Investor · Austin · Member since 2018 · 51 posts · 22 votes
Hi Y'all I bought a quadplex last year with a traditional 20% down spent about $25,000 on renovations and increased the rent from $3,800 to $4,800. How should I go about recording this income from my property in order to set myself up to be able to buy more properties in the future. I show a net gain of $0 or show that I made $2,000 a month in cash flow. Not looking to refi out or anything. Would appreciate any advice on this. Thanks in advance for the feedback.
The assumption is that you are asking how to look good for a bank to give you a loan? Otherwise I can't think of how recording the income would change your ability to buy at all. Your profit is your profit and goes in the bank account.
The answer is quite simple. Show as much income as possible on your tax return. How far you go with it is a grey area. For example, spending $3,000 on new hardwood flooring could be a 100% deduction on your income that year, but if you wanted to show more income, it would be eligible to depreciate it over the course of a few years (CPA would know how many) so you show a deduction the first year of say $400 instead of $3000.
Additionally, keep good records of income and expenses either in excel or accounting software, as well as copies of documentation like leases. Banks LOVE leases.