All Forum Posts by: Natalie Kolodij

@Natalie Kolodij is pretty active in the forums and specializes in tax strategy for real estate investors. She is pretty on top of things, from what I have seen. Ask her for the Joe Splitrock discount, haha.

My advice is talk to a few different people and see who you feel comfortable with. 

Watching the video just elevates her standing on Youtube and generates more views and more revenue for her false advice. 

There is no debate here. When an individual or group of individuals are prohibited from operating a short term rental in a property or market, that applies to a business entity. "Owner" in a legal context would be any individual, entity or agent that controls the property.

She makes multiple false statements. 

1. She says you need a business entity (LLC, C-Corp, S-Corp) to have a business. Operating without an entity makes you a sole proprietor business. A business doesn't require an entity and an entity doesn't mean you have a business. Business is defined by operation activities, not entity.

2. She says get a business so you can get an EIN. An EIN is an employer identification number. This is a type of tax ID. You can apply for an EIN if you are a sole proprietor, although it is usually not necessary if you don't have employees. Some sole proprietors still get an EIN to avoid using their social security number in business. Most landlord sole proprietors use their social security number as tax ID for simplicity, but you can also get an EIN. Either way, having an EIN has nothing to do with having to follow short term rental rules.

3. She says don't tell the owner or condo manager that you are renting it on AirBNB, tell them you are a corporation with corporate business travelers. Although lying about your use of the property, may avoid getting caught, it is hardly creative and it doesn't require a business entity. Anyone can lie and if you are good at it, you may avoid getting caught. She claims her process is ethical, but lying by most standards is unethical.

4. She says stay away from terms like "Airbnb, vacation rental, short term rental" and instead just say you are renting to clients. Making up a new term for what you do, doesn't change the legal nature of your business. A business is defined by actions and short term rentals are generally defined as stays under 30 days in most markets. Condos or some cities may define a different intervals, but the point is that it doesn't matter what you call it. 

People need to be careful because operating a business entity doesn't shield you from legal repercussions. If an LLC engages in illegal practices, the owners can be held personally liable. If the LLC is hit with fines, an attorney can go after you personally for damages.

Her real strategy is lying and luck. Lying about the nature of the business and lucky due to low enforcement of short term rental restrictions. If you are the type of person who wants to rely on lying and luck, no need to bother setting up an LLC. The mistake people make when using the "lying and luck" strategy is assuming just because it worked yesterday, it will work tomorrow. People get emboldened and take more chances. It eventually catches up to you. This is how good people get in big trouble.

There is an old saying, "if it sounds too good to be true, it probably is".

@Basit Siddiqi for tax purposes will my basis be two separate items? The original purchase price of the home + individual rehab items (some with different depreciation schedules)? Or is it just simple purchase price + rehab - land / 27.5 = new basis?

 You are claiming the the California Association of Realtors authority supersedes the IRS and Tax Court? FICA taxes are a California tax and not a Federal Tax?