All Forum Posts by: Joel Oh
Joel Oh has started 15 posts and replied 187 times.
Post: I am hearing STR doesn't count toward REPS status.
- Posts 188
- Votes 111
Quote from @John Underwood:
In general, when you are self-employed (not a w2 enployee) and actively work in your business, you report the income and deduct allowed expenses on Schedule C. You can think of it as income that you have to do something to earn. Income reported on Schedule C is subject to self-employment tax.
That is what I understood about Schedule C. I have multiple STRs so I have a lot of deductions (Insurance, utilities, repair, rent for arbitrage...) I preferred using Schedule C because of it but I understand why some people prefer using Schedule E from you guys' explanation.
Self-employment tax is nothing compared to the deduction I can get for my case haha.
Post: I am hearing STR doesn't count toward REPS status.
- Posts 188
- Votes 111
Quote from @Karen Chow:
For the STR tax loophole don't you only need 100 hours? Amanda Han wrote a book about this.
Yes, but STR rarely loses money, unlike long-term rentals. That is why most people combine depreciation practice to offset the first-year income. This only works for the first year of purchase and if the owner plans to hold the unit for 10+ years.
We all joined STR because of the cash flow, so why would anyone choose STR over LTR if it doesn't flow. Kinda make sense why their requirement is significantly lower than the regular REPS requirement.
Post: I am hearing STR doesn't count toward REPS status.
- Posts 188
- Votes 111
Quote from @Zachary Cain Humphrey:
Robuilt has some youtube videos where he covers these tax considerations. I highly recommend them.
I will watch it! Youtube taught me a lot too 😂 thank you for your recommendation!
Post: I am hearing STR doesn't count toward REPS status.
- Posts 188
- Votes 111
Quote from @Chris Seveney:
@Joel Oh
Your cpa is probably saying this based on your first sentence
I have good w2 income. It’s my understanding it’s very hard to meet reps status working a w2
Also I believe once you get above $150k basically you lose any benefits of reps status
I think I will be able to qualify for the STR re status if I run the cost segregation when I purchase the house.
I think that is what other comments are referring to.
Otherwise, it is pretty hard to claim the loss as STRs are generally very profitable. I see why people are saying it is difficult.
Thanks for your comment!
Post: I am hearing STR doesn't count toward REPS status.
- Posts 188
- Votes 111
Quote from @Ian Tyndall:
I don't know your sources of information but they are generally mot accurate. There are conditions to qualify for the STR REPs status that are unique to the STR business.
Some conditions that you have to document and be able to prove:
1. You must spend at least 100 hours managing guests and more time than anyone else in the calendar year
2. Average length of stay must be less than 7 days
Amazing! Thank you so much!
I was confused by that there are a different RE status for STR.
I think even regular CPAs are not fully aware of this!!
You guys always rock!
Post: I am hearing STR doesn't count toward REPS status.
- Posts 188
- Votes 111
Quote from @John Underwood:
Quote from @Joel Oh:
Hello guys! I have a good W2 income as well as STR income.
2023 is the first year I thought I could qualify for RE status as I am working as the property manager, handyman... (750+ hours) man I worked hard!
Just finding out that with a full time W2, it is nearly impossible to qualify the RE status especially with short term rentals. Hence, they are looking at STR as business income rather than passive income. What a bummer!
However, I am seeing posts here that many people utilize their short-term rentals for RE status by using Schedule E.
Can you really qualify as a REPS with a full time W2 income?
Also,
I am involved in rehab and management, so I am claiming my STR income under the Schedule C.
Why aren't you guys claiming it under Schedule C and getting the deduction?
What is the real benefit of claiming your short-term rental income in Schedule E? Is it just for the RE status?
Thank you in advance!
Pretty much impossible to be a RE professional if you have W2 income.
Pretty confusing area!!
Yeah.. I am so disappointed that I can’t have RE status.
Post: I am hearing STR doesn't count toward REPS status.
- Posts 188
- Votes 111
Hello guys! I have a good W2 income as well as STR income.
2023 is the first year I thought I could qualify for RE status as I am working as the property manager, handyman... (750+ hours) man I worked hard!
Just finding out that with a full time W2, it is nearly impossible to qualify the RE status especially with short term rentals. Hence, they are looking at STR as business income rather than passive income. What a bummer!
However, I am seeing posts here that many people utilize their short-term rentals for RE status by using Schedule E.
Can you really qualify as a REPS with a full time W2 income?
Also,
I am involved in rehab and management, so I am claiming my STR income under the Schedule C.
Why aren't you guys claiming it under Schedule C and getting the deduction?
What is the real benefit of claiming your short-term rental income in Schedule E? Is it just for the RE status?
Thank you in advance!
Post: After 1 year of STR journey
- Posts 188
- Votes 111
Quote from @Zachary Cain Humphrey:
Quote from @Joel Oh:
Today is my exact 1 year of STR journey and I finally hit the $75,000 mark for 2023!
It was a long journey but I learned so much.
I invested around $75,000 so I made over 100% cash on cash return.
Next year's goal is $250,000 and quitting my 2 jobs.
No one believed me when I first started it but I am getting there!
If I can do it! Everyone can do it!
Congratulations Joel! Where did you end up investing in?
It is Midwest Metro! I think the revenue is lower than popular vacation spots but the % return is higher with lower housing prices here. A different business strategy is required but definitely works!
Hello! I am looking for a CPA who can help me save taxes for selling a flipped quadplex in St.Paul, MN.
I purchased this property in 2022 and did a lot of rehab. (Floor, electric, roof, plumbing, siding....)
I used one unit as an owner-occupied ever since but can have a renter anytime if I want.
I have a W2 job as a real estate professional and also an LLC for STR business (Just me on the LLC so no nothing complicated)
The house is under my wife's name and she has a W2 income.
We usually file a joint tax but never studied much about taxes! (Was a big mistake! XD)
I am planning to sell this property in the next few months if there is an appropriate tax plan.
Please let me know if you are interested or know a good CPA who can help us!
Thank you so much :)
Post: After 1 year of STR journey
- Posts 188
- Votes 111
Quote from @Mindy Nicol:
Hi Joel, good for you. I am exactly a year into one property as well, however we are in a more expensive and perhaps competitive(?) market than you so I put a lot more down to get a decent house that wasn't a fixer. The VRBO and Booking fees, opex plus updates to the house I had to do mean I will just break even this year. I see it more as an opportunity to improve a property over time, build equity, and increase nightly rates, slowly I will see the return. We are going through a real shift in STR here with many dropping out.
Where are your bookings coming from for the most part? Did you have any expenses?
Mindy
I focused on the competitive advantage and it helped me a lot to save money. I am not targeting wealthy, long-term vacation people. I focus on the budget-friendly family and friend groups who are visiting the city. A lot of times, their options are limited so they are happy with what they get which is not A-level property. I think the important thing is understanding what the market wants and what I can do the best in the given circumstancs.
I didn’t have a lot of capital and didn’t want to borrow a lot of money so I started small and affordable.
I just use Airbnb because I already get a good occupancy rate and I don’t have time to manage multiple platforms since I am the property manager on top of my 2 other hats.
I hope this helps! Good luck 😄