All Forum Posts by: Joseph Coleman

@Basit Siddiqi thank you for your input. If I switch to a mid-term rental will I need to change the depreciation back to 27.5 yrs? If so, I may just keep as an STR to avoid changing the depreciation again and hire a property management company to manage for me. Or the best of both worlds would be to rent as a MTR in the offseason and STR in the summer (assuming it doesn't complicate things).

Thank you @Ashish Acharya and @michael plaks for your additional contributions. 

One quick update - I called the IRS out of curiosity and they said are not able to tell me what the correct depreciation should be because it is out of scope (I am guessing that is not a surprise to anyone given the comments above). 

I am planning to switch to do midterm rentals in the offseason and potentially long term to make it a MTR only to reduce the workload (I am self managing). 

Would this mean I need to change the depreciation schedule again in the future if I switch to a midterm rental or long term rental? 

More Details: 
Another reason I am trying to understand this at a deeper level is because my previous tax person used 27.5 years since I purchased the property so there are implications for previous years and there could be implications for the future; I am planning to switch one of the units to a mid-term rental later this year. My new tax professional already changed the depreciation in 2023 to 39 years and then billed me for it without telling me about the charges (they acknowledged that they didn't tell me about the fees). They also did not ask for earlier tax returns (pre-2023) but I am assuming I need to change those as well if I need to change 2023. Overall, I have no problem with changing the depreciation from 27.5 to 39. The impact on my taxes won't be large but the fees for making the changes will add up quickly, especially with several years of retro-active updates and if I need to update again in the future when I switch to a midterm rental. 

Any help is appreciated! 

Thank you for your input @Stephen Nelson!

@Michael Plaks Et al, 
If the IRS publications are ridden with mistakes, what do you consider the source of truth for tax filing requirements? 

Thank you everyone for your in depth replies. I discussed with my tax person and decided to use 39 years just to be safe. But it does sound like there is room for interpretation. I referenced the IRS documents and had some long discussion with ChatGPT and it also was saying 27.5 years would apply based on IRS publication 527. I know many investors who use 27.5.  It is hard to make sense of the requirement to treat a home that you live in as a commercial property. 

Does anyone know if a house hacked duplex STR should be depreciated over 27.5 or 39 years? In previous years my tax person used 27.5 but my new tax pro said it needs to be corrected to 39 years. It is an R2 zoned (upper,lower) duplex and I live in one of the units and rent the other as a short term rental.

@Melvin List Have you seen lower rates for FHA streamline loans?

@Melvin List
I am referencing the OBMMI - which shows rates for FHA at ~5.9%. Are you seeing lower rates in your underwriting system?

Mortgage rates are falling, and CME futures suggest even more drops ahead. Refinance activity is expected to pick up soon. If you’re planning to buy, will you wait for even lower rates or buy now and refi later? 

For recent buyers, are you considering a refinance as rates drop?

My situation: I have an FHA loan at about 5.5% and my understanding is that it usually makes sense to refi once rates are about .5% lower than your existing rate, which means I may need another .75 to 1% decrease in the rate. So I will wait to refi but watching closing. Any other suggestions/thoughts are appreciated.

Sources:

• Optimal Blue OBMMI

• CME FedWatch Tool

Thank you for looping us in! That sounds stressful. I just sent you a DM. I want to make sure we understand what happened. However, I was not able to identify you in our system to look into this. Concierge does not technically "recommend" using a particular lender or agent. But we do hold our featured agents and lenders to a high standard. We regularly deny lenders from signing up to advertise with us and cancel them if they do not abide by our code of conduct. 

@Keegan Schaub Do you have any updates on this deal? Would love to hear how it went. 

I would not consider an earn out seller financing. It is a distribution that is based on the performance of the business overtime - like a small equity position that helps to align the interests of the buyer and seller.