Tax & Entity Blueprint · 80% Leveraged Basis · Arizona Private Money Loan — No-Tax-Return Asset-Based Equity, Auction & Cash-Out Bridge Loans
Cost Segregation, MACRS 5/7/15-Year & STR Tax-Shield DSCR Strategy
Direct Strategy Summary: Because IRS depreciable basis equals total purchase price plus capital improvements regardless of LTV (Crane v. Commissioner), acquiring rental real estate with 75%–80% DSCR leverage and commissioning an engineering-based Cost Segregation study reclassifies 22%–32% of building basis into 5-, 7-, and 15-year MACRS property for accelerated Year-1 tax deductions.
Reclassified MACRS Share
22% – 32% of Building Basis
Personal property (5-yr), appliances/fixtures (7-yr), and land improvements (15-yr).
Leveraged Basis Multiplier
4x – 5x Cash Down Payment
At 80% DSCR LTV, you depreciate 100% of the building improvements with 20% equity.
STR / REPS Active Offset
IRC § 469(c)(7) / ≤7-Day Stay
Material participation (100+ hrs & more than anyone else) can offset active income (confirm with CPA).
DSCR Underwriting Impact
Zero Penalty for Paper Losses
DSCR loans ignore Schedule E depreciation write-offs completely.
Step-by-Step Underwriting & Execution Sequence
STEP 01
Acquire & Place Property in Service Before December 31
Close with 75%–80% DSCR financing and make the property ready and available for rent within the tax year.
STEP 02
Commission Engineering-Based Cost Segregation Study
Break out land allocation (typically 15%–25%) and segregate 5-, 7-, and 15-year MACRS components.
STEP 03
Scale Portfolio Without Schedule E Paper-Loss Denials
Because DSCR underwriting never reads personal tax returns, large depreciation write-offs never hurt future loan approvals.
Frequently Asked Underwriting Questions
Will taking massive cost-segregation depreciation hurt my ability to qualify for my next DSCR loan?
Never. Conventional Fannie/Freddie loans penalize investors who show paper losses or omit tax returns, whereas DSCR loans do not collect tax returns at all.
Do I get to depreciate the portion of the property financed by the DSCR mortgage?
Yes. Under federal tax law, your depreciable basis includes the full purchase price plus capital improvements, including debt-financed acquisition basis.