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Mastering Tax Strategies: Eric Oliver's Cost Segregation Expertise for Optimal Real Estate Returns

• Tony Johnson

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Unlock the secrets to optimizing your commercial real estate investments with our latest episode! Join us for an enlightening conversation with Eric Oliver from Cost Segregation Authority, as we explore how mastering the art of cost segregation can transform your financial strategy. Learn how Eric's journey from a family-owned landscape design firm to becoming a leading expert in tax optimization can inspire you to leverage accelerated depreciation for immediate tax savings and enhanced cash flow.

Dive into the nuances of commercial property management, where we unpack the complex world of depreciation, renovations, and strategic property placement. We discuss real-world scenarios, analyzing how the decision to purchase vacant versus tenanted buildings can impact your tax strategy. Discover the benefits of partial asset disposition and the financial implications of capitalizing or expensing improvements, all designed to maximize your returns and minimize tax liabilities.

Finally, we take a closer look at bonus depreciation, a powerful tool introduced by the 2017 Tax Cuts and Jobs Act, and its evolving landscape. With Eric's insights, understand the political and economic forces shaping current tax policies and how potential reforms may influence your investment decisions. Tune in to gain a comprehensive understanding of cost segregation and bonus depreciation, and arm yourself with the knowledge to navigate the ever-changing world of commercial real estate investment.

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Tony Johnson:

Welcome to another episode of Carolina Commercial Real Estate Connection. Today we have Eric Oliver with us. Eric, thank you so much for joining us today.

Eric Oliver:

Thanks, tony, glad to be here.

Tony Johnson:

Yes, sir, so we were just quickly talking. Eric is in cost segregation studies and works for Cost Segregation Authority. Prior to doing that, we were just quickly discussing. What were you doing, eric, prior to this?

Eric Oliver:

Yeah, prior to this, I was actually living in New York at the time working for a landscape design firm family company that my father-in-law's had for about 30 years and was thinking about possibly buying that company from my father-in-law and running that company and ended upin-law and running that company and ended up doing it for about five years and decided to move back to where I was born and raised here in Salt Lake City, utah. So we ended up moving back, but it was a good ride while it lasted, for sure.

Tony Johnson:

Nice. Yeah, I was going to ask what brought you to Salt Lake. So you grew up in Salt Lake. So how did you end up in New York in the first place?

Eric Oliver:

That's a good question. So went to school, grew up here, went to college here and then I had a job that took me to Richmond, virginia, for about 12 years and was living in Richmond, got married, started having kids and then from Richmond we moved to New York, did the landscaping thing and then, you know, as my parents started to get older and whatnot, we started having kids. We decided to move back west and that's kind of what brought me back to Salt Lake. At the time I was looking for jobs came across this cost segregation job. Honestly, didn't know what it was, other than it had to do with accounting and my degree was in accounting, and so I had to do a little Google search before the interview to find out what the heck it was talking about. But I've been doing it for the last 80 years. I've loved it ever since. It's been a great job, love helping investors and tax preparers be able to save some tax dollars.

Tony Johnson:

Fantastic. Well, let's start off a little bit broad. So, cost segregation can you explain the basics of cost segregation, why it's so impactful for commercial real estate investors, especially in today's tax environment?

Eric Oliver:

depreciation on your real estate assets. So normally real estate gets depreciated over either 27 and a half years for residential units, including multifamily, or 39 years for commercial. And so if you don't do cost segregation, let's just make the math easy. Let's say you buy a $390,000 office condo. Essentially you're going to take that $390,000, divide it by 39 years and you're going to get a $10,000 write-off every year, and I've oversimplified that a little bit. You do have to back out land value. Land is not depreciable, but the idea is you get one 39th of a deduction every year for 39 years.

