This involves both Short Term Rentals (VRBO/Airbnb) and Long-Term traditional rental home properties.
We have seen a huge increase in demand for cost segregation studies on single family (1-4 unit) properties and condos. The demand for depreciation tax deductions is growing.
Many of our clients have invested or are investing in residential rentals. Whether its one or two properties, or an entire portfolio of residential properties. As an investment class, we have observed a recent trend in Airbnb/VRBO – short term rentals (STRs).
Historically, single family rentals did not justify the $4,000 plus expense of an engineer traveling to conduct a traditional cost segregation study.
To meet the needs of a more affordable solution for smaller properties, ELB Consulting developed the DIYcostseg platform (www.DIYcostseg.com). This platform uses one of the approved Cost Segregation Methodologies as defined by the IRS. And at a much lower price than a traditional study.
Whether for residential or commercial, DIYcostseg will render an accurate and defended cost segregation study in minutes. This advanced modeling platform has been operational for over three years now.
As such, this is an excellent solution for residential (1-4) properties. It also is an excellent choice for multi-family and commercial properties that fall under $2MM in depreciable basis.
We see in many cases, investor demand is fueled by the pursuit of depreciation tax deductions.
When an investor qualifies as a Real Estate Professional (REPs) or Active Participant, the passive depreciation deductions can be used to offset ordinary income. To meet this special tax filing criteria, it takes a lot of time, tracking and effort to qualify. It is worth it.
To reach a similar status on STR investments, it requires less time. As with REPs status, there are specific IRS guidelines here, so be sure you follow them. When you do, it allows for the passive depreciation deductions to also offset ordinary income.
This aspect seems to be a driving factor in the very active trend in the VRBO/Airbnb asset class. Plus, the ROI on an STR is much higher than a traditional rental.
Regardless of property type, cost segregation and 100% Bonus Depreciation is a key to most investors’ real estate investment tax strategy.
For those who specialize in STRs or rental homes/condos, DIYcostseg offers a very solid report and is a cost-effective solution. It is also fully supported and defended in the event of an IRS audit.
The DIYcostseg platform is based on nearly 20 years’ cost segregation experience and well over 14,000 historical cost segregation studies completed. We also review every DIY study for accuracy and compliance. The platform is supported by a team of cost segregation experts and continually refined for various property types.