All Forum Posts by: Bonnie Griffin Kaake

@Kevin Johnson No. Short-term rentals of less than 30 days are considered a business, just like hotels, and therefore do not require you to be a real estate professional to make them active investments. They are required to be depreciated over 39 years. I have seen many depreciation schedules where a tax professional gets this wrong and when we do the cost seg studies, we correct it to avoid audit risk down the road. 

@Gerardo Hernandez If this property is anywhere near a larger city, you may be grossly underestimating the cost of the changes. You may need a new furnace installed and an additional hot water heater. Separating the utiitiies is another good sized expense. Electricians and plumbers are NOT cheap. You could be looking at $60k to $100k. One I recently did cost almost $200k but it is in a high demand area. A client of mine is purchasing multiple properties in Greeley, CO. He anticipates putting in as much in rennovations as he paid for purchasing the multi-family student housing. Cost segregation gave him a lot of extra cash-flow to make the needed upgrades.  

Research your intended target market well before investing. Some have plenty of upside potential and other areas, like Denver Metro, you are going to pay a premium to purchase and you will be competing with many buyers. Austin is also a fast growing area. And, learn how to leverage the latest tax regulations that apply to the type of property you will be purchasing, before you purchase. Know that your CPA/tax professional is not, in most cases, a tax strategist.  

You are likely paying more in taxes than you need to pay. The latest tax benefits (cost segregation, Tangible Property Regulations and more) can add as much as 6-10% of your property purchase price in after-tax cash-flow to your bank account. Properties purchased for $200k to more than $2.1+ Billion are eligible. What you and your tax professional may not know is costing you money. 

Hi Brian, If you don't already know, as a short-term rental you must depreciate this property over 39 years like a business rather than a residential rental. You can also do and engineering-based cost segregation study, the IRS' preferred methodology, and get a lot of that depreciation up front. This would likely give you $12k to $20k in after-tax cash-flow right away.