Real estate professional status 750 hours doable?
Member since 2022 · 20 posts · 12 votes
Real estate professional status 750 hours doable?
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Michael PlaksPro Member
Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votesEven though I already gave you an answer earlier on this thread, I need to add a few comments after seeing some totally irresponsible and reckless advice given by other commenters.
Short story is:
A. Can your wife qualify for REPS in theory? Certainly, this is a common strategy.
B. Can she qualify in your specific situation? No. Not unless she adds more real estate work.
C. Can you try something else besides qualifying your wife for REPS? Maybe. STRs for example.
You were told...
"she can... but careful planning and documentation are essential"
"...making sure that your wife understands what she needs to do to document her hours and activities."
Huh? Documenting WHAT?!? C'mon now, let's be real. You cannot document something that does not exist. Drop that empty hype, fellows. Yes, I said that, I call things what they are, I'm that old grumpy dude.
We need 750 hours. Where do we get it from?
From repairs and maintenance? Fine. How long does it take you to manage a maintenance request from your tenant? 1-2 hours per incident. Oh, I see, you are not going to hire a plumber. You are going to send your wife to personally unclog that toilet. Well, enjoy the couch tonight. But also, how long does it take in this case? OK, I will give you 5 hours. But we need 750 hours per year - or 15 hours per week. So we need 3 maintenance incidents per week, personally handled by your wife. Every single week, 3 incidents. Sorry, I'm not buying this story.
From make-ready's. Sure. How long does that take? So your wife will spend 5 full days repainting the whole place and scrubbing the bathtubs. Ok, we got 40-50 hours, tops. You had 3 of your 9 properties changing tenants. Yay, we have 150 hours!!! Still need another 600 hours. Which is 2 (instead of 3) 5-hour maintenance gigs every damn week.
From tenant changes. Gotcha. How many applicants did you interview? How long did it take you to negotiate the lease and oversee the move-in?
From visiting properties? You visit occupied properties? For what? How often? For how long? No, it's not a normal business practice and does not pass the smell test.
From driving? Travel time has been treated unfavorably by courts, with a few exceptions. If you rely on travel time to meet 750 hours, you're playing Russian roulette with the IRS. And even then - travel where, how often and, most importantly - why?
From watching YouTube gurus and listening to BiggerPockets podcasts? Nice try, but this time does not count.
In order to meet 750 hours, your wife will need one of the below:
- do something else real estate related, like wholesaling or realtor
- actively work on expanding your rental portfolio
- have an extensive DIY rehab, like a month-long full-time rehab (and then she might need another kind of rehab)
- a calamity such as multiple properties damaged in a storm where she will have to deal with insurers and contractors
- something else out of the ordinary
Again - if all you have is 9 single-family properties with stable tenants and typical occasional maintenance - you don't have enough work to collect 750 hours. Need something else besides lightly managing these 9 doors.
28 Replies
- Member since 2022 · 20 posts · 12 votes1y
Quote from @Corby Goade:
If you have high W2 income, the amount your STR makes (or loses) will be peanuts compared to the tax savings. Way better returns on the cost seg than you'd ever cash flow from an LTR.
Yes I know, It is something that I will consider, thanks for the reply.
- 1ySean GrahamBusiness MemberInvestor , CPA · Detroit, MI · Member since 2016 · 583 posts · 248 votes
Quote from @Samuel Kim:
Hello i am a doctor who wants to use cost segregation/bonus depreciation on my 9 rental houses, my home maker wife wants to meet the 750hr test to obtain real estate professional status and material participation.
Is it possible for her to have that many hours (750h) by managing our 9 properties? all are new constructions and I don't know how she is gonna be able to find 750h of work to do in these new construction houses.
Any help appreciated
There should be 750 hours of work (that's ~15 hours weekly) on new construction projects + property management. It might require doing everything herself.
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