Posted by Bud Branstetter on December 23, 1999 at 05:30:57:
Let’s see here, you borrow 10K. Interest only for a year at 15% is $1500. So you deduct that from your taxes. That saves you $420 at a 28% bracket. In turn the relative pays income tax on the $1500 at 15% or $225 or a net $1275. What would be the difference if gifted them that amount? You would also be able to protect them from an untimely death if you made them a partial beneficiary in an insurance policy for the amount owed.
I don’t think you’ll grasp this but why not use the relatives money for short term financing where you are in and out quickly. When you apply for long term financing from an institution do it such that you are buying at 60% of value. You make more deals by marketing and finding motivated sellers not by financing to throw cash at properties. Accumulate your cash so that you borrow from institutions only for that killer deal.