All Forum Posts by: Eddie Torres

Quote from @Michael Plaks:

You are looking at it wrong. Mortgage interest is only deductible if you have more "itemized deductions" than your "standard deduction." No time for a full lesson on this, sorry, but the point is: it does not necessarily reduce your taxes.

If it does, it's not dollar-for-dollar. You may pay $10,000 in interest but you only get back $2,000 back in tax savings. $2,000 is just a random number, the exact number depends on your overall tax situation.

Building an ADU if you plan to rent it is business interest, not personal interest. It gets deducted under different rules, but it still may not reduce your taxes. These rules are also very complicated.

Finally and most importantly: don't make business decisions based on taxes. Wrong mindset. Think whether this ADU makes sense financially for you, and should you also get tax benefits, then it's a nice bonus. But not the reason to do it.

Thank you for the response. I do in fact itemize every year which leads to a refund usually due to my mortgage interest.

It's my understanding that if the 2nd/HELOC is taken out for home improvement purposes, which it would be for an ADU, I am able to deduct it on my personal taxes. Even though I'm building an ADU, it's still remains on the same parcel as my primary home. I'm not taking a loan out against the ADU specifically. I can use the 2nd loan for improvements on other things on my property as well like new fencing, landscaping, etc. A lot different than taking out a mortgage loan on a standalone rental property, correct?

I had question about the mortgage interest deduction on my primary home. I understand that I can deduct mortgage interest up to $750k on my personal residence. Let's say my 1st mortgage balance is $600k and I want to take out a 2nd mortgage for $150k for home improvements which makes the interest on the 2nd deductible as well. Obviously I want the lowest interest rate possible but the way I'm looking at it is that it doesn't make much difference (from a tax standpoint) if the interest rate on that 2nd mortgage is 6% or 9% since the mortgage interest is deductible. Either way, based on my personal taxes, the deduction of that interest ends up being a refund to me every year and gets put back into my pocket. Would you say I'm looking at it correctly? Or am I looking at it wrong?

My questions stems from wanting to take out a 2nd mortgage to build an ADU now while rates or high or keep waiting until rates drop. TIA.

I had question about the mortgage interest deduction on my primary home. I understand that I can deduct mortgage interest up to $750k on my personal residence. Let's say my 1st mortgage balance is $600k and I want to take out a 2nd mortgage for $150k for home improvements which makes the interest on the 2nd deductible as well. Obviously I want the lowest interest rate as possible, but the way I'm looking at it, is it doesn't make much difference if the interest rate on that 2nd mortgage is 6% or 9% since the mortgage interest is deductible. Either way, the deduction of that interest ends up being a refund to me every year and gets put back into my pocket. Would you say I'm looking at it correctly? Or am I looking at it wrong? TIA.

Hello, I'm building an ADU at my primary residence that will be used as a rental. I'm hoping to install a doorbell video camera as well as maybe 1 or 2 exterior cameras. Does anyone know of a particular brand where I can have access to the cameras as well as give my tenants access? Like a secondary authorized user that can be changed with each tenant? I'm trying to avoid having each tenant wanting to come and install their own equipment each time there's turnover. Any feedback is appreciated. Thank you.

Just curious if anyone has any experience running a short term rental in a freelance type of way. Meaning you do your own marketing and booking without the airbnb or VRBO platforms? Is that even possible? Pros or cons? Any feedback is appreciated. TIA.

@Erin T. I don't want to sit here and judge your contractor because I don't know them but is it possible that they're lying to you in order to get you to spend more money? I'd try getting some answers from your city directly.

Like the previous person said, a new adu law just passed where it suppose to be easier to get an unpermmitted ADU permitted without necessarily making you tear down the old one. New law also passed where you don't really have to do much modification to the main home unless you have planned a larger ADU square footage wise. What square footage were you going to build?

I know you can't go back and change anything but in the future, I would've drafted my ADU plans and make sure they're approved before tearing down anything because in the event this doesn't work out, you tore down the unpermitted adu for nothing. Good luck to you. I've heard the city/county of LA isn't the easiest to work with when it comes to ADUs.

@Anand Shelat I'd require her to either elaborate on the situation or go ahead and get the restraining order. Explain to her that if she's asking you to make an exception, you need more proof or explanation so you know she's not making it up just to get out of her lease. If she gets the restraining order, you know it's serious and at that point, I'd let her out of her lease.

@Denise Johnson A lot of factors like others have said but generally it only makes sense to buy the rate down if you know you aren't going to refinance for several years. There's different buy down options obviously but I did the math one time calculating how much interest I'd save at a 2 point rate buy down and it would've taken me 5 year of no refinancing just for me to break even on the cost of the buy down based on interest saved. You can calculate this buy using a loan calculator that shows you your principal and interest. With the calculator, type in the loan amount and higher interest rate without buy down and notate how much interest is paid per month. Now, type in the loan amount and lower interest rate that you bought down and notate the monthly interest paid per month. Subtract the monthly interest of the lower bought down rate from the monthly interest of the higher rate. Let's say it's a $300 difference and you paid $5,000 to buy the rate down. You divide $5,000 by 300 (5000÷300=16.6). That means in order to break even, it makes sense to keep the loan with the rate buy down for at least about 17 months. That means it'll only start to benefit you after 17 months. If you refinance before the 17 months, you will have wasted money. This will only be an estimate as actual loan amortizations usually are front loaded with more interest being paid in the beginning of the loan but it'll help you decide if it's a good decision or not.

Hello, I'm taking on the task of having an ADU built on my lot within the next year, but as others might know, getting financing for these things can be a challenge if you don't have a ton of equity in your home or a large cash reserve. Here is the scenario:

1. I've already taken out $100k from the equity on my primary home, so that avenue has been exhausted.

2. I might be able to fund the remainder of the build with my own additional cash, but it would literally be all my reserves or close to it and that probably isn't a good way to live for obvious reasons.

3. I might be able to pull out some equity on my rental property but I'd rather not touch that and I'm not sure I'd even qualify due to almost being at my max DTI.

Does anyone know of any sources where I could get private funding? It's challenging because I'm looking to get financing for essentially a construction build so I know that might leave me with even less options since the collateral for many loans is actually the real estate that is in fact already built.

If anyone has any feedback, it would be much appreciated. Thanks.

I am looking to build an ADU on my property. 750 sq ft unit, nothing fancy. I've spoke with a few architects so far and the going rate for an architect is around $10k. I've spoken to one guy who is a draftsman and he said he can do it for much less at about $2500. He was referred to me by 2 people and has also sent me samples of ADU plans he has previously drafted. He also used to work for the city where my home is located so he knows the code well. Does anyone have any experience with this? It's my understanding an architect is only needed on more complex and bigger projects. With that kind of price savings and his previous experience, I'm leaning toward hiring him. Does any see any issue with this? Thanks in advance.