All Forum Posts by: Gabriel Parker

That seems counterintuitive given the intention is to lease the property to the business itself, not the individuals. Still a plus regardless since they deduct so little right now as it is. 

Hey there Bigger Pockets Community,

I have an interesting situation on my hands and would like some input to see if this plan is allowable or wise. My In-laws own a business that has government contracts in transit and are in a situation where they fight at the end of every year to lower their cash-on-hand and increase their overhead to continue to qualify for eligibility in certain contracts. 

They use a home office for their, "corporate," office and generally deduct what they can though they own it outright so only can deduct a small percentage of taxes and utilities they pay on the home. 

My thought was this: Could my fiance or I, (somebody outside ownership or affiliation with the business) create a property holding company that would purchase the home from her parents and lease it back to their business? Their home is zoned Low-Density Mixed-Use so it is allowable in their neighborhood to classify a property as light commercial use already. 

The thought here is that they could deduct their full lease payments (fair market value to rent that home would be approximately $2,800/ Month) as business overhead and the upkeep for the property would be classified as Capital Expenditures under the property holding business. 

Nothing here strikes me as illegal in any way though I don't know the nuance of the business tax code. Any thoughts on this would be appreciated.

Thanks for the input guys! @Nuhan Demirkan that is a good point about the opportunity cost of the money used for paying down the interest. 

@Kyle Eckert those are pretty drastic savings. Is that all from the shorter term of the loan? Or is some of that attributed to a lower interest rate as well? I will definitely utilize an amortization calculator though.

@Melvin List if the bulk of the down payment wasn't coming via gift money from in-laws I would consider that more heavily.

@Thomas S dead Equity is a term I'm hearing for the first time but it seems a good one to know. My Hope Is, in the future we will be able to refi or pull out a HELOC to have access to some investment capital.

Hello all at BiggerPockets!

I am new to the site and I am looking to pick some brains. My girlfriend and I are looking at buying our first home in the Pensacola, Florida area and I have a series of questions that I can't simply plug into Google. I recognize that though these questions will vary from case to case, some of you may have general principles that you follow and us being first-time home buyers, I'm hoping to get into the mind of experienced real estate buyers and possibly mortgage brokers. First off, should we spend more on buying down the interest rate or buying down the principal? Right now we have enough to cover 20% down on a $200,000 mortgage at about 4.1%. I know we would have PMI to pay if we went below 20% down but my question is, would we save more money with a reduced interest rate than we would spend on PMI? Second, should we go with a 20 year mortgage or a 30-year and pay down principal with the difference between the two? I understand there will be considerations and caveat to every single question I can have but I have so many of them and I don't know where else to get a straight answer. Thank you all in advance!