Can you take 100% bonus depreciation on parts of your property? What is the difference between accelerated depreciation and bonus depreciation? What are some other things you may now know to depreciate even more in real estate? Tom Brodie from CSSI shares his insights.

Read the entire interview here: https://tinyurl.com/4pver7wk

There have been some updates this year with the Big Beautiful Bill. Let’s start with Section 1709.

The biggest one, as far as the Big Beautiful Bill, is a 100% bonus depreciation, which means anything less than a 20-year asset can be written off 100% of its value right now. That was in place from 2017 to the end of 2022, and it started dropping by 20% a year. This bill brought that back. The current tax law was going to phase it out by 2026. It was 20% starting after 2022. It was 100% in the drop, 20% a year, which was going to be gone. They brought that back with the bill, which is significant.

The other thing is that Section 179 was an energy-efficiency tax deduction. You give some, and you take some. By bringing back the 100% bonus, they’re going to phase out Section 1709(d) in 2026, where this is really beneficial. If someone built a larger building, for example, 40,000 square feet, there is a dollar value per square foot that you can claim as a deduction if your building is more energy-efficient than the building standard from 2007. Anything built in the last 5 to 6 years, or even maybe longer, is going to be more energy-efficient than something from 2007. That is all found money because all you have to do is engage us to have a study done, and we can get you a deduction.

What is the difference between bonus depreciation and accelerated depreciation?

Accelerated depreciation differs from what most CPAs do today. Typically, they depreciate a building over its full economic life. For example, the economic life of an office building is 39 years. With accelerated depreciation, we break the building down into its realistic economic life. That can be 5, 7, or 15 years, while the structure itself is 39 years old. When you break it down into those component pieces, you’re accelerating the depreciation, which is a misnomer. In my world, you’re actually depreciating it correctly. If you’re depreciating something over 39 years, it’s not going to last only five years. That’s wrong. The IRS has accepted this method. To differentiate it from what’s happening now, and what most CPAs do, they call it accelerated.

What bonus depreciation does is it takes the 5, 7, and 15 years and says: if you’re eligible for 100% bonus, you can write off the total cost of those assets right now. That’s what 100% bonus depreciation is. It’s looking at everything that’s not structural and writing that off.

Cost segregation is the study that breaks down a building’s assets into their component parts. Once the assets are broken down, you can apply bonus depreciation or use accelerated depreciation based on the economic life units.

Tell us about the green zip drywall tape.

It's a green mesh tape is a type of drywall tape that can be removed. You apply it like regular drywall tape, then mud over it and paint it. The great thing is that if you ever need to remove the drywall, you can take off the baseboard, grab the bottom of the tape, and pull it up. Because it’s a nylon mesh, you can pull it up to expose the screws, then unscrew the drywall and take it down as one piece.

The fact that you can remove it so easily makes it a reusable asset. The IRS recognizes this as a five-year asset. Since it’s a five-year asset, everything connected to that wall can now be classified as a five-year asset.

Tom Brodie

CSSI - Cost Segregation Services

(713) 906-3710

tom.brodie@cssiservices.com

www.CSSIServices.com/tom-brodie

How did I make money on my first and worst investment? I’m going to be breaking down my first and worst investment and how I ended up making money on it and getting a free storage facility even after closing the business for 2 years.

Read this entire interview here: https://tinyurl.com/mr22f6mx

Top lessons learned from this experience:

- Don’t ever get into an asset class that you know nothing about without first going to industry specific events, building relationships, asking questions, and getting an advisor to help you analyze and purchase your first deal.

- Buying portfolios can be a great thing, you get multiple properties at a discounted rate, and after you buy them, you split them up and sell a few at market price, while keeping the others.

- This is not really related to car washes, but I have heard that the first offer you get is typically the highest offer you will get, and it turned out to be true in this case. When I decided to sell them while they were still open, we got an offer that was higher than the one that we ended up taking, but I turned it down because at that time the properties were not distressed and our sales price was based on actual NOI. However, it confirmed this theory that the first offer that you get is typically the highest offer you will get.

