Ashley:
When you buy your first rental, everyone gives you the same advice, play it safe, get a long-term tenant and collect the rent every month. But that same house run as an Airbnb can make two or three times the cashflow. So which one should your first deal actually be?

Tony:
And today, me and Ashley are going to settle it and we’re not pulling our highlight reel. We each grabbed one real property from our portfolio, mine is short-term, actually is a long-term, and we’re putting them head to head on three things that decide this for a rookie, money, the work, and the risk.

Ashley:
This is the Real Estate Rookie Podcast. I’m Ashley Kehr.

Tony:
And I’m Tony J. Robinson. And if my voice sounds a little bit different today, it’s because I’m overcoming a cold.

Ashley:
Oh, you guys don’t listen to when we just got back from Vegas, pool party.

Tony:
I did just come back from Vegas, but I also am overcoming a cold, which maybe –

Ashley:
I think they call it laryngitis from too much yelling and partying, Tony.

Tony:
Maybe a little bit of both, but it’s still me. I’m still here. Still Tony. So yeah, Ash and I today, we just want to talk about the difference between short-term and long-term. It’s a question that a lot of rookie investors have, and each of us just wants to share our experience of what this looks like. And we both intentionally tried to pick a deal that wasn’t a bad deal because obviously we both had deals that we didn’t enjoy or our best deals or home runs that maybe someone wouldn’t be able to replicate. We just tried to pick these kind of middle of the road deals that are super attainable and reasonable for all of our Ricky audience who’s listening. So before Ashley and I really started arguing about any of this, we just want to get some real numbers on the table. So I’ll start with one of my properties.
This is a tiny home that we own in Joshua Tree in California. We bought this a few years ago. I want to say maybe two and a half years ago or maybe three years ago at this point. But we’ve had it for a couple of years now. It’s 390 square feet, so it’s like a very small property. We bought it for just over $300,000. Our all – in costs for down payment, closing costs, we got some seller credits in there as well. And furnishing the place was about 50,000 bucks, something 55, somewhere in that ballpark, I want to say. And this deal for all the 2025 net, net, net cashflow was just under $12,000 for the year. So we’re looking about, for the cash we put into it, about a 20% cash on cash return. Now obviously over the years that we’ve owned it, we’ve had to replace things and add things, but all that’s included in those operating expenses.
But for 2025, we netted on this deal just under 12,000 bucks. So again, not my best deal, not my worst deal, just a very middle of the pack, very reasonable purchase price for a lot of rookies that are listening, 300,000 bucks. 10% down payment that’s 30,000 bucks actually acquired this property. So very reasonable first deal. Ash, what about you? What property’s going head-to-head with my 390 square foot property in Joshua Tree?

Ashley:
Yeah, so this is a duplex that I purchased in a rural small town outside of Buffalo, New York. And I bought it for 37,000, which yes, I bought this in I think 2018. So you’re probably going to pay more, but this was a cheaper duplex. Part of the reason was because it’s in a small town. It wasn’t actually a gray area. I was kind of known for having a lot of drugs and some crime in the town, but it was great cashflow. So bought the property for 37,000. That’s what it was listed for. And we ended up going to a bank and the bank offered us the financing on it. At first, we didn’t know how we were going to pay for it. And so we offered or the bank offered to us to do a 90-day unsecured loan. So already this was a deal that was getting interesting for us and we purchased it with cash from the bank and then we immediately went to the bank and refinanced with them and ended up appraising for $55,000.
And all we had done was put a refrigerator in there for about $800. So when we were able to refinance, since it appraised for so much, we actually got to refinance for more than we bought it for, also pay for our fridge from that money. And we each, and my partner and I got about $2,000 to walk away with and own the property. So the cashflow wasn’t super great. We’re not talking thousand dollars a month here, but it was enough that we were $0 into this deal and walked away with $2,000 each. But this property, and we’ll talk about this more, wasn’t a home run deal for sure. And it was just on the MLS, so that’s how we found it and financed

Tony:
It. Got it. And after you refinanced Ash, do you remember what the ballpark cashflow was?

