Free Educational Video
Real Estate Professional Status: Qualification & Benefits
Total Watch Time: 35 Minutes and 28 Seconds
Real Estate Professional Status: Qualification & Benefits Videos 1-4
Video 1 Transcript
Bob: This is the one that is the exception. This is the silver lining that you’re all going to find that probably none of you qualify for, but we’re going to talk about it anyway. If you have done a bunch of reading, you might have heard of this and maybe you can use this because you’ve got a bunch of losses. Wouldn’t it be nice if you were able to use those losses indiscriminately? My client with 190 rentals he has no trouble deducting his losses. Why? Because he is a real estate professional. There’s no question about it.
More than half of your personal services before you even trade your business that’s called your job. Must be related to real estate properties trade your business. That means rentals. That means developers, real estate agents, landlords of course. It doesn’t include people like mortgage brokers, real estate lawyers or real estate CPAs. I’m not a real estate professional even though I like to think I am sort of one.
Yet, you have to perform more than 750 hours in that real estate business. When you got a husband and wife, these two criteria have to be performed by the same person. I have to spend more than half of your time. They must says spend at least 750 hours doing that. The IRS is quite a stickler on these numbers. You have to prove it. I have been in fights with agents that say, “I have to prove it?”
There is a rebuttable presumption which is, “Find me anything– ” like my client with 190 rentals, “Find me anything this guy is doing that’s not real estate”. I don’t think I have to document it on him because find me something that’s not. How many people in your life keep track of your time in a log on a daily basis for everything you do? You don’t.
It’s an impractical obligation that the IRS is trying to impose on you, but if you’re going for this exception, you better be doing it. You better be keeping track. What I will tell you is, you have to be very active in real estate. Avoid that passive treatment. Your losses are treated as ordinary losses. There’s no limitation regardless of your income level. Getting you major tax savings.
Your annual income reduction on this, if you’re into California Real Estate where you’re not worried about the cash flow, but you’re playing the depreciation game while that property is appreciating and you’re observing the cash flow losses because you have a highly appreciating piece of real estate these losses can get tremendous. If you’re playing that game and you’re not a real estate professional, the benefit of the losses is lost, but if you’re a real estate professional this can get into really big money.
The folks that I have that have quit their non-real estate day jobs, they’re getting a lot of benefit out of this. They’re playing the California Appreciation Game. You can get a real estate license. That does get you credit value, but you got to do the work. You have to keep time sheets for your daily activity. I have right now, 25 (I counted them before I came here) active real estate professionals. This is the hard criteria to manage. I have 25 clients that are active real estate professionals. 21 of them are being audited.
They don’t just look at your real estate professional, that’s where they start. They’ll probably go away if they get you on real estate professional, but if they don’t, then that’s just a regular audit and they’re going to go after something else too. I’ve steered more people away from real estate professional than to it because I think it has to be very obvious for most people.
Participant 1: This would mostly be beneficial or applied to somebody who’s earning or getting losses of more than 25,000 a year.
Bob: Or having income that’s too high that their losses are now zero. You just have to be in a loss situation.
Participant 1: You think you get a lot of losses, but in some instances when people with lots of rental properties that might not have a lot of losses. It might not really outweigh or anything you can think of and still have a lot of losses.
Bob: Again, we go back in the statement I made earlier. I want you all to have a positive income. I want your properties to cash flow so that you don’t have to worry about these limitations. That’s the goal. That’s my goal. I like income producing property. I like having income that I have to worry about getting the zero, not what do I do with the losses that I’m racking up because my property doesn’t cash-flow.
All right, let’s keep going here. Tax on dispositions, what’s tax and what rate? The appreciation is tax is a capital gain from 15% to 20%, depending upon your income bracket. They used to be 15%, now it’s up to 20% thanks to the recent Affordable Care Act. Income, we’ve taxed another 5% onto it, depending on your level, I think it’s $400,000 of taxable income. You don’t want to pay area of property, that $400,000 on income can come from the property alone. In the Bay area, you have your day jobs and you have gains on your rental, be expecting to pay the 20% bracket on most of that gain.
We have a depreciation recapture. Remember when I was talking about the depreciation, how you’d have to recapture it, this comes back at a 25% rate, which is a good thing if your tax bracket is above that 25%. Not necessarily a good thing– The whole thing is if your other tax rate is less than 25% you don’t pay this, but most folks in this room are probably at least in the 25% bracket, and anybody above the 25% bracket in their regular income is only going to be 25% of the depreciation recapture.
