All Forum Posts by: Bonnie Griffin Kaake

Reaching out to the majority of CPAs will not likely help. We have found that more than 50% and closer to 90% of depreciation schedules by CPAs/tax professionals on STRs are not being done correctly. After seeing so many errors and hearing the same questions over and over from clients and their tax professionals, Our VP and I wrote a Q&A document to answer the most common questions. It is being posted on a website for the Colorado Society of CPAs this month. Let me know if you want a copy. 

@Phil Shelton  The IRS' recommended methodology is an engineering-based study. Yes, these do require a site review inside and outside. There are other methods of doing cost segregation studies and many cost seg companies use them because they cost less for the companies doing them. They are more likely to have errors that can get the attention of the IRS but if your only concern is how much you pay for the study, it is your choice. Most, if not all of the other less detailed studies don't offer audit defense at no cost with the study. 

Depending on what company your CPA is using, you may want to get a competitive estimate. Just remember that you need to know what you are getting for what you are paying. If someone asked me "what will a car cost" and I give them the lowest priced car to get their business, maybe a used car, that would be quite different than a new BMW or Lexus with all the bells and whistles. Know the questions to ask before agreeing to pay money for the study.  

@Bernard Reisz As a national professional cost segregation company for over 20 years, we never assign land values. We use the CPAs depreciation schedule numbers or when getting an estimate for the client where there has not been a federal depreciation schedule done, we will use the assessor's office's percentage of land versus total assessed value. 

Land values are serious business. Our actual studies rely on our partnerships with CPAs/tax professionals who confirm the numbers they will use before our studies are completed. I have seen land values vary for similar buildings from 6% of the purchase price to 99% of the purchase price. 

I have a mid-term rental and though the inquiries have slowed some, I am near hospitals so it has not impacted much. Here are some reasons people are looking for mid-term rentals: 

1. They are moving to my area and need time to find a place to buy. 2. Older women who are either divorced or widowed who are moving from another state to be near their kids and grandchildren. 3. With more people being able to work from remote locations, they will look for a mid-term rental near their preferred activity area...skiing, beach, mountains, etc. They stay for a season and go to another area. 4. Students working on their masters or doctorate and will be in an area for a while. Also med students on internships. 

These renters often stay for about 3 months. Others for a year. I give them a month-to-month lease and tell them I need a 30 day notice if they are leaving. Hope that helps. 

@Nicole Rojas   As Robert T Kiyosaki said "The most important word in the world of money is cash flow. The second most important word is Leverage."

If you paid more than $200K for that condo in NJ, start by getting a pre-analysis for cost segregation. It could give you about 6% to 8% of your purchase price in extra cash-flow to sweeten future deals. Leverage is what cost segregation gives you. 

Years ago you could get away with not providing refrigerators but today, even when selling or buying a house, the appliances usually stay. For a rental, I provide stove, refrigerator, washer, dryer, and microwave. Personally, I have not had problems securing tenants. 

@Samuel Nyu 

If you are feeling uncomfortable up front and you are having to live next to this guy in a duplex. Save yourself the brain damage especially for your first rental. Trust your instincts. His aggressive posturing can be trouble, I know I am being judgmental but I smell wife abuser. My apologies if I am offending anyone, I am married to a psychologist. 

No the market is not "over saturated". It is growing very fast in the areas that are allowing the opportunity to own and lease these STR properties. The unfortunate side is that many of the tax filings may likely have visitors from the IRS. We see well over half of the depreciation schedules are being done incorrectly. I have just published a document on Short-Term Rental Q and A's for investors in these properties and their CPAs/tax professionals. If you want a copy, let me know. No cost. Real estate agents can add value to their services by knowing these facts as well.

@Jenny Scott  What you are suggesting would not be my preferred direction from experience. No two people clean or consider clean the same way. Years ago my daughters and their families shared a tent camper. It always starts off well. Then, somebody breaks something and does not repair the damage or doesn't repair it soon enough for the next usage. One party wants out because another party did not clean the unit to their satisfaction after use. In short, relationships get harmed. 

Check the regulations and laws in the area before making any decisions. You might be better off listing it with a management company and book your stays when you want them. If you don't intend to stay there more than 10% of the time, you can depreciate it as a long-term rental of 30 days or more, or short-term rental <30 days or transient (like a hotel) for 7 days or less.  

I just published a Q &A document about STRs because we have been seeing the majority of depreciation schedules for STR are not being done correctly and there is too much misinformation on the Internet.

@Bernard Reisz Your explanation of cost segregation is a good short answer for those unfamiliar. What I would add is that the structure of the building and certain capital items cannot be accelerated or Bonus Depreciated. Only a good engineering-based study will give you the best break-out of what can and cannot be accelerated. The structure and capitalized items continue to depreciate over the life of the property, 27.5 or 39 years.  

And, remember that we should not be panicking about the 80% Bonus Depreciation for 2023. You still get 100% accelerated. 80% in the first year and the other 20% which can be accelerated is done with double-declining depreciation (DDB).