Rental Property Investor · Eastern Wisconsin · Member since 2017 · 30 posts · 7 votes
If you're a designated Real Estate Professional as far as taxes go how many units are you self managing?
I'm self employed and my day business makes a pretty good income. Employees take care of most of the work so I don't have to be here the normal 9-5. I also have 13 units that I self manage and another 8 that I have a property manager take care of. I'm looking to add more units in 2021. In order to offset my passive real estate losses against my active income from my day job I need to claim that I'm a Real Estate Professional for taxes (750 hours spent on real estate management minimum).
My accountant tells me that this is an area that the IRS audits quite often because they know it's a really sweet deal. So my question is to those that already designate themselves as a Real Estate Professional, how many units are you self managing?
I'm thinking about maybe adding a 4 plex and and buying a vacation home that I'll AirBnB. The AirBnB should eat up more time than a long term rental. Thoughts?
Rental Property Investor · NH · Member since 2018 · 50 posts · 28 votes
5y
@Dave Klein
There is no set amount of properties. Even if you qualify as a REP, you still need to work 500 hours in each (or all depending how you file) of your properties.
Rental Property Investor · Newport News, VA · Member since 2018 · 264 posts · 130 votes
5y
@Dave Klein
From what I understand... You can't be considered a real estate professional if you have a full time job. Someone please jump in if I'm wrong. Do you have a spouse that doesn't have a job by chance?
Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
5y
@Dave Klein It isn't measured by the number of units but more about your other 'job' whether that takes time or not. In the end the IRS wants their pound of flesh and won't give up easily. Talk to your accountant........is the other business related to RE in any way?
Rental Property Investor · Eastern Wisconsin · Member since 2017 · 30 posts · 7 votes
5y
My day business is an ecommerce apparel business. I have an over seas team of data entry people who add products to our site and then 3 people here in the US who handle the customer service and shipping of the products. I do come in Monday-Friday to make sure everyone is on task and has what they need to do their job but I spend half my day drooling over real estate I can't yet afford and listening to podcasts. This morning I left for 2 hours to replace a toilet. Tomorrow I'm going to spend 8-11am cleaning brush at one of my units.
I'm aware that being an RE professional isn't measured in units but rather time. I'm wondering if the IRS has ever pressed someone and said "Come on, there's no way you spend 750 hours a year managing XXXXX number of units".
From what I understand... You can't be considered a real estate professional if you have a full time job. Someone please jump in if I'm wrong. Do you have a spouse that doesn't have a job by chance?
Best,
My spouse works a traditional 9-5 job for the local school district so her job is more rigid and she would have a much harder time becoming a RE Pro. I don't feel that I have a full time job but rather a business that I own ....... it's a gray area I know.
Real Estate Coach · Salt Lake City, UT · Member since 2017 · 272 posts · 414 votes
5y
My accountant and attorney have both told me to keep a logbook of time spent on real estate. It basically has to be more than 750 hours AND more hours spent than on your other job(s). Almost impossible to do as a full-time employee because it's hard to work 40+ hours per week on two jobs.
Rental Property Investor · NH · Member since 2018 · 50 posts · 28 votes
5y
@Dave Klein
There is no set amount of properties. Even if you qualify as a REP, you still need to work 500 hours in each (or all depending how you file) of your properties.