All Forum Posts by: Austin Cheatham

At the end of the day, it’s really up to what you want to achieve. From a tax and cash perspective, refinancing could be a solid move. You could pull out cash tax-free and still benefit from depreciation and other deductions on the rental side, which could reduce your tax liability.

Quick Tax Comparison:

• Selling:
• Capital Gain: $160,000
• Tax Due: ~$32,000 (at 20%)
• Net After Tax: ~$128,000
• Refinancing:
• Loan Amount: ~$263,500 (at 62% LTV)
• Tax Impact: None on the cash-out
• Rental Deductions: Continue benefiting from depreciation and mortgage interest deductions.

Refinancing offers liquidity without the immediate tax hit and lets you maintain rental income, making it potentially more advantageous.

All of these are rough numbers of course, but just some different ways to think about it!

While I’m not an experienced investor myself, I can share my perspective as a real estate accountant, which might help you weigh your options.

1. Refinance and Rent:

Given the numbers you've shared, refinancing and renting could be a solid move. With an ARV of $400-425k and an LTV of ~62%, pulling out your initial investment while maintaining positive cash flow around $500 per month sounds like a good strategy. This would allow you to keep the property in your portfolio and generate ongoing income.

From a tax perspective, holding onto the property as a rental would let you take advantage of depreciation, which could reduce your taxable income. Plus, since the house is fully renovated, you’re likely to face fewer maintenance costs in the near term, helping maintain that cash flow.

2. Sell and Reinvest:

On the other hand, selling could free up about $85k after taxes and closing costs, which gives you flexibility to invest in other properties, possibly in PA where you’re more familiar with the market. However, you’d need to consider the impact of short-term capital gains tax, which depends on your specific tax bracket. Selling could be a good option if you have plans to quickly reinvest that capital into high-return opportunities.

3. Opportunity Cost:

Something to consider is the opportunity cost of the $160k in equity tied up in this property. If you think you could achieve higher returns by reinvesting that equity elsewhere, selling might be the better choice. But if your goal is to build a portfolio of rental properties for long-term cash flow, holding onto this property could help you achieve that, especially with the solid cash flow and lower anticipated repairs.

4. Trust Your Gut—And Your Strategy:

It sounds like both you and your wife are weighing your options carefully, which is great. My advice would be to align your decision with your long-term strategy. If building a portfolio of cash-flowing rentals is the goal, then refinancing and holding onto the property might be the way to go. If maximizing your capital for future deals is the priority, then selling and reinvesting could be more beneficial.

I’m happy to help you run the numbers or dive deeper into the financials if that would be useful. Feel free to reach out—always glad to assist.

Best of luck with your decision!

First off, congratulations to your wife on passing the real estate exam! It sounds like you both have a solid vision for your future in real estate, and it's great that you're taking proactive steps to build your credit and explore creative financing options like wholesaling.

As a real estate accountant, I work closely with investors who are just starting out, as well as seasoned pros. Having a solid financial foundation is key, and it's smart that you're focused on building your credit. In addition to that, here are a few pieces of advice that might help you on your journey:

1. Wholesaling as a Launchpad: Wholesaling can be a great way to generate capital and gain valuable experience in the market without the need for significant upfront investment. Just make sure you understand the legal and tax implications—having a solid contract and knowing how to navigate assignment fees is crucial.
2. Financial Planning and Tax Strategy: Since you're already in the process of building your credit, now's the perfect time to start thinking about your long-term tax strategy. As you grow your business, having a real estate accountant in your corner can help you maximize your deductions, ensure compliance, and plan for future investments. For example, understanding how to leverage the tax benefits of owning rental properties can significantly impact your bottom line.
3. Educational Focus: Your business focus on educating others about homeownership is not only commendable but also a strong marketing tool. As you build your brand, consider offering workshops or online content that also touches on the financial aspects of real estate, like credit building, tax planning, and investment strategies. This can set you apart and attract clients who are serious about making informed decisions.

If you ever need advice on the financial side of real estate, I’d be happy to chat. Building a strong team, including a knowledgeable accountant, can make all the difference as you move forward.

Best of luck on your journey—you're on the right track, and it’s clear you’re willing to put in the work to achieve your goals.

As someone who specializes in real estate accounting, I can share a few insights that might help you find the right tax strategist.

1. Real Estate Accountants: Working with an accountant who has a focus on real estate is crucial. These professionals not only understand the intricacies of tax planning for real estate investments, but they also stay updated on the latest tax laws and strategies that can maximize your deductions and improve your cash flow. Look for someone with experience in areas like 1031 exchanges, cost segregation studies, and passive activity loss rules.
2. Real Estate Tax Attorneys: If your situation involves complex transactions, legal disputes, or estate planning, a tax attorney specializing in real estate can be an invaluable resource. They bring a legal perspective to your tax strategy, which is particularly useful if you’re navigating issues that might require more than just accounting expertise.

Depending on your needs, you might even consider a collaborative approach, where both an accountant and a tax attorney work together to optimize your tax strategy.

Feel free to reach out if you have any more specific questions—I’m happy to share more insights.