All Forum Posts by: Nik Gernhard

I have looked through other threads here and elsewhere and still not able to find the answers to my specific questions.

We are closing on a property soon and going to use as a short term rental.  This is our first and only rental property.  Looking to do some renovating, updating, adding furniture etc.  The questions mostly lie in what we can deduct and what we need to capitalize and depreciate over time.  I view deductions as far more attractive as they are all taken in one year vs. over time and because eventually depreciation will be recaptured (unless you 1031 forever)...so it's really not a tax break.  It's just kicking taxes down the road when you will essentially have to pay back what you deducted leaving little advantage.

Below is not a complete list, but has most of what we are looking to do.  These are material costs only as we will likely perform most of the work ourselves.  Which makes me wonder if materials alone qualify for any of these safe harbors?

Assume the unreduced basis of the building is about $350k (I took out the land value)

*Add New Deck - $8k

*Interior/Exterior paint - $3k

*Dishwasher - $500

*Landscaping materials - $1500

*Wood/sheetrock to build walls to enclose an existing space - $500

*Furniture (beds, tables, chairs etc) - $5k

*Hot Tub - $5k

Can we use the SHST or De Minimis or Routine Maintenance safe harbor for any of this?  Can we use them all in the same year?  

For instance, if the decking materials cost $8k but we are only allowed $7500 (2% rule) under SHST, then can we claim the $7500 and leave the other $500 out of that claim?  Or would we have to capitalize and depreciate the whole thing because it is over the $7500 limit?

Can we claim things like a dishwasher and other appliances under De minimis in the same year as SHST?  Let's assume the deck was exactly $7500 instead and we were able to use SHST for that.  Can we additionally claim the dishwasher under De Minimis?  I am thinking no because I believe I saw somewhere that you can't combine any/all of these safe harbors, but I'm not sure.

What about the paint, furniture and things like a hot tub?  And what if we buy them used...do we just get a receipt from people on Craigslist or FB Marketplace?  

Finally, is any of this considered startup costs that we could somehow take advantage of?

Thanks

 John, I have a decent understanding of how Excel works (I actually use Google Sheets...basically the same thing) and I can make formulas etc.  I'd love to know how to set something like that up.  I can't imagine it is going to be all that difficult, I just have never done it before.  And we really don't intend on adding properties.  This is likely to be the only one, so things should be pretty simple.

Thanks for all the input.  I looked at Quickbooks and they offer different levels of service and cost.  It seems that with just a single property things are not all that complicated and we might just need the most basic service.  Yes?

We are in the process of closing on a house that we are going to make a short-term vacation rental.  This is our first rental property of any kind.  

Since this is only a single STR, we were weighing the option to self-manage or not. We live about 4 hours away from the property and have full-time jobs, but I have a bit of flexibility during my day. Nights are relatively open to address any issues and communications. It seems like plenty of folks self-manage multiple properties along with working other full-time jobs and raising families while living half-way across the country. The key appears to have "good boots on the ground". In other words, find a great cleaning service and you are 80% there. Also need handyman or plumber/electrician etc. Most of the work to self-managing appears to be front-loaded, but after getting things initially set up there really isn't a drastic amount of time or effort involved, especially with only one property.

My main questions are about record-keeping and running the business end of things. With a single property, do people start an LLC? Also, should we use Quickbooks or some other software to help keep track of everything? Also, it seems like putting the property "in service" as quickly as possible would be most beneficial with regards to tax benefits. Do people put properties in service ASAP even if they don't yet have all the upgrades you envision for the house?

Thanks