All Forum Posts by: Thiag Sivalingam

Looking for advice - Does it make sense to do a cost segregation study on a property (and claim accelerated bonus depreciation) I bought this year considering the following? why/why not?

(I understand that I need to consult a CPA to get the answer specific to my situation, but just wanted to get a general idea on what experienced investors suggest)

1) Property cost ~1M. Passive investment for tax purposes

2) Property is a two-family. In the process of doing a large renovation (~$100k)

3) Expecting to generate around $35,000/yr net cash flow

My guess is that no, this will not be beneficial for you.

Suppose that you generate $35,000 in cash flow. When you later in normal depreciation, you might depreciate, say $900,000 of the $1M in property value (talk to your cpa, this is just a guess) over 27.5 years.

That’s $32K in depreciation per year.

Now you have $3,000 in taxable income (maybe as much as $8K when we later in principle reduction on your loan payments).

Your tax liability is like $600 on $3000 in income ($1600 on $8,000).

So if your cost seg costs you $3,000 (please correct me if this is incorrect it may be much cheaper), you are spending real money to save a few hundred in taxes.

And by the way the cost seg just accelerates the depreciation. It doesn’t eliminate it. You have to recapture when you sell.

Where this might make a lot more sense is if you are a real estate professional or earn less than $150k in AGI. If so, then you can deduct losses in real estate from your personal return. In that case a big loss every year is having a real present value impact on your life today, freeing up cash.

Hope this helps!

Thanks for the detailed response, Scott! One thing I should have clarified is, the $35,000 is NOI after all expenses (PITI and maintenance). The annual income before expenses is around $88k

1 Vote

Looking for advice - Does it make sense to do a cost segregation study on a property (and claim accelerated bonus depreciation) I bought this year considering the following? why/why not?

(I understand that I need to consult a CPA to get the answer specific to my situation, but just wanted to get a general idea on what experienced investors suggest)

1) Property cost ~1M. Passive investment for tax purposes

2) Property is a two-family. In the process of doing a large renovation (~$100k)

3) Expecting to generate around $35,000/yr net cash flow

Thank you!

1 Vote

Quote from @Dave Skow:

@Thiag Sivalingam- understood ....if a new appraiser does a new appraisal - they will re measure the home and use the sq footage they calculate - they may make reference to the public record details but they will use their own meaurements ....I have owned a home for over 20 yrs and have done 5 different loans on it over the yrs - every appraisal comes in with slightly different sq footage ....also 200 difference will not make any huge difference in an appraisal as the value will be determined using the sales approach ( comparable sales ) and not the " cost approach " ( using sq footage )

Makes sense. Thank you!

0 Votes

Quote from @Lien Vuong:

I wouldnt bother unless you want your taxes to increase

Thank you all! My hope was, if the home appraises (new appraisal) for a higher value due to the increased sq. ft in the public records, I could leverage the additional equity to get a cash-out refinance. Not sure if I'm missing something

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@Dave Skow Thank you. Could you pls elaborate on why you are suggesting to not worry about it?

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We found through home appraisal report and recent architect drawings that the home we purchased is ~200 sq more than what public records show (location: Greater Boston). Is it better to have the city update their records (and potentially pay more RE taxes), or don't bother about it? Please note that this is going to be a long-term rental property.

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I'm looking for reliable, investor-friendly contractors for doing a significant remodeling work (kitchen, bathroom, basement addition, HVAC). Please let me know if you have recommendations.

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Boston, Massachusetts

thanks Pam and Lien! Will check it out.

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I'm a new landlord trying to understand the DOs and DON'Ts in this tenant friendly state. I have gone through mass.gov about landlord tenant laws, but was wondering if anyone had suggestions for a good resource that I can use as a cheat sheet.

Also, is the MA lease template on BP a good starting point to build a bullet-proof rental agreement? It looks a lot different from what standard Greater Boston rental agreement template.

Thank you!

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All Forum Posts by: Thiag Sivalingam

Thiag Sivalingam has started 9 posts and replied 19 times.

Post: Cost Segregation study?

Post: Cost Segregation study?

Post: Advice needed - Actual sq ft more than what public records show

Post: Advice needed - Actual sq ft more than what public records show

Post: Advice needed - Actual sq ft more than what public records show

Post: Advice needed - Actual sq ft more than what public records show

Post: Looking for investor-friendly contractors - Greater Boston

Post: Landlord - Tenant laws (MA)

Post: Landlord - Tenant laws (MA)