Sober Living Homes / Recovery Residence a Real Estate Activity?

[Amy Konopka]

I would think so....is a Property Management Company one as well? I thought so. 

Is my newly formed Property Management Company that provides furnished long term housing for individuals who seek a cooperative living arrangements a Real Property Trade or Business?  

**We are NOT A DETOX OR PROVIDE SERVICES.

**The property is deeded under my name, I told CPA#1 it will be a C-Corp but will file as SMLLC . I don't think shouldve changed his Tax Strategy for me (which cost me a BIG chunk of change)

  I have two CPAs giving completely opposite views. CPA#1 basically telling me my business and the actual HOUSE attached to the business don't qualify as a real estate trade or business, and the other CPA  #2 saying I structured it as I should have for liability and establish a Real Estate Trade or Business. 

The SLH is a LTR.   I am The Landlord Owner and I own the real estate (The House) and I created The Company that manages the day to day operations (leasing, interviews, furnishings,  appliances, cleaning supplies, repairs, etc). The Company has a volunteer in the house (not paid) that lives rent free.  She makes sure the girls stay sober.  She's not a clinician.  She doesn't provide services.  She REQUIRES sobriety through drug tests (urinalysis) because The Company requires sobriety, just as SOME companies require...no waterbeds, or no pets on the premises.  She's also in recovery, so I drug test her.  I believe this is where the issue is with my CPA.  The industry calls her the "House Manager". If she "works" for anyone, she's working for My Company.  Its The Company that is responsible for ensuring the house remains drug free and everyone can live together in a safe and structured environment. If they use, they need to leave. If they test positive, they can't stay there. If they bring in boyfriends, I need to know. The Company provides housing that is safe and peaceful to all the tenants living in this Single Family Home. The Property management company collects rent and pays me, The Landlord. I accept checks, MO and Zelle-  No insurance, no cash.

The Company Leases from me, The Landlord, but CPA #1 says I can't claim REPS and the house is under the "Sober Living Business". I'm not in the "business of Sobriety.  I'm in the house business. But I love the hands on aspect of Sober Living Residences.   I, The Company, am very involved, I know these girls, the House Manager and I are very tight.  We have to be.  Because we have to maintain a home with a lot of moving parts.  

As The Landlord Owner , I completely renovated the home myself with my partner with the intent of leasing it to The Company. That renovation ALONE qualified me for REPS (we did everything ourselves over a 7 month period and I have no W2).  I created The Company because I intend to scale with the  Group Home living "niche". I have no w2  I do gig work at about 500 hours per year max.  I have one other Long Term rental I self manage d for 20 years. My intent is to legitimize my standing as a Real Estate Professional by actually "being professional" with structures, time logs and real estate activity to offset my other non-passive income (alimony).  

So, Is The Company a Real Estate Trade or Business?  I know the property is despite CPA #1 saying it is "part of a Sober Living Business" and therefore separate from my "Rental Real estate Holdings". 

Thank you!
 

******Below is FYI ONLY  who prefer citations and more clarifications.  Not necessary to  read to answer my question. **********************

At the Federal Level, Recovery Residences are now officially recognized, HUD has even put out videos on the Housing Model. Search on Youtube.

  The National Alliance for Recovery Residences (NARR) is the "go to" organization for all things in this EMERGING industry.  Look them up if you're interested in learning more about this much needed housing model.  

LICENSING IS NOT REQUIRED. in California, not sure elsewhere.  But they are hoping to change this.  Don't hate me, but I want more regulation. I want the industry cleaned up.  

The industry has had ALOT of bad players. Alot of fraud. Body brokering. Crappy homes cramming bodies to the maximum allowable space.. But alot of GREAT ones, too. That is the exact reason I wanted to get into this industry. I LOVE battling stigmas.  I'm not interested in helping anyone maximize their ROIs, I am interested in telling you where to find info on creating a good quality home that will actually help people. 

The State of California even goes so far to CLARIFY what a Recovery Residence is

Definition:

For the purposes of HSC Section 11833.05, "recovery residence" means a residential dwelling that provides primary housing for individuals who seek a cooperative living arrangement that supports personal recovery from substance use disorder and that does not require licensure by the department nor provides licensable services, pursuant to Chapter 7.5 (commencing with HSC Section 11834.01).  A recovery residence may include, but is not limited to, residential dwellings commonly referred to as "sober living homes," "sober living  environments," or "unlicensed alcohol and drug-free residences."