Can anyone help with the cost basis of an owner built rental

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@Joshua VanNamewell, sounds like the best use of your time is to work so you can hire people to do these cabins...If you worked on the cabins yourself, you'd get paid back but much later when you sell. And, you'd be paying long term capital gains tax. That's where the lower cost basis comes into play. But, I am guessing you need something to pay the bills today instead of in 10 years...simply put, REPS is just the ability to take passive losses incurred that year onto your main 1040 return to offset your usual wages/salary. Normally (yeah, bunch of income limits), passive losses can't be taken onto your main return, but are carried over year over year until you have net passive income to offset. some investors pushing to get more tax deductions try this to decrease their tax liability that year. In certain circumstances I think that works. However, in the long term I find it to be tax inefficient. Good luck.

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More like 20 of the new guys. They're worthless aren't they? Remember the old test of 'build me a sawhorse'....now it's can you sweep the floor?

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We'll just have to get some old GCs on here to fly back for a week and get 'er done then.... But you couldn't afford the beer charge....... : -)

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Hey I appreciate that explanation on REPS. I already take a ton of deductions so I can see where it would be tax inefficient. My salary is nothing crazy so there is only so much to offset.I think my best bet might be to hire it out. Or as a previous post suggested hybrid approach where you basically farm out what you don't want to do. I have access to my employers subs for plumbing, electrical, and we have some finish guys for rock/trim.

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I would take 5 grey haired carpenters over 10 of the guys we're seeing these days.

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Thanks for your reply. My plan is to rent them for the next 5-10 years and then sell them and run as far and as fast away from New York State as possible. I would not pay someone else to build it out of spite. For me it is all about opportunity cost and tax ramifications. Losing out on w2 income and then losing out on the higher cost basis is a double whammy for me. I honestly still do not fully understand REPS and need to further research that. It seems you are correct that it may not be beneficial for me. Being able to use and appraised value as cost basis would be a dream but you are probably correct that that is unlikely as well.

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I am in upstate NY. This is a rural area and one can build their own home. I can legally build just about anything that I want up here. You still need to follow local codes of course. I am on a first name basis with just about all the local inspectors/code enforcement and they are an easy bunch to work with. It does not make sense for me to do all the work myself just for the savings in labor costs. I would be better off going to my job and working overtime and paying someone else to build it. I would then keep the extra hours going towards increasing my pension, extra overtime hours that would have been spent on my rental, my year-end bonus would be bigger, and I can come it with a significantly higher cost basis lowering my tax liability. The opportunity cost is too high if I am unable to somehow write down my personal labor. An outside contractor would probably finish it in 2 months and allow me to rent it several months sooner than if I built it in my free time. Over 11 rentals that would be $50k.

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This is a problem all of us with some trade skills can run into.You just have to deal with it, you're getting the huge savings of doing the work yourself.....you can't also get the write-off/basis.....You have to do the math and see if it's worth it. Also, you don't say where you are, but many states do not allow you to do 'Owner/Builder' work on your investment properties, just on your own personal residence....

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@Joshua VanName agreed the forums are a wealth of information. Based on your description I'd suggest starting by reading the book: Who Not How https://a.co/d/eLZv7lFI think we all start off more DIY and getting our hands dirty. However, ideally if we started both with the understanding that collaborations and building the right team in conjunction for planning for our larger future and objectives we'd get to the "freedom" that we are all actually chasing via RE that much faster. If you DM me I have a tool that helps you think through and craft your Vivid Vision (where you'll be 3 years from now) I just can't share it in the message b/c it has branding to my company. My guess is that you'll end up doing a hybrid approach and keeping the parts of these projects that bring you energy while finding other "whos" for the parts of the projects that don't. Just remember that when parts of the projects and operations feel heavy to you it doesn't mean they feel heavy to others. Delegating to elevate teammates and partners has been vital in the success of my companies and empowering my team to grow as people and together.

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@Joshua VanNameWhat are you planning on doing with these?If you sell them, it just means that you cost basis is lower, and you earn more profit (which was the point of doing the labour yourself)... No point being spiteful to pay somebody else to do the work.Not seeing how real estate professional status (reps) helps here. You need to have losses and you don't have much in the way of depreciation just yet, or not much at all.you need to consult a qualified professional how this development will be taxed. I am wondering if it will be capital gains at all. Building/developing like flipping I thought was dealing in inventory. So, it will be taxed as ordinary income. if you can declare a business around being a developer, then sure you could probably expense an excavator, truck, etc against your income assuming you sell them.If you keep an rent them, not sure if you could use an appraised value as a cost basis --- probably not.Hope this little bit helps. Good luck.