I'm in construction, am I "real estate professional"?

Question

Hey all, this is my first time posting on bigger pockets, hope I'm doing this right. I've been learning about real estate for over a year now and bought my first LTR in February. I'm under contract right now for a second single family house that will be a BRRRR. After listening to the last podcast 689 I wanted to ask the question of am I considered a real estate professional?  I have my own construction business so I receive 1099s. I frame new construction homes and after listening to the podcast I thought hey maybe I'll qualify and then be able to run a cost segregation study on one if not both of the properties and then take that deprecation/loss against my 1099 income. Any help would be great. Thanks everyone

Nathan Gesner · Answer

Here's a good article about qualifications: https://www.eisneramper.com/ta...

There are some legal cases at the end for practical application.

Julio Gonzalez · Answer

@James Parla REPs status is just one step for unlocking the ability to offset your income. You also need to meet the requirements for material participation. Here's a great article to check out before discussing it with your tax advisor: https://www.aicpa.org/resource...

Nate Sanow · Answer

You have a great advantage on many of us with your knowledge on construction.  Most of us go through some version of living hell to find contractors we trust and if really lucky, actually like.  I believe the definition is related to the hours spent on your investments or general business but don’t hold me to that…I’m just trying to say, are the legitimate hours one could say you’ve spent on these properties ??? If I recall there is a 1/2 time version of the RE professional too, but again I might be quoting outdated or inaccurate stuff there, definitely will tell you a good CPA is worth their weight in gold.

I wish you well on your journey man! You’ve got a competitive advantage with your trade skills.  Use it!

James Parla · Answer

thanks for the repsonse adam. In the podcast, the accountant that was on said that "construction" is one of the "real property trade or businesses" that would qualify someone as a real estate professional in the IRS's eyes which is more of where im looking for answers

Adam Bartling · Answer

You are the driving component of the real estate business. However I would say many of the real estate agents would probably say you're not a real estate professional you're a home builder but either way who gives it a damn about the title??

I have not had a title on my business cards in years.

I'll tell you this as a home builder, mini of the new construction loans I do they're always having to look for a home builder that I'll come in as the general partner who has actual HUD statements and relevant building experience in the last 3 years.

you might be able to scale that way???

I'm in construction, am I "real estate professional"?

Most Popular Reply