hey guys clint coons here and in this video i wanted to share with you a hidden tax strategy
for rental real estate you might be missing on the next deal you're putting together all right
let's get started okay so here's the deal when it comes to rental real estate a lot of people
buy properties and they intend to rehab it and it can be residential it could be commercial maybe
you know it's a quad duplex it doesn't matter but this is something you have to know about because
if you don't and you miss out on it you're gonna be walking around kicking yourself when i told you
hey you could have saved yourself an additional 30 000 in taxes had you done this one simple step
what is it all right let me just show you an example so you're gonna buy this piece of
property right here and you you buy this property and you realize hey it's gonna need some rehab
work maybe i need to replace the roof and i need to uh fix the so it's a hvac roof we need to do a
kitchen remodel uh in there and we got to do some uh beautifying so we gotta do some landscape work
uh as well on this particular piece of property so all in this entire rehab budget here
uh we're gonna be putting in about 80 000 uh dollars into this rehab so what a lot of
people will do is they'll go in they'll do all of this work to the property okay get it all set up
and then they'll talk to their tax advisor and the tax buyers say you know
what you should really do from a tax standpoint is coming and do a cost segregation study
all right so what is that i've got some other videos on this but just really quick if you
haven't watched those yet what it means is that you can break up uh this property
into different asset classes with an accelerated depreciation so you don't have to put it on a
straight line depreciation that you would in normal circumstances we can speed all that uh
depreciation up because of the nature of the property itself it's not going to last as long
as the actual structure so maybe your hvac is only scheduled to last five years
well why depreciate that property over the entire length of the house itself the structure itself
if it's going to be replaced in five years so you've got five seven and fifteen year property
inside of the structure which composes the majority of that structure and so the cost
segregation study what they're doing is they're finding all those components and then putting them
on an accelerated depreciation which means this you get a lot more tax deductions up front and if
you're doing it right now you can tap into bonus depreciation so you're writing it all off in one
year now that's huge for real estate investors but here is the strategy and that's the miss that so
many people run into when they're utilizing this type of planning with their investing
you see the cost segregation comes in after all of this value has been added in
the reality is what you should be doing is doing the cost segregation before you do this now here's
why so let's say that the what we're going to do is we're replacing all these items you come in you
do a cost segregation you look at the value of all of these items and you say okay the roof uh
it's got a remaining useful life value of twelve thousand dollars the kitchen has a
remaining useful life of six thousand dollars landscaping six thousand dollars the hvac
four thousand dollars so you add all that that up right there and you come up with 28 000
well guess what you're going to remove it you're getting rid of it so by doing the cost segregation
to determine out the value of this on the front end you can then when you pull it out
you can deduct this under what's called a partial asset just distribution on that so you can take
it out under a pad disposition of this asset of 28 000 which means that is a tax deduction
for you you can write off 28 000 in value of what you're throwing away people throw away
tax deductions all the time with their real estate because they're unaware of this strategy again the
numbers have to make sense right to do this but now here's where you're going to double this up
that's why i call it a hidden tax strategy because you're going to get 20 000 on your partial asset
disposition the pad and then you're going to come in you're going to do all this work fix all this
stuff here in your house and after you've done that you're going to come in you're going to do
cost sag number two and come back in and write off this 80k as well on your return because it's
going to be it has a new useful life brand new stuff we just put it on we know what the value is
it's remaining life but we're able to do a cost egg bonus it out in this year and so now
i'm picking up that 80k which normally you would anyways plus you're getting that 28k the stuff you
you took out of your property so you just picked up on this one probably about a ten thousand
dollar tax savings by utilizing a a pad before you started ripping stuff off this is the secret
that so many real estate investors miss when they acquire property that they intend to rehab before
you do it run a cost sag on it figure out what you're going to be ripping out if it makes sense
go through with it pick up that deduction come back and do it again same year pick up another
huge tax deduction take that money to the bank put in your account and go out and buy another piece
of property guys you liked the video hit the like button be sure to subscribe to my channel
for more phenomenal information like this that's coming your way in the next few weeks take care
bye