All Forum Posts by: Walter Jones

Hi Nicole, let's connect. I have 5 mid-term rentals I may have some questions for you also!

With tax season in full swing, now is the perfect time to understand whether you’re an active or passive real estate investor. The difference isn’t just about how involved you are—it also affects how you report income, deduct expenses, and minimize taxes.

Active investors are directly involved in managing properties, making decisions, and overseeing operations. This includes house flippers, short-term rental operators, and landlords who self-manage their rentals.

Accounting & Tax Treatment:

• Income is earned and taxed as ordinary income.
• You can deduct business expenses (mortgage interest, depreciation, repairs, etc.).
• May qualify for Real Estate Professional Status (REPS), allowing rental losses to offset other income.
• Subject to self-employment tax if considered an active trade or business.

Passive investors provide capital but don’t actively manage properties. This includes those who invest in syndications, REITs, or private funds.

Accounting & Tax Treatment:

• Income is typically passive and taxed at capital gains rates or as dividends.
• Depreciation benefits may pass through via K-1 tax forms (for syndications).
• Losses are generally considered passive and can only offset passive income, not active income.
• No self-employment tax obligations.

With tax deadlines approaching, understanding your classification can help you maximize deductions and avoid surprises when filing. Active investors may be able to offset more taxable income, while passive investors should ensure they have the correct documentation (like K-1s).

Not sure where you fall? Now is the time to talk with a CPA who specializes in real estate before filing your return. Whether you're hands-on or hands-off, knowing the tax rules can help you keep more of your profits.

@David Kaytes is correct. I've been involved with the Memphis Investors Group since 2016. I'm also an elected board member for the next year, as well as a Silver Sponsor. 

Our monthly meetings are live as well as on Zoom, and we have a Zoom lunch meeting every Friday. There's usually 2-3 out of state investors that are regulars there. It's a very vibrant and collaborative group.

I'm happy to help evaluate any deals you come across also. Reach out if you have any questions. Happy to help!

Memphis is a great market for investors because it’s affordable, has strong rental demand, and is landlord-friendly. There are plenty of cash flow opportunities, especially in working-class areas where rents are solid compared to property prices. But if you're willing to spend a little more, there are parts of Shelby County where you might not get as much monthly cash flow, but the properties have better long-term appreciation potential and attract more stable tenants.

The economy in Memphis is diverse, with major industries like logistics (home to FedEx’s global hub), healthcare, and manufacturing. Plus, with Elon Musk’s xAI supercomputer project coming to town, there’s even more potential for job growth and housing demand in the future. That kind of investment can drive up property values over time, making Memphis an even stronger place to invest.

Having an agent who is also an investor makes a huge difference. They understand what actually makes a deal good and can help you avoid common mistakes, like buying in the wrong neighborhood or overpaying for a property that looks good on paper but has hidden problems. A good agent-investor will also have connections to solid property managers, contractors, and lenders, making it easier for you to manage your investment from out of state.

Hey @Crawford Peay! Welcome to the tribe!

@Caleb Parr with Renshaw Property Management

Hi Saul,

For better cash flow potential, you might consider Memphis. Properties here often fall well below $150k, and the market is expected to see home prices rise by 10.5% in 2025. That’s one of the highest growth forecasts in the country while still maintaining strong rent-to-price ratios.

Memphis also has a resilient economy, driven by logistics (FedEx), healthcare, and a high percentage of renters. It’s a market where cash flow is achievable without needing a massive upfront investment. If you’re looking for steady rental demand and manageable property prices, it’s worth considering.

Best of luck with your search!

 Hi @Raushanah Morgan! I recently joined the Memphis Metro CCIM, and I'm attending the CCIM Foundations class on January 28th and 29th at the Memphis Area Association of Realtors. Hope to see you there!

I agree with @Melanie P. Focus on your own backyard 1st if you can.    

I started by house hacking a 4-plex, using a 3.5% down FHA loan and later refinancing at 2.9%. It's been a strong performer ever since. Since then, I've added six duplexes and three single-family homes.

Apart from the house hack, if I could start over, I’d focus more on single-family homes in better neighborhoods. They tend to have more stable tenants, no shared yard maintenance, and better long-term appreciation potential.