All Forum Posts by: Craig Jones

Quote from @Julio Gonzalez:

As others have mentioned, you can do as many cost seg studies as you want in a year. However, there are a lot of factors to consider when get a cost seg study to determine if the benefits outweigh the costs. If you are able to get REPS status, that would help tremendously. Have you obtained any detailed cost/benefit analysis quote? Most cost segregation study companies provide the quote for free. Is it a reputable company and will the documentation provided from the study hold up in an audit? If you need any help or have any questions, feel free to reach out!

Everyone here on this thread is talking about the corner case where the property's average stay duration is 7 days or less and the property is self-managed (i.e. you can meet one of the standard material participation criteria).  In that case, the rental activity is considered non-passive and a loss generated by cost seg + bonus depreciation can offset other non-passive income including W-2.  Even without REPS status.

I'm pretty sure this was meant to exempt lodging (i.e. hotels/motels) from passive loss limitation rules.  And not really intended to benefit high W-2 earners running STRs on the side, which is a thing that didn't even exist when that tax code was created.  For this reason, I think the "loophole" word is fair game.  But also, fair game to apply it to STRs since there's no ruling to the contrary.

Great post AJ. And exactly why I've turned my attention away from SFR STRs and toward small commercial properties that are totally outside the STR permitting regime.

This place is my prototypical ideal:  https://www.lochlevenlodge.com/

Amazing location, year-round demand, exempt from heavy-handed local STR regulation and permit caps. And also way, way underperforming. No OTA distribution, no dynamic pricing. You can call them or book a room on their website if you happen to know they exist.

You could easily run that place STR style with keycode locks on the rooms. No need for staff beyond cleaning and maintenance which can be outsourced.

Totally not for sale, no way, no how.  Believe me, I've tried 😊

But!  Search your memory bank.  You know other places like this near you or where you've vacationed.  Mom and pop are ready to retire and you can do it better.

EXTRAORDINARY profits are still there for folks with STRs in markets that have lots of demand, hard limits on the number of STR permits available, and 2021 mortgages below 3%.

Building and planning code in my jurisdiction includes fences.  That one would for sure be a code violation here, both in terms of construction and appearance.

I haven't noticed a change in bookings either after I made this switch.  I believe the map view on AirBnB now shows the total price for the stay including all fees (but not tax).  So it shouldn't put you at any disadvantage if your nightly price is higher (but has AirBnB's cut rolled into it) while other properties have a lower nightly rate but AirBnB's cut is added on top.  

I was just about to post about this.

Under the standard fee model, the guest service fee is about 14.2% and the host service fee is 3%.  So AirBnB gets a 17.2% cut in total.

If you choose "simplified pricing" the host fee is 15% and there's no guest fee.  You can then raise your prices so the guest sees the same total as before, and you actually end up netting 2.2% more.  

Another (minor) benefit is that AirBnB compliments you in front of the guest during the booking process:

Of course I'm not really covering anything.  The money has just moved under a different shell.

Honestly, I’d skip the 1/1 and go straight for the boutique hotel.  Especially if that’s where you want to end up anyway.

There are a million tired, old small-scale lodging properties in amazing high-demand waterfront locations.  With names like “Murmuring Waters” or “Lakeside Inn.”

Rebrand it, fix it up, put Intragram-ready local decor in all the rooms. Put key code locks on all the doors and turn it into an unstaffed self-service STR / hotel hybrid. If you wanna get really fancy, combine pairs of rooms into bigger units and/or build a detached owner's unit on the property.

Starting with a property that is already established commercial lodging also overcomes so many regulatory and zoning hurdles — present and future.

You would be shocked how well a place like this can do on AirBnB.  I don’t really understand it but people shopping there seem overjoyed to book units at our place — which are really nothing more than cute motel rooms across the street from a gorgeous lake.  They don’t even have kitchenettes.  Lots of bookings from Expedia and Booking.com too.

Quote from @Vilandre Forestt:

Yeah, that's huge! South Lake Tahoe has been a battleground for STR (short-term rental) regulations for years, and this ruling could shake things up even beyond Tahoe. The dormant commerce clause argument makes sense—favoring local owners over non-locals can be seen as discriminatory against out-of-state property owners.

I imagine the city will try to come up with new STR restrictions that comply with the ruling while still keeping things in check. But in the meantime, lawsuits are definitely coming from people who lost rental income. Could also open the door for similar legal challenges in other cities with strict STR bans.

Are locals mostly celebrating this, or is there pushback?

At one time "locals" might have been mostly service industry employees. But that's a shrinking group who largely commute in from Reno now because it's gotten too expensive to live up at the lake.  They blame rising rents on LTRs converted to STRs, which was the genesis of the voter initiative to ban STRs in South Lake Tahoe.  But I think it has more to do with the nationwide run-up in housing costs and Bay Area tech wealth consuming Tahoe housing inventory as 2nd homes.

"Locals" now are just as likely to be small biz owners who have a visceral connection to more visitors = more revenue.  Boutiques, galleries, coffee shops, ski & bike rental shop, natural grocery, the employee-owned Ace Hardware -- you name it.

Quote from @Josh St Laurent:

I live in Stateline on the NV side and I can say the ban didn't do much for LTRs like they hoped it would. Like a few others said, there is a lot of vacant housing or people trying to rent furnished homes that were setup for STR. It'll be interesting to see how it all plays out. Tahoe revenue comes nearly all from tourism and I can't imagine a scenario where supply exceeds demand. The parking lot at heavenly near my house usually is full and turning people away by 8:45 AM every weekend.

It's hard to calculate exact numbers, but Tahoe gets 10 - 20 million visitors a year. If it was a national park, it would likely outrank Great Smoky Mountains for the #1 spot. There are surprisingly few hotels, and STR supply is limited by hard caps on the number of permits in every jurisdiction except Washoe County.

So I'm with Josh.  I think the market could absorb quite a few more STRs without making a dent in rates or occupancy.  Especially larger properties.

It'll be interesting to see what happens. The original ban was a voter-sponsored initiative and it barely passed.  Ostensibly it was about protecting LTR inventory for locals, but I don't think it accomplished that.  I'm pretty sure most of the inventory that was STR before the ban just reverted to 2nd homes that are empty most of the time, or ski leases / summer monthly rentals which have been popular for decades. 

I don't think the city government was particularly in favor of it.  They recognized that the local economy is almost 100% tourism based.  And any gains for locals in terms of LTR inventory / rents would be offset by less money coming into town, fewer jobs, etc.