Ashley Kehr:
Today’s rookie reply is a great one because it hits three different fears that rookie investors have when they’re ready to move on from learning into execution.

Tony Robinson:
Yeah, we’ve got someone worried about how to rinse and repeat after their first rental. Another rookie panicking mid deal because insurance blew up their numbers. And a W2 investor trying to use short-term rentals for tax savings without getting crushed by regulations.

Ashley Kehr:
This is the Real Estate Rookie podcast. And I’m Ashley Care.

Tony Robinson:
And I’m Tony j Robinson. And with that, let’s get into today’s first question. So this question comes from the BiggerPockets Forum and it says, after spending four months reading and listening, I’m close to finally taking that first step, enough talk time for execution, but I still find myself questioning what do I do after I purchase my first rental? I’m focused on long-term rentals and cosmetic burrs, but I struggle with grasping creative ways to finance and rinse and repeat. While I’m fine dropping 40, 70 K as a down payment, I feel stuck in a holding pattern wondering if I need to wait and save another 40, 70 K to do the next deal. I’m excited about Cleveland, Cincinnati, Pittsburgh, and Dayton. Any nuggets of wisdom would be appreciated. Alright, so this question is really about how to scale your portfolio beyond the capital that you currently have access to.
I think there are maybe a few approaches that you can take. The first approach is to do probably the simplest way is just to take the 40 70 K that you have right now, put that down as a down payment on a deal, and then save up under the 40 70 K and just repeat that process over and over again. It’s slower, but it’s significantly less work and requires less creativity and it’s just a really kind of tried and true approach to build a portfolio. The second path is that you find a way to recycle that initial set of capital. So you can do things like the burrs that you mentioned where you’re buying a property, you’re renovating it, you’re rehabbing it, then you’re refinancing to get back some or potentially all of the capital that you put back into that deal, right? So the burrs strategy is the second way, and then another way is then partnering with other people to help fund your deals.
So if you’ve taken down this first deal, you’ve got a bit of a track record, you’ve proven that you know how to find deals, execute, and so on and so forth, maybe then you start leveraging partners and their capital to take down more deals. And then maybe probably the more complicated path is going after something like more creative financing. If you can do seller financing where you’re finding properties that are owned free and clear and then you’re negotiating directly with the seller to have them loan you the money is another way to scale beyond your original capital. But in my mind, Astros are probably the four big buckets, but curious what your thoughts are.

Ashley Kehr:
Yeah, I think the last part of this question as to should I wait and save up more money or should I go ahead and try and find another creative way to purchase a property without waiting and saving up money? But I think the answer is really to do this simultaneously. Start saving again, but also looking for deals where you can do some creative financing. So whether that’s a bur where you’re using hard money and then you’re going to refinance out of it and pull your money back out, whether it’s going to be finding a deal where the person will do seller financing. If you go to, I think it’s called landwatch.com I think is what it is, you can literally click a toggle or a filter that is for seller finance deals that are available that people are already saying they’ll do seller financing and you can submit offers and put the offer as seller financing.
One thing that I’ve always done is when I get to go face to face with a seller or I try to have my real estate agent communicate this, if I’m going to submit an offer that’s seller financing, I always like to say, have you talked to your accountant or your CPA about the tax advantages of doing seller financing? And that usually piques a little bit of interest and it sounds more reputable to somebody having it come from their own personal CPA rather than from somebody who’s trying to buy their property. If I try and tell them like, oh, here’s all the advantages and the reasons why it’s more likely they’ll listen to their CPA than me who’s trying to haggle them for a deal.

Tony Robinson:
Just last thing I’ll say asra, I do think that there’s value in thinking about deals number two, five and 10 before deal number one, but I think it’s a bit of a fine line because oftentimes I see people get so caught up and well, how do I scale and how do I get property number two and how do I get property number five that they lose focus on the fact that they don’t even have deal number one yet. So I think the majority of your focus right now should be on how do I make deal number one work? And then from there you can start making pivots and adjustments to go on to deal number two, number five, number 10. But don’t get caught in that loop of thinking so far ahead that you forget to take that first step.

Ashley Kehr:
That’s totally a great point. So we’re going to take a quick break, but when we come back, we’re going to understand when you should walk away from a deal or stick it out. We’ll be right back. Okay. Welcome back. So this next question comes from the BiggerPockets forums and it says, hi, I am a new investor to real estate. I’m 22 and looking to do a house hack using an FHA loan with three and a half percent down. I’ve got under contract on a property in Baytown, Texas, but during underwriting we found insurance costs were 6,000 to 8,000 per year plus flood insurance. The deal no longer cash flows even long-term, and I’m past my option fee. I feel stupid backing out but don’t know what to do. Is my earnest money gone? Please help. Ouch. That does hurt. And it doesn’t say how much the earnest money was, but I will say I’ve lost earnest money.
There was a deal, it was a cabin and I found out some things, title issues and all this stuff after my due diligence period was over and I think it was $2,000 and they told the sellers, keep the money. I’m backing out of the deal. And looking back now, I would’ve rather have lost that $2,000 than be stuck in a deal where I’m losing even more money. And I think that would probably be the case in this situation. If I mean just six to 8,000 per year plus the flood insurance, I don’t think I have a single property right now that is that much an insurance per year.

