Real estate professional on short terms while using management company?

Question

Can you still be considered a real estate professional while using a management company for AirBnB? I want to use the losses to offset my W2 income. Thanks

Kory Reynolds · Answer

Agreed that STR are not under the per se passive rules, and there is no real estate professional requirement related to them.  Which is why I state that they are are a separate consideration.

To be a REP you pass 1 test....you need more than 750 hours / more than 50% of your personal service hours in real property trades or businesses (note...not "rental" property trades or businesses").  Real property trades or businesses includes any real property development, redevelopment, construction, reconstruction, acquisition, conversion, rental, operation, management, leasing or brokerage trade or business. Not limited to rental activities at all.  This is the test I was referring to that STR hours would count towards.  Passing this first test alone does not make the losses on rental real estate non-passive, all it does is open the door to the next step.

The second part to actually benefit from being a REP for ones rental real estate activities is if you materially participate in your rental real estate activities, including the option to aggregate all your rental real estate for determining if you materially participate.  STR activities are not included as a part of this test, because they are not "rental real estate" activities.

It is very possible for someone to qualify as a "real estate professional" but not actually benefit from the status.  IE if one is in construction, they may spend all their time doing that, and then separately they invest in a syndication.  Sure they are a REP, but they don't materially participate in their rental real estate activities, so the losses in the rental game would remain passive.

Eric Williams · Answer

Short-term rentals do not fall under the per se passive rules. They do not have real estate professional requirements.

You would still have material participation requirements. There are 7 ways but they all require a consistent, substantial, and considerate levels of activity.

Either way for passive rules keep in mind you cannot attribute the activities of others to your efforts. They do not count, and if anything, make you look worse since there is evidence you are doing less.

The more they do, the less you do. Also other factors would hurt like having a full-time job.

Kory Reynolds · Answer

These are separate considerations, and no one can say for sure on your situation without a much deeper conversation.

But in short...yes someone can be a real estate professional while having a management company, they still need to meet the same hours requirements as anyone else.  If a management company is doing all the day to day, you may need a larger operation to hit the 750 hours required - it's not happening with a couple small properties.  The second step is that you are a material participant in your rental real estate activities, which has it's own facts and circumstances test.  Again, if a management company is doing all the day to day, you may need a more significant operation to actually count as a material participant in those rental activities.

Short Term rentals are a separate consideration altogether.  The work you do on them can count towards the 750 hours, but they are often outside of the category of Rental Real Estate income that being a real estate professional actually provides an advantage to.   Even though the real estate professional rules may not matter much for an Air BnB, material participation in that activity still does.

https://www.biggerpockets.com/forums/51/topics/1122635-the-s...

One of the other contributors on this board wrote the above post which will provide you very helpful information on the strategy you seem to be trying to execute.

Real estate professional on short terms while using management company?

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