REPLAY - Jodi Nielsen: Unlocking The Power of Cost Segregations On Your Real Estate Investments

LISTEN TO THE FULL EPISODE ON:

Discover the key to unlocking substantial tax benefits in your real estate investments with Jodi Nielsen, Sr. Account Executive at Cost Segregation Services Inc (CSSI). With over 40,000 cost segregation studies under their belt, CSSI specializes in accelerating building depreciation by up to 40%, enabling investors to utilize capital for further growth. Learn how for every $500k invested in a property, potential tax savings of $40-80k can be achieved (note: individual results may vary). From her background in Nuclear Medicine to co-owning a shipping company, Jodi found her passion in helping real estate investors optimize their assets. We delve into the fundamentals of cost segregation studies, identifying its suitability for your investment portfolio, and how it can elevate your real estate journey. Don't miss this opportunity to gain invaluable insights into maximizing your returns and building long-term wealth.

In this episode hosted by Mike Swenson, we discussed:

• The top benefits of having a cost segregation study done on your rental property
• How cash saved from cost segregation can be reinvested and be used to pay down the building, buy new equipment, or hire more people.
• Strategies for doing major improvements on your property
• The potential for higher returns when utilizing your money now instead of waiting to sell

Timestamps:

0:00 - Intro To Jodi's Career
1:57 - The Concept of Cost Segregation
12:24 - What’s the negative of cost segregation?
16:11 - Cost Segregation Process and How It Works
23:09 - Tangible Property Regulations
26:02 - How To Find Jodi

👇🏼 FOLLOW JODI:
https://www.superiorcostsegregation.com/

✅ SUBSCRIBE HERE IF YOU'RE LOOKING TO BUILD WEALTH THROUGH OPPORTUNITIES IN THE REAL ESTATE INDUSTRY

📈 GET STARTED INVESTING TODAY AND ACCESS OUR DEAL LIST!

💵 PARTNER WITH US ON BIG DEALS!

👨‍👩‍👧‍👦 BUILD YOUR REAL ESTATE AGENT CAREER WORKING WITH INVESTORS HERE

🎙️ LEARN ABOUT REL FREEDOM & HEAR MORE REAL-LIFE STORIES

💵 FREEBIES: DOWNLOAD YOUR FREE FREEDOM FOUNDATION BLUEPRINT

🏠 LOOKING FOR A REAL ESTATE AGENT ANYWHERE IN THE US? FIND A TOP AGENT IN YOUR COMMUNITY HERE!

👨‍👩‍👧‍👦  JOIN OUR FACEBOOK COMMUNITY

🎧 SUBSCRIBE TO THE REL FREEDOM PODCAST 👇
Apple Podcasts
Google Podcasts
Spotify

🔗 LET'S CONNECT 👇 
Facebook
Instagram
TikTok
Minnesota Real Estate

Read the full transcript here:

Mike Swenson
Welcome to The REL Freedom Podcast where we inspire you to pursue your passion to gain time and financial freedom through opportunities in real estate. I'm your host, Mike Swenson. Let's get some real freedom together.

Mike Swenson
Hello, everybody, welcome to another episode of The REL Freedom Podcast where we talk about building time and financial freedom through opportunities in real estate. And today, we're talking about a concept that maybe a lot of you don't know and don't understand, which is cost segregation. And so I'm going to start off with a quote of something that happened 234 years ago, back in 1789, Benjamin Franklin said the famous quote, nothing is certain but death and taxes. And our guest today, Jody Nielsen would say, and I can help you defer one of those things. And so we're going to talk about cost segregation. Today. Jody works for cost segregation Services, Inc, which is a national engineer based company performing over 40,000 Cost Segregation studies. And we'll talk about what it is and and how you can use it. But think about this for every $500,000 that you have in buildings or in assets, the tax savings that people can experience is typically between 40,080 $1,000. So as we look at our analysis of cashflow, appreciations, returns and all that, how do we help quantify kind of some of those potential tax savings by doing something like a cost segregation, you're looking at 40 to 80,000, potentially on a $500,000 building. So a little bit about Jodi, she has a bachelor's degree in nuclear medicine, absolutely prepared her for her. Her career here today, also is worked as administrator of a medical clinic, co owner of a shipping and Packing Company, and consulting businesses to help them with their finances and with their cash flow here. So Jodi, we're so excited to have you on the show.

