Buying investment property in cash, and then do refinance

8 Replies

Do we lose tax benefits when buying investment property in cash, and then doing refinance?

Does the 90-day rule for refinance after cash-acquistion, apply for investment properties?

Otherwise, does the cash investment buyer, lose on tax deduction, as once he refinances, the cash he gets doesn't get deduction, unless he use it to buy another investment property.

Am i missing something here?

You can refinance. Make sure you have spoken with, taken notes from discussion with lender who does delayed financing.  Then read all the IRS rules here https://www.irs.gov/forms-pubs...    936     Get your CPA involved, you don't want to "lose the deduction" as you state. Read: Trump Tax Reform 2017 Act


@Caroline Gerardo Thank you. I went over the PDF. They don't mention about any tax benefits or deductions available, for delayed financing for investment property. I just wonder if i lose all tax benefits, unless i reinvest again. Any user friendly explanations or links available for me to review?

@Eric James Basically same deductions which apply to investment property acquisition loan. Allowing loan interest to be offset with rental income. Given i am paying cash and then immediately refinance(investment property), does tax rules allow to be considered it as acquisition debt? If no, it would be a tax hit, as i can't use interest from cashout refinance to offset rental income, unless i reinvest into some other property

The money proceeds can buy another rental on your same IRS schedule (same vesting ownership), or you need  genius tax advisor to account the sale split as the 1099 won't line up. The money can be used to add a room but not repairs. Tax law is not something I DIY endeavor.  I am not a tax advisor. Beware of people who tell you to put a dummy line item on your closing statement, even escrow and title report FinCen form 8300. 

My clients and I do this a lot.  We purchase in cash - and then finance it afterwards...I call it a "deferred mortgage."  There is no waiting period and the terms/rates are more in line with a purchase money mortgage than with those for cash-out refi.

While I don't advocate using a short term asset like cash to purchase a long term holding, there are times when cash buying is the winning strategy - to be followed by securing a mortgage and recouping cash.

Thanks for your response. Is there a blog or reference website, which i can use to validate that the loan will be treated as purchase loan, and interest will offset income? My CPA is not well versed in such real estate transactions

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