ATLANTA. GA (Dec. 12, 2011) – Investors in commercial real estate have a variety of options for saving tax dollars and increasing cash flows – many of which they may not be aware.
Guests on this week’s “Commercial Real Estate Show” engaged in a wide-ranging discussion of the tax landscape facing owners of commercial real estate. Topics included: 1031 exchanges, cost segregation, using self-directed IRAs to invest in real estate, tax issues presented by cancellation of debt, and year-end tax tips for owners and tenants.
Real estate owners often aren’t aware of some types of 1031 exchanges that could benefit them, said Ricky Novak (top right photo) CEO of Strategic 1031 Exchange Advisors. 1031 exchanges permit an owner to defer the tax associated with a property sale if the owner then acquires a similar, or “like-kind,” property within 180 days.
A construction exchange, in which an owner purchases a lot and constructs a building that is similar to the one sold, is “a great transaction that’s often overlooked,” Novak said.
Waiting too long to find professionals to help locate the replacement property, not performing due diligence on the qualified intermediary selected for the transaction and not being fully aware of all the exchange options are three common mistakes made by owners in 1031 exchanges, Novak added.
Cost-segregation studies are another overlooked tool for lowering taxes and increasing cash flows, said Debbie Rodkin (middle left photo), director of business development for Bedford Strategies and Solutions. The studies identify and reclassify assets at a property that can be placed on accelerated depreciation schedules to lower federal income taxes.
Rodkin said the cost of the studies has decreased over the years. “A study that might have cost $9,000 about six and a half years ago might cost $6,500 or $7,000 now,” she said.
One of her firm’s clients – an owner of 11 self-storage properties in Florida – has saved more than $4 million through cost segregation, Rodkin said. Medical facilities, apartment communities and restaurants are ideal candidates for cost segregation because of their amount and variety of assets.
Rodkin said cost-segregation studies aren’t more prevalent in the marketplace because many owners are under the impression that the technique only applies to acquisitions. However, it can be applied to renovations and new construction, she said.
Other guests included Monte Smith (lower left photo), education director of The Entrust Group, and Hampton Mallis (lower right photo), CPA and principal of Reznick Group.
The show is available for download here.
The next “Commercial Real Estate Show” airs Dec. 17 and will examine how social media can benefit commercial real estate businesses.
About the “Commercial Real Estate Show”:
America’s “Commercial Real Estate Show” is a national talk radio show about commercial real estate. New shows are available every Thursday at the show website, http://www.creshow.com/. Shows are also broadcast on AM stations, including Atlanta stations Biz 1190 on Saturday at 10 a.m. andTalk 920 on Sunday at 9 a.m. Show podcasts are available on-demand on iTunes and the show website.
The show host is 30-year commercial real estate veteran Michael Bull, CCIM. Michael is the founder of Bull Realty, Inc, a regional commercial brokerage firm with three offices headquartered in Atlanta, Georgia.
Contact:
Stephen Ursery, Wilbert New Strategies, sursery@wnspr.com
Tony Wilbert, Wilbert News Strategies, 404.965.5022
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