Ashley:
I think it was around $200 a month, I think, which I think is pretty good for just a $37,000 investment. Plus we didn’t use any of our own money. So it was a very standard typical deal. It wasn’t a loser, but also wasn’t a grand slam per se.

Tony:
So Ash, my deal cashflow is again, about 12,000 bucks a year on this tiny house in Joshua Tree. Yours is a couple hundred bucks, but you got into it with literally no money left in the deal. So for a rookie that’s looking at both of those two paths, what should they be thinking about as they try and make that decision?

Ashley:
Yeah, so I think this is a great example and question to ask about any deal you’re looking at because it is so hard to compare somebody’s cashflow to somebody else’s. Most of the time it’s not apples to apples. So Tony, you look at Tony’s deal and be like, “Wow, 11 grand is way better than a couple thousand dollars that Ashley’s making off this. I want Tony’s deal. He’s making a lot more money.” But as we learned, we both put different amounts of money into the deal. So Tony has money sitting in there that he’s not going to get back out right away. I have no money sitting in the deal and I’m making some money. So there’s things that you have to compare for yourself as first of all, can you afford to leave money into a deal and let it sit there? Do you need to do the cash out refinance to pull that money back out because you need to pay off a hard money lender or a private money lender?
Or that was literally your life savings and you need to put that back in your savings to have some comfort and security for your family. But really you need to look at the cash on cash return. So this is comparing how much you invest into the deal compared to how much you actually make off the deal. And this can actually give you a better comparison when you find out how much money somebody invested into that. You go on Instagram and you look and se, oh, Tony just posted he makes 10 grand a month on this property in cashflow. How come Ashley doesn’t make that on her properties? She must suck as an investor. What we don’t see behind the scenes is that some investors pay all cash and they don’t have any mortgage payment and that’s why their cashflow is so high where if I’m going and I’m taking a loan that’s 80% of the purchase price, I have that mortgage payment so some of my cashflow is going towards that, but I also have less money tied up in the deal.
So you have to go back to the very, very beginning and compare what is more important to you and why are you investing in real estate in the first place? Do you have the money to leave into the deal? Or maybe you have money that you continuously invest in the stock market and let’s sit in the stock market and now you’re deciding you want it to sit in equity in a property or maybe you don’t have a ton of cash. So to propel yourself and get started, you need to use as little money as possible with still being cautious of not over-leveraging yourself. Or maybe you don’t need the cashflow now and this is an appreciation play for you for down the road that you want the property to appreciate. So I think looking at the cash on cash return to really compare and also what do you need to get out of the deal to make it work for the life that you’re trying to build and what your goals are out of real estate investing are more important than just comparing the cashflow.

Tony:
100%. And I think that takes us into the next big point is just the actual cash that it takes to get into either a long-term versus a short-term. And I think one of the biggest mistakes that new short-term rental investors make, aside from picking a city just because they like to vacation there, I think that’s probably the biggest mistake I see new investors make. But the second biggest mistake I see people make is that they take all of their available capital and they use it on the acquisition of the property. So their down payment, their closing cost. And then when it comes time to actually set up the Airbnb and turn it into a short-term rental, they’re pinching pennies and doing everything super DIY. And then they’re upset that the property doesn’t perform, but it’s because they didn’t invest the necessary capital to actually get the deal up and running.
So I think that is one of the biggest decision points you have to make is how much capital do I have access to? And if I do want to buy a short-term rental, do I have enough to both acquire the property and effectively set it up to compete at a high level within that market? And if not, if your budget is maybe more limited, then maybe going after a long-term rental does make more sense. Even if the cashflow is maybe reduced, maybe it does make more sense because all you have to worry about with a traditional long-term rental is the acquisition side. And obviously with both these properties, there’s maybe some minor repairs and maintenance we’ll have to do as we’re getting into the deal, but assuming for the most part that we’re talking about relatively turnkey properties, then most of your work as a long-term rental stops once you actually acquire the property in terms of cash you have to spend.
So it’s just an important point to consider. So if you’ve got $30,000 saved up, then maybe that does work for you to go into a less expensive market as a long-term rental. But for me, there’s probably no market where just $30,000 is enough to go and put forward a really strong short-term rental. I typically tell folks that whatever your pile of money is, however big it is, ideally you don’t want to spend more than 40, at most, maybe 50% of that on the actual acquisition. That way the other half or 60% is leftover for the actual setup. So for example, if you have $100,000 to go invest, I’d want you to spend maybe 40,000 of that acquiring the property. So that’s like a $350,000 property and a 10% down payment with another two or 3% in closing costs. You’re somewhere around $40,000 to acquire the place and then you can spend the other $60,000 on the actual setup of the property.
So just having those numbers in the back of your mind is important as you try and make that distinction between how much cash do I have and which between short-term and long-term makes more sense.

