Tax Optimization Strategies for Real Estate Investors With Yaron Pacht

In this episode of The Same Day Podcast, host Yoni Schmidt sits down with Yaron Pacht, VP of Business Development at Centiv, to discuss tax optimization strategies for real estate investors. Yaron explains how cost segregation works, clears up common misconceptions, and shares a success story of saving a client millions of dollars in taxes. He also dives into planning for depreciation recapture and how to stay compliant with changing tax laws.

Tax Optimization Strategies for Real Estate Investors With Yaron Pacht

Yaron Pacht is the VP of Business Development at Centiv, a firm specializing in tax solutions for real estate investors and developers. With a background in luxury real estate development and strategic partnerships, Yaron has extensive experience in helping clients optimize tax savings through advanced strategies like cost segregation. He leverages financial tools to enhance cash flow, minimize tax liabilities, and empower real estate investors to grow their portfolios.

Here’s a glimpse of what you’ll learn:

• [02:25] Yaron Pacht’s journey to becoming VP of Business Development at Centiv
• [04:45] What is cost segregation?
• [09:57] Strategies to avoid depreciation recapture tax
• [13:37] Misconceptions real estate investors have about cost segregation and depreciation
• [18:13] Yaron’s most rewarding success stories at Centiv
• [20:18] How cost segregation sustains tax benefits over time
• [23:52] Real estate investing under a new Republican administration
• [25:33] How Centiv ensures compliance and adapts to changing tax laws
• [27:49] The value of outsourcing tax management instead of relying solely on traditional CPAs
• [30:08] How cost segregation applies to property updates and renovations
• [31:43] Yaron’s advice on using tax strategies to grow and protect investments

In this episode…

Taxes don’t have to be a drain on your real estate profits. What if you could unlock hidden savings within your properties to accelerate cash flow and reduce tax burdens?

According to Yaron Pacht, a tax strategy expert with years of experience helping real estate investors, cost segregation is a powerful way to achieve these goals. By reclassifying and accelerating depreciation on certain assets, investors can realize significant tax deductions upfront, enhancing cash flow and reinvesting faster. He highlights that this strategy isn’t just for large-scale developers — it’s accessible to anyone with investment properties, from single-family homes to multifamily units. This approach not only boosts financial flexibility but also equips investors with tools to strategically plan for the future, including leveraging 1031 exchanges and bonus depreciation opportunities.

Resources mentioned in this episode:

• Yonatan Schmidt on LinkedIn
• Mat Zalk on LinkedIn
• Walter Bowser on LinkedIn
• Keyrenter Property Management
• Keyrenter Property Management in Tulsa | Oklahoma City | Arkansas
• Keyrenter Property Management email address: [email protected]
• Yaron Pacht on LinkedIn
• Centiv

Special Mentions

• PwC

Related Episodes

• “Exploring New Possibilities in Entrepreneurship” with Chip Gaberino on The Same Day Podcast
• “Beyond Profit: Building Living Legacies in Real Estate With Arturo Saldivar” on The Same Day Podcast
• “The Future of Financial Advising: Building Relationships Over Returns” with Morgan Martin on The Same Day Podcast
• “Tax-Efficient Exit Strategy for Landlords: Transforming Portfolios Into Passive Income Streams” with Ari Rubin on The Same Day Podcast

Quotable Moments

• “The wealthy don’t pay taxes, or savvy investors don’t pay taxes, and it kind of sounds like a pipe dream.”
• “Cost segregation basically means that we accelerate depreciation on properties, and by accelerating depreciation on properties, we increase cash flow.”
• “Anybody can use the strategy if you own an asset; this is a strategy that could benefit any investor.”
• “For us, it’s about putting money back in your pocket instead of giving it to the government.”
• “We’re so confident in our product that if you were to get audited, we got your back.”

Action Steps

1. Educate yourself on cost segregation: Learn the basics of cost segregation and how accelerating depreciation can increase your cash flow by allowing larger upfront deductions, optimizing your tax strategy.
2. Consult with a professional: Seek guidance from a specialized cost segregation expert, as this niche field requires specific knowledge beyond what general CPAs typically provide.
3. Evaluate your property portfolio regularly: Periodically assess your properties to identify those that could benefit from cost segregation, especially if you’ve made renovations or acquired new investments.
4. Consider the implications of depreciation recapture: Plan your exit strategies carefully to minimize tax liabilities from depreciation recapture using tools like 1031 or 721 exchanges to defer taxes.
5. Stay updated on tax regulation changes: Keep informed about shifts in tax laws and political changes to leverage opportunities like bonus depreciation for your investments.

