All Forum Posts by: Ian Tyndall

”This property will be on the beach in a place called Junquillal about an hour South of Tamarindo in Guanacaste”

Congratulations! The Ticos are some of the nicest people that I have ever met and it is a beautiful country.

So your place is 3 miles south of Tamarindo? 😂
The roads are my only complaint about CR. 

Is there a property management company in that area that you would recommend?

Quote from @John Underwood:

I would just clean it up and fill the cracks.

Can they not play pickle ball on it too? Not sure what pickle ball is, like bad mitten?

Pickle ball is like tennis, but played with paddle tennis rackets and a whiffle ball. Lots of old people like me are into it. Looks like there are 5 million players now in the US. We have a city court and they are packed day and night. 

I am buying a property that has a regulation Tennis Court on it 120'x60'. I thought that this would be a great feature in my STR. It is a older Court and needs some cracks repaired and a new net.

The cost surprised me: $22k to bring it back up to USTA regulations. I would consider a dura tile overlay but that is even more expensive. 

I might just power wash it and fill the cracks and not do the full treatment to get it to professional standards. Pickle ball seems to be more popular around here anyhow. I might look to modify the court in the future to become a dual pickle ball and basketball court as that might appeal to more families. Any thoughts on how to maximize the space?

Aubrey,

I have no expertise in this area, but I was in Tamarindo back in March.  I saw Vacasa rental signs everywhere.  I would recommend starting with them to get grounded if you haven't already.  They seem to have a turn-key service option so you should be able to get a lot of information from them.

Quote from @Scott K.:

You can file a schedule E with STR income. You do NOT need an LLC to avoid self-employment taxes. And if you pay $8000 to make an llc, you're a sucker...

Agreed. And yes, the rules apply for a partnership - you don't have to be married to be in a partnership. You can have a partnership without a LLC. $8k is a very expensive setup cost. Message me if you want to discuss ways you can bootstrap your setup.

Quote from @Michael Baum:

So, the above reply is not 100% accurate. We self manage and our CPA files a Schedule E. There are rules around which schedule you use. Easy to look up on the IRS site.

 That’s right - I oversimplified my response. To be considered an active trade or business to file a schedule C there are a couple of tests that the IRS requires. For instance,  your average rental duration must be less than 7 days AND you must meet the 100+ hours test or 500 hour test and no one else can have worked more than you. Look it up for the precise rules.   

Quote from @Josh H.:

Hello,

I have heard of leasing your short term rental to another LLC that you own in order to minimize tax liability from a video that I watched, but there was no information given on why this is advantageous or the mechanics of it. Can someone please let me know a simple explanation of this and how it helps lower tax liability?

Hello, you would do something like this to avoid self employment tax (12.5%) if you were self managing the property. When you self manage you file a Schedule C. If you use a property management company your income is consider passive and goes on your Schedule E.

If you are going to self manage when you have income (gains) from the operation then you will want to setup a c-corp or s-corp as the management company. You want the real estate to sit in a LLC that is treated as either a disregarded entity or partnership so that you can get all of the real estate deductions to flow to you. Then you lease your property to your management c-corp.

This enables you to avoid the self employment tax. You can pay dividends out of your c-corp which are treated as short term capital gains.

Quote from @Riley Lucchesi:

I rent in an area where there is a high density of short term rentals. Every time I saw a cleaner I would ask for their information and receive a quote. or if I saw a car with a vacuum/trash bags on the roof I would leave a note for them to call me.

I’m not sure how frowned upon this is but you can always reach out to Airbnb hosts in your area to see if they would like to share their cleaning contact info.

@Ian Tyndall
What has your experience been with turnoverBnB? Reliability, price, etc.

 Very fast bids received and the pricing was good.  Some were clearly priced high, but there were some quotes right where I wanted them.  I am not sure what the service providers have to pay for leads, so I will look into that.

I have received a number of bids from TurnoverBnB for two different properties of mine. 

Quote from @Pratap Singh:

Can remote STR help us to qualify STR tax benefit. STR in Florida and owner lives in VA. Managing remotely from VA after initial 2 weeks of onsite hours in furnishing property (~80 hrs) after closing in june.

And 20+ hours in remote remote co-ordinating bookings, cleaning by cleaner, answering guest etc. Except cleaner no other help as its new construction so no maintenance expected

Pratap,

You want to be able to claim your STR as an active business and not a passive investment. This way you can claim a loss against your ordinary income (loss). There are a couple of tests that you need to meet in order to claim this which I think you are on the right track:
1) Average rental duration must be less than 7 days
2) Then either: You managed everything yourself, or you materially participated in the business with 100+ hours and no one else spent more time than you, or you spent over 500 hours managing the property.

Disclaimer - I am an investor/property manager like you from VA and not a CPA/Tax Lawyer