All Forum Posts by: Ashish Acharya

Hi @Lena Scott,

Welcome to BP! You're already in the right spot, and you've already gotten some great advice and connections from everyone above. From a tax and financial perspective, I wanted to give you a few things that can help you get started on the right foot:

1. Private money and interest deductions: If you’re borrowing private money for your purchase or rehab, the interest on those loans is generally tax-deductible as long as it’s directly tied to the investment property. Make sure you keep detailed records of all loan agreements and interest payments.
2. Track every rehab expense: Contractor costs, materials, and any improvement-related expenses go into your property’s cost basis and can affect depreciation later. Organized records make your taxes easier and maximize deductions.
3. Working with contractors: Make sure all contractors are licensed and insured. Collect W-9s for any payments over $600, as you may need to issue 1099s at year-end. This keeps you compliant and prevents surprises with the IRS.
4. Plan for multi-state filings if applicable: If your property is out-of-state, you may need to file non-resident state tax returns. A CPA familiar with real estate investors can help plan ahead.
5. Consider your overall tax picture: Passive activity rules can limit early losses, and structuring your deals correctly can help you maximize deductions while minimizing risks.

Getting your team (CPA, contractor, lender, agent, etc.) aligned before you pull the trigger can save you time, money, and headaches down the road. Excited for you! Good luck!

Hey @Christopher Rubio,

Glad to connect with you! By the way, I love the honesty in this forum because something I frequently communicate to my clients and everyone I talk to about real estate is that you have to have a passion upfront to jump in and be successful. People still find success with this strategy, but if it doesn’t work out, there are others available. So, don’t feel discouraged.

From a tax perspective, here are some things to keep in mind as you start with out-of-state BRRRR or small multi-family investments:

1. Track everything for depreciation: Your purchase price, closing costs, and rehab expenses all feed into your property’s cost basis. Accurate tracking now sets you up to maximize depreciation and reduce taxable gains later.
2. Understand multi-state filings: Owning property out-of-state often triggers non-resident state tax filings. Planning ahead with a CPA familiar with multi-state real estate can save you from surprises.
3. Rehab expenses can help now: Any improvement costs you incur during the rehab phase may provide deductions or impact cost basis. Keep detailed records of all materials, labor, and contractor invoices.
4. Trusted Team: Even before making an offer, having a CPA who specializes in real estate investors review your numbers can help structure deals efficiently and anticipate tax implications. Have a lender who also educated you through the process and a real estate agent who knows the area you've already done your own research on as well.
5. Know the passive activity rules: Early losses may be limited depending on your overall income and activity level. Understanding this ahead of time helps with planning and avoiding unexpected tax bills.

Starting strong with these basics can save you headaches later and help you maximize the tax benefits of your investments.

@Kathryn Lewis Great points above!! Especially on understanding how a cost seg really works. Many people actually get started with STRs because of the tax benefits, not just the cash flow. Here’s how it usually works in practice (which you’ve probably read about, but we see a lot):

Investors buy a property in a market they believe in long-term and classify it properly for STR use. They may do a cost segregation study, which accelerates depreciation on things like furniture, appliances, and improvements. That can create paper losses, which, if you have enough income and qualify under material participation rules, can offset other income like W-2 or business income. The key is that this doesn't magically create cash; it reduces taxable income, which frees up cash elsewhere and can help scale your investments faster.

We also see a lot of new STR investors doing their own marketing on social media or other channels to save on operational costs, which helps improve real-world cash flow. And of course, the area and zoning really matter—you want to buy properties you truly see long-term value in, even if they don't look amazing from a pure tax perspective at first. When the fundamentals are right, the tax strategy and smart operations become accelerators, not the whole reason to do the deal.

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This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.

Hey @Victor Valencia! Glad to connect with you! Wow, what an amazing opportunity you had to jump in, and congrats on deciding to take the leap! A lot of people have opportunities like this in front of them but hold back because there’s so much to learn when getting into real estate.