Sponsor for this episode…

Keyrenter Property Management:

This episode is brought to you by Keyrenter Property Management.

Keyrenter Property Management is a full-service property management company that helps clients buy, renovate, and operate real estate assets.

The team helps clients build wealth while taking the headache out of property management.

That’s why, no matter what rental you have — single-family homes, condos, townhomes, or apartments — they can give you the management solutions you need.

To learn more about their services, go to https://keyrenterpmc.com/ or send them an email at [email protected].

Episode Transcript

Intro 00:04

Welcome to The Same Day Podcast, where we discuss driving incremental business growth and other topics related to real estate, property management and entrepreneurship. Now to the show at hand.

Yoni Schmidt 00:20

Hi there.Yoni Schmidt here, hosting today’s episode of The Same Day Podcast where I connect with top business and real estate leaders. Past guests include Chip Gaberino, a local restaurateur entrepreneur. Arturo Saldivar, a local developer and entrepreneur. And Morgan Martin of Merrill Lynch and who is a financial advisor. Today’s episode is brought to you by Keyrenter Property Management. At Keyrenter Property Management, we are a full service property management company helping our clients buy, renovate and operate real estate assets. We help our clients build wealth while taking the headache out of property management. That’s why no matter what rental you have single family homes, condos, townhouses, apartments. We have the management solutions that you need. Go to keyrenterpmc.com or email us at [email protected] for more information. Joining us today is Yaron Pacht, a highly accomplished professional and VP of Business Development at Centiv, a firm specializing in tax solutions for real estate investors and developers. With a decade of experience building strategic partnerships and introducing innovative business lines, Yaron brings a unique blend of expertise in tax optimization and business development that has helped save clients millions from his impressive career in development across industries to his distinguished service in the Israeli Defense Forces, Yaron’s background demonstrates his commitment to leadership growth and creating impactful financial strategies. Today, he’s here to share insights on how real estate investors can enhance cash flow and minimize tax liability. Welcome to the show and thank you for being here. Minimizing tax liabilities enhancing cash flow. Today’s November 6th. We you know, are on the on the back end of, you know, election day, which everyone has been kind of very focused on and talking about. You know, we all love to talk about taxes, especially Donald Trump’s taxes. Tell us a little bit, I guess, about your journey to becoming VP of Business Development at Centiv. What drew you to this role?

Yaron Pacht 02:25

Yeah. Well, first of all, thank you so much for having me on your podcast. I’m excited to be here. Yeah. I mean, so the way I got into this, it’s interesting. I’ve been kind of involved in real estate for most of my professional career. I started a design and build company out here in Denver, Colorado. We design and build luxury custom homes, and I used to do a lot of networking. I still do a lot of networking, but I went to a networking event and I met this gentleman. His name was Bobby. And Bobby was specializing in this thing called cost segregation at the time. I had no idea what it was. I was like, okay, sounds cool, you know? Sure, whatever. We started having a chat, and I started learning a little bit more about what he did. And it was very interesting to me because, you know, I’m somebody that’s passionate about personal finance and about helping other people build wealth as well. And one thing that I learned a lot growing up, and I heard over and over, no matter what I was doing, was, you know, the wealthy don’t pay taxes or, you know, savvy investors don’t pay taxes. And, you know, it kind of sounds like a pipe dream. Like, what does that mean? Right? And and this is one of those strategies. It’s one of the big ones too. And so learning more about that and staying in touch with Bobby, at the time he was working at PwC, PricewaterhouseCoopers, which is one of the big four accounting firms, and they specialized in this in his specific branch, and he decided to break off and start Centiv. This was about six years ago. And and I, you know, had met him about three years ago. And we just kept on chatting and eventually I said, you know what? I really like what this is about. I really like you. I want to get involved. So I joined Centiv and we’ve been building it ever since.

Yoni Schmidt 04:26

Tell, tell us a little bit for, you know, in in layman terms what is a cost segregation. And you know, you know, you use this for tax optimization. It’s a powerful tool for investors. Break it down for us, you know, and tell us, you know, what are the benefits for investors.

