All Forum Posts by: Ernest Fox

For 2024, I will have a significantly higher W-2 income (600k) due to unplanned stock option income (company I work for was purchased). Thanks to plenty of smart people here on BiggerPockets, I have learned that it may be possible to offset a portion of this unexpected higher W-2 income with the purchase and "active management" of a STR. (Yes I know there are other restrictions/conditions.)

In the past, I have toyed with the idea of a vacation/rental property in Ocean City, MD, Rehoboth/Bethany/Dewy, DE, and/or the Deep Creek Lake, MD area (I like the idea of being within 3 hours of the rental property in case something goes horrible wrong and I need to travel to the property).  This years higher than normal W-2 income coupled with the idea of being able to save a few bucks on tax has me giving more serious consideration to this idea.  So a couple of questions:

I think I'm targeting something in the 350-450k range, which means I'm probably looking at a condo. With about 100k to put down, I don't think I can be anywhere close to cash flow break even (at least not in any market that is driving distance from the Metro DC area). At this price point, would a cost segregation study even make sense to do on a condo so that I could take advantage of accelerated depreciation? Does STR self management make sense (from a tax offset for W2 income) without accelerated depreciation? I guess maybe, I could put less money down, so I could show a greater loss for this year?

I have never managed any type of rental property before, but I think I will be OK with self managing (not saying that it won't be a headache, but I think I can get through it).

I am open to other ideas and markets that are within about 3 hours of the Metro/DC area.  The goal is to find a way to offset some of the unexpected W-2 income and pick up of a vacation/rental property at the same time.

I am exploring the possibility of buying a STR - this would be my first time owning any rental property, so I have a bunch of newbie questions. One area that has caught my attention is the Pigeon Forge/Gatlinburg TN area - seems like there is a good rental income to acquisition cost ratio.

So here are the questions.

- I am in the DC Metro area, about 8 hours away....how do folks using VRBO/Airbnb handle check-ins for properties when done remotely?  I will need to self manage through VRBO/Airbnb in order to help classify the income as active income so that I might be able to right off the accelerated depreciation against W-2 income.

- I have about 150K available for a down payment, any suggestions on the type of property to target (cabin, condo) if the goal is to be around cash flow even?

- Any recommendations for a real estate agent in the Pigeon Forge area?

- Any recommendations for which condos to target/stay away from?

- Recommendations for maintenance/cleaning services?

- What dates are considered in season/out of season for Pigeon Forge?

Any and all info is appreciated.

TIA

This year, the company I was working for was acquired. As a part of the acquisition, all my stock options were accelerated and paid out as cash through payroll. This payment will leave me with about $600,000 in W-2 income for 2024. While researching my options to reduce my 2024 tax burden (already maxed the 401k and HSA), I see that it is possible to buy an investment property, use it for Short Term Rentals and as long as certain conditions are met, I can accelerate the depreciation which can be used as an offset to W-2 income. This seems like an ideal situation, as I was already considering the idea of a vacation rental property. This is all new to me, so I have a few questions:

• -I see that the depreciation expense will depend on the completion of a cost segregation study. Are there certain types of properties that I should target and/or avoid for a better outcome when it comes to the cost segregation study….Large Condo Assoc/Small Condo Assoc/townhouse/SFH?
• -Should I put the property under an LLC (pay higher mortgage rate, but better protection against lawsuits) or keep under my name?
• -I believe that I will need to self-manage the property through something like Airbnb/vacasa/vrbo in order to meet the “Material Participation” threshold? Any suggestions on what platform might be best?
• - I live in Maryland, any suggestions on what markets might be best for STR and about 150k to invest?
• - I realize that this maneuver will likely increase the risk of audit....curious to get a sense of how much more risk of audit I will face and does the IRS typically just audit the one year or would they dig into previous years as well?
• Any other legal options to help offset my W-2 income other than a STR?

Thanks in advance.