All Forum Posts by: Johnathan Simeroth

Quote from @Natalie Kolodij:

The Costs in 2021 won't be able to be deducted in 2021. 

It's all capitalized, even if able to be expensed by bonus depreciation. 

As mentioned above only some of the renovation will qualify for bonus depreiation, but costs will carry into the year the property in placed in service/ available for rent. You don't have a reportable rental yet to expense it against.

Thanks, this is helpful. So for 2021 I’ll report a capital improvement that gets added to my cost basis, and then in 2022 I’ll depreciate the value of property with <20 year life. Is that right? 
And One more question I have then… portions with a longer life and that are not moveable, like my roof that I just added. Are those eligible for section 179? And if so, would that still be expensed in 2022, or 2021?

BP community,

I'm looking for advice on how tax year timing affects my ability to take bonus depreciation and/or "expense" some of my capital improvements.

I purchased a duplex that needed a lot of work in 2021. I started a rehab immediately that will wrap up in early 2022. My payments to my contractor therefore started in 2021 (~130k) and I'll make the final payment in 2022 (~60k). I plan to use this property as a short term/vacation rental.

If the property won't be rentable/placed in service until 2022, I just want to confirm that I am still able to take some portion (as determined by cost seg study) of the 130k invested in 2021 as bonus depreciation in tax year 2022, right?

Great feedback, thanks @Ashish Acharya!

Dear tax gurus, CPAs, etc,

My understanding is that you can't count rental losses against your W2 income, unless you qualify as a real estate professional (which is very difficult if your W2 is unrelated to real estate). But I've heard that short term/vacation rentals are an exception to this rule, allowing otherwise passive losses (e.g. depreciation) to count against active W2 income. But to qualify for this you have to have materially participated in your STR, which means 100 hours minimum, and more than any other individual.

That's my understanding... please correct anything I've got wrong so far.

My question is: if I own one STR, it's pretty clear I can write off losses from that property against my W2 income. But if I owned 10x STRs, do I have to materially participate 100 hours on each property to write off all 10x? Or can I leverage systems as I scale so that I'm still spending little more than 100 hours total on my STR business per year, but write off losses from all 10 properties?

Really looking forward to the community's wisdom here! Thanks in advance.

@Alan Mills

I know a private lending broker who might be able to help. You’ll have to reach out to confirm he can do business in your market, but at least in Columbus, Ohio I believe he was saying no seasoning period required.

Of course, this is not a Fannie/Freddie loan. So you’re likely looking at higher rates. Still, I would get in touch and see what he can offer.

PM me if you’d like contact info.

Originally posted by @Brian Garlington:

@jonathan simeroth   Here's what will help you because there are lots of tire kickers in the Bay Area that are interested in Ohio. First, get pre-approved with a lender. Too many times agents, contractors, PMs etc. here from "potential lookie lou's" that don't do anything. The biggest way they gauge interest ends up being pre-approval from a lender because it shows you have already taken "some" steps. They also get hit with the so called, "Prices are low in Cleveland, Columbus, Akron, etc. so I will just pay cash." Then the prospective buyer, flipper, etc is told, great show me proof of funds :-)

Get pre-approved sir, with a lender, or even an HML and you will be taken much more seriously. If you need one, I can put you in touch with people who will do a mortgage loan in Ohio for as little as $50K.

Thanks Brian! We started with agents to get referrals to lenders and GCs. Good point that once we find lenders and get pre-approved, we might be able to take our pre-approval letters back to the agents and have them be more open about GC referrals. And GCs that we talk to might take us more seriously too!

We're interviewing a couple lenders per day this week. Just found one yesterday that will do refi with no seasoning period! I'm stoked! Talking to a few more today and tomorrow before we decide which 1-2 to partner with. If you have a contact you'd recommend, I'd love any referrals you have!

Originally posted by @Robert Ellis:

Originally posted by @Johnathan Simeroth:

Hi BP community!

I've received a number of referrals for lenders in the Columbus market, but most of them are conventional or portfolio lenders. Long term, I will definitely look to build relationships with portfolio lenders, but I'm also interested in seeing what rates and fees a broker can offer on some deals.

Does anyone have a good broker they've worked with and would be open to sharing?

I'd talk to Matt Casey at Fairway

Thanks for the referral, Rob! I'll reach out! 

Originally posted by @Ryan Freet:

@Johnathan Simeroth What are you looking for? It sounds like you are not looking for anything conventional or portfolio related?

Hey Ryan, thanks for your response. I'm looking for brokers that work with a number of lenders to source a variety of loan products, and can help me look for the best rates and terms for my specific needs. This is as opposed to walking in to a big conventional bank like B of A and asking for a loan, or from a local Ohio portfolio lender that will hold my debt and not sell it on the secondary market. 

 If I understand the relationship correctly, brokers might be able to secure better rates and fees for me in general starting out, but building a relationship with a portfolio lender might open up opportunities for more flexibility on typical rules/requirements where needed on future deals. Being a more personal business, you're able to build trust with portfolio lenders that opens them up to taking bigger risks on you.

Originally posted by @Robert Ellis:

Originally posted by @Johnathan Simeroth:

Hello BP community! Newbie here, getting started in the Columbus, Ohio market with BRRRR deals. As I'm just getting started, my primary focus has been building out my team of core 4, +wholesalers. It has taken a lot of time reaching out to multiple people for each role, interviewing them, and looking for one to two top notch people for each spot.

In the process, I've noticed that some agents have contractors they can recommend, but don't hand out contact information for GCs until you've got a property under contract. 

That feels risky to me, but I'm curious your thoughts on it. Is it worth missing some deals while I work on finding and interviewing GCs and pick one who is a good fit, or does it make sense to put a deal under contract if one comes up before I've got a good GC?

You don't have to wait until you are in contract for a few GC recommendations. But it is a good time because you have a good reason to do that. Which areas are you looking in? one easy way is to search "aca permit lookup" and you can look by street on permits that are pulled by GCs in your street and that's an easy way to start looking. Plus the GCs like to have multiple projects in the same area.  

 Rob, that's such a unique tip that I haven't heard anywhere else yet. I will for sure give it a try. Do you think that there's the same risk I mentioned above about Angie's list though? That I'd be interviewing a lot of contractors that are more geared (price and communication style and expectation -wise) for personal homeowners? Maybe that's more of a problem in California and I shouldn't worry too much about price differences in Ohio?

Originally posted by @Daniel Spaizman:

@Johnathan Simeroth

That's great that you're getting a jump start on the questions. And I agree about be willing to pay someone for their time to walk the property.

I've just been a property owner in Columbus for 9 months, but have learned a lot in that time. Analysis for future properties will definitely look different than for the first few, as will the members making up the team.

Thanks for the perspective, Daniel. Great to hear from someone who is doing what I want to be doing, where I want to be doing it. Please reach out if you're ever in the SF Bay area. I'd love to connect!