Yaron Pacht 04:45

Yeah. So at its core cost segregation basically means that we accelerate depreciation on properties and by accelerating depreciation on properties, we increase cash flow. And obviously cash flow is a good thing when it comes to business and real estate. In terms of kind of what that means in layman’s terms, when you buy a property, obviously you’re buying it for appreciation, you’re buying it for cash flow, but you’re also buying the for example, building on the property and a building is considered an expense, a business expense. Now it is a large expense, so it has to be capitalized over a long period of time, which means you can’t take the whole expense of the property out in one go. You can take it slowly over a long period of time, generally 27.5 years or 39 years. So just for the sake of numbers, if a property is, you know, $1 million, you have a million of dollars of depreciation to use over 27.5 years or 39 years, depending on the property. So, you know, that means you get a little bit every day over a long period, or every year over a long period of time, which is fine. You get to write that off against your taxes. However, what if instead of taking, you know, let’s just say, as an example, $20,000 of that every year against your income, you get to take $500,000 of that against your income in the first year. That means that until you make $500,000 in income, you’re not going to pay income tax. AndYoni, I’m gonna just share my screen really quickly to kind of give a visual illustration of what that would look like. So basically, this is an example of a property that would be a property that depreciates over 39 years. Here’s what the cost of the property was $1.5 million. And in this specific case, this person is able to take approximately $20,000 a year over that 39 year period. What we do with cost segregation. We go into the building and we reclassify pieces of the building. So as an example, a carpeting. Carpeting does not last 39 years. So why are we depreciating it over a 39 year period? Well, the IRS actually allows us to depreciate it at a significantly accelerated rate if we’re able to substantiate it. And so that’s what we’re illustrating here. Instead of just having one big block of a property at 39 years, we’re able to break it up into different buckets. So there’s the 39 year property, which would be, for example, the foundation in the roof. Then you have your 15 year property, which is land improvements like concrete areas outside trees and shrubbery and those kinds of things. We have five year property, which would be specialty assets, for example, like the flooring that we just described, which would be carpeting and lots of other pieces, and then FFA, which is furniture, fixtures and equipment, which would be, for example, appliances, just as an example. And there’s there’s thousands of things that fall within these categories. I’m just giving some generals. So what we do is we separate out all those assets. And as you can see here, there’s still $1.1 million in that 39 year bucket. But we’ve separated out, you know, in the 15 year bucket, $120,000 in the seven year bucket, about $100,000. And then the five year bucket, $180,000. Now there’s this concept called bonus depreciation, which means that the IRS allows us to take X amount of whatever falls in these, what they call short life buckets in the first year. In this specific scenario, it was 100% bonus depreciation here. And so therefore this specific client was able to take $400,000 in depreciation in the first year. That means, like I said. Until they make $400,000 in income from that property, they pay $0 in taxes.

Yoni Schmidt 08:59

Wow. Yeah. So that’s very interesting. I guess, you know, I didn’t I’ve never seen it like this. And this really helps me understand, you know, why a cost segregation might be so important? You know, can you tell us a little bit more about, you know, the back end of, you know, depreciating your assets. So when investors oftentimes have exit strategies, right, it could be selling the property to someone else, potentially a 1031 exchange. Right. What what does that look like when you go to sell the property and you’ve depreciated it so much. Right. Because as I understand it, you have what’s called depreciation recapture at the time of the sale, which is something that you end up paying taxes on. And, you know, if I’m an investor, I’m savvy. I need an exit strategy. Can I avoid this in any way, and if so, how can I avoid it?

Yaron Pacht 09:57

Yeah, that’s a great question. So that it clearly means that you did a little bit of research, because that is a question that a lot of people don’t even think to ask. Something called depreciation recapture tax. And basically the way it works is that if you do a cost segregation, when you go to sell the property, you’re going to have to pay that depreciation recapture tax. Essentially what that would look like is instead of paying a capital gains tax on on the property, when you sell it, you the the capital gain tax would go up to I think instead of 15 to 20%, it would be somewhere around 25%. It kind of just shifts to a higher tax Bracket. With that being said, there’s definitely situations where that affects the decision making and whether this makes sense for you to do or not. What we’ve found is in most situations, even with that recapture tax on the back end, the benefits still far outweighs the penalty for lack of better term. Now, the way that you can avoid recapture tax if you 1031 that property for example, you can defer that recapture tax into the next property. So that would be one way to avoid that. What we have found also is definitely our higher income earners. You know, if they’re making a high enough income income where their income taxes are in like a marginal rate of 30 plus percent, even with the recapture tax, they’re still saving 5 to 10% in terms of their marginal rate. So for them it’s a no brainer. But in general, definitely a good thing to consult with your CPA or your cost segregation professional to make sure that the strategy makes sense, but it’s definitely something to keep in the consideration when you’re looking into this.