Tony Robinson:
Yeah, that is wild. Six to eight grand plus flood insurance and flood insurance is not cheap. You have to go out and go out and get special flood insurance. Yeah, I agree with your point, Ashley. Whatever the EMD is, you have to weigh that cost against the ongoing cost of owning this property year after year after year after year to see if it actually makes sense to move forward with purchasing this property. I think a lot of this goes back to what Ash and I talk about a lot is that it’s easy to get emotionally attached to a deal and feel like you’ve already put so much time, effort, and in this case money into a deal. But sometime the smartest thing to do is to walk away. And if your deal does not work because of these new finances, then just go back to the settler and be honest.
Say, look, I had every intention of purchasing this property, but the flood insurance quotes that came back and the insurance quotes that came back are significantly higher than what I had originally anticipated. So I would ask that you release my EMD because this is not within my control. It’s not me trying to back out of the deal. Like here are the cold hard facts. Hey look, if you have an insurance agent that can give me a better price, I would love to talk to them, but if not, please work with me to make sure that we can walk away amicably. So I’m with you, Ash. I think I’m walking away from this deal because it’s not worth stepping into

Ashley Kehr:
Wait 100%. That should be the first step is trying to renegotiate with the seller. You might as well ask, they probably don’t want to have to start all over in the process of selling the property. So maybe they do have some wiggle room to continue to make it work. But that’s where I would start.

Tony Robinson:
And kudos to you for being 22 and locking down your first house hack, right? And then it’s a great way to start. We’re going to take a quick break, but while we’re gone, if you haven’t yet followed the podcast on Instagram at BiggerPockets rookie, then you can follow Ashley at Wealth and Rentals and me at Tony j Robinson and we’ll be right back after a quick break. Alright guys, we’re back and we’re here with our final question. This one’s about short-term rentals, taxes, and regulations. So the question is, I currently invest in long-term rentals but cannot take advantage of real estate professional status due to my W2 job using the short-term rental tax loophole to offset my W2 income with supercharge my investments. But I’m afraid of buying a property denied, but I’m afraid of buying a property and getting denied a short-term rental license.
Can anyone recommend beginner friendly STR markets, preferably within three to four hours of NYC? Alright, so a few things to unpack here. I think the first piece is that we need to break down what the short-term rental tax loophole is. I’ll try and do this in a way that’s super clear for everyone to understand. Real estate investing offers the ability to take losses, whether those are real losses like you actually lost money on that property or paper losses, things like depreciation, which is not a real expense, but it’s a paper loss. You can take those losses and apply them against other forms of income that you collect. Now, in order to take those paper losses and apply them against your W2 income, you have to be what’s called a real estate professional or qualify for what’s called the real estate professional status. For most people with a day job, it’s virtually impossible because you have to show that you put more hours into your real estate business than you do into your day job.
Most people can’t prove that. But with short term rentals, because they are classified as a business in the eyes of the IRS, not necessarily passive income like a long-term rental, you don’t have to qualify for real estate professional status. There’s something called material participation. And as long as you can show that you materially participate in your short-term rental, that then unlocks your ability to take the passive losses from your short-term rental and apply them against your W2 income. So I know that’s a mouthful, but if you just look up short-term rental tax loop, you’ll get some more insights there. So that’s this person’s motivation. And I know a lot of people who invest in short-term rentals primarily for the tax benefits associated with it, and it truly does give you the ability to largely reduce or sometimes even eliminate your tax bill altogether. Okay, so that’s the first piece.
Now, what this person is worried about is the regulatory landscape of the short-term rental industry. And while it’s shrewd that the regulations across the country have changed, shifted, evolved, some have gotten significantly more strict, it doesn’t mean that every single market is this huge regulatory risk when it comes to short-term rentals. There are really a few core things I look at to gauge the regulatory risk in a market. The first thing I look at is what is the current ordinance in that market? Can I legally rent a short-term rental? Is there a cap? Can I only do it in certain parts of town? Does it have to be a certain property? Is there a limit on occupancy? Is there a limit on usage? Just understanding what that current ordinance is to make sure that it allows me today to profitably run this property as a short-term rental because there are some markets where you can run it as a short-term rental, but you’re capped at only using it for 30 days out of the year.
Who cares if I can use it in any way, shape, or form if I only get one month from that property? It doesn’t make sense as a short-term rental. So just understanding the current ordinance. And then the second element is understanding the risk of that ordinance changing in the future. And the core thing that I focus on when I think about answering that question, Ash, is how economically dependent is that city on the revenue generated by short-term rentals? I’m going to pick on your home state of new, and in New York City, they effectively banned short-term rentals a few years ago. But if you think about why NYC was able and willing to do that, it’s because they didn’t care about the money that short-term rentals generated for that city, right? Like NYC is one of the, if not the most populous city in the United States, it generates revenues from literally every single industry.
It has no economic dependency on Ashley and Tony’s little Airbnb. But if you think about true vacation destinations, places where people only go to vacation, those are cities that are truly dependent on the money generated by short-term rentals in the form of transient occupancy taxes in the form of property taxes, in the form of people coming in saying a few nights and spending money in the local businesses where if those short-term rentals were to shut down that local economy would be severely impacted, maybe even collapse. So we want to look for cities that have that element of economic dependency and not so much the big cities that have a lot of things driving that economy. So that is my brief masterclass on the short-term rental tax food poll and regulations and how to avoid them. Ash, any questions or what do you have to add to that?

Ashley Kehr:
Any value that I can provide is I know the New York area and destination, so I can add two places that I think would be a good short-term rental areas to invest in. I did a quick Google search and tried to look real quickly if they’re short-term rental friendly. And it really depends on the specific area, but within that three to four hours of New York City is the Poconos tons of things, skiing in the Winter Lakes in the summer, and then also Lake George. It’s one of the cleanest lakes across the us I think in a great destination area. It’s close to I think Saratoga, where they have horse r ising and different things like that. But yeah, so those would be the two markets I would look into and just searching real quick, you have to get permits, things like that. And the laws vary depending on the specific area that you’re in and things like that. But those would be the two places that I would go and stay in a short-term rental.