Let’s say you’re in the 33% bracket for your regular tax and you’re going to take that depreciation deduction today at 33%, and then years later when you sell it, you’re only going to have to give it back at 25%. We call that good arbitrage. We got a rate break of 8% in how many years of time between the day we took the deduction and the day we had to pay it back.
On the state, we’ve got some new rules. Most tax at top rates 9.3% and now as of the new laws that were passed a couple of years ago, these go all the way up to 12.3%. Pay 20% up here, pay 20% up here, 25% recapture, 9.3% state. The state doesn’t have a break for capital gain, and if you’re selling it in your personal name, you’re going to have state withholding tax on California property, so go buy property elsewhere.
Other scenarios, including 1031 exchanges. Again, somebody will be talking about this. That’s a tax free and highly effective loophole. We have installment sales. You can sell your property over time, to a buyer, and spread your gains all over a number of years. I’m not particularly crazy about this. I hate being the bank, but with the right scenario, especially with– We were talking about the Obama Care Tax.
If you were able to sell on an installment sale, and take a little bit of gain every year, you wouldn’t get over those limits, and you’d save that tax. There is some incentive to do the installment sale, but you have to have a solid buyer that you trust with a property that you have to be willing to take back if they don’t pay. A lot of people say, “I’ll just foreclose on a property” well in California, that’s a big deal. Being able to foreclose on a property in California is a really big deal. In other states, a foreclosure can happen like that. Nobody’s going to get in your way, the process is very quick.
For instance, I own some properties in Texas, I own some properties in Tennessee. One of the reasons I picked those two markets, is that that kind of stuff isn’t a problem. They’re aren’t all the legal impediments in those states that there are to landlords and real estate owners in general. Those impediments don’t exist in those states. They exist here in California. They make it very hard to foreclose on a piece of property, especially if you’re an investor that’s carried notes back. It’s very hard to do in California. It can be done, but expect nobody to pay rent for months, and months, and months, and months. You’ll have to carry it. It’s going to be an expensive process. I’m not a lawyer, so I’ll stop there.
Gains from the sale of tandem property. This is one of my favorites, where you have one half of the duplex and uses it as our private residence and rent out the other half. You can use the gain on sale exclusion that we all have for the sales of our home, up to half a million dollars. Then you could 1031 exchange out the gain you have on the other side of the duplex. I’ve seen clients do that.
The gain on sale of tandem property can also be used where you used the property as your residence and turned it into a rental. The homeowner exclusion goes for- you have to have used the property two out of the last five years.
This is something I’m going to do as I get ready to retire, is I’m going to move into my rental. I have one rental in particular that I know I’m going to do it because I get a lot of appreciation. It’s a California rental so I have a lot of appreciation – it’s a California rental that I bought at a really good time and it’s appreciated very nicely. Anyway, I’m going to move into that property because I don’t want to pay the capital gains on that.
I’m going to use that property as my private residence because I’m retired, I’m no longer married, I’m single, my daughter’s about ready to move out of the house. I’m going to move into that rental and I’m going to live in it for two years. Then I’m going to sell that rental and I’m not going to pay any tax because it will have been my house. I’m going to have a half a million dollars of appreciation there but all the appreciation I do have in it, I’m going to exclude because it was my residence.
If you’re in the Bay Area and your exclusion is more than half, you know more than the half a million dollars that you’re allowed to exclude as a married couple, if you sell and more than half a million dollars you have gained, if you’ve converted it into a rental you get to use that rental to exclude a half a million dollars as a primary residence and then you can use a 1031 to get rid of the rest. That’s a neat trick.
Participant 2: I understand what you’re doing…
Bob: A lot of people don’t want to live in their rentals. I have one that I would do that.
Participant 2: All right. If you go to all those other states for a little while…
Bob: Yes we call that serial sale.
Participant 2: Wasn’t there a change in the rules…
Bob: That has to do with the property, yes, there was a change in the rules recently where once you do an exchange into another piece of property that you’ll have a- first of all, you can only use one sale exclusion every two years. That’s an important miss-sanction, you can only use one sale exclusion every two years. So you can’t do this more frequently than two years.
