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?

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!

Clifton Harris · Answer

@Mason Weiss, We're seeing many of the same trends in the Smokies.

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

Amber Stout · Answer

Interesting perspective, @Mason Weiss ! I'm an investor and mortgage broker here in FL, and I've definitely seen how challenging it can be to make traditional buy and hold deals pencil out with today's rates, insurance, and property taxes.

The tax advantages of STRs are getting more attention, especially from higher income investors. That said, I'm a big believer that the deal should still make sense beyond the tax benefits. I have seen some investors solely buy for the purpose of the tax incentive and from a cash flow perspective wasn't the best deal.

Curious, are most of your buyers purchasing primarily for the tax strategy or are they finding properties with decent cash flow as well?

Alik Levin · Answer

Scottsdale STRs had their moment, then oversaturation and a firm city stance. North Scottsdale plays a different game: snowbirds book 30-plus-day winter stays most HOAs allow, and high-end homes do best. Which side are your buyers on?

Myrtle Mike Thompson · Answer

@Mason Weiss I can echo that sentiment for the Myrtle Beach market. Whereas in the COVID craze of 2020-2022 we had a ton of newbie investors jumping into lower-priced (under $250k) oceanfront condos and other STR options seeking high ROI cash flow, the clients I've been working with lately are mostly high W-2 earners who are more focused on tax strategy. The right $400k property with $100k down can be a total gamechanger when a cost segregation study is implemented, and I've been working on aligning myself with trusted CPA's and lenders who can seamlessly deliver this strategy for my clients. I completely agree with your assessment that bonus depreciation will be a main driver of investment activity in 2027.

Mason Weiss · Answer

Depends on the income level of your clients, some investors are playing different games than others.

Michael Gonzales · Answer

@Mason Weiss - seeing a lot of the same interest in San Antonio. With 100% bonus depreciation back for property acquired after Jan 19, 2025, plenty of W-2 earners are asking about STRs. A couple of cautions I give people: the 'STR loophole' only works if the average guest stay is 7 days or less and you materially participate, so get a CPA involved before you buy, not after. And the property still has to make sense without the tax benefit, because the deduction is a one-time thing and the mortgage isn't.

Local rules matter too. San Antonio requires an STR permit and puts extra limits on non-owner-occupied STRs in residential areas, so check the exact address before you fall in love with the numbers.

I own a few STRs here myself and help investors buy them as an agent with eXp. As long as you run them well they tend to cashflow 3 to 5 times better than my long term rentals.

Also note, for someone who has done several cost segs and done some back calculations from purchase price to earned income paper loss - the numbers work out to ~27% of the purchase price (e.g. Buy a $380k asset, write off about $100,000 of earned income) but can very a few percentage points based on what features your property has and the land value.

Mason Weiss · Answer

I think a little bit of both!

Eugenia Chetverechenko · Answer

Mason, interesting to see how much tax strategy is influencing investment decisions in your market. I'm seeing more interest in STRs from higher-income clients for similar reasons. Curious, are most of your buyers specifically looking for properties that qualify for the tax benefits, or are they already interested in STRs and treating the depreciation as an added advantage?

What to Expect Going into 2027?

What to Expect Going into 2027?

Most Popular Reply

13 Replies