Eric Oliver:

The problem with that, tony, is that I'm not going to own my property for 39 years. In most cases I want my deductions now. And so how can we accelerate or get more of those deductions up front? And the way we do that is through an engineering-based study where we go in and, just as our name implies, we segregate the cost of that building. So when you buy let's say it's a multifamily when you buy multifamily, you're not just buying land and walls, you're also buying some appliances, you're buying some flooring, you're buying some cabinets, you're buying some ceiling fans, garbage disposals, et cetera. All those things I mentioned should be depreciated at a much faster rate. The problem is that when you buy that multifamily for, let's say, a million dollars, you and your tax preparer don't know how much the carpet is worth, you don't know how much the refrigerators are worth, you don't know how much the driveway is worth, and so you just know that everything. You bought everything for a million bucks. And so that's what a cost segregation company does is come in and segregates those costs into different asset classes, which allows you to depreciate them at a faster rate. So, for example, carpet is a five-year asset. It should be depreciated over five years, not 39 or 27 and a half years. And so when we can put a value to that carpet, you now get to write it off over five years at a much faster rate, which means you're front-loading or taking a lot of your deductions up front.

Eric Oliver:

Would I want to do that? Well, there's a number of reasons. There's time, value of money, there's inflation. A dollar today is worth way more than $1.39 years from now or 27 and a half years from now. So give me my deductions now versus letting the IRS hold on to these. So it's a great way for investors to generate cash flow in those early years instead of paying your money at the end of the year to the government in the form of taxes.

Eric Oliver:

If we can create this deduction, this non-cash deduction, use it to offset our income. We now have to pay or write a much smaller check to the government, which means we've just freed up cash flow that we can go pay down our debt. We can go buy a new property I don't know if people are still investing in Bitcoin. Whatever it is you want to do with that money, right? Go take that money and go put it to work, versus letting the IRS hold on to it and giving it to the government. So that's kind of. The idea is just segregate the cost, break the components up of the building.

Tony Johnson:

Okay. So to look at it from another point, are there risks or downsides to using that accelerated depreciation? How should investors balance that short-term tax savings with long-term planning?

Eric Oliver:

That's a great question. So there really is no downside to doing cost segregation. You wouldn't want to do it if you don't have a tax liability. So let's say you've already got enough deductions. I wouldn't suggest you paying for a. You don't have a tax liability, so let's say you've already got enough deductions. I wouldn't suggest you paying for a study, because these studies do cost money, so you've got to pay to get the study done. I wouldn't suggest paying for a study if you're not going to realize some kind of 7 to 10x tax benefit from paying for that study. So that's the.

Eric Oliver:

I don't want to call it a downside, but that's a time when you would not do cost segregation. That's the. I don't want to call it a downside, but that's a time when you would not do cost segregation. One thing you do want to consider, though, is you are front-loading your depreciation, which means you're going to get less depreciation in future years. Now, again, most investors are okay with that, because I want my money now to put it to work versus letting the IRS hold on to it. But it does require some tax planning, because when you go to sell that asset, you will have a larger tax bill in the form of capital gains. Now let me clarify what I mean when I say a larger tax bill A larger tax bill than you would have had you not done the cost seg. But you're still going to net savings. And the reason for that is I'll kind of back into this example, tony, because I think it makes a little more sense.

Eric Oliver:

But let's say you buy a building for a million dollars, you sell it five years later for two million. When you don't do cost segregation, you're telling the IRS that everything is doubled in value. I bought this office with all this stuff in it for a million. Five years later I'm selling this office with all this stuff in it for two million. So everything is doubled in value and the government's going to charge you tax on that. Well, my land has gone up in value, my walls have probably gone up in value, but certainly my dirty, nasty, stained carpet that's five years old has not doubled in value. So why are you selling your dirty, stained carpet for double what you paid for it and then paying tax on it? And the reason you're doing that is because everything is lumped in this one asset on your depreciation schedule called building and nothing has been broken out. And so the idea with cost segregation is you're going to take your deduction today against your ordinary income rate of let's call it 37%, pay back some of it at a future date at a lower rate and save the spread.

Eric Oliver:

And if you think about it, tony, in that example I gave you where I owned the building for five years and if you remember me saying, carpet is a five-year asset. What is the book value of my carpet after owning it for five years? It's zero, zero. It's zero book value. So I should be selling that carpet for zero, not double what I paid for it.

