Trying to get my wife to become real estate professional!

14 Replies

I work full-time (60-70 hrs) week on my regular job and do real estate on the side.  Like most people I'm working hard to build wealth and cash-flowing investments in real estate.  In the past 18 months, I've acquired 5 properties (6 units) which are all managed by property manager.  I have one that is self-managed with the best tenant you can ask for. (no phone calls or emails in the last 12+ months).  so 6 total rental properties.

My CPA - Amanda Han (listen to BP podcast #49) has been encouraging my wife to become a real estate professional to take advantage of the tax savings (especially for high earners above 200K who cannot take advantage of the passive losses).  

My wife is a stay at home mom with a full plate with 3 kids to raise.  That being said, our third (last) and youngest child is now going to pre-school in  a few months.  She may finally have more time to actually do the 750 hours of active participation/yr.   However, she has no experience as a landlord and little to no knowledge about investing.  

Finally here is my question.   Anyone know a good real estate course to attend (one that especially focuses on landlording - that's what she would be primarily doing in her 750 hours)?   That may help us to know if she can really do this thing or not.   Also, the course/trip itself will be tax deductible....and a little vacation away from the 3 kids!  Oh, also, it has be to be in a fun location to visit too.

Thanks

You could have just asked me today on our call but I won't hold that against you ....:)

Check out Dave Lindahl....He teaches mostly apartment investing but his classes and materials on property management is wonderful.

Medium keystone cpa   logo professionalAmanda Han CPA, Keystone CPA, Inc. | 877‑975‑0975 | http://www.KeystoneCPA.com | Podcast Guest on Show #162

Originally posted by @Amanda Han :

You could have just asked me today on our call but I won't hold that against you ....:)

Check out Dave Lindahl....He teaches mostly apartment investing but his classes and materials on property management is wonderful.

Wow!  Did I forget to mention...how awesome it is to have a CPA (Amanda Han) who is on biggerpockets!    And the fact that my CPA will respond to biggerpocket forums!   

Amanda, you told me today to focus more on real estate related activities to maximize my tax savings...so I got to thinking- I should not give up the idea of my wife becoming a real estate professional.

Thanks for the tip.   I've been resisting the idea of my wife becoming a "real estate professional status" because she seems to have little interest in it.  But slowly, my plan is to nudge her towards that role.  First, get her to read at least two real estate books...maybe Rich Dad Poor Dad and Millionaire real estate investor.   Watch a little HGTV together....go to a investing course, then start self-managing more of our properties, etc..easily hit 750 hours!(I know  HGTV does not count towards the 750 hours!)

@Joe Kim If you are asking your wife to do the work of a landlord and to do property management for the properties you own together, then she will need to know more about what that entails before signing on. If it resonates with her and she develops a passion for it, then great.

I agree the Rich Dad Poor Dad books are a good read, especially "The ABCs of Real Estate Investing" by Ken McElroy. I also recommend that you both read a classic book about landlording called "Landlording" by Leigh Robinson. It is now in it's eleventh edition, but you can buy the ninth edition for a very good price on-line. There is not much difference between the ninth, tenth and eleventh editions. It is quite comprehensive and gives you an "in the trenches" perspective. 

Also, take a listen to BP podcast #83 where I share some of our investment strategies and landlording tips. They might be encouraging to hear and provide some inspiration for her. I am passionate about landlording and the contribution we make to our community.

I would also be glad to talk with you and her about the ins and outs of managing your own properties while working full time. Even with kids in school and you working 50-60 hrs a week I would say your wife is already working full-time taking care of family and household needs. She most likely has the aptitude for doing property management work, but does she have the desire? Where will the inspiration come from? Does she want to become a real estate professional and in what capacity? What are her thoughts on this? How do you see you working together as a dynamic real estate investment team?

Whether or not she attends a tax deductible training program imbedded in a vacation is up to her. In any case, I would recommend rewarding her for the contributions she has made so far and treat her to some time off and some pampering!

Marcia Maynard, Fischer Properties | Podcast Guest on Show #83

@Amanda Han Good podcast. I've listened to it more than once. Sounds like you were the catalyst for @Joe Kim wanting his wife to become a real estate professional. I would be interested to hear your perspective about the tax savings and 750 active participation hour requirement. Also, what are your thoughts about real estate professional vs. real estate investor? Is there a clear distinction? Would love to hear the advice you initially gave to Joe and his wife about this, as it may be beneficial to our situation as well and how I and my husband define who we are and what we are doing. :-) Thanks!

Marcia Maynard, Fischer Properties | Podcast Guest on Show #83

@Marcia Maynard the "real estate professional" designation just means that you are actively and materially participating in your real estate business. So you can be a real estate investor and still qualify as a real estate professional. 

The advantage of having the real estate professional designation is that your passive real estate investments all become active income, meaning you can currently deduct passive losses against your ordinary income. So if you have been carrying over a $20k passive loss year-to-year and you are able to be designated as a real estate professional, the $20k loss is applied to your ordinary income. If you are married filing jointly, tax savings can be huge as the losses you are deducting will offset your spouse's income. 

Medium logo blackBrandon Hall CPA, The Real Estate CPA | http://www.therealestatecpa.com | Podcast Guest on Show #196

Originally posted by @Brandon Hall :

@Marcia Maynard the "real estate professional" designation just means that you are actively and materially participating in your real estate business. So you can be a real estate investor and still qualify as a real estate professional. 

The advantage of having the real estate professional designation is that your passive real estate investments all become active income, meaning you can currently deduct passive losses against your ordinary income. So if you have been carrying over a $20k passive loss year-to-year and you are able to be designated as a real estate professional, the $20k loss is applied to your ordinary income. If you are married filing jointly, tax savings can be huge as the losses you are deducting will offset your spouse's income. 

