*Expenses hurt, *Refi unhelpful.. Personal Tax Returns BRRR
I'll be as clear and quick as I can:
I recently finished renovating a 5 plex and SF house in NE, then subdivided the lot to create two different properties. I then refinanced them with a local bank, success, kind of.
A. Buy: Purchased $100k owner carry for 1 year. I put $10k down to owner.
B. Renovate: Just over $150k.
C. Refinanced: 80% LTV, new loan $235k left in deal $15k
D. Repeat: As I am preparing my tax returns with my CPA here's what I am running into. My books now show my expenses -$10k and -$150k to equal -$160k. **The new loan of $235k is not income, so my books show a negative. Stopping my ability to finance another deal. Renovations hurt me and the new loan is not helping.
Has anyone ran into this issue before? If so any insight?
- I have done 5+ flips but this is my first BRRR. I will be discussing this in a meeting with my CPA next week.
Most Popular Reply
@Kent Lord No you have no expenses, you have an asset with a basis of $250k. You spent $100k to buy it and $150k to renovate it, that is the basis of the property.
You are confusing balance sheet items, with income and expense items. A balance sheet is your net worth at a given point in time. An income and expense statement is your net income over a period of time, like a year. You can have a high net worth and no income or vice versa, high income and no net worth. A lender will look at both your net income and your net worth.
Right now it is not rented so you have no income nor expenses. You have an asset worth $250 and a loan against it for $235. so you have a net worth of $15k. That is how a bank will look at it.
Does this help make it more clear?