Question On Profit?
I am doing a rehab property. I should profit enough money to pay off one of my rental propertys and still have enough profit to do another rehab .
My question is will I be taxed more for the money put toward the purchase of the rental property?
And will paying off the rental property hurt me at tax time because of no losses to claim?
I am considering paying off one of my rentals to help me with my debt to income ratio. So I can buy more rentals.
I have not hired a accountant yet. But I will in the next month or so.
I was wondering what other people here thought.
Thanks,
Marty
Paying off the property will save you the interest you pay. Not paying it off means you'll pay all the interest but get roughly a quarter of it back after you deduct it. WHat would you rather have in your pocket at the end of the year, ALL the interest you would have paid, or 1/4 of it from being able to deduct it from your taxes?
It's not a good idea to pay interest JUST BECAUSE you'll get to deduct it at tax time.
If you intend to invest the money you'll have (instead of paying off the loan) then it's an entirely different question. If it's at a good interest rate, then you may wanna keep the loan.
Anonther reason to keep your loan is if you keep financing properties and pay them off, you are paying closing costs over and over. You could keep the loan and use your money to pay cash for another property.
One reason I keep my loan is that I don't always qualify for new loans (since I haven't had a job for the past 5 years). I then use my cash to buy another one.
There are many other factors to consider too, these are a few and I hope they get you rolling on the thought processes.
-Tony