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One of the major upsides of investing in real estate is the tax benefits you can take advantage of as an owner. This episode covers a powerful tax strategy, the cost segregation study. Scott Roelofs from RCG Valuations, explains how they work, who they are good for and why you might want to start employing this strategy now to save big on taxes.  Visit RCG at https://rcgvaluation.com/ --- Transcript Michael: Hey everybody, welcome to another episode of the real estate investor. I'm Michael album, and today I'm joined by a very special guest, Scott Roelofs. With RCG valuations, and Scott's gonna be talking to us today about all things cost segregation study. Some of you may or may not have heard about, but let's jump into it. Well, Scott, thanks so much for joining me today. Really appreciate you taking the time, man.   Scott: Yeah, man. It's exciting.   Michael:              So I just have to ask, I mean, you've got a ton of letters after your last name. I'm just curious. What do they all mean? What do they represent? Let us know give us some insight.   Scott: The big ones, CFA, Chartered Financial Analysts, you know, three years of study, average pass rate is 45%. So basically 8% of the people who try to get it actually do get those three letters. So that's kind of the big one ABV, that's   Michael: Your alcohol by volume.   Scott: Yeah, alcohol by volume. Yeah. It's an auditing. It's a construction, auditing. accreditation, then you have a IMS, which is asset management, AWS, which is a wealth management. I also have 679 1063 life health. It's actually funny, my cousin who is smart as I am, she comes up to me, and she's like, so are you done educating yourself? And I'm like, Yeah, I guess so. I guess,   Michael: I guess I shouldn't be.   Scott: So yeah, so I guess I'm, that's an…   Michael: Awesome,   Scott: You know, you may not know what they all look like, but you're like, there's a lot of them. So, yeah,   Michael: Totally. So there's not a whole lot that you don't do in the financial world. That sounds like?   Scott: I feel like I can walk into any room and hold down in any kind of conversation, whether it's, you know, in business or, you know, venture capital or anything like that.   Michael: Awesome. And so did you are you the founder of our CG Valuation a Monetization?   Scott: I am, yeah, I started doing cost segregation, kind of like in a selfish ways I had owned my own office and didn't want to pay as much taxes. So I started looking around and got introduced to it. And then I found a company that actually allowed me to do them, and like, actually kind of do the work. And they would help with some of the engineering and that worked out great for a while, but what happened is, is I started to look at things and go, okay, you know, you send me out with a measuring wheel and a measuring tape. And some of these places are huge. I mean, just my first one, which was our office, I own a portion of, like, the land of a whole bunch of offices, it was eight acres. And we had to, you know, count and measure, you know, is something like 2500 shrubs, you know, it was bananas.   And I'm like, this is an awful way of doing this. And so I started searching around, I first found, I got into, like, the drones, which is kind of a hallmark of what we do. And then we added the interior, I saw commercial for matterport cameras. Yeah, that's kind of like used for real estate. And I saw that commercial, I don't, man, if that can measure, like, I really got something and turns out again, so well, voila. So now we have the, you know, interior exterior, you know, kind of all this stuff. So but what happened, and I think this is, you know, just an a general business since this is interesting. But I started to try to implement the technology with the other company. And we kept running into roadblock after roadblock after roadblock. And finally, like, had a conversation with the founder of the company. And he's like, Listen, we just don't do it that way. You know, like, we've made exceptions, but you know, it's just, it's just not gonna work. And I go, all right,   Michael: Well, neither am I.   Scott: Then neither am I right. And so I'm like, well, then I'm going to start my own company. And that's kind of how RCG valuation came to be.   Michael: Awesome. Yeah. And so we're going to be diving deep into cost segregation studies, all things cost segues. So yeah, I would love if you could give us just a high level overview for those who are not familiar. What is a cost segregation study?   Scott: Yeah. So the government allows people who buy investment property to depreciate that property. depreciation is really just an understanding that stuff, there's wear and tear. And because real estate is, you know, heterogeneous, or, you know, in other words is every house is different, or every building is different. They don't have a good way to understand how you depreciate it. So they set a general rule 39 years for commercial 27 and a half for residential and multifamily. And that's really just kind of like an admission that they're just going to listen, we don't know how this is.   