I wanted to find a property to improve that had a good foundation and structure, but needed a lot of cosmetic work.How did you find this deal and how did you negotiate it?

These updates modernized the property, improved its curb appeal, and significantly increased its market value.

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.

Deegan and @Arda Bircan There are technically 7 Tests for Material Participation (but 3 that are most common) -> the individual 500 hour mark, that the activity of the individual is substantially all, and that the individual participates more than 100 hours + no-one else spends more time than them.Litmus Test: Are your hours integral to the operationsThe hours that qualify must be substantially all hours and have a legitimate impact on the rental activities.Activities that generally count: showing the property for rent, taking tenant applications & screening tenants, preparing & negotiating leases, cleaning & preparing the units for rent, repairs, and improvements, managing the construction, purchasing supplies & materials, inspecting the property, responding to tenant complaints & inquiries, collecting & depositing rents, evicting tenants, writing & placing advertisements, and working on your websiteActivities that don't count: education & research, investor-type activities, and travel time..

Negotiate with seller using the inspection report.Visit the area to get a feel for the weather/amenitiesIf you’re looking to get your money back down the line, don’t over spend on improvements Hope this helps! 

It's your opportunity to improve your lease agreement and to enforce lease terms that you want enforce and that may not have been in the prior lease.

Below are two charts that show the amount of unsold "improved" properties.

You have to keep at it and file for eviction if there is no improvement. 

It's essential to stay adaptable, continuously learn, and improve your underwriting process to avoid surprises and maximize financing opportunities.In summary, evaluating deals requires a deep understanding of underwriting templates and loan types.

If none of the other rental comps in the area have patios, it may be "over-improving".