First Rental Property | Need to Lower Taxes

[Renee Mills]

Hi all. My husband and I are just starting out in our real estate investment journey. We just set up our LLC and are starting to look for our first property. The goal initially is to lower our taxes, so looking for a short term rental and to write off depreciation.

Based on my reading, we must have a property “ready” to rent, not necessarily rented to do that cost segregation.  Can someone give me some additional high level info on that.  I’d love to save on taxes for 2025, but worried it’s too late in the year to find a property, close, and have it ready to rent by the end of the year.  Any info is appreciated for this newbie!  

[Melissa Justice]

@Renee Mills,

Welcome and congrats on taking action - setting up your LLC and looking for your first STR is a great start!

You’re correct - for a cost segregation study and to take advantage of bonus depreciation, the property just needs to be placed in service by year-end. That means it must be ready and available to rent (furnished, photos taken, listed, etc.), even if you don’t have a tenant or guest yet.

If your goal is 2025 tax savings, you’ll want to close, furnish, and list it before Dec 31st. It’s still doable, but time is tight - look for new builds or newly rehabbed STR-ready properties to speed up the process. You realistically have about 3-4 weeks to go under contract with a home and close by year end.

Markets like Birmingham or Tuscaloosa, AL offer affordable STR options with strong rent demand and there are new builds available there which are move-in ready & tenant ready which makes setup faster for tax timing.

Always happy to chat more about what's worked for other investors. Best of luck!