Deducting Personal Interest

[Nghi Le]

If I have personal loans from family and friends (to invest in real estate), can I deduct the interest I pay to them?  I recently learned that there are some interest expenses that you can't deduct, and was wondering if this was one of them?

[Linda Weygant]

@Account Closed

I see you are new to Bigger Pockets just this week, so I'll see if I can provide a little guidance for you.

Here at Bigger Pockets, you will see people talking about their investments and you will see people doing stuff you have never heard of or who do things a little differently than you do them.

The cool thing about Real Estate Investing is that there is no one right way.  There is no cookie cutter approach.  No "one size fits all".  Real Estate Investing is as unique as each individual or group of individuals.

Coming across with your strong opinions that your opinion is the only right way is going to, quite frankly, irk quite a few people.  Please note that the OP did not ask *how* to structure his agreement with friends and family - he simply asked if he could deduct the interest.  

Folks gave him some additional pointers that he may not have considered regarding the topic, which is perfectly cordial and acceptable.

Your insistence that your opinion is the only right way for him to structure thing is not going to win you any friends here and, if you are looking to network, you will be unable to find folks to partner up with if you have such a narrow view of how real estate investing ought to be done.

Open your mind up a bit and allow for some other points of view and you'll do very well here.

What the OP is doing is perfectly fine and legitimate and, if that's the way he and his friends and family would like to structure things, then by all means it's not up to us to criticize that unless he asks "hey guys, what do you think of this structure?"

Note that what you are suggesting might carry the added burden of capital LOSSES for his friends and family, not just capital GAINS.  A loan position is much safer and usually carries guaranteed income for the lender whereas the equity position you are insisting on shares quite a bit of risk that the OPs friends and family may not want.