Eric Oliver:

And then what you're doing is you're shifting that gain over into the capital gains bucket and you're paying that back at 20%. So you're taking your deduction at 37, paying some of it back at 20% and saving the spread. And that's kind of at a high level, without getting too far into the weeds. The idea of what happens when you sell this asset Because that's a question we get often is hey, if I'm front-loading all this, that means I'm foregoing some depreciation in future years? The answer is yes, you are, but you're front-loading it, getting it at a 37% deduction, paying some of it back at a 20% deduction and saving that 17% spread in that example. So hopefully we didn't get too far in the weeds there but that's the idea.

Tony Johnson:

That's one thing to consider. Okay, so in other words, what you're saying is you're capitalizing on an inflationary environment because you're getting the money, as opposed to when we're continuing on this inflation track, you're getting. If you're not doing a cost segregation and not being able to take that money and put it back to use, you're actually losing money by extending it out. Now one thing is, if you are accelerating the depreciation and then you're selling it, you're saying that you're not increasing your tax liability. So if I'm accelerating the depreciation and then I'm selling this in four years and I've depreciated and accelerated all that, don't I increase my capital gains tax when I sell?

Eric Oliver:

You do correct.

Eric Oliver:

So you will pay more capital gains, but that increase in capital gains is going to be less than your tax savings when you took the deduction, because you're getting the deduction against your ordinary income this year.

Eric Oliver:

So let's say we're creating a $100,000 deduction, you're going to take that against your ordinary income and let's say you're in a 35% tax bracket. So that $100,000 deduction that creates a $35,000 tax savings for you this year. When you sell it in four years, let's say you pay it all back the whole $35,000 tax savings for you this year. When you sell it in four years, let's say you pay it all back the whole 100,000. You're paying it back at a 20% capital gains rate, so you're paying back 20,000 and you just saved the spread, which in that case is 15,000. So it's actually still a savings. Still a savings, yes. So when I say you increase your tax bill upon sell, you increase it above what you would have had to pay had you not done cost seg. But you're still decreasing your overall tax implications by doing cost segregation because you're getting the deduction up front and paying some of it back later at a lower rate.

Tony Johnson:

So, in other words, that's not even a negative, then that's still not a negative.

Eric Oliver:

People think it's a negative because they're like, hey, my CPA told me if I do this, I'm going to have a big tax bill when I sell it. I'm like, yeah, you will, but you're going to have a bigger tax savings today when you do it. So if I save you $100 and you pay back $50, you're still netting $50 in tax savings, betting 50 in tax savings.

Tony Johnson:

And you're getting the positive of being able to cash, take that money and get that cash that you can redeploy right now. So that is fantastic. And so let's see, here I'm going through, here You're handling a bunch of my questions here. So now, what about when you're buying distressed properties and doing a fix and flip, let's say so. Let's say you buy a vacant property and then you're investing a bunch of money and doing a huge renovation and then maybe selling that commercial. So if I bought, you know, a junky little building, right and I go, put all this money in it and upgrade it. So if I bought an industrial building for, let's say, a million, did a renovation on it, how is that work? So we're talking about things that are already existing right. So if I went in and I did a fix, bought it for a million, put $500,000 in it, now it's worth $2 million. Is that a different or is it all still the same function as far as you're concerned?

Eric Oliver:

Yeah, that's a good question and the answer is it depends. There's some variables there that it would depend. So in order to take depreciation on any asset, it has to go into service. So in the example you gave, where you buy an old, dilapidated building, let's say it's vacant, it's boarded up you buy it for a million, you go, put $500,000 into it and then you turn around and sell it for $2 million. In that case you don't get any depreciation because it never went into service. However, go ahead.

Tony Johnson:

I was going to say yeah, I understand that. I'm sorry. Let's say you fixed it and flipping it, but then filled it and you're holding it. So I'm sorry. I understand exactly what you're saying. So we bought it for a million, put $500,000 in it, then we've stabilized it and now we're holding it and it's valued at $2 million. So we've got 1.5 and it's valued at $2 million. Walk us through that example.