Michael: So you figure it out.   Scott: Yeah, yeah. So you figure it out? Well, that is, you know, what they would call the composite method, but they did through different case laws and everything. They decided that you could break up a piece of real estate into its individual components because they do run out at different times. However, you have to have a professional who knows what they're doing right. So as a property owner, you don't have an inherent skill to you know, Identify, quantify and cost every piece of like commercial construction that's in your building.   Michael: Right. Right.   Scott: What we do is we come in and we scan the property, we identify all the different components from carpet to plumbing to electrical roof, you know, site and permit. And then we use the different case law that allows us to break those out into different depreciation schedules. So five 715, and then the remaining like structure remains at 27, half or 39, that allows the, you know, kind of push that forward. So if you would understand it this way is in year one, you would have all of the 27, all of this 15, all of the seven and all the five, in year two, you have the same, but in year six, you've used all the five, so you have only 715 27. And then in year 16, you only have 27 left, so that pushes it accelerates the depreciation towards the front end. And then with the new tax laws, anything under 20 years, you can bonus depreciate, so you can take all in one year. So anything that is 15, seven, five and below, you know, can be depreciated all in the first year, and then you just appreciate the remaining 27 years for the rest.   Michael: Got it. So just in full disclosure and transparency, Scott, you've done several cost segregation studies for me. And that explains why that number was so big on the front end of your one depreciation was because this bonus depreciation you're just mentioned, right?   Scott: Yeah, that's right. It depends on what your goals are. We've always said Our goal is never to give you the largest depreciation, our goal takes a step back. And we want to give you the largest tax deduction for the longest number of years, right. And that's important because sometimes bonus is good for you. And sometimes it's not, if you had $180,000, you want to write off, but you have a bonus of 1.2 million, you don't lose that bonus, but you have to carry it forward. And the problem with having to carry it forward is if your next year of income happens to be 20,000, you use that 20,000, you'll carry forward your deduction, but you're not writing off, those are low tax dollars, I would much rather see you instead of having 1.2 million go so your incomes 180. We want to write off 170, but then have that 170 every year for a number of years. So the number of years you have you're all knocking off that top and 40% tax rate. And then instead of using it on the 10%.   Michael: Got it. Got it. And so if I heard you, right, there's the year breakdown is five 715 and 27 and a half. But did you say that there's something that are depreciable for a shorter lifespan did I miss here?   Scott: There are there's an IRS documents, that's how to depreciate property. And there are some individual items that they put out there that are different. We actually just did one on on Native American land, which was interesting. All of the fives go to three, the fifth teams go to nine and and then the 39 goes to 22. It's strange. But yeah, so there's just different ways to depreciate different property. A lot of that doesn't apply to actual real estate.   Michael: Got it? Okay, so the big categories we need to be aware of are five 715 and 27 and a half.   Scott: Yeah, that's pretty much where it falls.   Michael: Okay. And so how does it work? Like, if I've got this house, right, let's say I bought it for 200,000? Is the cost segregation based on the purchase price is based on the taxable value? And then how do you know how much electrical is in that house? versus how much plumbing versus how much drywall?   Scott: Sure, the nice thing with us is that we actually don't go off of valuation, we go off of cost basis, so we go off of what you actually paid, or what you actually put in the property.   Michael: Okay.   Scott: So for us, that's maybe not be a benefit for some people, because like, they go, Hey, my values way up. But for us, it makes it a lot easier, because then we're not making having to make a judgment or, you know, say, Hey, you know, I think my property's worth a million bucks. Here we go, Well, that doesn't really have anything to do with it, you bought it for a half a million, right? So that's what we're working with. So it's very simple in that way is that, you know, I bought it for half a million I put 100,000 in, and those are the numbers that we work with.   