🏁 Q4 is coming...How STR Investors should prepare for 2025 Material Participation

[AJ Wong]

We're entering the final lap of the year — and for STR investors, Q4 isn't just about holiday bookings. It's about locking in material participation for 2025. Miss it, and the STR loophole benefit gets pushed a full year out.

Since the ‘Big Beautiful Bill’ renewed 100% bonus depreciation our phone has been ringing non-stop with short term rental investor interest. Fortunately we've been anticipating the return since prior to the election - and are well prepared to support investor searches and execution on a tight timeline - but to ensure it’s also the 'right' investment- requires added attentiveness, due diligence and tenacity to execute.

Here’s what savvy investors are doing now:

Closing Before the Finish Line
Deals that close by October should give investors time to rack up management hours and qualify for 2025. Anything purchased afterward? Too late — no 2025 loophole advantage. That means you need to be in contract within the next 6 weeks or so to realistically close and meet material participation.

Logging Hours with Intention
Material participation isn’t just a buzzword — it’s hours in the books. Q4 is where investors double down on active involvement: design, setting up systems, coordinating contractors, managing guest stays, and tracking everything. Speak with your tax professional for suggestions and whether activities are valid.

Targeting Licensed, Zoned STRs
Not all rentals are created equal. Properties with licenses, zoning compliance, and a history of bookings give you the best chance at immediate performance and tax eligibility. We’ve seen a strong uptick in pending sales - particularly for luxury STRs in the past month.

Strategizing 1031 Exchanges
Rolling gains? Align your 1031X timeline so your replacement property qualifies for STR material participation in the same tax year. Mistime it, and you'll watch a golden opportunity slip. Our most recent luxury sale was a combination of exchange intended for STR usages. This particular clients timing was optimal as they were in contract prior to the Bill passing and closed last week.

Are you trying to cross the STR finish line this year?