Yoni Schmidt 11:52

Yeah. Are you familiar with 721 exchanges?

Yaron Pacht 11:57

I it’s funny that you say that. I actually was talking about that with somebody recently. Just remind me that that’s where you shift your assets to a fund to.

Yoni Schmidt 12:09

And then you are issued shares of that fund. It’s almost like you’re, you know, you’re selling your property into a REIT and that owns it. You no longer own the property and your issued shares that are correlated to the value of the property. And, you know, the grand total worth of the fund. So would that also be a strategy to defer depreciation recapture and and not have to pay those taxes.

Yaron Pacht 12:36

That’s a great question. You know, it’s funny because I was talking to a company recently that does those 720 ones, they have about a thousand assets in their management across the nation. And their specific scenario, they actually do not utilize cost segregation as a strategy.

Yoni Schmidt 12:54

Yeah. Wouldn’t be Flock Homes right?

Yaron Pacht 12:56

That’s right. Flock. Yeah.

Yoni Schmidt 12:57

Okay. Ari Rubin. Yeah yeah.

Yaron Pacht 13:00

Yeah yeah, that’s what I was talking to you about it. Yeah. They actually don’t use cost segregation. He said in their specific situation, it actually makes it more complicated. And it didn’t make sense. They said maybe in the future they would consider it. But yeah. And that’s a great example of where this may not be the best strategy. It’s not always a you know, it definitely seems like a slam dunk, but it’s not always a slam dunk. And so that’s why you definitely have to talk to the proper professional to make that decision.

Yoni Schmidt 13:28

Yeah. Nice. Tell us about some misconceptions that real estate investors have about cost segregation and depreciation. you know, optimization.

Yaron Pacht 13:37

I think actually, for the most part, the misconceptions is that most people either first of all, a lot of people just haven’t even heard of the strategy, which is interesting. Everybody’s heard the 1030, right? A lot of people have not heard of this. And then there’s a lot of people that have heard of this, but believe it’s not for them for a number of reasons. A lot of them believe, oh, this is only for the big boys. This is only for if I’m, you know, if I own a skyscraper in Manhattan or if I own, you know, the the Kansas City Chiefs Stadium, the the Arrowhead Stadium, whatever it is. Right. The truth of the matter is, though, anybody can use the strategy if you own an asset. I mean, potentially obviously it needs to make sense, but potentially this is a strategy that could benefit any investor. That’s one of the reasons I’m passionate about it, because this can help anybody build wealth. And we have clients that have one property and they do the strategy, and it saves them a good chunk of cash and helps them accelerate their goals in terms of buying more property.

Yoni Schmidt 14:41

Yeah. So can anyone come in at any given, you know, moment in time? Say I bought my property five years ago. I’ve been depreciating it just on a straight line, you know, 27.5 year depreciation schedule. Now I want to do the cost segregation. I’m guessing I’m paying you guys some sort of fee to do this. And then you provide that to my CPA who is then depreciating the asset at that schedule.

Yaron Pacht 15:07

Yeah. So basically what would happen is, is a client would come to us with their asset. And we would just take down some information. This is in terms of the process, right. We would take down some information. Generally it’s going to be the the address of the property when you bought it, how much you paid for it. Have you done any major renovations on it. And what do those look like? Just to get a high level idea of that and then have you perform the 1031 exchange on it. Those are the main questions we’re going to ask. Once we have that information, we’re able to do an analysis on the property and say, we believe we can get you X amount in depreciation and it’ll cost you Y. I’ll tell you in terms of the cost versus the benefit. On average our clients get a ten x benefit. And that’s on the low end. We’ve had clients that have gotten as much as 100% 100 X returns doing a cost segregation from their you know, what we would do is go visit the property, you know, take our measurements, take videos, put a 3D plate together with one of the devices we have. We take it back, run it through our calculators, and then we’re able to actually put together a deliverable to give that to the CPAs.

Yoni Schmidt 16:25

Got it. Beautiful. And I’m guessing you use vendors on the ground. You’re not the one going out to measure the property and visit it necessarily.

