Using Cost Segregation to Optimize Real Estate Tax Benefits
Todd Strumpfer, a senior account executive at Cost Segregation Services, Inc., discusses depreciation, its importance in real estate investing, and why pharmacist real estate investors should consider cost segregation services for their properties.
About Today’s Guest
Todd Strumpfer is a 1993 graduate from the University of Minnesota with a BA degree in Marketing & Management. He has worked in Business Development for Cost Segregation Services, Inc. (CSSI) since 2009. Todd lives with his wife and three children in Rochester, MN and works with clients nationwide to bring them the income tax savings and cash flow producing benefits of cost segregation.
Episode Summary
Many people have a negative association with the term depreciation, but when it comes to real estate investing, depreciation may often translate to tax benefits. On this episode of the YFP Real Estate Investing Podcast, your hosts, Nate Hedrick and David Bright, invite Todd Strumpfer, senior account executive at Cost Segregation Services Incorporated, to talk about depreciation and why you should investigate cost segregation as a real estate investor. We dive into the discussion with a definition of depreciation from a tax standpoint and how breaking it down can provide tax benefits. Todd talks through how tax cuts accelerate depreciation and why money available immediately is better than potential future payouts. Listeners will find out why the state of a property at the time of purchase does not impact depreciation and the common mistakes and misunderstandings around depreciation. There is some discussion about the services provided by CPAs and tax planners, what each does and how those roles differ regarding cost segregation. Todd also explains the fees charged by Cost Segregation Services, Inc., and when cost segregation services will save you money. The episode wraps up with some great tips from Todd on optimizing your tax situation and where you can get into contact with him.
Key Points From This Episode
- Welcome to Todd Strumpfer, senior account executive at Cost Segregation Services, Inc.
- What depreciation is from a tax standpoint, and how it differs from the property dropping in value.
- Breaking down the lump depreciation value into individual costs.
- Why cost segregation is beneficial to owners in the short term.
- How tax cuts accelerate depreciation further.
- Why the state of a property when bought doesn’t affect the tax benefits.
- The common mistakes and misunderstandings Todd sees in this field.
- The relationships between CPAs and tax planners, and how they differ.
- Todd’s suggestions on how to optimize your tax situation: why vacation properties are so beneficial.
Highlights
“I always make it clear, you’re not getting more depreciation with cost segregation, you’re just speeding that up, accelerating it, and getting to take those expenses per depreciation sooner.” — Todd Strumpfer [0:12:03]
“That’s what it boils down to with cost segregation is the time value of money. A dollar today is worth more than it will be a year from now or 10 years from now.” — Todd Strumpfer [0:12:58]
Links Mentioned in Today’s Episode
- YFP Real Estate Investing 18: Tax Strategies for Real Estate Investing
- Cost Segregation Services Incorporated
- Your Financial Pharmacist
- The Your Financial Pharmacist Podcast
- Call Todd Strumpfer: (888) 303-4874
- Find out if your property qualifies for cost segregation
- Contact CSSI
- YFP Real Estate Investing
- Join the YFP Real Estate Investing Facebook Group
- Your Financial Pharmacist Disclaimer and Disclosures
Episode Transcript
[INTRODUCTION]
[0:00:08.1] NH: Hello and welcome to the Your Financial Pharmacist Real Estate Investing Podcast. A show all about empowering pharmacists to achieve financial freedom through real estate investing. I’m Nate Hedrick and each week, my cohost David Bright and I explore stories from pharmacists all over the country who are achieving their real estate goals while maintaining a meaningful career in pharmacy.
Whether you’re a first-time investor or a seasoned pro, we’re here to provide education and inspiration about the world of real estate. Please note, this podcast is intended for educational purposes only and should not be considered financial or investment advice.
[0:00:42.3] NH: Hey, David, how’s it going?
[0:00:43.7] DB: Hey, good, thanks man, how are you doing?
[0:00:44.7] NH: I’m great man, getting ready for the end of tax season here so my mind has been spinning like that but otherwise, really doing good.
[0:00:51.7] DB: Yeah, we’re recording this one, right before the April tax deadline and this episode will go live just right there after. Taxes is around everybody’s mind right now and not just kind of the getting it done sort of compliance work that everyone does but also thinking through as we’re doing all these, some of that strategy and how real estate tax benefits can apply to your financial picture.
