All Forum Posts by: Anirudh Reddy

@Anirudh ReddyWhen it comes to a seller-financed property, who claims the mortgage interest depends on who’s responsible for the loan and who’s making the payments. Since the loan is still in your name, you can deduct the interest you’re paying to the lender on your tax return...

The buyer, on the other hand, can’t claim the interest paid to your lender because they’re not legally responsible for that loan...

I disagree. The purchase contract makes the buyer legally responsible for the loan. Hence the buyer is the only one eligible to deduct the interest.

Hmmm, Not to be argumentative, just curious. When someone buys a property using SubTo, does that make then legally responsible for the loan? Ethically for sure, but I'm not aware of a legal responsibility. I don't remember that legal argument arising in the last couple of cases I was in, so it just may not have been addressed.

I think @Patrick Roberts hit the nail on its head. Which of the two scenarios are we talking about: Subject-to or Owner-financed wrap?

A. Subject-to. In this arrangement, the buyer signs a contract where one of the clauses specifically says that he assumes responsibility for the loan which remains under the seller's name. This contract (as far as I understand, albeit I'm not an attorney) transfers the legal responsibility to the buyer, and then my answer on tax consequences stands: interest deduction belongs to the buyer.

B. Wrap. In this case, the buyer does not pay the loan directly. He pays seller's note ("outside" loan), and then the seller turns around and pays his loan ("inside" loan). In this case, the seller is still responsible for his original loan, and then Ashish's answer is correct: interest deduction belongs to the seller.

Once I re-read the original post by Anirudh, I realized that he left both interpretations possible. But based on him saying that the loan is "being paid off every month by my buyer" it seems that we're dealing with A, subject-to.

We need clarity, Anirudh.

I believe what I have in my case is a "wrap around mortgage". I am continuing to make payments on the existing mortgage from the payments received from my buyer, which I am assuming is a characteristic of a wrap-around mortgage where the seller acts as the financier for the difference between the existing mortgage and the sale price. I am financing the difference between the existing mortgage and the sale price. So, I am indeed getting monthly payment from my buyer that would cover both monthly mortgage payments and also provides me interest only payments on the difference between the sale price and mortgage payment.

A land contract has been signed in the county between me and my buyer documenting this transaction.

I am assuming that this means I can deduct interest paid to original lender and report the interest I received from buyer as income like Ashish mentioned?

0 Votes

Hello,

I sold a property on seller finance in August 2024. The loan is still on my name, but is being paid off every month by my buyer. So, for the interest paid on the loan from August through December, who can claim the interest for tax purposes? Can I claim since the loan is on my name? One of my associate mentioned that both me as a seller and the buyer can claim the interest paid every month, but I am not sure if that makes any sense.

Any help is greatly appreciated.

Thanks,

Ani

2 Votes

Quote from @Remington Lyman:

Quote from @Anirudh Reddy:

Hello,

Hello! I am trying to sell a property that i own in dayton, Ohio. I was told that homeless/squatters got access into the building somehow and they were seen by an agent who was touring property for their buyer. How can i stop homeless/squatters occupying my property?

I don't want to put boarding all over which would reduce my property value which is what my realtor is recommending me, but I am not sure if I am 100% in favor of it. What else can I do instead? Anyone experienced this in past?

Should I just go back to getting the property rented out completely and then market it for sale? Would that be a smart move?

Thanks,

Ani

I recommend putting in a security screen door. They look nice and helped me keep homeless people out. Have you been to the property yourself to see how they are getting in?

Great Idea! I didn't think about it. I haven't been to the property myself unfortunately since I am managing it out of state. I initially thought may be a security alarm, but a security screen door seems much better solution. But, it would still leave the windows as entry point. May be board up the windows but put screen doors on the main doors as a hybrid solution would work.

1 Vote

Dayton, Ohio

Hello,

Should I just go back to getting the property rented out completely and then market it for sale? Would that be a smart move?

Thanks,

Ani

1 Vote

Dayton, Ohio

Hello,

Should I just go back to getting the property rented out completely and then market it for sale? Would that be a smart move?

Thanks,

Ani

3 Votes

Dayton, Ohio

Hello,

Me and my partners are interested in buying new construction townhomes near Tampa, Florida that are going in the mid 300k price range.

We all have our homes as our primary residence and we don't intend to change that. So, we can't use FHA loans with low down payment options.

Are there any loan options out there that would offer low down payment options (5 to 10% down) for an investment property?

