All Forum Posts by: Chuck Ward

Quote from @Julius Vincent:

Hey @Chuck Ward - Just a few things to add. The IRS does tend to look closely at REPS claims, but that doesn’t mean you should shy away from filing if you truly qualify (i.e., meet the previously mentioned tests). You just need to have your documentation dialed in. I have clients who use Toggl and even simple Excel and Google Sheets spreadsheets to track date, property, what they did, and how long it took. The more specific, the better...“showing unit to prospective tenant” is much stronger than “worked on rentals.” 

The IRS generally operates on the “file now, prove later” model. But if you can’t prove it later, they’ll disallow the deduction and hit you with back taxes, interest, and possibly penalties.

If you ever have to defend REPS in an audit, here’s the kind of proof the IRS likes to see:

- Contemporaneous time logs (spreadsheet, Toggl, Google Calendar, etc.) — entered as you go, not all at once months later.

- Property-specific records - each entry tied to a specific address or asset.

- Detailed activity descriptions - avoid vague phrases; list actual tasks performed.

- Supporting documents - emails, text messages, receipts, invoices, contracts, before/after photos that match your time entries.

- Consistent year-round activity - not just crammed into a couple of months; spread across the year to show ongoing material participation.

Thank you for the detailed response. Not sure the juice is worth the squeeze in our situation after discussing with my CPA. But I am thinking it could be a good habit to start until there's enough juice.

Quote from @Aaron Zimmerman:

Agreed 100% with@Michael Plaks on REPS. You would need to prove you worked more than your w-2. 

I would look into the short term rental loophole with your STR property as that may be able to generate some tax benefits for you without qualifying for REPS

Thanks for responding, Aaron. I will def look in to the STR loophole further. -Chuck

Quote from @Michael Plaks:

@Chuck Ward

This is really for your lovely CPA to explain to you tomorrow.

The crux of the matter is your hours involved in your non-RE business (#5) vs the hours managing your RE portfolio. One of you must be spending MORE hours on your RE portfolio than on your other business. If you can prove that - then that person probably passes the required REPS test.

Thanks for the response. Curious- does it always come down to the log and exceeding the w2 hours? Between the texts, emails, calls, QB entries, checks and bills, reconciliations, meetings- while I don't have a log, I do know that I am meeting/exceeding the 750 rule. I just haven't analyzed my time with the w2 job.

So reading everything online, and here, I am struggling with my own personal situation and finding it hard to believe that I and/or my wife do not qualify for this deduction. My accountant is awesome, honest, and ethical. I am meeting with her tomorrow to discuss our 2024 Taxes. Before I do, am hoping for some expert input.

I do realize that logging time seems to be very important. So while I am asking questions, I am answering a few myself- bear with me:

A few facts:

1. We own 3 Mobile Home Parks- Most are tenant owned, but some are park owned. One LLC owns all 3 of them.

2. We own 1 SFH, Long Term, in our personal name. (first one, will switch to LLC when rates drop)

3. We own under separate LLCs 1 Commercial, 2 Homes, and 1 Town Home.

4. We are currently renovating a property under another LLC that will be an STR and will be placed in-service this year

5. We own our W2 Income producing business that we both work physically daily- Mon-Fri. And our combined income, if no profit, us under $100k year.

6. We pay 1 Mgmt company to handle the Town Home. For now- that may change in 2026.

7. We manage all other properties ourselves directly. A total of 29 Rentals. Maintenance, Leasing, Advertising, Evictions and Collections, etc. Some items are handled by sub-contractors but we are always involved 100%. We even collect rent and sign leases at our retail store during the day whle we are working our "job"

So, this leads me to the next part:

1. How in the world would we not justify as REPS?  Or could we? (what am I missing?)

2. What's the best log to use?

3. Yes, I am very tired...lol

Quote from @Chris Seveney:

@Chuck Ward

Can you afford the home if it were conventional financing and you had to convert it to a long term rental?

Most likely, yes. However, the challenge to me is to capture her 3.75% existing mortgage at the same time preserving our cash. She needs to use the funds for a new home purchase, just not sure how much she needs on the front end. The asking price is appropriate for this parcel. Long term rental, not primary, is our goal for now.

Quote from @Michael Carbonare:

Try a long term lease option.  Minimal cash upfront, negotiate a monthly rent, lock in a price today that will benefit from any appreciate that might occur during the term of the lease.

That is a great idea! thanks

Looking at a $1m property. Owner having a hard time selling, we wouldn't mind owning, esp for Short term rental purposes.
Owner owes $249k.
We would like to use very little cash, maybe higher interest rate for the seller, balloon in 5 years should interest rates come down.
Anyone had success or any ideas you could share?

We have other investments, good credit. HELOC is tied up in rehab currently. That will get mortgaged in the next 30-60 days, freeing up $300k.
TIA-Chuck

Yes, you are correct.

Being in a Rural area, I am finding that DSCR doesn't seem to be an option for me at this time. I can cash flow an extra $1,000 per month with interest only payments at current rates.

This would apply to a BRRRR, Buy and Hold property strategy-- Anyone use a HELOC, (interest only) for a BRRRR with success for a multi-year length of time?

Seems that with a HELOC and positive cashflow, payments would accelerate the debt. If you had enough of these properties, you could then combine cash and accelerate those as each property is paid down, correct? And with the correct HELOC, you also have the needed funds for repairs. Why would anyone want a traditional mortgage or DSCR with the rates where they are?

Just looking for opinions- I can talk myself into anything....lol

I just spoke with Jason Park, he's on here - Coastal Capital Funding. Check them out.....https://coastalcapitalfunding.com/