All Forum Posts by: Ryan Moyer

 In the immortal words of Tom Hardy in Inception, "you mustn't be afraid to dream a little bigger, darling".

You have a good understanding of things, but you're missing the ways it can be leveraged.

Bonus depreciation works best when you have one high earning spouse and one non-working spouse.  That way the non-working spouse can commit the time, all while creating cash/assets that reduce the amount the working spouse needs to work in the future (this is extremely common for physicians in general right now, as many of them are burnt out and looking to reduce hours in the coming years).

You're right that the tax advantage is only a 1-year thing.  But if you have a working W2 spouse and a non-working spouse materially participating, your tax savings are going to come in the form of a giant tax refund.  If the working spouse has a salary of 500k with the employer taking taxes out of their paycheck, and they purchase a $1M house that their spouse materially participates on, after cost seg/bonus depreciation that would net them around $100k in cash via a tax refund after their $350k tax deduction from the bonus depreciation.

And what better to spend that refund on than the down payment on another house to use for bonus depreciation next year, which generates a big refund next year, which you can use for another down payment the year after, which generates another big refund the year after, and now we're scaling baby.

And now a decade or two later you've got 10+ properties. Money has inflated, rents have gone up, but your mortgage is fixed. All those people that have houses from 15 years ago that we're all saying "well of course you're making tons of money in STR, you have a mortgage from 2010!". That's you, and the guests have been paying that mortgage the whole time.

You're right that the tax "savings" are actually just deferment.  In addition to the time value of money (you now have 10 cash flowing properties with tons of equity that you couldn't have afforded otherwise), you also have to consider that those taxes only have to be paid back when you sell.  Most people that use bonus depreciation don't ever plan on selling.  If they need a cash infusion, they'll just borrow against the home.  And if they do sell, they 1031 and roll the deferment over to the new property.  Then eventually one day they die, the deferred tax is not inherited, and it disappears into the air.

So 20 years from now you retire (or sooner, if you'd like) and you've got 10+ cash flowing properties that were purchased way back at 2023 prices (those lucky people that got real estate when it was that cheap!) with tons of equity via appreciation and 20 years of mortgage paydown, that pay you more in your retirement than you ever dreamed of.  You've spent no money out of pocket for this since your tax refunds covered it all (meaning you could continue dumping your savings into the stock market, so it's not like you're missing those returns).  You travel in luxury for 20 years, then you die, and your heir inherits those 10+ cash flowing properties that are now completely paid off, with insane amounts of equity, and all those tax deferments fly away into the sky.

Oh yea, and that $2000 per cost segregation?  Barely a rounding error in all of this.

Obviously, not everyone is comfortable with that kind of leverage, and you're right that someone making 70k a year just doing it once for an extra 12k on their tax return it may not make as much sense for.  But for some circumstances, it can be unimaginably lucrative.

EDIT: Usual disclaimers here.  I'm not a CPA, just a guy on the internet!

Personally I think this is in your head, but I don't have any data.  Management companies have been doing this for decades (for other reasons).

Cleaning fees have legitimately gone up a lot in most markets over the last few years.  Just normal supply/demand as well as raised expectations in cleanliness.  The number of STRs has grown rapidly, while the number of cleaners not nearly as much.  So a lot more competition for cleaners, and with this new class of hotel traveler coming to STRs, guests have a much higher standard for what constitutes a vacation clean than they did in the past.  So cleaners are being asked to do more, and they are in higher demand.  A rate increase happens naturally there.

As to other bogus fees, that's not really anything new, especially in large management companies like the one in your example.  Here's a thread Collin made about it years ago.  Most commonly used in rent shifting where the intent is to dupe the owners, not the guest.  In fact the whole premise is that it doesn't really matter to the guest.

The reality is that there's no real benefit to shifting rate into fees in terms of acquiring guest bookings because both Airbnb/VRBO feature total price heavily now, and actually default to not even showing the nightly rate on new accounts or when not logged in.  The only people that see the nightly rate in the search are those that had old accounts before this change and haven't hit the toggle to show nightly price instead.  But even for those accounts it is total price inclusive of fees that is featured on the property page.  It's not like resort fees on hotels where they actually show you a lower total price and then tell you in the fine print that resort fees will be added on top of that later, and don't actually show you what your real world price will be at any time during the booking.

On expedia all fees are rolled together into "host fee".  That includes cleaning fee.  So if you have a cleaning fee, you have a "host fee".

Haven't used them myself, but I've heard plenty of good things about Safely and Waivo.

Some PMS's will offer damage insurance when booked through the PMS widget as well.  I know Ownerrez and Hospitable both offer this, for an upcharge.

I live 45 minutes from Park City and vacation there 3+ times per year and I don't invest there. If I were to make a list of "Markets to have the highest likelihood of negative cashflow in 2023" or "Markets where you're most likely to have your STR banned due to regulation in 2023" Park City would probably be near the top of those lists. So for it to end up on a "best markets for STR in 2023" list to me shows either an extreme lack of knowledge of STR in the area or someone pushing an agenda (like a Park City realtor trying to convince people to buy with them there). While this forum is LITTERED with the latter, it doesn't appear to be the case here.

What it does appear to be is simple reputation management, putting a bunch of big posts out there to appear as a general subject matter expert so when someone is looking for a lender they see them as reputable. Which is totally fine.....IF YOU'RE ACTUALLY PROVIDING HELPFUL INFO.

