semi-fired
Confused about dryer sheets
- Joined
- Jun 26, 2008
- Messages
- 4
Hi all,
I'm considering picking up a residential rental property in the small Missouri town I live in, and there are some options as to how I can finance it. I'd like to get your opinions on them, including tax implications of each.
Option #1: I can pull the entire purchase price out of the equity of my residence. My current loan on my home is about 20% of the value of my house. The note is held by a local bank, and they'll rewrite the note at no charge to me. This is probably the easiest option (20 minutes of my time and no $$ cost), but I'm concerned about the tax implications. I'll get the normal personal writeoff on interest, but I assume I'll have to pay income taxes on the rent (minus prop taxes, insurance, expenses) as I won't have a mortgage payment to offset it (I'll still have a mortgage payment of course, but it'll be combined with my own home's mortgage).
Option #2: My bank will write a loan backed by CDs I have at the bank, 2 points above what they're paying me. This locks up my CDs however, and what's the point of making less on my cash if I lose the liquidity.
Option #3: I go get traditional financing on an investment property, and I assume I'll pay the market rate for a commercial loan, which is 1-2 points higher than primary residence loans? And I'll have to come up with 20% down.
Let me know what you think. Thanks in advance.
I'm considering picking up a residential rental property in the small Missouri town I live in, and there are some options as to how I can finance it. I'd like to get your opinions on them, including tax implications of each.
Option #1: I can pull the entire purchase price out of the equity of my residence. My current loan on my home is about 20% of the value of my house. The note is held by a local bank, and they'll rewrite the note at no charge to me. This is probably the easiest option (20 minutes of my time and no $$ cost), but I'm concerned about the tax implications. I'll get the normal personal writeoff on interest, but I assume I'll have to pay income taxes on the rent (minus prop taxes, insurance, expenses) as I won't have a mortgage payment to offset it (I'll still have a mortgage payment of course, but it'll be combined with my own home's mortgage).
Option #2: My bank will write a loan backed by CDs I have at the bank, 2 points above what they're paying me. This locks up my CDs however, and what's the point of making less on my cash if I lose the liquidity.
Option #3: I go get traditional financing on an investment property, and I assume I'll pay the market rate for a commercial loan, which is 1-2 points higher than primary residence loans? And I'll have to come up with 20% down.
Let me know what you think. Thanks in advance.