All Forum Posts by: Mike Hansen

Quote from @Matthew Becker:

How is there 10K of properties for rent in San Antonio.  Everything I read says we have a housing shortage.  I live in North Idaho and we do have a shortage.  If that is true I would probably sell and buy in a place where there is less competition.   I always try to find better markets to buy in but once I dive in I can't find a better place than where I am at.  

A property is not just SFH or multi, it includes apartments. Bundle all options that a renter would consider and you simply have what I stated above

Hey Chris,

first, I would never take into account what Zillow is estimating to be the rent. If you want a more accurate estimate for rent, use any platform and zoom into your local neighborhood and see what similar properties are advertised for rent. Notice I say advertised and not going for because next, you will want to see how long these properties have been on the market and if they have decreased their rental asking amount. I have property here in San Antonio as an active duty member as well and there are over 10k properties listed for rent in the city. What makes your property standout from the one that is listed down the street for $200-$400 less? If there isn’t anything that you can think of, most likely your property will sit on the market as well. Not sure if you’re closer to Randolph, Lackland or Ft Sam Houston but this also plays into account on what rental amount you should look to achieve. Lastly, if you’re currently taking a homestead exemption on property taxes, once that drops off (if you’re currently taking chose to transfer the exemption to your new home) your property taxes will likely increase $1k-$2k thus increasing your monthly mortgage. Hope this is helpful as Texas markets are sometimes not that easy to navigate when it comes to long term rental due to high property taxes and an overwhelming amount of supply on the market. Feel free to reach out any time

It recently dawned on me the idea of a non military affiliated individual assuming a VA loan, would this individual be able to then also gain the benefit of using an IRRRL since they have now acquired a VA loan through assumption? Reasoning for asking this is that it could potentially be a beneficial long play on acquiring a property through assumption, and as we go down in interest rates, utilize this monetary benefit to refi as it comes at a mere .5%. Let me know your thoughts and if anyone has first hand experience.

Quote from @Aristotle Kumpis:

Hey Jadan. I have a builder in San Antonio that offers a 4.75% interest rate on their duplex's. They cash flow positive and are in a good area. Happy to send you more information. SAT is a fast growing market too.

Aristotle,

would love more information about these duplexes here in San Antonio 

Quote from @Heidi Fischer:

Hello

I'm a high W2 earner and have been looking for a STR and finally went into contract but can't close until mid-end of December 2024. Would I be eligible to take the bonus depreciation on my 2024 taxes? If I can get 2 different renters in before Jan 1 2025-is still possible by obviously getting a cost seg.

Also, would all of the house hunting, going out to see properties, research (lcalling city for license/map searching) and buying the furnishings count toward the 1 of 7 qualifications IRS demands in addition to the 2 Airbnb bookings-preparing home, cleaning, set up etc?

Or would it be better to just close in 2025-knowing the bonus will be less? Is it still 80% for 2024? I’ve read conflicting numbers -either 80% or 60%. 

I really appreciate anyone’s help :) 

Also if anyone knows an excellent tax strategist/CPA/ STR experience in Las Vegas-please drop a name-that would be so helpful. Feeling overwhelmed and nervous about an audit!!!

Thank you kindly.

2024 bonus depreciation is 60% and goes down to 40% in 2025. While it's not impossible to close in mid December and still meet all requirements of the STR loophole, it will be extremely difficult due to the nature of hitting 150 hours, having it rented for 15 days or greater and having the avg stay be no greater than 7 days and not a decimal more. I am not familiar with Las Vegas rules but most platforms won't let you apply for a permit unless you are on the title of the property, then you will need to furnish the property after closing unless you are purchasing a property that comes furnished. You mentioned closing mid to end of Dec, you would have to close on the 14th or 15th, furnish in 1 day, have it listed and booked 5rough Dec 31st. AND have provided the 150 hrs of material participation and not have had any other person perform longer work hours than you. Once again not impossible, but very VERY close to impossible. Sorry if this isn't the information you were wanting but get with your cpa and they'll advise you on the same. Smarter strategy would be to secure the property and start in 2025. Yes it'll come at a 20% less on the bonus depreciation but it's better than stressing yourself out trying to meet all requirement in 2024 just to be disappointed and have to do it in 2025 anyway. Hope this helps a and best of luck

Quote from @Doug Smith:

We do them, but they aren't cheap and your LTV will be lower that a HELOC on a primary residence. Banks aren't really in the business of lending to real estate investors anyway...they focus primarily on "operating entities", but they can be done. They will, however, be above the rates your posting. There's a significant risk premium for investor 2nds.

I’m willing to accept higher interest rates on a line of credit as the overall $$ amount is significantly lower than refinancing an entire property at the above mentioned 6-7%, not to mention restarting the amortization schedule all over again. What is the avg interest rate for a line of credit?

It appears there are less banks/lenders out there doing lines of credits on a rental property vs primary home. What banks or lenders are other investors using to access some of their equity? Not looking to cash out refi a sub 3% for today’s current 6-7%. 

