All Forum Posts by: Ashish Acharya

@Evan Rekowski 

Welcome to BP! You’re already in the right place by being here and have the right idea by investing in real estate to chase financial freedom.

It’s one of the few assets that appreciates in value while still offering tax benefits through depreciation.

A house hack is a great way to get started as mentioned above. It lets you live for less (or even free) while building equity and learning the ropes. As you grow, you’ll want to understand how different types of rental properties interact with your income, especially the difference between passive and non-passive income from a tax perspective.

There are also some unique tax benefits and deductions available since you’re in the military; it’s worth looking into how your service benefits and possible home exclusions might work with the type of real estate you invest in.

Understand the STR loophole and active participation as both can save you taxes. I am assuming you do not qualify as REPS, but learn about it as you have a long way to go.

Just keep learning and you’ll be in a great spot. Thank you for your service, by the way.

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

@Mei Zhu 

Welcome to BP! You’re already in the right place by being here and have the right idea by investing in real estate to chase financial freedom.

It’s one of the few assets that appreciates in value while still offering tax benefits through depreciation.

A house hack is a great way to get started as mentioned above. It lets you live for less (or even free) while building equity and learning the ropes. As you grow, you’ll want to understand how different types of rental properties interact with your income, especially the difference between passive and non-passive income from a tax perspective.

There are also some unique tax benefits and deductions available since you’re in the military; it’s worth looking into how your service benefits and possible home exclusions might work with the type of real estate you invest in.

Understand the STR loophole and active participation as both can save you taxes. I am assuming you do not qualify as REPS, but learn about it as you have a long way to go.

Just keep learning and you’ll be in a great spot. Thank you for your service, by the way.

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

@Jessica Szombathelyi 

Welcome to BP! You and your husband are in an great position with the equity plus an ESOP payout gives you some financial breathing room to start your real estate journey. And the fact that you’ve already been hands-on remodeling your own home means you know how much work goes into it at times.

From a tax perspective, there are a few things worth keeping in mind as you plan your next move:

• Keeping CA house and using equity: If CA property can be converted to cashflowing rental you should. You can always tap into equity by getting HELOC. You can also lock in sec 121 500k capital gain exclusion by selling this to your privately owned corp. You will get best of both worlds.
• Depreciation: Once those rentals are up and running, depreciation becomes one of your biggest opportunities to save in taxes and reinvest your savings into your portfolio. Understand REPS and STR Loophole.
• Rental Strategy: Whether you go long-term, mid-term, or short-term, each has a different tax profile especially in how income is classified (passive vs. non-passive) and how you can use potential losses. You'll definitely want to make sure you're working with a CPA who can help you strategize here.

And since your husband’s in the military, it’s also worth looking into the Capital Gains Exclusion Extension under the Military Homeowners Assistance Program, which can extend the time you have to qualify for the Section 121 exclusion even if you’ve moved due to orders.

You’re already in the right place by being here! I hope this helps, and please tell your husband thank you for your service. Good luck to both of you! Happy to connect

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

@Adam Danes 

This situation is common for investors who minimize taxable income. The main issue is that taxable income and real cash flow are very different. When you claim deductions like depreciation, repairs, and interest to reduce taxes, your income appears low on paper, which makes banks deny loans based on debt service coverage ratios.

To improve your chances, plan for short-term income recognition before refinancing. You can delay some deductions, group passive activities to show stronger combined income, or adjust entity structures so one reports higher income for lending purposes. Temporarily increasing management fees or guaranteed payments in an S Corp or partnership can also help show stronger borrower income.

It’s also smart to plan taxes with financing in mind. Sometimes showing more income and paying slightly more in taxes can help you qualify for a refinance and access more capital. If traditional lenders still reject the deal explore portfolio lenders, private lenders, or asset-based loans that focus more on property value and equity than tax returns. 
I can connect you with an investor-friendly lender if you DM me.

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

@Jayson Magee 

There are many mentors here. If you need a detailed analyzer, let me help.

Flipping houses is taxed as non-passive income not capital gains. The IRS treats it as a business so profits are subject to both income tax and self-employment tax. Using an S Corporation can help reduce self-employment tax by splitting income between salary and distributions. Ask your tax advisor to do the S-Corp analysis.

All rehab costs, materials, utilities, loan interest, and property taxes are deductible business expenses. If you use private money lenders, interest paid to them is deductible but you must issue Form 1099-INT if payments exceed $600 in a year. Holding properties longer does not convert the income to capital gains unless the intent changes to investment rather than resale. If a true investment, use a separate entity.

Once you start profiting, understand how rental investment can wipe out your taxes.

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

@Amy Houghton

The STR tax loophole generally does not apply to midterm rentals which are typically leased for 30 days or more. Under IRS rules, a property qualifies for the STR loophole if the average guest stay is seven days or less, This allows rental losses including depreciation, to offset W-2 or other active income without needing REPS.

If you operate this as bed and breakfast, then you can still do what STR does with MTR.

However, once the average stay exceeds 30 days and it is not hotel/BAB, the IRS treats the activity as a long-term rental, making it passive by default. To achieve similar tax benefits for midterm rentals, you would need to qualify as a Real Estate Professional by spending over 750 hours per year and more than half of your working time in real estate activities.

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

@Ryan Xiques 

It’s great that you’re combining your contracting background with real estate investing. Structuring your business correctly from the start can make a huge difference in how much tax you pay later. If you operate under an S Corp, you can strategically avoid SE taxes. But it only makes sense after you cross a certain threshold. Your tax advisor would do this analysis for you.

Once you begin renting properties, understanding passive versus active income and exploring strategies like REPS or cost segregation can help you reduce or defer taxes while building long-term wealth.
With your contracting experience, you’re in a great position to turn every renovation into a Tax-smart investment.

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

@Stephen Moten 

Yes, limited negative cash flow is normal for a house hack. When you analyze this property, you need to look at the true cash flow after you fully rent it out.

The rental portion allows deductions for mortgage interest, taxes, repairs, and depreciation. If your income is under $150K, up to $25K of rental losses may offset other income under the passive activity rules.

Losses beyond that carry forward to future years or until the property is sold. Depreciation also creates paper losses that reduce taxable income even if cash flow is slightly negative, making modest short-term losses beneficial from a tax standpoint.

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

@Ana Booze 

If you’re financing a multifamily property, the loan type depends on the size. Properties with up to 4 units qualify for conventional residential loans, while 5 or more units require a commercial loan based on the property’s income.

People usually start a JV for a bigger asset where you can get funding from other equity partners as well.

With all these, please don't forget the tax implications of qualifying as REPS. Bigger assets can significantly save you taxes.

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

@Adan Caballero 

Welcome to the world of real estate investing!

First, learn the difference between non-passive and passive income, because how your income is classified determines what deductions you can take and how it’s taxed.

Keep detailed records of every expense tied to your properties, from mileage and closing costs to renovations and even home office use if you manage your rentals from home.

When you’re ready start RE journey, consider forming an LLC or S Corporation (not for rentals) for liability protection and potential tax advantages, but only once the numbers justify it.

Also, get familiar with depreciation, it’s one of the most powerful tax tools for real estate investors, letting you deduct a portion of your property’s value each year to reduce taxable income. Lastly, a good CPA can help you plan entity structure, financing, and timing of repairs or purchases to legally minimize taxes from day one.

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