All Forum Posts by: Bonnie Griffin Kaake

Quote from @Darren Maloney:

Good evening. I am thinking of buying an income property before end of year, in part to take advantage of the generous Jobs Act depreciation allowance which I understand will expire 12/31/22. Does this have relevance to a SFR and 2-4 unit strategy or just more systems-intensive MF, office and industrial assets? Will appreciate any insights. Thank you in advance.

This post was made a while back but it is worth responding to with updated information. The Bonus Depreciation of 100% went thru 2022 and then dropped 20% per year. There is a bill that has overwhelmingly passed the House and is being held up in the Senate due to the Child Tax Credit. We fully expect it will be passed by the end of May 2024. It will reinstate the 100% Bonus Depreciation for 2023, 2024, and 2025.

Next point, if you want to know how to choose a cost segregation service provider, be sure to ask the right questions. The cost of an audit can be high. Your best bet is to get an engineering-based study done, ask a lot of questions and get the answers in writing.

@Jen Lombardi  What you need is a pre-analysis on the properties. There is no cost and it will give you the numbers you and your superior need to make sound decisions going forward. On our pre-analyses/estimates, we also give you the NPV as part of the estimate. 

@Arn Cenedella This is an impressive portfolio. Congratulations! Let's connect, I am interested in what you do to add value to the deal. 

@Nickolas Wolfe You may not need REPS status to use the STR bonus depreciation against your W2 income. You do not need to go back to 2021's taxes to get the depreciation benefits available to you for 2023's tax filing. Hopefully, you have extended your tax filing so you can take advantage of these benefits for 2023. An engineering-based "quality" cost segregation study will bring your depreciation up-to-date with your 2023 tax filing.

If you have more questions, I am here to help. 

Quote from @Jose Perez:

I am looking at a STR and a seasonal rental. Does this tax rule apply to seasonal (4-6 months), rentals as well?

thanks everyone for all your posts. I am learning a ton

Hi Jose, the property you are describing can most likely have a cost segregation study done on it. The best way to know is to get a no cost pre-analysis/estimate. There are some things you need to know. If you are occupying it at anytime, you may not be eligible if you don't abide by the length of time IRS lets you stay. If the average number of tenant occupancy days in a year is 7 days or less, it is a STR and if you are actively participating at least 100 hours per year, and more than any other person or company, you can consider this an active investment. If the average number of rental days in a year is more than 7 but less than 30, it is still a STR and is treated as such but it is not an active investment, unless you have Real Estate Professional status. STRs are depreciated over 39 years (regardless if they are active or passive properties). If the rental averages 30 days or more, it is a long-term rental property and gets depreciated over 27.5 years. Let me know if you have more questions.

@Ana Bejar  Have you leveraged cost segregation yet on all your properties? This could give you the cash-flow you need now. With those lower interest rates, you may not want to sell those properties but a 1031 exchange into a larger investment could give you more leverage. You didn't mention whether you are a real estate professional or not. Also, have you grouped your properties, active or passive, to be able to use losses on one against gains on another?

Another option you may not have considered is to work with a developer and build a multi-family property in a desirable area, leverage ECO construction benefits available ($5 to $15 per sq. ft.) and cost segregation and bring in a management company to manage the property once it is ready for occupancy. Hands off, more time for family, and, if you hold it with the intention to pass the property to your heirs, you never have to pay any of the tax benefits back. Your heirs inherit the property at its new market value and they can leverage whatever tax benefits are available at that time.

I am here if you have additional questions. Don't pay more in taxes than you need to, especially when there are options that you and your CPA/tax professional may not have considered. 

@Dan Engberson  It sounds like you are on the right track. Don't forget to add an adviser to your team to work with your CPA/tax professional to maximize the tax benefits available on each and every project. It costs you nothing to get the information that will save you many thousands of dollars. Some ground up construction projects and major renovations can save you as much as $5 to $15 per square foot when you consider the benefits of ECO construction methods. If you need more information, let me know. Here to help. 

Let's talk. 

@Alec Jacobs You said "My agent gave me first dibs". If you don't have a contract with that real estate agent, the agent works for the home seller, not you. This is especially true if the agent who represents the seller is at the same real estate agency as the agent you are working with. Yes, it can be an advantage to know when a new property comes on the market in a buyer's market. You are most likely paying that $20K extra because both agents work for the same company and have that early information. 

@Suganya Vinayakam There are many different opinions on the value of an ADU. Yes, they cost more to build and the ROI takes a long time. On the other hand, with the price of real estate today, it is difficult for our children to be able to afford their own homes. If the ADU is part of the parents' property, it can be a blessing. The adult child would not likely be able to afford to purchase in the neighborhood where the parents live.

For seniors, living in an ADU on their children's property sure beats a $7K/mo assisted living center and still gives them independence.

There is a lot of push-back coming from HOAs in today's real estate market regarding ADUs. This is for many reasons, some legitimate and others just excuses or racial profiling in a different form. Please don't shoot the messenger.

The severe housing shortage is increasing housing density from coast to coast. There are no easy solutions. What I am seeing is older residential units being purchased, eventually torn down and upscale apartments replacing them. In my opinion, it has already started, we are going to see single family residential zoning going away. Those who get on board earlier are going to be the winners of the future. I work with one client in CA, who is buying up small houses on bigger lots and adding ADUs quite successfully. 

Here is a simplified calculation that some may be interested in: ADU cost $200K, annual rental $21,600 ($1,800 per month) = almost 11% per year. Just try to get that interest rate from a bank.