3-4 Unit Rental Properties Under Trump Tax Plan

Pokemon Master's picture
Rank: King Kong | banana points 1,398

Is there anyway you can take out a residential mortgage for a business that owns 3-4 unit rental properties? If not, it seems like buying 3-4 unit rental properties no longer makes as much sense with the new tax code. You either need to choose between being a business that can write off interest and property taxes or getting an 80% LTV loan at the residential rate. You can still get the best of both worlds if you only intend to own one property but that limits you to a $700k mortgage and you aren't getting the full tax benefit if you already pay a lot in state income tax.

Anyone have any experience in how this side hustle has changed since the new tax laws went into effect?

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Comments (11)

Aug 26, 2018

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Oct 3, 2018

Why would you not want to be the business? You'll be putting more equity in at the beginning vs residential mortgage, but more structuring options for the commercial loan. Aside from reducing some liability, that's the point of a corporation--a legal entity that exists for tax planning.

Jan 12, 2019

Sorry for the very late reply here. But I would prefer to do a residential loan, where else are you going to get an 80% LTV loan that cheap? An 80% LTV loan at 4.5% can really juice your returns vs. 65% LTV at 5.0%.

Jan 12, 2019

How did this change under Trump? LLC/commercial financing has been a point or so higher with lower LTV

Jan 13, 2019

Because interest and RE tax deductions are more limited under Trump for an andividual. I was under the impression that in order to qualify for a residential mortgage that the property must be owned by a person.

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Jan 13, 2019

Deductions for property you live in are more limited, relevant business deductions mostly aren't unless you have a limited partner receiving over 35% of losses. If you do, the business interest limitation might be relevant.

Business deductions include those for properties owned by an individual for profit, not personal use.

I'm simplifying but that's the gist of it.

Oct 3, 2018

Why can't you buy a 4-Unit Deal via Pass Through Entity? Can still write off interest and Property Taxes.

Jan 12, 2019

Also sorry for the very late reply. Can a pass through entity get a residential mortgage? I thought those had to be made to an individual.

Jan 14, 2019

They cannot

Jan 12, 2019

Back in the S&L days you could get resi loans to an entity, but no more. When I did residential in the late 90's we had clients sign two grant deeds at closing. One taking out of the trust for the loan file and a second one putting it back in the trust or entity.

I would just get the loan in your name, put the property in an LLC and take the deduction.

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