All Forum Posts by: Curtis H.

@Steve Vaughan

I paid a LOT of interest in those two years. That's where the temptation comes in to claim it. I paid $50K to reinstate the loan and stop foreclosure, then proceeded to pay $2500 per month for the next two years as my regular mortgage payment, so most of that was interest as well. We are talking $100K in payments to the lender in two and a half years, where most of that was interest. 

It's still not worth it. If I don't claim it, there is virtually nothing that can go wrong with the refi. It should be a slam dunk. I make enough W2 income to qualify for the refi loan, with a little to spare. I also have excellent credit for the first time in about 5 years, so my rates should be the best. Now is the time.

Hello BP family, 

My situation is an interesting one...

I am about to refinance the home I am living in Sub2 to get the loan in my name. I've been here through three tax cycles. When I took over payments in 2014, I told the seller he can claim the interest that year, even though I paid for half of it (or all of it seeing as he wasn't making payments). However for 2015 and 2016 I would be claiming it of course. Now I've already read on other posts that this is fine. I paid it, I claim it. If IRS asks for proof, I have the bank statements showing I paid the mortgage.

The question is about the refinance. This will be a $400K loan on a home now worth $600K. They are going to ask for two years tax returns for sure, and I haven't filed them yet. I am planning on doing my taxes in the next month, and I'm curious if claiming the interest on a home I am not on the loan for will bite me in any way? I don't want them contacting the lender obviously to verify anything and triggering the due on sale clause in case the financing doesn't go through with that lender. Also, would claiming the interest mess with my debt to income ratio at all? I already learned the hard way 3 years ago when applying for a loan that writing off a bunch of expenses on my rentals was a BAD move as it all but killed any chance I had at getting a loan for a home in CA because of DTI ratio. Since I had already filed the taxes there wasn't much I could do but ride it out. So I'm claiming NO EXPENSES on 2015 and 2016 even if I paid them. I want it to look like I made as much as possible those two years.

Any advice is appreciated. My whole 10 year investing plan hinges upon me successfully refinancing, then getting a HELOC on the $200K equity. I can NOT mess this up. The more I type the more I think I just won't claim it to be safe. If I don't claim it, I probably will lose a grand or two, but will sleep well at night. If I get greedy and claim it, and it comes back to bite me, I will hate myself for the next three years.

@Joshua D.

Sounds like a plan! Do you have a portfolio lender? I'm assuming they allow you to use a percentage of the projected rents when calculating your Debt to Income Ratio? 

I have to refinance my Sub2 property in my name first, then do a HELOC. However, I will have a $400K loan now in my name so...

@Joshua D.

Yes yes yes! I'm super excited to hear about someone who has already done what I am attempting to, because somewhere down the line somebody who I respect will tell me how silly this all is. I don't want to move again, I really don't. If I can get another SFH where I live without having to be the owner occupant, that's the ultimate goal, but I will move if I have to. The real benefit is in the rehab. It is SO MUCH EASIER on the finances to fix something up while living in it over a 2 year period. However, once you have affordable access to cash for rehabs, it becomes a non issue. The HELOC is going to be key for me. When you did yours did you have an issue with the bank letting you use those funds for the down payment? Did you have to draw the money out and let it sit for a month or two before using it so it looked like the money was in there all the time?

@Joshua D.

Boom. That's how you do it. Very happy for you my man. Hopefully in 2 years I will have a similar story. I'm assuming you did a refi on deal 1 and/or 2 to fund the next purchases?

@Joshua D.

How did those work out for you numbers wise if you don't mind me asking? I don't need details, just more like "we cleared $20K on the first, $40K on the second" etc. I'm still open to it, but I don't see it working in a duplex.

@Sarah Lorenz

Yes with a wife and 3 kids the house hacking becomes nearly impossible. I owned a 2700 sq ft. home at 21 in Texas, then moved to Socal and lived in a 1000 sq ft apartment, then a 1600 sq ft apartment. I now live in a very small 1000 sq ft. home on a very nice street and couldn't be happier. The reason I can't do the multifamily house hacking is because I simply can't share walls and ceilings with other units again. It's not interior space I need, it's privacy and distance. Also there were some weirdos associated with those complexes I lived in, and by myself I could care less, with small children it's an issue. 

@Dave Foster

On the refi, umm...yeah. Not sure what I was thinking. It's not income if you are paying it back. 

In regards to the rehab loan, I know there are 203K renovation type loans where they put them together, and it seems like that's ok in the 1031 scenario. 

Thanks!

@Dave Foster

I like the exchange and then refi workaround. Didn't know that was an option. When you do that, I assume that year you have to claim whatever cash you pulled out as income correct? But that simply gets taxed as income and not capital gains? Another question...

If I sell a rental, take the proceeds and find a 4plex that needs $25K in rehab work, how would that work with a 1031? Would I have to find the rehab money elsewhere? Could I still use it as a downpayment on a purchase and renovation loan?