Eric Oliver:

In that example, the 1.5, your 1 million of purchase price plus your 500,000 of improvements. That's going to be your starting depreciable basis. So we're going to start depreciating based on that 1.5. Now, unfortunately, even though it's valued at two, the IRS only allows us to depreciate what our basis is into the property and in that case your basis would be 1.5 million, the million purchase plus the 500,000 of improvements.

Tony Johnson:

Now let's look at that a little bit differently, because there's a big Let me interrupt you I'm sorry because I wanted to interrupt you one time because I want to add just another variable to this. So let's say we're doing this fix and flip and of the 500, 300 is fixed renovations, carpet updates and then 200 is in, let's say fixtures and finishes. Maybe you've put in built-in desks or mobile desks that could be removed. Does that equate as well into this amount?

Eric Oliver:

It does. So some of those improvements anytime you have improvements, some of them are going to be. There's two different ways. I've seen it handled multiple different ways by multiple CPAs. But typically you have your repairs and maintenance and then you have items that need to be capitalized. Sometimes you could just immediately write those off. So if you buy a desk for your new office, that's going to get written off as an expense, never gets capitalized. But if you put in a new bathroom in your office building that needs to get capitalized and that will be depreciated over 39 years, and so yeah, so you're going to give that $500,000 of improvement cost to your tax preparer. A good tax preparer will try and pull out some of that stuff to immediately expense it and then whatever they can't gets amortized over the useful life of that asset.

Eric Oliver:

Now, in saying that, there's a caveat there that's important to know. Let's take that same example. But let's say when you bought the building there was a tenant in there. So you bought an old building. It was beat up. There was somebody in there. They had six months left on their lease.

Eric Oliver:

When you buy that office building, it's in service, it's being used for its intended use or purpose. So the ideal way to do that would be do the cost sake study on the existing stuff that's in that building. Your tenant's lease expires, you kick them out, you spend your $500,000 renovating it and now you get to depreciate your $500,000 plus the original amount. So let's say we replace the carpet. In that case we're going to get depreciation on two sets of carpet the original carpet plus the carpet that you put into it with your renovations. That's the first thing. The second thing is you get something called a partial asset disposition, which means when you dispose of that old carpet, that carpet is a five-year. Let's just make the math easy. I like to make the math easy because I can do it in my head.

Eric Oliver:

Let's say that carpet determined is worth $50,000 and you kept it for one year You've essentially used again this is not exactly precise but just for visualization purposes you've used one fifth of the value of that carpet because it's a five-year asset. It's worth $50,000. Your remaining book value let's call it $40,000, for example purposes that $40,000, when you pull that old carpet out it still has $40,000 worth of value. You get to write that off as an expense that never gets recaptured upon sale, and so you're getting that expense as well. So the key is is you have to have the building in service.

Eric Oliver:

If it's vacant, not in service, you do your improvements and then you put it in service. That's the first scenario. Second scenario we just talked about is when you buy it, it's actually in service because you're using it as an office building. You do your depreciation on all those assets, kick the tenant out, put in your renovations. Now you get to do the depreciation on all those assets and so you're getting kind of a two for one or double bank for your buck there, because you're depreciating, in my mind, two sets of carpets or two sets of cabinets, et cetera. Hopefully that made sense. I didn't.

Tony Johnson:

That does make sense. As long as it was in service prior to your renovation, you can use and go ahead and take that what was existing and use a cost segregation to that that what was existing and use a cost segregation to that. If it wasn't in service and you do the renovation, you cannot take the cost seg on those previous items because you've renovated it prior to them being in service makes complete sense.

Tony Johnson:

Yep, absolutely that is fantastic information, very beneficial and helpful, so um helpful. So are there any key differences of how cost segregation applies, besides the year timeframe, with multifamily versus normal commercial assets like office, retail and industrial?

Eric Oliver:

There is, so let's we should probably talk about. There's something called bonus depreciation that there is, so let's we should probably talk about. There's something called bonus depreciation that some of your listeners may have heard of or not. But bonus depreciation is kind of like putting cost segregation on steroids, so it's completely separate. People oftentimes will get cost segregation and bonus depreciation confused two separate ideas, but they complement each other very well.

