All Forum Posts by: Jason Mak

Wanted to check in with BP and see if anyone had any experience with selling condos and any advice how on to be tax efficient.

I'm currently constructing a 37 unit condo project and plan to sell the condos individually at retail price.  As I understand, most developers who do this have to pay capital gains on each of the condos and there really isn't any way to do an exchange unless I purchase 37 individual condos elsewhere.  So a 1031 exchange might be out of the question.

Alternatively, instead of selling the condos, we could perhaps "lease to own" the property for 12 months in order to reclassify the condos as a long term capital gain which would result in being a taxed a lower capital gain %.  

Was wondering if anyone had any experience with this and any advice.

Thanks

Jason

interesting...i just bought a $8.8m property in Montclair, CA and I got an estimate for $6000 to do a cost segregation study.   The company that gave me the estimate was  http://costsegs.com

I'm interested to knowing why you are doing the cost seg study (as i'm considering it)? Do you plan to hold the property long term?  Since I tend to have long hold periods (10+ years), I'm wondering if it is bad idea to use all the deductions in the first 5-7 years not have any deductions in the later years when income could be significantly higher.  Appreciate your thoughts

@Jeff Hobbs  - Hi Jeff - thanks for re-igniting this forum.   And hoping you can take a look at my situation.

I'm considering cost segregation on my portfolio.  There are two scenarios that I'm considering using cost segregation and looking to get an honest answer.  Both assets are large apartment buildings worth +$8M in value so there is sufficient capital).  Also, in both assets are long term holds (10-20 year time horizon)

Scenario 1 - For a newly purchased apartment building.  This seems to be a prime candidate for cost segregation as I can get the most deductions over the next 5-7 years.  However, since I'm a long term hold, I won't see the depreciation benefits in year 10-20 when income will hypothetically be much improved.  So I enjoy the deductions now but it becomes a headache later 

Scenario 2 - I've owned a large apartment building for 12 years already and have depreciating it steadily since purchase.  My CPA commented that cost segregation won't add much value since the building is already 50% depreciated away.  Is that an accurate statement?

Finally, in the event of a sale and 1031 exchange, does the cost segregated property qualify for 1031 exchange?

Thanks in advance

@Jeff Hobbs  - Hi Jeff - thanks for re-igniting this forum.   And hoping you can take a look at my situation.

I'm considering cost segregation on my portfolio.  There are two scenarios that I'm considering using cost segregation and looking to get an honest answer.  Both assets are large apartment buildings worth +$8M in value so there is sufficient capital).  Also, in both assets are long term holds (10-20 year time horizon)

Scenario 1 - For a newly purchased apartment building.  This seems to be a prime candidate for cost segregation as I can get the most deductions over the next 5-7 years.  However, since I'm a long term hold, I won't see the depreciation benefits in year 10-20 when income will hypothetically be much improved.  So I enjoy the deductions now but it becomes a headache later 

Scenario 2 - I've owned a large apartment building for 12 years already and have depreciating it steadily since purchase.  My CPA commented that cost segregation won't add much value since the building is already 50% depreciated away.  Is that an accurate statement?

Finally, in the event of a sale and 1031 exchange, does the cost segregated property qualify for 1031 exchange?

Thanks in advance

@Richard Shevak

Hi Richard, sorry but reading this a year later...hope you are still around BP to see this message.  In your quote above, you said that the cost segmentation analysis would be beneficial for properties that you deem to hold for the long hold period.  However the way I'm seeing it is that if I plan on holding a property 10-20 years, than conceptually, than all the cost segmentation does is allow me to take more deductions upfront, rather than equally over the course of 27 years.  Is that right?  So if I'm looking to hold long term, than I'll lose the deductions in later years?

Of course, I'm discounting the time value of money factor here but am I missing something else?

Thanks!

Jason

@josh prince

Sums it up right there!  Bravo!!!

@Todd Dexheimer  thanks!  

@Matt Clark

that sounds like what we do too.  I charge a $200 cleaning fee and deduct for damages.   However, typically that $200 doesn't cover the cost of a full paint and clean ($500).

So if the unit required a full paint, would you charge the tenant for that?

Thanks!

Wanted to survey all the multifamily managers out there and ask them how much of the actual unit turnover costs do you deduct from the tenant security deposit?

For example, typically if a tenant leaves the unit in good condition, we'll refund the full security deposit minus a nominal cleaning fee.  However, there will still be some charges incurred by landlord such as carpet cleaning, touchup painting, etc that is goes over that cleaning fee.  In this case, I would incur that overage as a turnover cost.

Obviously if there are large damages or larger jobs, I would deduct from the deposit.  

I'm curious of all the landlords out there, how much of the turnover that you charge to the previous tenant and how much you incur as the landlord's expense?  

I've seen @Jeff Greenberg speak and he is a great communicator and fooled me that he is an introvert!  Jeff is right...real estate is still largely a people business but you should see this as a challenge to improve yourself.  

I am similar where I hate breaking bad news to people, whether its firing an employee/vendor or telling a contractor they lost a bid, I hate the feeling of it...but on the flipside, I relish doing it as it is an opportunity to get out of my comfort zone and practice getting better at these things.