Real Estate Professional Status - What It Takes
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- Опубликовано: 28 сен 2024
- Today we are going to talk about REPS and what it takes to have Real Estate Professional Status!
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Clint Coons, Esq. is one of the founding partners of Anderson Law Group, Clint has grown his legal and tax firm to over 400 employees by assisting real estate investors with creating and implementing solid entity structuring plans. His success in these regards is in large part due to his personal investing experience. A successful attorney, real estate investor, and speaker, Clint has used his innovative and dynamic strategies coupled with knowledge borne from experience to help thousands of people save millions of dollars and build real wealth.
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The information provided in this video should not be construed or relied on as legal advice for any specific fact or circumstance. Its content was prepared by Anderson Business Advisors with its main office at 3225 McLeod Drive Suite 100 Las Vegas, Nevada 89121. This video is designed for entertainment and information purposes only. Viewing this video does not create an attorney-client relationship with Anderson Business Advisors or any of its lawyers. You should not act or rely on any of the information contained herein without seeking professional legal advice.
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It is unbelievably generous of you to make these videos and respond to people.
Thanks for watching
@@ClintCoons My wife is looking to qualify as real estate professional. We’re looking into 20 properties. Someone else finds the property, remodels it, finds the tenant, collects rent, etc. Can she log her property-specific hours re: analyzing profitability, doing weekly remodeling progress and decision making calls, negotiating deals and financing, traveling to check on her properties, cashing Ana writing checks, doing bookkeeping, etc., while someone else does the rest?
@@AbrahamIGuerrero Wow - interesting scenario. I would say this is a toss-up. The time spent researching and buying the property should count (only the properties you purchase). I also would count the decision-making calls, working with contractors, etc.. I think the time running the numbers/profitability if they represent a considerable portion of the time would not work because this is investor activity. I think its worth a shot.
@@ClintCoons Awesome, man. Thanks a million and a half! I’m extremely thankful for your help to all of us here.
so clearly put. Best explanation so far. Thank you.
Thanks!
Thanks
Does obtaining a real estate license qualify for IRS professional status hours?
Thank you!
Hi Clint, I want to qualify for REPS but I've seen videos with conflicting information about which hours qualify for the 750. I own and self manage several rental properties, no property manager. My properties are about 4 hours from my home. Can I include travel time to and from my properties, meeting with my real estate agent, contractors, etc in my 750 hours? How about time spent on bookkeeping, education, or researching new properties in my established market? Some videos say that "investor level" hours don't count. I don't have another job so I'm not worried about the 50% rule.
Yes the travel time counts provided there was a valid reason for it. The other stuff can be counted provided it is not excessive. For example assume you spent 600 hours on managing 100 on travel and 50 on bookkeeping, education and research you will probably qualify.
wow Clint, that might save my family some money but i gotta ask you first.
I was mainly staying home dad but did a little handy work around town while the kids were in school. I did not have a LLC or any legal entity at all (friends mainly)
Back in Sept. of 2022 we decided to move out of state and started panning for the end of the school year (june-july following year). That being said since Jan 1st this year i put a lot of work (with my own 2 hands) on the primary residence to bring it up to date and improve in order to max out our rent capitalization. I put more than 750 hours in the first 6 months of 2023 before we moved away and rent it out starting July. Does my situation qualifies my for real estate professional in order to use that status against my spouse's income ?
If so i need to talk to you more about it !
Great scenario and it falls into the gray area. I would suggest you consider making the election. Further be prepared to show a log of your time if audited.
Does travel time to the properties you own out of state count if you're checking your properties we manage and do inspections yourself?
Restrictions but I don’t know them
Does the time you invest in education related to REI count? Courses, online material, books? Thanks
It needs to be evaluated in the overall context of your investing to determine if this time will count. It could in limited circumstances.
what if someone has 1 out of 4 properties managed by the manager, the rest is managed by the owner? will it meet the material participation requirement?
If you meet the tests the answer is yes (and you make an aggregation election)
So regarding the 50% rule, if i work 2080hrs in 2023 at my W2 job but then log that i worked 1046hrs for my real estate management and activities, would it mean i qualify
Most likely not because you have a full time profession.
You don’t work that many hours
Does commercial property count as real estate .
yes
Indiana. I tried to create a partnership LLC with another LLC as the member. Not allowed, has to be a person. Would love to hear some feed back.
James who told you that? IN does not ask for the members information on the filing.
@@ClintCoons This is on the in.gov site.
Indiana law prohibits naming a business as a Governing Person. Your filing will be rejected if a business name is entered.
It only allows a person to be named as the governing person. There was nowhere to add my LLC as a member of this partnership LLC.
I may be confusing Member and Governing Person, but i went through the entire set up and there was no opportunity to add my LLC as a member of the partnership LLC.
@@jamesbuie5017 James the governing person is listed on the annual report and it is optional for LLCs. You would not list your holding company on the annual report. Further, IN does not ask for the LLC's member information when you file to set up your LLC.
Do you have to have a Real Estate liscence?