Eric Oliver:

So bonus depreciation is a tool that the government has utilized for a number of years to stimulate the economy. So they say, hey, if the economy is not doing well, we need people to go out and buy stuff, so we're going to incentivize them to buy stuff. And the way they incentivize them is saying, hey, if you go buy a new bulldozer, instead of depreciating that bulldozer over 20 years, we're going to let you take a big depreciation number up front and then depreciate the rest over the useful life. So bonus depreciation has been anywhere from 20%, 30% up to 100%. So in that bulldozer example, let's say you buy a bulldozer for a million and bonus depreciation is at 50%, then instead of taking that million and dividing it up over 20 years, you're taking that million dollars. You're taking 50% of that, or 500,000 and writing it off in year one. So that's a huge incentive for me to go buy a bulldozer at the end of the year because now I can offset 500,000 of my income. So you can see how it incentivizes people to go buy.

Eric Oliver:

Well, let's go back a little bit to 2017. At the time 2017, bonus was at 50%, had to be on brand new assets, meaning I couldn't go buy a used bulldozer, I had to go out and buy a new one because the government wanted to stimulate manufacturing and whatnot. So they said, hey, you got to go buy a brand new bulldozer and that asset whether it's a bulldozer or anything else had to have a useful life of 20 years or less. So I think when Congress first was looking at bonus, they didn't think that it applied to real estate Because, remember, real estate is 27 and a half or 39 years, so bonus doesn't apply. However, if you do a Cossack study and you break up that 39-year asset into five, seven and 15-year chunks, all of a sudden your five-year assets are eligible for bonus. Your 15-year assets are eligible for bonus. So, again going back to 2017, bonus was at 50% At the time.

Eric Oliver:

Donald Trump with the Tax Cuts and Jobs Act. He overhauled the tax code and was very favorable to real estate investors. As you can imagine, he owns real estate and so he thought let's be favorable to real estate investors. So a couple of things changed. One is they went from 50% bonus to 100% bonus. So now if I buy a million dollar bulldozer, I get to write off the full million dollars in year one and I don't have to spread it out over 20 years or whatever the useful life of that bulldozer is. That's huge. The second thing that they did that I think was a little more subtle and I think had a bigger impact, is they added five or six words to the tax code. That made all the difference.

Eric Oliver:

Remember I told you that previous bulldozer example, tony, that you had to buy a brand new bulldozer. Well, they added the words in the tax code that say new to you, the taxpayer. So now I can go buy a used bulldozer it's new to me, the taxpayer and all of a sudden I get bonus on it. So I don't know how many of your listeners buy bulldozers. So let's relate this to real estate. What does this mean for real estate? So if I go buy, so the 100% bonus was in effect for any assets bought between 9-27 of 17 and 12-31 of 2022. So if I bought a million-dollar multifamily and I had a cost segregation study done and let's say the cost segregation study yielded about a 30% segregation, meaning of that million dollars I've purchased, price 300,000 of that was for things like garbage disposals, ceiling fans, flooring, concrete walls, retaining walls, et cetera. I would get 100% of that $300,000 as a deduction in year one. So that was huge. So bonus depreciation is starting to phase out. So remember, anything bought between 9-27 of 17 and 12-31 of 2022 is eligible for 100%. Anything bought in 2023 is eligible for 80%. Anything bought here in 2024 is eligible for 60% and then it phases out slowly 20% each year until 2027 when it's down to zero.

Eric Oliver:

Now, in saying that, the good news is I hope it's good news is that Congress did have a bill put in front of them earlier this year. The House voted almost unanimously, with bipartisan support, to pass the bill and that bill was to extend 100% bonus through 2026. However, once it passed the House, it got to the Senate. The Senate decided hey, wait a minute, we're in the middle of a presidential election year. We don't want to pass this this year because that's going to look good for Biden and his team. So we're going to stall it and we'll see what happens. So my guess is and I've got my fingers crossed- Did you say it passed the Senate or passed the?

Eric Oliver:

House. It passed. The House first got to the Senate.

Tony Johnson:

The Senate said we're not passing it this year, but the Democrats controlled the Senate, so are you sure it's not the Senate.