[0:01:13.0] NH: Yeah, I mean, especially things like depreciation which can be confusing and taking it a step further, things like cost segregation, it can feel like a lot and our job is not to know everything but it’s to really be able to understand it enough that we can take action on it and make sure that our pros are doing things the way that we want them to.
We thought, what about a way to bring on some of that information by bringing out one of those pros and really talking through cost segregation and what the details of that can look like.
[0:01:38.9] DB: Yeah, we’ve done this before back on episode 18, we had Amanda Han and Matt MacFarland that talked about depreciation and just other tax strategy considerations and one of the things that I loved about that episode is there was this, kind of this enough to be dangerous and enough to be conversational with your CPA where there’s never this intention of you becoming a tax professional just by listening to a magical podcast but by having enough knowledge to have some of those strategy conversations and not feel totally lost but to feel a little bit more empowered.
So, that’s precisely what we want to do today too when it comes to cost segregation and other kind of trickier concept but to bring on a professional that can help to break that down so that you can know when and if this might be a strategy that you should consider in your investing as well.
[0:02:26.9] NH: Yeah, I’ll tell you, this podcast alone actually helped me understand better when to tap that pro because it felt like, “Oh cost segregation is this thing you do when you’ve got massive multimillion dollar properties only” but what we learned in the show is really that’s not the case. I think that hopefully we’ll show other investors that there is a time to tap a pro and it doesn’t have to be when you’re this massive multimillion dollar investor, which it’s a good time to start asking your CPA no matter what your invest looks like.
[0:02:51.2] DB: Yeah, I think that we covered a lot of things in there, like when to talk with the CPA and what questions to ask and what are some of those key price points cutoffs like maybe not for a $50,000 rental house in the midwest but doesn’t necessarily have to be a multimillion-dollar skyscraper, that there is a happy medium in there and so today’s guest talks a lot about some of those practical nuggets as well.
[0:03:16.8] NH: Yeah, I think we buried the lead enough, this week we’d be bringing on Todd Strumpfer with, CSSI, Cost Segregation Services Incorporated. Todd and his company, I mean, just the amount of detailed analysis that have gone through over the years, they work in all 50 states, they do engineering-based studies that look at cost segregation and figuring out how to basically accelerate depreciation in a meaningful and legal way.
It’s a really great professional service that people can tap into and get the things they need to be able to run this analysis and do it the right way.
[0:03:47.1] DB: Again, I love the examples that he gave, that provided some tangible numbers and even some rules of thumb for what price point, what intended hold time for property, where this can start to make more sense for someone in terms of maximizing those tax benefits.
[0:04:04.2] NH: Yeah, lots of options to apply today’s content regardless of where you’re at. Without further ado, I want to make sure we take you to the episode and we’ll jump in from here, hope you guys enjoy.
[INTERVIEW]
[0:04:14.1] NH: Hey, Todd, welcome to the show.
[0:04:15.2] TS: Thank you very much, glad to be here.
[0:04:17.1] NH: Yeah, this is awesome. We got connected with you through Tim and Tim over at the YFP main channel and just thought, “Man, what a perfect fit to bring on the show talking about cost segregation today.” Maybe jump in, tell us a little bit about yourself and your background?
[0:04:29.0] TS: Sure, I’m Todd Strumpfer, I’m with CSSI, Cost Segregation Services Inc. and been with them for about 11 years now. Our home office is Baton Rouge Louisiana, I happen to be in Minnesota so I’ve got clients in probably every state at this point but enjoy helping building owners and their tax professionals see the benefit from cost segregation, tax benefit, tax savings so nobody wants to overpay taxes if they can avoid it, so kind of a fun business to be in.
[0:04:59.1] DB: Absolutely, I think we hear with — when it comes to real estate investing lie that we hear this thrown around like there’s tax benefits in real estate investing and then because a lot of real estate investors get really wishy-washy after that. They just kind of move on quickly and secure the whole issue, right? They don’t really dive into that topic but real estate investing does have major tax advantages, one of those that gets discussed a lot is depreciation.