Thanks,

Ani

3 Votes

Tampa, Florida

Quote from @Martin Taylor:

Quote from @Anirudh Reddy:

My scenario: I have 40k$ in cash right now. 10K$ in stocks. Me and wife both have W2 jobs. We both want to retire in 10 years from now with 10k$ in cash flow per month.

Goal: Buy SFH rental property and rent them out.

What I think I would be able to achieve with the cash I have: I can buy a 120k$ SFH in Memphis with 220$ in cash flow per month. I would have to do 25% downpayment for every SFH purchase of that value = 30,000$. For the sake of analysis, I assumed I would buy the property of this value over and over 1 for every year with 30,000$ in downpayment every single time. That would give me below cash flow through my first 10 years.

Year 1 – 2748$ (1 SFH)

Year 2 – 5580$ (2 SFH's)

Year 3 – 8907$ (3 SFH's)

Year 4 – 12537$ (4 SFH's)

Year 5 – 16478$ (5 SFH's)

Year 6 – 20742$ (6 SFH's)

Year 7 – 25337$ (7 SFH's)

Year 8 – 30275$ (8 SFH's)

Year 9 – 35565$ (9 SFH's)

Year 10 – 41219$ (10 SFH's)

41k$ per year would give me 3400$ per month which is nowhere close to my goal of 10k$ per month.

Question to the experienced folks! – What am I missing? With 30k$ in cash every year to invest, am I constrained to just 3400$ in cash flow after 10 years if I go ahead with long term rental and buying traditional SFH's without any other creative investing method involved? How can i tweak my math/investing approach to get to my goal of 10k$ per month cash flow?

Maybe switch your strategy from SF to MF and see how that improves your timeline for reaching your cash flow goal. When we started it was with one SF home but we quickly transitioned into MF and bought a triplex a short time later. We're at 4 properties but 11 doors. Our monthly cashflow far exceeds what we would see with 4 SF properties. Starting with your goal and working backwards may also help in finding the best mix of property types going forward as well. Good luck!

Thank you Martin! I will definitely consider this strategy.

0 Votes

Quote from @Eric James:

If you don't have a large amount of cash there's only one way I know of to scale somewhat quickly: BRRR or other value add strategy. You won't do it buying one rental a year, as you have realized.

Thanks for sharing your insight eric!

1 Vote

Quote from @Chris Seveney:

@Anirudh Reddy

Conservatively you need 10x your goal in cash, so if you want $100k a year you should have $1M (this is actually aggressive) - buying rentals in Memphis will not get you there as you have zero appreciation and one time a tenant destroys a place and $15k of damage there goes 5 years of cash flow

Realistically 10 years with $30k year you won’t get there unless you were a lot more active in the space such as flipping or renovating properties yourself or raising funds from others but that typically means leaving your w2

Thank you Chris. Your note about effect of damage by tenant in a particular case on cash flow is interesting. Thanks for sharing your insight!

0 Votes

My scenario: I have 40k$ in cash right now. 10K$ in stocks. Me and wife both have W2 jobs. We both want to retire in 10 years from now with 10k$ in cash flow per month.

Goal: Buy SFH rental property and rent them out.

Year 1 – 2748$ (1 SFH)

Year 2 – 5580$ (2 SFH's)

Year 3 – 8907$ (3 SFH's)

Year 4 – 12537$ (4 SFH's)

Year 5 – 16478$ (5 SFH's)

Year 6 – 20742$ (6 SFH's)

Year 7 – 25337$ (7 SFH's)

Year 8 – 30275$ (8 SFH's)

Year 9 – 35565$ (9 SFH's)

Year 10 – 41219$ (10 SFH's)

41k$ per year would give me 3400$ per month which is nowhere close to my goal of 10k$ per month.

0 Votes

All Forum Posts by: Anirudh Reddy

Anirudh Reddy has started 7 posts and replied 12 times.

Post: Who can claim interest paid on a seller finance property?

Post: Who can claim interest paid on a seller finance property?

Post: How to keep homeless people away from vacant property while I try to sell it?

Post: How to keep homeless people away from vacant property while I try to sell it?

Post: How to keep homeless people away from vacant property while I try to sell it?

Post: Low down payment (5% to 10% down) investor loan options in Tampa Florida?

Post: Goal setting: 10k$ per month in cash flow in 10 years

Post: Goal setting: 10k$ per month in cash flow in 10 years

Post: Goal setting: 10k$ per month in cash flow in 10 years

Post: Goal setting: 10k$ per month in cash flow in 10 years