Eric Oliver:

Yeah, no, there was a few senators that said we're not passing anything this year.

Eric Oliver:

It wasn't just the bonus depreciation, there was child tax credits, there was all kinds of stuff built, this tax overhaul plan, but um, so anyway.

Eric Oliver:

So what's what I think is going to happen is we've got the election here in a. In a couple of weeks we're going to have a presidential election. Regardless of who wins, Congress will get back together after this presidential election and they will put together some type of tax reform bill that will go back to the floor early next year, and I think that bonus depreciation will get extended. Now, the reason I say that is 95% of the folks in Washington, regardless of what side of the aisle they're on, they own real estate and that bonus depreciation bill is tied into the child tax credit bill. So the Democrats want the child tax credits, the Republicans want the bonus depreciation of these business incentives, and it's actually working out for all of us that these are tied together because in order for them to get one thing done, they got to agree on the other thing, and so my guess is we'll extend the child tax credits and extend the bonus, but we'll have to wait until early next year to see.

Tony Johnson:

Well, let me ask you this, since you're bringing that up so if right now, how is that incentivizing someone to proceed with a cost segregation study right now? Let's say if you went ahead, moved forward, proceed with a cost segregation study right now. Let's say, if you went ahead, moved forward and did a cost segregation study before the end of the year, you're capped at 60% on the bonus depreciation. Would you be making a mistake if that was passed? Let's say they pass the bill early 2025 and go back to 100 and you just did it at 60, how would that be altered?

Eric Oliver:

Yeah, that's a good question. So they usually will retrodate these bills and so what would happen is anything bought this year in 2024, because we don't file our 2024 taxes until next April if they pass this bill in January or February, then they will retrodate it so that anything you bought this year will receive 100%. So it's interesting how it works that there's all these tax software companies out there. They need to know the tax law before they push out their software and so if anything does happen, it'll probably be in January or February. That gives them time to update their software. So when people start using the software come the middle of February to file their taxes, it's got the right bonus depreciation amount.

Eric Oliver:

But the ones who are going to miss out and I don't want to say miss out, because they still got 80% is the 2023. I don't think they'll retro it for 2023 because, remember, those taxes were due just yesterday I think, as we reported a few days ago. So those taxes are said and done. So it'd be very difficult for them to retro this back to the beginning of 2023 because then people are gonna have to amend. It's gonna be a bit of a nightmare, but they still have time to and it could be very easy for them to retro it to 2024 because again we don't file those taxes until April of next year, or even October if we extend.

Tony Johnson:

Now, is there a time limit for someone? Let's say you bought the property in 2023, you haven't done a cost segregation. They're hearing about this and it's very interesting to them and maybe they want to capture it at 60 before their time runs out. Does it matter when they purchased it? If I purchased it in 2023, do I need to do it that year, or am I still eligible for this cost segregation? Good, question.

Eric Oliver:

So cost segregation you can do on your asset at any time. So if I bought a property in 2010 and I have a tax problem this year, I can actually go back and do a cost seg study on that property. Now, it doesn't always make sense, you wouldn't. You know, if you've owned a property for 26 years and it's a 27 and a half year asset, you've already taken almost all your depreciation. There's not a lot left, but I always recommend anything that's within the last 15 years.

Eric Oliver:

You should probably have some numbers ran to see if it makes sense. As far as the bonus depreciation goes, bonus depreciation is based on the time the building goes into service. So if I bought a building in 2020 when bonus was at 100%, I never did a cost seg study and all of a sudden I do it this year for my 2024 taxes, I still get the 100% bonus because that's the law that was in place when I put my building into service. Even though I'm doing my cost seg study in 2024, when bonus is at 60% because I put that building into service back in 2020, I get to take the 100% bonus on those assets.

Tony Johnson:

Oh, that is good information. So, as long as you purchased the building before 12-31-2022, as long as it's, let's say, after September 27th 2017, and prior to 12-31-2022, if you purchased your property within that window and you did the cost segregation study even now, you can still capture that 100%.

