Has Anyone in CFL Bought a STR Recently (2022+) to Offset Their W2 Income Tax

[Andrew Galloway]

Hello Bigger Pockets CFL community. I am looking into the STR and STR/bonus appreciation strategy as a way to offset W2/short term income. Since the market pre-May 2022 just is not comparable anymore I am interested in anyone who has done this in CFL from around May 2022 onward successfully and how it went.

The goal would be to aquire a STR that would cash flow itself, or at worst break even and also use that to maximize deductions to lower W2 federal income tax. I've read about strategies to do this and bonus depreciation and how the 1 year bonus depreciation is being phased out. While Orlando is a huge STR market, I'm also aware that it is currently a tough and saturated market.

If anyone has successfully done this in CFL, please give as much detail about how you did it and how it went. Or if you tried it and it failed also let me know. Another caveat: there are a lot of STRs out there that are breaking HOA/local government/state/federal laws or strongly bending the rules, and I'm looking for people who did not do that or who mitigated risk there.

For myself, I am a high income W2 earner and I currently have FEIE foreign income tax exclusion but at some point I have to be able to return to the USA fully or at least hedge against that possibility. So I am looking at this as a way to decrease my federal income tax if I lose FEIE. Otherwise I would start getting hit with very nasty taxes. I also am looking at this strategy for a family member who is in the area with W2 income.

Thank you!

[Sarah Kensinger]

When it comes to the strategy you're looking to learn, I would dig into Anderson Business Advisors and Toby Mathis (Tax Toby) channels on YouTube. It might also behoove you to hire the firm to help you navigate what you need and maximize every tax benefit out there. 

Hopefully someone on here has done a STR in CFL and can give you the other feedback you're looking for.

[John Underwood]

Quote from @Sarah Kensinger:

When it comes to the strategy you're looking to learn, I would dig into Anderson Business Advisors and Toby Mathis (Tax Toby) channels on YouTube. It might also behoove you to hire the firm to help you navigate what you need and maximize every tax benefit out there. 

Hopefully someone on here has done a STR in CFL and can give you the other feedback you're looking for.

I second Anderson Advisors. They are very good at what they do and they have alot of free content on You Tube.

[Shawn McCormick]

I have two local contacts for you Bell-Harding (HBI) is a local high level CPA specializing in Foreign investors and these scenarios.

Another would be Daniel Boyd a local cost-seg specialist 407-451-8996

Best of luck

[Andrew Steffens]

I think you are going to have trouble finding currently cashflowing Orlando market properties at todays price and interest rate.

[Raymond J. Rodrigues]

@Andrew Galloway, if you're open to a not so saturated STR market that performs strong, I would check out the Tampa Bay Area and reach out to @Josh Green. He’s helped quite a few BP members successfully STR in the area and is a one stop shop for all STR needs. You’ll know what I’m talking about after you speak with him. 

[Josh Green]

Quote from @Andrew Galloway:

Hello Bigger Pockets CFL community. I am looking into the STR and STR/bonus appreciation strategy as a way to offset W2/short term income. Since the market pre-May 2022 just is not comparable anymore I am interested in anyone who has done this in CFL from around May 2022 onward successfully and how it went.

The goal would be to aquire a STR that would cash flow itself, or at worst break even and also use that to maximize deductions to lower W2 federal income tax. I've read about strategies to do this and bonus depreciation and how the 1 year bonus depreciation is being phased out. While Orlando is a huge STR market, I'm also aware that it is currently a tough and saturated market.

If anyone has successfully done this in CFL, please give as much detail about how you did it and how it went. Or if you tried it and it failed also let me know. Another caveat: there are a lot of STRs out there that are breaking HOA/local government/state/federal laws or strongly bending the rules, and I'm looking for people who did not do that or who mitigated risk there.

For myself, I am a high income W2 earner and I currently have FEIE foreign income tax exclusion but at some point I have to be able to return to the USA fully or at least hedge against that possibility. So I am looking at this as a way to decrease my federal income tax if I lose FEIE. Otherwise I would start getting hit with very nasty taxes. I also am looking at this strategy for a family member who is in the area with W2 income.

Thank you!

As Ray mentioned - I do this a lot for many clients that are out of state. I've purchased at least 20+ in the last 12 months and I've bought 3 myself. I used bonus depreciation on 2 I bought last year and wrote off over $350k. I'm a real estate pro so material participation isn't an issue, but the majority of my clients are in the $300k-$900k/yr gross household income range and so using STRs is not only the best way to get great ROI on real estate nowadays but the tax benefits are the primary driver for most including myself. Feel free to DM and we can see if you'd be a good fit the market I work and if not, at least I can give you a few pointers as far as STR fundamentals and a couple resources for cost segregation.

