The Untold Solutions We Overlook with Jeff Hiatt

Summary

Wake Up to Wealth Podcast: Episode Summary

Title: The Untold Solutions We Overlook
Host: Brandon Brittingham
Guest: Jeff Hyatt, MSC Consultants
Duration: 38 minutes and 26 seconds

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Introduction to Jeff Hyatt and Cost Segregation

Timestamp: 00:57 - 03:15

Brandon Brittingham welcomes Jeff Hyatt, a seasoned expert from MSC Consultants, to discuss a critical yet often misunderstood financial strategy in real estate: cost segregation. Jeff shares his extensive background, highlighting that MSC Consultants has been conducting cost segregation studies since 1996, with over 24,000 studies completed to date. He emphasizes the depth of their expertise, boasting a team of 10 accountants and 17 engineers dedicated to this field.

Jeff Hyatt [02:52]: “We have at this point 10 accountant types and 17 engineer types who do the work. We've done about, in total, about 24,000 studies...”

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Understanding Depreciation in Real Estate

Timestamp: 03:15 - 05:14

Jeff explains the foundational concept of depreciation in real estate investment. Typically, commercial properties are depreciated over 39 years, while residential rentals, including single-family homes, are depreciated over 27.5 years. This straight-line depreciation allows investors to deduct a portion of the property's cost each year against their income.

Jeff Hyatt [05:14]: “I'd rather grab it now versus waiting. I don't know if I'll be alive in 39 years or 27 and a half. If I can get some of it today, then I'll take it today.”

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The Power of Cost Segregation

Timestamp: 05:14 - 16:35

Cost segregation is introduced as a strategy to accelerate depreciation deductions, allowing investors to take larger deductions in the early years of property ownership. Jeff illustrates this with a $1 million property example, where $800,000 is depreciable after accounting for non-depreciable land value. Through cost segregation, a portion of this amount can be reclassified into shorter depreciation schedules (5, 7, or 15 years), significantly increasing upfront deductions.

Brandon Brittingham [04:26]: “So like, you know, you buy a building, so like, what the H Vac or like, how does that work? Whether you get some, some accelerated depreciation on some of the items.”

Jeff further explains that many investors are unaware they can retroactively apply cost segregation to properties purchased in previous years without needing to amend their tax returns, using Form A-3115. This allows investors to reclaim deductions from as far back as the 1986 Tax Reform Act.

Jeff Hyatt [10:28]: “...you can go back to when the tax law changed, which was the tax reform act of 86 fixed, took away investment tax credits, and at that point, everything became straight line.”

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Benefits of Accelerated Depreciation

Timestamp: 16:35 - 26:38

By accelerating depreciation, investors can free up significant cash flow, enabling them to acquire additional properties sooner or improve existing ones without needing external financing. Jeff emphasizes that this strategy not only enhances cash flow but also increases property value through strategic renovations funded by the tax savings.

Brandon Brittingham [28:14]: “It's what you keep... You can grab that deduction now and then. It'll play for you along the way.”

Additionally, Jeff highlights that professional cost segregation studies are crucial. DIY approaches or using inexpensive programs can lead to IRS audits and penalties, as the IRS requires comprehensive documentation, including site visits and detailed analyses, to validate accelerated depreciation claims.

Jeff Hyatt [21:26]: “You need to have an actual site visit. You can't just wing it. You can't do DIY...”

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Why Cost Segregation Often Goes Overlooked

Timestamp: 26:38 - 37:23

Despite its benefits, many investors overlook cost segregation due to misinformation and lack of awareness. Jeff points out that only about 30% of eligible investors utilize this strategy, leaving 70% untapped. Common pitfalls include accountants' unfamiliarity with the process and the complexity of IRS requirements.

Jeff Hyatt [15:56]: “It's estimated that about 30% of the people that could have taken advantage of cost seg have done it. In other words, 70% have not.”

Brandon adds that many investors consult general accountants who may not specialize in real estate, leading to missed opportunities for maximizing tax benefits.

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Real-World Impact and Financial Example

Timestamp: 28:39 - 36:05

Brandon shares his personal experience, illustrating the substantial tax savings achieved through cost segregation. For instance, on a $4 million property, cost segregation can result in a seven-figure write-off, a figure that would take years to accumulate through standard depreciation alone.

Brandon Brittingham [29:00]: “...it was a seven figure write off on our taxes.”

Jeff reiterates the return on investment, noting that their services typically offer a 4 to 5 times return, making cost segregation not just beneficial but also financially savvy for qualifying properties.

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Jeff Hyatt's Commitment to Community and Service

Timestamp: 37:23 - 38:26

Beyond his professional expertise, Jeff shares his philanthropic efforts with Swim With a Mission, a nonprofit organization supporting veterans through service dogs, therapy programs, and other supportive services. Since 2017, Jeff has helped raise $13 million for veterans and their families, underscoring his dedication to community service.

Jeff Hyatt [32:00]: “We've raised about $13 million for veterans and their families, providing support, helping them through tough times.”