Michael: Okay.   Scott: And then how we do it is, you know, this kind of gets into why, you know, some of the people never heard of it, because there are why they're CBA never brought it up, is because we work with construction, right? We work in construction engineers. And so part of our process is, you know, scanning, identifying and measuring, you know, all the different components. So start with the easy stuff, right? The stuff that you can physically see, right, so we actually create a floor plans and we have something that's really cool and very helpful called a ceiling plan. So imagine you have an office that is 20,000 square feet with 200 offices, right? Okay, try counting the fluorescent lights in that.   Michael: I'd rather not   Scott: And here's where the trouble kind of comes in is you go Okay, so I'm standing in this office now trying to picture I'm standing on an office with 200 rooms and 40,000 square feet amount that's accurate. But whatever, yeah, and you have to count anywhere between 120 and 130 different items. So do you count, just like the fluorescent lights and circle the entire building once? Or do you count all of those items that's in the room, and then go room by room counting, you know, 50, to 100, items, all those things, so becomes very, very difficult. And so that's where our scanning comes in, it actually looks upwards at the ceiling, because we scan the whole thing. And so on one sheet of paper, I can actually just see every single light in the entire thing, it also helps us see, one of the kind of one of the tricks that we have is if you can see like a floor plan, but that looks at the ceiling, you can see where all the vents are. And HVC will run the length of the building, and will branch off of a main pipe.   And so we can actually draw the hvac from that plan. So that's, you know, kind of one of the ways that, you know, we were able to kind of fix things and identify them, there's other little tricks of the trade that we don't want to give everything away. But for the most part, we can see everything, you know, I know you do multifamily, there are large multi families here in you know, in Arizona, that you know, there, but 200 doors or something like that, one of the difficult things is there's usually about 5200 square foot squares of gravel that are throughout the entire property. And when you're not looking down like a satellite, that's almost impossible to count, I think about this all the time, and how we can, you know, work with other competitors, I'm going there's no way. Standing on the ground and actually counting and measuring because, you know, frankly, a lot of these shapes are not squares, you know, they're, you know, different shapes. So, you know, without a computer, how would you get the square footage of these little tiny bits of gravel all over a place?   And I think the answer is I don't, right. So what happens is that with a lot of cost segregation companies, you'll get a cost allocation. So they'll say there's, you know, $100,000 of gravel on this whole big lot. But there won't be a quantity allocation, you know, they're not actually measuring it and then multiplying it by four footage, they're just going to the end and getting an estimate,   Michael: Why is that a bad thing, if they just give the number of seemingly that's what's the important thing anyhow, at the end of the day?   Scott: Everything has to do with accuracy. And so the IRS puts out guidance, and they actually named several levels of cost segregation, the highest level being actual cost and engineer base. So you go out and measure everything you measure, count everything with the actual costs. And then the next best is, you know, engineer base with estimated cost, which is we do a combination of those two items, mostly. So a lot of times, you know, if you just build or you've remodeled, you actually have the actual cost, right. But if you bought a property, you know, you paid a price, you know, many times you don't have any idea what your actual costs are going to be. And so estimate is the net, but then, and then it kind of goes down from there. And so then, you know, you kind of fall into rule of thumb, which is essentially what that is, is, you know, based on a property that's this expensive, a rule of thumb would be, you know, 30%.   I'll explain it this way. This is kind of like a, you know, a financial evaluation. But there's a rule of thumb in like companies that if you ran a company, you would pay two to three times revenue, right?   Michael: to purchase that company.   