All Forum Posts by: Bonnie Griffin Kaake

@Wayne Brooks  In the thread above, you mentioned that rehab and fix-up money goes to your basis. That does not have to happen if you do the changes in any year other than the same year you buy the property. To be compliant with the Tangible Property Regulations (TPRs), a lot of this can be expensed. Also, under TPRs and by doing a cost segregation study, you can do a Partial Asset Disposition and write off as a loss the items you remove from the property that would be included in the original basis.   

@Stephen Mahler Unfortunately, the list of activities you mention in your post do not count toward hours for RE Professional qualification. If your wife does not work a W2 job and is actively managing your investment properties, she may likely qualify as a RE Professional. She would have to meet the 750 hours requirement (all properties combined if grouped) and material participation requirements. 

I don't deal with the financing end of RE investments but I would be open with your loan officer and explain the situation. If he/she cannot do both deals at the same time, check with other lenders. If you have the downpayments and you have the ability to pay the loan, don't be shy. Sounds like both are great deals. You can do this, don't take no for an answer. 

My expertise is in saving you taxes and increasing cash-flow on properties you have purchased or are considering purchasing by leveraging the ever-changing tax laws and regulations. 

@Corbin 

@Corbin Lane You may make it easier for yourself if you can do a 1031 exchange into the property. That leverages your equity from the original property and then add what you can to the downpayment. Keep trying and maybe the 1031 exchange service will have some good advice for you as well. Once you have closed the transaction, take advantage of the tax and cash-flow benefits of a cost segregation study...this could give you a sizeable cash-flow in taxes you will not have to pay going forward. You can do this, don't give up. 

Depending on your tax situation for 2020 & 2021, you may have at least another $50k in cash-flow after taxes available to you. Did your tax professional group your existing properties so that you could use passive losses on one property to offset passive gains on the other? There is a strategy that could allow your husband to be a "real estate professional" and make your investment properties all "active" so they could offset your W2 income. This would require him to resist taking another W2 job. Of course, this all depends on your income and whether it will support your family for a while. 

@Dylan Whitcher and @Marco G. Not all cost segregation services are the same. You want to be sure you are covered in case of an audit. The IRS has increased their audits of depreciation schedules as of 2019. They are looking for ways to increase their income and poorly done depreciation schedules are targets. An engineering-based study is the IRS' preferred methodology and not something CPAs do themselves. The exceptions are the few big national accounting firms who have in-house engineers. There are strategies for leveraging the available tax benefits, including being in compliance with the Tangible Property Regulations (TPRs). Many are specific to a particular investor's situation. 

@April C. If the current HOA rules allow STR, even if they change those rules, you may get grandfathered in under the old rules if they don't disallow STR. Best option is to talk to an attorney before committing to the purchase.

@Eric Shiva Have you considered Greeley or Pueblo? The prices are more attractive although you may likely have to do some renovations to bring them up to rental quality. Greeley has the advantage of being a college town. 

@John Semioli If you bought in a covenant-controlled community with an HOA, be sure to read the bylaws. Many do not permit STR.

@Dylan Whitcher Great response...thank you! My focus is educating investors and their tax professionals without cost, about how to leverage the latest tax regulations in the investor's favor. When investing in commercial or residential rentals, the tax advantages right now have never been better. You can increase your cash-flow and reduce or eliminate your federal plus state taxes by expediting your depreciation. Traditionally, CPAs and tax professionals have used straight line depreciation over 27.5 or 39 years to depreciate income property in full. 

Instead, by expediting the depreciation (paper loss) under the current tax laws and regulations, you can enjoy an increase in after-tax cash-flow of about 6% to 10% of what you purchased the property for originally. This represents federal plus state taxes that you do not have to pay. The structure of the building goes on to be depreciated over the full 27.5 or 39 years. The simple way to explain this is that it is like getting an interest free loan from the IRS that you don't even have to pay back in full and what you do pay on sale in "recapture" is much less than the amount you had access to and had the opportunity to reinvest. Think time value of money...you win the lottery, do you want cash up-front or wait for dribbled cash over years and years?

If this is still sounding like another language, contact me. No obligation, no arm twisting, just information. If you don't pay taxes, are going to sell the property in a year or two, or paid less than $200k for the property, this strategy will not work for you. It is recommended by the American Institute of CPAs (AICPA).