Funding question.. cash out refi vs loan

[Roger Princeau]

I have a funding question. I have a deal locked up for$250k.. (seller will finance me $50k. So I'm needing funding for $200k. Was looking into cash-out-refi. Accountant says this route won't let me deduct taxes. Does this point be down the road to a conventional mortgage, or is that not a reason to shy away from cash-out-refi? Any other thoughts on which way I should try and get funded would be appreciated. Thank you all in advance.

[Joe Splitrock]

Originally posted by @Joe Villeneuve:

Originally posted by @Roger Princeau:

@Joe Villeneuve sorry my mistake. The the question is should I cash out refi from my house versus a conventional loan? I should have been clearer but the accountant said if I do a cash out refi from my house I won't be able to deduct taxes on the rental property. I'm trying to figure out which way makes sense in order for me to get funded on this project. Appreciate your response.

 I must be missing something.  Why can't you deduct taxes on the rental property?

 Tax law says deductibility follows use. That means a cash out refinance on your primary home, if the interest is used to buy a rental property, the interest is deductible against the rental property. If you did a cash out refinance on your primary home and spent the money buying a Lamborghini, then it is not deductible. In order for interest to be deductible, it needs a legitimate business use. The loan is secured against your home, but used to buy a rental property.