Cost segregation study?

[Brian Plajer]

Hello, 

This past Summer my brother in law and I added a vacation rental to our portfolio. I have been listening to podcasts and they mention cost segregation studies and bonus appreciation and there is even a STR loophole. We bought our home from a flipper so the interior is all updated. We paid $710K and its block from the beach on Emerald isle NC. I'm not sure how to determine if its worth it to have the cost seg study done. I know I can call our tax person and figured I'd ask if anyone has done this with their STR property and would you share your experience?

thanks, Brian

[Julio Gonzalez]

@Brian Plajer 

Your property definitely has the potential to benefit from a cost segregation study. Determining whether to do a cost segregation study or not has a lot variables. 

- Are you in an area where land is very valuable leaving you with less to depreciate? 

- How long are you planning to hold this property? If less than two years, cost seg probably isn't a good route. 

- Are you planning to do any renovations? If so, I always recommend getting the study done prior to rehabbing. 

- What is your ROI and the amount paid for a cost seg study?

- Do you have a current need for that cash flow generated from the tax savings? 

- Could you go reinvest it in another property to build even more income? 

- Would you have net income or net loss without the cost seg study? 

- Are your real estate investments active or passive? 

- Are your losses locked up against your passive income? 

There are a lot of factors to consider when get a cost seg study to determine if the benefits outweigh the costs. If you are able to get REPS status, that would help tremendously. Have you obtained any detailed cost/benefit analysis quote? Most cost segregation study companies provide the quote for free. If you need any help or have any questions, feel free to reach out!