All Forum Posts by: Account Closed

Hey Juan! I will say you should try to find someone who is reasonably priced and is able to grow with you over your investment journey. For instance, we work with real estate investors big and small for tax prep and advisory. A firm like this could help you grow and avoid making costly mistakes along the way! 

Hey Philip, many accountants can work in other states, they don't need to be living there or even have an office there to do great work. For example, we have several clients focused on real estate investing in other states that we do great work for out of our main office in Manassas VA. I hope that allows you to broaden your search!

Hey Lake! 

Congrats on putting together a downpayment. That sounds like a great chunk of change to use to house hack a duplex in dallas. Those other markets are either cold, or to expensive. Best of luck! If you have any tax questions feel free to reach out 

100% bonus depreciation coming back would be huge! Hoping for this for all of our sakes

 That is a good point, transparently I cant think of one off the top of my head. Ill have to ask around the office today. Gross negligence often comes in the form of folks just not understanding fully their policy and most are not going to hire a lawyer to read over the insurance policy hence we like doing the additional asset protection.

Real estate investors often find themselves traveling to and from rental properties, banks, hardware stores, and meetings with various professionals. If you've set up a home office, your business-related travels are tax-deductible within your "tax home," which is the geographic location where your rental business is established.

Tracking Your Business Miles

To make the most of these deductions, you can choose between two methods: the actual expense method or the standard mileage deduction. Regardless of your choice, maintaining an IRS-compliant mileage log is crucial. The log should include:

• Odometer at the beginning and end of the year
• Date, purpose, and locations of each trip
• Number of miles for each trip

Using an automatic mileage tracking app like MileIQ, combined with Stessa's mileage expense feature, can simplify this process. In Stessa, go to your Transactions page, click "+ Add," choose the "Mileage" tab, input the details, and save.

Standard Mileage Rate

The standard mileage rate is a straightforward way to deduct local travel expenses, requiring minimal tracking. Multiply your business miles by the standard rate (e.g., 58 cents per mile for 2019) to calculate your deduction.

Example: If you drove 6,700 business miles out of a total of 10,000 in 2018, your deduction would be $3,651.50.

Actual Expense Method

Under this method, you deduct a portion of actual vehicle expenses. This includes lease payments, gas, insurance, maintenance, and more. Keep records (e.g., receipts) and use Stessa's mobile app to streamline expense tracking.

Example: With a business percentage of 67% (6,700/10,000) and total vehicle expenses of $8,000, your deduction would be $5,360.

Travel to New Markets

When exploring new markets outside your tax home, travel expenses are treated differently. Research and evaluation expenses for a property eventually purchased are added to the property basis. Once you own a property, subsequent travel for acquisitions becomes tax-deductible.

Deductible Travel Expenses

Transportation

• Airfare, train, bus, and car expenses
• Travel to and from the airport and lodging to business locations

Lodging

• Overnight stays required for sleep or rest

Other Expenses

• 50% tax deduction for meals outside your tax home
• Dry cleaning, phone, tips, and other necessary business travel expenses

Note

• Entertainment is no longer tax-deductible under The Tax Cuts and Jobs Act.

Mixing Personal and Business Travel

When combining personal and business travel, some expenses may still be deductible if the trip is primarily for business. Business days are those where you spend four or more hours on business activities.

Example: If a seven-day trip includes five business days and two personal days, expenses for the five business days are tax-deductible.

Understanding these local travel deductions and navigating the nuances of business and personal travel will help you leverage tax incentives as a real estate investor. Stay informed to run your business effectively and maximize your income.

From a tax perspective, its best to "buy, borrow, and die". If you can gift your heirs cash flowing real estate they can rely on, I would think that is practically better then a massive stock portfolio. 

One of the primary challenges of managing short-term rentals is the constant turnover of guests. Unlike traditional long-term rentals, where tenants sign leases for extended periods, short-term rentals can experience frequent changes in occupancy. This high turnover requires meticulous scheduling, efficient cleaning services, and quick problem resolution to ensure a seamless experience for guests.

Another hurdle is the need for continuous marketing and promotion. With the abundance of short-term rental options available, property owners must stay proactive in promoting their listings to attract potential guests. Maintaining a strong online presence, optimizing listings with eye-catching photos and compelling descriptions, and adjusting pricing strategies to remain competitive are crucial tasks that demand constant attention.

Additionally, property owners must address the legal and regulatory landscape surrounding short-term rentals. Many cities and municipalities have implemented restrictions or regulations on short-term rentals to address concerns such as noise, safety, and neighborhood disruption. Keeping up with and adhering to these regulations can be time-consuming and may require legal assistance.

Amidst these challenges, there is a glimmer of optimism for investors - the short-term rental tax loophole. Investors have found that the potential financial gains from short-term rentals, coupled with certain tax advantages, can make the management challenges worthwhile. The tax benefits often include deductions for operating expenses, such as cleaning and maintenance costs, as well as depreciation on the property.

By leveraging these tax loopholes, investors can maximize their returns and offset some of the challenges associated with managing short-term rentals. It's essential, however, to consult with tax professionals or financial advisors to ensure compliance with local tax laws and regulations.

 Hey Jeff, 

This is a great question and one we get all the time as we specialize in working with real estate folks, but the size of the portfolio can vary widely. 

As we have an accounting firm, note I am a bit biased, but here is what I see folks have the most success do: 

You should start with an accountant who is very familiar with your investment strategy and grow with them until you cant anymore. Along the way, we see so many folks make mistakes that they need to get amended and that can take years to finally recoup all of the money lost from paying to much. 

If your serious about growing a portfolio, best to partner with a tax firm that has helped 1000s of others do it, so you don't mistakes along the way. Its almost like a finance mentor your getting, along with someone you can trust to prepare your taxes. 

But be wary, there are expensive accountants out there that try to overly charge clients due to their knowledge. In a way, its not their fault, its just they have become so in demand and they cant hire fast enough to keep up, so the only way to keep growing is via price. 

In short: 
A great accountant will help you get wealthy faster, a bad one will have you make mistakes faster, and no accountant will ensure you keep making the mistakes your currently making. I strongly encourage finding a fairly priced, knowledgable accountant you can trust. 

Hey Mark, This scenario you describe has not happened in our firm with any of our clients yet, but I have heard from other accountants that it has happened before. This is due to folks getting policies with specific clauses absolving the liability of the insurance company getting triggered. Our logic is why give them a chance. When its your lawyer against an army of insurance company lawyers that do this all day, best to not even get into that fight to begin with and do some simple extra protection.