I'm Mark Kohler here! Now let's talk about an important strategy. That's
Taking the country by storm
It's been around for a few years, but it's just getting more and more popular and that's the air B&B
VRBO
vacation rental daily rental
And I have a lot of clients that are going from a standard
Single-family home rental property strategy buy a home rent it out monthly
And you'll need something like that and turned it into a vacation rental and putting it in one of these service programs where they can
Be rented on a daily weekly basis a lot of times
They're seen three to four times what they would get in monthly rent in the form of daily rent well
Let's talk about some of the tax and legal issues
See if we can help them make this a big success for you number one keep in mind. This is a business
I want you to treat it like a business. I want you to track all your expenses related to it
It's gonna be a great tax write-off
But you're gonna have to report all this income you're earning and also keep in mind with a business. There's risks involved
Sometimes having a single-family home rental or a duplex or a four-plex with nice steady monthly or annual renters
Can be safe and comfortable these vacation rentals one bump in the market and your rent can take a nosedive
You want to be careful thinking that you're gonna have all this extra cash flow when maybe three or four other rentals down the street
Dominate the rental market in that area
And you get nothing so really do your homework treat it like a business do your homework in advance
Do your due diligence and make sure converting it to a daily rental is going to be in your best interest?
Number two another important legal issue and that is looking at the local regulations the municipalities and cities and counties
Some cities are not excited about having another vacation rental on a street neighbors may not like the extra
And believe me hotels and motels in the area
Don't like it either because it cuts into their business so some cities are banning these vacation VRBO
Airbnb type rentals in their area because they think it hurts businesses it hurts neighborhoods other places
It's wide open so you want to look at the area you're gonna buy this rental
Or where you already have a rental and make sure it's gonna work as a vacation rental before you jump off that cliff to
Number three before we get to taxes, let's talk one more legal issue and that's protection guys you're gonna
Probably have more exposure with a vacation rental, then you would a standard monthly or annual run
The standard runners, they're not there to party. They're not there on vacation. They're not maybe having as much fun
They're just living there and so vacation
Tenants can be harder on the property they can also
Get hurt have more activities going on that could create exposure to you
This is where the LLC the limited liability company comes into play which is going to be the standard entity to hold this vacation rental
Before you rush to LegalZoom and click-click-click can set up your entity you might want to consult with a lawyer to see
Which entity fits you best in your state? Where's the rental?
Where do you live?
and how many rentals you're gonna put it in LLC there's a lot of questions here and
For a few extra hundred bucks you can talk to a real lawyer and get the right entity for your situation
Look at my information below to talk to someone in our law firm just to decide but you've got to be careful
Just setting up
We think is the the best entity for this without getting a consult
But think protection and make sure you have an entity between you and the property now finally. Let's talk taxes my favorite I
Want you to make money and I want you to pay as little taxes as possible so you've got to know what to expect here
Again remember my first point you're a business. I want you tracking all your expenses you're gonna
Probably get going on some sort of QuickBooks strategy
And maybe just more than Excel tracking your expenses do the best you can to track everything next remember you're gonna have to pay
Taxes on this income you're earning and even though we're deducting
depreciation and mortgage interest and cellphones travel dining entertainment all those other videos and things I love to talk about
You're gonna be writing all those off, but you're gonna probably have taxable income because you're getting
three four times rent what you would on a monthly or annual rental, so
Be ready to pay some taxes now
The newest issue here from an IRS perspective is that when it's a vacation rental as long as you're not
acting like a hotel doing things like
changing linen daily
Cleaning daily providing concierge services providing breakfast lunch or dinner or some sort of happy hour if you're not acting like a hotel
Then you're gonna be able to report it on a Schedule E
Like a standard rental, which means no self-employment tax
But if you're acting like a bed-and-breakfast or a hotel or motel you're gonna have to report it on a Schedule C
Which means self-employment tax which means I'm probably gonna put this in an S. Corporation or of an S
Corp manager, LLC right it just got crazy all of a sudden again
Why you probably want to get a consult with an attorney?
Accountant before you dive into this and make sure your accountant understands what you're trying to accomplish bottom line
This is a great strategy, and I love it
I love to use vacation rentals myself when I travel and I'd love to have rental property making more money right makes sense well
Keep working on this strategy look at your options do your due diligence?
and I hope that we can be of service at our accounting from a law firm as you go down the path and
Remember the American Dream is real. Don't give up keep trying keep investing and realize real estate can be a great path to use
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