All Forum Posts by: Adam Smith

@Tina Salgado Welcome to the site!  Make sure to upload a picture.  Personally, I love the podcasts.  Check them out on ITunes, there is a lot of great information on all 151 of them!

There is a lot of information on the site, podcasts and webinars.  Don't get overwhelmed. Start learning and pick a path and forge forward!

Good Luck!

@Brandon Hall @Jeff B.

Thank you for the thoughts and replies.  I think we will just continue the way we are going since we only have one rental at this point.

Thanks Again!

@Marcos Moura Welcome to the site!!  You will find an abundance of information on the site!!

Looks wonderful! Great Flip! 

Congratulations!

@Jeff B. Thanks for the information.  We do use Schedule E on our 1040, but IRS income limits restrict us from writing off our paper losses.

Can you expand on "invokes the full restrictions of any RE agent or broker"?  What are the restrictions?

Thank you!

@Brandon Hall Thanks for the information.  My wife is a full time realtor but she doesn't spend 500 hours a year on the rental.  I was not aware there were material participation rules that need to be met.  I thought she just had to be involved with getting it ready to rent, showing the home, tenant screening, etc.  (i.e.-no property management).

I will take a look at the seven material participation rules so that I know what we have to meet in the future.

Thanks Again!

I have searched the forums and have found bits and pieces of answers to my question so I thought I would ask to see if I can get a complete answer.

My question is:  Is it beneficial to be designated as a "real estate professional" for tax purposes when we have one rental.  This year, which is the first full year that we have owned it will have a loss because we had to do some repairs.  Based on the below specifics can we (specifically my realtor wife) be declared as a real estate professional for tax purposes for our rental.

A little more detail on our situation.  We have W2 Income that is close to the IRS limit so we can't write off losses (or very little if any).  My wife is a realtor in Colorado (1099 employee) where she spends greater than 750 hours on real estate...not on our rental but on her real estate deals. 

Does this qualify us for the real estate professional designation so we can write off paper losses from our rental?  This year we had to do $10k in repairs (almost drained the income we made from rents received for the later part of last year) so we will have a loss when combined with depreciation and interest, etc. write offs.  I think on a normal year we will still show a profit if we don't have any repairs.

Last year I thought I remembered our CPA telling us we do not want the designation but I don't know why??

Any information would be greatly appreciated.

@Ramon Moreno It really just depends on your goals. Define your goals very clearly (ie-write them down) and then research ways to reach your goals. Work backwards from your goals as well. For example if you want/need $4k a month and each rental will net you $500/month then you need to purchase 8 rentals. This is obviously just round numbers (don't forget to add in maintenance, vacancy and cap ex) but the concept is the same. Maybe another house hack (single family or even multifamily) or a BRRR are options. Search BP if you want the definition of BRRR.

You didn't mention any other consumer debt that you have.  If you have a lot of other debt using this equity to pay it off could be a way to move towards your goals.  Just depends on how you feel about consumer debt and your personal situation.  I personally feel that consumer debt is like swimming with ankle weights on.  For some reason a few mortgages don't bother me as much since we have "emergency" funds for our rental.  There are many conversations on debt vs debt free on BP.

For your first property you have a nice amount of equity to work with.  I am not exactly sure of your local market but just make sure you do your research, be confident, define your goals and work a plan to reach your goals. Don't be get emotional about an investment and don't be afraid to ask questions on BP!  You will make your money on the buy side.

I look forward to following your success!!

@Jake Allen Hattock  Welcome to the site.  I am also a civil engineer and working on getting our second rental.  Make sure to listen to the podcasts, they are full of information as well as the free e books on the site.

Congratulations on your investment.   As @Dawn Anastasi mentioned there are no dumb questions on BP.  We are all learning.  One thing we did with the utilities is our Town just switched from allowing renters to pay the water bill to only billing the owner of the property.  The sewer bill is this way as well.  What we have done is just have the tenant pay the water and sewer bill in addition to the rent.  The lease states that the tenant will pay these bills so it was more of logistics of how they will pay them.  To be clear, we actually pay the bill every month to make sure it gets paid.  Never want to have a bill in your name and have your tenant pay it because if they don't it is your debt and your credit.  Not sure how your Town does the billing but this is how we handled it.

As far as the lease goes we met with a local realtor (wife co-worker) that has 14 rentals and learned how he does the process.  Between this and BP we made our way through it and have wonderful tenants! 

Hope this helps. Keep moving forward, asking questions and learning!