| The difference in the information included in a Tax | | | | percent of the expenses for the home, are tax |
| Return and a Profit and Loss Statement are very | | | | deductible. |
| much the same, however, the bottom line is very | | | | If your Lender takes these factors into |
| different. | | | | consideration, your income, on the Lender's |
| The young couple started a small business, which | | | | application would be far greater, than what is |
| grew quickly into a six figure income with 2 years. | | | | shown on the tax return. |
| Fortunately, they purchased a home immediately | | | | Solution: |
| after the real estate shake up and qualified for a | | | | Another way to help the Lender, to say yes to |
| condo, with stated income, and a copy of their | | | | your loan, is to have a Profit and Loss Statement |
| bank account statements. | | | | prepared. (Another way is to lower your |
| Now, 3 years later, the couple's business is doing | | | | deductions, pay the taxes and qualify for |
| very well and the goal to purchase rental | | | | additional loans) |
| property has become a serious goal. | | | | P and Ls, can be a little tricky. A good policy is to |
| Problem: | | | | have a CPA prepare your P & L. A good |
| The tax return shows insufficient income, | | | | way to know what your Profit and Loss |
| however, the goal, is to keep as much money as | | | | Statement will show before you pay a Certified |
| possible and provide any and all, legal expenses, to | | | | Public Accountant (CPA), is to prepare your own |
| lower the tax liability. | | | | P & L, using one of the popular software |
| The mortgage lenders, now, require that you | | | | programs, or have your tax accountant prepare a |
| provide every detail of your financial situation, | | | | rough draft. |
| before making a real estate loan. | | | | CPAs can be expensive. Do your homework |
| If your income was $350,000, and your Adjusted | | | | before making an appointment with a CPA. |
| Gross Income is only $45,000, the Lender, may | | | | Many mortgage Lenders, are now checking |
| or may not, take into consideration, the | | | | borrower's actual tax return with the IRS, before |
| deductions. And since the young couple used one | | | | making the loan. The Balance Sheet, and the |
| half of their new condo, as a home business, the | | | | Profit and Loss Statement, can help to show a |
| depreciation of their home and almost fifty | | | | more positive financial picture. |