Smaller properties are cheaper to update or can use higher quality materials.

Labor shortages and increasing material costs are increasing construction costs for fix-and-flip investors.

Keeping 5-10% in cash or alternatives provides liquidity and diversification.

You will constantly hear of shortcuts during construction and the conscientious decision to use lower quality materials during the renovation.

The STR loophole is all about “material participation”.

The LP still has to meet the material participation rules in order to take full advantage of the depreciation losses even if they meet REPS. 

Flooring: A lighter or mid gray lvp to compliment (~$3 sq ft material) Cabinets: White shaker style (Lowes/Home Depot, Readily Available with little lead time) Countertops: White Quartz with black veining to match black matte finishes if the return on investment is there or just a nicer laminate (calacatta marble natural stone look)Finishes: Black matte for a modern look or the classic brushed nickel.

The question is alternative use of equity compared to current use.  7.

And I put all quality materials and high end finishes throughout.

If you materially participate and the rental qualifies as a STR you should be able to take advantage of bonus depreciation on a STR.