The conventional loan max is 10+1.In order to finance a new primary residence, I will need to reduce my loan count by 1.I'm hoping to do the following:Cash-out refinance Property A, with a new, bigger first mortgage.Take the proceeds from Property A and pay off Property B.So, In summary, instead of having two small loans on Property A and Property B, I will have one big loan on Property A.I have presented this idea with my CPA, and I was told the cash-out portion of the refinance would not be tax deductible because cash-out refinances must be applied to improvements on the same property.I reached out to a second CPA for another opinion, and they were not aware of any reason why the interest on the cash-out refinance would not be tax deductible as long as the funds were used to pay off a purchase mortgage on another rental property.That's where you come in :).I would like to hear your opinion on the matter, or some possible ideas on how to reduce my loan count by 1 (other than paying it off with cash).

James,Without knowing the Limits, Location (fire protection varies), deductibles, loss history, etc. the comparisons will be difficult.  

500 x 20% : $118K down payment + closing costs ($10K ball park): Total to purchase $128k Reno: $50k + $128k : $178k ADU: $115k plus $178k : $293k All in Rents: $5k x 12 months: $60k Cash on Cash return: 60k divided by $293k : ConC ROI: Gross : 20.4% (I'm sure you will have maintenance expenses, capx, PM etc etc ) and you will also have tax sheltering and deductions: plug in all numbers to get an accurate number). 

.- Tax deductions.

Below $500k, it has no effect.I found another example from a different website: http://www.floresattorneys.com...RIA illustration 2: Jack Able, a single taxpayer, bought a home on Jan. 1, 2009, for $400,000, and uses it as rental property for two years claiming $20,000 of depreciation deductions (thereby reducing his basis in the home to $380,000).

@Aurora MartinezI would deduct from their deposit and explicitly say that could turn a violation of the terms of the lease.

I'm looking for a Accounting firm that has a good amount of experience, knows the ins and outs and loopholes, deductions.

@Patrick PhilipYou do not deduct the cost of buying land and costs directly related to construction, such as L&M, until you sell the house next year.

You want an accountant that can help you strategize and who is responsive when you want to know the tax consequences of the decisions you are making throughout the year.Since you are a real estate agent, you also want an accountant that understands business taxation and deductions as well. 

I saw that I can list the price for 20% less than the market rent value and still be able to claim the tax deductions.