Tony Robinson:
And I think the other thing I’d add to that question too, Ash, and this is not true for short-term rentals, but for all strategies is ask yourself what your motivation is for staying within three to four hours of New York City. Is it because there’s just this comfort factor of being able to go and check in on the property yourself and in case something happens, you’re there to kind of be present? Or is it because maybe you want to use it yourself if it’s more so the personal use, that makes sense. But if you’re leaning towards this tighter radius simply for comfort reasons, I would encourage you to understand that whether the property is four hours away or eight hours away, you’re probably not going to be the person cleaning the Airbnb. You’re probably not going to be the person fixing maintenance issues. You’re not going to be the person restocking supplies, you’re going to hire all of those things out anyway.
So if you can find a deal in a property that’s in Bozeman, Montana or Des Moines, Iowa, or name the city in the random place on the west coast, if that is a better deal for your specific situation, I wouldn’t say that you should necessarily avoid that just because it’s not as close as you want it to be. There are tons and tons of people every single day who are buying properties remotely and are successfully managing them as long as they have the right systems and processes in place and likely for you. You’re already listening to this podcast and we share a lot of the different ways you can do that remotely.

Ashley Kehr:
And one thing I would add too is if you want to use it for yourself personally, make sure you’re aware of what the rule is for that. Isn’t it a pretty gray area though, Tony, as to how many days you can actually use it if you’re writing it off as a short-term rental?

Tony Robinson:
Yeah, there was a lot of discussion on this, but yeah, I mean, usually what most lenders say is that somewhere around seven to 14 days is a good baseline of personal use. So there’s actually two different things we’re talking about here. One is a lending requirement, and then the other is how the IRS views it. So from the IRS perspective, your average state duration for the year has to be seven days or less. So as long as your average guests stay, when you look at all your reservations is seven days or less, then you’re still able to quantify this as a business. Once you get over seven days, they start to treat it more like a traditional long-term rental and you lose that ability to qualify for material participation. But if you’re seven days or less, you get that ability. So midterm rentals wouldn’t qualify for material participation because most of your saves are 30 days or more on the lending side.
The only real requirement is if you’re using a second home loan to purchase the property, and if you’re using the second home loan, there’s a personal use carve out where you have to use a property yourself in order to qualify for that specific loan. And I’ve heard different figures from different lenders, but seven to 14 days is like a usual good benchmark, but you just got to have the intention to use it yourself at some point during the year. So luckily, those two things are not connected. So I can get whatever kind of debt I want. I can get hard money, private money, conventional debt, not FHA, because you got to live there, but I can do any kind of debt that I want, and as long as I’m seven days or less, I can still qualify for material participation.

Ashley Kehr:
Yeah, I think another point I wanted to make on that too is just if their motivation is three to four hours is because they want to use it for personal use, knowing that they can’t spend, depending which way they go, they can’t spend their whole summer staying there, going every single week up there for the whole summer if they are going to use it for the short-term rental tax loophole or whatever too. So I thought I would use my A-frame all the time, the day I was so sad to rent it out the day I rented out, I was like, oh, don’t worry, kids are going to come here all the time. We haven’t stayed the night once. Maybe one time we went since we started booking it out, but it’s like, yeah, don’t make that a huge deciding factor, I would say, as to deciding on a market if you don’t know for sure if you’ll actually use it or not. Anyways, thank you guys so much for listening to this episode of Real Estate Rookie. I’m Ashley. He’s Tony, and we’ll see you guys on the next episode.

Dave:
If you skip this episode, you could be leaving thousands of dollars on the table. They say there’s only two things guaranteed in life, death, and taxes. And since you’re alive watching this right now, today we’re going to focus on the latter how real estate investors can legally pay less tax. And things have changed a lot this year. Big time. The big beautiful bill tax provisions are going into effect for this April’s tax deadline, and it has huge implications for real estate investors, and that’s true whether you own one rental or an entire portfolio. The strategies we’re sharing today, they could save you hundreds, thousands, or even tens of thousands of dollars over the lifetime of your investments. In this episode, we’re also going to share under the radar tax strategy that 99% of investors are missing out on. And we’ll have a CPA tell us what you need to do today so you’re never scrambling during tax time again.
Hey, what’s up everyone? I’m Dave Meyer, chief Investment Officer at BiggerPockets. Today’s guest on the show is Amanda Hahn. If you haven’t heard Amanda before, she’s been on the show a lot, but she’s an expert. She’s a CPA tax strategist, and she’s a real estate investor herself. She specializes in helping investors pay the least amount of possible taxes legally. And since April 15th is coming sooner than any of us hope or think. Let’s bring out Amanda and learn together how to save some money this year. Amanda Hahn, welcome back to the BiggerPockets podcast. Thanks so much for being here.

Amanda:
Yeah, thanks for having me, Dave. I’m super excited to be back.

Dave:
Well, we’ve had you on the show many times, but some in our audience may not know who you are yet, so can you just introduce yourself for us?

Amanda:
Of course. Hi everyone. My name is Amanda Hahn, and what I always tell people is that I am a CPA by day and by nighttime I am like many of you a real estate investor. My husband and I co-authored the two BiggerPockets textbooks, so if you haven’t checked those out, make sure to do so. One of my passions is really in helping to educate people on all the different things they can do to use real estate, to not just build wealth, but also to save a significant amount in taxes if you do things correctly. So really excited to be here. It’s that time of the year when taxes are top of mind.

Dave:
It is. Well, thanks for joining us today, and if you haven’t read Amanda’s book and you want to save money on taxes, it’s the single best thing that you could do. Self-admittedly, Amanda, this about me am terrible at this stuff. I’m not good at tax strategy, but I’ve gotten better because of reading Amanda’s books and getting to know her. So definitely check that out, but hopefully we’ll give you a little taste of the kind of stuff that you can learn here in this episode. So Amanda, maybe just break it down for us, for people who might be new to investing or for those who are just scaling their portfolio, I think a lot of us, it takes a little time to realize that you should be thinking about taxes. What sort of the big buckets of tax strategy that investors should be thinking about?