Remember, you have to had been in that house using it as a private residence for two years so you need two years to qualify for it anyway. You can’t use this two out of five rule for a property that you got into as an exchange. If you got into a rental, you can’t use this technique if you’ve acquired that property as a rental, using a 1031 exchange within the last five years. That’s the exception that you’re looking for.
Video 2 Transcript
John: If you’re a real estate professional or if your spouse is a real estate professional and you’re married filing jointly, so if you are a real estate professional or your spouse are on a jointly filed tax return as a real estate professional, all your rental losses will offset any other kind of income.
What does it take to be a real estate professional? I’d say about 50% of the real estate professional case law comes out of California, and it’s mostly bad. Let me explain why, because that’s a federal court. We can’t really blame California directly as much as I would like to, because that’s what the rest of the country does, by the way. It’s your fault. Let me go through the tests and I’ll explain why we have issues here.
You have to show more time in a real property trader business than all other personal service hours. What does that mean? You work 40 hours on a W-2. You got to show 41 hours in the real estate. The real estate, for this purpose, could be more than just rentals. It could be you’re a realtor, or maybe you’re a contractor, or you flip houses. You can combine all that.
I spend 20 hours at my W-2 job, 20 hours at my rentals, and another 10 hours as a rehab contractor, so I have 30 hours of rental real estate trader business. I’ve got 20 hours of regular W-2 more than half my time is in some sort of real estate. This is, by the way, where California investors get killed.
Here’s what happens. This is very common. I’m sorry but this is true. I can back it up. Engineer at a company makes $200,000 on his W-2, works at least 40 hours, owns three rental properties two of which are in Nevada, and says he spends 41 hours a week on his rentals.
Do you see the problem? Is that a believable story? I mean what do you do? Fly to Nevada every week and cut their lawn, feed them? Of course, they don’t spend that much time on there. They just put it on the return, anyway. Evidently in some circles, the philosophy is a 1040 is a good first offer. You guys got to work with me. Thank you. Look, I’m trying to keep it non dull, I can talk like an accountant. You don’t want that.
The other tests for real estate a professional, so that’s the first one, and that’s the hard one. In fact, what we see a lot of the time is if we have a high earner, a married couple, we have a high earner, if the spouse works either part-time or doesn’t officially work, stays at home which is unofficially a lot of work especially if you have kids, but bottom line doesn’t pull a W-2 or have a job like that, oftentimes the spouse will qualify as a real estate professional. They put enough time into the rentals on their own. They qualify and get the tax break for the couple.
Now, what is my issue? What I’ve seen with California investors on real estate professional status for the spouse; politics, spousal politics. Technically, sometimes the spouse could do it, and you ask, and as my dear wife said, “I’m not doing that. I don’t want to.” I won’t repeat everything else she said.
There’s always a catch, and the question is, “Is it a good fit for the spouse or not,” and both spouses have to agree it’s a good fit. The other requirements are 750 hours per year minimum in the real estate. That’s about 15 hours a week. That’s where it’s a hard sell. If you have managed rentals, that’s not going to happen.
If you have three rentals, let’s see, five hours a week per rental. Again, are you making them dinner? How do you put that much time in? 500 of those hours have to be hands-on. This is the material participation.
There are seven ways to show material participation. The 500-hour hands-on is the one most people use but there are other tests. This is very important, very, very important and often missed. There’s a technical election that has to be filed on the tax return. It’s the aggregation election. You have to say, “For passive loss purposes we want all of our rentals treated not each as a separate activity,” because that’s the default. You have 10 rental properties. Each one has its own activity.
We’re not going too deep into what that means. Trust the nice lawyer. He wouldn’t lie to you. Each rental property is its own activity. You have to make an election if you’re going to be a real estate professional that all 10 rentals are treated as one activity. A lot of accountants missed this. It’s very common. It’s very technical. They missed the aggregation election.
Write this down if you’re interested in it. 469(c)(7); that’s the code section. 469,C as in Charlie, 7, aggregation election. If you’re taking real estate professional status, every year, have your accountant point to the return where it is. Don’t trust them when you are asking, “Did you put it on there,” point to where it is, because once you do this once, you should file it every year thereafter. This is missed very frequently and people who otherwise qualify end up losing out.
Now, here it says, “Timesheet is not required equals timesheet is required.” Let me translate the tax courts language for you. The tax court says, “You don’t have to track your time, you don’t have to have a timesheet,” what they really mean is, you have to have a timesheet.
