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Scott Krone Featured on the Rental Property Owner & Real Estate Investor Podcast

In this episode, Scott Krone joins Brian Hamrick, host of the Rental Property Owner & Real Estate Investor Podcast where they discuss the adaptive re-use of commercial space and how it can be turned into an asset class that is very attractive and extremely profitable.

Scott Krone is the managing partner of Coda Management Group, a company that teams up with investors to purchase and convert undervalued warehouse space into climate-controlled self-storage facilities. Scott has a Masters of Architecture degree from the Illinois Institute of Technology and he's created 47 syndications and has over 400,000 sq. ft. and 2,759 storage units under management, along with over 25 years of development and design-build experience.

Scott shares the process he goes through in converting old warehouse space to self-storage, including his typical costs per sq. ft. for acquisition, construction, and soft costs. He discusses the financing that's available for these projects and how Coda builds and sells their developments to REITS.

Scott and Brian discuss the importance of mentors, whatever happened to the original 'Lincoln Log' factory in Chicago, and how he uses personality profiling techniques to build his team and understand his clients better.

Some key takeaways from the interview include:

  • Things to look for when purchasing a property:
    • Demographic: hire a feasibility consultant
    • Size: look at the size that the end buyer wants
    • Zoning: If your cost structure is lower than your competitors, it gives you more flexibility in the pricing.
  • The more open and flexible the space is, the greater ability we have to put functional units.
  • Look to maximize the investor's rate of return.
  • PACE financing is through the department of energy. If you are using green energy and it can be paid out through the property taxes.
  • Structure your debt so it’s interest only and through the interest reserve.
  • If there is too much product in a market place, that will impact your pricing. Know where you stand in the supply and demand.
  • Take education from outside businesses and apply them to your company.
  • Ask yourself and your business, are you solving a problem.
     

Listen to the full interview and read the complete show notes here!

WEBSITE FORM HERE

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Scott Krone Featured on Flipping Junkie Podcast with Danny Johnson

Danny Johnson of Flipping Junkie was joined by Scott Krone, Founder of CODA Management that teams up investors to purchase undervalued warehouse space and convert it into climate controlled, self-storage facilities that are managed by a top 3 operator. In this episode, Scott shares with us what he considers to be the most valuable lessons he’s learned throughout his career. He begins by advising “develop a strong team,” and explains how he relies on a strong team of brokers, contractors, lenders, and more to be able to keep everything running smoothly.

Some key takeaways from the interview include:

  • You need to develop strong team. The longer you’re in the industry, the more you’ll depend on the team.
  • Focus on developing each aspects of your team.
  • Use a wide range of resources to find properties.
  • Figure out if it is a good time to be in the market.
  • You can make “real money” in development, changing the use of the property.
  • Go in to markets that are not over saturated. Hire feasibility consultants to get the demographics of the area you are interested in.


Listen to the full interview and read the complete show notes here!

WEBSITE FORM HERE

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Updated Regulations - Opportunity Zones

By now, you may have heard about Opportunity Zones. Opportunity Zones were created through legislation that was passed into law in the 2018 Tax Act. We now have over 8,700 zones across the United States where development is being promoted through a tax shelter. It is anticipated that over $100 Billion dollars in private funds will be invested into these opportunity zones. Each zone was designated by each state’s governing body and then approved by the U.S. Treasury Department. Since the recent update released in April was 169 pages, we break down some keys points below.

WHAT WE ALREADY KNEW

 Three Incentives to taxpayers to invest in economically distressed areas:

  • Temporary Deferral: Defer capital gains tax until 2026 by investing unrealized gains in a Qualified Opportunity Fund of which is self-certified.
  • Reduction of Capital Gains Tax: Tax liability cost basis is reduced by 10% if the investment is held in the fund for 5 years and an additional 5% reduction if held in the fund for 7 years.
  • Exemption: If the investment is held in the fund for 10 years, the capital gains accrue tax-free
     

Who & How?

It is important to note that any taxpayer can elect to defer gains. Individuals, LLC’s, C-Corps, partnerships, S-Corps, trusts and estates can all elect to defer their gains by filing a Form 8949 with a tax return.

Only tax on capital gains from sale or exchange can be deferred. Ordinary gains are not eligible.