Since that’s really at the core of what we’re talking about today, can you give us just a brief background of what is depreciation from a tax standpoint and how is tax depreciation different from the property dropping in value.
[0:05:35.3] TS: Sure, yup. The tax code is 76,000 pages long so CPAs and so forth, they’re starting to know more about cost segregation and I’m not a CPA. I’m not a tax professional but I know a sliver of the tax code that deals with cost segregation and depreciation but yes, depreciations a great thing. It’s a non-cash expense people call it, so it’s a business expense and when you’re spending money, you don’t necessarily like that but when it comes to tax time, the more expenses you have that’s going to lower your tax liability and put you in a better spot tax wise.
Depreciation’s a non-cash expense so you’re not going to Staples and buying pens and paperclips, you get depreciation for the property that you own. You’re right, when you buy a property, you know, you’re looking for a rental income, you’re looking for the property to appreciate and go up in value for sure and that’s almost always what happens. So, if you sell that in 10 years or whatever, you’re going to make a nice profit on the sale of the property on the sale of the property but the IRS allows for depreciation of the property or it’s wearing out overtime.
I don’t know why they picked this numbers but for our residential rental property, they say the depreciable life or the depreciation is 27 and a half years and for a commercial property, it’s 39 years. What the IRS says is you’d get depreciation expense that are going to go into calculation route. Try to make a simple calculation here, so let’s just say you buy a $500,000 property and so land does not depreciate. The dirt underneath he building does not depreciate and that’s not to say, if there’s a parking lot that depreciates, landscaping depreciates but the dirt we call the land does not depreciate.
That gets subtracted out of the equation, so if it’s a $500,000 property, land is very different everywhere in the country but let’s say 20% of that is land, that gets subtracted out and then what’s left is the building bases or depreciable basis, cost basis for the building. We’ll also include and add into that any improvements, any improvement costs after purchase would also be part of that number.
Math is not my strong suit but let’s just say after subtracting out land, adding in any improvement cost, let’s say there’s a $500,000 depreciable building basis. Then, if it’s a residential property, duplex or vacation rental or something like that, you would take that $500,000, divide it by 27.5 and then that’s going to give you a number and that’s your depreciation amount each year for 27 and a half years. So that’s a chunk of expense every year the owner can claim for 27 and a half years.
[0:08:32.6] NH: That 18,181 my calculator says means that you get to take that off of your taxes. Now, does that eliminate those taxes or does it delay the taxes out? How does that actually affect what I’m paying at the end of the year?
[0:08:46.3] TS: Yup, that’s a business expense for depreciation. That gets added to any other business expenses that the owner has and as far as a tax savings number, whatever the expenses add up to, you multiply that by your tax rate and that’s going to give you the actual money that you’re not having to write a check out to for taxes. 37% is the highest federal tax rate and that’s the number we use for our estimates, most of our clients are in that range.
[0:09:15.3] DB: So then, it sounds like when figuring that depreciation then, the goal is to understand the breakdown there in the 27 and a half years or 39 years. I’ve heard other numbers thrown around for other things, does everything always depreciated at those or are there different aspects of a building that can depreciate it at different rates?
[0:09:33.0] TS: Right, that’s where cost segregation’s going to come in and not much history, if I’m going back to the late 90s, the one that’s well known is Hospital Corporation of America or HCA, I believe they were out of Nashville and they owed, I believe 800 million to the IRS, some huge number that they owed in taxes and they argued that parts and pieces of their property should be able to depreciate more rapidly.
You know, carpeting is an obvious building component that doesn’t usually last 27 and a half years or 39 years. They won that case and their other cases. So, this has been around for over 20 years now where the IRS has said, they agree, certain parts and pieces what we call building components of properties will wear out and depreciate more rapidly than 27 and a half years.
In a typical building, there might be 50 to 75 different what we call building components that can be put on a faster depreciation schedule than 27 and a half years. Five years is a lot of the internal building components, carpeting for example, there could be some seven-year building components that depreciate or property that’s going to give them a better tax situation and then 15-year life components are going to be driveway or a parking lot or landscaping, exterior signage, things like that outside of the property, exterior wise.