Brandon commends Jeff for his contributions and emphasizes the trust and reliability that MSC Consultants brings to their listeners.

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Closing Thoughts: Waking Up to Wealth

Timestamp: 35:52 - End

The episode concludes with Brandon and Jeff reflecting on the true meaning of waking up to wealth. Jeff encourages listeners to take ownership of their financial futures, leverage available resources, and support others in their wealth-building journeys.

Jeff Hyatt [37:03]: “Take ownership of it and run with it... If you can help somebody else get to their next level, then do that.”

Brandon reiterates the importance of education in financial success and invites listeners to engage with trusted professionals like Jeff to unlock their wealth potential.

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Key Takeaways:

1. Cost Segregation Explained: A strategic tax planning tool that accelerates depreciation deductions, enhancing cash flow for real estate investors.
2. Professional Expertise is Crucial: Proper cost segregation requires detailed studies and compliance with IRS guidelines to avoid audits and penalties.
3. Significant Financial Benefits: Properly applied, cost segregation can lead to substantial tax savings, allowing for quicker property acquisition and improvements.
4. Community Impact: Professionals like Jeff Hyatt not only provide financial strategies but also contribute significantly to community and veteran support.

Notable Quotes:

• Jeff Hyatt [05:14]: “I'd rather grab it now versus waiting. I don't know if I'll be alive in 39 years or 27 and a half. If I can get some of it today, then I'll take it today.”
• Jeff Hyatt [10:28]: “...you can go back to when the tax law changed, which was the tax reform act of 86 fixed, took away investment tax credits, and at that point, everything became straight line.”
• Jeff Hyatt [21:26]: “You need to have an actual site visit. You can't just wing it. You can't do DIY...”
• Brandon Brittingham [28:14]: “It's what you keep... You can grab that deduction now and then. It'll play for you along the way.”
• Jeff Hyatt [37:03]: “Take ownership of it and run with it... If you can help somebody else get to their next level, then do that.”

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For more insights and actionable strategies on transforming your financial future, tune into Wake Up to Wealth with Brandon Brittingham. Don’t miss out on leveraging expert advice to elevate your wealth-building journey!

Transcript

[Jeff Hyatt]

Hey, let me tell you about my good friend Jeff Hyatt over at MSC Consultants, and check out his episode if you've missed it. With today's volatile interest rate environment, real estate investors are looking for every advantage legally available. More and more are realizing that accelerating depreciation allows them to free up cash flow, enabling them to acquire their next property sooner. MSC's approach to call SEGS is the answer. If you've got properties out there you haven't done, call SEGS on paying too much in taxes. MSC's approach to cost SEGs is the answer. Visit them at ww.costsegs.com that's ww costsegs.com and ask for my good friend Jeff.

[Brandon Brittingham]

This is Wake up to Wealth, a podcast dedicated to helping you change the way you think about wealth. And now, here's your host, Brandon Brittingham.

Hey, what's up, everybody? We are back with another episode of Wake up to Wealth. And I've got a gentleman in the studio that I met recently in the boardroom, Mastermind, and he's got his friend here with us, Thor. You might catch glimpses of him on the podcast. Jeff Hyatt. Thanks for coming here today, Brandon.

[Jeff Hyatt]

Thank you very much for having me. I'm thrilled to be down here with you today.

[Brandon Brittingham]

So the cool thing, one of the things we're going to talk about today, right, is probably one of the most misunderstood and just a ton of misinformation out. And you guys know that if you follow me on social media, if you listen to the podcast, I bring people on here that teach you ways to become more wealthy. And one of the biggest things is I actually had this conversation with somebody yesterday that started coaching with me and, and we were talking about how much money he made last year. And I said, that's not how much money you made. And he's like, what do you. He got offended. What do you mean? I said, well, you made that minus 48% state and federal taxes. And he said, oh, shit, you're right. And so one of the things we're going to talk about today is depreciation through real estate, specifically what you're an expert on, which is cost segregation, right?

[Jeff Hyatt]

That's correct.

[Brandon Brittingham]

And so it's so crazy to me the amount of misinformation, wrong information, bad advice people get on the subject. So I'm excited to have you because this is the. That people need to hear, right? And the right information. So, like, just someone, probably most people, even that are listening to this show, they don't Even understand, like explain depreciation and then behind that, if you wouldn't mind, explain cost segregation so people understand it.

[Jeff Hyatt]

Absolutely. Thank you very much for asking. Those are great, great lead in to the conversation here today. So, and just a little bit of background on myself just to put it out there.

[Brandon Brittingham]

Absolutely.

[Jeff Hyatt]

We've been the Firm, I'm with MSC Ms. Consultants, we've been doing cost segregation studies since 96. Yep. I joined the fir firm in 99. We have at this point 10 accountant types and 17 engineer types who do the work. We're all internal. We've done about, in total about 24,000 studies, plus or minus since back in the day.

[Brandon Brittingham]

Wow.

