All Forum Posts by: Dan C.

I recently bought a cash-flowing duplex and SFH home. I am house-hacking the SFH and the split will be somewhere around 28% personal and 62% business. Some of the money I used was my own, but I also borrowed multiple times (all within a 1.5 month timelines from my parents to make this happen). They hold a lien on the SFH and we did a promissary note/private mortage agreement for 80% of the house although I used more than that from them towards the house. I am paying them a typical mortage fixed rate monthly. Before I make the first payment this month (and a little extra for the past months, we were putting it off to know the final amount), I want to know how it should all be structured in writing to make sure I can deduct all the interest for the duplex and as much as possible for the SFH considering a house-hack is not all business. The entire payment is interest as it is a interest only loan. My parents will be claiming these gains on their taxes of course.

How should I structure everything in writing? (besides the promissary note already signed and notarized)

Do I need to prove I used all of this money for business purposes to the IRS to be deducted?

How should I split the allocation between houses given the implication of the note below? (I have to know how much for each house so I can do the accounting correctly for the house-hack)

Is there any other question I should be asking?

I'm also looking for a CPA, EA to help me through this journey who is an investor themselves. Preferably someone who can do Indiana taxes and Florida when I move there eventually. If you have any recommendations, that would be awesome!

Thank you for your help and advice in advance!

Note: I will be keeping my parent's loan (amount on the promissary note and more) for the next couple of years on the SFH, but fixing up the duplex, refinancing it, paying them off for that portion by Feb/Mar 2023. I will be financing the remodel with my own money.

I recently bought a cash-flowing duplex and SFH home. I am house-hacking the SFH and the split will be somewhere around 28% personal and 62% business. Some of the money I used was my own, but I also borrowed multiple times (all within a 1.5 month timelines from my parents to make this happen). They hold a lien on the SFH and we did a promissary note/private mortage agreement for 80% of the house although I used more than that from them towards the house. I am paying them a typical mortage fixed rate monthly. Before I make the first payment this month (and a little extra for the past months, we were putting it off to know the final amount), I want to know how it should all be structured in writing to make sure I can deduct all the interest for the duplex and as much as possible for the SFH considering a house-hack is not all business. The entire payment is interest as it is a interest only loan. My parents will be claiming these gains on their taxes of course.

How should I structure everything in writing?  (besides the promissary note already signed and notarized)

Do I need to prove I used all of this money for business purposes to the IRS to be deducted?

How should I split the allocation between houses given the implication of the note below? (I have to know how much for each house so I can do the accounting correctly for the house-hack)

Is there any other question I should be asking?

I'm also looking for a CPA, EA to help me through this journey who is an investor themselves. Preferably someone who can do Indiana taxes and Florida when I move there eventually. If you have any recommendations, that would be awesome!

Thank you for your help and advice in advance!

Note: I will be keeping my parent's loan (amount on the promissary note and more) for the next couple of years on the SFH, but fixing up the duplex, refinancing it, paying them off for that portion by Feb/Mar 2023. I will be financing the remodel with my own money.

Thank you for the advice, I'll definitely cash-out with the other one for 75% at the 6 months mark so I can get all the improvement money out. For the one without significant improvements, I'm fine with the 75%, when the time comes I'll have the savings and the job to pay the difference. With your advice, it sounds like keeping the interest only private loan is the best. Thank you for the advice, just needed to check in with somebody with a little more experience.

No, there will be no significant improvements. I have another already cash-flowing house with a similar scenario where I bought it for 105000, putting about 37000 into it and it will be worth 160-180K so I will definitely wait the 6 months on that one. That should put me at about 15-20K of my own money once I cash out. The private money loan from my parents is almost is about 95% loan amount at a rate of 5.5% interest only for up to 5 years. The high leverage and interest only part really helps on the cash flow and overall return numbers.

I probably won't save anything switching to a 3 or 5 ARM. A 7 or 10 ARM might give me a while to wait out interest rates. Do you think they will ever go down lower from here in the next 3-10 years or is getting a 30 year right now a good idea? I know 6% isn't high for post WWII American history but has served as a ceiling for the last 15 years.

I am buying the property in 3 days on 7/8/22. I'm buying with cash but am borrowing from my parents. If we write up a formal loan and file a lien, will that automatically push me to 6 months or is it the same either way? Thank you for your help everyone!

Hi, I’m a first time cash buyer who bought 2 properties with my name on the property but am using private funding from parents as well (I pay them a monthly interest rate). I didn’t know about the 6 month refinance rule for cash buyers. I’d really like to cash-out refinance sooner than 6 months. Is there any way around it? Thanks in advance.

So I'm about to close my first investment duplex on 5/31/22 in Indiana. It currently has tenants which will be staying. From what I've read, costs from before I have started my first rental are considered startup costs for tax purposes and they can only run to $5000. I want to buy a set of power tools to work on the house and write them off as a business expense. If I buy them before (but same month) I have closed on the house but are using them to work on the house after I bought them, are they deducted vs. capitalized as a start-up costs vs. regular cost. Thank you for the help in advance!