Case Study: 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 for 1 year while listed with an agent, plus 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 buyers 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 maintaining 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 Single Family Home, Multi Unit Property, Mobile Home Park or RV Park with little or no equity and are having to pay cash to close - or if you want to minimize your capital gains tax when selling - we have many creative solutions to help sellers. If your property is not penciling as an investment for traditional buyer's cash on cash returns reach out to us with the "Get Top Dollar Offer!" button below for an offer or just to consult with us on your options and how a sale would look like with us, & tap into our network where we are helping our investors place millions in real estate assets to offset their business taxes.

We can help you, and help you quickly & close in 2 weeks, 30 days, or whatever timeline you need with capital ready and waiting. Reach out to see if we have a way to creatively solve your sales at any price point.