All Forum Posts by: Bonnie Griffin Kaake

Short-Term rentals must be depreciated over 39 years like a hotel/motel. They need to be filed on a Schedule C for taxes. 

Short-Term rentals can be active investments without being a RE Professional. Therefore, even if you have a W2 job, you can deduct the losses from cost segregation against that income. The owner or spouse must be actively materially participating in the management of the property at least 100 hours per year and more than any other person or entity. 

Long-Term residential rentals are depreciated over 27.5 years. They are usually less management intensive and unless you are a RE Professional (don't have to be a licensed RE agent) they are passive investments. 

If you switch from STR to LTR or from LTR to STR, your CPA/tax professional must file a 3115 change of accounting form with the IRS.

@Eli Madden I am in Colorado Metro Area and I work with CPA's that are up-to-date on real estate investing. It is true that you don't have to have a CPA in your own state because most work over the Internet nowadays. Nevertheless, sometimes you do just want to sit down in a meeting face-to-face. 

@Dainen VanGorkom The West Highlands area in Denver is booming with total renovations and scape and rebuilds. I would make your offer generous and contingent on certain due diligence items to your satisfaction. Maybe have a heart-to-heart with the Denver Building Department as soon as possible. It sounds like you would be improving the property either way. 

Don't forget that you would be very wise to look at a cost segregation estimate based on your purchase and what you intend to do with the property. There are some great tax benefits that you don't want to miss. 

@Travis Reed You would be well advised to take the advice of both @Julio Gonzalez and Chris Picciurro and work with an experienced engineering-based cost segregation company. Your time is better spent on doing what you do best. A quality cost segregation company will cover you if ever audited. If you get audited by doing it yourself, you will spend a lot more money defending yourself than the small cost of getting a professional study done on your $500K investment. I have done studies or hoped to do studies on properties that only had 5% of the purchase price that could be cost segregated and others where 90% could be depreciated. This is not as easy as it might appear, even for someone with your background. The tax considerations are complex and change from year-to-year and quarter-to-quarter. 

@Michael Hutchinson  Many people leverage cost segregation studies to get extra cash-flow to purchase additional properties. You can usually count on 6% to 8% of your purchase price in taxes you don't have to pay until you sell or postpone if you do a 1031 exchange. There are many creative ways to leverage your current property, it just takes exploring. Some do cost segregation studies and get loans on equity. If I can help, let me know. 

@Alex Jacobson  I agree with @Colleen F. in that you would be best off with commercial machines since they will hold up to the use in an apartment complex. Having these available will increase the attractiveness of your property as well. No tenant likes to go out in snow and ice to go to a laundromat. I am also in Colorado. I have done many site reviews and cost segregation studies on multi-family properties. The tenants I have had the opportunity to talk to, love this feature. They can help you with your taxes as well.  

 Hi Spencer, 

You don't need a cost segregation person in your own area. Most of the best companies have reps (some better than others) in some states or all 50 like we do. The studies are done at their corporate offices. The estimates are at no cost and give you the information you need to make smart financial decisions for your specific situation. Using a CPA will most often get you far less than using a company that uses the IRS' preferred methodology, engineering-based. It is your call but if your property was purchased for at least $250K, I would go for a company that stands behind their studies at no cost to you if you are ever audited. Let me know if I can be of service. 

 That is terrific! Go after that warranty! 

@Courtney Nguyen  You sound like you could use some good news. Are you aware that "replacing" a roof can often be expensed? I know that is not what you want to do but if it is needed, you may have some benefits available. 

@Joe Lee  You will also need a reliable engineering-based cost segregation company. Whatever you do, don't go by price alone. You need a company that has been around for many years and stands behind their work if the IRS comes calling. Let me know if I can answer any questions you have about tax benefits available to investors in commercial real estate or residential rentals.