Ashley:
Along with that, I also think in some circumstances that it’s easier to actually get financing on long-term rentals than short-term rentals. And I say that just because long-term rentals have been more popular, have been more established and have more proof of consistent income by showing a lease agreement that this property has had consistent rent every single month coming into the property. Where on the short-term rental side it is taken, like Tony, even think about when you first started how different financing for short-term rentals has even evolved over the last several years, but still you are at such an advantage going to a bank and getting financing on a long-term rental. I just talked to a credit union the other day and they don’t do any kind of financing on short-term rentals at all. It’s just not something that it’s in their wheelhouse or they’re willing to adapt as this, not that short-term rentals are new, but I would say the banking industry, most people who are on VRBO and rented out their homes and things like that probably just most commonly got second home loans on them to rent them out.
But things have definitely changed a lot as far as rules and regulations on that and everything. But I think as far as when you have the capital and financing and funding a deal, it is easier to fund a long-term rental than a short-term rental to start out. All

Tony:
Right, so the money makes short-term rentals kind of look like an easy winner, but there’s one number that never shows up in the spreadsheets and it’s the one that makes most people quit and that’s your time. So we’ll get into that right after a quick word from our show sponsors. All right, so on paper, the money says that Airbnbs kind of make more sense, but let’s talk about what it actually costs you to earn that money because this is where these two strategies start looking nothing alike. All right, so I just want to paint the picture of what running an Airbnb typically looks like. Now first I will say there are lots of tools and automation that allow you to automate a lot of what it means to be an Airbnb host. And generally speaking, if you’ve got one or two Airbnbs and you’ve got all the tools set up correctly, an hour or two a week on average is pretty reasonable for you to spend managing your short-term rental.
Some of that’s going to go to the actual guest, communicating with your guests, answering their questions. Some of that’s going to go toward the back of house operation. So dealing with maintenance tasks, managing your pricing. And then some of that’s going to go toward maybe admin type related things that you’re probably going to do as a real estate investor regardless. But the front of house and the back of house are the two things that are probably more so unique to short-term rentals, but it is definitely not passive. And I try and communicate that to anyone who’s thinking about buying an Airbnb is that if you want a truly passive income, don’t buy a short-term rental. If you want a truly passive investment, you need to go invest in someone else’s syndication. You need to go buy a REIT, you need to be maybe a private money lender.
Those are really the only avenues that are truly, truly passive where you’re just getting mailbox money on a regular basis in real estate investing. But on the spectrum of passiveness, short-term rentals are probably on the less passive side. Now that said, I know a lot of short-term rental investors, I’ve coached a lot of short-term rental investors who are able to do this while working full-time jobs, while having family commitments, while having commitments to their community, to their church, whatever it may be, who are still able to successfully manage the short-term rental without it turning into a full-time job. But big caveat here is that it is still more work probably than a traditional long-term rental. And I’ll just give you guys a really quick example of some things that have happened to us this past week. We had a pool pump go out at one of our properties and in the middle of summer, people want to use a pool.
So that’s not necessarily something that we can drag our feet on and people book our properties oftentimes because we have pools in the middle of the summer and it’s super house. We got to jump on that and make it happen. Memorial Day, we had a bunch of cleaners call off and it’s one of the biggest weekends of the year. So we’re scrambling to find backup cleaners to make sure that we can get coverage across some properties. So some weeks are busier than others. Some weeks are lighter than others, but again, I’d say about an hour or two on average across a normal week is pretty reasonable if you’ve got a small portfolio. What about on the long-term rental side, Ash? Wha kind of time investment should people be thinking about as they’re doing this? Yeah,

