The market conditions in the Apartment Industry continue to improve and remain strong. According the National Multi Housing Council (NMHC) 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.

Client Benefit:

The Engineering Based Cost Segregation Study provided Additional Depreciation of $1,551,665 over and above the straight line method. Which resulted in a tax benefit to the client in the amount of $624,666 over the first six years of ownership.

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 blended federal and state income tax rate of 40%. Although the sample depicts a specific type of property, actual results may vary.

Source by Doug Mortenson