Collecting Keys - Real Estate Investing Podcast

Real Estate Taxes, Legal & Insurance: What Investors Actually Need

What you keep matters as much as what you make. This guide pulls together what Mike DeHaan, Dan Austin and Dylan Koch have covered on depreciation and real estate professional status, 1031 exchanges, entity and estate structures, landlord and wholesaling law, and insurance, including the claim on Mike's house after the Spokane wildfire. It is educational only, and the hosts say the same thing repeatedly: verify everything with your own CPA or attorney.

Start with these episodes

What are the core tax tools a rental owner should understand first?

Dan's solo tax episodes are the plain-English starting point. He splits spending into operating expenses (maintenance, utilities, lawn care, insurance, mortgage interest), which are expensed in the year you spend them, and capital items like roofs, furnaces and windows, which get added to basis and depreciated. Depreciation itself is purchase price minus land value divided by 27.5 years, taken every year even though the cash stays in your pocket.

His worked example from the property business-plan episode: a $275,000 purchase minus $50,000 of land is a $225,000 basis, plus $50,000 of capital improvements brings it back to $275,000, divided by 27.5 years, for roughly $10,000 a year in write-offs against that property's cash flow. On the entity side, Dan explains that with an S-corp election you pay roughly 15% payroll tax only on a reasonable salary, while owner draws above that are subject to income tax only.

From: EP 132 · EP 108 · EP 35

When does accelerated depreciation and cost segregation backfire?

Cost segregation breaks a property into shorter-lived components so you can accelerate depreciation and often show a paper loss on a cash-flowing property. The hosts' view has hardened over time: it's a timing tool, not free money. Their own CPA advised against a cost seg on their six-unit because they weren't in the top bracket, and Mike noted cost seg salespeople usually model savings at the maximum rate to make the numbers look best.

On EP 288, tax strategist Thomas Castelli says to skip the study if you're flipping, if you plan to sell in one to three years, or if you're in a low bracket today and expect to sell in a higher one without a 1031. He also explains that straight-line recapture maxes out at 25%, while the bonus depreciation portion can be recaptured at ordinary income rates up to 37%. Greg Helbeck makes the same point about the tax provisions in the "Big Beautiful Bill": bonus depreciation reduces taxable income, not your tax bill dollar for dollar.

From: EP 288 · EP 214 · EP 392 · EP 448

How does real estate professional status actually work?

Real estate professional status (REPS) lets excess losses — depreciation plus maintenance, taxes and interest — offset active income like flipping profits or a W-2 instead of carrying forward. The threshold the hosts cite is at least 750 hours in real property trades plus more than half your working time, meaning more hours than any W-2 job.

Dan has claimed it while holding a W-2 by documenting more than 2,080 hours a year with MileIQ for mileage and Google Calendar for meetings. He's specific: content creation alone doesn't count, but a meeting that led to a joint venture does. Castelli adds a trap people miss — if a property manager runs your rentals and you don't materially participate, the losses stay passive regardless of your hours. Mike credits REPS plus depreciation for offsetting his active income; on EP 278 he said he had made millions since 2020 and was only paying taxes for the first time that year.

From: EP 66 · EP 288 · EP 278 · EP 487

Is a 1031 exchange worth it, and what are the alternatives?

A 1031 exchange defers capital gains and depreciation recapture: after closing you have 45 days to identify like-kind replacement property of equal or greater value and 180 days to close, and heirs receive a stepped-up basis if you keep rolling it. A reverse 1031 flips the order. Zach Lemaster cautions that most 1031s fail, especially when selling one property to buy several from different sellers, because one seller can blow the timeline.

The hosts have cooled on exchanges for small portfolios. On EP 373, Mike's accountant told him to simply pay roughly $60,000 in taxes rather than buy a mediocre replacement; after loan and transaction costs the exchange would have saved about $12,000. Brett Swarts presents the deferred sales trust as an alternative: you sell to a trust for a promissory note under IRC 453, so there's no constructive receipt, no 45/180 clock and no like-kind requirement. His rule of thumb is roughly $1 million in net proceeds or gain, because the tax bill has to justify the structure.

From: EP 62 · EP 373 · EP 391 · EP 476

How do you find a CPA or bookkeeper who understands an active real estate business?

The hardest-earned lesson on the show is that hiring a professional doesn't remove your responsibility to check the work. On EP 73 Mike described a bookkeeper manually altering numbers, and a CPA marketed as the expert for wholesale and flip businesses who omitted a large number of transactions. Years later the problem recurred: on EP 503 Mike says his CPA left roughly $30,000 of lending income off a prior-year return, producing a $7,800 bill plus penalty interest.

Fractional CFO Michael Glaspie separates tax accounting, which reports what already happened, from managerial accounting, which sets future strategy — and says most investors pay for the first and then expect the second. Mike and Dan say it took them three or four accountants to find one who understood depreciation alongside an active flipping and wholesaling business, and that it isn't your job to coach your professional.

