Hi there,

We've got one investment property now (seller financing) and we're looking to expand, so exploring what we can qualify for with a conventional loan.

For the existing property, we put quite a bit of money into it to fix it up 2 years ago, so on paper, we're still operating at a "loss" on our taxes as we continue to offset our earnings with our previous expenses. I know this is what makes real estate such an attractive investment, because it's so easy to offset your tax burden by reinvesting in the property itself! We are actually netting $30k a year on the property though, so it's a solid little money maker for us, and we'd like to use that cash toward future investments.

But now the rub - our mortgage guy says the banks will look at our tax docs to see what to count as income, and the mortgage on our investment property will look like a liability since we're declaring loses on it, at least for the next year or two. So how do folks get around this? It seems weird to me that money we spent 2+ years ago makes us look like we have less income than we really do to buy more property today, since we are cash flowing. Do we really have to wait until we start showing a profit on our taxes to be able to use this income toward our purchasing power? Or do we have to talk to a different kind of mortgage broker? 

I want to look poor to the IRS but rich to the banks! :P