We give real estate investors the
The Problem
As a real estate investor, selling properties for a high-margin profit comes with a built-in challenge: paying atleast 20% of that profit in taxes.
This tax burden hurts your immediate earnings and ties up capital, restricting your ability to reinvest in future opportunities
The Key
While many developers build to sell, some also hold properties as rentals.
In the short term, rentals are less profitable than selling, but rentals hold an advantage that can quickly boost the profitability of your real estate sales.
How it works
Making the most of your rentals
The power of depreciation
Holding rentals gives you access to depreciation, to account for the expense of the wear and tear in rental properties. The IRS allows you to write off the building’s value over 27.5 years. While the market value of your property may increase, the physical structure itself is aging and depreciating, turning that decline into a tax-deductible expense. When used strategically, this depreciation can offset the high tax costs of real estate sales.
But we take it one step further, using accelerated depreciation:
There are two types of depreciation
STANDARD DEPRECIATION
The standard depreciation method assumes that the entire building depreciates evenly over 27.5 years. This straightforward approach divides the building’s value by 27.5, allowing you to take a steady annual loss.
While this method is useful for offsetting rental income, it doesn’t provide the substantial tax relief needed for larger gains from real estate sales.
ACCELERATED DEPRECIATION
For developers facing significant tax events, the accelerated depreciation method provides a more impactful solution. Unlike the standard approach, accelerated depreciation allows you to claim larger deductions in the early years.
This is because certain parts of the building—such as appliances, fixtures, and cabinetry—wear out faster than the overall structure.
By conducting a cost segregation study, you can identify these faster-depreciating components and reclassify them, enabling you to take much larger deductions upfront when you need them in the year of a sale.
What is a cost segregation study?
This is the process of examining your property, to identify assets that can be reclassified into 5, 7, or 15-year depreciation classes – much faster than the property as a whole.
Based on our findings, we then work with your CPA to compile a comprehensive cost segregation study that emphasizes the shorter life assets of your property, so your depreciation value rises- and your tax bills fall lower than you could have believed.
The Result?
Pay less upfront taxes on every sale
Which means:
Boosted cash flow
Free up capital
More investment
opportunities
In a nutshell
Here’s our 4-step process to maximizing your tax savings:
Stop paying unnecessary taxes.
Be a smarter
developer.
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