Cost Segregation - What type of Property is best?

[Frank Rubino]

Hi all,

What type of property do you feel is best for a cost segregation/accelerated depreciation strategy?

I want to buy either a medium-sized multi-family building (6-8 units), or a portfolio of 10 single family rental homes.  I'm wondering which is a better fit for a cost segregation. With the 10 single-families, I'll have 10 roofs, 10 heating systems, 10 water heaters, and so forth, that can all be accelerated for depreciation calculations.  But would this have to be treated as 10 separated properties with 10 separated cost segregation studies?  Is it perhaps better to buy a multi-family "building" instead?

Thanks!
 

[James Parrish]

@Frank Rubino

Generally, structural elements of a building cannot be accelerated. Also, systems that serve the general maintenance and operations of a building or home are excluded as well. There's a lot of nuance that goes into determining what can and can't be accelerated, I'd suggest consulting one of the many professionals in this forum.

When deciding which "type" of property to buy I'd focus on which property makes more sense from a financial perspective rather than a tax perspective. Assuming both are home runs though, I'd say both types can get you similar deductions from a percentage perspective. While the number of units can increase your deductions, what really matters is what systems and materials are used inside the house.

Again a lot of factors come into play here. Feel free to DM me if you have any questions.