BRRRR Property in Reno stage - Tax Strategy

[Abigail Nalbandian]

Hello all,

Husband and I are working on our first deal. We bought a house cash at the sheriff sale and are going through the process of remodeling it. Our plan is to follow the BRRRR strategy. We listened to plenty videos and podcasts, and read plenty books, and decided to open an LLC and transfer ownership of the house from us to the LLC. Now I am wondering if we did that too soon.

We are not done with the reno yet (it was a hoarder's house and nothing had been updated in over 20 years), and because the property had no electricity for over 6 months, the city wont turn on electricity until we pass electrical inspection.  So even if we finish our part of the reno in time to have it listed before the end of the year, we are at the mercy of the inspector.  I have a few questions that I have listed below.  If anybody can guide me in the right direction I would really appreciate it as I am a bit concerned about the tax concequences of all of this.

1. Will we be hurt for tax purposes if we are not available for rent before the end of the year? Husband read somewhere that the LLC must have a "product" available in order to function as such.

2. We are spending a good amount of cash on the renovations. Also because we live in a different city and are doing a lot of the reno ourselves, we have a lot of travel expenses related to the renovation. Are all of these expenses tax deductible? Or are they captured through depreciation once the property is re-appraised during the refinance stage of the BRRRR strategy? If the 2nd is correct, do we just claim depreciation for the capital we paid at the sheriff auction for the house?

I know lots these are tax specific questions.  However, the person that usually does our taxes is not a real estate investor and doesn't know a lot of the answers.  Which brings me to the next question: How do you go by finding a good tax professional/ CPA to advise you through your investing in real estate venture? Again, this is our very first deal and a we still have plenty to learn.

Thank you in advance for your help!

Abi