From a tax perspective, here are a few things to keep in mind as you get started:

1. Gifting and cost basis: Since the property was a gift, your cost basis is usually what your dad originally paid, not the $30K you gave him. Keeping good records now will make depreciation and future taxes much easier to handle.
2. Using equity wisely: With the property valued significantly higher than what you paid, options like a cash-out refinance or LOC can give you funds for your next deal. Interest on these loans tied to investment properties is generally tax-deductible.
3. LLC vs personal ownership: Many investors use an LLC for liability protection. From a tax perspective, a single-member LLC usually reports on your individual return, but a CPA can help you decide what setup works best as you scale. This should not stop you from start. There is no tax savings.
4. Track every expense: Every dollar spent on purchase, rehab, or closing costs adds to your cost basis and helps with depreciation, which can reduce taxable income in the future.
5. Build your team: Even if you know contractors, having a CPA who specializes in real estate investing can help structure deals, plan for taxes, and make scaling smoother.

Starting with these basics, such as organized records, smart leverage, and the right guidance, will put you in a strong position to grow your portfolio without unnecessary surprises.

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This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.

@Sim Xing Wow, that’s a wild situation! You've gotten some good replies above. You should definitely check if it would actually benefit your tax situation. The tax treatment depends on how the property was actually used during the year.

A few things to keep in mind:

• Conversion to rental vs. personal residence: For cost segregation, the property needs to be classified as a rental. Since tenants were living there under a valid lease, it may be possible to treat that period as rental use.
• Depreciation and cost segregation: A cost segregation study could apply to the property for the rental portion, allowing accelerated depreciation on eligible components. Depreciation might not be able to reduce your taxable income so understand the REPS or active participation threshold.
• Prorating personal vs. rental use: If you moved in later in the year, you’d need to prorate deductions between personal and rental use.
• Other tax considerations: Beyond cost segregation, there are other strategies you could explore with a CPA, such as deducting expenses like property management, maintenance, and mortgage interest, or planning for future rental vs. personal use conversions to maximize tax benefits.

Because this can become nuanced, it’s best to sit down with a CPA experienced in real estate rentals and cost segregation to ensure everything is allocated correctly.

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This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.

Hi @Abram G Stoltzfoos & everyone

It’s amazing how willing this community is to share their experiences and help others grow. I pick up something new every day, and we all know the real estate world is full of learning curves and opportunities if you’re willing to jump in. We try to bring that same mindset to the tax side of things, too. Always happy to connect!

@Bryan Johns,

You’re on the right track. A couple clarifications that might help:

@Janet Behm

I have seen this in many recent posts, and it's good to remind people to check the source and do their research. Just because they have a big following does not mean they are credible, especially when it comes to taxes. Clickbait headlines promising “easy refunds” or “loopholes everyone qualifies for” can lead people into real trouble with the IRS.

Some things that are often misunderstood:

• STR (short-term rental) rules: People sometimes assume they can deduct every expense without limitation or ignore occupancy thresholds. Not following the rules can trigger audits or penalties.
• Business expenses: Just because something seems “business-related” doesn’t mean it’s fully deductible. Personal use, mixed-use items, or home office mistakes are common pitfalls.
• Retirement or education credits: These are often oversimplified on social media, and claiming them incorrectly can lead to huge penalties.

The IRS has sophisticated systems to catch improper claims, and relying on viral tips instead of professional guidance can be very costly. It’s always safer to double-check advice with a trusted CPA or tax professional before acting on any of these "loopholes" or "hacks". If it seems too good to be true, it probably is.

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This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.

@Andre Taylor

Lots of great information on this thread, and I had to join because cost segregation is a great strategy that we recommend often, especially now that bonus depreciation is back at 100%!

That said, there is an important point to keep in mind:

• Amending prior returns: If you haven’t done a cost segregation study on a property you already own, you might not be able to amend previous returns to claim missed bonus depreciation. You need to look into filing Form 3115

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This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.