All Forum Posts by: Jacob D. Lange
Jacob D. Lange has started 4 posts and replied 10 times.
Post: Deductions with No Revenue?
- Posts 10
- Votes 2
Thank you @Michael Plaks.
That is pretty much what I thought.
I seems it would be in my best interest to try to get the property finished and at least one rental before the end of the year (if at all possible).
Post: Deductions with No Revenue?
- Posts 10
- Votes 2
I just purchased a house by the beach that will be a STR. I am in the process of renovating, but I am doing so from out of state, and for various reasons I might not generate an income from the property this year.
Can I still deduct business expenses and depreciation? I should make less than $100K from my W2 job, which would make me eligible to deduct from my taxable income. I am mainly concerned that a lack of income from the property would result in me being audited (or somehow violating the tx law).
Please let me know what you would recommend. Thank you.
Post: Tax Deductions on a New Property???
- Posts 10
- Votes 2
Originally posted by @Dan Schwartz:
@Jacob D. Lange in general, you aren’t “in business” until you are actively generating revenue. That doesn’t mean the revenue has to be realized immediately, but you need to be working to generate it. Some people suggest offering the property for rent as soon as it is habitable as an indication that an attempt to generate revenue was made.
Until you are actually “in business,” you need to capitalize, not deduct, your expenses. Based on your other post asking about financing a cash purchase, it sounds like you have a rehab in progress (or plan to have one). The costs of the rehab, which will be significant, are capitalized and added to the basis of the property. You cannot deduct these costs as expenses.
That’s a broad overview based on the little detail that’s been offered. This is the perfect thing to take to an accountant and get help developing your best strategy. I think many people approach CPAs cold, saying “I’m going to start buying real estate (some time) and I need a ‘core four’” like they are asking someone they’ve never met to the prom. You can approach someone and say “I’m purchasing a house for cash, rehabbing it and I want to maximize my return while also making sure it’s as tax-efficient as possible. Can you help me?” I bet you get a different level of interest in return.
Good luck!
PS - to your other post, ask about “delayed financing.” Usually no waiting period, but also usually limited to 75% of purchase price or appraisal, whichever is less. Cashing out at an appreciated value usually takes time. Look for @Andrew Poston’s great thread on this from a while back.
Thank you, @Dan Schwartz. That is definitely helpful.
Post: Financing an all cash purchase???
- Posts 10
- Votes 2
I am purchasing a property all cash. Is there a period of time I would have to wait before I could then secure a mortgage on that property.
I heard 6 months, but that might be only for a re-fi.
For context, I am buying a property for 65K. With 8 to 10K of work, it should appraise for 100K or a bit more. I hope to get a mortgage for 75% of the appraised value.
Post: Tax Deductions on a New Property???
- Posts 10
- Votes 2
New Investor here, in contract on my first rental property.
If I do not have any revenue related to the property in this fiscal year, can I still take all the legal deductions? Do I have to wait until I can show revenue before I can take deductions?
I make less than 100K, which I believe in the threshold for filing a loss against my w2 income. But will it be a red flag for the IRS (audit) if I declare a business loss without showing any rental income?
Feedback would be greatly appreciated.
I am a little concerned about acquiring financing. This property should be worth a good amount once I make some renovations on it, so hopefully I will be able to secure a mortgage on the property, even if it is for a lower loan to value ratio. We shall see.
@Kathryn Morea Thank you for the information. I am not familiar with Act 74, so that is something I am definitely going to research. I do plan to buy additional properties in the future, however, I am doing so on a teacher's salary. So it will take some time. My plan is actually to buy the property in cash, renovate, and then finance out (hopefully at 75% or so) and potentially get a 2nd property then.
@Reinaldo Lopez I currently live in NYC, but my good friends lives in right around the corner from the house so he is going to help me manage it.
@Mario J Perez in Luquillo.
Anyone else investing in Puerto Rico? I see some posts from a few years ago, but nothing too recent. I am just getting started. I have a property in contract now. I plan to operate it as an AirBNB.