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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.