If you look at the number of cases that people win without having a timesheet, they are very few. The tax court says one thing but, in this case, does another. You do need to track your hours, I’m sorry to say.
Do I agree with this? No, I don’t like bureaucracy. It’s becoming more important to track what you did than what you did, which is why our country is becoming less productive and more bureaucratic, but unfortunately, it’s the rule. Track your time if you intend to qualify as a real estate professional.
What are real property trades or businesses? Development, redevelopment, construction, reconstruction — which for me is rehab, it’s just a synonym — acquisition, conversion, rental, operation of any of these, management of any of these, leasing, or brokerage. Brokerage of real estate; for example, a land broker, there’s case law you’re not a real estate professional. Land brokering is not a real property trader business.
This is a handy little, see if you can qualify. For some of you it’s a no-brainer that you can’t, for some of you might be able , particularly if you’re borderline, track your hours. The people who do not have to track their hours are usually the full-timers. “Look, all I do is I’m a realtor, and I’m a landlord, and I’ve got 20 properties.” “Okay, you know what? You probably don’t have to track your time.” I can get that out on deposition or testimony because of a no-brainier, but if it’s at all clause make sure to track your time.
Participant: Sir, just for clarification, you’re talking about passive income and/or active income?
John: If you are a real estate professional, your passive losses, aka your rental losses, can be offset or they can outset your other income. If you are not a real estate professional, those losses sit in a separate bucket and they will offset other types of gains. They just sit there without doing you any good. It’s adding insult to injury. The fact you had a loss is an injury, and the insult is, “And by the way, you can’t write it off until we say you can.” Real estate profession is one way around that.
Let me give you the other way around it which demographically won’t apply to most of you but I will give it to you. If you make adjusted gross income, married filing joint $100,000 or less, $25,000 of rental losses can be used against other types of losses. For every $2 over $100,000 adjust the gross income, so it’s the last number on the last page of your 1040. Adjust the gross income. For every $2 over $100,000 you lose $1 of the $25,000.
At $150,000 adjusted gross, you can’t use that exception at all. Because this tends to be a high-earning area and you guys are disproportionately given that you are involved in passive investment even by the standards of this area, higher earners, what I found is demographically, this exception does most of you no good, but I thought I’d throw it out there. Let me see what the next sliders are for the break time.
The other seven tests, I’m not going to go through them, they are the seven tests from material participation. If you remember, I said material participation most people use 500 hours in rental activity to prove it, but here is the seven ways to do it. Yes, ma’am?
Participant: Are there any other advantages besides passive losses?
John: The question is, are there any other advantages for real estate professionals other than passive losses? A, you read my mind. B, please ignore what else you saw in there.
Participant: Okay, will do.
John: The net investment tax. The new Obamacare tax, it’s about 4%, I’m rounding a little, 4% on passive income including rentals, interest, dividends, now I am using passive in a different sense. 4% tax on dividends, net rental income, so you have to show profit, et cetera, et cetera. That applies to brackets filling jointly $250,000 or more adjusted gross, single $200,000 or more.
Again demographically, it would apply to a lot of you in this room; if you are showing rental income, you’ve got this additional tax.
If you qualify as a real estate professional, the net investment tax does not apply, but let me give you a caveat. Here’s my caveat. Let’s say you have a bunch of passive losses, and I mentioned if you sell a property, all the losses that build up on that property the day you sell come unbundled. You can use them to create a net loss, or reduce your gain, or whatnot, because each property has a different activity.
Once you become a real estate professional, those 10 rentals are one activity. In order to unbundle prior passive losses that are sitting on your return, you would have to sell all 10 properties. You have to sell the whole “activity” to release losses. Now, you have some math to do.
You estimate, you get a spreadsheet, and this is the annual tax planning that a lot of you don’t do. A lot of you have tax people that you only talk to when you do returns and you don’t plan, that’s a huge mistake.
The planning you have to on this is, let’s assume you qualify as a real estate professional and it would reduce your net investment income tax, the NIIT, the Obama tax, it would reduce it. You have to make a net present value calculation of how much tax would it save versus how much losses does it defer, because now you have one activity, so if you sell one property those losses don’t come unbundled.