[Jeff Hyatt]

With that said, we have some experience here and if you don't do anything, when you buy a property, whether it's a restaurant building, industrial building, any kind of building out there, you're going to have 39 year depreciation.

[Brandon Brittingham]

When what does that mean?

[Jeff Hyatt]

Meaning. And let me just finish up one other thing. If it's a residential rental, apartment rental, then it's 27 and a half. So I got that out there.

[Brandon Brittingham]

Same with single family.

[Jeff Hyatt]

Same with single family.

[Brandon Brittingham]

Got it.

[Jeff Hyatt]

Renting it out 27 and a half year. So that means that the IRS will allow you to take a deduction against earnings when you've bought, let's say you bought the building for a million dollars just so it's round and we have to take out 20% for land, land being non depreciable.

[Brandon Brittingham]

Right.

[Jeff Hyatt]

So now we're at 800 grand and so you're at 800 grand and the IRS will allow you to deduct the 800 grand divided by 39 or 27 and a half years and that becomes your depreciation deduction against income from that property.

[Brandon Brittingham]

Got it.

[Jeff Hyatt]

So that's what it is to start. And many times people have done that for years and years and years or they just bought it this year and they're thinking they're going to only have that option. But if they hear about it, cost segregation, and I ask them, if I said to you, Brandon, hey, I know you're going to, you were talking about depreciating the building over 39 or 27 and a half. Would you rather wait 39 years for a deduction or would you rather take a deduction today? Most people are going to say, gosh, I'd rather grab it now versus waiting. I don't know if I'll be alive in 39 years or 27 and a half. Don't know if I'm on the building. Don't know what the tax code's going to be. If I can get some of it today, then I'll take it today.

[Brandon Brittingham]

Yeah.

[Jeff Hyatt]

And so that's what we help people do, is accelerate the depreciation deductions on their buildings. Because the IRS will also, if it's properly identified, allow you to take items over five or seven or 15 years versus 39 or 27 and a half.

[Brandon Brittingham]

Got it. So like, you know, you buy a building, so like, what the H Vac or like, how does that work? Whether you get some, some accelerated depreciation on some of the items.

[Jeff Hyatt]

Hey, let me tell you about my good friend Jeff Hyatt over at MSC Consultants, and check out his episode if you've missed it. With today's volatile interest rate environment, real estate investors are looking for every advantage legally available. More and more are realizing that accelerating depreciation allows them to free up cash flow, enabling them to acquire their next property sooner. MSC's approach to call SEGS is the answer. If you've got properties out there you haven't done, call SEGS on, you're paying too much in taxes. MSC's approach to call SEGS is the answer. Visit them at www.costsegs.com. that's www.call segs.com and ask for my good friend Jeff.

So the IRS says a building, to be a building has to have certain things, right? Okay. And so those things are the walls, the windows, the doors, the roof, the H Vac, plumbing for a bathroom, any electrical for lighting. Those are the structural components or the 39 or 27 and a half year items. The items that are not in that category are basically from when you drive onto the property. So you're coming off the public road and now you've entered your property just like coming here.

[Brandon Brittingham]

Yeah.

[Jeff Hyatt]

So there's parking lot, there's compacted gravel underneath the asphalt, there's striping on the parking lot, there's fences, there's walking grass, areas for dogs, there's fencing, there's ramps, there's all kind of stuff outside of the building to the property line. 15 year category, whether you're talking apartment or the other categories, 89 year. Then you get inside of the building and you've got things that are not, and this is a layman's term here, so it's not exactly correct, but anything that's facade gets to go into a faster life. So for instance, the trim on the, on the walls or the engineered flooring or the nice wood backdrops, anything that is not structural. Get for the most part gets to be in that faster life.

[Brandon Brittingham]

Understood.

[Jeff Hyatt]

Five years or seven years.

[Brandon Brittingham]

Okay. All right. So you gave a great example of the 800 and this is bubba math. We're not holding you to it because we're doing this on the fly. But take the same scenario of that million dollar building. What does that look like in a cost seg. And I know there's a thousand variables that go into this, but just for someone's listening so they understand. All right, so we got this eight, we've got this million dollar building, we got 800. We can depreciate, do a call, say what does that look like?

[Jeff Hyatt]

So that could, depending on, like you said, a number of variables. One of them being, well, it could be somewhere between 25%, 15 and 25% of that 800.

[Brandon Brittingham]

Of the 800. Got it.

[Jeff Hyatt]

Okay. Could go into a faster life.

[Brandon Brittingham]

Right.

[Jeff Hyatt]

And then you've got bonus depreciation in there too, which it helps turbocharge what we're talking about. But with that said, typically the difference between a 15 year reallocation and a 25 year allocation is going to be the difference between an urban setting versus a suburban setting. And that really comes down to then mean, what is the 15 year property going to be in a suburban setting? You've got more parking lot, walking trails, maybe in an apartment complex or maybe, you know, a home might like a residential rental home, might have a play play yard area, might have fences, driveways, all that. Whereas if you're looking at an a property in an urban setting where the building is kind of plopped down on the street with maybe a little sidewalk, they're not going to have an irrigation system, they're not going to have planting beds and shrubs and trees and mulch and things like that. So that's somewhat the differential.

