To read the full version of this content please select one of the options below:

Improving US real estate returns with cost segregation

Ivan C. Roten (Department of Finance, Banking and Insurance, Appalachian State University, Boone, North Carolina, USA)
Jarrod G. Johnston (Department of Finance, Banking and Insurance, Appalachian State University, Boone, North Carolina, USA)

Journal of Property Investment & Finance

ISSN: 1463-578X

Article publication date: 5 April 2019

Issue publication date: 10 June 2019

Abstract

Purpose

US taxing authorities allow property investment to be separated into components. The purpose of this paper is to demonstrate how the classification of property affects the amount and timing of depreciation. Increased and accelerated depreciation increases after-tax cash flows and investor returns.

Design/methodology/approach

This paper explains traditional methods to analyze real estate investments and introduces modified methods that include the effect of taxes to improve the estimate of the potential return to the investor. Commonly used property classification methods are evaluated and projections are used to demonstrate the impact on investor returns.

Findings

Modified methods may improve return estimates and appropriately classifying property improves investor returns.

Practical implications

After-tax cash flows should be used to analyze potential real estate investments and properties should be accurately classified to maximize returns.

Originality/value

This paper demonstrates how to analyze real estate investments and maximize returns.

Keywords

Citation

Roten, I.C. and Johnston, J.G. (2019), "Improving US real estate returns with cost segregation", Journal of Property Investment & Finance, Vol. 37 No. 4, pp. 334-344. https://doi.org/10.1108/JPIF-02-2019-0021

Publisher

:

Emerald Publishing Limited

Copyright © 2019, Emerald Publishing Limited