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No. of Recommendations: 2

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You need to be aware that you cannot deduct the interest payments on a cash-out loan for a rental property unless the cash is spent on the property that secures the loan.

I do not think that is true.

Reading chapter 4, I think any loan's interest (including HELOC on the 1st rental property or even an unsecured loan) could be used as a business expense for the 2nd rental. That is, assuming that you can show that the loan's proceeds were used for buying the 2nd rental. (pretty easy to show $ from a loan going into a separate checking account or money market account, and then going from there to the downpayment for the property, and thereby prove that's what you used the money for)
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