All Forum Posts by: Ashish Acharya

@Kyle Gagnon 

For beginners, cash flow should be the top priority unless you already have a large portfolio that allows you to focus on appreciation. Long-term wealth building through appreciation usually outperforms immediate cash flow only when you have the scale and flexibility to leverage tax efficiency, because tax efficiency compounds wealth faster than monthly income.

even High cash flow properties often do not create taxable income because of depreciation.

Appreciation or value-add assets can also generate significant paper losses through depreciation and cost segregation, allowing investors to offset other income while building long-term equity.

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.

@Benjamin Dolly 

If a loan above 80 percent loan to value leaves you with thin or negative cash flow after real reserves, you should wait or change the deal.

Tax breaks will not rescue weak math. As a high earning W2 earner, long term rental losses are usually passive and get suspended once income passes roughly 150,000, so you rarely cut this year’s W2 tax.

You can buy now only if the property supports about a 1.2 debt service coverage after honest reserves or you have a clear plan to hit that within 12 months. You can house hack a 2 to 4 unit to use lower down payments and better rates while depreciating the rental portion. You can do light value add to raise net operating income, then refinance to drop mortgage insurance and reduce effective loan to value. You can bring in a capital partner so the deal closes at 20 to 25 percent down.

If you need current year tax offsets, you can do 1 short term rental with material participation, knowing it is an non-passive business with right participation.

In your shoes, you can either house hack and refinance within 12 to 18 months, or partner on a simple cash flowing duplex that already meets coverage on day 1.

If neither is available, you can wait and keep saving.

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.

@Levonte Wilson 

Welcome. Better that you're starting with small multifamily and aiming to build a long-term rental portfolio. Let's keep the tax stuff simple and practical. Buy in your name or a single-member LLC. Skip S corps for holds. Open a separate bank account. Track every dollar.

Rental income is usually passive.

If you or a spouse qualify as a real estate professional, losses can offset other income. With active participation, you may be able to use up to 25,000 of losses, subject to income limits. Call it a repair only when you fix something that’s broken. Expense those now.

Capitalize true improvements and depreciate them. Use the 2,500 per-invoice safe harbor for small items like appliances or use bonus depreciation when it is at 100%.

Think about cost segregation after you scale. Plan for depreciation recapture down the road. A 1031 exchange can defer it when you sell. If you house-hack, you still depreciate the rental portion. Allocate costs by something reasonable like square footage.

Check your local landlord rules and property tax details so you don’t miss forms or credits. Keep the books clean and boring. You’ll keep more cash for the next down payment.

@Lloyd Hussey

The next few years will be big for this. The market will also get better for buyers. STR and REPS are great, but you need to learn about reverse passive planning if you want to play like the wealthy.

The goal is to create legitimate nonpassive losses that can help reduce your taxable income.

To make the strategy count for your 2025 return, the property needs to be placed in service by December 31, 2025. That means it should be furnished, listed, and available for guests with two bookings. Once it’s ready and available, you can start claiming depreciation and related expenses for the year.

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

@Daniel Yurick 

Please work with an investor friendly lender so that they can back out depreciation. If not, your DTI will be low.

If your taxable income is low due to business deductions (not depreciation), traditional banks and credit unions that underwrite based on tax returns aren't ideal. Instead, consider DSCR (Debt Service Coverage Ratio) lenders or portfolio lenders that qualify you based on property cash flow rather than personal income. DSCR loans are designed for real estate investors whose rental income supports the mortgage, allowing you to keep your tax deductions without inflating your AGI. Portfolio lenders and some non-QM bank statement programs can also use business deposits or CPA-prepared P&Ls to verify income. From a tax standpoint, it's usually better to preserve deductions and use a cash-flow-based loan rather than increasing your taxable income just to qualify for traditional financing.

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.

@Claudia Macias 

That’s awesome, Claudia! You’re in a great area for real estate investing. House flipping is taxed as non-passive income, meaning profits are subject to ordinary income and self-employment tax. Once you’re profitable, forming an S Corporation can reduce taxes by allowing you to take part of your income as distributions instead of salary. Your CPA will have to do an analysis when you want to elect an S-Corp. Be sure to track all expenses like materials, contractors, and loan interest since they’re deductible.

When you buy into rentals, your income becomes passive, so it’s not subject to self-employment tax, and you can deduct depreciation to lower taxable income. Property taxes average around 2 to 2.5 percent, but there’s no state income tax, which helps offset costs. As your portfolio grows, qualifying for Real Estate Professional Status can help you use rental losses to offset other income (W2 and Flips).

