Skip to content
×
Pro Members Get
Full Access!
Get off the sidelines and take action in real estate investing with BiggerPockets Pro. Our comprehensive suite of tools and resources minimize mistakes, support informed decisions, and propel you to success.
Advanced networking features
Market and Deal Finder tools
Property analysis calculators
Landlord Command Center
ANNUAL Save 54%
$32.50 /mo
$390 billed annualy
MONTHLY
$69 /mo
billed monthly
7 day free trial. Cancel anytime
×
Take Your Forum Experience
to the Next Level
Create a free account and join over 3 million investors sharing
their journeys and helping each other succeed.
Use your real name
By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.
Already a member?  Login here
Short-Term & Vacation Rental Discussions
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

Updated 11 months ago on . Most recent reply

User Stats

2
Posts
3
Votes

Most Tax Benefits? Renting Spare Room from a Primary Residence vs Investment Property

Posted

If you're weighing between purchasing a primary residence and renting spare bedrooms versus buying the entire property, which is more tax write off advantageous.  In either case, the idea is to do the short term rental. Such short term rental  will follow these criteria(see numbered list below), in order to take advantage of (1) qualifying to fill out schedule E, thus avoiding the Self-Employment tax should there be any profits. and (2) being able to offset your W2 income should there be a paper loss. 


Criteria for short-term rental:
1. rent 2/3 bedrooms in short term rentals
2. Do not provide substantial services 
3. average stays of 7 days or less
4. materially participate
 

Primary Residence route:
I presume that doing this route will:
1) portray yourself less risky from a lender's perspective
2) Less downpayment requirements. Allowed to put less than 20%
3) lower mortgage interest rate
4) proportionally straight line depreciate your property. 
Question: Is it worth it to perform a cost segregation when you rent out spare bedrooms ? Or is this an overkill ? Or would it suffice to simply do do the straight line depreciation. 


Investment Property:
1. Deprecate entire house. Cost segregate the entire house. Truly maximize the cost segregation benefits.  
2. Simplify tax filings as there is no need to do all the proportional calculations. 
The only con is the higher interest rate. 

Question: Do all the presumed benefits above outweigh the higher investment property mortgage rates? 

I may be be biased, but it seems so much cleaner to handle in all aspects.  Being able to enter all expenses, mortgage, mortgage interest, sewage, water, security , gas/electricity , cost segregation study to depreciate it  over 5,7,15 years as opposed to the 27.5 years. 

Additional Question:
Is it possible a lender give you a close to a primary residence interest rate for your investment property ? Considering you currently have 0% household expenses, I believe this should actually be less risky if you currently live for free. 

Most Popular Reply

User Stats

12,445
Posts
15,152
Votes
John Underwood
#1 Short-Term & Vacation Rental Discussions Contributor
  • Investor
  • Greer, SC
15,152
Votes |
12,445
Posts
John Underwood
#1 Short-Term & Vacation Rental Discussions Contributor
  • Investor
  • Greer, SC
Replied

I'm not going to rent out rooms in my primary house and have strangers under the same room. I'm sure serial killers like to rent rooms in other people's houses. If your not that fond of your family then go ahead and take the risk. What's the odds something bad could happen? Slim I'm sure.

So I'd take the other option.

  • John Underwood
  • Loading replies...