Answer
What is cost segregation on apartment buildings?
Cost segregation is an engineering-based study that reclassifies portions of an apartment building from 27.5-year residential real property into 5-, 7-, and 15-year assets. That accelerates depreciation, front-loading deductions and sheltering rental income (or offsetting other passive gains). Studies typically cost $5K–$15K and pay back in year one on most $2M+ buildings.
When it makes sense
Buyers running a cost-seg on acquisition frequently pay a 25–40% first-year depreciation write-off. Existing owners can retroactively cost-seg via Form 3115.
How it interacts with a sale
Cost seg accelerates recapture too. If you cost-segged and later sell without a 1031, the recapture bill is larger. Plan holistically with your CPA.
Local context
This answer reflects how deals actually trade in Cameron Samimi's core coverage area: the South Bay (Torrance, Redondo Beach, Hawthorne, Lawndale, Gardena, El Segundo), Long Beach (Alamitos Beach, Belmont Heights, Wrigley, Bixby Knolls, Downtown), and Westside LA. Pricing, rent regulation, and buyer depth differ materially between these submarkets — verify the specifics for your property before acting.
Related