Eric Oliver:

Correct Yep. And even if you bought it after, even 80% is still Remember we were doing cost seg when there was no bonus. But 100%, 80%, 60%. This is just the cherry on top. This is just the like I said earlier. This bonus depreciation just puts what we do on steroids and makes it even more powerful. But yeah, 100% is really good, 80% is great.

Tony Johnson:

So this is something that new investors need to think and consider when you're analyzing a property. Sometimes people look at properties in multiple fashions. This is one way that smart investors look and underwrite properties to make sure that they have upside. So this is an additional way to capture upside for someone that is newer to investing. So when people are underwriting and you'll look at it and not understand how this person why are they making? Why does this deal seem to work for them? I can't figure out when I'm underwriting it, this deal because when you're utilizing multiple strategies when you're investing in real estate, this is one of the strategies that you have to understand. When you're underwriting a property where you can make that money, and if you have a big tax bill coming, this is a great way to hedge that tax bill and be able to keep money and keep moving and keep investing, as opposed to just leaving money tied up in your real estate.

Eric Oliver:

Yeah, no, you hit on the head. There was, during those bonus years of 100% bonus, there was people who were buying properties just for the tax break. You know, they may not have been cash flowing, they may not have been in a great market, but it was an opportunity for them to save 100 $200,000 in taxes. That was all the reason they needed to buy that property and then they were going to renovate it, knock it down, build something else or whatever other reason. But yeah, you don't ever want the. I don't always suggest buying it just for the taxes. All of those other factors that you mentioned cashflow, equity appreciation, all that other stuff that goes along to when you're underwriting a property. But you definitely don't want to forget to look at the tax benefits because that could be a deciding factor in whether or not a deal makes sense to move forward on.

Tony Johnson:

And just so we're clear again, I want to reiterate and, eric, you've done a great job explaining this for everybody listening when you're looking at cost segregation studies, you have to remove the land value from the cost segregation state. So that is not part of this. It's just the building and the finishes inside of the building that they are doing the cost segregation and you're saving and getting the depreciation value. So whenever you're looking at this, make sure you're looking at the building value so you know when you're purchasing, that's what we need to break out the building from the land and that's what you're going to be able to depreciate. Correct, yep, eric, thank you so much. I really appreciate you coming on today Been a wealth of knowledge. If people want to reach out to you and they want to learn more about cost segregation and maybe work with you on a cost segregation, what's the best way to get in touch with you?

Eric Oliver:

Yeah, so the best way is just through our website. So it's just wwwcostsegauthoritycom. My contact information's up there. Please use it as a resource. You guys, we're kind of a niche accounting firm. We don't do tax returns at our firm. So if you've got child tax credits or earned business income, I can't help you there. But if you've got depreciation questions, I'm happy to help you. We also do a free benefit analysis. If you've got properties that you think might benefit from doing cost seg, we'll look at them for free, give you an idea of the expected tax savings as well as what our fee would be, and then you guys can decide if it makes sense with your CPA or your tax preparer to proceed from there. But please use us as a resource, guys. We're happy to help any way we can.

Tony Johnson:

Fantastic Harry. Thank you so much. Yeah, and listen, the cost segregation has an expense to it. It is minimal to nothing, to the amount of what the value is. Now you don't want to waste your time doing a cost segregation and call Eric. If we're talking about like $150,000 or a $200,000 purchase, probably doesn't make sense, starts to make sense. $300,000, $400,000, $500,000 and above right. Anything below that. It's not worth the time, energy for anyone involved.

Eric Oliver:

Yep, you got it. Yeah, usually if it's under about 250, our fee is going to eat up most of your tax savings, and so I always suggest anything over 250 is worth looking at. Anything less than that is probably not a great candidate for cost seg.

Tony Johnson:

Fantastic, eric. Thank you so much again for joining us. It's been a great time. Everybody. This was Eric Oliver, again with Cost Segregation Authority, and it's erik at costsegauthoritycom is his direct email and, of course, you can also go to that website and reach him. Eric, thanks so much sir.

Eric Oliver:

I appreciate it. Thanks for having me, tony, it's been great. Have a great day you too.