Real Estate investment

[Help]

Thank you
I'm thinking about doing the STR method to be considered an active investor, which only requires 100 hours and self-management. Do you know if prorated works for that? (Too late for this year, but just curious)

It does not work.

[Fish Tank]

It does not work.

Thank you.

Anything else I need to know before purchasing an STR for active investor status?

[Mr Green]

I was recently listening to a podcast, and it was explained like this:

If you are not classified as a real estate professional, you can only deduct the depreciation/losses against passive income streams.

If you are classified as a real estate professional, you can deduct the losses against income earned from active income streams as well.

To be classified as a real estate professional the IRS requirements are:

• More than one-half of the personal services you performed in all trades or businesses during the tax year were performed in real property trades or businesses in which you materially participated.

• You performed more than 750 hours of services during the tax year in real property trades or businesses in which you materially participated.

Can you share a link to the podcast?

Those limits of passive losses are only if property is on personal name, If it is under LLC then the passive losses has no limits even if you are not a RE PRO, As far as i know

[Moshe Green]

Can you share a link to the podcast?

+1
(I am not affiliated with the poster in any way, i think)

[Ephcc90]

Those limits of passive losses are only if property is on personal name, If it is under LLC then the passive losses has no limits even if you are not a RE PRO, As far as i know

Lol that’s funny - but very incorrect.

[Fish Tank]

Can you share a link to the podcast?

I don't remember which podcast it was.

Those limits of passive losses are only if property is on personal name, If it is under LLC then the passive losses has no limits even if you are not a RE PRO, As far as i know

That is incorrect.
What you may be referring to is another option to be able to count the deductions against your w2 income "STR loophole".

That is if you own a short-term rental and self-manage it and spend 100+ hours managing it, you are considered an active investor.
(It wouldn't make a difference if it's an LLC etc.)   

[WonderingYid]

From what I understand, I need an accountant that specializes in RE.
Therefore, prior to paying $350-$500 for a consultation, I figured I will ask here first.

On that note, can you recommend one?

A serious accountant, should probably be giving you a free 15 minute call.

[WonderingYid]

Does anyone here buy (or know someone that does) distressed single family home in NJ?
Please PM me.

[davidd75]

what do you think of buying a house in Orlando area (near a minyan)for and renting it out (airb&b or other platforms)) and then using the house for ourselves during winter break, pesach etc

good idea/makes sense?
pitfalls?
what should I watch out for

Am I likely to get mortgage approval from a lender if they know I plan on paying the mortgage using rent monies from same house? I do have a lot of equity in my primary house will that help?

[Euclid]

what do you think of buying a house in Orlando area (near a minyan)for and renting it out (airb&b or other platforms)) and then using the house for ourselves during winter break, pesach etc

good idea/makes sense?
pitfalls?
what should I watch out for

Am I likely to get mortgage approval from a lender if they know I plan on paying the mortgage using rent monies from same house? I do have a lot of equity in my primary house will that help?

Many people started doing this during Covid. Not sure how it's working out right now, but spoke to someone a few months ago who owns a couple houses and he said the short term rental market there is very competitive - because there are so many owners like this.

[AsherO]

Am I likely to get mortgage approval from a lender if they know I plan on paying the mortgage using rent monies from same house? I do have a lot of equity in my primary house will that help?

No experience or expertise, but AFAIK a mortgage like this wouldn’t be for primary residence, so it would get underwritten as secondary residence or as investment, which are underwritten differently.

[notyettaken]

what do you think of buying a house in Orlando area (near a minyan)for and renting it out (airb&b or other platforms)) and then using the house for ourselves during winter break, pesach etc

good idea/makes sense?
pitfalls?
what should I watch out for

Am I likely to get mortgage approval from a lender if they know I plan on paying the mortgage using rent monies from same house? I do have a lot of equity in my primary house will that help?

 It sounds like you are doing this to have a vacation home and not as a business. Question is do you want the headache of managing an airb&b from 1000 miles away in a competitive market with no easy way out. (selling real estate is a hassle). Also make sure there are no local bylaws against short term rentals, sometimes it goes by neighborhood so check carefully. And if it isn't illegal now that can always change.
 probably better off renting.

[Yo ssi]

probably better off renting.

make sure there are no local bylaws

[yuneeq]

I know someone who did purchased a few. He told me that it’s basically break even but he’s building equity and uses it for vacation. There’s a company that manages the rentals but it’s not headache free.

Also - both the purchase price and mortgage rates were lower when he bought a few years ago, now it’s probably a bad investment.

[Yef]

The best type of investment is one where you use the property. As long as you can at least break even. You build equity and get to have your own property to use for vacation. Property manager takes care of the nitty gritty

[whacked1]

The best type of investment is one where you use the property. As long as you can at least break even. You build equity and get to have your own property to use for vacation. Property manager takes care of the nitty gritty

What does "break even" mean? zero net income? I wouldn't call that the best type of investment. Simple numbers would be:

Your cash in x whatever your avg rate you're getting on your other investments - equity you're building = true cost of your vacation. If you can rent for much less, than its a terrible investment as no risk was calculated

[yuneeq]

Property manager takes care of the nitty gritty

You still deal with finding/talking to potential renters, it's not completely passive

[Yef]

What does "break even" mean? zero net income? I wouldn't call that the best type of investment. Simple numbers would be:

Your cash in x whatever your avg rate you're getting on your other investments - equity you're building = true cost of your vacation. If you can rent for much less, than its a terrible investment as no risk was calculated

I am referring to a situation where he is putting a down payment and the income covered the mortgage and expenses. The mortgage being covered is your profit plus the use of the prior plus the equity build up. It is much better than getting 5%- 8% on that same small down payment.

[davidd75]

No experience or expertise, but AFAIK a mortgage like this wouldn’t be for primary residence, so it would get underwritten as secondary residence or as investment, which are underwritten differently.

yes correct it would be for a secondary residence or investment hence trying to gauge if this is feasible getting a approved using rental income from subject property etc...

[davidd75]

I know someone who did purchased a few. He told me that it’s basically break even but he’s building equity and uses it for vacation. There’s a company that manages the rentals but it’s not headache free.

Also - both the purchase price and mortgage rates were lower when he bought a few years ago, now it’s probably a bad investment.

good points although someone else told me you can negotiate now more with seller re purchase price more because the high interest rates are pushing down the demand(buyers)