but reduces your basis for sale—plan around holding period and recapture to maximize value.

Much easier on new construction than an existing building as long as you have good receipts along the way for building components.