Like I say, there might be 50 to 75 of those different parts and pieces in our property and that’s what a cost segregation study will do is go through the property on paper, list all these different building components, put them in the correct depreciable life and assign a cost to each of those components. Carpeting might get a $20,000 cost, lighting might get a different cost. So, all those costs for all those building components is going to add up to that one number we talked about earlier, the building cost to basis number.
[0:11:35.9] DB: Okay and then by having those in a five-year, seven-year, 15-year schedule, however those would breakdown for those different components, you’re getting more of that depreciation earlier rather than just the $18,000, taking the whole number divided by 27 and a half so you’re kind of front loading that depreciation then.
[0:11:52.8] TS: Exactly, yup. Typical building, we’re going to usually see 20 to 25% of that overall building basis number, that can be accelerated with cost segregation. You know, I always make it clear, you’re not getting more depreciation with cost segregation, you’re just speeding that up, accelerating it and getting to take those expenses per depreciation sooner. There it might be like I say, 20 to 25% of that overall cost that can be accelerated.
Somebody might say, “Well, I get all the depreciation eventually anyway”, and that’s true if you own the property 27 and a half years or 39 for a commercial property. A lot of people don’t own them that long but I use it, an example of winning the lottery. I don’t play the lottery but if I did and I won a million dollars and I was given the choice of, do you want a million dollars today or do you want $25,000 a year for the next 40 years?
You add it up, it’s the same amount of money but most people with a good business mind would say, I’d rather have the million dollars now so I can put that to use now and start getting a good return on that money now. That’s what it boils down to with cost segregation really is the time value of money. A dollar today is worth more than it will be a year from now or 10 years from now.
Really, you can use that tax savings for anything but most people are going to use it wisely and put it back into their business, maybe they’ll remodel a property, maybe they’ll use it to help get their next property, something like that.
[0:13:24.1] DB: No, that makes really good sense. In terms of another term that I’ve heard here is bonus depreciation and some of the more recent tax cuts. How does that factor into these timeframes and accelerating depreciation further?
[0:13:38.1] TS: Right. So, bonus depreciation came about with the tax cuts and jobs act and before there was — where there’s been bonus depreciation for a while I should say. Tax cuts and jobs act gave us 100% bonus depreciation that’s called. Before that, we have 50% bonus depreciation which was still great but what it means is that anything — and it’s not just properties, it’s not just affecting cost segregation it’s for all sorts of business things that people purchase.
What it means with 100% bonus depreciation is, anything with a life of 20 years or less which is what we’re going to identify with the cost segregation study. All of that can be pushed forward to the first year. So, if somebody bought a property in 2021 and we would — we start by doing an estimate of the tax benefit for them, they want to do a cost segregation study. At this point, they probably need to get an extension for 2021 taxes but we could get the study done for them and they’d still benefit on their 21 return.
All of the 20 to 25% that gives accelerated with cost segregation, they would get all that expense for depreciation for tax year 2021. Whereas before that, it was still great but it would be spread out over a few years. The benefit would be spread out over a few years rather than all right away for 2021. One little note on that is, that makes it better right now for even smaller properties, maybe even $150,000 that’s spent on a duplex or something like that.
When it was 50% bonus depreciation was still good but the benefit for right away would be smaller so it makes it harder to spend the study fee that we would charge whereas now, they get all of it right away, it’s a lot more beneficial right away for the owner.
One other note too on bonus depreciation that your listeners might find interesting is, anything here purchased in 2022 now for the full year, that’s going to include 100% bonus depreciation and then as things are standing right now, anything purchased in 2023, it drops form 100% bonus down to 80, which will still be great and then it drops to 60% the year after that and so forth and that can always change. It seems like these things get voted on or put into a bill somehow or another and so, but as it stands now that’s where we’re at.
[0:16:09.0] NH: So, with that bonus depreciation, is there an advantage to buying a property that needs more rehab upfront or doesn’t necessarily matter, you can get the bonus depreciation either way?
[0:16:17.1] TS: Yeah, you get the bonus depreciation either way, so as far as the tax year that property has to be what’s called placed in service. So, if somebody bought a two-unit property, a duplex and it is just in poor shape so they need to renovate that before getting some tenants, maybe they bought it in the end of 2021 and they’re rehabbing it now and it is not going to be placed in service until April or May, they would get that tax benefit for 2022.
