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I don't know what a HELOC is, but if a loan is financing the rental property, the interest on the loan is an expense against the rental income.

HELOC = Home Equity Line Of Credit. I guess we could write a check for any purpose up to the limit and deduct the interest on Sch A. But we plan to only using the HELOC for business expenses for the condo and hope the interest would be deductible on Sch E.

...except for item 75, which I wouldn't pay unless this is the only lender on the face of the earth.

If you really meant "Lender fee to forego Item 1004 Taxes/Assessment Reserves" I guess you are correct, let them earn the interest on the RE taxes escrow account.

That's how I'd do it, remembering that capitalized purchase expenses (and any immediate capital improvements) are part of your depreciable basis.

Thanks for the reminder and for your response to my questions.

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