Rental Property Investor · NY · Member since 2019 · 2 posts · 0 votes
Hello fellow investors!
I'm currently using the BRRRR strategy to grow my portfolio and so far got a total of 9 properties. 2 are in the process of being rehabbed and I will hopefully be looking for tenants soon.
I was debating if I should try doing a fix and flip after the next refi on both of these properties. Unfortunately the taxes that I will need to pay will probably be too high for my liking. Then I got an idea, why not do a lease option agreement with the new tenants, do a cash out refinance and then sell it to them down the line in about 1-2 years? Plus the advantage of not paying for maintenance issues and possibly getting a higher cash flow.
But then there are a few questions. Will it be possible for me to cash out refinance since these will not be regular rental leases? And will it be really beneficial from the tax perspective?
Has anyone tried this method and did it work for you or someone you know?
I'm currently using the BRRRR strategy to grow my portfolio and so far got a total of 9 properties. 2 are in the process of being rehabbed and I will hopefully be looking for tenants soon.
I was debating if I should try doing a fix and flip after the next refi on both of these properties. Unfortunately the taxes that I will need to pay will probably be too high for my liking. Then I got an idea, why not do a lease option agreement with the new tenants, do a cash out refinance and then sell it to them down the line in about 1-2 years? Plus the advantage of not paying for maintenance issues and possibly getting a higher cash flow.
But then there are a few questions. Will it be possible for me to cash out refinance since these will not be regular rental leases? And will it be really beneficial from the tax perspective?
Has anyone tried this method and did it work for you or someone you know?
I will truly appreciate your advice!
Thank you
They are regular rental agreements if you do things according to Dodd-Frank law. You have to have one document for the lease and a different document for the Option. If everything is in one document it may present a problem for you. I would redo the documents properly if they are presently combined. There are specifics your attorney can clarify for you. You should be able to cash out refi as I do, and there's no tax liability for borrowed money. It's a very smart move actually when done properly. Almost all of my properties are on lease options to tenant buyers.