The market conditions in the Apartment Industry continue to improve and remain strong. According the NMHC (http://www.nmhc.org/2014-July-NMHC-Quarterly-Survey) markets are tighter, sales volume is up and financing is more available. Many apartment owners have increased profitability from the lower vacancies/higher rents. With increased profitability, comes increased tax liabilities. Engineering Based Cost Segregation can help apartment owners decrease their tax burden, increase their cashflow and maximize the return on their investment.
Here is a summary of the results for a cost segregation study on a 150 Unit Apartment complex:
This 5 building, 150 unit garden style apartment complex contains 109,654 square feet of gross building area and is situated on a 5.51 acre site. The property was purchased in 2008 for $5,525,000 of which $828,750 was allocated to land. In addition, a major renovation totaling $1,518,220 was completed in 2008 and was included the study. A significant portion of the improvements qualified for 50% bonus depreciation.
|Tax Year||Additional Depreciation||Cash Benefit|
|TOTAL Yrs 1 – 6||$1,551,665||$624,666|
|FEES & RETURN ON INVESTMENT|
|Total Professional Fees||$13,500|
|NET After Tax Fees||$8,100|
|Return On Investment||71.1 : 1|
This sample is based upon actual results of a completed study. The benefit numbers are based upon a federal income tax rate of 40%. Although the sample depicts a specific type of property, actual results may vary.