Scott: Yeah, to purchase that company is, you know, if they made a million dollars in revenue, you would buy for about 3 million to these companies that each do three, you know, do a million dollars in revenue, but one has 85% profit margin, the other one has a 15% profit margin, right? Are those two companies valued at the same?   Michael: No they shouldn't be?   Scott: They should not be? Right. So your rule of thumb is helpful, right? It is a good starting point, you know that you would pay 3 million, but if you paid $3 million, and your profit margin was 15, versus paying 3 million for a profit margin of 85. You one person got ripped off?   Michael: Yeah!   Scott: You're getting what you're paying for. I think the issue would be as if you're paying for an engineer based study that's at the highest level, because you would like to have some level of audit protection. You're paying for that, but you're not getting it, then you're getting ripped off. I'm not trying to accuse anybody of you know, ripping people off, but you have to deliver what you say you're giving and that's where we shine, we're very clearly able to deliver it and only that we can deliver your property to the IRS if need be. We can just send them the the walkthroughs and the 3d models that we have. And if they want to count the trees, they can count the trees they want to measure the drywall measure the drywall, they could actually do that. And that's you know, I think the difference that would that we bring versus other people.   Michael: So if somebody was going to go get a cost segregation study done, and they were into being by different companies, much like I did, How would somebody ensure that they're getting the most, you know, bulletproof study results that they could? What questions should they be asking?   Scott: The first question is an engineer base? That is what the IRS is mostly looking for. Okay. And this is this question would bound to come up to most people is when you're searching, you will find the DIY. And I mean that in a general sense, right? Like do it yourself kind of thing. So what you would do with those is you send in where your your addresses, maybe a few items, like roof type, and you know, things like that. And then they send you back within a few minutes, your allocation,   Michael: The breakdown of your 5 -7 -15-27.   Scott: Yeah, breakdown, five 715. So that would be really a rule of thumb or an estimate. And so and then what they add is, you know, kind of an audit insurance. And that is an interesting to cover, because when you read the fine print on that, what that means is, is that if you were ever audited, then they would actually come out and do an actual cost segue for you.   Michael: Try and catch up.   Scott: Yeah, but I go, that's not how that works. Let's think about our tax system. Right? our tax system is an honor system. So they're expecting you to do your taxes correctly. Right? Right. That's the expectation of the honor system, once you've been audited, you don't get to go to them and be like, Oh, whoops, I meant to not take that deduction that I didn't. It's too late at that time, you don't get to change the numbers. The numbers are what they are. You submitted them, and you signed off for them as they are true. Okay.   So even if they did come out and do a cost segue, what are they going to do perfectly match them to the estimate that they gave you, that's the thing that I just don't really understand is, you know, it's kind of like back and you probably remember back in the mortgage days, you know, it's like, guy selling a house. He's like, dude, I need this appraisal to be 300,000.   Michael: Right, make it so.   Scott: And then the appraiser comes in, like, hey, it hit 300,000. What do you know, you know, what do you know? Yeah, you know, not trying to degrade anybody who might have been in that industry. I mean, that, you know, as a whole system, starting from the financial side down, that, you know, that messed everything up, the whole thing was so messed up. So don't want to attack any one person or industry in that time. But facts are facts, you know,   Michael: It happened, right? Yeah, that's how it went down. Okay,   Scott: You know, we kind of make a joke about it, you're like, Listen, if you want to, you know, take your $500 and say, I took a couple bags down to Goodwill. And, you know, that's my charitable donation, I get 500 bucks. You know, a lot of times, you're not going to need a receipt for that. But the area that we'll deal in, is we're going to give you a $1.5 million tax deduction. So hold on to that receipt, you know, it's like it's Dumb and Dumber, right? This 250,000 IOU you might want to hold on to that one.   Michael: Such a good reference.   