Not at all
If I started a property management business, and managed mine and other people’s properties would that count as a real estate professional? What are some business people can start that would meet this requirements without a license? Thank you
Mr. Clint you're still knocking it out the park 👏 easier said then done , this along with most of your videos are disclaimers Case in point ! And yes I'AM A LOYAL 🙏 GRATEFUL SUBSCRIBER TO YOUR CHANNEL !!🤝
I appreciate that
I have done a lot of research on the this topic. You have put it so simply! Wish I would have found your videos last year!! Will be watching all of them and subscribing from this point on.
Is there a downside to claiming RE professional? We made 210k in 2021 from pension, workman’s comp, W2 and investment distributions. We have been told that we pass the income requirement for claiming passive losses but our CPA is concerned that claiming RE Prof will come back to bite us in the future if we show a profit. I have never heard a downside and was hoping to get some feedback from you! Thanks so much for your time!
downside would be if you sold a property at a loss the loss could not be used until you end up selling all of your real estate because of the aggregation election to treat all of your investing activity as one activity. What is the likelihood you will find yourself in a situation when you are selling real estate at a loss?
@@ClintCoons thank you so much for your response! The chance is probably slim to none. We have anywhere from $40-$100,000 in equity in all properties mostly due to sweat equity. I don’t for see selling in the next 10 years at least.
Our CPA mentioned that since we make 210k in 2021 from stocks/w2/pension we cannot claim passive deductions. However if we claim real estate professional it may bite us in the future if we report a profit.
We usually spend 75k average per year on renovations over the last 4 years.
I have a meeting scheduled to discuss but I am very confused.
@@andreacrooks8418 I do not see how claiming REPS will bite you in the arse. :). Ask him to explain his reasoning then let me know.
Thank you. If I acquire the property in the middle of the year, can the 750 hour rule be prorated?
Unfortunately no.
If my wife and I buy a neighboring house and rent it to my son's family, and my wife manages the property would that work?
She will need to put in 750 hours in a real estate activity and not hold a full-time job in a non-real estate-related field. If she meets these criteria, then she will need to spend 100 hours a year on the property.
@@ClintCoons She would be there all the time, mostly checking on the pool temperature.
So (as long as one of my LLC's owns the property) I could work for my prop management LLC Monday through Friday for 4hrs & that would qualify for Rep status correct? OR even if my Wife worked the 4hrs at the PM company while I was out working a W2 job spraying for cockroaches - we'd still qualify right? 😅
If she does not have another full time job and meets the test the answer is yes.
Great information...
Shalom Clint hopefully you can help me out with a situation. My god mother passed away and then a few months later my god sister passed away. When i was a little boy my god mother gave me the key to the house. There was no Will,
as far as I know and the house was paid off. I have neighbors that hate me because I took possession of the house. I am not currently employed. Is there any advice you can give me, can i speak to you? If not its ok, keep putting them Great videos out ✊🏿
Shalom
Without a will leaving you the house the property will be distributed to her heirs if a probate is opened. If a probate is not opened and no one challenges your ownership, you live in the property for 10 years then you can make a claim via adverse possession.
I work for a commercial real estate brokerage as a licensed leasing agent/manager. I make w2 income from this job but also have rental property. Would this be considered for REP status?
You would meet the REPS test but you still need to spend 500 hours on your investment properties.
Hi Clint, thanks for this video! If my spouse is a high earner (he’s a physician) and I meet the requirements for a real estate professional, can we use depreciation losses to offset his W-2 income? We are married and file jointly.
Yes you can.
Hi Clint I love your videos I am in the process of creating my llc and I am needing a register agent, do you offer those services/ how much they are/ thanks by the way I liked the anonymous way to create it
Yes we do. $150
As a real estate professional that materially participate in reals estate, it is their only job, should this person use schedule E or schedule C to report rental income?
Typically E
Thank you sir...."What the HEL!!!" Love it.
Matthew Steed
Thanks for watching.
That is the best explanation of REPS that I have heard. Thanks
Glad it was helpful!
I am sure you are not a Real Estate Professional then. Am I right?
Correct
Wasn't going to hit the like button until he said "what the hell!?" Haha
👍😂
For taxes, I’ve read that the property income generated with professional status would no longer be passive(#3 on your video) and would need to be reported on schedule C which is subject to self-employment tax vs. on schedule E it was all passive and not subject to self-employment tax. Is this true? Thanks!
It all flows on to Sch E. Professional status changes your losses to non-passive but not active (Sch c)
@@ClintCoons Thanks for the response Clint! Really appreciated!
Hello Clint! Thank you for this explanation. I am a full time realtor, no question about that. I have a rental unit that I self manage. Not sure if I devote 100 hours of time towards that rental though because it's in another City. If I travel to the location to check in on how things are going, how much reasonable "time" can I log for this trip?
You should keep a mileage log and actual travel time.
That didn’t answer the question. The rules are poorly defined -
Gee, the 750 hours is boloney.
That is only 2 days a week, 14.42 hours a week.
That's is a lot less than 50 % of my time.🙃 So is basically impossible unless you eat and sleep REI.
If married and your wife is the RP and you file jointly....
How is that impossible???? That’s extremely reasonable.
It means your working time.
What if I meet the test as a real estate pro
But my wife does not
We are married filling jointly.
Can my depreciation losses offset our total income combined ?
Yes. Only one spouse needs to qualify. And by the way, for the hours test for REPS, one spouse must entirely qualify using just their own hours. But for the material participation tests, hours from both spouses can be added together to qualify.