Jodi Nielsen
Well, thank you, Mike, I appreciate you giving me the invite. And I love to help people and give them knowledge, you know, you don't know what you don't know. And Cost Segregation is something that many people do not know about. As you mentioned, we have done over 40,000 studies, we've been in business since 2001. Cost Segregation, the concept of it is it's not new, it's been around since 1997. So this is something basically if you own a building, you're sitting on cash, we just need to get it out for you. So what what cost segregation, the words kind of sound like what is that it's it, basically, your building consists of nine building systems and up to 220. building components. What we do as an engineering based tax consulting firm, is we break out what we can in your building into five, seven or 15 year life. And by doing that, we can typically up to 40% of the building we can break out and by doing this, we accelerate the depreciation. So as you had mentioned, Mike, what what can you do with that cash flow, it's all about cash flow. That's what I've done in all my different businesses is just help people you know, with cash flow, and cash is king still, whether you decide to invest that money you don't pay in taxes, you decide to pay down part of your building, or you buy new equipment, or you hire more people. If we do not as a company, we do not file taxes, but we do work hand in hand with your CPA and I do or your tax professional I should say. Many of them they do know about it, I've never met a tax professional that is an engineer. So just so for the people listening here, we will work hand in hand with them we make their life easier because we give them a broken down definitive calculation of every single thing in your building. Whether it's flooring, plumbing, electrical, window shades, LED lighting, you know masonary work, any anything that parking lot outdoor signage, sidewalk so there's a lot of different types of buildings too. And so what I get asked a lot like is if you know well I have an Airbnb or I have a warehouse or ever retail strip. I've condo as long as you file in the United States and it's not your permanent residence. We can help you. So what what we want to look at It is kind of either a depreciation schedule, if you've owned your building more than a year, you would have already had the building and the land broken out. And then any improvements you've done over the year, cuz sometimes I do get, oh, it has to be a new build or brand new building I bought, not true. We look at everything. If you have a 20 year old building, there's probably not going to be any depreciation left in it that I can help you with. But what have you done to that building in those 20 years? Most people, you know, maybe put 50,000 in one year 100,000, another year, another 80,000. So when we look at those schedules, we can be like, Oh, okay, well, there's still things that we can help you with that. So it's always beneficial to kind of have a chat and see where things are at. Now, if you just built or bought a building, that's going to that have a depreciation schedule. So at that point, what we would need is your closing settlement statement. And two important things that we I always ask, number one was there a 1031 exchange involved, that it's not a bad thing it's a lot of clients do, it's just we do have to take into consideration what we need to take out for that 1031 monies that was moved over into some side note with 1031 exchanges, because the cost is one building. And then you turn 31 into another building, typically, it's gonna be a bigger, more higher value building, you're gonna want to keep costs a unit because the whole concept of 1031 is defer, defer, defer paying the tax man. So you'd want to continue to do cost segregation, there'd be no reason not to. The other thing I was going to mention, if you have a building, and you are going to be doing major improvements on it, we would want to know those as well, because we would add that to the cost basis. Now, there's some strategies that may be when you do some major improvements. And that comes into kind of another fold of the onion, if you will. There's partial asset disposition. So basically, there's things that you tear out of the building, thrown in the dumpster, I would call it dollars in the dumpster. So there's a value to what you tear out to, and I can help you get that if you qualify. So when you look at buying a building to I mean, I work with, you know, CPAs, building owners, investors, bankers, it's always beneficial because Cost Segregation is gonna give everyone definitive numbers on what your building's worth. And as a banker, a lot of them realise the value if you tell them you have an acrostic study, because they want to make the loan due to buy your building. However, they want to get paid back, right? So if they know you've kind of got like steady and you've got cash flow, they know they're gonna get paid at least first, first year, second year, etc. Now, what what people, when you when you look at cost segregation, I have been getting a lot of questions recently about what this bonus depreciation. So bonus depreciation, kind of stepped back to before the tax cuts and Jobs Act of 2017. Bonus. At that time, you had to build something new. And it asserted 100%. And by 2017, it was down to 50%. Meaning what that means is anything we find that under a 20 year life, you can accelerate, and you can take full advantage of that money, the same tax year. Now, what happened in 2017, September 28, they said if you bought a building, or built a building, anybody can get 100% Bonus. They are now trying to play it out. So by 2026 They're saying that there will be no bonus right now we're at 80% bonus in tax year 2023. You don't ever lose any benefits. I don't want anyone to get worried about oh, I didn't buy a building in 2022. So I'm not getting 100% Bonus. It just means that you can't use all of the money the very first year, you would it would be spread out over the next five years, but you never lose benefit.