[Brandon Brittingham]

Got it. So rough math and correct me if I'm wrong on this because I'm doing it on the fly, but let's just say we're using this for just an example. We get that million dollar building, 800,000 depreciation. Let's say we hit that 20% number. So that's 160,000 we can take in the year we buy it.

[Jeff Hyatt]

You can take in the year you bought it, depending on when you bought it, because you can go back retroactive.

[Brandon Brittingham]

I was going to ask you that next.

[Jeff Hyatt]

So do you want me to cover that right now?

[Brandon Brittingham]

Go ahead. Yeah.

[Jeff Hyatt]

Okay. So if you bought it, technically you can go back to 86.

[Brandon Brittingham]

So as a no shit at this.

[Jeff Hyatt]

Point, you could go back to when the tax law changed, which was the tax reform act of 80 fixed, took away investment tax credits, and at that point, everything became straight line. So you can go back to then and fix it without amending your tax return.

[Brandon Brittingham]

Wow. The reality is, I did not know that.

[Jeff Hyatt]

Yes. Seats, Thorpe. Sorry.

[Brandon Brittingham]

We got Thor's in the studio with us, and he just walked off camera.

[Jeff Hyatt]

Sorry about that.

[Brandon Brittingham]

That's all good.

[Jeff Hyatt]

Anyway, so you can go back.

[Brandon Brittingham]

He's like, he likes my cameraman.

[Jeff Hyatt]

He does.

[Brandon Brittingham]

He does.

[Jeff Hyatt]

Hey, buddy, how you doing? So every Thursday is Thursday.

[Brandon Brittingham]

That's right.

[Jeff Hyatt]

And today is Thursday or Thursday. So. So you can go back without amending and fix the depreciation you could have taken but haven't yet taken. Seats. Seats.

[Brandon Brittingham]

So you know that. I didn't know that. Yeah, that's the first for me because I actually had. We had somebody in here yesterday who I was telling you about, this gentleman off camera, and he's got nine property this that he's owned for a while. And I said, what do think they're worth? He said, a million bucks. And I just. I said, well, that's probably about 200K was, you know, bubble math. Right. And so let's take this one step further. And again, correct me if I'm wrong, because I have a cfo. I don't do taxes. I don't do any of this. That's why I have people like you that are way smarter than me. So someone who the irs. And if I butcher this, correct me in real estate, from the way my CFO explains it to me, because I'm a real estate professional, I can take those losses against my active income.

[Jeff Hyatt]

You can? Yes.

[Brandon Brittingham]

Okay. I got it. Right? Yeah, you're right. Okay, good. Okay. So for those of you who are out there listening to this, think about it. The example he just gave, we take that $160,000, I can then use that loss against my active income that year. Am I saying that right?

[Jeff Hyatt]

You're right. As long as you're real estate professional.

[Brandon Brittingham]

As long as you're real estate professional.

[Jeff Hyatt]

Right.

[Brandon Brittingham]

And that is something that you got to figure out with somebody that's smarter than me, because we are not CPAs. But most of the. A lot of people that listen to the show are probably real estate professionals, your investors. You're on the agent side, whatever the case is. But this is why wealthy people do this. Yes.

[Jeff Hyatt]

Oh, yes. I mean, it is a great way to accelerate your wealth accumulation, too, because what it allows you to do is Grab that money that would have been sent to Washington D.C. and most people say they would rather control the dough.

[Brandon Brittingham]

And they're going to blow it, by the way.

[Jeff Hyatt]

Yes, you're right. So as opposed to sending it there. Yeah, they get to retain it and that's what they get to do. Then they can take that deduction of 160k and go and use that tax benefit, that tax savings to go buy another property more quickly or improve their current properties without having to borrow money.

[Brandon Brittingham]

Right.

[Jeff Hyatt]

So now they can fix up their properties. Guess what they can do then? Increase the rent, because now it's a better value property. They can probably, as part of the brrrr conversation, refinance it now with a higher value and then they get to redo the whole thing again. So that allows them again to just go ahead and accelerate their wealth accumulation and retention.

[Brandon Brittingham]

So why do you think there is so I run into this all the time and you and I sat in a room with a bunch of really smart real estate and I would, if we pulled that room when you got done talking, I would bet 60% of the people in the room had no idea about this. Right. You're right. Why do you think there's so much misinformation or misunderstanding? I mean, I know taxes are complicated, but like, this is a big deal and people don't under. They don't know this or they don't understand it. And then a lot of times you guys that follow me know I coach a lot of people and teach them how to run a real estate investment business like we do. And we're in a. Jeff and I are in a mastermind that's for real estate investors. And a lot of times what I hear is they're like, well, I talk to a professional accountant or whoever. Not all accountants are bad. That's not what I'm saying. But they tell them not to do it or they tell them a price that's outrageous, that it doesn't make sense to do it. It's like there's no across the board. Like, it's just so misunderstood and so many misconceptions.

