Hi I am Craig Johnson, a licensed commercial
real estate broker with Northwest Equities
Investment Real Estate Services, Inc. and
joining me today is Jonathan Frizzell with
Cost Segregation Services, Inc.
Jonathan is a Senior Account Executive with
CSSI and brings his years of experience to
our conversation today.
Craig: Jonathan why don’t you explain what
a Cost Segregation Study is, and why it could
be very important to a commercial real estate
owner.
Jonathan: Well Craig when an individual or
an entity buys a commercial building, the
improvements to the real estate qualify for
27.5 or 39 year depreciation schedule, depending
on whether it is residential (multi family
for instance), or a non residential property,
such as an office, industrial, retail building,
or any type of commercial property.
A Cost Segregation Study identifies individual
components of a commercial building, such
as the heating system, wall systems, carpeting,
lighting, plumbing, and a whole host of other
items, that are eligible for a shorter depreciation
schedule, such as 5, 7, or 15 years.
Craig: So if I understand this correctly if
I own a commercial building, I can use a Cost
Segregation Study to accelerate my depreciation,
and a result cause higher after tax cash flows
from the property, is that correct?
Jonathan: Absolutely, you are essentially
taking more of the depreciation up front to
the earlier years of ownership of the building
as opposed to taking it in a straight line.
This can also be a used by anyone who has
owned their property since 1987 and in most
cases, you will qualify for “catch up”
depreciation and actually receive a substantial
check from the IRS.
Craig: Jonathan, please don’t be offended,
but is this really legal?
Jonathan: Yes, it is approved and legal and
is recognized both in law and by the IRS,
that being said you really need a good quality
study, done by people with engineering and
tax back ground, otherwise if the study is
weak or not detailed properly, it could be
overturned in the event of an audit and/or
you my not get all the benefit possible.
Craig: Who should consider having a cost segregation
study done?
Jonathan: If you own or are acquiring commercial
real estate with improvements value of $300,000
or greater and have in ownership since 1986
may get substantial benefits.
Craig: How would I get started?
Jonathan: I would suggest getting a no cost
Predictive Analysis from a true engineered
based Cost Seg. provider to see if the potential
benefits would justify the cost, with us it
is in most cases than not.
Craig: How would our viewers reach you?
Jonathan: you can reach me directly at 206.399.7769
or email jonathan@jonathanfrizzell.com, our
website is www.jonathanfrizzell.com.
Craig: Thank you for joining us today Jonathan.
This is Craig Johnson, Commercial Realtor
with Northwest Real Estate Equities in Vancouver
WA, feel free free to call me with your commercial
real estate questions at 360-281-3130, thank
you for watching!
