Cost Segregation and Self-Storage Properties...Reduce Federal Income Taxes. Increase Operating Capital.

A typical self-storage unit averages 25% - 35% of its improved value as short-life property, which generates higher annual depreciation and reduces federal income taxes. Cost segregation studies minimize ordinary income to maximize return of capital and/or capital gain related distributions. They also create flexibility to achieve various operational objectives.


Benefits of Cost Segregation

• Decreases a self-storage facility's income taxes, allowing the owner to invest the savings in capital improvements, reduce debt or simply improve cash flow.
  
• Provides immediate reduction in federal income tax through increased depreciation.
  
• Defers taxes on gains to a lower rate. Cost segregation changes the character of income based upon the nature of short life property (it physically depreciates) and the mechanics of reporting a sale. The bulk of the gain upon sale is typically allocated to land and long-life property.

IRS Guided. Cost segregation is a conservative, IRS defined approach implemented by O'Connor & Associates' professional real estate appraisers to update depreciation schedules for correct component allocation. Utilizing appraisal specialists allows our clients to realize considerable cost efficiencies. Our fees are typically one-half those charged by non-appraisal firms for comparable properties.

How Do We Work With Self-Storage Properties?

After a careful review of your entire property by one of our expert appraisers or cost segregation advisors, we identify the amount of five, seven and 15-year property components you have, apply the various depreciation schedules to each and calculate the new depreciable amounts. Selected components are in accordance with the IRS Audit Techniques Guide. A typical self-storage unit averages 25% - 35% of its improved value as short-life property, which generates higher annual depreciation and reduces federal income taxes. Depending on the size of the property and when it was acquired or built, year one tax savings can be substantial. For a property with a cost basis of $2,000,000, it would not be unusual to see cost savings of $30,000-50,000 in the first year.

A list of common short-life items for self storage property as defined by the IRS Audit Techniques Guide include:

5-Year Property	15-Year Property
Removable flooring (vinyl, carpeting, wood)	Parking lot/asphalt paving
Selected cabinetry	Parking lot striping
Special ventilation	Site work
7-Year Property	Fencing
Signage	Sidewalk concrete
Vinyl/wood wall coverings	Landscaping

Actual Self-Storage Savings

Property Location	Improvement Basis	Total Short-Life Property	Short-Life as % of Improvement
CA	$3,258,724	$910,913	28%
TX	$2,410,846	$684,531	28%
CA	$5,147,887	$1,477,259	29%
LA	$1,167,350	$352,190	30%
TX	$1,024,250	$318,371	31%
CA	$1,368,652	$436,046	32%
TX	$1,989,756	$754,325	38%
TX	$2,998,480	$1,381,340	46%

The O'Connor & Associates' Difference

• Leader in "look back" studies.
  O'Connor & Associates is the industry leader in "look back" studies having done more studies benefiting from Section 481a than any other boutique firm in the nation. Commercial appraisal is a core competency of our firm with extensive expertise in defining property values across dozens of land uses. We can establish and analyze a cost basis, even when such details are not available from original construction documents
  
• We don't "over-engineer".
  O'Connor & Associates combines the right balance of tax, accounting, valuation and real estate expertise without "over-engineering" what the IRS requires. This balance is reflected in our solidly competitive fees
  
• Fast turnaround.
  O'Connor & Associates' project turnaround is 4-6 weeks. Under special circumstances, it can be as short as 10 business days. This reflects our flexibility, customer focus and a well-tuned business process for generating cost segregation studies.
  
• Use of property appraisal experts.
  O'Connor & Associates streamlined our approach so your team is contacted by only one professional who collects information and coordinates technical requirements related to documentation, site visits, clarifications, etc.
  
• The O'Connor & Associates goal is to be upfront, honest and handle our client relationships with the utmost integrity. We know how important that is in today's business environment.

In addition to cost segregation studies, O'Connor & Associates also provides appraisal services for lenders and developers of self-storage facilities and commercial property tax reduction for self-storage owners.

Click here to request a free no-obligation estimate of tax savings for your property.



O'Connor & Associates is a national provider of investment property consulting services including cost segregation studies, due diligence, lease abstraction, tax deduction, feasibility studies, tax reduction, lease audits, partial interest valuations, real estate consulting, commercial real estate appraisals and gift tax valuations.

Our appraisers are competent to appraise virtually all types of property including land, neighborhood shopping centers, warehouses, bowling alleys, motels, mobile home parks, self-storage units, retirement homes, multifamily housing, movie theatres, veterinary clinics, single-tenant retail centers, funeral homes, bars, amusement parks, hospitals, schools, night clubs, apartments and medical facilities.