Amanda:
Yeah, well, we will start at the basics, which is that it’s important to understand when you invest in real estate, you are actually a business owner in the eyes of the IRS. And so we hear people talk a lot about how tax law favors business owners when it comes to write-offs, deductions, depreciation. And so it’s really important to understand that as a real estate investor, I am now able to take advantage of a lot of those same tax benefits and deductions that the traditional business owner has access to. And this is true regardless of whether we own our rentals in our individual name or in our trust or in an LLC,

Dave:
We call it real estate investing. But it really is just entrepreneurship. You’re starting a small business to own real estate just like any other service business or business that you create. And that is good. That’s a good thing for real estate investing. That’s why you get better tax benefits than if you were to go out and buy stock or cryptocurrency or anything like that. That’s why real estate has so many advantages. So what are the big things that people should be thinking about as they enter tax season right now?

Amanda:
What’s really interesting is when we work with investors all over the US on proactive tax planning, about 40% of tax returns that we review from previous years are not optimized for tax savings. And I can share some of the most common mistakes I see. And I think these are kind of the things that we should all keep in mind
As we get ready for tax season. And we’ll start with just capturing expenses as real estate investors. I think we’re all really good at making sure we write off our mortgage interest and property taxes and management fees. But some of those common mis deductions, even insurance, property insurance is one that we see missed pretty frequently. Really, and it’s really strange because we all have property insurance, but just some of the overhead things. Home office, most real estate investors manage their rentals from their home. Very few people actually go out and rent an office space. So if you have an eligible office, make sure you are claiming it because it does help you to save on taxes either today or sometime in the future depending on your facts and circumstances, but just overhead expenses, going to BiggerPockets conference, your BiggerPockets membership, buying a textbook, for example, using your car for business, right?

Dave:
Yeah, absolutely. For sure. I always wonder about travel. Is that something that you can deduct? I invest out of state, and so sometimes I’m going to visit the Midwest and I’m staying at hotels. That’s something I can deduct, right?

Amanda:
Yeah, for sure. And you actually, it’s not a requirement that you own rental properties in a state in order to take a tax deduction. What is required is that you’re able to demonstrate the main reason for that travel is related to real estate activities. So for example, if I didn’t own any properties in Orlando, but I’m going to Orlando for a BiggerPockets conference, that travel itself should be tax deductible, right? The flights, the hotels, the food when I’m there. And same thing, if I happen to have a trip planned to go to Ohio to look for rental properties, even though I don’t end up buying any properties, my travel costs could be deductible as long as I can show I went there for the purpose of looking for real estate touring properties and things like that.

Dave:
So I want everyone to listen to that. This is something that comes out a lot when we talk about outstate investing. People don’t go and visit markets that they’re considering investing in. And I always encourage people to do it. It’s a big expense, I understand that, but it is tax deductible in most situations. So that does take the sting out of it a little bit. It is a business expense and encourage you to think about it. So that’s one big thing people should be thinking about the returns, right, expenses. What else is there?

Amanda:
Well, along this kind of a similar line, oftentimes when we review tax returns, obviously one of the big things we look at is depreciation, right? Our ability to take a paper loss on the purchase price of the rental building we purchased, and we frequently we’ll see the depreciation as a very round number. So $500,000 for Main Street or $200,000 for Fremont Street. And that usually jumps out to me as not really capturing all of our costs associated with the acquisition of a property. Because we all know when we buy a property, we’re not just paying the purchase price of it, we are also paying closing costs. And there is different allocated or prorated property taxes, insurance and all those. So one thing we can do for any of you who’ve purchased a property during the year, sold the property, refinanced on a property, make sure you send your closing disclosure to your accountant as you get ready to meet them because then they can take the closing disclosure and pull out all of those associated expenses beyond just you telling them what the purchase price is.

Dave:
Okay, that’s a very good tip. And how big of a difference does it make? If you have an average rental property, it’s $400,000, you’re making some cashflow off of it, how big of a difference in your tax is it when you prepare the tax, right? And when you do it sort of just haphazardly?

Amanda:
Oh, the answer really depends from person to person, right? Because one question is going to be what is your tax rate? If you’re someone who is in a high tax bracket because you make a lot of income from other sources, then even a thousand dollars of a deduction could save you $500 in actual cash. And for some people that’s, it’s a decent amount. I think for anyone, I would never throw away $500 for no good reason. No. But if you have a good system to track your expenses, those items add up over time. So if you’re able to utilize it this year to offset your taxes, great. If you can’t because of passive activity limitations in the tax world, I always encourage clients, still track them, send it to your accountant because you want to make sure it’s reported. Because even the expenses that you can utilize today, you never lose them. You get to utilize them some point in the future.

Dave:
In an era of real estate investing where it’s super hard to find cashflow, this is cashflow. We often treat taxes as this separate income source or something different to think about in real estate. But as Amanda just said, she used a modest example of if you can save 500 bucks, that’s reasonable. If you could save 1200 bucks and that’s a hundred dollars a month in cashflow, that could change your cash on cash return from 3% to 6% in a given year if you’re actually just doing this right? And it’s one of the ways I think you could just keep more money in your pocket and that really has measurable differences in your actual overall return profile.

Amanda:
Yeah, I used a very small example, but if we go to the other extreme and say, well, how impactful could that be in real life? If we’re talking about somebody who invested in a rental property where the building was $400,000 with the current law where we have a hundred percent bonus depreciation, that could be what? $120,000 of a deduction just in the first year. If you’re in a 50% tax bracket, that could be $60,000 in tax saving. So we’re saying, okay, save 500 or save 60,000. I love both of those.

