All Forum Posts by: Aaron Zimmerman

You would pick up the additional deduction by filing a form 3115 assuming the property was placed in service in 2024 and you're filing a 2025 tax return

If you have two other properties in the same LLC, then if someone from your other two properties sues you, all of the assets in the LLC could be at stake depending on size of lawsuit

As I understand the situation, you have a property that you're doing a cash out refinance. Then, you plan to acquire another property with the proceeds of the cash out refinance. The mortgage interest on the first property would be deductible because you're releveraging the property. Please correct me if I'm wrong on the facts and I can assist and revise my answer as the facts change

Speaking on the cpa side, you will definitely want to connect with one to talk through the ramifications of owning and managing a short term rental. There are significant tax benefits at stake and there's a lot of variables you don't want to miss.

biggest things are renting the property out for an average of 7 days or less, 100 hours and more than anyone else's time (or one of the 6 other material participation tests, and not using the property too much post move out

I would recommend finding anything to house hack. If you need to, rent by the room in a SFH or utilize the property for an Airbnb.

On #1, that makes sense. I would also rather buy the property vacant if possible! You could get a bad resident.

For property taxes, in my market property taxes are paid in arrears (I.e. in 2024, you're paying 2023's property tax). If this is the case for you, then this applies. let's say it was $5,000 for the previous year taxes. Let's say you close in November (11/12 of the year). You would want to make sure you get $4,812 ($4,500  x 11/12 x 1.05) as a property tax credit on your closing statement. 

regarding the appraisal, only you have access to the appraisal. Seller doesn't have the appraisal.you are right that the loan balance and payment would go up more but you're saving the money today. This is especially helpful when you need to put money into the property. 

If you're trying to reduce cash out of pocket, you can do the following assuming it's an active rent

1. Close earlier in the month (you will get more of the rent allocated to you and have additional time before your mortgage starts. 
2. get 105% of prior year property taxes, at least.

3. If the property appraises, and a condition to increase the purchase price by 2% (or whatever your max credit is) and then get a credit. This can fund your buy down.

4. Buy during non-peak times. Buy during September - January and you will likely find the best deals. 

There's a lot of great professionals on biggerpockets. I would encourage you to get a real estate focused accountant as they should know the tax code the best. I'd recommend reaching out to a few people in the forums you resonate with and go from there. Otherwise, getting recs from local investors can also be a resource!

That's an unfortunate experience. Sorry to hear. I can assure you that true professionals do not act like this!

I would agree on the house hack provided you want to live there for a couple years and you're reducing your housing expenses overall. You wouldn't want to house hack if you're increasing your housing expenses or the property won't cash flow when you leave.

another thought too is that if you buy now and you're reducing housing expenses, rents will increase over time, so it may cash flow when you choose to not live there