All Forum Posts by: Aaron Zimmerman

 Totally fair. Your situation has quite a bit of nuance for sure. I hope you can achieve your ideal lifestyle. Have you considered buying a business in the trades? There are 10% SBA loans to purchase businesses. Of course, you would need to do your own research and due diligence when purchasing a company but perhaps that's a way to get involved in the trades in the owners seat. Perhaps you could roll the housing equity into a smaller business. Given your husband's expertise in marketing, you probably have the skills to grow a business. 

A couple factors that come into play when assessing cost:

1. Complexity of return (many things such as # of states, # of properties, 1031 exchanges, etc)

2. Bookkeeping records (if they're worse, they'll charge more). 

3. # of times you talk with your CPA/tax planning (generally tax planning is going to cost more)

It depends on the CPA, location, etc. I feel like $6k is a lot if it's just the tax return. However, if you're getting tax planning/strategy calls, I feel like it's not a drastic overpay. The cost of the right advisor initially is a lot less in the long when you pick a bad advisor. Often times, cheap is expensive!

Before doing any cost segregation study, I would implore you to talk with a CPA, make sure you qualify for the STR Loophole, and then do the cost segregation study. Cost segs can be done the following year as well.

@Katie Southard - there's a lot to unpack here. 

Here would be a reasonable case if you sold the property while getting the section 121 exclusion. If you sold let's say for $460k net and you've rented out the property for a little less than 2 years, you'll have some minor depreciation recapture. I would venture maybe $20k total, conservatively. The ultimate tax hit is at most $5k (20k * max 25% tax rate) and it's probably not worth it to 1031 exchange for that little of tax deferrals. It'd be better to pocket the cash in my opinion and invest elsewhere.

It seems like there's a bit of conflict between where you are and where you'd like to be. You are working a demanding corporate job but also want to build rentals on the side. Is there a way to reduce the amount of hours so you have more time for other activities?

I would recommend you and your husband get on the same page about future investing goals. Something I do with my wife is quarterly money dates. We discuss spending, net worth, and future investing goals with the cash. It's not perfect but it's a start and something for you both to look forward to as you continue building your life together.

Some other questions to consider are:

1. What do you want your ideal life to look life?

2. What problems do you want to be solving? Do you want to be solving tenant issues, buying properties, problems at work, etc. 

Happy to be a resource as I know all of this is challenging. You've done well with having options, now just need to decide and get on the same page. 

Kyle - I would recommend looking through the forums, connecting with a few CPAs on here, and making a decision. I think Biggerpockets is a great resource with plenty of knowledgable CPAs here that can provide more certainty to your situation.

Agreed with Bruce. Ultimately, all the costs would be added to your basis in the property and depreciated when you place the property in service as a short term rental. One way to get tax benefits while you're living there could be installing solar panels or upgrading the energy efficiency of the home. 

Purchase price + improvements = basis

From there, you would need to meet the requirements of the STR Loophole. The main one being material participation. You will want to talk to a CPA to see which hours count and which hours don't as there is a lot of gray area with your situation.

To piggyback on Henry's comments, he's spot on with #4. Assuming you meet real estate professional status (which it seems like you do - you'll just want to have a time log verifying) AND materially participate in your rentals, you simply wouldn't get that big of a year one benefit. 

That said, if you feel like it's worth it to spend, let's say $3k to get a $6k tax benefit, that's still not a bad ROI. If it helps save for the next deal or you need working capital for this deal, then I'd say do it. Otherwise, if you have plenty of reserves, then it's probably not worth the time in my opinion.

Michael - while there may be great local CPAs, you can open up your pool of CPAs that can help you by working remotely. Most CPAs can file in all states. 

I would also recommend that you find a CPA that also invests in real estate.

Check out the forums for CPAs including this thread. 

I third that $1,740 is astronomically low. I don't understand how your CPA can even make money at that price but that's beside the point. 

I would highly recommend finding a CPA and tax strategist. Based off your current portfolio, I would recommend meeting at least quarterly and potentially even monthly given the complexities that would arise on that portfolio. 

Without knowing your situation too well outside of what you've posted, it's likely that you are over $150k MAGI, meaning you aren't deducting rental losses OR the properties are generating positive income after depreciation due to the low costs of the property. If you are okay giving up control, which it seems like you might be given the DST investments, you could invest in syndications of real estate that may lower your tax bill if they do cost segregation studies. Of course, you'd need to see if it's a good investment for you. Just a few ideas to consider as you navigate your current portfolio.

Well done on building such a large portfolio and doing this all while working a W-2!

@Madeline Walsh - Congrats on your purchase! Seems like an awesome deal. Hope this investment will lead to other investments in Chicago.