Thanks for the clarification. That is helpful to know. Well, then my husband and I are real estate professionals! Our actively and materially participating in our real estate business is well documented by our LLC and business practices, as well as by our tax preparer.

Marcia Maynard, Fischer Properties | Podcast Guest on Show #83

@Marcia Maynard Do either of you have a W-2 job? Another stipulation of the designation is that 51% of your worked hours needs to be in (or on) your real estate activities. So if you have a full-time W-2 job, you likely won't qualify. 

For instance, if you have a W-2 job, assuming you work 2,000 hours in a year, you would need to work roughly 2,040 hours in your real estate activities or 4,040 hours total during the year to qualify for the designation. 

Medium logo blackBrandon Hall CPA, The Real Estate CPA | http://www.therealestatecpa.com | Podcast Guest on Show #196

Originally posted by @Brandon Hall :

@Marcia Maynard Do either of you have a W-2 job? Another stipulation of the designation is that 51% of your worked hours needs to be in (or on) your real estate activities. So if you have a full-time W-2 job, you likely won't qualify. 

For instance, if you have a W-2 job, assuming you work 2,000 hours in a year, you would need to work roughly 2,040 hours in your real estate activities or 4,040 hours total during the year to qualify for the designation. 

Well then, perhaps we are not real estate professionals! We both have W-2 jobs and self-employment income from our respective professions (sign language interpreter and musician/pianist/entertainer.) Our real estate business is on the side. I work a 32-hour work week with W-2 income. Occasional freelance income as well. My husband is primarily self-employed but also is employed (sea-going employee) for a few months of the year working as an entertainer for the cruise industry. We both work about one day a week in our residential rental property business, sometimes more.

Marcia Maynard, Fischer Properties | Podcast Guest on Show #83

Originally posted by @Marcia Maynard :

@Joe Kim If you are asking your wife to do the work of a landlord and to do property management for the properties you own together, then she will need to know more about what that entails before signing on. If it resonates with her and she develops a passion for it, then great.

I agree the Rich Dad Poor Dad books are a good read, especially "The ABCs of Real Estate Investing" by Ken McElroy. I also recommend that you both read a classic book about landlording called "Landlording" by Leigh Robinson. 

Also, take a listen to BP podcast #83 where I share some of our investment strategies and landlording tips. They might be encouraging to hear and provide some inspiration for her. I am passionate about landlording and the contribution we make to our community.

 Thank you, Marcia.   Your episode #83 was great and I listened to recently.  I will check out Landlording too.  

-Joe

Is this designation any different than just having the home business deductions?  If not, then no need to go through all the training, which may be overwhelming to someone who isn't very interested in real estate law.

There are simple books about how to manage your own properties (I suggest the Nolo Press books to my friends and family, as they are easy to read and understand and they also include many well-written contracts and forms).  So, if she doesn't really need to go through an intense training course, and if the designation is no better than a normal home business as far as taxes go, why not just go down the path of less resistance?  Set up your home office and have your wife handle the phone calls and emails, and bookkeeping, and banking, etc.?  Maybe between the two of you, you'd be putting in enough hours?

I'm just remembering how exhausting being a stay-at-home mom is, and I only had one.  Pushing her into working a bunch of hours just as she's seeing a possible break with the one child going to school, may end up with your head on a plate :-)

I could not have got in the game without my wife. We have acquired 3 single family homes in the last year and a half. She was in the medical field and wasn't really happy. Since we started all I do is pick the property and she takes over. She has dealt with closings, contractors, showings, land lording and everything between. Did I mention she already dealt with an evictions?    She is simply put a "Beast" at this real estate thing. I hope your wife try's it. She may find she loves it. 

Best of Luck to you!

I have successfully represented a client in an appeal before the irs on this issue. Be careful irs only counts real estate business activity toward the 750. You can't count investor activities like research looking at new properties or going over financials ect. If you're planning on growing your portfolio you might want your wife to get her real estate license. All of her time as a real estate agent counts toward her hours, and IRS really doesn't question license real estate agents licensed contractors etc. make sure you meet with a good CPA who understands real estate rentals and hopefully owns some of their own. Ask them exactly what you need to do with your circumstance and what documentation you need to keep. Lastly make sure your wife puts real estate professional in her occupation box on 1040. And you also need to add a statement to your return says: I (your wife's name) am electing to treat all my real estate activities as a single activity, pursuant to IRC Section 469(c)(7)(A).

Originally posted by @Cameron Skinner :

I have successfully represented a client in an appeal before the irs on this issue. Be careful irs only counts real estate business activity toward the 750. You can't count investor activities like research looking at new properties or going over financials ect. If you're planning on growing your portfolio you might want your wife to get her real estate license. All of her time as a real estate agent counts toward her hours, and IRS really doesn't question license real estate agents licensed contractors etc. make sure you meet with a good CPA who understands real estate rentals and hopefully owns some of their own. Ask them exactly what you need to do with your circumstance and what documentation you need to keep. Lastly make sure your wife puts real estate professional in her occupation box on 1040. And you also need to add a statement to your return says: I (your wife's name) am electing to treat all my real estate activities as a single activity, pursuant to IRC Section 469(c)(7)(A).

@Cameron,

So you don't think she can find enough "material participation" as a landlord only for 6 properties to make it to 750 hours. 

Biggest portion of our portfolio is in texas.  Can my wife get a texas real estate license remotely, while living in California?  

@Joe Kim possibly but a variables may take more than I can peck out on my iPad , I'm happy to discuss with you further email me your contact info [email protected]