I think it was Robert Kiyosaki who stated if you own rental properties and your paying taxes you are not doing it right. Please Help me understand this better. I basically use the brrrr strategy and use my local lenders to get my money back to buy again. However, this thing they call the debt service coverage ratio keeps me paying a lot of taxes quarterly. I have to show I make good money on my yearly taxes or they wont loan to me. I tried a few times to take advantage of my write offs and pay less and the banks cut me off! No more loans! How do you write off so much to avoid taxes and when it shows you don't have income????? I do have a good income and I pay a ton of taxes.. Any advice would be greatly appreciated..
Kiyosaki and many others who repeat this phrase are full of it, basically.
There're many investors who highly leverage their properties (meaning huge loans) and show zero or almost zero taxable income, due to accelerated depreciation and other tax strategies. They borrow based on their assets's (properties) values and their credit strength, not on income. Which means private or commercial lenders, not banks.
There're also many successful investors who have great cash flow that is not erased by depreciation, and they happily pay income tax on their positive income.
There's no one "right" way to do real estate investing. Only for a salesman who is peddling his training.
Accountant, Enrolled Agent · Grayslake, IL · Member since 2011 · 5k+ posts · 2k+ votes
8y
Brandon,
Its about claiming what you actually incur. You don't want to mis-represent your income to the bank either. However, I would weigh what the actual numbers look like to see how your business is actually performing. You may be incurring a great deal of other expenses that are weighing it down such as conferences & Memberships etc.
Looks like you're in the Pensacola area. I disagree 100% with Kiyosaki on that one. I have tons of clients who have a net profit because they bought well and keep their properties running lean. Bullet proof them well to avoid massive maintenance issued.
I never tell a client to incur a $100 expense for a $42 deduction unless it has other savings that increase it over the $100 cost such as eligibility for a credit etc.
Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
8y
He sells books and programs . Don’t forget that Robert went bankrupt several times and his accountant is under investigation by the feds last I heard online
Kiyosaki and many others who repeat this phrase are full of it, basically.
There're many investors who highly leverage their properties (meaning huge loans) and show zero or almost zero taxable income, due to accelerated depreciation and other tax strategies. They borrow based on their assets's (properties) values and their credit strength, not on income. Which means private or commercial lenders, not banks.
There're also many successful investors who have great cash flow that is not erased by depreciation, and they happily pay income tax on their positive income.
There's no one "right" way to do real estate investing. Only for a salesman who is peddling his training.
Accountant · We serve all 50 states · Member since 2015 · 90 posts · 50 votes
8y
Hi Brandon,
That's a great question and a challenge for many full-time beginner investors! I believe that paying more taxes just to increase your chances of getting better financing terms will cost you a lot, depending on your tax bracket and your return rate. And it's simply not fare! I recommend you to find an investor-friendly lender(s) with who you will be working on a regular basis, who will look at your EBIDTA, cash flow and cap rate.