Quote from @Sean Carter:

Hey everyone currently active duty military I would love utilize my va loan for investment  purposes don’t know where to start  in GA btw 

 Sean,

welcome to the BP community and congrats on wanting to start your REI journey. I too am active duty and have utilized my VA several times to expand my portfolio as it is a great tool to use if you’re willing to live in the property for the required 12 months. First, I would get with two people, an investing friendly real estate agent which you could connect with on here as well as a local lender. That way you can see what you qualify for. To maximize your first VA entitlement, I would skip the single family homes unless there aren’t really multi units (1-4units) available in your area. If you go the single family home route, I would find a house with 4-5 bedrooms so you can live in one, rent the other 3-4 via house hacking. If you don’t mind living with other people, this is the easiest way to get into REI with little capital from you. 12 months after living in the SFH or multi unit, you can then look for another property and rinse and repeat. Hope this helps a little as this was the strategy I used to start my journey. Like always, I’m always more than happy to chat more about other strategies or answer questions you may have. Best of luck on your property search

Quote from @Tom Dean:

Quote from @Mike H.:

Quote from @Tom Dean:

Quote from @Jonathan Greene:

Quote from @Tom Dean:

Quote from @Jonathan Greene:

I don't think that's a realistic price point for doing what you want. If you can spend 250-325k, you should think MTR, not STR, because that is more likely to scale in any area because of all of the different types of renters for MTR compared to STR, which is more location-based and amenities-driven. You can do MTR anywhere, but you can not do STR anywhere.

Thanks for the straightforward reply, I don't have an interest in MTR's as I would prefer to buy more LTR's at a lower price point instead. Wondering if you, or anyone else, has an idea of a minimum viable price point and city for doing a truly viable STR? I have been doing research into this but so far have not been able to be fully sure of this. Thanks.

Why are you more interested in STR than MTR? MTR is less spend on furniture, less guests, and at that price point for a buy, will likely make more money and have less upkeep and management. For LTR, your price point is fine for SFH in the Midwest in many states, but you would be better sticking with LTR and not trying to STR. To do short-term rental, you need locational amenities and house amenities to win and that price point won't get there.

Because with an STR I can write off  expenses against my W-2 income ( I expect a loss the first year) if it's an average 7 day stay or less. MTR is treated like an LTR from what I understand and I already own a couple LTR's so would rather do more of those than an MTR and avoid the extra hassle of furnishing, etc.

 Here is one that I'm a little confused on.  I am not sure I've ever seen where the tax writeoffs are different for STRs than they are for MTR's or LTR's in terms of writing losses off against your regular income.  Ultimately, if you're not considered a real estate professional, then you can only write off up to a certain amount against your regular income (25k maybe?).   But I think thats as long as you make 150k or less too.

I have never seen anything that suggests you can go over the 25k against your regular income if you're not a real estate professional just because its an STR. I don't think they differentiate the rental type for the writeoffs.

I've researched this a fair amount, from what I understand there's an exception section 469 of the tax code that says if you actively manage the str and have an average stay length of 7 days or less then it's treated as an active business and the income is therefore not passive and expenses are able to be written off against W2 income. I've seen other posts on bigger pockets that discuss this as well.

You are correct. Multiple stipulations to qualifying but if one does their due diligence, it's fairly straight forward. A lot of investors don't understand all the tools that are available to them because you would have to talk to someone that strategizes taxes i.e CPA, enrolled agent, tax lawyer etc. in order to use the short term loop hole, you must rent your STR for 15 days or more and be no greater than avg stay of 7 days. Not 7.1. here's a real life example using your buy point

property bought $300K

Land value $37k, leaving $263k as building value (land can not be depreciated)

Having a cost segregation done, you can accelerate depreciation. On average, a safe number would be 1/3 of the building value can be reclassified which comes out to $86,790.

In 2024 bonus depreciation is 60% = $52,074

In 2025 bonus depreciation is 40% = $34,716

These $$ amounts are what you can write off in year 1 against your W2 income as a “paper loss”. Depending on what your income bracket is, this can significantly decrease your taxable income. Significantly different than the minimal taxes saved most people think, as this is a strategy they currently aren’t utilizing. 

Quote from @Mike Hansen:

Quote from @Tom Dean:

Would appreciate any advice, I would like to invest somewhere in the southeastern quadarant of US (for example I'm open to somewhere like Missouri that isn't traditionally part of the "southeast"), looking for somewhere where I could acquire a SFH STR between $250k - 325k.

So far I've looked mainly in Texas, Dallas seems too high for this, seems you need to be around at least $400k there to really get something decent for an STR. San Antonio seems it may potentially work as it's a bit cheaper than Dallas. I looked at OKC a bit but I'm just not sure the demand for STR's there is sufficient.

I'm looking to get a property with short term stays, 7 days or less. Would like decent occupancy, around 50%+, not too seasonal where it just sits empty half the year also. I would say I lean more towards cities, in case it ever needs to be turned into an LTR, but am open to more vacation-centric destinations.

Any advice is much appreciated, thanks!

 Tom,

I completely understand the strategy you are looking to execute and accomplish when it comes to offsetting your W2 income with STR paper losses via cost segs and bonus depreciation. Your price range is very doable in the San Antonio market as prices in TX have continued to decrease substantially over the past quarter. Looking into the STR market, i would suggest a couple things to include into your property search. 1) the STR market is very saturated here so look for something unique or offer unique amenities to your guests, this will help your property stand out 2) different set of rules for properties located within city limits vs without i.e. outside city limits doesn't require a permit which the city is cracking down on the amount of STRs on any given street or neighborhood 3) HOA is a big deterrence as a lot of HOAs don't want any rentals of less than 30 days so an in depth search into covenants and by laws would be doing your due diligence. No one wants to make a six figure investment just to get shut down by the governing body for said neughborhood 4) property taxes are high so as long as you factor those into your underwriting and it still turns a profit, you're fine

My overall thought is San Antonio is a wonderful market for STR as well as having the exit strategy to turn it into a MTR if need be. While the MTR would allow you to execute the STR loophole strategy you're looking for, at least it's an exit strategy which is always good to have. I'd be more than happy to discuss any further questions you may have. Best of luck in your STR search.

MTR *wouldnt* allow you to execute the STR loophole strategy. Sorry for the typo