Scott: Yeah, I know, right. So we're gonna document document document, you know, we're gonna give you everything, you know, that any other company gives you from the exact numbers, you know, you have access to 600, 4k photos, 3d models, and a 3d walkthrough of the property. And I don't know if you want it to go to a different topic. But one of the interesting things about the doing a walkthrough, versus a photo is very, you know, I think it's actually really interesting. And how that is, is, if I were to say that I had 40, fluorescent lights, and my proof that I had fluorescent lights was a picture of a fluorescent light, right? There's no context there, right? I could take a look up, take a picture of my fluorescent light right here and say, Hey, you know, there's a fluorescent light, and there's 60 of them.   Michael: There's 40, right?   Scott: When you can physically walk from room to room in a virtual walkthrough, you know, hey, I'm in this room, there's four lights, and then I walked out of this room and walked into the next one, there's four there, so you can actually count them and know that he didn't miss anything.   Michael: Yeah, that makes so much sense. And I love the 3d model, too, because I took this statistics course in college. And the first day, the professor handed out like a thing, it was a cylinder and said, Okay, I want everyone to measure it, and come right down what your measurement is. And everybody, of course, had a different measurement and the variance between, you know, the whole class was massive. It's like, we all have the same measurement stick we all have, we're all measuring the same device, but yet the disparity is huge. So I could definitely see that with someone walking through and measuring versus a walk through tour, where everything is, is is modeled out, we're all looking at the same thing.   Scott: Sure. Well, I think to I mean, dive right into it. Let's look at the economics of it. Right. You know, the reason one of the reasons people didn't know about cost segregation studies, is it used to cost $30,000   Michael: Hmm.   Scott: And so in order to make it economical, you had to own a $10 million building, right? Because, you know, you better get a massive write off and have a lot of profit to pay 30 grand, right. Well, now those prices have come down, you know, they push down to the I don't think we do many under nine. I mean, you know, there's always massive buildings that are complicated, but you know, it's more in the three to six to seven ish range. The question is, is that how have the cost change. And we think about this constantly, the best part is we're super transparent, we've cut costs with technology is we don't have to send a construction engineer to your property, we can have a pilot operator, go to the property, scan it. And then we can have our engineers working from a computer. So it's a lot more efficient.   And so we go, we can cut costs, because we've added tech, right? And we go, how have you got caught? We look at those things. And we go, you're supposed to be sending an engineer out, and you go, right, but you make $10,000. Now you make three or four. Right? Okay, so what's cut?   Michael: Right, what are you doing differently?   Scott: You know, we have some guesses, we think that the, the amount of time spent on a property is being cut? No, here's some examples of that, you know, I don't want to be too accusatory. But, you know, we know how we do it. We use technology, right? And we use efficiency. And that's why, you know, how you're still able to get the top quality with the prices coming down. You know, and that's, you know, I'm sure your question that most people are going to want to know is, how is pricing set? And how much do these things cost?   Michael: Right. So let's talk about that. And then we'll jump into who these are good and bad for? So is there a kind of a ballpark estimate? Or if I've got a $500,000 property, a cost segue might cost me this much? Or how do you determine price.   Scott: I actually wrote a program that you can run a quote on our website, so it's our CG valuation calm, and then you just click the quote button, okay? It's absolutely free. And most importantly, you don't have to give us your information to run the quote,   Michael: Awesome, I don't have to give you my social and credit card and my email address,   Scott: You don't have to give us anything, you can just sit and run quotes all day. And it's free, you can make adjustments and see how the variables work, because that will adjust the price. And you know, how much you can depreciate. So the two different types of properties. So there's a few variables that kind of go into it. I mean, basically, it's pretty simple. It's, it's more expensive and more complicated, the cost goes up. If it's short and smaller, and simpler, the cost goes down. But the number one discount that we give people is doing multiple properties. So if you're running a quote on our system, and you go, Hey, I own 10 properties, but I'm, you know, I'm only looking at cost, like for this one, you can run several quotes and add that multiple properties thing up, and you'll watch your price, you know, drastically get cut. So, it's, you know, it's an it's an incentive to do more business, which we're, again, pretty transparent about, you know, yeah, we want you to do lots and lots of business classes. And maybe that's just, you know, kind of my background, but how do you incentivize someone to do more business financially, right, you know, like, your cost is gonna go down if you do more.   