Dave:
Yeah, sign me up a hundred percent. Alright, so those are some great basics that everyone, whether you’re just starting or have a big portfolio should be listening to. Of course this year we have some exciting tax stuff, I think from a real estate investing perspective where many of the provisions that were passed last year in the one big beautiful bill act are starting to go in effect. So I want to pick your brain on that a little bit. Amanda, we do have to take one quick break. We’ll be right back. Welcome back to the BiggerPockets podcast. I’m here with Amanda Hahn talking about tax strategy. It’s the beginning of the year, it’s time that we all start thinking about this. Amanda enlightened us before the break just on how you should be thinking about capturing your expenses on a property level and how to maximize your deduction so you can keep more money in your pocket. A lot of things are changing though, Amanda. It’s not just the same old, same old in tax world for real estate investors. So maybe you can give us a high level overview of what has changed and what’s in the big beautiful bill act that is relevant for real estate investors.

Amanda:
Yes. Well, I mean not surprisingly with the current administration, the one big beautiful bill included a ton of very amazing benefits for real estate investors. One that I think everybody was really excited for was the return of 100% bonus depreciation.
Previous to that, we can always take depreciation on our rental properties, but under the old law, if there hasn’t been changes this year, bonus depreciation would’ve only been at 20%. So with the change of the law, now bonus depreciation for 2026 is at a hundred percent, which effectively means if you bought a property after January 19th, 2025 or anytime in 2026 and the foreseeable future, not only do we get to take depreciation on our rental properties, but that amount is supercharged, meaning we can take a very significant tax benefit upfront rather than the traditional rule of having to wait over a significant number of years to take a tax write off for it.

Dave:
And maybe you could just help us understand what is the benefit of frontloading depreciation and what are some instances or circumstances where you recommend that for real estate investors?

Amanda:
For sure, the purpose or the benefit of accelerated depreciation, basically saying rather than waiting over time to take a tax benefit on the purchase price of my rental building, I’m going to do what’s called a cost segregation study. And what that does is it allows me to then take faster depreciation this year and maybe the next few years rather than having to wait. So effectively we’re looking at the time value of money of

Speaker 3:
Savings.

Amanda:
In other words, I know I have to pay taxes to the IRS, I can either pay it now or I can pay it slowly over the next 27 or 39 years. And if I choose to pay my taxes later, that means I’m able to keep my cash longer with me today and reinvest and grow that money today rather than just giving it to the IRS. So that’s where the concept of it. Now, I will say it is not for everyone. So don’t run out and start taking accelerated depreciation just because you hear it here. The ideal profile of when you want to take accelerated depreciation are in years where you can actually benefit from it. So that would be years where you have high taxable income and or years where you can actually utilize rental losses to offset that different set of income that you’re generating, whether it’s from a W2 or a business that you operate. And so conversely, who should not do a cost segregation? Well, you should not accelerate depreciation if you’re not able to utilize it this year.

Dave:
For someone like me or maybe for someone else who has a W2 job is bonus depreciation and doing the cost even worth it.

Amanda:
Another great time to do cost segregation is if you have a gain. So let’s say I have a portfolio, but I sold one rental for a huge gain and I didn’t want to 10 31 exchange or use other strategies. I could also consider a cost segregation on one of the properties in my existing portfolio and try to offset one with the other.

Dave:
So you can actually take the depreciation from one portfolio property and apply it to another one even if you’re not a real estate professional.

Amanda:
Yep, exactly. Exactly.

Dave:
Love that.

Amanda:
And I will say one other thing since we’re on the topic of someone who is not a real estate professional, you may have been told by your accountant that there is no tax benefit to you investing in real estate because either you work full time or you make too much money. And when you hear that from an accountant, they’re doing what I called tunnel visioning because all they’re saying is, for example, Dave, you are not going to see a huge benefit this year in owning rental real estate. You’re still going to pay taxes on your W2 income. But what they’re not factoring in are the different benefits, which is I generated rental cash flow that I’m not paying taxes on. And also in the future when I generate future cashflow, I may not have to pay taxes on. And also the most important part, which is at the end of my investment with this specific property, if I were to sell it at that point, I can actually use all of the accumulated losses from that property to reduce not just the capital gains from the sale, but also W2 and all other income as well. So there’s absolutely benefit to being a real estate investor. It’s just a timing of when somebody actually sees that.

Dave:
One of the things I struggled with early in my investing career is you look at these things, you say, oh, I’m going to pay this tax eventually if I just defer it. And at least for me, I didn’t really appreciate the time value of money element. I can keep more principle in my pocket and use that to go buy other investment properties to make renovations on my properties. And in addition to just delaying that, this is getting nerdy about it, but you also wind up paying your taxes in inflated devalued dollars over time too. So you’re purchasing power. Part of the idea of the time value is money is your money is worth today more than it’s worth in the future. And so if you can hold onto it and use it to build your portfolio currently, then it’s better to invest a hundred dollars today than it’s a hundred dollars several years from now.
And so that’s one of the main things about tax strategy that real estate allows you to do. And that’s kind of the same idea behind a 10 31 too, right? You eventually in theory at least have to pay that tax, but if you can defer that and go out and save the 20% on capital gains and just go buy another property, it means you just have more purchasing power, which is so powerful, especially early in your investing career. So anyway, long conversation here about bonus depreciation, depreciation in general. Anything else from the one big beautiful Bill act that our audience should know about?