Mike Swenson
So just to talk through some of these things. You know, you and I had talked about this previously. The hard thing here for people to understand is to help quantify the benefit of what a potential cost segregation study can do. Because we have deal calculators we can Calculate, here's my projected cash flow. Here's my projected, you know, appreciation, and here's my projected returns. And sometimes, you know, we kind of get lost in this middle ground of how do we project what our tax savings might be. But understanding this is very significant, right. And so if you're buying a building of a decent size, there's a big savings here a big potential cashflow savings, because of of taking advantage of this cost segregation study. And so I think a lot of times people feel like, Oh, I just don't know enough about that. Or I don't want to take the steps to look into this further. Because it's, it's taxes, and it's what the heck is this, and I don't understand it. So I'm just not going to do it. And really understanding there's a powerful tool here to help you in your investment journey, and like you said, unlock a lot of potential cash, that you can then use either to pay down the mortgage, go find another building. And so figuring this out, or spending some time studying Cost Segregation can have an incredible value for an investor. Oh, absolutely.

Jodi Nielsen
And it, you know, I tried to make it as easy as possible for people. So we will do, like a free analysis, and somebody would be interested. And we'll tell you, you know, what, what we believe we're going to get out of your building, and we hit our numbers 90% of the time we're above, we'd rather over deliver. So I say I'm getting you, you know, 50,000 of tax benefits, I might come in at 60,000, you don't ever pay me anything more. So within 48 hours, I can have some numbers back to to you and let you know, you know what the cost of the study will be which we actually were an expense to eat as they get to write us off, and then what your tax benefits going to be. And this is huge, like you mentioned, I mean, you have investors here, and you know, a couple that you and I both know, that we just were kind of discussing, I mean, it's been super fun to watch them, they have, you know, bought, and then they've taken that cash flow that they had, and they've invested again, and they just keep costs, ageing the buildings and keep building their portfolio. So there, there's really I can tell you, um, as far as cost segregation, what would I want to know? Like, what's the negative? Why wouldn't somebody want to do it. Because if you don't, if you don't pay taxes, like your nonprofit, or you just don't ever pay in taxes, there's probably not going to be a benefit to you. Or if you're a flipper, I know you probably have people that listen to this, unfortunately, there's not enough time for you to take your money to make more money, if you're flipping the IRS kind of stances on it is that if you hold something, at least two years or more tax cost segregation can be beneficial should be beneficial for you. You also mentioned, you know, the dollar month when people think they have to have at least a million dollar building, we can go you know, off at the new by, you know, down to like 140 150 for there still to be tax benefit for the class has to outweigh the cost of the study. So, you know, if people, I like to give two analogies that people kind of like the one of them is think of it like the lottery, like you just want a million dollars in the lottery. And I said do you want a little bit of money for 39 years commercial or 27? and a half years would be residential? Or do you want it to get a whole bunch of it right now? Will you want it right now because the time value money, right? A dollars worth more to date, that will be you know, tomorrow, so we don't get people more depreciation, just want to make that really clear at the end of the life that you're building going to be the same amount. Now this is a little quote that I like my little 86 year old guy who's such a great investor. He though said at the beginning when he started this with me, he said so let me get this straight God if I don't do this, and I die next year, I've never got to use my money. Like yeah, that's pretty much it. So we're we're just top loading it. So you get your your your your own interest free loan, instead of going to the IRS or giving it to yourself. And most people like can I say that? I'd like Yeah, well, I think I know what to do with my money better than what the IRS does. So you know, kind of being in charge, like you said of you don't know what you don't know what you want to be in charge of your life and your your portfolio to be able to say can I take advantage of this 20,000 20,000 $2 million? And what can I do with it? So that you know when when people look at your hearing people, oh, they did pay taxes? I can tell you probably 90% If they own a building, they're probably doing cost segregation. Mm. So, I will bring up to if you've owned a building more than a year, you know, people kind of get a little confused as to they're like, Oh, well, I've been straight lining it, what do I do, I don't want to amend, you don't have done and when you do a cost segregation study, what we'll provide for you and your your tax professional as what's called a 3115 form. And that form just clearly tells the IRS that you're switching from straight line to accelerated, so there's not a mending. And because I know a lot of times people are like, Whoa, I don't want to mess. So that that's a nice thing. And if obviously, if you just bought a building, you know, today, you would just start out with accelerated depreciation.