[Jeff Hyatt]

Hey, let me tell you about my good friend Jeff Hyatt over at MSC Consultants, and check out his episode if you've missed it. With today's volatile interest rate environment, real estate investors are looking for every advantage legally available. More and more are realizing that accelerating depreciation allows them to free up cash flow, enabling them to acquire their next property sooner. MSC's approach to call SEGS is the answer. If You've got properties out there you haven't done. Call SEGS on you're paying too much in taxes. MSC's approach to cost SEGS is the answer. Visit them at www.costseggs.com. that's WW costsegs.com and ask for my good friend Jeff.

You're absolutely right on all of that. So we're. Our firm is part of, and some of our tax professionals are part of a group called the ascsp, which is the American Society of Cost Segregation Professionals. So within that group, there's a lot of research that is done. It's the overarching authority within the cost seg space. And it's estimated that about 30% of the people that could have taken advantage of cost seg have done it. In other words, 70% have not.

[Brandon Brittingham]

And the IRS isn't showing up saying.

[Jeff Hyatt]

Hey, typically, no, they don't go, hey, you should be doing a cost.

[Brandon Brittingham]

Yeah, you got a bunch of money sitting in your properties that you don't have to pay us.

[Jeff Hyatt]

That's correct. That's not the typical conversation with the irs. So with that said, what ends up happening is they talk. Maybe they talk to an accountant, and the accountant goes, well, you're going to get the depreciation anyway. Why bother hiring a Cost SEG company? Yeah, because it's the same amount. We're not giving more depreciation. But to my earlier comment, if you'd rather have the deduction today than 39 years from now, why not grab it now? 100%, same amount. Let's just take some of it now.

[Brandon Brittingham]

And to your point, the things you mentioned earlier, the tax code could change. I mean, we don't know. You don't know. Know what tomorrow's going to bring you. So I'd rather put the money in my pocket today.

[Jeff Hyatt]

Correct. And redeploy it.

[Brandon Brittingham]

Correct.

[Jeff Hyatt]

So what ends up happening is sometimes the accountants don't quite understand it themselves. Yeah. We have many of our referrals come in from accounting firms that specialize in real estate. Focused clients. There are those who are not focused on real estate. And sometimes it's been that that client has grown and become more into the real estate than that incumbent accounting firm can deal with.

[Brandon Brittingham]

That's a good point. Yeah.

[Jeff Hyatt]

And so now they've got 10 buildings, and they're no longer just the attorney or no longer just the contractor guy. They've got 10 properties. They should be talking probably to somebody that knows more about real estate who would then steer them on the right path. But with that said, all is not lost because you can step back, grab the depreciation, no amended return. There's a form called A3115, which is a complicated form. And another reason many accounting firms that are not familiar with it kind of steer away from it. There's a lot of data points on that form, and if they're filled out incorrectly, it can trigger an audit. So we always complete the 3115 for the client, for their accounting firm, so that it's done correctly. And of our 24,000 studies, we've probably done about 8,000 3115s through the years. So we have the ability to help the client stay on the right path there. On that note, one of the things like you brought up earlier was that, you know, on H Vac, for instance, people think, oh, that is not going to last 27 and a half or 39 years. And it won't. But the beauty of our reports when they're, when the client has them, is that it isolates that value. And what that value is, is, let's say on your $800,000 building, let's say we said there was 50 grand we attributed to H Vac. And you say, okay, so what, it's in 27 and a half or 39 year life. It is what it is. But the deal is we identify that many of our competitors don't do that. They don't put in that value, and they just say, well, it's your 27 and a half year is, you know, 640,000. Well, the beauty of our report is that you can step back when you replace the H Vac because in fact, it doesn't last 39 years. You have a big chunk of that still on the depreciation schedule, even though that H Vac went in a dumpster. Yeah, well, you get to take that deduction now because we've got that information for you. So you can reuse our report multiple times to the point where we also have a thing we call the iron silo of depreciation for our clients. And what that does is hold all of your depreciation information at hand so that you or your accountant can get to it anytime you want in the future as you do those renovations. So you don't have to necessarily call me, although feel free to. But bottom line is you've got that access to get in and you can see, oh, what was the value of that roof? We just replaced the roof or all the windows. We got rid of the single pane put in double pane or the siding. So when you do an upgrade on a building, you're able to take those abandonment losses in the future as you do renovations.

[Brandon Brittingham]

Yeah, you said something you. I'd never heard that either. You had mentioned that at Boardroom, so I'm glad you brought that because I'd never heard that either. That was, that was news to me.

[Jeff Hyatt]

Well, and again, all of these little points along the way make cost seg even more valuable for your clients or your friends and your colleagues out there and the listeners is that as time progresses, they are going to be doing renovations.