So, we would include the purchase price, the original purchase price, again, subtract out the land and then add in the renovation cost to that and so they are going to get benefit from cost segregation on the rehab and the renovation cost as well.
[0:16:59.3] NH: Great, that helps and the overall concept of a cost segregation study sounds intense and technical, right? What are some of the misunderstandings or misconceptions that people go into this because again, I myself have not done a cost segregation study. It hasn’t been a fit for our properties yet but maybe it’s just that I am not understanding something. So, what are the things that you commonly see as mistakes or things that people miss when considering doing this?
[0:17:21.3] TS: So, it is not always a good fit and maybe I can cover now when it is not the right time to do cost segregation study but for those that benefit from it, it’s a great thing but there’s something called the real estate professional. So, they would — you could save benefit more than somebody that is not a real estate professional. There is several qualifications for real estate professional.
One of them is spending 750 hours annually on the real estate business, so if you are a pharmacist, that’s your bread and butter, that’s your job so you’re probably not going to be a real estate professional if that’s the case. In that case, it would still be good a little, you know, often times but the benefit from cost segregation and if you are a pharmacist and not a real estate professional, that’s going to offset your passive income not your active W2 income.
So, we work with a lot of pharmacists or dentists or doctors or anybody that invest as well as their regular job and if you have one property, you know there is going to be rental income there, so cost segregation can offset that. A lot of these people, we’ll get one of them, we’ll get a second and a third and so forth. So, let’s say they have five rental properties right now and they do a study on one, well that studies could have benefit them on all five of those properties.
It is going to help offset all of that passive income, so if you’ve got one property just not much income there, you know you could wait a year and do the study next year or the year after, you don’t have to do it right away but once you have enough passive income that you are looking for a way to offset that a little bit, cost segregation will be something to look at. It is not great for people that want to buy a property, fix it up and sell it right away or flip it.
There is something called recapture. Again, I am not a CPA but in simple terms, recapture would mean if I did a study now and then I sell the property in a month or even a year from now, I have to give back a portion of that tax benefit from cost segregation. So, we usually recommend waiting about three years or holding the property for about three years after doing a study and there is not a magical timeframe necessarily.
But if you’ve had it for three years, you’ve had three years use of that tax savings from cost segregation to get a good return on that money to offset the fee that you paid and recapture is not going to be much of a concern after three years or so. For example, everything that we identify as five-year components that is already going to be depreciated over half way by three years and if they wait for it for five years and that’s already depreciated all the way.
So, those are the times not to do a cost segregation study if you think you are going to sell it pretty quickly or you just don’t have too much build up as far as passive income that really, you are not really worried about offsetting that at this point.
[0:20:09.0] DB: No, that makes really good sense and you brought up that there is a fee associated with this, that this is complex math and this does have to be put together. This is not like a DIY where I just open up Excel and I try to do this myself. So, what are those fees, what does that look like? Can you get us in the ballpark of what that would be and is it different for that $150,000 duplex or that 10-million-dollar apartment complex?
[0:20:31.9] TS: Right, so our minimum fee is 1,950, just speaking for our firm and those other good quality cost segregation firms out there and obviously like anything else, often times you might want to get a few quotes and we are fine with that and anybody would be fine with that. 1,950 is our minimum fee, that’s going to be the fee for a property that maybe they spent about a 150k or more for.
These are just rough number, don’t exactly hold me to this but a $150,000 single-family rental maybe, the tax benefit, actual tax benefit on something like that might be 12 to $15,000. It could be more, it could be a little less. So, that’s kind of the point where we see people getting excited about cost segregation. You know, they pay them 1,950, they are going to save $14,000 on their income taxes, so they are netting what? $12,000 at that point.
So, that is $12,000 if they’ve got a good way to use that that they might be very happy and not paying in taxes right now and as you go up from there, you know, a million-dollar property, our fee probably be in the range of three to $5,000 depending on the situation but the tax benefit for a million-dollar property is going to be much more than a $150,000 property. So, hopefully those, you know, once you get below that 150k mark, the benefit versus the fee just isn’t very interesting or it could even be upside down depending on the numbers.