Mike Swenson
So talk about the process and how it works. So you'd mentioned this before you guys do kind of a free analysis for people's talked about property up to $150,000 or more often, you can find enough benefit there to offset the cost. So if I'm interested in looking more into this, you guys provide kind of a free study. So what what do I need to send to you? Or how does that work to kind of get that free analysis to know if it's going to make sense or not?

Jodi Nielsen
Yep. So what I would probably say is, if you've owned the building more than a year, I would want your depreciation schedule. And then if you've done any major improvements in 2023, that wouldn't be on the schedule, yet. You'd let me know that. If you just purchased the building, you would send me the closing settlement statement. And then I would ask, Was there a 1031 exchange involved? Or was there any major improvements you're going to be doing this year, when I get those answered? That we like the address, and what's the use of the building typical, asked also, how many square feet it is, you know, because 50,000 square foot buildings can be different than 5000 square foot building. And then within 48 hours, we'll come back with the analysis. If you like the numbers, we do ask if you have appraisal and or blueprints, we are engineered based. So that's what the IRS prefers. And so when the IRS says they prefer something, typically what you want to do, we actually physically come to the location of the property, we take pictures of the whole outside and inside, if it would be a hotel or multifamily living, we do need to get into one of each type of units. And then all of the common areas. And our studies take like six to eight weeks, we do get paid half upfront, and then half when our study is completed. And I know people from you know want to know pricing a lot like, you know, what, what are we looking at, you know how much expensive, we don't, we don't have a set fee, it's really what the buildings used up. But I'll, I'll give you kind of an example, let's say you have a a million dollar office building, and then you have a million dollar warehouse, both was the same year, same month. So there's going to be more stuff more assets in the office building. And so you know, that's probably going to give you a say, you know, the $80,000 tax benefit. And the cost of the study is probably going to be somewhere between, you know, don't quote me here, I don't set the fees, but I've been doing this a long time, somewhere probably between 14 150 800, something like that, now, the warehouse is not going to have as much stuff in it. So that's probably only going to give us maybe a $45,000 tax benefit. But the cost of the study, because there's not much stuff for us to look at, is probably going to be you know, between the 3800 to 4800 type of price range. You know, and it kind of varies a little bit to like I said how big it is, if it's 120,000 square foot warehouse is probably going to be a little bit more thought of building was going to be more or less, I will bring up right now that's been really popular. The last and COVID Actually, it's really taken strides is the Airbnb, a lot of people are into those right now. And those are those are really, you know, been very beneficial for a lot of people, especially if you're running your own and doing a lot of the work yourself, you can actually use that towards your active income. That can be very beneficial to

Mike Swenson
you and then understanding you know, the the money that you're going to pump into the study here, you're going to recoup that and much more on the back end. And so understanding yeah, there's an investment that happens to get this study done. And yet, like you said, you would only do the study if it makes sense for you financially. And so it's like yeah, it's not like I'm gonna I'm gonna pay you this money and then you come back and you're like, Oops, sorry. You already know ballpark what what is going to be the the advantage here. And then yeah, if the numbers make sense, it's like okay, let's move forward with this study. You get this steady and have it done in, like you said, ideally, it's going to be more than what you had anticipated. And then happy day great, we have a bigger savings than what we thought. And so that is the thing. There's, there's really not a lose scenario here. Because you're already going to look at the cost benefit here,

Jodi Nielsen
you also get too expensive. So exactly, you know what, there's, yeah, so there's, there's, there's really like most left people say, you know, it's a no brainer. I mean, why would you not want your money now, I mean, again, if you're looking at buying, I always think it's kind of funny, though, I have some guys that, you know, they know they're going to sell any year and they still do it because they feel like they can take their money in make more money in that kind of scenario. That would be something I would definitely tell you talk to your tax professional about. But also, let's say you constipated and somebody comes in offers you 10 times what your building's worth, you'd probably be like, number 1am I sitting on gold that I missed? Or number two, do I really care that I paid God five grand I just made, you know, 500,000 or whatever. So you know, and we do use combined federal state tax rate, do your to figure out what your tax benefits going to be? Obviously, you know, top Dakota or, you know, states that don't have Florida that don't have a tax, that would be just the federal, but I mean, we do I do I probably have clients in 42 states now. And it's, it just works for people everywhere, when they when they start doing this and you know, your investors, you probably will never stop. I mean, just to repeat, repeat repeat type of situation.

