Key takeaways
- Rehab = capex, depreciated 27.5 years.
- Refi proceeds are tax-free.
- Cost seg accelerates depreciation.
- LLC pass-through avoids double taxation.
- Track basis carefully across BRRRRs.
Core concepts
Capex treatment
Improvements added to basis; deducted over time.
Refi proceeds
Loan proceeds, not income — tax-free.
Cost seg
Reclassify 5/7/15-year components on each BRRRR.
Step-by-step framework
- 1Track basis: purchase + rehab + closing.
- 2Engage cost seg on each completed BRRRR.
- 3File LLC tax return annually.
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Common mistakes to avoid
- Expensing capex.
- Forgetting basis adjustment on refi.
- Missing cost seg opportunity.
Frequently asked questions
Are refi proceeds taxable?
No — loan proceeds.
Cost seg minimum?
$300k basis.
LLC required?
Recommended at 3+ properties.
Pay self-employment tax?
No on rentals (typically).
Action checklist
- ☐Basis tracking.
- ☐Cost seg on each refi.
- ☐LLC return filed.
- ☐Real estate CPA engaged.
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