Tax Benefits For Rental Property
hi everyone!
this is my first time on this site and it looks great, very informative.
I have no mortgage on my home and am looking to finance a rental property with no money down using the equity i have. my question is, if i do a cash out loan on my residence and use the money to pay for the investment property, will i still have the benefits of deducting expenses, depreciation, etc on the investment prop? i also have a fair amount of stocks i could also take out a loan against. any info would be greatly appreciated!
I believe you can on your investment property only claim the depreciation.
But I would strongly check with your CPA, as the few dollars spent now can save you headaches in the future.
I am in the process of using equity to buy my next property out of my home, and seeing my CPA today.
I'll come back with the answer.
Also I would strongly urge you to reconsider using your stocks as collateral. Think of the worse case scenario, what happens if the stock market crashes overnight?
I think a lender would have a hard time being convinced they should lend to you based on stocks.
I sold all my stocks and used that to buy property instead, and I found this to be a far safer investment than stocks.
As an example in 2000 when I bought my first property I put $2500 down.
I put $2500 in the stock market.
After three years I sold this property after earning $1000 per month CASHFLOW for three years $36000 from it, and equity of $54,000 after capital gains, agents fees and commissions, plus I pushed my credit score over 700's by paying 2 mortgages off early.
At the same time I sold the stocks I bought for $1.09 I ended up with 2293 stocks, sold these shares at $ 9.90 ending up with $22000 roughly less tax and commissions etc.
Now these stocks went up to $35 last year that meant I could have made over $80k, but it could have also gone down to .70cents.
So I stick to real estate.
I also met a guy whom lost $3m last year his lifes savings. I told him he should have put it in real estate and listened to his gardner friend whom taught me to do just that.
I also bought the VP of Merryl Lynchs' Rolls Royce two years ago, after he had some bad luck. Something about the stocks went way down overnight?
Can happen.
So my $2500 in RE vs Stocks has me convinced I am doing the right thing.
It is up to you to decide by doing your research and asking good questions like this one, and hope those more experienced than I can give you a better answer.
Happy Investing$$
You will be allowed to take any and all deductions for the investment property no matter how you came up with your down payment. The interest on the home equity loan will have some limitations if you borrowed more than $100k. Good luck and keep investing!
i bought my first house last year with the equity that was in mine. interest is deductable
as far as the property you buy you still depreciate like normal
KIWIINUS
did u learn anything of interest from your CPA? please share.