All Forum Posts by: Harry Tommas

Hey all,

I've struggled to understand interest tracing and even after re-reading the IRS documents I am still pretty fuzzy and hoping to find some guidance from this community.  How would interest tracing work in this scenario:

1. A while back my wife and I did a cash out refinance (Loan A) of a condo (Investment Property A)

2. We used all the refi cash from loan A towards a portion of the down payment on an **owner occupied** multifamily (Investment Property B)

3. We recently cash out refi'd Investment property B (Loan B) and now that money is just sitting in it's own separate bank account.

4. We are about to use the cash from Loan B to invest in more real estate (our own as well as other people's syndicated deals).  We are also considering using the funds to buy some gold as a hedge.

My understanding is that I can deduct 100% of the interest from Loan A, and Loan B as long as I keep the funds I received from Loan B separate from our personal funds and only use them for other investing activity, is that right?   

-Are there any other limitations on how I invest Loan B that could impact my ability to deduct the mortgage interest?

-Would there be a way to purchase gold using Loan B funds without harming my ability to deduct the interest? 

-My wife and I deposited the Loan B refinance funds into a newly created bank account that is in our personal name, any issue there?

Anyone have any experience or pointers on this?

Tom, thanks for the tip I'll pick it up and give it a look.

Dave T, wow, that clears up a whole bunch. Thanks so much for your thoughtful reply. I appreciate it. I'll likely go ahead and setup a dual member LLC with my wife and put both properties into it just to limit our liability and protect our other assets.

Austin S, I agree completely...high quality problem.

Hey all,

First post on BP and I'm a relative new comer to RE investing so be gentle. Here's my current setup:
-a long held rental property (condo) in my name with a loan in my wife and my name jointly.
-a recently acquired two family rental property in my wife's name with a loan also in her name.
-Last year my wife and I filed taxes jointly when I owned only the condo.
-My wife earns a good income and I am not currently collecting any income although I plan to do so from the rental property income (as soon as I get our entity setup).
-I am focused full time on running our rental properties and growing our portfolio of property so I believe I qualify as a RE professional.
-We are using her income to qualify ourselves for all of our investment loans on properties we buy going forward.

Here are my questions:
-What ownership structure (LLC, Sole Proprietorship, or Land Trust) is best from a tax perspective? I'm leaning towards LLC or Sole Prop.
-Will I be better able to write off expenses if I transfer both properties into an LLC, or is an LLC unnecessary from a tax perspective?
-If there is no tax benefit to an LLC, should I hold both properties in my name, or her name for maximum tax benefit?
-When I start paying myself income, is there anything I should do/know about how I disburse it?

I am especially interested in how to maximize our ability to qualify for loans going forward by keeping her debt to income ratio low.

Thanks in advance folks, I'm glad to join the community!