Cheaper and more user friendly cost segregation app

[Renjie Song]

Hi all,

Like many small landlords, I am trying to take advantage of cost segregation to increase my depreciation and further reduce tax liability.

However, a full-engineering approach is quite costly (easily over $3-4K per study for a small building). I have found some cheaper alternatives like KBKG and DIYcostseg online that still cost between $400 and $500, not including audit defense. They are taking a pure estimate approach with a survey and don't even ask very detailed questions (such as what appliances you have in the building). They do offer full engineering if IRS-audited.

I am thinking of creating an app that will charge significantly less (40% - 50% less) than the two sites above, with a potentially more detailed survey. The cost of the items in the building could be based on either a national cost database or an AI/machine learning prediction. The final report could be PDF, an excel file or presented in an online dashboard. The user can pay extra for audit defense (similar to premium service offered by KBKG and DIYcostseg) and we can back it up with a full-engineering study from an actual cost seg company.

The app will have a portal for each landlord, and each property will have its own dashboard similar to Stessa. The user will also have a subscription option. This would be good for long-term tracking in case they need to replace, repair or retire certain property. This functionality will make your life (and your accountant's life) a lot easier during tax prep time.

Down the road, the app will offer integration with accounting or PM software.

I want to see if people have any interest in using such an app, and what other features or problems you can think of. Any feedback is welcomed!

Renjie

[Bonnie Griffin Kaake]

Quote from @Tiffany Cohen:

I think if you could get the numbers to work in creating an app it could be very helpful! Cost segregation makes sense for all projects but others are right - the barrier to entry for something like a $4,000 survey are what will prevent the small guys from benefitting from such a service. If you can find a way to make the process simple, easy and provide value it could really be helpful to investors of all sizes!

 As long as a property's purchase price is at least $200K, the IRS' preferred methodology for cost segregation is cost-effective and affordable for even these smaller rentals. Nowhere near $4,000 and can include audit defense from a reliable company at no additional cost. Cost seg is not a simple process that can be done with a one-size fits all software. Take for example a recent owner of a 2 million dollar property where the land cost was 99% of the purchase price. Yet, the property had a viable restaurant operating out of the building. And, to make matters worse, it was part of a 1031 exchange. There is no chance of a benefit with any cost segregation study on this building. It is important that you choose the right cost segregation company. An audit is going to cost you so much more than the difference in the price of the study!