All Forum Posts by: Sam Rush

@Michele Wax I appreciate the offer.  I believe with all of the information provided here thus far, I have a good idea what I need to do to correct last year's and this year's information as well as what I want to do as a practice going forward.

@Eamonn McElroy Awesome!  Glad I'm understanding it a little more appropriately.  Maybe I'll look into double entry accounting some day just for my knowledge, but reflecting on my limited accounting education for now all of this is making sense.  I am quite familiar with the house hacking concept, but the taxes portion will probably be something I need to review a little more in depth.  The line definitely blurs a little between personal and rental expenses when your investment and personal residence is one in the same.

@Natalie Kolodij Thank you Natalie.  I apologize for not being an accountant or a tax professional and maybe misusing some lingo.  Excellent suggestion on how to potentially record the information.  I think since the lender does have an easy to use website that shows each of the interest payments, insurance disbursements, taxes paid, etc., then I'll go back and adjust my stuff based on all of this great feedback.

Learning new things every day and probably this way I won't confuse whomever is preparing my taxes in the future as well because we'll be on the same page with the information.

@Eamonn McElroy Thank you for your clarification.  I think this helps me understand this a little better how this all plays out.  Each escrow payment should be considered an asset and what the escrow pays on my behalf from that asset is what I should consider as the expense?  Did I get that correctly.

The plan is to eventually live in one of these units.  Would you mind elaborating on how this changes the taxes portion?

As for the example, it was just an example trying to use figures in case it was easier to understand.  If I'm following your above explanation, if I overpay in a year and the escrow account pays me, then do I count that as income?  I'm sure they'll just keep adjusting their numbers but just trying to make sure I understand the concepts fully.

@Wayne Brooks - I realize the principal portion of my mortgage payment is not deductible.  With that in mind, do I continue to keep the total mortgage and escrow payment that goes to the lender on my income/expenses balance sheet?  Then come tax time I completely disregard that portion of my expenses which would have me subtracting all of those payments replacing them with the interest paid over the course of the year, the insurance that was paid over the year (seems to be in monthly disbursements), and the taxes that were paid for the year?

That makes sense to me for tax purposes though it may show that I made more of a profit than maybe I really did.

Or....do I not even include the mortgage/escrow payment at all on my income/expenses balance sheet and only record the interest paid each month, the insurance disbursement each month from escrow, and the taxes paid for the year in the winter?

Hello BiggerPockets!!!  I'm newer to the real estate investing game and seeking out some additional advice about taxes.  I recently bought a fourplex that I'm holding (I'm even starting to look into another acquisition).  With this new venture comes a lot (more like endless amounts) of new experiences, education, and of course questions.

Either way, I was looking into the details behind my taxes a little more closely.  From my perspective, I've been filing my mortgage & escrow payment as an expense on my balance sheet.  The escrow account pays insurance and property taxes on my behalf just as the mortgage payment includes interest as well as principle.

When it comes to filing taxes I want to make sure it's being done correctly.  If I'm showing the mortgage & escrow payments as monthly expenses am I doing that right?

If I'm doing that right, then would I just not include the mortgage interest and the property taxes paid on my behalf when filing my taxes?  Or do I include it as well?  I feel like that's showing as a double expense if you will.

Let's use an example.  Let's say I pay $1500 per month.  $700 of that goes to interest, $300 of that goes to principle, and $500 of that goes to the escrow account.  So at the end of the year I'm showing $18,000 in my expenses.  Let's say I get a report back from my mortgage company that $8,400 of interest was paid on the year.  I also get a report back that the escrow account paid $3000 property taxes (the other $3000 went to insurance throughout the year).  What do I file for in my tax categories?

Thank you Harjeet for your comments.  I'm still going through the process of finding the best lender for my current needs.

New to real estate investing and looking to diversify my investment portfolio.  BiggerPockets has been a great resource for a plethora of information, but it's time to start taking some action.  Where I'm open to suggestions and opinions of others who have much more experience than me in this market, I have seemingly found myself most interested in the "house hacking" concept of a multi-family unit (likely a fourplex).  At this stage in my life, taking away my greatest expense and generating another income stream is very enticing.

I'm hoping to find an experienced investment-minded realtor/broker who would be willing to help guide and minimize the risk of potentially making some crucial mistakes at the beginning that may ruin or complicate the experience. For example, I'm already finding out that not all mortgage groups will do fourplexes for FHA loans by policy and not all are willing to include future revenue streams from the investment property in their calculations. Things like this is probably common knowledge for an experience investor.