[Brandon Brittingham]

Right.

[Jeff Hyatt]

And the key is, you know, to make sure you're, you're staying within the tax code. But within that tax code, there's plenty of bandwidth and width for you to take advantage of the way the laws are written now. And so that's what we help people do. And we've been doing it for years and years.

[Brandon Brittingham]

So if anybody, if you're listening to this, hopefully you have the intelligence on this next question to put this together. But what I've also heard or I had a client recently, we've managed 30 properties for them. And he said, I'm going to go on the Internet and download the form and do it myself. Or there's a DIY program that cost me 400 bucks. Why should someone not do that?

[Jeff Hyatt]

So the IRS, interestingly enough, has to communicate to their auditor folks in the field. And so they have this document called an audit techniques Guide. It's how they, the irs, you know, big irs, communicates to the folks in the field. And this is what they say to do. And within that Audit Techniques Guide, there are things that the IRS says must be present to be considered a viable cost segregation study. And those are an actual site visit. You can't just wing it. You can't do DIY. You can't have some photographer guy that you're paying 25 bucks come in and take photos of the place because they're not considered authoritative within the tax code. So with that said, you need to have an actual site visit. You need to have it done by qualified professionals. And the way to fix things in the future is with that 3115 not amending. But the reason you shouldn't do that is because what will happen is the an audit wouldn't happen the minute you file that particular return. It's probably going to be possibly two or three years later. Well, two or three years later, guess what's happened. If they disallow that deduction for you, you're going to have penalties, penalty, interest. Interest have been compounded two or three years for two or three years plus the tax and the interest rate the IRS charges is not a friendly interest rate punitive.

[Brandon Brittingham]

Yeah.

[Jeff Hyatt]

And you don't want that. So most people find when they look at cost seg and when they, especially with our work, if they spend a dollar to have the study done and they save themselves four or five dollars in taxes, they'll say, hey, that's a good deal, let's do it. We hit that threshold at about 350 to 400,000. So if the client has spent 350 or 400,000 to buy a building, to build a building or to renovate a.

[Brandon Brittingham]

Building, that's their basis total.

[Jeff Hyatt]

That's their basis total. Potentially then. And we're going to be over that hurdle and they're going to get four or five to one return investment.

[Brandon Brittingham]

Got it. I was going to ask you Costs, that kind of explained it. Yeah.

[Jeff Hyatt]

And so what we, because we've, when we first started doing this, and keep in mind I just said it was 350 to 400 now, but back in the day when we started, we would have said, hey, Brandon, you need to be at a million dollars basis.

[Brandon Brittingham]

Right.

[Jeff Hyatt]

Otherwise it's not going to make sense. Well, that was a long time ago. We've got more team now. We've got a database and we can pull that information in so we can give you an estimate, estimate of tax benefit before you spend a nickel. So you'll know roughly what you're going to save in taxes and what our fixed fee is going to be.

[Brandon Brittingham]

Right.

[Jeff Hyatt]

So you don't have to go into it blind.

[Brandon Brittingham]

Right. You don't have to guess, make a decision. Yeah.

[Jeff Hyatt]

We always estimate conservatively because again, we don't want to have you adjust your estimated payments down and then have penalties and interest if they were wrong.

[Brandon Brittingham]

Yeah.

[Jeff Hyatt]

So we'd rather come back and say, Brandon, hey, we said we were going to save you 100 grand of income tax. Hey, we saved you 150 or 200 or we said a million. Now it's a million and a half. Okay, great. So that's our typical approach.

[Brandon Brittingham]

Yeah. So I mean, in your opinion, I mean, you kind of just answered it on the basis. But I mean, don't you think your average real estate investor, even if you're brand new, your asset value is going to be higher than that? Like, you know what I mean? You're not, you're going to have more than one property in most cases. You know, if you're an active investor, you're going to have several. Right. And you're going to get into the millions of inequity or you know, value of the property. I mean, and correct me if I'm wrong, once you meet that threshold of asset value, does it, doesn't it make sense to always do it?

[Jeff Hyatt]

Pretty much. Okay, that's a great question in point. And on the east coast, the west coast, for the most part, I somewhat jokingly say you can't dig a hole for a building. Right. For three or four hundred grand.

[Brandon Brittingham]

Right.

[Jeff Hyatt]

You know, you're going to be just by the time you get to that point, you're there. Yep. So like you said, almost everything will make sense. There are some times it doesn't make sense. So since we're talking about it, let's I'll go into that. If you're not, if your client or friend or a listener is not paying income tax now, cost doesn't make sense.

[Brandon Brittingham]

Right.

[Jeff Hyatt]

Because we only help you offset taxes. And if you're, if you've got no.

[Brandon Brittingham]

LS or something that's going to offset it. Yeah.

[Jeff Hyatt]

Then you don't need us. If you're going to buy and flip, which some of your listeners for sure are, they're your, your audience. This won't work for buy and flips. But if you're going to buy the property and hold it for at least probably three years to five years, you're going to get over that hurdle. Because either way you go with either not cost seg or cost seg, you're going to have recapture.

