Many apartment owners have increased profitability from the lower vacancies/higher rents. With increased profitability, comes increased tax liabilities. Engineering Based Cost Segregation can help apartment owners decrease their tax burden, increase their cashflow and maximize the return on their investment.
The market conditions in the Apartment Industry continue to improve and remain strong. According the National Multi Housing Council (NMHC), markets are tighter, sales volume is up and financing is more available. Many apartment owners have increased profitability from the lower vacancies/higher rents. With increased profitability, comes increased tax liabilities. Engineering Based Cost Segregation can help apartment owners decrease their tax burden, increase their cashflow and maximize the return on their investment.
Here is a summary of the results for a cost segregation study on a 150 Unit Apartment complex:
This 5 building, 150 unit garden style apartment complex contains 109,654 square feet of gross building area and is situated on a 5.51 acre site. The property was purchased in 2008 for $5,525,000 of which $828,750 was allocated to land. In addition, a major renovation totaling $1,518,220 was completed in 2008 and was included the study. A significant portion of the improvements qualified for 50% bonus depreciation.
Client Benefits:
Tax Year
Additional Depreciation
Cash Benefit
2009
692,973
277,189
2010
403,458
161,383
2011
221,390
88,556
2012
111,005
44,402
2013
107,917
43,167
2014
24,923
9,969
Total Years 1 – 6
$1,551,665
$624,666
Fees & Return On InvestmentTotal Professional Fees$13,500NET After Tax Fees$8,100Return On Investment71.1 : 1
This sample is based upon actual results of a completed study. The benefit numbers are based upon a federal income tax rate of 40%. Although the sample depicts a specific type of property, actual results may vary.
How Does a Cost Segregation Study (CSS) Work?
How does a Cost Segregation Study provide a tax benefit to property owners? This article breaks down the details of Cost Segregation.
Tax Planning & Cost Segregation
If you have a client, friend, or acquaintance that owns Commercial or Residential Rental property that is currently profitable, or was profitable within the last five years, a properly performed engineering based cost segregation study could help reduce their current tax burden or help them qualify for a tax refund.
In-House Cost Segregation Studies
Cost Segregation is a very specialized field. It is important that the person conducting the study is highly qualified. A Cost Segregation Study performed In-House, by employees of the company, is often times reviewed with more scrutiny by the IRS.
