Small bay industrial buildings are very hot property these days across the U.S. They work well because they are perfect for many small business owners especially those operating in the trades. Sometimes buildings like this are also call Flex Buildings.
Some have small office spaces but otherwise it’s a nice bay with maybe 1,000 – 2,500 SF of warehouse space. The ones I’ve seen also have a bathroom in each bay.
It doesn’t seem like there is a lot to these buildings and I will often get the question as to if these are worth studying or not. I will say that virtually every commercial building is worth studying if the basis is north of $200,000, if the owner is or expects to be profitable and if they purchased it with mostly new cash and debt. If they purchased the building 100% with 1031 exchange money, then that would need to be looked at to see if it would be worth studying or not. Carryover basis can qualify for acclerated depreciation but not bonus depreciation. That can impact the results of a study and it might be that it’s not worth the fee to do the study.
These properties will tend to have a small amount of 5 year class life property – maybe 3-8% max. The 15 year life can sometimes be sizable depending upon the driveways, parking etc. This will often be 10-15% and could be more. So many of these barebones small bay industrial / flex buildings will see 15-20% of the basis that can be accelerated.
If you have a $1,000,000 cost basis, that would be $150,000 – $200,000 in a depreciation expense in Year 1 or whatever year you decide to take this deduction by applying cost segregation.
I work all over the U.S. and help building owners, business owners and investors save money on their income taxes by doing cost segregation on their buildings. I work closely with many CPA firm and tax professionals around the county to get these studies done for their clients. We are responsive, accurate and have a long track record of 22 years in the business and more than 55,000 buildings studied. Our reports are easy to understand and apply to one’s taxes.
If you have a building or are considering buying or developing one, feel free to reach out and we can have a conversation. There’s no cost for us to talk. We can run an estimate at no-charge. There’s no obligation to do business with us. I’m here to help. If you’re on LinkedIn, let’s connect!
