Case Studies

Cost segregation study utilized by an investor to offset business taxes on a million dollar property

Scenario:

Homeowners tried to sell their brand new construction million dollar house with a qualified agent and brokerage recommended by Ryan Serhant for over one year. The sellers were really feeling the pain of high monthly payments of over $5,500/mo while listed with an agent & extra additional holding costs during ground up construction. They had a HELOC taken out of the property to fund other real estate projects, and no remaining equity in the property - due to this, they were going to have to pay over $100,000 in closing costs to sell their property.

Strategy:

I offered a solution to step in and pay the payments on the seller's behalf, and paid them $10,000 cash at close and also covered the closing costs, and offered to pay the realtor's fee - so they could walk away with cash instead of paying almost $100k at closing. This method of creative transaction is called a sale subject to the existing debt on the property where the debt remains in the seller's name, and is paid by the buyer on behalf of the seller while the ownership of the property as recorded on the deed transfers to the buyer.

Execution:

We maintain a database of buyers that are placing millions of dollars annually into real estate as a tax strategy to depreciate the revenue in their businesses. Our partners are particularly helpful for properties in areas that can have biases or be misunderstood by local investors because they buy nationwide. They use our engineered cost segregation study contacts to get the maximum depreciation possible in a study that is prepared by professionals maintainig records that are available to be audited. Typically a study can be used to depreciate 40-60% of the real estate value in the first year against their business revenue. Their end goal is to reduce their tax burden as much as possible while gaining valuable real estate assets - this allows them to purchase investments that aren't in the scope of more conservative investors that need higher cash on cash or rental returns. This was a particularly useful strategy for this property because of it's potential to net around $72,000 a year as a short term rental with the high down payment & holding costs needed to purchase a million dollar property. We completed this in 30 days - and could have completed this sooner if the seller's were not away on travel.

Takeaway:

This case study shows the power of creative finance and the ability to bring two professionals together that both solve each other's problems. Moreso, this allowed the seller's to gain $10,000 instead of having to pay $100,000 to close and sell their property. They now also receive a monthly payment for 30 years for extra equity given to them as a courtesy. They could not have had a better outcome due to the waiting time for a short term rental license required with the county that partially complicated this offer to previous investors or semi-annual homestead owners wanting to rent the property while away.

Call to Action:

If you have a property whose owners have little or no equity and they would need to pay cash to close - reach out to us.. or ask us about creative solutions to also pay sellers equity they have over time to mitigate capital gains obligations to help sellers walk away without a burden of paying to sell their house at any price point.

Or if there is a property that is not penciling as an investment for buyers, tap into our network where we are helping our investors place millions to offset their business taxes, and we can get these done in 30 days or less with capital ready and waiting. Reach out, let me see if we have a way to creatively solve your sales at any price point.