Does my short-term rental qualify?

You may have questions about the difference between real estate professional status and material participation. There are two ways in. Real estate professional status needs 750 hours a year, plus more than half of all your working hours. Material participation in a short-term rental needs more than 100 hours, and more than anyone else. If you work in tech at 60 hours a week, spending 750 hours on a rental is daunting, and you don't have to.

Material participation takes about 100 hours a year. That's about two hours a week, or about two work weeks in a year. Your spouse's hours count, too. So it works if you live close to your rental, and it works if you live farther away and visit once or twice a year to set things up.

Say you work in tech, making $1 million a year at 65-hour weeks. Your day job pays about $300 an hour. A $500,000 cost seg deduction over 100 hours works out to about $5,000 an hour, about 17 times your day job. Now say you make $250,000 a year at 50-hour weeks. That's about $100 an hour. A smaller home with a $150,000 deduction over the same 100 hours is $1,500 an hour, 15 times your day job. Every house is different. Your numbers come from your own house.

After the first year, you can hand the day-to-day to a property manager. You keep the expense deductions and the ongoing depreciation, and you get your time back.

So when friends ask why you bother with the rental, tell them it's your escape from your day job, and it's worth 17 times more per hour. Visit unlevered.io/learn to find out more, or run your estimate today.