Today we want to talk about a key term in real estate investing, cost segregation.
Cost Segregation is really simple.
It's the idea that within an apartment building, some things have a useful life of maybe 27 years, and other things, like carpets or countertops are going to have a much shorter life. By segregating, or distinguishing the costs, into those different categories, we can accelerate the depreciation of those things that have a shorter life, and therefore get better tax benefits to our investors faster.
Oftentimes, we see syndicators talking about how the numbers relate to that. They might say, bonus depreciation offered on an investment is 50%. If that's the case, what does that percentage mean?
In layman's terms, the percentage is based upon their initial investment amount. For example, if an investor puts in $100,000, and we say that the projected depreciation is 50%, what we're saying is that we expect in that first year of ownership, that they will have something like a $50,000 accounting loss on that investment that they can use to potentially offset their active income on their properties.
Is this something an investor can expect to reap the benefits from on a Nighthawk Equity investment? And if so, what percentage roughly?
The answer is, yes. Absolutely.
On every deal we do, we do bonus depreciation. We generally offer bonus depreciation of 50 to 80% in year one, depending on the property, and a bit more in year two.
It is something that's front loaded into that first year of ownership. We always do it on each asset that we purchase.
Real estate has always offered substantial tax benefits, and bonus depreciation is just another example of this. If you have significant passive income and you want to discuss how to pay less on that in taxes, please schedule a call by visiting NighthawkEquity,com/call and book a call today.