All Forum Posts by: Petur Karlsson

Thank you so much for the valuable input, guys!

I have a bid incoming for luxury vinyl on all three floors, and a bid for vinyl first & second floor + master bath tile/master bed carpet on 3rd floor. I will be able to compare materials and labor for each part and make up my mind that way. 

If the tile ends up being a lot more expensive, I will sacrifice higher appraisal and take the luxury vinyl route. I don't plan to get a mortgage above a certain amount anyway, as it would reduce the cash flow from the rent I project to receive. 

Makes sense? Why would I over-improve to just have more equity locked up in the property at the end of the day? That money would be better used investing elsewhere for a higher return.

Wayne and David, 

thank you for the responses, I very much appreciate your input.

I know the rehab costs get added to the cost basis of the property and will be depreciated rather than discounted as operating expenses, but I want the real estate professional status for two reasons.

1) I can't use depreciation to offset income tax without it, as our household income exceeds the IRS limit for real estate deductions.

2) There are many other things to write off, such as taxes, insurance, subscriptions, meals, books, phone & internet bills, miles driven for real estate errands, office supplies, home office deduction, etc.

However, maybe it's not that important for me to achieve the real estate professional status this year, as I have just learned that I can carry the losses forward into next year and stay focused on achieving the status by the end of 2021. I just reformed the way I log everything and am more disciplined with saving supporting evidence like screenshots of texts, emails, call logs, pictures, etc. so the main argument for shooting for the real estate professional status is that it helps you to stay focused and continually improve your methods.

I will have to find a good CPA to help me navigate all of this, have you guys got any recommendations for real estate focused CPA's that work across state borders including PA?

Hey Seth, Looks like we have thunderstorms in store for tomorrow. Is the event still on or will it be postponed until the 30th?

I know this is a local market specific question... BUT:

I have rehab underway (BRRRR) on a three story brick property built in 1910 with a large scope of work; attic conversion to master bed/bath, plaster demo, some framing, new plumbing and electric, insulation, drywall throughout, new windows and some doors, minor exterior repairs and soffit covers, painting, kitchen/bathroom remodel and new flooring except for the first floor living/dining room hardwood that.

I have a flexible budget and am putting a lot of sweat equity in as well but after the pandemic threw a 2.5 month wrench into my plans, I am on the hunt for time savings and cost efficiencies.

Initially, the plan was to tile the floors in the kitchen, the old bathroom as well as the new master bathroom on the 3rd floor. Now I'm considering doing ALL luxury vinyl tile instead to save money and time. For the third floor master bedroom I was also considering stain resistant seamless carpet but am also thinking about putting down LVT there too.

What do you guys think?

LVT throughout, ie. first floor kitchen, whole second floor (3 bedrooms, hallway & bath) and the whole third floor including master bath? 

Vs. LVT first floor kitchen, whole second floor but tile the third floor master bath and carpet the master bedroom? 

Vs. LVT everything except tile only the master bath?

This is intended to be a long term rental but I'm obviously concerned about the appraisal value for when I refinance the property and for tenant appeal. So far in my local market research, I haven't come across many properties that have tile finishes unless they are in a much higher price bracket and I will still do a "subway tile" back splash for the shower unit in the 2nd floor bathroom. I don't want to hurt the appraisal value too much by foregoing the tile but also don't want to over-improve the place and not get a nice value add from it. 

I will look at more comps to firm my mind but I would greatly value your input as well. Please let me know what you think!

@Jonathan Greer our W2-income is enough for the real estate professional status to make sense, ESPECIALLY if I manage to convert our primary residence into a rental property before the end of the year as well (then buy a duplex for a house hack)!

Be careful, though. The RE Pro tax status pertains to losses on RENTAL properties. FLIPS are active jobs with ordinary income and I'm not sure if the RE pro status is something eligible to flippers unless they also own rental properties.

Also, I dont care if the IRS will pay attention to me or not, I want to be legit and do things correctly and legally out of principal and with long term success in mind.

To address your second point, consider looking for private lending from family. I was fortunate enough to have in-laws that are very financially savvy and clearly understand what I'm doing, so they graciously offered to pull out HELOC money on their primary residence that they own mortgage free, to help the me and the wife acquisition and rehab our first rental. You can also look for a partner that can bring money to the deal, as long as you have complementing skill sets and symmetrical goals.

Hello, Kyler! 

What kind of financing did you use to purchase your current home? If its not an FHA loan and there are no contingencies to you living in it for a set amount of time, you can consider listing it for rent while searching for a duplex to purchase for a househack, living in one side and renting out the other. That way, you'll have free (or close to free) housing and much better monthly cash flow to put aside for growing your investments.

This is exactly what I'm planning to do. I have a BRRRR deal underway (Buy, rehab, rent, refinance, repeat) and as soon as we complete it, my goal is to rehab our primary residence, rent and refinance it as well and then purchase a duplex to start house hacking. By that point, I'll have three properties building equity and no housing costs! It's never too late to get into house hacking, even if you already own a home, and it could be a very wise move to speed up the trajectory of your wealth building journey.

Hello everyone!

I'm knee deep in an lengthy rehab on my first BRRRR deal ever, in Sellersville, Bucks County PA.