So, I mentioned I think earlier that you don’t have to do the study right away, so, if there is somebody that paid a $150,000 for their property but they did that 10 years ago and they have an improved property at all, well, it’s already depreciated 10 years. So, all of that depreciation is already gone, that probably won’t make sense but we can always run a free estimate as well, so I don’t know if this is a good time to mention, you know, if it is an older property, they have already filed a return or two on it, we do those all the time.
There is something called a 3115 form or a change in accounting method form it’s called. So, what that form does it switches them from straight line depreciation, which is what it’s called if they’re not using cost seg, straight line over the cost segregation over depreciation. So, our fee for that is 750, so there is additional fee if we have to do that. Most CPAs I’m told charge a thousand to 1,200 for that one form.
We prepare an unsigned draft. We’re not their tax repair so we do an unsigned draft so the CPA doesn’t have to bother with it. If they want their CPA to do that, that’s great but if they want us to do the draft, we’ll do that for 750. Different things pop into my brain here but you know the largest CPA firms have engineers, construction people on staff to do cost segregation in-house. So, if the people listening are working with top five or top 10 CPA firms as far as their size, they very well would have people on staff to do cost segregation.
They could still get multiple quotes, they don’t have to use that firm to do cost segregation. We’re an independent cost seg firm, so we don’t do tax returns. We don’t compete with what a CPA normally does, so that is kind of our niche is that we work with the 95 to 97% of CPAs out there that don’t have engineers on staff to do cost segregation internally.
[0:23:51.8] DB: Well and that makes sense to kind of the relationship between the tax planning side of things and the CPA side of things and the cost segregation too. I guess as you are explaining this more it makes sense why a larger CPA firm may try to have options readily available and even a smaller firm may want to have someone like you in their back pocket that they can reach out to for some of this because it sounds like a lot of this very individual dependent.
Individual circumstance dependent, so, for some of these kind of decisions of like, “Should I engage with a cost segregation company, should I do the 3115? Should I do a lot of the complexity and the strategy here?”, do you suggest reaching out to the cost segregation company directly or do you suggest starting the conversation with the CPA to get some of those just a background of the individual and their kind of tax needs, their tax strategy?
[0:24:41.3] TS: As far as the building owner, how they would start the process, yeah, both would work well. You know, I have done this 11-years and I full well know that the CPA needs to give their blessing before the building owner is going to move forward with the cost segregation study. So, we definitely want them involved, need them involved. When I started 11 years ago, there was maybe half of the CPAs that didn’t know about cost segregation or didn’t know enough about it to talk about it with their client or recommend it to their client.
So, there was more education, you know, part of my job back then but at this point, most CPAs are well aware of it. Obviously, if they have any questions, we’d set up a conference call that get questions answered but we really would move forward with the study until the CPA is onboard and knows how it works and we want to — you know, we do the study but we want to make sure the results of the study will apply nicely to the building owner’s tax return, so that they get that tax benefit.
[0:25:39.1] NH: It sounds like not just the tax return then also but also their strategy of where they’re going with that property. Like if they want it to be only a one-year hold, then you’ve said maybe not, maybe it is more like that three-year point and presumably some flex there in different properties or some of the price points, just some of the strategy of what that investment is there for.
It sounds like plays into it also where the building owner needs to talk responsibility for the strategy and make sure that everybody is in the loop with that and everybody is bringing the tax strategy behind the investing strategy.
[0:26:09.1] TS: Exactly, right. It’s got to make sense for everybody involved. One thing that might help listeners as well is to see how kind of how this all works together is if you don’t do cost segregation, either way you have what’s called a depreciation schedule in your tax return. So, without cost segregation, it is going to be really simple. It is going to say land with the dollar amount and then improvements or building with the dollar amount.
With cost segregation, it is just going to be more of a complex depreciation schedule. It is going to have a breakout with five-year to life, seven, 15-year life, 27 and a half year life, so that’s really all that’s happening is we do the study and it is going to provide them with what we call a cost report, which again is a breakout of five-year components listed with the dollar amount for each one, 15 year life whatever is there and then that information helps the CPA, that’s what they use to put together the depreciation schedule.
[0:27:04.5] NH: That helps a lot. So, any other suggestions? I mean, this has been great, it gives us a good high-level overview of when to start thinking about those but any other suggestions that you have for investors that might be trying to figure out how to maximize that depreciation or really just in general to optimize their tax situation?