Michael: So most of our listeners are in the single family space, I would argue in the 100 $150,000 purchase price. So let's talk about boo are good candidates to have a cost segregation study done. If I said that verbally correctly, who would benefit from a cost segue study, and Who wouldn't? You know, who should avoid these?   Scott: Absolutely. So let's just start with the who wouldn't, is probably a lot easier, you know, and more narrow, and then you can just kind of balance yourself out, most flippers, just don't, and the reason is pretty simple. You want a very, very high cost basis, when you sell a property, because you're gonna pay a lot of taxes, we give people a very low cost basis. So you know, it doesn't fit, we'd like to see probably a five year hold. Some people say, three, I'm not super comfortable with that I would like to see over five years, and there's, you know, there's reasons that we can get into why that is, the cost can be prohibitive, right? Because what happens is, when you're when you get to a low enough number, we hit like a fixed cost, right?   So, for even for a pilot to go out, it's just like, Listen, it's gonna cost x plus time, right? So at the time, isn't that great? It still costs x. So you know, there are some hard floors that we hit that we try to do. But you know, that's kind of where you but if you'll see in our coding system, it is designed to make it cost effective. It really is just kind of a ratio. So you go, Well, I own this property, it's 100,000. Is it worth it? You got what you pay for it? Right? If it's, you paid nothing for it. And yeah, if you paid seven grand for it, then no, you know, so you have to understand what your costs are. Also, you're gonna have to understand what your tax year is going to be like, Well, you see some people that it might cost a little more, but they had a major windfall, and they just don't have any other way of reducing their taxes.   So give an example somebody that is trying to 1031 a property, they they bought a property, you know, 200,000 they're selling it for 2 million, and you know, they're trying to get the 1031 through and it's November and it falls through right. So now you got $1.8 million of gain and you owe capital gains on that. So I don't know what does that 400,000 ish, whatever,   Michael: It's a crap ton.   Scott: It's a lot. You know, let's just say that you don't have 400,000 in cash, you know, and whatever, I don't know. So in that scenario, you know, having $100,000 house and then you do a cost segue, that's, you know, 1000 $2,000, maybe 2000s a little rich for you, but you're not going to have a $2 million tax bill every year, it becomes imperative that this year you need as much tax deduction as you can get. And so then you do you know, several of them and, and, you know, you take the bonus on all of them, we had a client that had sold the business and had a windfall of somewhere in the range of $20 million. What are you gonna do?   Michael: Yeah.   Scott: You're going okay, so I just got this, and now I got a $5 million bill, I need to write a check for 5 million, what can I do, and and I'm not going to need it next year, right? The windfall is a once in a lifetime opportunity, I need the depreciation now. I have another client too, that they inherited double e bonds, basically, you don't pay any taxes until they come due. And these bonds they inherited were like 50 years old. So every year, they add an additional $120,000 coming due that was fully taxable, but it was only going to come due for another four years. So does depreciating over 39 years sound like the right way or maybe accelerate that over a four year period sound like a good idea for you?   I don't want to call it a game. But this is what we do with the IRS, the IRS is indifferent to tax timing. And that's why cost segregation doesn't necessarily raise your audit risk is because if you are allowed by law to depreciate a million dollars, and we keep that and that's the one thing that we make sure we do you don't depreciate a penny more or penny less than a million dollars. As long as you do that. They're more indifferent to when you do it. So they're because they're going okay, you're gonna take your million dollars early linear won't get it late. And so that's why that's different than tax credits and tax deduction, you get a refundable tax credit, they are not only out money, but they may have to write you a check, like just straight out money.   