Amanda:
Yeah, well beyond bonus depreciation, one of the good things about the one big beautiful bill is that we were able to retain the tax that’s called qualified business income deduction, QBI for short. So that was something that was available that was then extended as part of the one big beautiful bill. And basically the reason we care about that is real estate investors is QBI basically allows certain types of business income to have tax-free treatment up to 20%. So an example could be if I’ve owned my rentals for many years and even after using depreciation and cost segregation, I have to pay taxes. There’s taxable income. Well, under QBI, if I had a hundred dollars worth of taxable income, I may only have to pay taxes on $80 of it, which means $20 of my taxable rental income could be completely tax free. And this doesn’t just apply to rental income, it applies to all different types of income, specifically in real estate as well. So for those of you who are flipping properties, doing wholesale, or if you’re property manager co-hosting all of the different types, up to 20% of that taxable income could potentially be tax free under QBI deduction. And that is something we enjoy for 2025 as well as 2026.

Dave:
Amazing. Finally, a tax win for flippers at wholesalers. Honestly, as you’re listening to Amanda, most of the benefits for real estate investors come with buy and hold styles of investing. It doesn’t need to be rentals. A lot of them still apply for short-term rentals or midterm rentals, but it’s kind of a buy and hold. The transactional kind of real estate doesn’t always get the same treatment. But QBI is a great example,

Amanda:
Although I will say that for some reason a lot of tax returns we review that are prepared by other firms are often missing that QBI deduction. So one of the things as you’re getting ready to meet with your accountant to file last year’s taxes, that’s another question you can add to the list is just to have them double check, make sure I’m getting my qualified business income deduction. And it very well could be that, hey, it doesn’t apply to you because you have rental losses, right? So when we have losses, it doesn’t apply because we’re already not paying taxes on it. But to the extent you have taxable income from real estate or even a non-real estate business, it’s super, super significant when it comes to savings. We see this mostly with our clients who do fix and flips and our clients who are on the active real estate side, brokers, realtors, has been a very significant tax saving in the past couple of years.

Dave:
All right, well everyone, make sure that you have QBI or at least think about QBI and see if you qualify for this QBI deduction this year. Sounds like that could be a huge savings. Alright, we got to take a quick break, but when we come back, we’re going to talk to Amanda about how to set yourself up for a stress-free and hopefully very profitable tax prep season this year. Stay with us. We’ll be right back. Welcome back to the BiggerPockets podcast. I’m Dave Meyer here with Amanda Hahn talking tax prep and tax strategy for 2026. We’ve talked about what things you should be looking for in your tax prep this year. Talked about the new changes in the one big beautiful bill act that investors should be paying attention to. But Amanda, I just want to talk about the stress that comes with tax prep. It’s not fun for most people, so how do you systematically recommend people go about doing this so that they can capture the most benefit, but that’s not driving them crazy?

Amanda:
I’ll tell you what I feel are the two main reasons people hate tax season. I mean outside of just the fact that they have to pay taxes. I think one is record keeping. Okay, if you’re someone who has not done good record keeping last year, this is sort of the end of the road where you’re like, man, now I got to go through my bank statements and my receipts and try to categorize all the stuff that I don’t remember what I did or didn’t do. And really the best way to change that is just to have systems in place, right systems for your bookkeeping and accounting. If you have the budget to outsource it, great, take that off of your hands If you don’t, it’s really just a matter of setting time aside on a monthly basis to make sure you do all of that.
Because if you’re like me, it’s difficult for me to remember what I did a week ago. So for me to have to think about a year ago, that’s the stress of like, oh my gosh, it’s like a mountain of paperwork and we know it’s coming every year, tax time comes. So I think just taking the time set up a system that works for you, whether it’s QuickBooks or SSA or an Excel spreadsheet, whatever that happens to be, but getting the system set up so you are doing it on a month-to-month basis really will help alleviate a lot of the stress at tax time. I think the second reason people don’t like tax season is the surprise. So the surprise of

Dave:
So true,

Amanda:
The anxiety of like, am I any refund? Am I going to owe a lot? The best way to alleviate or prevent that is with proactive tax planning. So for a lot of our clients, and that’s why we focus so much on the planning because your tax bills should never be a surprise. If you’re planning during the year, if you’re meeting with your accountant throughout the year, before you buy properties, before you sell properties, before you open a new LLC or partner with a friend of yours, to always kind of have at least touch points on, okay, what’s our income, what’s our deductions? So that by the end of the year in December, we have a pretty good idea whether we owe or we’re going to get a refund. But I will say you can only have effective tax planning if you have good financial records. So that also goes back to just having clean bookkeeping. So we know

Dave:
That’s a good point.

Amanda:
We can monitor year round.

Dave:
Well, I want to talk to you more about tax planning. I think that’s a super important thing. But when you talk about bookkeeping, are there any tools? You mentioned QuickBooks, tesa, both good tools. Are there any new ones? I’ve been getting a lot of ads honestly for AI bookkeeping. I don’t know if that’s just people who want to say everything is AI right now, but it’s really just the same product. It’s always been. But are there any specific things that you think people should be looking for when they’re setting up a system

Amanda:
From a tax perspective? The main thing you want to look for is the ability to track income and expenses by property. That is what’s required for IRS reporting. And also just for you as a property owner, if you have multiple properties, I want to know how each property is doing. And I think a quick tip I would say is to have a separate bank account that you use exclusively for real estate things.

Dave:
A hundred percent, yes.

Amanda:
If you have an LLC for your rental properties, use that account. If there’s no money in there, you transfer money from your personal account into the LLC account and then pay for the expenses. That I think helps to cut people’s bookkeeping headache by maybe 80 or 90%.

Dave:
Yes, there is a no brainer for doing that. That’s a great quick tip. So let’s talk a little bit about tax planning proactively. I like this idea. So can you give us an example? I’m going out to buy a new property this year. I call you and say, how do I plan for this in the most taxed optimal way? What are some of the things you’re thinking about or some of the things I should be thinking about?

