All Forum Posts by: Dane C.

 Thanks for the input Michael.

1. My understanding for material participation for an STR is that you have to contribute 100 hours work or more and have contributed more "work" than anyone else. That would be very feasible for me on a single property.

2/3. My goal is not necessarily to pay no taxes. To be perfectly honest, I wouldn't even say that my goal is to become a real estate investor, a landlord, or a STR business unless the opportunity was perfect for me. I don't believe that it is easy work and so I apologize if I've given that impression. The reason I'm asking these questions is mostly motivated by an interest in personal finance, investing, taxes, and general intellectual reasons. I think the best point I've seen mad in this thread though is that after the initial tax savings you've created a tax liability by having an income generating property with reduced passive losses moving forward so thank you for that!

4. Missed the boat on that one, but thankfully I love her for different reasons :).

Thank you all for the input, it's been a really enlightening thread. Fear not, for now I'm not planning to quit my day job and will continue doing what I'm good at, it's served me well thus far.

I appreciate the input those of you have given regarding whether or not to get into REI. I think it's fair to say that I'm in the pre-contemplative stage at this point. I.e. I don't have a specific investment I'm looking to jump into but I am gathering input/info/advice for a very specific tax situation.

All good points. As I mentioned above I'm a W2 employee and do not own my own practice nor will I ever based on my line of work. The questions above are more of a thought experiment at this point, as in if it's not something that is technically feasible it is not something that I would pursue further. As far as time commitments go, I would be looking at properties in my immediate vicinity and have the free time (up to 20 hours a week) and motivation to make it work if the opportunity is right. For example, if there are tax benefits available to improve the profitability of a relatively turnkey property, that is the kind of investment I would be looking at.

Thanks for the input. While I know this is the case for REP status, my understanding was that there is no such constraint for the STR "incentive." I'm basing this thought process on this post. 

I'm a physician with a fairly high W2 income (and thus high tax liability). I've wanted to get into real estate for a while as a means of diversifying my assets and reducing some of my tax liability. I'm facing a $280k tax liability this year ($205k federal). I have been looking into buying some multifamily homes and using the STR loophole to claim passive losses against W2 income and had some questions about this, including the legality of it. This is mostly a thought experiment at this point so below is the case:

The property: A newly built $1MM multifamily home (3 units)

The Case:
I purchase the property this year. I do a cost segregation study and claim bonus depreciation. I put it on airbnb as a short term rental. I meet the requirements of material participation. I claim the passive losses against my active W2 taxes. I convert the property to a LTR the following tax year.

Questions:
1) Are cost segregation studies worth doing on newly built multifamily homes or is it specifically for businesses or business type properties? Is this a case by case basis?
2) If I own the property for part of the year, is the tax deduction prorated in any way?
3) After the upfront depreciation is taken and the STR loophole is used, do I need to continue with the unit as a STR or can it then be converted to a long term rental (LTR) for the following tax year (or at any point down the line)?