Balance Between Tax Deductions and Remaining Lendable

[Corri Golden]

In 2022, I purchased 10+ single family and small multifamily properties.  During tax time, I deducted as much as I could.  Unfortunately that left me unable to purchase properties the following year.  How can I find the balance between deducting expenses and remain lendable? Are there any strategies or books that touch on this?  I've spoken with the two CPAs and they have basically left it to me as to how much I wanted to deduct.

[Michael Plaks]

@Corri Golden

It cannot be "up to you" how much to deduct, they probably did not explain it well. If you spent $1,000 on marketing, you do not get to choose whether or not to deduct it. You must deduct it, otherwise you're breaking both tax rules and lending rules.

Where you have options is how to classify some expenses. For example, if this $1,000 was spent on appliances, you can deduct it as maintenance which hurts your lending profile, or you can deduct it via bonus depreciation that does not affect lending. There's a lot of details here, and it needs professional guidance.

But there is a bigger underlying issue. If all you do income-wise is rental properties, there is a good chance that you cannot show enough income for lending, no matter how much you play with depreciation. 

The solution is asset-based lending. Income-based lending is mostly for people with traditional jobs. Bigger Pockets has a special forum on creative financing  https://www.biggerpockets.com/forums/50  where asset-based financing is discussed. And there're tons of blog posts and podcasts if you search for them.