Michael: Yeah. Scott: So they're going to verify that your tax credit is legitimate with tax timing, you know, I don't want to be misconstrued that they don't look, but it's less of a priority to them. Because they're just going well, it's a it's a timing issue. And the IRS never really cares about timing. That's why they, they don't need to catch you. You know, like, if you're, if you're cheating the IRS, they don't need to catch you this year. They don't care about time,   Michael: They'll get you next year, the year after.   Scott: And if you if we get you seven years later, the penalties are going to be pretty bad. So yeah, they're not in a hurry. So time is not necessarily matter. But what you can do is make that to your advantage. One of the secret sauce that we have is it does come from me being a CFA not a CPA, you know, I have the greatest respect for CPAs. And what they do, you know, we, you know, we feel we're an expert in about four to five tax codes, there's 9800 of them. So this is no eight denigrating what CPAs do, but it's just a difference of how I look at the world, right?   So I'm looking at things from a financial standpoint, how to grow a business. And so what we try to do is we go okay, so not to call it anybody's age, but we're decently young for property owners. You know, I think a lot of property owners are, you know, in their 50s and 60s, but if we had accelerated depreciation over seven years, how many times do I have to repeat that before I retire to three, maybe not a lot. And that's a tax timing thing. So I'm in my high income, earning years, where I want my highest appreciation, and I want to defer them to a time that I'm in a low income in retirement is one way of using timing to your advantage.   Michael: Sure. And so it sounds like if somebody is contemplating getting a cost segregation study done, it really needs to be kind of a three way conversation. One is themselves the owner to is with their CPA, their tax planner. And then third is with a cost segue study to find out what the impact is going to be on their taxes and and the CPA can tell them, Hey, this is going to be beneficial to you now, or maybe you want to hold off, is that fair to say?   Scott: I agree. The CPA is going to be absolutely integral in the cost segregation. And I think one of the questions that, like we were talking about a little before comes up is Why can't my CPA just do it? And the answer is, they don't employ engineers, right? They're, they're not construction specialists. And that's, you know, we have, you know, kind of three parts to our business. I was a joke with people I say, there's at least one part of my business that people's, the eyes roll in the back of their head, you know, it's like, oh, technology. That's super cool. Construction. Love it. Like taxes. You're like, yeah, oh, god, this is awful. Are you like taxes? You're like, dude, I'm a tech guy, man. I'm like, you know, love the numbers and the tech school and you're like, sweet, go walk, you know, do a bunch of construction. You're like, no, that's not that's not really my thing. You know? So So yes, it gives us a little protection for our business that somebody One part of what we do so the CPA has has their role, and they have to fit it into the overall picture, make sure all aspects of your tax life work and cost segregation is going to work for you.   We work very closely with a bunch of CPAs to, you know, help them understand, you know, exactly, just the ins and outs of a specific tax code, right. So we try to be experts in about four or five codes, which, like I said, they have to cover 9800. So insane respect for what they do. But when it comes to the four or five, you know, we can offer some help to the CPA and, you know, and to the client to help them understand a little bit.   Michael: Awesome. So, when you did the costsegs, for me, I had just done some major extensive rehab on a couple different properties. So I had heard that, you know, cost seg are great for rehabbers people that have done a lot of value add people that have spent a lot of money on properties, but I had also heard that you could buy a turnkey property and still take advantage of a cost segs, is that true?   Scott:: Absolutely. I think that when you dive into it, so let's just take the, you know, look at them as two finished property. So if you have a multifamily residential, you'd be looking at somewhere about, you know, 30 to 35% of it that we'd be able to allocate towards a faster schedule. So like, kind of bonus side, right. So that's where you would kind of start now. Now go to your rehab, you not only had you know, all the remodel, but you had what we call disposal, or it's a partial disposal, I'll explain it this way, if you bought a property for a million dollars, and you found out you had to put a roof on it, and the roof costs $100,000. So on your balance sheet, a lot of times people would put that their property is $1.1 million.   