Yaron Pacht 16:35

Actually, you know, I’m actually going tomorrow to San Diego to do a site visit.

Yoni Schmidt 16:38

Oh, wow.

Yaron Pacht 16:39

Yeah, I don’t I don’t often them do them. We do have other team members across the nation that do that. But I do it myself sometimes. Sure.

Yoni Schmidt 16:47

Got it. And the cost to to conduct the cost segregation is related to the benefit there is no it’s not like a flat fee. I’m going to pay $1,000 to do a cost seg for me and provide me with a good, you know, depreciation schedule.

Yaron Pacht 17:02

So actually we do not base it off of the benefit. That is yeah. That’s something that the IRS discourages there. Their concern is if if it’s based off the benefit then we’ll try to pump up the benefit as much as possible so that we get more money. And that’s discouraged. The way that we do it is there’s a flat base fee. And then the depending on the size and complexity of the project, that’s how we determine the final fee.

Yoni Schmidt 17:29

Yeah.

Yaron Pacht 17:30

And just to give you an idea of, like, the cost to do one of these things for a single family home, it’ll range somewhere in the range of, let’s say, you know, $3500 to $6000, give or take. And then obviously, depending on the complexity and the size of the project, you can just go significantly up from there.

Yoni Schmidt 17:48

Yeah. Got it. Okay. So, you know, reading a little bit about Centiv, that’s all great info but reading it a little bit about Centiv. You know, I read somewhere that you have saved clients over $250 million in, you know, in taxes. What? Tell us a little bit about one of the most rewarding success stories that you’ve been a part of. If you can think of something right off the top of your head.

Yaron Pacht 18:13

Yeah, I got a great one. About a year ago we had a client. He has about 150 units in the Denver metro area. He had never heard of this strategy. So it’s interesting because he had built himself up from nothing. He had zero. And he started this slowly by and 1031 to build himself up. Now he has about 150 units and we got referred to him from his realtor, if I remember correctly. And his big concern was I’m doing very well with these properties, but my tax liability is just off the charts. What can I do? And his realtor happens to be a partner, a referral partner of ours. He referred us and if I remember correctly, we gave him, I think it was $2.5 million in deductions and it cost him like I think it was. It was like 10 or $12,000. So obviously a pretty big win for him because he’s not going to be paying income tax for a while. And and here’s the other beautiful part of it is with those $2.4 million in deductions, that means that you have all that money back in your pocket instead of giving it to the government, it’s back in your pocket and you can reinvest it and build your portfolio that much faster. Instead of waiting to build up that pocket of cash to go and buy again. He keeps all this money and he actually is already on the warpath. He just went bought another property. And really recently we’re going to be doing another cost segregation on that.

Yoni Schmidt 19:45

Yeah. And so that’s interesting. When you do that I guess you’re like you’re you’re continuously delaying that tax bill that. Right. Because because you have more deductions you, you ultimately, you know, you’re kind of addicted to the depreciation schedule. If you stop buying then all of a sudden this tax bill may catch up with you. Because now all of a sudden you’re making all this money. Is that am I am I correct to assume this or am I thinking about this. Right.

Yaron Pacht 20:18

So not not not quite. It’s not going to you’re not going to stop investing one day and all of a sudden, a tax bill that’s the size of a truck just falls on your head. What would happen is it kind of peters off? I can actually. Pull up a slide here to kind of illustrate what I mean. So just to give you an idea of what the slide is saying here. The red line would be your standard straight line depreciation that your standard CPA would be doing. And the green line would be your income. And then the difference between the green line and the red line, that’s your taxable income. When we do cost segregation, we force this red line up to be this blue line. And so as you can see, the difference between this blue line and this green line is what we call net operating loss. That means on paper.

Yoni Schmidt 21:15

Sorry you were cutting out. It’s called that that that area between the gray line and the green Greenland is called.

Yaron Pacht 21:23

A net operating loss. That means net operating loss, right? On paper, you’re losing more money than you’re making. And that’s where you’re not paying that tax and you’re getting those tax credits. Now, eventually it does catch up with you because we’re not creating tax credits out of thin air. This was already your tax. These were already your tax credits. All that’s happening is we’re accelerating the rate in which you get them. So once it does catch up with the green line now you’re still getting your straight line depreciation. It’s just not as much as it was before. So yes you will get attacked. You will start paying taxes again at some point. But it’s not it’s not just going to dump back on you. It’s just going to be, you know, great. I’m back to my regular tax rate.

