House-Hacking / Managing Property / REPS?

[Ammar Khan]

Hey everyone,

I've been learning about attaining the real estate professional status (REPS).

From what I understand, if I own the property, and if I self manage it, then I should just about automatically qualify for REPS.  Is this correct?

Also, if I am self managing, can I log 16-24 hours per day if I am doing things like monitoring security cameras throughout the day, receiving and delivering renter's mail, responding to whatever needs/concerns renters may have, etc., and if I am available to my renters after hours / through the night?

(I also do all of the advertising, tours/viewings, communications resulting from the advertising, but once all of the rooms are rented, and I am purely managing, how are property managing hours discerned, I suppose that's my question here.)

[Ty Coutts]

Hey Ammar,

Yes, you are correct that owning and actively managing rental properties can qualify you for real estate professional status (REPS) under IRS rules. To qualify, you generally need to spend more than 750 hours per year on real property trades or businesses in which you materially participate.

Activities such as self-managing, handling tenant needs, monitoring security, and overseeing property maintenance all count towards these hours, even after all units are rented out. Keeping detailed records of your time spent on property management tasks is crucial for documenting your eligibility for REPS. Consulting with a tax professional can help ensure you meet all IRS requirements and maximize your tax benefits. Hope this helps. Feel free to reach out to me directly if you have any questions/want to discuss further. 

[Ammar Khan]

Hi Ty,

Thank you very much for your response.

The notion of "keeping detailed records of your time spent" has befuddled me up to this point.  I have started doing it, but I'm not sure if I'm doing it correctly.  

For example, is this sufficient?:

Monday, 7/1/24

7 AM - 11 PM

-Monitored security cameras throughout the day.

-Checked mail and delivered to tenants, as necessary

-responded to tenant question regarding parking

-remained on standby all day for tenant needs/emergencies

Or is something like this necessary?:

Monday, 7/1/24

7AM-7:30AM - Monitored security cameras

1:30PM-2:15PM - Responded to tenant question regarding parking

3:00PM-3:30PM - Monitored security cameras

4PM -4:15PM - Checked mail and delivered to tenants, as necessary

7PM-7:30PM - Monitored security cameras

10:30PM-11PM - Monitored security cameras

7AM-11PM - remained on standby all day for tenant needs/emergencies

Further clarification on this will be greatly appreciated.

[Ty Coutts]

This general log gives an overview of your activities, but it might not be detailed enough for IRS purposes.

Example 2: Detailed Log

Monday, 7/1/24

7 AM - 7:30 AM: Monitored security cameras

1:30 PM - 2:15 PM: Responded to tenant question regarding parking

3:00 PM - 3:30 PM: Monitored security cameras

4 PM - 4:15 PM: Checked mail and delivered to tenants, as necessary

7 PM - 7:30 PM: Monitored security cameras

10:30 PM - 11 PM: Monitored security cameras

7 AM - 11 PM: Remained on standby all day for tenant needs/emergencies

This detailed log breaks down your activities into specific time slots, which can provide a more precise account of how your time was spent.

Best Practices for Record-Keeping

Be Specific: Break down your activities into smaller time intervals, as shown in the detailed log example.

Use a Logbook or App: Consider using a time-tracking app or a dedicated logbook to keep daily records.

Document Standby Time: Clearly note the hours you are on standby for emergencies, but also separate it from active tasks.

Include All Activities: Document everything from advertising to maintenance and tenant interactions.

Consulting with a Tax Professional

Given the complexity of qualifying for REPS, it's always a good idea to consult with a tax professional. They can provide specific advice tailored to your situation and ensure you're meeting all IRS requirements.

Additional Resources

If you're looking to expand your real estate portfolio or need financing options, let me know. I'd be happy to discuss mortgage solutions that can help you grow your business and achieve your investment goals.

Feel free to reach out if you have any more questions or need further assistance.

Best regards,

Ty

[Drew Sygit]

@Ammar Khan you cannot qualify for REPS if you have a W-2 job.

Google the IRS requirements and read for yourself.

[Adam Bartomeo]

Oh boy... I think that you are more than STRETCHING the truth here... I work 80 a week in real estate which far exceeds most people and you want to claim that you work in real estate 16-24 hr a day???

I am all about using the tax code to your advantage but flat-out LYING about being a professional is unethical, immoral, and WRONG!

[Ammar Khan]

Quote from @Adam Bartomeo:

Oh boy... I think that you are more than STRETCHING the truth here... I work 80 a week in real estate which far exceeds most people and you want to claim that you work in real estate 16-24 hr a day???

I am all about using the tax code to your advantage but flat-out LYING about being a professional is unethical, immoral, and WRONG!

 Hi Adam,

The reason I opened a biggerpockets account and then asked this question is so that I don't do anything "unehtical, immoral, and WRONG".  That's why I am here, to ask a question and to learn.  Please notice how in my original post, I posed questions.  I did not say: "This is what I do every year..."

Do you currently manage any properties during your 80 hrs/week?

[Ammar Khan]

Quote from @Ty Coutts:

Document Standby Time: Clearly note the hours you are on standby for emergencies, but also separate it from active tasks.

Hi Ty,

Thank you again for the information.

Do you think standby time will count towards material participation?

Do you know if the IRS has provided any guidance, or had any rulings, in this regard?

Because in reality, by not hiring a property manager, and committing to doing the easier things myself--like unclogging a toilet / shower drain, fixing a light bulb, pest control, calling a plumber--I am committing to be on standby for many hours, which is a sacrifice of peace of mind / being able to leave town or take vacations--and I would like to know if it's worth it.