Joplin Area Real Estate Investor Association

Understanding Nightly Rentals #3

Utah Real Estate Investors Association

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If you’ve been following along, we’ve discussed the regulatory side and an introduction to the tax side of doing short-term rentals. Today we will discuss how to hold title and save on the self-employment taxes we mentioned last month.

First, hopefully you now understand that the rent you make from short-term rentals is taxed differently as active income. That means it’s taxed more like your flip projects that you run through an s-elected LLC. (We’ve done other blogs on s-election and tax savings! Go back and review some of those if you don’t understand how the s-election saves on taxes on ordinary income.) While is it totally fine to own your flip in an s-elected LLC, it is NOT good to own a rental property in an s-elected LLC. This is because there is a “sale of asset” tax that can apply when you transfer or sell an asset you’ve held for a long time. You don’t want to pay this tax!

So, just like any other rental property, you should “own” the property in an LLC that is taxes as either a single member or partnership. And if available to you in your state, a Series LLC. This will be the same LLC that you own all your other rental properties in. So that’s good news! You will own your short-term rental the same way you own all your rentals.

But what about the tax savings on thi
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Who Needs a Real Estate Coach?

Hawaii Real Estate Investors

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The simple answer to the seemingly complex question of “Who needs a real estate coach?” is everyone investing in real estate. That’s right, the institutionalized investing company to the one-person show need coaches and advisors.

The CEO of a public investing company has mentors/coaches as well as a board of directors to turn to. They often don’t have a choice of who their coaches are, but real estate investors do. Unfortunately, with this choice of a coach comes another choice that is often made instead. That choice is to not get any help at all.

Not getting any help at all is very often the cause of failure statistics we hear so much about. Real estate investors will often claim that they don’t have the time or money for a coach. Think about that comment. How can you not have the money to get help from someone that can potentially save or make you more money since you obviously are not getting it done on your own? Or how about that time you are lacking? Maybe if that investor sat down for an hour with a coach, they would be able to see why they don’t have time and do something about it with the help of someone who has already been in those shoes.

A coach gives to real estate investors something most of them don’t have; a sounding board and a board of directors to turn to for advice. These are two great resources to
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Understanding Nightly Rentals #2

Utah Real Estate Investors Association

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In the last blog, we talked about short-term rentals and the need to confirm the licensing and zoning issues that may apply. Here we are going to talk about the taxation of short-term rentals. What follows is a summary of some tax issues. This is NOT meant as tax advice. Please consult your own tax professionals.

Rented for Fewer than 15 Days During the Year – When a property is rented for fewer than 15 days during the tax year, the rental income is not reportable, and the expenses associated with that rental are not deductible. Interest and property taxes are not prorated, and the full amounts of the qualified mortgage interest and property taxes are reported as itemized deductions (as usual) on the taxpayer’s Schedule A. This would only apply if you rented out your residence or a vacation property on occasion.

The 7-Day and 30-Day Rules – Rentals are generally passive activities. However, an activity is not treated as a rental if either of these statements applies:


1.  The average customer use of the property is for 7 days or fewer—or for 30 days or fewer if the owner (or someone on the owner&rsquo
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Understanding Nightly Rentals - part one

Utah Real Estate Investors Association

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There has been a big push for landlords to look into short-term rentals (think, Air BnB) as opposed to longer-term (monthly or yearly) typical rentals. The reason for the push is that renting a property nightly can bring in much more per month—even including vacancies. It has become almost an entirely new real estate investing technique.

While a great way to make additional rents, there are things that you should understand before jumping in with short-term rentals. The first is legality. All rental properties are regulated by the city in which they are located. You will also see county or state-wide regulations. But typically, state laws govern the relationship between landlords and tenants and other larger matters. In most jurisdictions, the specifics of what types of rental properties are allowed are done at the city level.

This city-sponsored legislation arises because cities are charged with protecting neighborhoods and the “look and feel” of their respective cities. And they have a lot of authority on rentals. Most cities require landlords to register ALL their rentals properties, pay a licensing fee and make determinations as to how many unrelated tenants can live in a give property. If you are
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Keys to Title #2

Utah Real Estate Investors Association

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In my last article I discussed some of the key elements of title like the settlement statement (CD) and the title commitment (PR). Go back and read that article if you haven’t already. In this article I will cover the three types of insurance policies.

There are two policies that protect the new owner and one policy (essentially) for lenders. The two owner policies are the Alta Homeowner’s policy and the Standard policy. The Homeowner’s policy is the default policy provided on almost all retail transactions and covers the most things. It is also more expensive than the Standard. For a complete review of coverage, ask your escrow officer for a sample policy or list of coverages and exclusions.

Some of the important things the Homeowner’s policy covers that the Standard does not are boundary lines (fences and shrubs in the wrong place), adverse possession (when a neighbor encroaches on your property without you knowing it), unrecorded easements (like a right of way or access) and mechanic’s liens. These are the most common problems that you will find affecting your property. So, I do recommend the Homeowner’s policy to protect you. But you can opt for the Standard and add on
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