All Forum Posts by: Joseph Palmiero

Yes, assuming that the proceeds were used for that rental property.

The downpayment would not be deductible in the year of purchase. It would be part of the total purchase price of the property and depreciated. 

Quote from @Irving Franco:

@Joseph Palmiero

So if I purchase a hotel with a minimum of 5% ownership that I manage, but do not work on site, and continue my current W-2, then in theory I would be able to use tax losses from depreciation of the hotel I own, to offset taxes paid from my W-2?

Hours spent running a hotel do not count towards REPS hours because it is not considered a real property trade or business. You may be able to achieve your goal by focusing on materially participating in your airbnbs.

Regarding income taxes, increasing a property's value and refinancing is not a taxable event.

You need to own at least 5% of a real property trade or business for your hours to count towards REPS.

Mobile Home Parks can generate a lot of bonus depreciation.  A large portion of a park's purchase price gets allocated to land improvements which is 15 year property.

Here are a few questions to consider. How much do you have to feed it each month?  Do you have the income and/or savings to fund the difference?  How long are you willing and able to do that? How secure is your other income to feed it?  What is the appreciation potential?  

The bottom line is this would be extremely risky unless you personally have great income and a strong balance sheet.

Focusing on the potential tax savings, I think that is a personal decision you will have to wrestle with.   For me personally, I like a deal to work on its own and consider the tax benefits to be gravy.  Also, not including the tax benefits will also build in a margin of safety in the deal, just in case one or more of your assumptions turn out to be wrong.

@Ashish Acharya is correct. Using an s-corp for buy and holds can lead to negative tax consequences. Use a single member LLC.

A S-corp could be a good option in your situation depending on how much income you are generating from the sales. This would help you reduce self employment taxes. It does come with administrative costs such as filing a seperate S-corp return and setting up payroll. You have to do a cost benefit analysis on how much you save in SE tax vs. the additional administrative costs. Keep your buy and holds in a separate LLC with its own bank account and set of books.