This post is especially for commercial real estate brokers who own buildings and have extended their 2023 taxes. Assuming you have some tax liability for your earnings in 2023, if you own a commercial building(s) and/or residential investments and you have not done cost segregation on those buildings, this would be a great time to see if this can work for you. This may be especially beneficial if you have a significant tax liability and if you are planning on holding your buildings. This also goes for those who aren’t CRE brokers but own commercial real estate. If you own a profitable building that you plan to hold for another 3 or more years, why not look at the impact a cost segregation study could have on your tax liability and cashflow for the property.
Get an estimate in your hands so you can have an informed conversation with your own tax advisor to see if doing a study now makes financial sense.
Photo: SVN Blackstream Greenville, SC – John Murphy presenting cost segregation to CRE brokers
One of the things I enjoy about the work I do is getting an opportunity to speak with commercial real estate brokers. I can do this for residential brokers as well as they will often be working with investors or they might be buying their own property.
If you work at either a residential or commercial real estate brokerage and are looking for a speaker for your meetings, I’d be happy to come in and speak as long as you’re within a reasonable driving distance for me. I’m based in Greenville, SC so I certainly anything here in the Upstate is accessible. Also, the Charlotte metro and Columbia are only 90 minutes away.
Here’s a presentation I recorded to help commercial real estate brokers understand cost segregation.
I get asked to come in and present to commercial real estate brokers, financial advisory firms, CPA firms and occasionally a college might ask me to speak to their accounting students. The the folks who are consistently really interested in learning more about cost segregation are the CRE brokers…as well they should.
This is not only easy money but it’s a great value-add service that you can tell your clients about which in turn might lead to another deal. How so? Let’s say you help a buyer purchase a new building. As part of your due diligence, you get an estimate for cost segregation. It’s likely the owner is not familiar with cost segregation. You might end up saving that owner $30, $50, $100k+ on his/her taxes. It might even be enough that they want to buy another building with you. You can earn a referral fee on business you send our way. Of course it’s nowhere near what you earn with real estate commissions but it all helps at the end of the day. Telling your clients about cost segregation and getting them an estimate is a win-win-win for everybody.
I recorded a presentation that I recently used to help educate many commercial real estate brokers. It’s not meant to be an in-depth study of cost segregation but hopefully provides enough of an overview to help you understand the power of cost segregation and why you should have a trusted source to help you and your clients maximize their building’s cash flow while minimizing the taxes for the owner.
Presentation about Cost Segregation for Commercial Real Estate Brokers
“We are excited that NAI Columbia is officially rolling into our business family,” Jon Good, CEO of NAI Earle Furman said in a news release. “This collaboration will mutually benefit both of our firms with more manpower, added support and additional resources. Together we will be able to better serve our clients throughout South Carolina and beyond.”
This sure seems to make a lot of sense especially in the world of commercial real estate where there are some very big players with large networks who serve the Upstate and Midlands area.
My experience is that 8 out of 10 building owners aren’t aware of this incredible tax application that boosts their cash flow and lowers their taxes… commercial brokers, insurance brokers, tax and financial profressionals and property managers are all trying to reach buildling owners and yet few if any are having conversations about cost segregation. You don’t need to be an expert. Just ask if they’ve done it yet to their building. It’s a missed opportunity all the way around.
If you don’t ask, you’re missing out on potentially really helping a client. In some cases you might gain a new client because of it. Maybe you end up writing another policy or pick up more money to invest from them. Or maybe with the extra money they save they end up buying another building with you…or you pick up a new tax client. Plus you can get paid a referral if you join our referral program. It’s easy and costs you nothing. Contact me to join our program and let’s keep business and building owners in business and profitable! Note: financial services cannot be paid a referral due to regulations. However, let’s say you help someone save $50-$100k on their taxes…perhaps they will reinvest some of that tax savings with you buying financial / life insurance products.
Commercial brokers play a very important role in the ongoing development and improvement of a community. They are often in-the-know of what’s happening in a particular area…who’s developing what and which companies are moving in and/or expanding. They help business owners, building owners and investors of all kinds with sourcing or developing a building or project to suit the prospective owner’s needs. They often can help give recommendations on financing, inspections, engineering, surveying, insurance, renovations, construction etc. The one area they are weak in is in cost segregation.
Why should commercial brokers have a trusted source for cost segregation amongst their mix of other expert advisers whom they can readily share with a prospective client? It’s pretty simple….commercial brokers should introduce cost segregation to every client and have each building evaluated. There’s no cost to do this and the upside is significant certainly for the client. The commercial broker can also generate another income stream for his brokerage by partnering with us to deliver this service to his clients.
We know the upside for the client on cost segregation but why wouldn’t the commercial broker also participate in creating another revenue stream? Ask me about our referral program. It can help pay for some office lunches, outings and year end parties. But the bigger thing is that the broker will have helped his client maximize his/her building by saving a lot of money on taxes. The tax savings provided to the client might actually be enough to help that building owner go buy another building of which the broker may represent him/her on that and make another commission.
Remember, not every building or every building owner is going to need to actually do a cost segregation study. Some buildings aren’t profitable and maybe won’t be for some time. Some owners aren’t particularly profitable either and so they don’t need the tax deductions. However, every building should be evaluated so you at least have it on hand and can reference it each year as you review your particular tax situation for that year. Perhaps you don’t do cost segregation for a variety of reasons in 2022…maybe not even in 2023. But by 2024, it probably makes more sense. Well, a smart business owner, building owner and investor is going to know what that might look like for him or her. There’s no reason they should not have an estimate on hand and in their files. It should be part of a normal business and tax review process if not quarterly…at least annually.
Cost segregation will save big money for most owners. They might see between $30,000 – $70,000 in income tax savings per $1 million in building cost or basis. We can do studies on buildings with a cost or basis as low as about $175,000.
Lastly, I will say that as I speak with building owners, 8 or 9 out of 10 have not heard of cost segregation. Of those that might be familiar with it, there’s a lot of misperceptions as to it’s value vs. it’s cost. It’s very common for me to quote estimates that demonstrate a 10, 15, 20:1 return on their investment in the study. That’s a 1,000 – 2,000% return. Most commercial real estate delivers returns in the 5-8% range…we’re talking massive returns here with cost segregation compared to the investment in the study. The most likely way a building owner would hear about cost segregation would be through the commercial real estate broker. Please share the information…make an introduction and let’s help building owners maximize their buildings, lower their taxes and increase their cash flow.
Be sure to reach out and I’d love to help – John Murphy, 864-276-1448
