topic Should i refinance my rental property and take cash out? in Investors & landlords

Should i refinance my rental property and take cash out?

kmart23 — Sat, 01 Jun 2019 15:49:55 GMT

Scenario: current loan = 110k current house value 350k Lets say i take out a loan for 210k pay off my old loan and recieve 100k cash out. my interest will go up, will i still get to deduct the full amount of interest against my rental income? Does it matter what i do with the 100k? Implications of: Improve rental property? pay down unrelated debt? Nothing-just put it in the bank?, Invest it in stock market or other investment opportunities? When ultimately selling property will my taxable gain still be calculated after paying off debt (plus any depreciation recapture)?

The balance owed on a property does not impact the gain o...

MichaelL1 — Sat, 01 Jun 2019 15:49:57 GMT

The balance owed on a property does not impact the gain or loss when sold.

If does impact what money you get at closing.

Would I get a loan to invest in the stock market no--but that is me.

I am not a risk taker and like to pay down debts. However we do not do tax planning here, so choice is totally yours.

There is always depreciation recapture on the sale of the rental.

Thanks Michael, what about the increase to my interest ex...

kmart23 — Sat, 01 Jun 2019 15:49:59 GMT

Thanks Michael, what about the increase to my interest expense -- i still get that as a reduction to my rental income @ 100%, correct? And does it matter what i do with the money? I know if i did improve the property, like maybe add a pool for 50k, I would get to increase my basis by that amount, but what if i do nothing with the money? That's really the main question, does it matter what i do with the money from a tax perspective (notwithstanding the tax benefits of putting it right back into improving the actual rental property you just refinanced)

https://ttlc.intuit.com/replies/3301761">https://ttlc.intuit.com/replies/3301761</a>

<a rel="nofollow" target="_blank" href="https://www.fool.com/knowledge-center/tax-implications-for-refinancing-an-investment-pro.aspx">https://www.fool.com/knowledge-center/tax-implications-for-refinancing-an-investment-pro.aspx</a>

This 2nd link is pretty good and will answer everything which is yes, you will have a higher interest deduction on the return