[Brandon Brittingham]

Right.

[Jeff Hyatt]

So you have to give back so much more in the short term on a two or three year hold, that cost seg probably won't make sense. If you're only going to hold it that long and in capital letters there and you're not going to do a 1031, if you said, hey, I am going to buy it, I am going to hold it for three years and I'm going to then 1031 it, which many of your listeners as well will be doing. So now 1031 is in play and you're going to buy the next property and it will make sense to do then. Typically if you're over that first threshold and then you go to the 1031 acquired property and you can grab the deductions out of that to the extent there's new basis there.

[Brandon Brittingham]

Yeah, no, it makes a ton of sense. You know, it's funny, I had this conversation with somebody the other day and we were talking about the end of last year. We bought a portfolio of properties. Cash flow was decent, not anything crazy. And they said, you know, hey, why did you buy that property? You know, the cash flow was okay, it penciled right, but it wasn't great. And I said, the tax savings alone, my cash flow will never reach it. Right. So the tax savings that I got last year on buying that portfolio, in my life of owning that prop, that portfolio until it's paid off, I probably will never get what I got back in the tax savings. That's the shit that people don't understand.

[Jeff Hyatt]

Yeah.

[Brandon Brittingham]

It's what you keep.

[Jeff Hyatt]

It is, it's the whole game. It's not what, what do you show. It's what do you get to keep at the end of the day. And with that said, you can grab that deduction now and then. It'll, it'll play for you along the way. Plus, as you do renovations in the future using the iron silo, you get back to that depreciation information for future abandonment losses. Life is good.

[Brandon Brittingham]

Yeah. I mean, so just to give rough math, because I love to give people examples, we bought it was about a 4 million in some change and I think we hit about 25% on the cost seg. So you can do the math on that. Right. It was, it was, it was a seven figure write off on our taxes.

[Jeff Hyatt]

That's.

[Brandon Brittingham]

You know what I mean? It'll take that portfolio a long time to net me seven figures.

[Jeff Hyatt]

That's exactly it. But if it saves you in other buckets that you would have been paying.

[Brandon Brittingham]

Out of, and I can now take that money that we would have been able, you know, we would, we would have been on the hook for. Because we, we made money last year and I can take and redeploy it into other assets. Do you know what I mean? Get a return on that money.

[Jeff Hyatt]

Absolutely.

[Brandon Brittingham]

Is there anything else that you think people need to know or understand about the subject? We haven't talked about?

[Jeff Hyatt]

You know, it, it's one of those scenarios. We've done so many. We've. We, I think last year did projects in 43 or 44 states. Yeah, I don't remember the exact number, but we go all over the country. So if they were interested, they could, you know, just give a simple. Basically it's a seven or eight question response to, you know, what's the street address? So we can initially take the initial glance at it without having to go there right off the bat.

[Brandon Brittingham]

Right.

[Jeff Hyatt]

But you know, square footage, what kind of building Is it who you know, is it 10, is it a 10 tenant retail plaza or is it a 10 unit part apartment building?

[Brandon Brittingham]

Right.

[Jeff Hyatt]

And so we give basic questions. They'll typically know them right off the top of their head. We can give that estimate and then they can make a decision as to whether to proceed or no.

[Brandon Brittingham]

Yeah. And just so you guys know, I mean, you guys know how I feel about you guys as listeners and who I allow on the show and who I allow sponsor the show. So Jeff and his company actually have recently become a sponsor. So these are, these are people that we trust that if you guys need help in this arena, that we feel confident that you can go to use them. So you'll hear them on the show in commercials, you'll hear them and hear us talking about them. So you guys will get access to all their information, all their contact information. I highly suggest you guys use them. I highly suggest you use this and leverage this as a tool. It is so surprising to me how many people still don't use this and don't know about and don't understand it. Well, we've talked about a lot of the reasons why, but now you guys, you have a resource. You have a resource here, and it's somebody that we trust. I want to switch gears for a minute before we wrap up just because I think it's important, if you wouldn't mind, would you talk a little bit about what you guys shared at Boardroom, the organization that you're involved in? Because I think that's really, really cool and I'd love for you to touch on that a little bit.