Amanda:
And I think, again, it kind of depends a little bit on the different facts and profiles of a specific taxpayer. So if we’re saying, oh, well Dave is not a real estate professional, a household with dual income W2, nobody is really able to claim real estate professional status, then maybe a recommendation could be, can we consider a rental property or the next one you buy to be a short-term rental?
Why? Because short-term rentals, we can use the short-term rental loophole where you don’t have to quit your job. Real estate could be a side hustle. You could potentially use the short-term rental losses against W2 and other types of income provided that you meet all of the requirements that still being hands-on and all those things. And so that part of the conversation then maybe kind of veers into where should the property be? Should it be close enough where you can be more hands-on, or are you comfortable with using apps to be able to semi manage or self-manage remotely as well? And then what kind of entity who should be on it? Is it one person, both spouses? So that’s the fun part, right? The initial question is, I want to buy more real estate this year. And then it turns into a lot of different decision makings on, well, have you considered this or that also to get the optimal tax benefit too.

Dave:
Yeah, and I would imagine we started this section of show just talking about stress, that when you plan this upfront, that basically takes away what you were saying, the stress of the unknown at the end of the year. When you add a new property, it’s only incrementally making your taxes more complicated, not like doubling it. If you’re going from one to two properties, now you have double the amount of work you have to do for taxes

Amanda:
For sure. I mean, just having even a system could be, I have a checklist whenever I buy new properties, here are the things I need to put in a folder, the closing disclosure, the appraisal form. I also probably want to make sure I have an entity set up, or at least I’m going to call my CPA, let them know these things happened. So just having that already. So every time I am expanding my portfolio, these are the things I’m going to keep here together. And that tax time is just a matter of sharing all those things in that folder with your accountant or with your bookkeeper even on a monthly basis.

Dave:
Awesome. Well, this is great advice and I really recommend people doing this. Again, I know I keep saying this, but I just think in general, people get really excited about buying properties when they’re first starting, which is right. And then two years into your investing career, you’re like, oh my God, I could have been doing this so much better from a tax perspective, but take it from me, take it from Amanda. Just try and do this stuff upfront. I promise you it will be worth your time and money. It is always worth your time and money to start doing these things upfront.

Amanda:
And I will say I unfortunately do meet people who historically are very model citizens when it comes to tax filing. If they just have a W2 job, they own their home and it’s like always filed on time, filed by February or March, and then, oh, I bought rental properties and then I got overwhelmed and I just basically stopped filing tax returns because I didn’t know what to do. But I think it’s really important to understand if I’m describing you as a listener, it’s really important to understand that taxes don’t go away, so you will have to file your tax return. And again, the sooner you do it, the better you’re going to feel. I promise you.

Dave:
All right. One last question for you, Amanda, before you get out of here. You said you’re also a real estate investor. What are you investing in these days?

Amanda:
Oh, well, actually I live in California, but I grew up in Las Vegas and I went to college there. So a big part of our portfolio has been in Las Vegas, so we continue to expand in Vegas. But I think our latest acquisition was in Florida, and I talk about this with clients as well. In the last couple of years, we’ve gotten more and more into passive investments through syndications and things like that all over the us. And for us, it’s just a change in priorities. And our focus, we’re in a season of life where we have two young boys that require a lot of attention with sports and all the things. So it wasn’t like before when we were starting out, it was a lot of Burr properties. We have the time, we didn’t have the money, we had the time, and now we’re in a different place where we have more of the resources but not as much time to go after the properties ourselves. And we might change when the kids leave us and go off to college, then we might go back to doing burrs or maybe doing our own apartment buildings.

Dave:
A hundred percent. I’ve done the same thing, done a lot more passive investing over the last couple of years. And that’s the benefit. You get to a place where you’ve put in the hard work and then you get to choose. You get to choose if you want to do investing passive. I moved back to the States now I’ve kind of missed doing some active investing. So I’m doing that more for fun than just not needing to. But that’s the goal. So congratulations on getting to that stage in your investing career.

Amanda:
Yeah, thank you. And are you considering house hacking with your new home?

Dave:
I’m calling it a live-in flip because we’re not renting out any part of it, but we bought an under, it’s a 1968 build and it feels like it’s 1968, I’ll tell you that. We got popcorn ceilings. We still have those intercoms that people used to have super old school. They still work. It’s pretty fun to use

Amanda:
Only in the expensive homes though, when they have those, right?

Dave:
I think back in the day, yeah, it was nice, but it’s still perfectly comfortable. But the idea is we’re going to start renovating it and hopefully spend probably in somewhere in the 200, 250 grand range, but we think it will increase the value like 400,000. This is in Seattle, very expensive market. But that’s kind of the idea. But I’m calling it a live in flip, but I don’t know if we’ll actually sell it after two years. We might live in it for longer, but we’ll see. But we’re going to do a value add to it.

Amanda:
Yeah, I love that. And I think a lot of clients, I mean a lot of newer investors think that primary home investment strategies are for people who are just starting out in real estate, but I think people will be shocked to know how many of our clients that are doing very large deals also try to optimize their primary home a hundred percent to the nth degree. So I love that.

Dave:
Yeah. The other place we were considering buying was a house hack. It was like an up down duplex, and we were going to rent out the bottom basement. Personally, my dream home is like a primary that has an A DU above a garage that I could rent out. That would be the perfect situation. But Henry and I actually just did a show about this yesterday. We recorded it talking about how at every phase of your investing career, thinking about your primary residence as an investment makes sense. You don’t have to for your lifestyle, but there are always things you can do to make your primary home a money maker for you if you’re willing to make what I think are pretty small sacrifices to get those gains.

Amanda:
And the tax benefits are just typically pretty amazing when we’re talking about primary homes. Absolutely.

Dave:
Well, Amanda, thank you so much as always for being here. We really appreciate it.

Amanda:
Yeah, thanks for having me.

