What to Expect Going into 2027?

Question

This year, I think the most advantageous real estate investing strategy has been acquiring a short term rental for bonus depreciation. With high interest rates, and low cash flow spreads, investing in long term buy and hold rental properties seems to be not worth it. I think the trend will continue into 2027.

So far this year, I have helped 15 investors gain massive tax benefits off their W2 income or business income by purchasing a short term rental. Taking a six figure deduction has provided more cash flow than they could ever get in other real estate strategies. Now we still want the properties to cash flow or at least break even, but that is why the Airbnb transaction market has stayed competitive and more balanced whereas everything else has switched favorably to a buyer's market in the greater Phoenix area.

Anyone else having this in their markets as well?

Lee Futcher · Answer

Hey @Mason Weiss,

Fifteen investors in one year is a lot of people you've helped, and I can see why the bonus depreciation side is so appealing for someone with a big W2 income. A six figure deduction in the first year is hard to match with a long term rental at today's rates.

I'm not a host myself, but my wife and I have spent the past four years living mostly in short-term and monthly rentals, so I see these properties from the guest side. I think the part that sometimes gets lost is that the tax benefit usually depends on the owner being genuinely involved in running the place, and that's a real commitment for someone who already has a demanding full-time job.

If I were helping a buyer in Phoenix today, I'd sit down with them before they close and map out a normal week at the property: who answers guest questions, who coordinates the cleaners and turnovers, who handles a broken AC in July, and how they'll keep a simple log of their hours. It only takes an hour, but it gives them a clear picture of the time they're signing up for, so the deduction and the day-to-day work both line up with what they expected.

Best of luck heading into 2027,Lee

Andrew Steffens · Answer

Hey Mason

I am seeing almost exactly the same as what you are mentioning in the Tampa market. I have sold 22 STR's this year with another 5-10 hopefully closing before EOY. I am also in agreement that STR is one of the best strategies due to the current tax benefits. It is very possible to positive cashflow positively at a moderate level and when combined with some to most of the down payment being effectively subsidized by the IRS it is very powerful.

When speaking with a new client about the general market it is challenging to explain to them the market is NOT soft for STR's. The fact is STR's by definition are in highly desirable areas (i.e. near Gulf Beach or downtown areas) the general market for these assets have been pretty flat the past few years during the high rate times since a big boom during COVID. Adding in the turnkey ones with a high rate of performance and the amount of buyers in the market for them, these are moving pretty well as long as they are solid assets with good performance at a reasonable asking price. Unfortunately the news and Zillow articles make potential buyers think its 2008 and sellers will accept any lowball offer we throw at them and that is just not the case in the already developed areas. That said, if you are in the market for a suburban house in an overbuilt area 40-45+ mins from the attractions with 0 STR potential, you can get a hell of a deal right now!

What to Expect Going into 2027?

2 Replies