Mike Swenson
Like you said, kind of a no brainer here, when you start to see like, oh, gosh, I can really experience this benefit here. And yeah, you you see it show up and it provides more cash flow in that short term, it is kind of a no brainer. Real estate agents are you tired of letting the busyness of life get in your way from achieving your real estate investing goals, I'm super excited to announce we've created the real freedom investor agent tribe, it's a place for you to come get educated and network with others so that you can make sure that you're hitting your real estate investment goals. So find out more on our website, real freedom.com Click on the store link, we've got a membership, we've got a mastermind group and some private coaching as well check it out, I've priced it super low, the goal is to get you in not have price be a determining factor to keep you from your goals. So come check it out, schedule a call with me, and we're happy to see where your real estate journey is going to take you.

Jodi Nielsen
Well, if you might have some investors to that own with, maybe there's three of them, or five of them or whatever. So the benefit, you just depending on your ownership, it just gets divided out that way how you know if you're 2020 2020 and so it's still very beneficial. You know, because there's multi investors. The one thing that there's also more benefit, and it's probably I don't want to go down in the weeds, but it's all in your favour. That's called tangible property regulations. So basically, when you've done a cost segregation study, the main thing I would tell you if you ever have anything done on your building after that, you'd want the contractor to break out what they're doing three very important things and that tear out disposal and replacements and once we get those things you can you can expense a lot more different things than you would have been able before. The other thing I would tell people too is once you've done a cosmic vacation study with with CSSI but you might want to talk to your insurance carrier. I've had a lot of clients that have gotten lower premium and the reason being there's really no going back and forth about what's worth what because it's all engineer calculated numbers I mean we're not aggressive we're not passive we're it is what it is you know your windows are with this or roughs with this flooring with with this, you know God forbid a fire that the easiest example that that people find so, you know there's, there's there's really a good way to get things done. You do want to have them done right. No people all audit I just had a thought here, people Oh, is this gonna, you know, give me audited as you know. It's actually a little bit the opposite. We've done 40,000 sites we've never triggered an audit. We have been involved in like 17 audits like they were audited for safe payroll. And they they seen we did their costing Today we're in and we're out your audit defendant doesn't cost the client anything. It's right in our agreement. And I mean, obviously, we've been around a long time, and we've done a lot of these. So we're we do things right. And you do want that. Probably people have heard, you know, the IRS are talking about getting like a 3000, or whatever, more IRS agents, I don't know if they're gonna be able to do that or not. But if but if they do, I mean, you're rest assured you're in good hands, and you want to do things correctly.

Mike Swenson
Yeah, absolutely. So we kind of talked through the basics here of why would we want to do it? What's going to be the benefit? When wouldn't it make sense, which is very rarely, what would be kind of the next steps? You know, you had mentioned that free analysis. So if somebody is like, hey, Jodie, I want to learn more. Now. I want to reach out to you in any some of these concepts. I don't, I can't quite wrap my brain around him. I don't understand them yet. And yet, the good news is, we don't have to fully understand them. But talking with you will really help. So how can they reach out to you to get more information? Well, thanks,

Jodi Nielsen
Mike. Yeah, and I like to be I'm about relationships. And I like to be more of a consultant for people because, you know, I want you to understand, because what you need to understand, and I try not to go down the weeds at all, anybody, but you have to have a good trust. And hopefully, I bring that to people I think I do. I can my phone number and Jody God I Nielsen and I E L F e n, and I'm at 651-210-1921. And then my email is long, so I'm gonna say it and then spell it. It's Jody, that Nielsen at cost, segregation. services.com. So it's J O D, I got in I E L F, E N, at cos B O S, T, segregation, S E, G, R E, G A T I O N, S E r, v i c e f.com. How segregation services. And then my website is www dot superior cost segregation.com.

Mike Swenson
Awesome. Thank you, Jodi, for coming on. Thank you for sharing. It's a topic where if I hadn't heard about it before, it's going to take a little bit of time to get my brain wrapped around it. But at the same time, you make it so easy, and you help us out. And like I said, Really, you're only moving forward if it makes sense. And so it's a win win situation. And so just certainly reach out to Jodi. If you want to learn more. I'd love to hear from you all