Today, we’re talking about a crazy hot topic in the alternative investment market right now: short-term rentals.
Here at NuView, we’ve been getting lots of people calling and asking questions about short-term rentals.
Our RS Manager, Brian Martinez has learned some important factors of these investments from his clients along the way, and the key take-away here is that you can own a short-term rental inside of your IRA.
Important Considerations For Owning Short-Term Rentals
There are a few other things you’ll want to take in consideration when owning any short-term rentals with your self-directed IRA.
The first thing to understand is that these types of investments may be subject to something called UBIT,
which means:
- Unrelated Business Income Tax
This is because owning a short-term rental is like owning a business (think of owning a hotel). But just because there is a tax on it, does not mean you can’t make great profit off of your own short-term rental.
“With proper due diligence, and a prime location, great profit can be made with short-term rentals.”
– Brian Martinez, Retail Sales Manager, NuView Trust Company
Now, you need to do your due diligence first. Make sure the Airbnb, VRBO, or whichever short-term rental you are using, is in a prime location where you are going to get consistent traffic and tenants.
This will ensure that you are going to make good returns on your investment. For example, Brian owns a short-term rental too – a condo right outside of Daytona Beach.
Then, you should double check with your county to make sure it’s even permissible to own a short-term rental. When Brian first checked with Daytona, these types of property investments were not allowed. Instead, he went just outside of the county and found a condo to use as an Airbnb, which has worked rather well so far.
In regards to upkeep, you should consider hiring a property management team, because you’re not allowed to do the cleaning yourself.
This makes a property management team a good investment in addition to the short-term rental(s). Having that team will take a lot of stress off you in maintaining the property and keeping up with the tenants.
At this point, all you’ll have to focus on is that cash flow coming in and getting deposited right back into your IRA.
Don’t Worry & Just Ask Questions
Brian sees a lot of clients asking many questions about short-term rentals, and his advice is:
- Don’t be afraid of UBIT
- Do your due diligence
- Make sure you have great amenities
- Consider hiring a property management team.
If you have any questions, feel free to reach out to your friendly IRA specialist at NuView.
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