Rental Property Investor · Central Texas · Member since 2017 · 6 posts · 1 vote
Hello all, this is my situation and my husband and I disagree on the best course of action. We have a house that is worth $135,000. We owe $40,000 and it will be paid off in 8 years. We just bought a house at an auction for $76,500. After fees, we owe $75,000. Should we do a cash out refinance on the first house to pay for the new purchase, should we try to get a separate mortgage, or should we pay for it using savings. I appreciate any help.
Morris County, NJ · Member since 2020 · 5k+ posts · 2k+ votes
6y
@Shonna Parker
Depends on your personal tax situation. With SALT restrictions, it’s no longer generally better to carry as much loan on your primary residence to max itemizing your deductions. If the loan is on the investment property, you can deduct all the interest payments on that property (against rent or just have the carryover passive losses)
Investor · Tampa, FL · Member since 2019 · 80 posts · 17 votes
6y
Congratulations on locking up a deal, I would look into a Private Money Lender or even a Hard Money Lender. I don't know if using most of the equity in your personal residence during these times, but it is still a viable option if PML and HML don't work out in your favor. Best of Luck!
Morris County, NJ · Member since 2020 · 5k+ posts · 2k+ votes
6y
@Shonna Parker
Depends on your personal tax situation. With SALT restrictions, it’s no longer generally better to carry as much loan on your primary residence to max itemizing your deductions. If the loan is on the investment property, you can deduct all the interest payments on that property (against rent or just have the carryover passive losses)
RIght... So, if you take the loan against the investment property instead of your personal residence, you can take the deduction against all of the interest payments. Depending on the overall profit/loss of the property/porfolio, you may not be able to take the passive losses onto your 1040, but at least you have the deductions.
Rental Property Investor · Phoenix, AZ · Member since 2018 · 141 posts · 165 votes
6y
I would get a private investor to come to the table with the down payment and closing cost. That investor would be paid a return that is set by you and your husband. It just seems to risky in my opinion to take out equity for another home purchase especially when considering SALT.
Rental Property Investor · Central Texas · Member since 2017 · 6 posts · 1 vote
6y
@David M. I’m sorry. I don’t think I was clear. The equity loan would be on an investment property to finance another investment property. Not our primary residence at all. Because we’re so close to paying it off, we’re unsure if we should refinance for 30 years.
I don't know.... Sounds like your info on your primary residence really has no bearing on this transaction. So, the "first house" is the house you bought at auction? Now you have another house you want to buy? Its not clear how much equity you'd be able to pull nor how much you need for this next deal.
Rental Property Investor · Central Texas · Member since 2017 · 6 posts · 1 vote
6y
@David M.
No, Sir. The first house is a house that we’ve owned for 15 years, it is currently a rental. We’re trying to determine is it smart to pull equity out of this house to pay for a house that we just purchased in an auction. We had to put down 10% at the end of the auction but we still have to pay for the home. We’re not sure whether it’s best to cash out refinance the first house and use that equity to pay for the house we just acquired.
Austin, TX · Member since 2018 · 164 posts · 107 votes
6y
@Shonna Parker
That is the strategy that I used for my first rental purchase. I plan on having the refinance done in the next 30 days and will use that to pay back the HELOC on my personal resident and then hopefully find another property to do the same thing again!