- Work with a broker that exclusively sells that specific asset class, and follow up with them on a regular basis to make sure you and your properties are on top of their mind. I’m a believer in showing up and following up because people easily forget about you, whether you are selling or buying a property, you need to keep people accountable. This is not to say that the broker wasn’t working on them, but it was to keep reminding her that I was really interested in selling them. My follow ups were about once a month/once every other month.

- There’s a known saying in real estate that “You make money when you buy”. And because I got these properties at a great price, and even though the deal was a complete failure, that is another reason why this worked out. Proving another real estate theory to be true.

Three years after purchasing these properties I decided that it’s not worth my time to try to fix it, and that I’d put the car washes up for sale, and close them completely. Not knowing when I was going to be able to sell them. I decided to take the hit on the mortgage payments until I sold them because my time was not worth the time that I was spending trying to solve that problem. The mortgage payments were cheaper than my time. The car washes stayed closed for two full years. Last year I managed to sell one of them, and this year I sold the remaining two, two years after completely closing them.

I hope that you can learn from my lessons learned, so that you don’t have to make the same mistakes that I made. To better investments!

www.montecarlorei.com/investors

Why are car washes a great investment? What investors should keep in mind when buying car washes? Why now is the time to buy? Why have car washes grown in popularity? Melissa Croll, Associate Partner at Attlee Realty, shares her expertise.

Car washes have been a hot topic with investors for the last few years, why are they a good investment?

The popularity of car washes has definitely grown since I started. We began selling car washes because there was an influx of equipment orders. We were asked by an equipment operator to start doing site selection. In the beginning, we were looking for land, and that eventually led to what we do now—selling existing car washes and everything that comes with them.

What’s really brought car washes to the forefront is the recurring memberships. Every city has its own weather challenges. Here in Dallas, for example, we sometimes get those random freezes that people might not know about. Other markets have a lot of rain. It depends on your market, but these recurring memberships allow somebody to sustain income even during the down times. You don’t need a sunny day to make an income if you play your cards right and build those memberships.

Another reason is that car washes are low-labor businesses, which is part of why they’ve become so popular. With self-serves, for example, you have minimal staffing needs. Of course, you still need someone to pick up trash and ensure everything is working correctly, but not having to hire a large staff is very appealing to investors. The express tunnels need a lot fewer people than opening a restaurant or a retail store.

What should investors keep in mind when buying car wash sites for building a car wash?

It’s real estate 101: we need to consider our location. This is especially important in car washing, because you have to think about a car wash as an impulse buy. If I am driving down the road and there’s a car wash, I should stop. But if I can’t turn around or get to it, I’m probably not going to turn around and go back. Now, if it’s right there and I can easily get to it, I’m going to pull off and wash my car because it was an impulse buy.

These are all things we look at: ingress, egress, and population. You want to make sure the area can support the car wash. How close is the competition? These are all considerations we take into account, even when we’re selling dirt. And whenever we’re working with somebody to rebuy a car wash, we go through all of this with them because, at the end of the day, we want our buyers to be successful. Hopefully, they’ll continue to buy more, and we love seeing them succeed.

Why is right now a good time to buy car washes?

I will say there’s a sense of urgency right now for many people. As you know, this year they passed the Big, Beautiful Bill, and this is huge for our industry. We’re back to 100% depreciation, and you can take advantage of cost segregation. What that means is you can write off equipment and similar items, which can save significantly. I literally have people coming to me now in October trying to close before December 31, saying, “I need to close so that I can get some tax write-offs.”

For many reasons, I’d say there’s a sense of urgency right now. If you want to take advantage of buying a car wash and benefiting from that tax law, you need to do it now because a car wash deal can take 30 to 90 days to close, so we’re really at that point where, if you’re going to get it done, you need to be going under contract now.

Melissa Croll

melissa@attleerealty.com

https://www.instagram.com/carwashprincessmelissa/

www.carwashtraders.com

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