The project started in late February, DAYS before the pandemic came around. Talk about good timing... Anyways, I accounted for the unforeseen and thankfully am still within budget, although the rehab is taking several more months than originally anticipated and the workload is massive to say the least. New floors (except 1st floor hardwood), attic conversion to master bed/master bad, new windows/doors, new bathroom, new kitchen, plaster removal, framing and drywall, painting, exterior brick repairs and soffit covering, new plumbing, new electric, THE WHOLE GAMBIT. Welcome to the university of real estate investing, I say.

I am putting in a lot of my own sweat equity and that, alongside with business meetings with the wife, networking with other investors and all the communications with my real estate agent, insurance agent, lenders, contractor and subcontractors, are accumulating to the point where I can likely achieve the 750 hours of real estate work required to designate myself as a "real estate professional" on our next year's tax return. This status allows me to write off all the real estate losses against our household income taxes. Terrific!

THE MOST IMPORTANT THING about claiming this status is to keep a detailed and contemporaneous log of all your activities, with supporting information like pictures, screenshots, etc. There are other things to consider, like NOT having any other work that exceeds the amount of time you spend on real estate activity (sorry investors with full time jobs, I'm lucky to be a stay at home dad). You also need to have at least 500 of those hours DIRECTLY related to the properties themselves. Please consult with a real estate CPA if you're planning on doing this, there are several other points to consider as well. (I also recommend The Book On Advanced Tax Strategies, found in the BP library) 

If you are a real estate professional already or have experience filing as one, HOW DO YOU LOG YOUR ACTIVITIES?

I use google calendar. I log everything same day (most of the time), try to be as detailed as possible and start each log stating participants and the entry's duration, and usually set my real estate home office address or the rehab property address as the location of the activity, unless it's a trip to the bank, Home Depot or an event/meeting elsewhere. 

Would you deem this to be an acceptable approach or should I convert to something else? I like this format and also print out every entry to store them in a physical folder. Both the virtual and physical log can be referenced in case I get audited by the IRS.

Another question I have is, WHAT ACTIVITY CAN BE COUNTED TOWARDS THE 750 HOURS REQUIRED? 

I consider the following: -Searching for properties, -analyzing properties, -working on properties, -marketing properties, -screening & communicating with tenants, agent/lender/insurance/contractor communications, -work on the real estate business itself like writing a business plan, contingency plan or company policy, -errands pertaining to the real estate like picking up materials or taking checks to the bank, -business meetings with my contractor and my wife who is obviously involved, -networking with other investors or attending real estate events. I also deem the writing of this post to be a real estate activity, correct me if I'm wrong?

A big question I have is: Do webinars count towards real estate activity? What about reading real estate books? HECK, WHAT ABOUT ENGAGING THE BP FORUMS? If anyone can answer these question, it would be massively helpful to me and other rookie investors who are looking to acquire this status. I've read a whole bunch of the BP books and spent quite a lot of time doing online research, but am too scared to involve those hours for eligibility.

If anyone wants to make any remarks or ask any questions pertaining to the real estate professional status, I welcome you to join the discussion! 

Thanks in advance for reading and/or responding, everyone.

Welcome to the world of real estate... and welcome to Bigger Pockets!

I'm a new rental property investor in the Bucks county area as well. I will be attending my first networking event soon,the very same one that Jean Carlo mentioned above, hosted by Seth Bryan on July 23rd in Perkasie.

Clearly, there is demand for Bucks county real estate investor meetups. Seth took the initiative after multiple other locals had been asking for one in previous posts.

Fingers crossed this first one goes well and that people get together to plan a second one as well!

As a new investor with my first investment property under rehab, I am actively participating in the work with my contractor. Some would say it's working IN my business, but as far as I'm concerned, I am learning a LOT of lessons about the structural components of real estate, how the work is done, what material prices and labor costs to expect for various components, the scope of work that I hadn't accounted for, small details that are useful to know when looking at the next property, managing contractors and subs, taking ownership of shortcomings and finding creative solutions to tackle problems, and equally important; Having an absolute blast while I'm at it, fueling this passion! 

While driving to and from the property and while working there, I tune into a bigger pockets podcast every single time, get in some sweat equity to bolster the "jump start" into investing, nurture a healthy relationship with my contractor who I intend to employ indefinitely, learning about his strengths and weaknesses, all while taking so many lessons with me into the future.

Actively participating in the rehabs is NOT my long term plan, but for where I am at in the journey, I feel perfectly positioned. I am holding business meetings with my wife where we plan long and short term objectives and split tasks between us. For example, our goal after BRRRR-ing our first rental property is to rehab our primary residence and convert it into a rental, subsequently buy a duplex where we live in one side and rent out the other while also setting up the next BRRRR deal. (Four rentals in the medium term PLUS house hacking our way into free housing, freeing up additional money to invest each month)

 I have home office work sessions where I contemporaneously log all my real estate activities, do the bookkeeping and keep all the filing organized (physically/virtually), communicate with relevant parties like lenders, subcontractors, agents, etc. I want to scale up and build a more elaborate funnel for finding and creating deals and expand my network, but all in all, I feel good about the trajectory and am also remaining on the safer side by avoiding over leveraging or spreading myself to thin. 

Do you feel like I'm taking it too slowly? This is how a lot of the big shots started their journey as well. You've got to start out by hustling and this approach to me is worth more than a $150k, 4 year university degree.