High cash flow from rentals can mean higher taxes. A duplex generating $2,000 monthly gets refinanced for $50,000 to buy another duplex, resulting in $3,000 combined cash flow after debt service while writing off more mortgage interest and reducing taxable income.
loan-to-value matters, but debt service credit ratio matters way more. So what is your ability to be able to pay the loan? And mortgage interest is a write-off. So I like, I know I was telling an investor that didn't have very many units, he's like, dude, I have a duplex and I'm cash flowing $2,000 a month on this duplex net. I'm like, that's way too much. You're going to pay so much taxes. Like, why would you not refi, put some debt on that thing so that you can write off the mortgage interest? It'll be more tax efficient. He goes, well, 'cause my $2,000 is going to only be $1,000. Okay. You lost the other $1,000, but you could refi $50,000 out, buy the next duplex, right? And do the exact same thing. Now that duplex cash flows $2,000 a month. 2 plus 1 equals 3. You were only cash flowing 2 before, plus that $1,000 a month. Like I said, it's more tax efficient. You're not paying taxes anymore because you're writing off the mortgage interest. So I just started getting really good at like realizing and paying more attention to like debt management.