[Jeff Hyatt]

Absolutely, I'd be happy to. So I never served in the military myself. And right after 9, 11 happened, I realized, oh my gosh, I should do something. But I had two little girls at the time. My business was just launching. I really couldn't pull away. And I was just beyond the age to be able to enlist anyway, so I had some headwinds there. So about 2010, I got involved with a military group to help support veterans and their families and started with that one group, did another group, and now I'm with Swim With a Mission. And I've been on that board for now since 2017. So I guess in the math, that's about seven years. And so we've raised about $13 million for veterans and their families, providing support, helping them through tough times. There's 22 suicides a day from folks that have been overseas and downrange and providing, providing protection for our way of doing business here. In the US and there's a lot of folks that could use help and service, and that's what we do with Swim with a Mission. So what we do is support veterans and their families with service dogs. Equine immersion, which is a horse therapy program, art therapy, substance abuse. So we try to raise money for these veterans when the government agencies have typically not been able to do that. And we provide support and help them. And it's been a great group. We do a lot of work with the Navy seals. So we've support the Navy SEAL Museum, which is in Fort Pierce, Florida, where the Navy SEALs started back in 1941, and provide them a lot of support in their charities. Trident House and a few other. Their college support for veterans, kids that are lost. And it's been a great group. We do a lot of work throughout the Northeast and have really had a lot of fun doing it. And you got to meet a few of the seats.

[Brandon Brittingham]

Yeah, that was really cool event. Yeah. Yeah. And is. Is that how you got Thor?

[Jeff Hyatt]

Well, Thor is. Is my own dog.

[Brandon Brittingham]

Yeah.

[Jeff Hyatt]

And every Thursday is Thursday.

[Brandon Brittingham]

Yeah.

[Jeff Hyatt]

But he. He is like one of the service dogs we would provide. So we provide the vets that are used to using and working with big dogs. We provide them service dogs like they would have had in combat.

[Brandon Brittingham]

Got it.

[Jeff Hyatt]

They used to over.

[Brandon Brittingham]

That's really cool.

[Jeff Hyatt]

And it's been a lot of fun. We've given away a lot of dogs through the years with all that money.

[Brandon Brittingham]

Yeah. That's awesome. I end the show every time the same way. Number one, wealth of knowledge. Thank you. Because if there's a bunch of people that just listen to this, that you've just saved them a ton of money for sure. Right. And again, use them and their company because there's bad information, bad actors, bad players out there, and you can be taken advantage of when it comes to this because people don't understand it. So that's one of the reasons I really wanted to have him on here today, because it's rare that we get somebody in your field that, number one, wants to get on camera or get on a show, and then two actually knows what the hell they're talking about and is not going to take advantage of people. So I appreciate you for coming on here and doing that and being a sponsor of our show, that many listeners can now reach out to you guys and use you. But I always end the same way. We call this show Waking up to wealth because I grew up very poor, and from an education standpoint, I felt like I was Never taught about money the right way. So we here believe in teaching people the actual keys to unlocking wealth. And I ask everybody the same question. What does waking up to wealth mean to you? Doesn't have to be money. Doesn't have to mean anything. It's just what your version of it is.

[Jeff Hyatt]

So it's a great question. And I love the title of your. Your podcast. And it's. It's. The podcast is not named Waking Up Wealthy. Yeah, it's Waking up to wealth and how do you become wealthy?

[Brandon Brittingham]

Right.

[Jeff Hyatt]

And like you said, that can be a number of different things to different people. In my view, how you end up getting down that path of waking up to wealth is to take ownership. Don't be a victim. Don't allow where you were in the past to be where you are in the future. Take ownership of it and run with it. And whatever the challenges you have are, you know, get over them and move on and figure out a way around it. So that's one thing. And then come at your interactions in the world from abundance. And if you can help somebody else get to their next level, then do that. I had that situation for me with some CPAs initially who connected me into their clients, and they helped me get to the next level. It didn't do anything for them per se.

[Brandon Brittingham]

Right.

[Jeff Hyatt]

But it helped me. And so I try to pay that forward to folks that I'm interacting with that could use, you know, getting to their next level, whatever that is. If I can make a connection, I make a connection. So that's what I would say. Waking up to wealth is in my world.

[Brandon Brittingham]

Awesome, man. Listen, dude, I truly appreciate you coming into the studio. Everybody that knows me, I got 10 dogs. I'm a dog lover. So I appreciate the fact that you brought your dog today. I thank you so much for being a guest of the show and giving the audience great information and pouring into us today.

[Jeff Hyatt]

Hey, thank you very much for having me, Brandon. I'm thrilled to be here and appreciate everything you're doing and look forward to seeing you at the boardroom. Mastermind.

[Brandon Brittingham]

Thanks so much for tuning into this episode of Wake up to Wealth. We sure do appreciate it. If you haven't done so already, make sure you're subscribed to the show wherever you consume podcasts. This way, we'll get updates as new episodes become available. And if you feel so inclined, please leave us a review on Apple Podcast and tell your friends about about the show. It is how new people find us. Until next time.

[Jeff Hyatt]

Hey, let me tell you what my good friend Jeff Hyatt over at MSC Consultants and check out his episode if you've missed it. With today's volatile interest rate environment, real estate investors are looking for every advantage legally available. More and more are realizing that accelerating depreciation allows them to free up cash flow, enabling them to acquire their next property sooner. MSC's approach to call SEGS is the answer. If you've got properties out there you haven't done, call SEGS on you're paying too much in taxes. MSC's approach to cost SEGS is the answer. Visit them at www.costsegs.com that's www.costsegs.com and ask for my good friend Jeff.