Dave:
And if you want to learn more from Amanda, you should go check out her two books that she’s written. You can get them on biggerpockets.com or you can always find them on Amazon. And I’m happy to say Amanda will be back at BP Con this year speaking and leading a tax workshop. As she always does, BP Con tickets are now available. Early bird tickets are for sale to the cheapest they will ever be. So if you want to get in there and get some hands-on advice from Amanda and her husband Matt, come to BP Con in Orlando this year, biggerpockets.com/conference. And if you to hear the episode I was just talking about with Henry and I talking about primary residents, it’s episode 1236. It came out on February 6th. Go check that out. Thanks again, Amanda, and thank you all so much for listening to this episode of the BiggerPockets podcast. We’ll see you next time.

Looking for an affordable, cash-flowing market earmarked for major development and a projected population and economic surge? Grand Rapids, Michigan, could fit the bill.

Among the new projects planned in a billion-dollar development, the Transformational Brownfield Plan in the Grand Rapids Riverfront area, is the construction of a new soccer stadium, amphitheater, apartment building, and supportive infrastructure, Michigan Public, an NPR station, reported when the project was announced in 2024.

In late 2025, another development was announced: the seven-acre Fulton & Market riverfront plan, led by Magellan Development and local partners, costing $795 million, backed by the Michigan Strategic Fund, and including multiple new housing projects.

“This corridor has long been a vital part of the community, home to so many people and businesses that make Grand Rapids special,” Winnie Brinks (D-Grand Rapids) said in a statement. “It’s great to see them finally getting the attention and investment they deserve.”?

The Michigan Economic Development Corporation reports that the development will add roughly 630-735 new housing units, including three new towers, with tax-capture incentives. Magellan president J.R. Berger called the Transformational Brownfield Plan “a cornerstone of the Fulton and Market development” that unlocks the ability “to transform riverfront parking into a vibrant ecosystem of residential, restaurant, office, retail, hospitality, and public space that connects neighborhoods and further energizes downtown Grand Rapids riverfront.”

The Appeal to Investors

Those unbeatable Midwest price tags, coupled with economic development, have made the chilly Great Lakes area and beyond a hotbed for investors in recent years. Below the hulking skyline cranes and beyond the hype of the Midwest, Grand Rapids is anchored by some sturdy business fundamentals.

According to regional economic development group The Right Place, Greater Grand Rapids’ cost of living is about 8% below the national average, even as the area experienced 6.1% population growth over the last 10 years and a 9% increase year over year in residential building permits in 2024, which occurred in conjunction with burgeoning healthcare and tech industries.

The Stats

In a positive sign for investing, the Grand Rapids area is predicted to enjoy a moderate but steady price appreciation rather than an explosive boom and all the frenzy that comes with it. A housing trends analysis from Redfin noted that as of January 2026, the median sale price in the city was about $282,000. That marked a roughly 4.4% increase from last year, with the price per square foot up 5%, and homes sold in a brisk 33 days, signaling a price-sensitive buying public, but overall demand remains solid.

Realtor.com named Grand Rapids as one of its “refuge markets,” where buyers are migrating from larger, more expensive metros in search of affordability, value, and stability.

“Our 2026 top housing markets offer better value than nearby high-cost hubs, yet steady demand and persistent inventory shortages keep prices moving upward,” Danielle Hale, chief economist at Realtor.com, said in a press release. “For buyers, that can mean more competition and faster price gains. For sellers and homeowners, it signals strong demand or home price appreciation and equity gains.”

A Deeper Dive

Home prices in Grand Rapids rose a healthy 9% in 2024, preceded by 7% in 2023 and a 32% increase overall since 2021, according to Grand Valley State University’s Seidman Business Review, drawing on data from Greater Regional Alliance of Realtors (2025) and Federal Reserve Bank of St. Louis (2025). The price increases in the area have been driven by rising employment and constrained supply, which seems set to change, as 40% of residential permits in 2024 were for multifamily construction.

The Investor’s Play

The economic push toward development, as well as toward more established healthcare and tech industries, creates a housing need. For smaller investors, development projects always create opportunities around the glossy new riverfront condos in the modest infill projects in surrounding corridors.

According to real estate company Cornerstone Home Group, the best values for investors to buy in Grand Rapids come with B-class and C-class properties, which include the biggest Grand Rapids neighborhood Creston (North Grand Rapids), as well as the West Side, Southwest/Burton Heights, and Walker, all of which should be able to be purchased between $150,000 and $300,000, per Zillow data. 

Rents and their outlooks for investors are as follows, according to Cornerstone:

• Studio, about $1,280 to $1,330 per month: Stable to modest gains
• One-bedroom, about $1,420 to $1,540: Moderate gains
• Two-bedroom, about $1,640 to $1,800: Moderate gains helped by new builds
• Three-bedroom, about $1,850 to above $2,110: Stronger gains, especially for single-family rentals

Sizable Rent Growth

Small landlords make up the main investor base in Grand Rapids (institutional investors own less than 1%), says Business Insider. Rents are up year over year from 4.1% to 4.5% as of mid-2025, according to the Cornerstone Group. This follows a statewide trend in which housing demand has increased while supply has not, leading to rent increases, according to the Mackinac Center for Public Policy.

Not helping matters have been the number of foreclosures in the state, with Michigan one of the top five states in the country for foreclosure activity as of the first half of 2025, according to ATTOM.

Final Thoughts

Grand Rapids has come a long way. It still has a way to go, however. Behind the splashy headlines of imminent development, U.S. Census statistics reveal that 16.9% of households were living in poverty, which is higher than the state average. With new construction and businesses coming to the city in the next few years, there is an ideal opportunity for astute investors to purchase low-priced rentals in pivotal areas, get them up and running, and enjoy the ride as the city takes flight.