Ashley:
A lot of stuff for long-term rentals. Say you have everything rented out, you can spend a couple hours a week or even sometimes just a couple hours a month as you set one day aside and this is when you’re going to see if there’s any lease renewals you need to do. Confirm everybody paid their rent. There’s little things that may pop up on the daily such as a maintenance request or communication with a tenant or clarification on something. When you have a vacancy, coordinating contractors for the turnover. In New York State, you have to offer a tenant a pre-inspection when they’re moving out. So two weeks before their move out date, you go in, tell them all the things they would be charged for and they get two weeks to correct it. Then when they move out, you do another inspection. And then I think it’s 14 days within 14 days you have to mail back their security deposit to them.
So definitely when there is a turnover, there is a lot more management and activity you need to do, but definitely way less if you just have tenants in place, there’s way less to do than a short-term rental. My short-term rentals, the same questions get asked over and over again, which even if we put them in our guidebook, even if we have a sign in there, it’s still new people coming into a property or even before they even get to the property asking when we had our A – frame, when we had the pictures taken, we hadn’t put a TV in there yet. I cannot tell you how many people are concerned about going to a cabin in the woods and there not being a TV and confirming that there is a TV in there. But there is, but it’s not in the actual expensive, nice listing photos we got.
So we added that in specifically to our description. Yes, there is a TV, but we’ll still get the question. So luckily Hospitable has an AI agent that actually responds to all these, so it definitely has limited for the short-term rentals. For the long-term rentals, I don’t have any kind of AI yet that responds to my tenants for the long-term rentals, but I do have a maintenance AI. So when someone submits a maintenance request, the AI actually chats with them to get more information. I literally would get a text that says water leak or faucet leak. That would be the maintenance request. Is it the bathroom? Is it the kitchen? Is it gushing water? Is it just a little tiny drip? So the AI maintenance follows up with that. So property management has definitely come a long way, but even if you have property management in place, there’s still asset management.
You still have to quote out your insurance every year if you want to save money, you still have to do your lease renewals. There’s still a lot you have to do to actively manage, but it is less work, I would say, than the short-term rentals. And

Tony:
This is my hot take where I really do think in the next five to 10 years probably, a lot of the property management is probably going to be done by AI anyway. From the things I’ve seen in the last couple of years and the advancements that I’ve seen in the AI space specifically as it relates to property management, I wouldn’t be surprised if every single one of us has a personal AI agent managing at least our kind of client-facing, guest-facing, tenant-facing communication and maintenance requests in the next five to 10 years. So maybe this becomes a moot point anyway about the time that it takes because we’re going to have agents doing all this for us anyway. All right. But for a rookie who still has a full-time job, which one of these honestly fits into the life that’s maybe already full? So the short-term or do long-term?
Guys, again, I’ll say that as a short-term rental operator, we’ve got 26 single family homes in the portfolio right now that are active. We’ve got a 13-room hotel. And if I were to look across all the guests who are checking out, we’re recording this on a Wednesday. If I were to look at all the guests who checked out today on this Wednesday, I’d say maybe, I don’t know, say we have 15 people checking out. I maybe had to actually talk to two or three of those people. And the other 12, 13, they’re just going back and forth with all of the automations that we set up. And then they check out and they leave a five-star review and they talk about how communicative Tony and his team were. So it is a very common thing for us to not actually have to communicate to a guest.
Now we have set our properties up the right way. We invested a lot of time to make sure that guests have the right information when they need it inside the property through messages, guidebooks, QR codes, all those different things. So we’ve really optimized a lot of what our properties can do. So I think that’s why we’re able to do that. But if you have a full-time job, it is 100% possible assuming you set it up the right way to do this while working full-time. Now I will say the people who really hate being short-term rental hosts and who are just banging their heads against the wall when it comes to management are the people who haven’t spent enough time automating and building the proper systems. But honestly, I think that’s true for any form of investing. And Ash, I’m sure you’d probably echo that as well as even as a long-term rental investor, if you’re not spending the time to actually build the right systems and processes, that can also turn easily into a full-time job as well.

