Deducting vs Capitalizing Expenses: Impact on Financing / DTI?

[Harman N.]

Hi all,

If you're aggressive about deducting repairs & improvements in-year on your taxes (as opposed to capitalizing over time), could that have a detrimental impact on DTI and therefore future ability financing ability for buying more rentals? Or do lenders back out the repairs like they do with depreciation?

- Harman

[Brian G.]

@Harman N. No personal experience with this but I do believe a competent lender would add back in your make ready cost on a new investment to get a true picture of cash flow as your make ready is part of your basis in the newly acquired asset.