[Andrew Galloway]

Quote from @Sarah Kensinger:

When it comes to the strategy you're looking to learn, I would dig into Anderson Business Advisors and Toby Mathis (Tax Toby) channels on YouTube. It might also behoove you to hire the firm to help you navigate what you need and maximize every tax benefit out there. 

Hopefully someone on here has done a STR in CFL and can give you the other feedback you're looking for.

 Thank you, I will check out those Youtube channels. I may have to break the years of laziness and try to find a professional tax firm. I am able to read and absorb a lot of material but there are a lot of complications for this type of strategy so I was interested in a real world example of it playing it.

[Collin Hays]

The goal should be to buy an investment to be an addition to your W2 income!  If it's offsetting income, that means you're going the wrong direction.

[Malik Javed]

Quote from @Josh Green:

Quote from @Andrew Galloway:

Hello Bigger Pockets CFL community. I am looking into the STR and STR/bonus appreciation strategy as a way to offset W2/short term income. Since the market pre-May 2022 just is not comparable anymore I am interested in anyone who has done this in CFL from around May 2022 onward successfully and how it went.

The goal would be to aquire a STR that would cash flow itself, or at worst break even and also use that to maximize deductions to lower W2 federal income tax. I've read about strategies to do this and bonus depreciation and how the 1 year bonus depreciation is being phased out. While Orlando is a huge STR market, I'm also aware that it is currently a tough and saturated market.

If anyone has successfully done this in CFL, please give as much detail about how you did it and how it went. Or if you tried it and it failed also let me know. Another caveat: there are a lot of STRs out there that are breaking HOA/local government/state/federal laws or strongly bending the rules, and I'm looking for people who did not do that or who mitigated risk there.

For myself, I am a high income W2 earner and I currently have FEIE foreign income tax exclusion but at some point I have to be able to return to the USA fully or at least hedge against that possibility. So I am looking at this as a way to decrease my federal income tax if I lose FEIE. Otherwise I would start getting hit with very nasty taxes. I also am looking at this strategy for a family member who is in the area with W2 income.

Thank you!

As Ray mentioned - I do this a lot for many clients that are out of state. I've purchased at least 20+ in the last 12 months and I've bought 3 myself. I used bonus depreciation on 2 I bought last year and wrote off over $350k. I'm a real estate pro so material participation isn't an issue, but the majority of my clients are in the $300k-$900k/yr gross household income range and so using STRs is not only the best way to get great ROI on real estate nowadays but the tax benefits are the primary driver for most including myself. Feel free to DM and we can see if you'd be a good fit the market I work and if not, at least I can give you a few pointers as far as STR fundamentals and a couple resources for cost segregation.

One thing to add regarding cost segregation:
You should always read the bio and resume of the persons signing your Cost Segregation study. Make sure they are certified with the American Society of Cost Segregation Professionals (ASCSP). The designation for Certified Cost Segregation professional is CCSP and comes after the engineer’s name. Any designation less than that is substandard. Just like you would only use a CPA to file your tax return, you should only use a CCSP to conduct your Cost Segregation study.

[Ashish Acharya]

If you're looking to use short-term rentals (STRs) and bonus depreciation to offset your W2 income in Central Florida, it's possible but challenging due to the saturated market. Some investors have found success in areas just outside Orlando. Bonus depreciation is phasing out, but a cost segregation study can still help with tax benefits.

Make sure to stay compliant with local laws and HOA rules, as regulations are strict. This strategy can help if you lose your FEIE, but be cautious with the numbers and compliance.

We have many clients here. We are based in FL.

[Todd Anderson]

Andrew,  I work with investors every day that are doing this same strategy with LTR.  Most all do a Cost Seg report as soon as they close.  This becomes easer because the properties that we work with are new construction, so it is easy and fairly cheep to get the report done.

We work with builders to help move their inventory of off market new contruction Investment properties at spacial investor prices and incentives. All of the SFR and 2,3,and 4 units show cashflow day one for our investors. When you add in appreciation and tax benefits the high W2 earning investors are very happy with the return.

Feel free to connect if I can help.

[Sarah Kensinger]

Quote from @Andrew Galloway:

Quote from @Sarah Kensinger:

When it comes to the strategy you're looking to learn, I would dig into Anderson Business Advisors and Toby Mathis (Tax Toby) channels on YouTube. It might also behoove you to hire the firm to help you navigate what you need and maximize every tax benefit out there. 

Hopefully someone on here has done a STR in CFL and can give you the other feedback you're looking for.

 Thank you, I will check out those Youtube channels. I may have to break the years of laziness and try to find a professional tax firm. I am able to read and absorb a lot of material but there are a lot of complications for this type of strategy so I was interested in a real world example of it playing it.

In many cases it really does pay to have someone help out!