Maybe, what you do, if it’s feasible, it isn’t always economically feasible, but if it’s feasible, maybe you sell the properties that have the losses on them, then elect the real estate professional status to avoid the net investment income tax, except on Thursdays, because there’s always just another rule. There’s just always another rule, that’s the nature of law and bureaucracy.
Let’s see what the next slide is, if it finishes this topic. Yes, depreciation. We’ll hit depreciation when we come back from the boy’s room briefly. This is not a sales fest so I’m into sales pitch to the extent I have one is very gentle. We sell three courses, and I’ll talk more about them but during the breaks if you want to look at them, one teaches you how to do bookkeeping. It’s $300, it has a plug in to QuickBooks, and it teaches people who have no clue about bookkeeping how to do it.
There’s one on entities. I’m not really getting into entities, but if you want to see how to set them up, which one to setup, how many to setup, which state to set it up in, which we already gave you that answer; not Nevada, wherever you’re doing business for rentals, how to maintain them, et cetera, there’s one back there, it’s $299. To give you an idea, by the way, my time is $350 an hour. Those will save you a lot of time.
Then I’ll talk a bit more about what we’re doing with IRAs, because I’m doing a workshop. If you’re interested in a two-day workshop intensive on IRAs, and after we’ve talked this afternoon you will be, there’s too much money at stake not to be. There’s so much at stake.
Video 3 Transcript
John: Is it highly likely real estate professionals are audited? Yes, if the story is no good. In other words, if you’re a real estate professional with 10 properties, none of which have a professional manager, that’s a good story. If you have two properties that are managed, that’s a very bad story, especially if they’re single family because how could you possibly get 750 hours into it?
They do hit that issue a lot and again, out here a lot. For some reason, we get a lot of pro se cases out of California for real estate professional status. Meaning, they don’t hire a lawyer, they represent themselves and then, get crushed.
Video 4 Transcript
John: The question is, what are some of the things in terms of time count? Travel time that’s related to active management time counts. If you travel to the properties– look, guys, IRS is not– I was going to say they’re not dumb, that’s not always true.
How about in this context, they’re not. You get a lot of, “Well, I went to Florida to look at properties. I was there for about two weeks. I drank and ate a lot and for about 20 minutes when I crossed the street, there was a house and I saw it.” You’ve got to show that the primary purpose of the trip was business. How do they measure the purpose of a trip? This will be some of the gray you like.
When you take a business trip and you want to write it off, the way you decide if a trip itself, the cost of getting there, the plane ticket or the car mileage, that’s all or nothing. You can take all of it or none of it. It’s what’s the primary purpose of the trip. Normally, they look and say, “Did you spend more days on business or fewer days on business?” What’s a business day? Four hours and one minute on business. I don’t want you cutting it that close, be like a government worker. Get your five hours in.
Make it so it’s not so close that they can knock you out because you’re so close to the line, if they can find any amount of time that was personal, it screws up the day. If you have more business days defined as at least four hours and one minute a day, on a trip, then you can write off the entire cost of getting there.
For example, what I like to do a lot, I will take a van and drive to Chicago. I got a lot of clients in Chicago. I’ve got them all over the country. We’ll go to Chicago and stay there for seven days. I guarantee you, four of those days I’ll either be speaking like this, meeting with clients. I happen to have a mobile home park between my house and Chicago. I’ll probably spend part of the day looking at that and actually talking to the manager and so on and I’ll document it.
If I go to a seminar or teach one, I’ll have a copy of the seminar in my notes and who I met. Because for me, business is easy. If I’m talking to you about giving me money, either as a lawyer or as an investor, that’s business for me. It’s really easy to get a business day. I usually like to get around six hours then you can screw around for the rest of the day. We go to Illinois, I got four days in these business days, I can write off all the mileage on the van. Does that fact that my kids are in the back change anything? No.
I can write off lodging, meals, and entertainment on the business days only. On the non-business days, I cannot write off lodging, meals, and entertainment. Would anybody eventually guess as to which day you go to Martins, which day you go to Wendy’s?
That’s how you fit in the vacations, that kind of thing. In fact, what I’m doing after I’m done here, if they allow it because I don’t if it’s allowed in California because evidently quite a lot it’s not, I’m going to go and have a nice Davidoff Cigar. It’s my reward for being a nice boy. Then afterwards, I got a red eye over to Houston. There’s a cruise going out of there. It’s called the IRA Fun Cruise. I’m going to go speak on it. You better believe I will measure, very carefully, which days are business and which ones are not.
