Buying a Rental Property, pt.2

So things are moving a pace, Watson. Our lender, a very friendly and hardworking guy, has added a new wrinkle to our tax write-off question. Just as we were about to enter escrow, he suggested to the agent that we would like to roll the approximate non-recurring closing costs into the loan. He figured them at @ $3000. So now a quick calculation at www.bankrate.com shows us that this will increase the amount of the interest we might pay over the life of the loan to $7200 at 7%. We are just ball parking here because the lender has told us already that he is looking to use a stated income basis for the loan because of our son's credit history. His FICO is 730 but for real estate, especially these days, since he has only about a year of payroll background, the FICO is not as important as it normally is. The question for us though is the value of the tax write-off this year. If we pay the closing costs, we get to claim them now. However, since this property will be a cash flowing entity, the $20 a month interest will decrease our income from the property and so affect out tax basis that way too. Now, I have to think about this property from its other purposes (retirement income, early mortgage reduction value, property appreciation, etc.) point of view.

Today, we meet with the lender. It will be interesting to hear his perspective. I'll get back to you.