In this case, the info just appears to be a hodgepodge of random markets with random tourism website quotes alongside some quick broad AirDNA metrics pasted in that don't really mean much in a vacuum. Again, that wouldn't so bad except that, at least given the market that I'm familiar with on the list, it's not only not helpful, it can actually be harmful. And directing people to Park City as a "top market" is harmful to the people who listen to it. Because it's only a very specific kind of buyer (particularly someone who likes to vacation there and doesn't really care too much about returns) that the area makes sense for.

We see all these posts on this forum about whether the STR market has taken a big downturn or not, and the prevailing theme we see in the answers to those threads is that the only people struggling are the ones who were stupid enough to buy a bad deal in a bad market at the peak. The thing that grinds my gears about those replies is that, while the buyer certainly deserves some of the blame for putting too much trust in people, it's posts like these and many of the people that post on these forums that pushed people into those deals in the first place. This forum has a bad habit of preying on people that don't know any better and then blaming them for listening to them in the first place.

I dunno, I've had this post sitting here for like 24 hours not sure if I want to even post it or not, and if it's too brash. But I think that is needed at this point. I'm just tired of people being fake helpful on this forum to try and drive business. If you want to be REAL helpful to drive business then great, I'm all for that. 

Oof.

This is my place: https://www.airbnb.com/rooms/52612233

When we bought it, it was completely unthemed, but furnished.  

Managing about a dozen properties in the area (and owning one) I would say one thing that I think relates to your question before I get into the costs.  If you're working with a budget it's going to go a lot further in terms of your returns if you get a place already furnished and then just throw out what you don't need or what you end up theming, rather than starting with nothing a spending a fortune on stuff that's not going to matter very much to your bottom line.

In other markets and with other approaches, design of regular every day items can really matter and help a place stand out. Here, if you're going with the theming approach, that theming is all people are going to care about.

To put it another way, if people are deciding between a bowling alley or a golf simulator or a $10k arcade machine or a theater or an X-Wing, the dresser in the 8th bedroom or the coffee table in the 3rd living space aren't going to drive their decision.  But these houses are huge and furnishing them out is very expensive.  I've seen people in the area buy new construction unfurnished and spend $100k+ just to furnish them.  You are going to get a WAY better return on that $100k by buying an already furnished place and spending $100k on awesome theming.

Now, with that out of the way, regarding our place and our experience/costs theming it...

We didn't hire a "do it all" themer/designer.  We kind of planned it ourselves and hired subs.  It was a massive headache dealing with some of them, though we did save money in the end.

Garage Arcade - We hired someone to drywall in the garage door, build a closet around the water heater, paint, and lay carpet.  Hired someone else to do the electrical and help us source the arcade games.  Total cost was around $20k.

Star Wars room - This was the spot we hired a designer for, though it was just for this room and not the whole house.  We told her generally what we wanted (X-wing vs. Tie Fighter with a bridge connecting them) and let her run with it.  This is an oversized 10x20 room.  Cost was $18k.

Princess room - I actually designed this one myself.  The bed I was actually able to find, and then we did the room around it.  The wall is just wallpaper we got off etsy, and Disney princess fathead stickers.  We hired someone to assemble the bed, hired someone to put up the wallpaper, hired someone to run the LED lights and hang the chandelier.  Total cost was a little over $3k.

We spent another $14k having someone fill out the rest of the house including the Toddler clubhouse under the stairs, the "lightly" themed rooms like Toy Story and 101 Dalmations, and just general decor and furniture that wasn't already in place.  We could have done this for much less ourselves, but at the time we were very busy and just didn't have the time to do it ourselves.

So all-in after we added coffee bar, kitchen item, etc (the place was managed by Vacasa before we bought it so it was very lacking in things an STR needs) we were around $60k, not counting a few repairs we had to do on the driveway/pool/etc.

Had we hired a do-it-all designer and not had to manage the subs ourselves it would have been a LOT less of a headache, but probably would've hit $100k easily.  Were the home unfurnished when we started, at least $150k.

If you really want to go all out I've seen designers in the $300k range do homes that make mine look like a piece of junk.  I manage one of these, and it's an awesome place.  Those are unfortunately getting more and more common now as the barometer of what constitutes a super property continues to rise.  3 years ago I'd have said my property was 98th percentile in the area.  Now I'd put it around 75th percentile.

You're going to want to consult a cpa for a final answer, but my non-cpa and unofficial understanding is that this would be very difficult. Most people that want to make their losses active sepf manage for the year they want to do that.

It doesn't hurt to ask.  It's also worth noting to them how different Airbnb's rating system is compared to most, and make sure to note that Airbnb may de-list/ban any properties whose rating score drops below 4.5.  In their head they'll likely think to themselves that some cobwebs (that you've vowed to take care of going forward) don't mean the property should be banned from the platform, and consider deleting it.

Haha love it.  What even is this article.  They list the places and then in the description of the places they list why their metrics are  not real, lol.

Seems like a big swing and a miss is that they're including non-STRable properties into the median home price calculations.  One of many problems.  But just funny to see them make fun of their own inaccurate metrics in their own article.

1. Crestview, FL

Median home list price in August: $725,000
Annual mortgage payment: $56,687
Annual revenue potential: $147,997
Potential annual profit: $91,310

For newcomers, the challenge is finding the right opportunity, says Mandy Reigart, a real estate agent with Realty ONE Group in Destin

“If I could find properties for $725,000 that would net $91,000 a year, I would be the busiest agent in the area,” she says.