Great Foundation & Ready to build a portfolio

[Jay Williams]

Hello all,

I am from Jax, FL and I currently own a duplex there. (airbnb 1 side, the other is geared towards medium term rentals)

I have all the tools I need to build a portfolio; however, I am lacking the knowledge on how to build it in the most advanteagous way. I want to focus on using real estate as a tax shelter and pay as little in taxes as possible. The 2nd goal is to increase cashflow enough to retire early.

Those of you who have scaled a portfolio of 10+ properties, what are some of your "I wish I had known before I started" lessons. 

I plan to meet with a cpa who has extensive knowledge and experience as a real estate investor.

Any and all advice would be greatly appreciated.

Thanks!

[Konstantin Ginzburg]

@Jay Williams

I am currently at ten units and the main thing "I wish I had known before I started" was to have started much sooner than I did. A secondary thing that I would have likely wanted to know is to enter into multifamily properties sooner than I had. When I first entered into real estate investing; my focus was on single family homes. Luckily, I had a great realtor who encouraged me to look into the multifamily space and that has proven to have a higher cashflow than single family homes. If one of your goals is to increase cashflow enough to retire early; then the obvious answer is that you need to prioritize cash flow in your acquisitions. There are two primary ways of accumulating wealth within real estate: cash flow and property appreciation (debt paydown and tax benefits are other factors as well). If your goal is cashflow, then be sure to target properties that do cash flow and allow time to do the rest. If the property cash flows to begin, this cash flow will likely grow over time. 

Your goal of tax protection is best discussed with your CPA. One more recent lesson I have learned from my CPA is the separation of active and passive income streams for taxation. While long term rentals are considered passive investments; and hence the depreciation cost for them can only be applied to rental revenue as opposed to your active job; an STR is considered an active investing so the depreciation from STR revenue can be used to offset W2 income if certain conditions are met. For full disclosure, I am not a CPA or professional accountant so while this may be information worth keeping in mind; I would highly advise reviewing this with a CPA to ensure everything is managed correctly.