Putting STR into service at end of year vs beginning of next year

[Marc Shin]

why do some investors try to put their new STR's into service towards the end of the year when there is very little active income to offset? what is the benefit of putting a new STR into service towards the end of the year vs the beginning of the next year?

[Nick Velez]

@Marc Shin

Primarily to capitalize on the higher bonus depreciation since it is declining by 20% every year at the moment until it phases out. The goal of a cost seg is typically not to offset the income from the property, but to offset income from your active income (potentially a high W2 job). I have a lot of clients who have had great income this year and thus they are rushing to purchase a property by the end of the year, so they can place it in service. The year it is placed in service, is the year you can utilize the cost seg. Placing a property in service in December of this year versus January of next year is a 20% delta. 

Investors in general, tend to be more active at the end of the year from what I noticed. There tends to be less competition from every day home owners who need to move in the spring/summer before the new school year starts and thus the possibility of having more leverage on sellers. On the flip side, inventory tends to be lower so it really depends on the inventory level in your specific market.