Des Moines Apartment Complex

Approach & Results

Client Profile
A CPA firm recently engaged McGuire Sponsel to carry out a cost segregation study for a recently purchased apartment complex in the suburbs of Des Moines, Iowa, for approximately $22.7 million. They sought to optimize the client’s tax strategy for this significant real estate investment.

Process
The process began shortly after the building was purchased in December of 2023. Our team conducted a thorough site visit, examining the property in detail and reviewing all relevant documentation. This comprehensive approach allowed for precise identification and reclassification of assets into shorter depreciation categories.

Study Results
The cost segregation study was finalized in February of 2024, delivering impressive results for the client. Our Fixed Assets team successfully reclassified over 19% of the depreciable basis from 39-year property into 5- and 15-year property. These personal property assets, all eligible for bonus depreciation, accounted for over $3.8 million of the total project cost. As a result of this reclassification, the study yielded an increased first-year cash flow of over $1.1 million for the client, surpassing the original projection by more than $51,000. Furthermore, the net present value of cash flows over the life of the investment exceeded $706,000.