All Forum Posts by: Matthew Cervoni

 Great question! I think it depends on the individual's circumstances but I have always "paid myself first." What I mean by that is before I do anything, I set aside what I need to achieve my savings goal first. That could mean investing in stocks, saving up for a downpayment on a property, or cash reserves. Then I build my lifestyle based on whatever is left. 

The NET amount makes the most sense if you are a W2 employee, since you'll have withholdings taken out of each paycheck plus benefits like the IRA you mentioned. I would worry less about percentage and more about the monthly savings that will get you to your goals.

Begin with the end in mind, and work backwards from there! 

@Michael David those are great goals! I'm sure Pace Morby & Hevin Hill will give you great information, and I'm certain you'll come away with new team members! 

I think having goals in mind for an event like this goes a long way! 

I'm certain we will all have a great time and learn a lot at BPCON! I'm curious to find out some of your specific goals your have for attending this year? 

I'll get the conversation started! My real estate accounting business has really hit its stride this year and I'm hoping to meet more investors that we can help. For my investing business, I want to find a solution to add more units to my portfolio despite my business being less than 2 years old, which has made finding financing more difficult. 

Self-employment taxes are imposed on self-employment income in lieu of Social Security and Medicare taxes that an employee would typically have withheld from their paycheck. It is calculated on the net income that an individual derives from a trade or business. 

Rental income is not considered self-employment income, and therefore is not subject to this tax unless it is received in the course of a trade or business as a real estate dealer (IRC 1402(a)-4). 

Does it surprise anyone that things don't simply end there? 

Whenever substantial services are provided for the occupant in connection to the rental, the IRS may view your activity as a hospitality business that would be subject to the self-employment tax. (Think hotel businesses.)

So, this weeks Tuesday Tip is to understand what those substantial services are so you can determine if the juice is worth the squeeze when deciding what level of service you will provide at your STR. Here are the most common:

Transportation Services

Daily Cleaning

Concierge Services

Providing Food & Beverage (Bed & Breakfast style)

Conducting tours and other outings & events

So, what can you provide without triggering self-employment taxes? Based on past cases and revenue rulings, other services that are required to maintain the space in condition for occupancy and are not "substantial" include: 

Utilities

Furnished Units

Incidentals such as bottled water, snacks, toilet paper, and soap

Cleanings of common areas or cleanings after the occupant has ended their stay

Unfortunately, there is no clear line drawn in the sand as to what services might trigger a self-employment tax liability; the substantiality requirement creates a significant gray area to be navigated. 

If you have an Airbnb rental property, please consult your tax advisor for guidance on your specific situation. 

 @Thomas Aellis I read your original post where you mention "max scaling" and took that as you will be owning more then 2 properties very soon, and likely many more than that. 

If you are in fact going to scale to a large portfolio, having things set up correctly on the front end will be very valuable. Having a professional who specializes in entity structuring and a professional who can do your bookkeeping and tax planning will save you far more in the long run than you will pay those people. (Maybe that professional is the same person.)

If you just own two properties and want an easy option for DIY bookkeeping, I recommend Stessa. 

If your 8-10 properties are inside of one LLC, you might look into Stessa. 

If you're looking for maximum scaling, I'd recommend outsourcing your bookkeeping to a professional real estate bookkeeper or a CPA who offers this service. You'll save far more in taxes and reduce headaches significantly, especially if you are growing fast!

 Love this lol! I think @Eric Martin & I will be looking for the same! 

I can't believe BPCON is already less than a month away! (where did my summer go?) This will be my first time going and I am excited to meet any of you that will be there. 

The best advice I've gotten for attending a conference or large event is having a goal going into it. We do want to enjoy ourselves and make new friends/network with people who share similar interests, but having a specific goal or goals can help you get the most out of one of these events. 

The person giving me the advice went into BPCON with a goal of filling some spots on their team that were either vacant or lacking. They enjoyed themselves and were able to strengthen their team at the same time. Conversely, they knew some friends who went without any goals and those people still had a great time but did not feel the same level of value. 

This week's Tuesday Tip is about one of my favorite topics, high quality bookkeeping helping real estate investors achieve their goals! 

Remember, bookkeeping is more than just the tedious task of organizing historical financial data for your investments or real estate business. It can be used to raise capital, save money on taxes, and make better investment/business decisions. 

Setting some Key Performance Indicators (or KPIs) is a good way to pull more meaning out of your financial statements. This can help you better understand past performance and make adjustments to improve your investment or business. What you decide to measure will depend on your goals, but here are a few examples of KPIs: 

Monthly cash flow per unit

Debt-to-Income Ratio

Dollar or Percentage Growth

Loan-to-Value Ratio

Personal Hourly Rate 

What are you measuring and what do you hope to achieve? 

For these to be meaningful, the underlying financial data does need to be correct. If you are unfamiliar with bookkeeping principles I would recommend getting a professional real estate bookkeeper to keep your books current and correct! 

 @Shiloh Lundahl I think you hit on so many important factors here. I was talking with a group of investors about this very topic and the "find a coach that has done or does what it is you want to learn to do" and "willingness to put in the work" were common themes! Also, congratulations on your coaching success!