CEO and Founder of L.A. Property Management Group and Crown Commercial Property Management recently shared their experience with cost segregation studies, highlighting the benefits it can provide for property owners. These studies help accurately determine which components of a property depreciate at different rates, allowing for a more accurate deduction on taxes and potentially increasing short-term cash flow. Despite the upfront costs, the study can pay for itself in the first year, making it a valuable investment for property managers and owners.
A cost segregation study involves dividing real property, personal property, and land improvements to depreciate at rates that reflect their realistic life spans. This can result in a more accurate deduction for depreciation and help reduce the owner’s tax bill. The surge in popularity of cost segregation studies in recent years can be attributed to the benefits they provide property owners in maximizing their investment returns. Typically, accounting firms conduct a feasibility analysis and a property inspection to determine if the property is suitable for the study and identify components that qualify for short-life treatment.
The process of a cost segregation study usually takes 30 to 60 days, making it a time-efficient way to increase the value of income properties. Property managers are encouraged to familiarize themselves with investment strategies like cost segregation studies to help their clients save money in the long run. For property owners, seeking progressive ways to enhance their ownership experience, such as cost segregation studies, can lead to significant financial benefits. It is important to consult with a licensed professional for advice specific to individual situations.
Overall, the use of cost segregation studies can be a valuable tool for property managers and owners looking to optimize their investment returns and reduce their tax liabilities. By accurately depreciating different components of a property, owners can benefit from increased short-term cash flow and maximize the value of their income properties. As the popularity of these studies continues to grow, property managers and owners are encouraged to explore this investment strategy to make the most of their real estate investments.
