All Forum Posts by: Catherine Javier

@Catherine Javier

David is good. I have another local in Washington if you need

For second home, I recommenda Tony Xie in Raleigh. He is good. I will PM you his phone number.

Hi @Catherine Javier,

Though you may not be qualified as Real Estate Professional, due to your W2 job, you may be able to meet the Material Participation rules if you manage your STR yourself.

This will allow you to write off your losses against your W2's taxes (and if you do a cost segregation, these losses on paper could be very beneficial)

Having said that, I am not a CPA and highly recommend you talk to your CPA and Tax Planner for more info.

Good luck!

@Catherine Javier Hey Catherine, I have some experience with this as an Airbnb owner with W2 income. I'll try to answer some of your questions below but several of these would best be answered by a Real Estate friendly CPA if you don't already have one. I used one this year for the first time and it was a game changer.

1. We can purchase a second/ vacation home with 10% downpayment, is that right? In most cases, I believe yes. They may ask whether it will truly be a second home or if it is being purchased as an investment property. If you plan to set up an LLC, then you might defeat the option of calling it a second home and it could become obvious it is actually an investment property. Rates/points may be higher for the 10% down option, but I would start reaching out to some lenders to confirm this is still an option with your personal situation.

2. If we do this and make it as a short term rental, can things be written off such as Interest Rate, Points, Repair and replacement of appliances in the property, fixtures, furniture, utility bills, HOA, (coffee etc for guests?) This is where my answer will differ from your situation. I bought my Airbnbs with the intention of them being run exclusively as businesses. Short answer is that for a business, all legitimate business expenses can be deducted.

3. Can We purchase this under our names, and just make an llc for the activity/rental perse so we can open a set up a business credit card/bank accounts? You can, but that wouldn't make sense in my opinion. The home will be in your name anyway, so trying to hide the bank accounts behind an LLC veil would be unnecessary unless you absolutely wanted to. An LLC is a pass-through entity anyways, so the tax situation would be the same as if you and your spouse ran it as a sole proprietorship. With an LLC also comes the reporting requirements, fees, etc. Again, up to you, but it would seem discombobulated to have the house in your name but then the bank account / credit card in an LLC. If you want a stronger answer, call up a CPA and get their insight.

4. If we have a LTR in FL and hopefully an STR in WA, can we claim both losses in our W2's (providing 1 of us passed the requirements of material participation) Recently had this discussion with my CPA and there are very specific criteria that must be met in order to be considered real estate professionals. Although not impossible per se, it could be difficult to prove material participation based on the amount of hours your W2 require from you. They'll look at the LTR which typically doesn't require a lot of time and the STR which requires more, but maybe not enough to satisfy the hour requirement. Again, ask a Real Estate friendly CPA for specifics.

One thing to consider that you didn't mention is the property's depreciation and the fact that it will decrease your taxable income just like the other business deductions. 

I live in SoCal and manage two Airbnbs in Florida, so if you have any other questions, I would be happy to discuss. Good luck with everything!

My opinion is ABSOLUTELY! (please keep in mind that I am NOT an accountant and do not work for the IRS) The day is full of 24 hours and ANY Real Estate activity works toward the 750 hours and regardless of how many you CURRENTLY own she can be be putting in TONS of hours to BUILD that portfolio.

If she tracks what she spends her Real Estate time, and Real Estate is her true passion, you will be surprised as to how much time she spends on Real Estate activity...how much time (door to door) does she spend driving to see places, driving neighborhoods in different markets she is in, reading Real Estate investing articles/books, trolling zillow and realtor, talking with other Real Estate people, talking with property owners, listening to podcasts and so forth... Real Estate investing and being a real estate professional is not a career that you punch a clock, but if you track your time most of us quickly see we spend a TON of time on real estate and that counts!

Every week has 168 hours.... she spends 36 at her job...so she has 132 hours left...how she spends those 132 hours is HER business and something no one on the planet can prove, the world cannot make ASSUMPTIONS and apply them to a specific person...she might sleep 14 hours a day or 2 hours a day

A couple of thoughts:

1. It's going to be difficult to meet the IRS requirements owning only a single property (unless it's a large apartment complex). 

2. 750 hours is a minimum, but material participation in your real estate holdings also has to be her primary job. Just pointing out that if she works 900 hours (or whatever number) as a nurse, she has to document 901 on real estate. 

Here is the best guide I've found on the subject of achieving and documenting REPS status: https://www.therealestatecpa.c... (I have no affiliation with them, not self promoting).