All Forum Posts by: Roger Pearce

I'm looking for some expertise from STR landlords or accountants. I came into an extra $200K this year! The problem is it's going to be taxed as W-2 earnings. I only have long-term rentals and a full-time job so I come nowhere close to qualifying as a real estate professional and all my losses are passive. I realized the other day that maybe I could buy a house to use as an STR, spend 100 hours fixing it up and staging it, and perhaps manage to get a few guests before the end of the year. Then I could accelerate bonus depreciate (at 80% for 2023) hopefully about 1/4 of the amount I pay for the house. A $450K house should give me about $112K of depreciation for this year, which I can deduct from the extra $200K of active income I made this year. At a 35% tax bracket, that should save me about $39K in taxes. If I put down $150K on this house my mortgage payments on my $300K loan would be about $38K. This means that even if no one rents my house for the whole of next year the only money I will be out of pocket would be Insurance, taxes, and whatever it costs me to furnish the place.

Am I correct? I know my numbers are ballpark, but should I assume differently? Is it OK that the house will only be available as an STR for probably less than a month of 2023 and still claim accelerated bonus depreciation?

Part 2...

How long does it need to be a STR in order to legitimately claim accelerated bonus depreciation? Can I switch it to a furnished long term rental January 1st and not owe the IRS the money I saved on taxes in 2023?

Thanks in advance for your help and advice.

Roger

Thanks a lot, @Tara Montgomery. I'll let him know you sent me.

 Yes please!

@Tara Montgomery

Naga, thanks for your response. Eventually we got a lawyer who worked out a deal with the manager to let us out of the contracts. Frankly the lawyer didn't help us save any money. He got us out of the contracts for exactly what the management company had previously told us it would take. Plus we had to pay the lawyer. Unfortunately battling it in a court of law for months/years was not going to work for us and neither would taking months to go through a state organization/arbitration, etc. We decided this because the management company was mismanaging our 3 houses and was losing enough money every month to make it worthwhile to just get out of there. So sadly we lost some money there.

Hi. I'm looking for a good company in Atlanta to do a cost segregation on a SFH I bought last year for accelerated bonus depreciation. Please let me know if you have any companies I could use or any I should stay away from. Thanks a lot.

Roger

Me too. Thanks for posting.

@Joe Villeneuve what a fantastic way to put it. Thank you!

For many years we had a fantastic PM for our 2 properties here in Ga. and in October she abruptly sold all her management contracts to a bigger company that has made multiple mistakes, is not transparent with communication and overcharges us for repairs. We would like to leave them and we have a new manager in mind.

Our contract with our old manager began with a satisfaction provision stating that if we are not happy with her performance we are welcome to give her 30 days notice and leave without penalty. That contract was sold to the new PM company in October and we have not been asked to sign a new contract with them. Just like all management agreements there is a 'Term' provision that states that their management contract will renew when the lease renews unless we give them 60 days+ notice before the renewal date. The contract does not make any mention of any penalties for firing them mid contract presumably because the satisfaction guarantee would supersede any fees.

To make a long story short the new management company is saying that the satisfaction guarantee is not a binding part of the contract and they choose to go by the 'Term' provision so we have to wait until the lease is renewed. Incidentally one of the leases is up for renewal in about 11 months. It should be up in 7 months but the new manager forgot to get the renewal contract signed for 4 months after they had told us it was complete (and didn't even charge the month to month rate) so their lease renewed last month when we pointed out their mistake. The  new PM is insistent that their lawyers have assured them that the 'Term' provision is all that matters and that the satisfaction guarantee is useless. He has offered to let us out of our contracts early but we would have to pay all management fees they would have received for the remainder of the contract. As I mentioned, no penalty for early termination is mentioned in the contract from our old manager, and we have never been asked to sign a new contract with this new PM.
So, what can I do? Sure I could just have the locks changed and tell the tenants that we have a new manager. But then I expect the current manager would just refuse to hand over the security deposits etc and may even threaten to sue for even more. If they refuse to pass the security deposits to the new manager what recourse do I have? Does hiring a lawyer usually scare companies like this into being honest? Does anyone here know good arbitrators in Atlanta?

I'm attaching a copy of the first page of the contract. Am I in the right or am I delusional?

Thanks in advance for any help or advice.

Roger Pearce

Hi Ryan,

i have a fully paid off rental worth 200k and I'd like to cash out refi about 150k. I have excellent credit. What rate can you offer me? I'm willing to pay points but I don't have to.

Thanks,

Roger Pearce