Ramifications of a cash out refi on our AZ rental

Tax, SDIRAs & Cost Segregation
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Ramifications of a cash out refi on our AZ rental

Jim Valdivia
Moorpark, CA · Member since 2018 · 6 posts · 0 votes

We've owned a rental SFR in AZ for 14 years. We are looking to refi our rental with a brand new 1st for the purpose of using the equity. I'm curious about limitations. Does anyone know of any limitations set on the proceeds from the refi? Can I purchase a 2nd home, or do I need to make it a rental property? 

Thank you,

Jim

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  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · Sarasota, FL · Member since 2017 · 5k+ posts · 3k+ votes
    7y
    Originally posted by @Jim Valdivia:

    We've owned a rental SFR in AZ for 14 years. We are looking to refi our rental with a brand new 1st for the purpose of using the equity. I'm curious about limitations. Does anyone know of any limitations set on the proceeds from the refi? Can I purchase a 2nd home, or do I need to make it a rental property? 

    Thank you,

    Ji

    Jim, there are no limitations. Depending on how you use the proceeds will determine if the interest related to the additional  mortgage balance is deductible for tax purpose. 

    If you use it for on Investment or a business,  the interest is deductible at that level(not at your rental level). 

    Underwriter will ask on writing how you plan to use the proceeds. I would refrain on saying  “to gamble” or something like that. “To improve/add to  the property” is what works most of the time. 

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  • Carl FischerPro Member
    Rental Property Investor · Ambler, PA · Member since 2015 · 2k+ posts · 1k+ votes
    7y

    @Jim Valdivia

    Enjoy the extra cash and the higher deductible interest. 

    [email protected]215-283-2868
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  • Jerry Padilla
    Lender · Rochester, NY · Member since 2014 · 3k+ posts · 1k+ votes
    7y

    @Jim Valdivia

    A SFR investment property will get you up to a 75% LTV loan with conventional financing. You can spend that cash however you would like.

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  • Jim Valdivia
    OP
    Moorpark, CA · Member since 2018 · 6 posts · 0 votes
    7y

    Thanks everyone. Just want to make sure that I cover myself.

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