  • Short-term capital gain
  • Long-term capital gain
  • Section 1231 gains from a sale of business assets
  • Unrecaptured Section 1250 gains
  • REIT and RIC capital gain dividends
  • Collectible gains
  • Carried interest
  • Qualified Opportunity Fund

A qualified opportunity fund (QOF) is a self certified entity that owns interest in eligible property or businesses within an Opportunity Zone. 90% of the assets from the fund must be held in Opportunity Zone property which is reported on the tax return each year. Investments must be equity investments in businesses, tangible property, or real estate within an Opportunity Zone.

Opportunity Zone Investor -> Qualified Opportunity Fund -> Operating Partnership -> Qualified Opportunity Zone Business or Real Estate

 

NEW CLARIFICATIONS

Fund Contributions

  • Taxpayers have 180 days from the end of the taxable year to invest the capital gain into the Opportunity Fund. For example, 180 days from December 31, 2018 is June 29th, 2019.

Qualifications of OZ Business Property

  • Property within an Opportunity Zone has to be purchased after December 31, 2017.
  • Land and vacant buildings are NOT required to be substantially improved after they are acquired
  • Property that is straddling an Opportunity Zone has to have more than 50% of the square footage within the zone
  • When exiting, proceeds from a sale or disposition of property must be reinvested within twelve months of the sale

These updates brought some much needed clarifications on many different topics within this legislation that was passed into law in the 2018 Tax Act. Please feel free to use this as a reference when making investment decisions on Qualified Opportunity Funds.

WEBSITE FORM HERE

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Scott Krone Featured on Old Dawg's REI Network

Scott Krone, founder and Managing Partner of Coda Management Group, joined Bill Manassero on the Old Dawg’s REI Network to discuss Self Storage and shares insider information and insight on the industry, as well as commentary on how to identify good investments from the bad. The Old Dawg’s REI Network is a community of people who are approaching retirement and interested in generating increased cash flow for their retirement years.

Some key takeaways from the interview include:

  • Market shifts and the relationship to real estate investment strategies
  • Why self-storage is better than single or multifamily properties
  • What kind of returns you can expect when investing in self-storage
  • How to weigh risk when investing in self-storage facilities


Listen to the full interview and read the complete show notes here!

WEBSITE FORM HERE

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Scott Krone Featured on The Real Estate Locker Room Podcast

Scott Krone, founder and Managing Partner of Coda Management Group joined John Carney, a highly-respected thought leader in the specialized and lucrative field of real estate investing, on the Real Estate Locker Room podcast. They discuss the importance of making profitable business adjustments for long-term success, and how doing so has proved key for Coda Management Group.

Some key takeaways from the interview include:

  • Teamwork is important, and you need to work together for a collective goal.
  • The overall market affects the real estate market.
  • You can’t operate in a vacuum – you have to pay attention to what is happening around you – from the market to your competition.
  • With commercial real estate, pay attention to the numbers. Commercial real estate is more numbers driven where residential real estate is more emotional driven.
  • Never be content, and always look to improve.


Listen to the full interview, and read the complete show notes here!

WEBSITE FORM HERE

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Scott Krone Featured on Cashflow Ninja Podcast

Cashflow Ninja is a podcast aimed at empowering and inspiring people to discover how to generate their own income and manage, grow and protect their own wealth in the new economy. Scott Krone, founder and Managing Partner of Coda Management Group joined M.C. Laubscher on the Cashflow Ninja to share why and how he got started in the Self Storage space, and how buying distressed real estate assets in a non-distressed market has paid off for his business. He shares where his story all started, how Coda Management Group got started and some tips of the trade.

Some key takeaways from the interview include:

  • Where there is an increased amount of risk, there is an increased amount of money potential.
  • We make our money on the “buy” portion of a real estate investment deal. We focus on the acquisition to make sure that we are buying at a really good price point to take advantage of inefficiencies in the marketplace.
  • The biggest factor in Self Storage is saturation levels – how many other competitors do you have in a very fixed radius.
  • Self Storage is more of a “Crockpot” investment. It’s not a “microwave” investment where you get rich quick, but the time and investment pays off in the long run.


Listen to the full interview, and read the complete show notes here!

