In this concise video, Christian Osgood and Cody explain how using seller‑financed real‑estate deals with a low down payment (10‑15% instead of the typical 30‑40%) can deliver the same depreciation and tax write‑offs while requiring far less cash, effectively making the tax benefit up to four times more efficient. They describe cost segregation studies that break a property’s 27.5‑year depreciation schedule into 5‑, 10‑ and 15‑year asset buckets, allowing accelerated write‑offs that largely expire after about five years. To fully capture these benefits, investors must qualify as a Real Estate Professional (REP) and coordinate with a CPA. Because the accelerated deductions are front‑loaded, the strategy works best when investors continuously acquire new properties to absorb the write‑offs before they sunset, turning tax incentives into a scalable wealth‑building engine that also supports community revitalization.
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If your goal was, I'm going to buy X amount of real estate, I'm going to pay it off, I'm going to ride off into the sunset, unfortunately for you, you're left with a new problem.
Today we're talking about financial benefits on a tax front when you're buying with seller financing.
I'm Christian, this is Cody, and here we go. This will actually be a fairly short video, but a really critical one. If you want to pay a lot less in taxes, putting less down, you get the same tax benefits without nearly as much money down. So how do we actually structure a seller finance deal that would be different than a conventional deal, Cody?
Well, a lot of people are putting 30-40% down on their deals. I'm going to typically put 10-15% down. Now the beauty is they're going to get the same exact write-offs when they're putting their 40% down as I'm going to get when I put my 10% down, meaning that my actual benefits are 400% more effective and useful than theirs.
Now, if you're consistently buying seller finance deals like we are, your write-offs are going to massively exceed any income that you can possibly bring in on a property. Your tax— again, everyone's tax situation is unique, but your tax liability on your real estate should be zero. Now we run a lot of what's called cost segregation studies. So we take the 27.5-year lifespan that the depreciation of a property has, and we compress it into like 5 years. Now the government thinks 27.5 years is when you're going to pay enough in maintenance from things falling apart to where you'll have paid the entire replacement cost of the building. That's what the depreciation is. What a cost segregation study does is basically break out every single individual component that goes into a building, down to things like how many shelves are there and how long does a shelf last? What are the appliances? How long should a fridge last? They're gonna break those down mostly in 5-year, some 10-year, some 15-year buckets, and you're gonna write it off on an accelerated basis. What does this mean for you? Massive, massive tax benefits that mostly sunset after year 5. You're not gonna pay more taxes, so what do you have to do to mitigate That buy more real estate. Ta-da! If your goal, your original goal, is I'm going to buy X amount of real estate, I'm going to pay it off, I'm going to ride off into the sunset, unfortunately for you, you're left with a new problem. You can do that and you'll pay taxes on it, and that can be fine. And honestly, I know a lot of people who do that. They reach a point where they're like, you know what, I'm done, the taxes are okay. However, while you're doing your build phase, you do not want to get eaten up by taxes that are completely optional. You're actually incentivized by the government to buy and renovate properties. They're traditionally not good at that, so it actually is like good for communities and good for society as a whole to give you incentives to buy, renovate, and lease properties. As we're doing this game, roughly— and we could do it just every 5 or so years, I guess every 4 years before it resets— you just have to scale up. If you have a big portfolio, you need a lot of write-offs. If you come in 10% down on a huge building, you're likely able to write off the whole rest of your portfolio.
Now you do, as a caveat to this, you do have to talk with your CPA to make sure that you qualify for your REP status, your real estate professional status. Otherwise, some of this is not even going to be applicable to you. And if you chat with them, you can ask how to get that status so you can get more write-offs against your qualified income.
But when you're playing the game, if you're making the decision, I am going to be a professional real estate investor. Investor, in a full-time go into real estate. This is a game where you are financially incentivized to improve your communities through programs such as cost segregation studies. And well, there's a few other things you can do, but that's the biggest piece—seller financing that you can do that no one else can do. These ridiculously low-down deals mean with—means with little to no—none of my own cash I can get massive tax benefits against the active and passive income related to real estate.
And that's a wrap for today's short video on benefits as a buyer. Someday we'll talk about it as a seller. However, make sure to hit the subscribe button so you can see that video, and we'll see you next time.