Many investors use an S Corp or LLC for flips and separate LLCs for rentals. To stay compliant, form your entity (SMLLC) before your first flip, keep separate business accounts, and work with a real estate CPA. Learning about 1031 exchanges will also help you defer taxes when reinvesting capital gains (not Flip profit). With the right setup, you'll be ready to complete your first flip and start building long-term wealth through real estate.

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.

@Tulika Bose 

Welcome to the world of real estate investing and congratulations on starting your journey with both financial and tax strategy in mind. With a $300K budget and a goal of building a long-term rental portfolio, your key success factors will be smart leverage, the right market, and tax efficiency.

Forming a single-member LLC offers liability protection and simplicity (this will not save you taxes), while a multi-member LLC (this will also not save you taxes) helps structure ownership with your son. Each property provides depreciation benefits that reduce taxable income, and if one of you qualifies as a Real Estate Professional (REPS), you can offset active income with rental losses. You could also benefit if you fall under the active participation rules.

Focus on after-tax ROI by factoring in deductions such as depreciation, mortgage interest, and travel expenses. Avoid HOA-heavy or over-renovated properties, and prioritize Class B rentals near colleges or job hubs. As your portfolio grows, grouping your rentals for tax purposes can simplify management and improve deductions. Overall, Philadelphia or nearby New Jersey markets offer the best balance of affordability, cash flow, and tax efficiency for your first 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

@Erica Davis 

As an out-of-state investor, choose a property manager who is tax-literate: They need to understand the material participation rules, and they should coordinate with you if you plan to meet REPS or STR. Confirm they preserve decision logs and exportable communications to evidence your involvement.

They should collect your W-9 and use your EIN, have a written 1099 policy for vendors they pay as your agent, register and file all applicable state and local taxes (sales/lodging/occupancy, business licenses, any nonresident withholding) in your entity’s name, and keep security deposits in a separate trust account. Demand exportable monthly statements with GL detail, vendor names, and invoices so your CPA can distinguish repairs vs. improvements, apply Tangible Property Regs and the de minimis safe harbor, and coordinate cost-seg and partial asset dispositions.

For short-term rentals, they must track nights, owner use, and services separately and reconcile platform 1099-Ks to prevent double-counting. Insist on a year-end tax package, clear classification of reimbursements vs. income, audit-cooperation language in the contract, and guaranteed data-export on termination. Clarify who is the employer for on-site staff and require W-9s plus insurance from all vendors. Walk away from anyone who says Airbnb pays all your taxes, can’t explain local filings, commingles funds, or won’t provide invoices and a proper year-end package.

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.

@Hunter Foote 

I am glad you shared these. These long-term housing and operate more like small businesses, opening the door to deductions and credits that traditional rentals don’t always qualify for. Investors can often use cost segregation to accelerate depreciation, reducing taxable income while maintaining strong cash flow. In some cases, partnering with or leasing to a nonprofit operator can even allow for partially tax-exempt rental income under certain IRS provisions.

Beyond depreciation, operators may also qualify for the QBI deduction, which lets you exclude up to 20% of your business income from taxes if the property is managed as an active business rather than a passive rental. Expenses related to staffing, maintenance, certifications, and community programs can further increase deductions while improving the property’s overall impact.

What makes this model special is its ability to combine purpose and profit. Investors help people rebuild their lives while building wealth through consistent income and smart tax planning. With the right structure and guidance, recovery housing can be both a meaningful and financially rewarding addition to your portfolio.

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.

@Michael Santeusanio 

I talk to investors everyday and have it myself. 

By leveraging options like seller financing, private loans, partnerships, or subject to deals, investors gain flexibility in structuring payments and ownership, which directly impacts how income, interest, and depreciation are taxed. Interest paid on these arrangements is generally deductible when linked to income-producing property, while sellers can defer taxable gains by spreading income over time. Because creative financing often requires less upfront capital, investors can acquire more properties and accelerate depreciation deductions, especially when paired with cost segregation studies, allowing them to shelter more income.

In joint ventures or partnerships, profits, losses, and depreciation can be allocated strategically to align with each partner’s tax position, as long as the allocations have economic substance. Creative deal structures like installment sales or wrap mortgages can also defer capital gains (and NIIT Taxes) and enhance cash flow, particularly when combined with 1031 exchanges. Still, proper documentation, compliance with interest reporting (Forms 1098 and 1099-INT), and avoiding pitfalls like dealer status or misclassified personal-use interest are essential.

Ultimately, when structured thoughtfully, creative financing becomes more than a growth strategy, it transforms into a sophisticated tax planning tool that turns leverage into a lasting financial advantage.

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.