WEBSITE FORM HERE

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Scott Krone Featured on Commercial Real Estate Pro Network

Like its name suggests, Commercial Real Estate Pro Network is a podcast about Commercial Real Estate Investing. It is designed to be a resource for investors and professionals engaged in Commercial Real Estate.

Scott Krone, founder and Managing Partner of Coda Management Group, joined J. Darrin Gross on Commercial Real Estate Pro Network to discuss Self Storage real estate investing being an attractive alternative to low cap multifamily. In addition to providing some basic Self Storage education, Scott shares some secrets to Coda Management Group’s success.

Some key takeaways from the interview include:

  • The ideal Self Storage opportunity is an existing building with current zoning in place that allows for Self Storage. There is less hassle, and the timeline is shorter.
  • Understanding the opportunity better than your competition is the key to success.
  • The difference between renovating and new construction is staggering including the total timeline and costs. 


Listen to the full interview, and read the complete show notes here!

WEBSITE FORM HERE

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Scott Krone Featured on How to Lose Money Podcast

How To Lose Money is a wealth-building podcast dedicated to the honest, sometimes gut-wrenching stories of business and life lessons learned. Scott Krone, founder and Managing Partner of Coda Management Group, joined How To Lose Money podcast hosts, Paul Moore and Josh Thomas to discuss the importance of getting everything in writing. In this podcast episode, he shares a specific example that could have turned out very differently had written (and not verbal) consent been obtained.

 

Some key takeaways from the interview include:

  • There are things you can control and things you can’t control in life. Maximize the things that you can control, so that you don’t have to experience those pains.
  • Look for and seek out mentors – you can grow from their experiences, you don’t have to recreate the wheel, and you can grow faster.
  • Don’t go into panic mode, do your research, and look for alternative, viable solutions to get you out of bad situations.


Listen to the full interview, and read the complete show notes here!

WEBSITE FORM HERE

Coda Management Group Development Closes for $1.2 Million by Petros PACE Finance, LLC

As reported on March 19, 2019 on PR Newswire, Petros PACE Finance, LLC (petros-pace.com) announced the closing of a $1.2 million Commercial Property Assessed Clean Energy (C-PACE) transaction in Toledo, Ohio, marking Toledo's first privately funded C-PACE project and Ohio's first Opportunity Zone project to include C-PACE financing. The Toledo-Lucas Port Authority is the C-PACE program administrator and Coda Management Group is the developer.

The transaction will fund energy efficiency upgrades as part of the redevelopment of a 1900's era commercial warehouse building into a 690-unit self-storage facility. Proceeds will be utilized to replace the roof, insulate the ceiling, and install double-pane windows, high-efficiency furnaces and AC units, LED lighting and controls.

"C-PACE financing was a critical component in the capital structure for this transaction and we had a short window to close in order to take advantage of this Qualified Opportunity Zone funding," said Scott Krone, CEO of Coda Management Group.  "Petros stepped up to provide timely execution along with competitive terms and we look forward to working with them in the future."

The Opportunity Zones program, passed as part of the Tax Cuts and Jobs Act of 2017, promotes economic development in distressed communities by giving investors and developers the ability to forgo and defer paying some capital gains taxes if they invest in any of the designated zones.

Read the full story here!  

WEBSITE FORM HERE

11 Frequently Asked Questions about Cost Segregation for Self-Storage Properties by Heidi Henderson

Heidi Henderson is the Executive Vice President of Engineered Tax Services.

1. What is Cost Segregation?
Cost Segregation is the process of identifying personal property vs. real property, and individual building components for tax purposes, rather than treating a building purchase as one large asset. This determination allows a property owner to depreciate their assets over the useful life of each asset instead of assuming that the entire purchase amount applies to one long-term (39-year) asset.

2. Does my property qualify?
All investment properties, including self-storage properties qualify for cost segregation. When a cost segregation study is applied, you are telling the IRS that you are simply choosing one acceptable method for depreciation (MACRS*) vs. another approved depreciation method (straight-line). Both are acceptable, however MACRS requires an analysis to identify the value of each individual asset you own, rather than looking at your property as one large asset.

