All Forum Posts by: Bonnie Griffin Kaake

In areas zoned single-family residential, no airbnbs or VRBOa are permitted. You can rent an entire house to a single family for periods of time 30 days or more. We do have one home in a single-family residential area under an HOA that permitted an owner to put in a small apartment in their basement for renting to a nurse and her family so they could care for the wife of the couple who own the house. She has MS and needs daily care. More and more HOAs and cities are blocking all Airbnbs and VRBOs due to excess traffic and cars parked on the streets.

I think we are going to eventually see more ADUs (An Accessory Dwelling Unit, usually just called an ADU a secondary housing unit on a single-family residential lot) in the future. Families are struggling to afford single-family homes anymore. In other countries, they have more communal living options and it is common to have adult children, parents and grandparents living in the same house. Our housing crisis is pushing us in this direction. Actually, I have read that some cities have eliminated single-family residential zoning due to the lack of affordable housing. 

You can also find some properties in Colorado Springs that are less expensive than the closer Denver Metro areas. Greeley is also seeing an uptick in investors. The colleges/universities in both areas are attractive to investors looking for properties that can benefit from additional upgrading to increase rents in both areas. Grand Junction is another attractive area to invest in. The Denver Metro area is softening up a bit, it is taking a little longer to sell a single-family or multi-family right now. No more long lists of investors/buyers offering far over the asking prices like they were. 

Quote from @Faith Roy:

HELP!!

We bought 2 investment homes and now are having trouble with the technical parts of it!

My husband is a contractor and we decided to buy 2 houses that were cheap and flip them. (The one house was $95k and the other was $120k, both from the same seller- who is a family member- in a subdivision) At the time, we couldn’t get a loan for the $215k so we have a note with the seller. The houses are now worth over $250k each. We are living in one and in the middle of construction on the other. We have lived in this house for a year now. How do we go about selling these to avoid Capital gains? What’s the best way to do this with lending/title co./ etc.. do we do quit claim on one and 1031 the other? Every time I think about it I STRESS!!! Help please!

If I am hearing you correctly, your goal is to avoid capital gains and purchase a more valuable property for investment purposes.  You will need an intermediary to handle a 1031 exchange. A 1031 is the best way to avoid capital gains until the newly purchased property is sold. Make sure the new property you purchase is much more than the combined two you are relinquishing. And, to reduce your tax liability going forward, get a cost segregation study done on the new property. Cost seg will save you a lot in taxes. 

@Steven Foster Wilson Be sure the company you are considering does engineering-based studies, the IRS's preferred methodology. Be sure to ask how many studies they have done and if they cover you if you are ever audited without cost to you. Read the fine print so you know you are comparing apples with apples. I work on properties in all 50 states. 

@George Post  It is in your best interests to get cost segregation pre-analyses/estimates on all your properties. Yes, even if you are not a RE professional and have a W2 income. You can aggregate all your passive properties and use losses on one to offset gains on another. Your descriptions of each of your assets should warrant serious consideration of the benefits available to you. Why pay more than you have to in taxes?

Quote from @Joshua Myers:

After listening to the most recent BP podcast I want to pursue a Cost Segregation study for a few properties. We bought 2 SFR's last year that I think we can apply to last years taxes. We also purchased a SFR rental in Pickerington this spring and we're in the process of buying a short-term rental in Destin, FL. Please let me know if you have worked with or have a reference for company that handles these.

Thanks!

Your best bet is finding a cost segregation company that offers an engineering-based study and covers you if you ever get audited. This is not likely a company that is headquartered in your state. All companies that provide studies are not the same.

Quote from @Michael Mackney:

Hey guys, I purchased my first property, a duplex, back in early April. At that time the property did not need any huge rehab needs, more cosmetic stuff later on. So I fixed immediate concerns such as a leaky toilet, broken handrail, etc. I didn't want to do too much at first and overwhelm myself on my first deal.

Now, I am thinking of giving it a cosmetic facelift to raise rents. My question is, what are the options to fund this? I know if I was doing a BRRRR, a hard money loan could have helped with purchase and rehab but is a hard money loan ideal for just rehab? Would I still have to refinance to pay back the lender if I did that?

 Hi Michael, Have you considered keeping the property for a while, maybe 4-5 years? If so, you may not have to get a loan for fixing it up. If you do a cost segregation study on the property, you likely won't have any taxes to pay for a while on the income you receive on the property. How much depends on your purchase price and your tax rate. Let me know if you have additional questions or I can help in any way with an estimate of what you can expect. 

Quote from @Sean Cassidy:

Hey everyone, I live in a 60 year old building on the Bay in Miami. Because nobody in Miami pays their condo fees, the building is falling apart and needs to be torn down. It is worth something though as it has all surface parking and a huge bayfront lot. The lot is probably 150 yards wide by close to 300 yards deep. Units in the building directly next door start at about $2.5 million. So my question is, is there any way I can present this to a commercial real estate firm and make some money for myself? I am not a realtor or even an owner but this will happen and I want to be part of it. There is a bidding war already starting but the bids are low and I am guessing not enough to get the deal done. I am guessing it would take at least $100 million to get the owners to sell. My very uneducated guess.

Hi Sean, Are you considering purchasing the building? If so, there are real benefits available to the investors if they are open to it. 

Quote from @Thiag Sivalingam:

Looking for advice - Does it make sense to do a cost segregation study on a property (and claim accelerated bonus depreciation) I bought this year considering the following?  why/why not?

(I understand that I need to consult a CPA to get the answer specific to my situation, but just wanted to get a general idea on what experienced investors suggest)

1) Property cost ~1M. Passive investment for tax purposes

2) Property is a two-family. In the process of doing a large renovation (~$100k)

3) Expecting to generate around $35,000/yr net cash flow

Thank you!

 On the low side, you would have about $66,000 in taxes you don't have to pay. Yes, even if you are a passive investor because you can always roll what you can't use in a specific year to the next. Why pay more in taxes than you need to pay? You can always invest that extra cash in your properties or leverage it to buy more. Sure beats letting the Treasury hold it for 27.5 or 39 years. 

@Adam Zuar There is one big difference between filing in 2021 and filing in 2022 for your parents. When you file in the first year of ownership and tax filing, you don't have to do a Change of Accounting Fort 3115 to switch from straight-line depreciation to accelerated. This is a complex form and makes the cost of doing the study a little more. Most tax professionals hate doing this, but we do them for the CPA/tax professional to review and sign. As for bonus depreciation, it applies if available the year the property was purchased and occupied. 

There is no income limit on getting the bonus depreciation. Although, some states restrict its usage. Check with your own state and your CPA to determine if there are any restrictions. Even in the unlikely case there are restrictions on bonus, it is still worthwhile to do a study and it is recommended by the American Association of CPAs (AICPA) and the Journal of Accountancy. 

Let me know if you have any additional questions. It only takes about 2 days to get a no-cost estimate on the benefits available. There is no difference between personal ownership and an LLC from the perspective of cost segregation studies.