Can I WRITE OFF Interest on a PERSONAL Loan Used for RE?

Question

Good morning,

I took out a personal loan for RE investing in order to bridge the gap in the acquisition and then I am going to cash out refi. Can I write off the interest on the personal loan and will the bank frown on me using a personal loan when I go to cash out refi?

Thanks,

Andrew

Basit Siddiqi · Answer

Interest tracing rules - The deductibility of interest depends on what the funds are used for.

If you use the funds for business related purchases, it is a deduction.
if you use the funds for personal related purchases, it is personal, and likely not deductible unless it is deductible somewhere on schedule A(Itemized deduction).

Best of luck

Greg Scott · Answer

Those are two very different questions.

I"d talk to your CPA about the writing off the interest.  I'm guessing that if the loan created some sort of contingent lien against the property, you probably can, and otherwise you can't.

The bank will take into account any debt you have towards your DTI.  Even if it is an informal loan, realistically you should be disclosing this where appropriate in the application otherwise you are committing fraud.  Whether or not that will impact your ability to qualify, your banker can help you.

Can I WRITE OFF Interest on a PERSONAL Loan Used for RE?

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