3. When does it make sense to do a Cost Segregation study? 
Cost Segregation can be applied to a newly purchased building, a newly constructed building, or a building you have owned for around 15 years or less. If the property is not fully depreciated (39 years is the length of normal depreciation), then there is an opportunity to change the method with cost segregation. Although any property can be depreciated under MACRS, the
costs of performing a cost segregation study may outweigh the benefits if the property was acquired for less than approximately $300,000.

4. What items are reclassified via Cost Segregation?
Under straight-line depreciation a property’s total cost (less an allocation for land), is depreciated evenly over 39 years. Under MACRS the assets are identified and reclassified in 5-year, 15-year, and 39-year class lives depending on the IRS determination of its actual useful life. And whether the assets are used for your business use, or the basic function of the buildings use as a structure. Examples of 39-year property include; windows, walls, doors, roof, HVAC systems, plumbing, and electrical. Examples of 15-year property include exterior improvements such as; fencing, exterior signage, asphalt, curbs, landscaping, and exterior lighting. And examples of 5-year property are; carpet, appliances, specialty lighting, woodwork, unit partitions, individual unit locks and security, and business specific heating and ventilation systems.

5. Does the type of property affect the tax savings?
Some property types will have a higher reallocation percentage than others. Interior, climate controlled self-storage properties will see a higher amount than a shed-row or boat and RV storage type. The allocations are based on actual assets and values or each of the components within the property.

6. What information is required to do a Cost Segregation study? 
Surprisingly, the information required to perform the study is limited. For a recent purchase, the closing statement or HUD is the only requirement. Blueprints are helpful but not necessary. New Construction projects require cost breakdowns and total costs for construction and development, but individual invoices are not required.

7. How do I choose a Cost Segregation provider? 
Choosing a reputable firm is a vital to ensuring that every aspect of the IRS requirements are met, and in the case of an audit the report is upheld without disallowances or associated interest and penalties. The IRS Audit Technique Guidelines dictate that a physical site visit is performed, the analysis is performed by a professional with cost-accounting or engineering expertise, and the method of determining asset value is an approved methodology. Make sure that audit defense is included in your study, and that the final report offers complete detail over every aspect of your property. Choosing a low-cost provide may be tempting, but the ultimate savings, detail and support of a reputable provider will far outweigh any additional costs. And finally, ask for references!

8. Will I get audited if I do a Cost Segregation study?
Cost Segregation is not a “trigger” for audit. The IRS issued automatic consent for deprecation whether applying a change from straight-line to MACRS at the time of purchase or retroactive for a property you bought 10 years ago. This means that taxpayers are allowed to make this change with the approved forms offered by reputable cost segregation firms. However, in the rare case of an IRS review, rest assured that a detail report with the proper IRS approved methods and audit support will affectively defend your tax filing position.

9. How much does a Cost Segregation Study cost?
The cost is usually based upon the type and use of the building, size, and location of the property. Beware of cost segregation providers who charge a percentage of the tax savings. The tax savings is relative to the entity type, number of owners, the year of acquisition and other factors, so the actual cash benefit can vary. Most providers will offer a quote along with projected tax savings, so you and your CPA have the information necessary to make an educated decision.

10. How much will a Cost Segregation study save me? 
The tax savings realized with a cost segregation can vary depending on the type of building, your total acquisition cost, and length of ownership. Self-storage properties vary in type and size and may see reclassification percentages from 15% to as high as 40%. Request a detailed benefit analysis from a qualified and experienced firm who has a history with self-storage properties.

11. What does the Tax Cuts & Jobs Act (TCJA) passed in December 2017 mean for my tax return? 
The Trump administration passed the TCJA which is the largest tax reform bill passed in over 30 years. There are significant changes that offer tax cuts for real estate investors. The largest change being the adoption of 100% bonus depreciation for tangible personal property acquired after September 27, 2017. Tangible personal property is defined as assets with a useful life of 5, 7 or 15 years. Therefore, when cost segregation is performed to identify the personal property
(5, 7 15-year property) apart from real property (39-year assets), it allows the property owner to capture bonus depreciation on those reclassified property and immediately expense the entire value in the year purchased!

*MACRS: Modified Accelerated Class Recovery System

WEBSITE FORM HERE

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+1 847 272-7775
info@codamg.com

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