Now, does it matter that I’m meeting with clients or potential clients on a beach with booze? No, as long as I can document it. I keep cards and everything so I do track it because I have to be especially above reproach in terms of my record. I’m coming back to the question because I think I dallied off of a little bit. What was the precise question again? I have the whole ADD thing, I need reminders.
John: Research? That’s right. For real estate professionals status, there’s a category of what they call investment type activity that does not qualify as a trader business. For example, checking on the manager, for managed properties, if you talk to him directly, it will qualify.
Reviewing statements they send you does not qualify. Let’s see what else. Research, it depends how much you buy. That’s a gut feel thing that you’re going to negotiate with an agent. That’s going to be gray. For example, I have two properties and I spend 30 hours researching. It depends on how much time and what comes of it. If you can show the agent the research actually does result periodically in a purchase. Periodically doesn’t mean like once every five years, you’ve got an argument. Can you go somewhere and look at properties? Yes, if you actually buy properties somewhere. They’re going to look again at the pattern and the sense of the facts.
I go to Hawaii once a year and look at properties; I never buy there, ever. That’s not a real good argument. If I go look at properties, what I’m I going to note? Who did I talk to, how long was I there, how many did I walk through, how many offers did I make, I’ll keep copies of the offers. We scan everything. I pay the kids to scan. It’s great in a number of ways. We’re going to Chile for two months this summer, which to my clients makes no difference because most of my clients are not in Columbus, not in Ohio, they’re everywhere.
Now, instead of me calling from Columbus, Ohio; I’ll call from Viña del Mar, Chile. Any other difference? None, except, “Okay, I’ll call from Skype.” The kids are paid to scan regardless of where we are at the time. I will have them scanning all the records and documents and every thing. There was a reason I was bringing that up and it went away. I do that a lot. The whole ADD thing. I’ll come back to it. There was a reason.
Coming back to what you said though. Again, if it’s something you would do with stocks or bonds, it’s probably not considered active time. If it’s something that’s in addition to that, it’s a little more active, looking at the properties can do it. If you record what you’re looking at. The scanning came from because I save everything so when I go and look at properties somewhere and I want to write off the trip for looking at properties because I will, I do actually make offers and I do actually periodically buy.
Now, sometimes the offers, actually a lot of the times the offers are really low. If they actually accept it, I’m thrilled. We have the kids to scan that sort of thing. What was that, a segue. We pay the kids. We’re going to Chile, we’re going to have to give them money to spend, because look, I’m taking away their summer. It’s winter in Chile now. We’re going to be in Viña del Mar which climate-wise is identical to the Bay Area except reverse season. It’ s going to be roughly 45 in the evening, 60 in the day, rainy and windy.
They’re going to spend money. Well, I pay them to scan. I write it off. What’s their tax bracket? Zero. Up to $6,000, it’s zero. If you pay them out of not a corporation, you pay them out of not a corporation, so an LLC, a sole proprietorship. If they’re under 18, they don’t pay social security tax. You pay your kid out of not a corporation, under 18, no social security tax. Now, so I pay them to do the scanning. The money moves from my bank account to their bank account. I get a deduction, they don’t show income but the money is still in the family.
Guess what they’re going to use it for? Spending in Chile. Economically, what has changed? Very little. Tax-wise, what has changed? By the way, this is more of just how we bring up the kids. When they work for me on a W2, half the money goes in the bank, half the money they get to spend.
If they come up with the money on their own, my son especially is very good at spotting what people like. He goes to a good private school, the kids have money. For reasons unknown to me, one of his friends wanted Kanye West pants. They’re $100 retail, John found them brand new on the internet for $50, sold them to the kid for $75. He does stuff like that all the time. He only has to put a third in the bank. We try to incentivize them when they would come up with something on their own that that’s a good thing and they can have more benefit from it. That was the reason I went off in to the kids and the scanning because it’s tracking the hours, the activity, in this case making the offers to show that you were looking at the properties.
I would say accounting, unless it’s directly accounting for the rentals. In other words, reviewing the property management statements. That probably doesn’t qualify. It’s more the looking for the property, talking to the tenant, managing the manager other than reviewing their statements. That definition is still evolving. There’s a lot of litigation on that.
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