Yoni Schmidt 22:10

Got it.

Yoni Schmidt 22:11

Yeah. Unless you continue to buy and then as you’re buying more you have more depreciation.

Yaron Pacht 22:20

Well. Right? Well that’s right. Which in that case. And that actually brings us to this one. Oh, this is. Yeah. Yeah. This is a strategy that we bring to a lot of our clients. I’m sure you’ve heard the term deferred. Deferred? Deferred. Right.

Yoni Schmidt 22:34

Yeah.

Yaron Pacht 22:36

That’s kind of the strategy. It’s kind of similar with 1031. Right? 1031 you just keep on going bigger and bigger and bigger and bigger. And as long as you keep it in the assets, you’re not going to be paying those capital gains taxes. And so, you know, there’s the income. You know, you’ve done your cost segregation. You bought another property using the money you’ve saved as well. Any other money you’ve had, you do another cost segregation and you continue to stay in that net operating loss. But as you can see, even once you stop buying at the end here, you’re not you don’t get a dump of of massive tax bill because you’re still you’re still you were still owed that depreciation Anyways, right?

Yoni Schmidt 23:19

Yeah. Very interesting. Okay, let’s let’s bring it back to, I guess, you know, today’s environment, right? We’re we’re again November 6th. Donald Trump just won the elections. What are you guys anticipating now that a Republican president is in office? The House appears to be also, you know, won by the Republicans or at least the Senate. Sorry. And then, you know, we’ll see about the House what happens. Are you preparing in any sort of way?

Yaron Pacht 23:55

Yeah, definitely. Strictly from a fiscal side. This is actually seems like a positive thing for investors and developers in general. The reason is because that 100% bonus depreciation that I brought up earlier in the conversation. That’s something that the Trump administration had brought to light in 2016 when he became president. And that really gives investors the max benefit using the strategy. Over the years since Trump, it’s been kind of petering out a little bit. So instead of being 100% bonus depreciation, it started to go to 80% and 60% and 40%. What we expect to see is in the next 6 to 8 months, that they’ll pass a bill to bring it back up to that 100% bonus depreciation. So, you know, obviously everybody has their thoughts about if Trump is going to be the great president or not. But strictly from this perspective, this is going to be a good thing.

Yoni Schmidt 24:56

Yeah.Specifically for real estate investors. I would imagine since Trump is invested heavily into real estate as far as I’m aware.

Yaron Pacht 25:05

Yeah. And this is a strategy he uses for his own buildings.

Yoni Schmidt 25:09

I have no doubt. Okay. So talking a little bit we’re talking a little bit about regulations. You know many investors they struggle to keep up with changing tax laws and regulations. How do you and how does Centiv ensure you know compliance and accuracy in these strategies? And what do you do to stay ahead of the curve in the know with your finger, you know, on the pulse of the market?

Yaron Pacht 25:33

That’s a great question. Yeah. So you know, strictly from the expertise side of things, all of our cost segregation professionals actually came out of PwC. So they did this on the highest level. And we’re talking the big boys. Right. You know, specifically Bobby, before he started Centiv, he did cost segregation on, I think, most of the Olive garden locations in the United States that Atlanta Falcons, Mercedes-Benz Stadium, Porsche when they built the racetracks in manufacturing plants here in the US. So strictly from the expertise side of it, you know, we got that covered from the compliance side. We’re always our team is always I think actually we have a weekly training that all of our professionals, including me, by the way, even though I’m not technically on the tax side of it, we are required to go to those weekly trainings and we go through if there’s any changes or if there or if there’s any anticipated changes on the compliance side and any regulations that are being brought up specifically for that reason. With that being said, also on every single one of our deliverables, we offer lifetime audit protection, meaning that, you know, thank God, as long as we’ve been in business, we’ve never been audited with any of our 250 million plus dollars that we’ve saved our clients. However, if we were to get audited, we’re so confident in our product and how we deliver it in our knowledge, in the process and in the in the overall concept of cost segregation that we feel comfortable saying, hey, if you were to get audited, we got your back. You call us up, we’ll be right next to you, and we’ll get this thing sorted out as fast as possible.