From: EP 73 · EP 137 · EP 270 · EP 503

What about land trusts, joint ventures and estate planning?

On EP 243, attorney Joe Seagle explains that plaintiffs' attorneys look first at insurance coverage and then at property records, so keeping your name off public records is the point of a land trust. He recommends one trust per property so a lawsuit or code violation on one house doesn't block a refinance, and notes trusts are disregarded for tax purposes, with the beneficiary LLC reporting income. The downsides: transferring title can trigger reassessment, loss of homestead or valuation caps, and give a carrier an excuse to drop the policy. Land trust statutes mainly exist in Florida, Illinois and Indiana; elsewhere investors use Wyoming, Delaware or Nevada LLCs, series LLCs, or a parent LLC as sole member of property-level LLCs.

For partnering, Dan argues for a joint venture agreement on a single project rather than forming a company together — dating before marriage, as he puts it — spelling out contributions, roles and the exact back-end split. His blunt rule: never sign terms you don't understand. After Dylan totaled his car, the group spent an episode on estate planning, including beneficiary designations, transfer-on-death deeds, trusts, and a written "if this, then that" plan reviewed annually.

From: EP 243 · EP 67 · EP 458 · EP 508

Which landlord and wholesaling laws are changing?

Dan's eviction episode separates tenants, guests, squatters and trespassers, and argues most viral eviction horror stories trace back to the landlord's own mistakes: no proper lease, accepting partial first month's rent, missed notice deadlines. His lease-up standard is full first month's rent plus a security deposit up front, an attorney-reviewed lease and a signed move-in checklist. He and Mike prefer cash for keys — $1,500 to several thousand, damages and eviction record waived, in writing — and he says to negotiate and file at the same time rather than drift weeks behind.

On regulation, Dan walked through Washington rules that shifted the standard from "ordinary wear and tear" to "ordinary use," require 180 days notice for rent increases above 3%, and require three delivery attempts on three different days to serve a pay-or-vacate notice, which his property manager bills at $75 per attempt. Wholesalers face new disclosure regimes too: the hosts describe a Washington law requiring solicited off-market buyers to disclose the seller's right to a buyer-paid state-certified appraisal with a cancellation window, and note Ohio requiring a timestamped disclosure before the PSA.

From: EP 233 · EP 409 · EP 453 · EP 493

What have the hosts learned about insurance claims?

Insurance runs through the show for years, starting with an oil-leak claim on an Airbnb where Mike learned not to volunteer information: saying "the furnace is broken" got the loss classified as an unreimbursable appliance when only the oil feed line had failed. Public adjuster David Melzer later explained why carrier estimates come back low — field estimates get reviewed internally and line items get stripped each pass, so a $20,000 estimate can be cut in half. He advises bringing in a public adjuster early (roughly 10% of the claim from day one versus 30% or more to chase a supplement later), answering questions directly without oversharing, and shopping policies yearly once you own three or four properties.

Then Mike lost his Spokane-area home to a wildfire that hit 3,000 acres in under three hours. His public adjuster expected 200-300% more than the insurer's initial offer on a full loss, and Mike says anyone asking 25% should be avoided. He credits his policy: 125% of home value with full replacement cost at current market value rather than depreciated value, a difference he estimates at close to $500,000 of payout for under $200 a month more in premium. The adjuster knew code requirements and surfaced coverage Mike didn't know existed, including up to $60,000 for landscaping.

From: EP 504 · EP 505 · EP 234 · EP 450

Frequently asked questions

Do I need an LLC or trust before I start investing?

Mike and Dan call entity structure one of the most common procrastination traps. Joe Seagle's approach is one land trust per property with an LLC as beneficiary, but he also notes transferring title can trigger reassessment or insurance problems, so it isn't right for every property.

Is a cost segregation study worth it on a single rental?

It depends on your bracket and holding period. The hosts' CPA advised against one on their six-unit because they weren't in the top bracket, and Thomas Castelli says skip it if you're flipping, selling within one to three years, or expect to sell later in a higher bracket without a 1031.

Can I claim real estate professional status with a full-time W-2 job?

Dan does, but he documents more than 2,080 hours a year with MileIQ and Google Calendar, and says content creation alone doesn't count. Castelli adds that if a property manager runs your rentals and you don't materially participate, the losses stay passive no matter how many hours you log.

How much does a public adjuster cost, and when should you hire one?

David Melzer says public adjusters usually work on contingency — around 10% if involved from day one, 30% or more when brought in late. After his house fire, Mike says his adjuster charged about 10% and expected 200-300% more than the insurer's first offer, and that anyone asking 25% should be avoided.

Does seller financing save the seller from a big tax bill?

Not the whole bill. Dan explains depreciation recapture is owed in full in the year of sale regardless of structure, while capital gains get spread over the payments, which can keep some sellers in a lower bracket. He tells listeners to raise the topic but never promise savings only the seller's accountant can confirm.

All 48 episodes on taxes, legal & insurance