Ashley:
I think really the biggest thing you need to do is to have a boots on the ground, especially if you are long distance, but even if you live next door to your property, but you’re working full-time, or maybe you’re not even working full-time, but you’re on a vacation or something. But having either a maintenance person, a cleaner, the batteries are about to die in your code lock and need to be changed out. Having somebody that can run miscellaneous stuff and do that for you I think has been the big game changer for me as far as making my life easier and also because software can only do so much, but if you truly want to not have to worry and panic because you have a meeting that you have to be on, but your guest is saying that the lock isn’t working and something broke or they don’t…
I had one time somebody complained because there was no cookie pan, the cookies in there, no cookie sheet or whatever. I don’t know if somebody stole it or what happened to it, but that we were able to just Instacart them one. So I think just thinking of all the things, what would actually disrupt your W-2 job and how can you already have a plan in place to take care of that? And the easiest thing is you can find somebody super trustworthy that’s going to go over there. Even if they’re not somebody that can fix the problem, they’re just somebody who can go there, show up, show that you’re being proactive. This is especially good for long-term rentals. Show your tenant, you hear them, you’re listening, this is an issue, and you have somebody that’s coming over right now to look at it to help them take care of it, and then they can go and either report back to you what they think should be done or go ahead and just call the plumber, whatever needs to be done.
So I think having that boots on the ground person is really important, but putting that plan in place as to what happens if I’m not available, how does that process work and who do I turn to? So short-term earns more, but can eat into more of your life. But before you pick a side, there is a silver lining that can sink either bet overnight and one more tax move that can hand a high earner a giant check that is next. We’ll be right back.
All right, so we’ve covered the money and the work. Now the part nobody likes to think about until it happens. What can go wrong and how a rookie should actually choose? So let’s go over the nightmares, Tony. What is the risk that keeps a short-term rental investor up at night?

Tony:
Yeah, I think I’ll talk about the risk that people assume keeps me up at night, that actually doesn’t a whole lot. And honestly, Ashley, the two things I hear from aspiring short-term rental investors that kind of stops them. One is the remote management, which we just talked about. It’s like, “Hey, how do I manage this thing remotely?” But again, my first year Airbnb was 3000 miles away from our house and we figured it out. Most of the people that I work with also invest remotely as well. So remote management is one, but we talked about how to optimize most of that. But the other big thing is the regulatory risk and the regulatory landscape. And people are like, “Well, what happens if they ban short-term rentals?” It’s true that the regulatory landscape for short-term rentals has changed a ton, especially post – COVID, but that’s only because it’s still such a new industry that a lot of cities just simply hadn’t figured out how they were going to handle short-term rentals.
So a lot of the big headlines we see were people just or cities or local jurisdictions, municipalities reacting to the sudden surge in short-term rentals in their neighborhood. So the way that I approach it guys, and the way that I try and reduce the regulatory risk is in one of two ways. Number one is my first option is to choose a market that is economically dependent on the revenue generated by short-term rentals. And what that means in practice is if I go into a city and I do not see a large business headquarters or multiple business headquarters, or I don’t see a large university, or I don’t see a large international airport or shipping ports or all these different things, lots of sports teams, these things that drive inherently a lot of revenue. And really the only thing that’s driving that revenue are people coming in booking a short-term rental and then spending money at the local businesses and seeing some of the local attractions.
That is a sign to me that there’s strong economic dependence on that city, on the revenue generated by short-term rentals. I was on a call for one of the cities I invest in and they were just giving an update about the city that they want all the short-term rental operators to be on. And they were going through the city’s revenue generators and the number one highest revenue generator for the city was the transient occupancy taxes being paid by short-term rental guests and operators. That was their single largest line item. Their second largest line item was property taxes, which you have to assume was probably also a good percentage of those were short-term rental owners as well. And then the third line item was sales tax from local businesses. And you got to imagine the people walking into those shops and spending money in those local businesses are probably the majority short-term rental guests as well.
So short-term rentals were very clearly the number one revenue driver and had a big impact on number two and number three. That is a city that has a very strong economic incentive to still regulate short-term rentals so it’s safe and respectful to the neighborhood, but would probably never outright ban short-term rentals because of the economic dependence that it has. So that is the thing that I focus on when I talk about reducing the regulatory risk. And if I can’t get that, if I can’t find a market that is heavily economically dependent on short-term rentals, well, then I want to make sure that maybe I do have a backup option of something like a midterm or a long-term for that market, but that’s how I go about reducing the risk for myself. Ashley, what about you? What are some of the risks on the long-term side?