[0:27:19.0] TS: Yeah, as far as what’s good or not good, you know, we always draw our estimates on the conservative side, so typically the after results are better. On the type of buildings that are not going to be so great is very minimal, very few. You know, in my 11 years here, I’ve just had a couple of times where they’ve said, “Well, I got a warehouse” and so we ran an estimate based on a warehouse, which they were great but in this case maybe it is just solid concrete floor and metal walls and just no build out, nothing in there.
There is not going to be the components there that can be accelerated for depreciation. So, we gather, it is our job to gather enough information for the estimate to make sure that it’s accurate but we run them conservative. So typically, the actual results again are better so as long as it doesn’t have dirt floors or cut cinderblock walls or something, it is going to work out well for the owner.
Vacation rentals are a big thing now too. We are getting more and more of those coming through, so those are excellent for cost segregation, maybe a pharmacist likes the idea of getting the vacation rental somewhere nice and they can use it part of the time and then rent it out the rest of the time. So, you know, if they are going to be there just a couple of days, it really has very little if any impact on cost segregation.
If they want to use it half of the year or three months of the year and rent it out the rest, they would get the tax benefit for whatever percentage of time that they are actually renting it out, so they can use it personally for part of the time. The more that it is rented out, the more tax benefit from cost segregation, you won’t get tax benefit for the time that they’re personally using it but those work great as well.
[0:29:00.0] DB: Every time that we talk with someone about a vacation rental, that just sounds like a better and better deal, right? You get a way to make memories with the family and you get another income stream and now you are even telling me that it can be strong tax benefits from doing that as well through cost segregation. So yeah, I have a feeling there’s a lot of pharmacists thinking about the vacation home as an option there.
This has been super helpful. If there is a pharmacist out there that’s thinking, “You know, I got to learn more about this” how can people find you? How would they reach out to you? How would they connect with you to learn more?
[0:29:29.1] TS: Sure, let me give you my number, it’s 888-303-4874. My website is really long, I don’t know if that can be posted maybe in the show notes or whatever.
[0:29:42.1] DB: Well, absolutely, yeah.
[0:29:42.3] NH: No problem.
[0:29:43.1] TS: It is bestcostsegregationservices.com but that works good too. They can go there, there is a little form they can fill out with little bit of property information and that will come right to me and then I send it to our analysts and we would put together a free estimate but they can email or call, everything is on the website there.
[0:30:00.1] NH: That’s great Todd. Well again, we really appreciate you coming on the show today, sharing this super important information that I think we haven’t really talked about at all and a year of this show being on and so it is great to have you on to kind of cover it. I am expecting more and more people are going to be listening to this thinking, “Man, I have a property and this is the perfect for it now that I have heard about it.” Again, just really appreciate you sharing that with our audience.
[0:30:18.2] TS: You bet, thanks a lot. I enjoyed it.
[0:30:20.2] DB: Thanks so much.
[END OF INTERVIEW]
[0:30:21.1] ANNOUNCER: Thanks for listening to the YPF Real Estate Investing podcast. If you like what you heard on today’s show, please leave us a review and subscribe to the show so you never miss an episode. If you have a question, know someone that would make a good guest or want to connect with Nate or David, head on over to yfprealestate.com and join the growing YFP Real Estate Investing Facebook group.
[DISCLAIMER]
[0:30:42.2] ANNOUNCER: As we conclude this week’s episode of the YFP Real Estate Investing Podcast, an important reminder that the content on this podcast is provided to you for informational purposes only and it is not intended to provide and should not be relied on for investment or any other advice. Information in the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment.
Furthermore, the information contained in our archived newsletters, blog posts and podcasts is not updated and may not be accurate at the time you listen to it on this podcast. Opinions and analysis expressed herein are solely those of your financial pharmacist unless otherwise noted and constitute judgments as of the dates published. Such information may contain forward looking statements, which are not intended to be guarantees of future events. Actual results could differ materially from those anticipated in the forward looking statements. For more information, please visit yourfinancialpharmacist.com/disclaimer.
Thank you again for your support of the YFP Real Estate Investing Podcast. Have a great rest of your week.
[END]
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