House Hacking- Using a Master Lease w/ Tenants in owner occupied

[Andrew Cooper]

Hi All- 

I live in and own a rowhouse in Washington D.C. I have been house hacking for almost two years now and basically live for free in the basement while having three tenants occupy individual leases in the upstairs rooms. The kitchen and common areas are shared. I am in the process of building an Accessory Dwelling Unit in the backyard with a one-car garage and one-bedroom apartment that I will move into and then rent the basement to pay for the new unit. 

As I begin to expand, I am exploring the option of using an LLC to master lease the house out to and have my tenants pay their rent directly to the LLC, instead of me directly, as I currently do. I believe there are a number of advantages to this, including-

1. Increased liability protection for any damages that may be sought from a potential tenant. 

2. Increased tax deductions for things I currently cannot like cell phone, travel, entertainment, etc. 

3. Moving into a more formal business arrangement with the expansion of another unit plus the ability to expand further down the road. 

My question is- what are your thoughts on this in general? 

More specifically, how would I go about doing this? I know how to setup a an LLC but I have never used a master lease for this type of situation. I can't find much on other people exploring this type of arrangement and am wondering if anyone else out there has done something similar for a house hack.

Thanks for any advice/feedback you can give! 

It has been a great learning experience so far and the financial freedom has been tremendous. It's on the beginning, but I am wanting to learn how to grow and believe this is a next step. I'm happy to answer any questions from my experience doing this that others may have.