Ashley:
Yeah, I would say that mine has also significantly changed over the years. When I bought my first property, I was scared of being sued. I was scared of the roof flying off and not being able to pay for a new roof, having the money. And I think learning about having proper insurance in place has really eased my mind a lot on the liability things. Also having a really good attorney and then also having a cushiony reserves account where if a new roof does need to replace, well, that’s why I invested in real estate to keep up on my properties and maintain them so that one day I can exit and there’ll be a great property to sell. So I’ve had to get really comfortable with spending money on my properties and when things happen and that’s just the course of business. So I’d have to say right now the biggest nightmare that I have is probably not being able to figure out a maintenance request and the tenant stopped paying and the tenant moving out because we can’t figure out what the maintenance issue is.
So right now the good part I would say about having a lot of units is that if somebody does stop paying, your other unit’s cashflow can cover that payment. So unless a lot of people stop paying rent, that is a huge benefit that I used to have that fear that if somebody stopped paying now the second thing besides not being able to problem solve or figure out a solution for a property and it just sitting because we can’t figure out this maintenance issue, the second thing is a slow eviction due to New York state laws. And I’ve gone through one of them where it took over a year to evict this person. And then even after that we went to small claims court and it was just a long time and a lot of legal fees. And it was just like that was actually something that really kept me up at night.
And I had to keep reminding myself that this property had performed so well. This was one bump in the road and I’ve had a new tenant in there for over a year now and it’s been wonderful again and great again and I just had to frame my mindset. But that is a huge fear of having to go through that process again of just having to deal with someone and get them out of my property I would say is the biggest risk right now to me.

Tony:
Well, Ash, I want to pull my Trump card here, not related to the current president, but in the old sense, my Trump card and explain why I think for high income earning individuals, short-term rentals right now are probably the best asset class for those folks specifically to invest into because of the tax benefits associated with short-term rentals.

Ashley:
I mean, technically I guess you say the Trump card was a Trump card because Trump did give –