Yoni Schmidt 27:14

Yeah. Love that. So talking about that a little bit, you know, for investors who are considering outsourcing their tax management, you know what kind of things like this audit protection should they look for in a trusted partner. And why is outsourcing often also beneficial to outsourcing as opposed to you know, doing just a straight line depreciation without, of course, doing the cost segregation and, you know, maybe doing it yourself, not relying on a CPA.

Yaron Pacht 27:49

Gotcha. So yeah, I’ll tell you this. One of the first questions I always get is, oh, well, doesn’t my CPA already do this or why doesn’t my CPA do this? And really it comes down to two things. Cost segregation is a specialty niche in the tax code and the tax area, and CPAs in general are built to work in the average general tax area. And as a matter of fact, there’s actually not a course to learn. Cost segregation. The only way to learn it is to actually live in it and work in it day in and day out and get trained in it. And so your average CPA just doesn’t have that experience, and it’s not even a matter of if they want to offer it to you, they don’t know how to offer it to you. And I mean, there are definitely a few CPA firms here and there that offer it. But, you know, I work with hundreds of CPAs. I could count on 1 or 2 hands, the amount that offer cost segregation on their own. The other thing is, there is a certain level of construction and engineering that you acknowledge that you need to have as a cost segregation professional, because we don’t just look at things like the carpeting and the walls. We’re also looking at the HVAC systems, the electrical systems, the the structure of the property, and you need to know how to look at a blueprint, read that and be able to piece together or piece apart what goes where, how you can depreciate certain pieces of of of those systems. And that’s something that regular CPAs just don’t have the expertise in. And that’s why, for the most part, they’re going to outsource it to somebody like us.

Yoni Schmidt 29:28

Interesting that you mentioned, you know, systems. So let’s talk about that for just one second. I own a duplex. Right. And I am you know, let’s say hypothetically, I’ve done a cost segregation. My CPA is depreciating based on that cost segregation. All of a sudden my AC unit blows out. I need to replace the entire system. I spend $10,000 to put in a new furnace and a new condenser. What happens to that cost segregation? Do I have to go update it? Is that piece of equipment now restarting its depreciation schedule on its own? And that cost is coming back into the the depreciation schedule.

Yaron Pacht 30:08

Yeah, that’s a good question. I’ll actually expand that even bigger right. You know obviously what you described. But what if I own a property and I did a cost segregation and now the property is just old and it needs to be updated. And I go through $500,000 at it to update it. You can do another cost segregation on that property, because anything that you’ve done in terms of updates that’s qualified, depending on the type of work you’ve done on it, to analyze the, the, the renovations and accelerate the depreciation on those things. So I’ve replaced all the current, let’s just say, right, I’ve replaced all the carpet in my property, I’ve replaced the HVAC and AC system, I’ve replaced all the appliances. And I’ve built out, you know, a new room, whatever it is right now, you have a whole new basis to work with and to get more bonus and accelerated depreciation. So yeah, when we work with our clients and that stuff all the time. I had a client recently that bought a property. He’s going to use it as an Airbnb and they, you know, put hundreds of thousands of dollars into it to refresh it and theme it and all these fun things. And they came back to us about six months after we did the initial and said, hey, we got all this new stuff, can we do anything about that? And we were able to get them a good chunk there. So yeah.

Yoni Schmidt 31:26

Nice. Yeah. Yeah. And lastly, what one piece of advice would you give real estate investors who are looking to protect and grow their investments through effective tax strategies?

Yaron Pacht 31:43

I would definitely do some research, learn some more, you know, talk to people like us at Centiv. And just even just ask your CPA, hey, this cost segregation thing I’m hearing about is this something that could potentially be right for me? That’s a question that most people don’t even think of. And frankly, a lot of CPAs don’t even think of just because it is relatively niche. So just be educated about it and make sure to ask. And that can be the difference between you keeping literally hundreds of thousands of dollars in your pocket and being able to accelerate your goals and investment to build your wealth for yourself and your family.

Yoni Schmidt 32:25

Yeah. Love that. Yaron, thank you so much. This was super educational for me, for our listeners. Really grateful that you’re here, my friend. And I hope that, you know, we can work together on one of these and maybe help me save some money so that I can continue to buy some more real estate.

Yaron Pacht 32:43

I love that.

Yoni Schmidt 32:44

I appreciate your time. Yeah.

Outro 32:50

Thanks for listening to The Same Day Podcast. Tune in to a new show each week and be sure to subscribe to get future episodes.