But that's not true. Because you don't have to, you only have one, so you took a piece of property, and you disposed of it. And whenever you dispose when you have an asset that isn't worth anything anymore, then you have to take an immediate write off for that asset. So let's say that the old roof was still worth about $40,000, what we would do is you would have all of the depreciation, just like a brand new place plus, anything you had to rip out, and the cost involved with that, in order to, you know, to add to the cost segregation, you got 30,000 to the cost segregation, but then you would add, like the 40,000, for the roof you tore off and you know, all of the carpet and the toilets and whatever you pulled out of there, and that the stuff that you threw out, would also add to the cost segregation. That's why a rehab is very, very good for you. But it doesn't take away from that you still get about 30% you know, extra bonus right off just from buying a turnkey place.   Michael: Wow. Okay, so is that kind of a ballpark estimate, then if I buy something turnkey? Let's say go buy $100,000 property? Roughly? I should I could expect 30,000 in bonus depreciation in your one ballpark?   Scott: Depends what your land is.   Michael: Oh, sure. Okay.   Scott: But yeah, so we're talking building land is a big thing. And that's one thing that we can cover. And actually one of the things that I think that we do a very good job of, there's actually a lawsuit that came out of LA County. There's a property owner that wanted to reduce the value of land that they were appraising in his building. And what came out of that lawsuit was that property owners do not have a specific ability to differentiate the value of the building versus the land, they do have an ability to value the total purchase, because that's what they do. Right? They buy the entire thing.   So the it was ruled that the property owner was not able to do that. But that's where I come in, is, and we go back to what we're talking about with me having, you know, construction on it certifications being evaluation specialist, right. So I'm, you know, one of 40 cfaes in the state of Arizona, right. And I'm, you know, there's probably about 1000 of us in the entire country, right? So do I hold the specific credentials, to be able to value land versus building? I certainly do.   And we use that we will look at those and work very hard to make sure that your land is allocated correctly. And if it's not, we will provide the proof that it should be reallocated an example that we would see, and sometimes they're accurate, and sometimes they're not right, but the example that we would see is, you know, you have an allocation of land that we think is far too high. We will go and find land sales in that area over the last, you know, 10 years, and we use pretty conservative numbers too.   But let's say that they say the lands where you know, it's a million dollar building and they say the land is worth 400,000. We will go through and go there hasn't been a piece of land sold in that area over a 10 year period over 100,000 and so we would just go, the actual sale of land is more accurate than whatever calculation you're using to assess that land. And so, we would use statistical analysis. So, you know, you know, over 30 options, you know, pulling out and reallocating, you know, different outlier, high and low and, and use some very strong statistical analysis to revalue your land at, you know, at a much lower level, you know, if need be.   Michael: So, Scott, this has been awesome, man, thank you so much for coming on. If people want to get in touch with you, Rcg for your services for cost segues, what's the best way for people to do that?   Scott: Yeah, so RCG Valuation.com is we that's where we were in a quote on that, quote, you'll see somebody whose name his name is Tyler Baldwin, he is our Director of Sales, you can call him directly and by have anything to say about it, they'll call you really, really quickly. I really work on that very hard. And you know, I think Michael, you, you know, obviously, you've worked with us and you can attest to this. You know, once you start working with us, you will have my cell phone, you just call m . So, and I try to answer and we try to be as available as possible, you know, so we like to get out. You know, get our quotes and get the people as quickly as you can and help them save taxes.     Michael: Love it, love. Yeah, Scott Roelofs Thanks so much, man. Really appreciate you coming on. And I'm sure I'll be calling you from the next caustic studies shortly.   Scott: I appreciate it. We love it.   Michael: Big thank you to Scott for coming on the show was a lot of fun. I learned a ton. Hopefully you did too. If you'd liked this episode, please feel free to leave us a rating a review whatever it is, you'll see your podcast and we look forward to seeing the next one. Happy investing.