All Forum Posts by: Joe Roberts

I have a few questions when it comes to calculating taxes on my BRRRR properties I am hoping someone can shed some light on.

1. I want to make sure from my research that I know how to properly arrive at the depreciable basis for a property. I have a property that I purchased for 101,000. Leaving closing costs aside (I have a question about them later), I then made 45,000 in renovations to the property and it later appraised at 199,000. The county assessor has placed a land value of $40,500 and an improvements value of $76,900, so the land % is 34.5% and improvements is 65.5%. Now for the refinance I had an appraisal done which placed the land value at $40,000. As I understand it, I now have the option of A) Multiplying 146,000 (purchase + capital improvements) by 65.5% for depreciable basis = 95,630 or B) Subtracting $40,000 (appraised land value) from 146,000 for depreciable basis = 106,000. Is this correct?

2. If I do a cost segregation study for the purposes of taking advantage of Bonus Depreciation (I am considering some of the algorithm-based DIY services) anything placed in the <20yr category and depreciated 100% is subtracted from my depreciable (27.5 year) basis. So if I can take $20,000 worth of 100% bonus depreciation, then the amount from the above example that I would depreciate over 27.5 years would be 86,000 (106,000-20,000). 

3. I know that I can add certain closing costs to the adjusted basis of my property, but in the case of a BRRRR, I am doing two closings in a year, so can I add all the costs which I incurred twice (e.g. recording fees) to the basis?

4. As long as I used that money from the refinance to further my business (i.e. purchase another property or renovate another property), which I did, I am allowed to deduct the interest payments correct?

5. Hard Money Loans and Private Loans. Can I deduct the interest and points I paid in Hard Money Loans or to Private Lenders for the purposes of BRRRR-ing a property?

6. HELOC. Can I deduct the interest I paid on a HELOC which I took out for the purpose of BRRRR-ing a property?

Anyone with any insight on any (or all) or these points is welcome! Thanks in advance!

@Marc Poulin

Wilmington has become a very competitive market (for all the good reasons listed by folks above) and BRRRR deals in the neighborhoods above can be hard to find, though not impossible. Rarely will you be able to find a deal in Wilmington proper where you can be all-in for 75% LTV, so plan on slowly having your BRRRR budget chipped away with leaving 1-$15k in each deal.

The outlying areas offer better prospects, but they are increasingly competitive as well. I would suggest you look in Castle Hayne and Leland as good areas. Hampstead is too pricey for the most part as it is a wealthy bedroom community to Wilmington proper and with its fantastic schools come very high taxes in Pender County. You can also look in the Sneads Ferry and Holly Ridge/Surf City areas for some good value (though there is low inventory). 

@Sean McDonnell is a great local agent who specializes in serving OOS investors and will have some good info for you as well. 

Best of luck!

I am looking at purchasing a multi-unit in Atlanta (in the Bankhead/English Ave/Washington Park area) and want to find a good property manager who has experience managing multi-unit commercial rentals and specifically has done a lot of work with the AHA and knows the ins and outs of renting to Section 8 in the Atlanta market.

Any recommendations are greatly appreciated!

@Marcus Holloway If you don't mind me asking, what lender did you use?

@Brett Owen I have not, I will check them out though! I saw  an ad in the BP Magazine this week that Aloha Capital does Bridge Loan and long-term financing as well

@Brett Owen

That’s something else I’ve definitely considered. Hard to find banks doing HELOCs on investment properties right now. I called 30 banks this week and none of them are doing it! 

@Zach Westerfield

That’s a really good idea, I’ll have to start beating the bushes to find someone!

@Zach Westerfield

Everything I’ve read (and heard) is that it’s purchase price only, no rehab costs.

https://selling-guide.fanniemae.com/Selling-Guide/Origination-thru-Closing/Subpart-B2-Eligibility/Chapter-B2-1-Mortgage-Eligibility/1745493761/What-are-the-requirements-for-a-delayed-financing-exception.htm

Here it says you can roll closing costs/points into the new loan but says nothing about rehab.

@Zach Westerfield

I didn't want to do delayed financing because although I am not trying to pull out more than purchase+rehab, a 75% LTV off the expected appraised value would allow me to recoup a good amount of the rehab costs, which is what I want to do.

I would absolutely do commercial financing (and pay the higher rate) if I could find 75% LTV on a 25 or 30yr amortization. Do you know any lenders offering that?

@Tarik Turner

Do you know of any off the top of your head? I am definitely willing to explore higher rates for a quicker turn on my $

It was a great time last night, very excited about our new investing community!

Anyone in the Jacksonville, Sneads Ferry, Holly Ridge, Surf City or Hampstead area should definitely check it out next time!