Maximizing Financial Benefits of Personal Residence

[Chris Mooney]

Hi all!

I bought a house last year that has been my primary residence (although I will eventually list the basement studio on Airbnb). I'm doing a considerable amount of DIY renovations. I'm redoing the studio basement, turning the garage into a functional space (office, yoga studio, etc.), will modernize the kitchen (paint the cabinets, redo tiling, change countertops and sink), and the bathroom (updating almost everything in it).

I bought the house at market rate, so I didn't "buy" a deal, but am hoping to leverage a few strategies to maximize the value we get from it. Strategies are:

1. Airbnb the basement studio 

2. Use the garage as an office space for my side business and write off that space on taxes

3. Treat this as a live in flip and if I sell in a few years, not be taxed on capital gains

I have two questions:

1. Are there any other strategies any of you would recommend to make the most out of my situation? 

2. Are there any specific requirements for this to be considered a live in flip? How do I ensure any appreciation gained through my DIY renovations end up not hit for capital gains tax? Any advice at all on this topic is more than welcome.

Thanks everyone, and be safe out there!

[John Warren]

@Chris Mooney the good news is that you don't need to do anything special to take advantage of the tax laws for your primary residence. Just make sure you have lived there for two years and the gains should be tax free. I personally have done this twice here in Riverside and North Riverside, and it has helped me build up the equity to buy multiple apartment buildings. The only thing you would need to consider is whether turning the basement into an Airbnb will turn a portion of the home in a rental property. Check with your accountant to see if there are tax consequences to that.