You know that old saying, “It’s what’s on the inside that counts”? Well, that is very true, but when it comes to the self-storage industry, it’s also what’s on the outside that matters.
Today’s customers are looking for the total package when it comes to a place to store their most prized possessions, and that includes facilities that are well-maintained and attractive. However, some improvements, such as shiny new unit doors, do more than just look appealing. Newer doors also provide a safer environment, and Janus has a variety of options available with security as a priority. When you add a smart locking system such as the Nokē Smart Entry System, a Bluetooth electronic lock and total access control system, you’ll know you’re doing everything possible to keep your tenants’ valuables as safe as possible.
But let’s be honest, renovations like that cost money, and in today’s economy, new doors can be a heavy lift financially (pun intended). If only there were a way to save money when undergoing a renovation project such as this. Well, you’ve come to the right blog because there is, and it’s called cost segregation!
Good question. Cost segregation is a very smart tax strategy that accelerates depreciation and reduces the amount of taxes owed. This method allows parts of your building to be depreciated on a 5, 7, or 15-year schedule instead of depreciating the whole building at 27.5 or 39 years with the straight-line method. Cost segregation is a great way to help you find additional deductions through renovations and write-offs, including installed doors.
Utilizing a depreciation method such as cost segregation, you could save up to $100,000 for every $1 million in building costs within the first five years of ownership. Yes, you read that right. And faster depreciation means you’ll have more money available to put back into your business, however you want to use it!
Cost segregation is not just for large or high-value buildings, either. Your property may qualify with a cost basis of as little as $250,000 or renovations of at least $100,000. In the case of a renovation, a study may also include Partial Asset Disposition, in which the value of components disposed of during the renovation is identified. This value can then be taken as a loss, minus what has already been depreciated.
Rest assured, this isn’t some risky endeavor. Federal tax code guidelines are well established, and several hundred thousand building owners have utilized this effective strategy over the last twenty years.
An exclusive program that goes hand in hand with cost segregation is the Janus R3 Program. R3 (Restore, Rebuild, Replace) focuses on replacing storage unit doors, optimizing unit mix and idle land, and adding a more robust security solution. This enables owner-operators to charge higher rental rates and stay ahead of the competition.
By investing back into your aging facility, you can take advantage of cost segregation, as well as a variety of other benefits and insurance discounts as well. With R3, you are upgrading to the highest quality products available while gaining all the competitive advantages of the R3 program.
R3 helps you transform your facility, make it safer and more secure, and, of course, increase your ROI; all while providing a valuable tool for cost segregation.
Self-storage doors tend to endure tremendous wear and tear and are usually among the most common items that need replacing. As mentioned above regarding Partial Asset Disposition, when you throw your old doors away after replacing them, you can write off the remaining basis that has not already been depreciated.
Another reason that doors are the topic of the cost segregation discussion is the safety factor. Newer doors provide a safer environment, minimizing issues such as tenants struggling with older doors that are hard to open and close or, worst of all, having a door fall on a tenant, putting you at risk of a lawsuit. Replacing your older doors is a wise decision regardless of whether or not you are utilizing cost segregation.
One ideal way to upgrade your facility’s doors and provide a heightened sense of safety and security is to incorporate the NS Series from Janus International. The NS Series consists of the NS+ Door and the NS Retrokit package, which both incorporate a robust lower bar equipped with security clips that help prevent unauthorized access and reinforce door strength. Anchored floor guides also provide enhanced stability and durability. You can never have enough security for your tenants, so these are wise choices for any facility.
As you can see, updating your self-storage doors is a win-win all the way around. You’re ensuring your tenants an environment that is as safe and secure as possible, giving them peace of mind that their valuables are in good hands. With cost segregation, you can save money and, in turn, improve your facility, which then lets you charge more for unit rentals. Everybody benefits.
With current quick turnaround times, there’s never been a better time to consider renovations. To learn more about the many benefits of cost segregation with regard to your renovation projects and how to add to the valuation of your facility, click here.