Tax Efficient Real Estate Investing with Short-Term Rentals (STR)
At Bright Hill Advisors, LLC, we specialize in real estate accounting and tax planning to help you achieve financial freedom through tax-efficient real estate investing 🏘️💰 Here’s a path you can steal to get started:
- Live frugally to save as much income as possible and be intentional about where your money is going. This will help your family thrive without waste or excess 💰💡
- Use your savings to make a down payment on a short-term rental (STR) property. STRs are preferable because they allow you to meet one of the material participation tests, which turns your rental property into a non-passive one. This means that any losses from the property can offset your other non-passive income 🏠👨👩👧👦
- Keep the average stay per guest at the STR to less than 7 days to meet the material participation tests. This will allow you to use any losses generated from the property to offset your other non-passive income 📈💰
- Conduct a cost segregation study on your property to accelerate depreciation and maximize your losses in the first year. This will lead to a significant tax refund, which is like an interest-free loan from the government 💸👌
- Use the tax refund and cash flow from your STR to make a down payment on your next STR acquisition. Repeat this process until the cash flow generated by your STR portfolio is greater than your family’s expenses 💵👨👩👧👦
It’s important to note that the bonus depreciation is decreasing by 20% each year starting in 2023. This means that acquiring and placing STRs in service sooner rather than later is more beneficial from a tax perspective because you can get more bonus depreciation in the first year 🗓️💰 At Bright Hill Advisors, LLC, we can help you navigate the complexities of real estate tax planning to optimize your investments and achieve financial freedom 🙌💼
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