Tony:
Bring it back.
He did bring back 100 bonus depreciation. I guess a good word to say. Could work both ways, but Ash and I are not good in political or advocating for one side or the other, but that is the current state right now. But one of the biggest benefits of investing in real estate are the tax benefits associated with buying real estate and both short-term rentals and long-term rentals have the ability to produce these big paper losses where basically even though the property’s producing cashflow, apreciating in value, the real estate or the IRS, I’m sorry, allows us to depreciate real estate because eventually you have to replace things, like I actually said, the roof, your flooring, your appliances, and all these different parts of the home need to be replaced over time. So even as the value goes up, you as a homeowner still have to maintain that property and certain things wear and tear over time.
So because of that, the IRS allows us to depreciate real estate. And when you depreciate real estate, you get this big tax benefit. And I’m not a CPA, actually not a CPA, go talk to your CPA and I’ll try and keep this as quick and efficient as possible. But whether it’s a short-term rental or a long-term rental, you can do what’s called a cost segregation study, which basically is like a fancy word for an engineering study that allows you to accelerate the depreciation of real estate. If it’s traditional single family home, the usual depreciation schedule, Ash, check me if I’m wrong here, it’s 27 and a half years I think is the normal depreciation schedule. If it’s commercial, I think it’s like 39.5 years, but 27 and a half years is the normal depreciation schedule for real estate. But with this cost segregation study, you can actually bucket different parts of the house into different depreciation schedules.
And then what Ashley and I were talking about is this thing called 100% bonus depreciation where you can front load a lot of that depreciation in year one. So basically you buy a property and the very first year that you own it, you can front load a bunch of this depreciation that otherwise would’ve taken you 27 and a half years to realize. Now the difference between short-term and long-term is that with a long-term rental, the only way that you can apply those paper losses against your other forms of active income, i.e. Your job. So if you’re a high income earning individual, let’s say you get a $50,000 tax benefit from this property that you purchased. The only way that you can take that $50,000 and apply it against your W2 income is if you qualify for what’s called rep status or real estate professional. And the bar is effectively impossible to meet if you work a full-time job because you have to show that you work more hours in your real estate than you work in your full-time job.
So if you’re working 40 hours a week, you’ve got to prove that you’re consistently working 41 hours a week in real estate, which is just not reasonable for most people. With short-term rentals, there’s something called the short-term rental tax loophole that allows you to qualify for what’s called material participation. And the bar for material participation is significantly lower than working 41 hours a week in real estate. There’s a few different ways you can do it, but one way is that you work at least 500 hours over the entire year on your short-term rental or you work at least 100 hours and no one else combined works more than that 100 hours on your property yourself. So those are typically the two paths most folks take to qualify for material participation. But once you meet that threshold, you can then take all of those paper losses from the short-term rental and apply them against your W-2 income.
And that folks is how a lot of people who are high income earning individuals are significantly reducing or sometimes even eliminating legally their tax bill through what’s called the short-term rental tax loophole. So everything else that we’ve said so far guys, and whether short-term or long-term, I think it can kind of cut either way. But I have a very strong conviction that if you’re a high income earning W-2 individual, short-term rentals have a very, very unique positioning in the eyes of the IRS that they can give you a really, really strong benefit when it comes time to file your taxes. So if you’re tired of paying big tax bills and you want to legally and ethically reduce those tax bills, buy a short-term rental.

Ashley:
Yeah. I mean, how can I debate that? Well, if you maybe are already self-employed and maybe you already show a loss on your taxes, maybe you already own property that already has depreciation on it, that you can report that you don’t have a high income W-2 that you need to offset. With long-term rentals, you can still depreciate, get the depreciation, but you can get the 100% bonus depreciation if you qualify for real estate professional status. So there is some benefit to that, but basically there’s set rules and limits as to how many hours you have to put towards real estate investing. And if you have a full-time job, it typically won’t make sense for you. And that’s why a lot of spouses take one spouse and have them quit their W-2 job and they become the real estate professional status and then they get the bonus depreciation and it actually they end up saving enough money in taxes to be able to offset what they would’ve made in their W-2 income too.
So there are still benefits still long-term rentals on the tax side of things. Okay. So you guys decide based on what we have told you, there’s no way that only short-term rentals could be perfect for everyone or no way that long-term rentals could be perfect for everyone. So you need to decide. So let us know in the comments if you’re watching on YouTube, what strategy is perfect for you and why? Because this isn’t a one size fits all for each of these strategies. These are specific to what you want out of life. And remember, that is why we get into real estate investing because we all have goals we want to reach. We all have a lifestyle that we want and real estate is supposed to help us build that. We’re not supposed to build our life around real estate. I’m Ashley, he’s Tony, and thank you guys so much for joining us today and we’ll see you on the next episode of Real Estate Rookie.
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