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Updated 2 months ago,

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Sam Desmond
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Secondary home with small garage/room rental better than investment property strategy

Sam Desmond
Posted

A friend of mine is trying to figure out what is a better long term strategy. Have the main home on the property lived in by family and let friends live in the very small garage/room in the back. (typical California home). This would be purchased as a primary home and then probably turn into a secondary home as their job would probably require a move over the years. But wants to leave immediate family in the main home on the property.

The other option is, after a few years then rent out the garage and room while still having the family live in the main home. About 1/5th of the livable space would be rented out. And treat this as 1/5th space as a rental.

Or down the road, would it be better to have the entire property (home & garage/room) rented out to everyone involved and the property become an investment property. 

Need some advise on long term tax strategy as a secondary home (out of state) versus an investment property. 

If the entire home is rented out then there can be some incentives to fix things like some big repairs such as roof, windows etc. The interest is deductible etc. But then on the other hand you are treating your family as a transaction and have rental income. And maybe in 20 years when the property sells it could be taxed differently, but not sure since it was initially a primary home. 

Other than "talk to tax professional". Does anyone have any advice on this?

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