1031 exchanges, depreciation timing, and entity structures built for portfolios, not just a rental or two.
Rental real estate is the most tax-advantaged asset class in the code, and most portfolios still run on the defaults: 27.5-year straight-line depreciation, every property in one LLC, losses suspended because nobody qualified for Real Estate Professional Status, and a sale that triggers recapture nobody modeled.
The gap between a filed return and a planned one is usually five figures a year on a modest portfolio and six on a larger one. Cost segregation front-loads depreciation into the years you own the asset. The short-term rental rules let an active owner deduct losses against ordinary income without professional status. A 1031 exchange or an installment sale decides when the gain is taxed, and the entity structure decides who pays it.
We review the portfolio building by building, the last three returns and how you and your spouse spend your time, then write a plan that sequences acquisitions, studies and sales so each year is deliberate.
What we typically see: Every building on 27.5-year straight-line. Losses suspended as passive. A sale closed in the wrong year. One LLC holding the whole portfolio and the liability that comes with it.
Each one is modeled against your numbers and written into the blueprint with the documentation it needs.
Ten years of returns and nobody had mentioned a look-back study. The first year of planning found more than the last decade of filing.
Usually yes on anything above a few hundred thousand dollars of building basis, and on short-term rentals and multifamily in particular. The study cost is weighed against the depreciation it accelerates before we recommend one.
Not necessarily. Short-term rentals with material participation, the $25,000 active participation allowance below certain income levels, and offsetting the losses against other passive income are all on the table.
It depends on the lender, the state and the liability profile. The plan looks at entity structure alongside the tax picture rather than defaulting to one entity per door.
Recapture applies, which is why exits are planned. A 1031 exchange defers it, an installment sale spreads it, and holding through an estate can eliminate it.
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