House Hacking: When to renovate a unit? Occupied or Vacant

[Kevin Wu]

Hi Bigger Pockets!

I'm a newbie in real estate investing from Boston, MA. I am currently searching for my first small multi family to house-hack and I ran into a question while putting in offers: when should I renovate a unit as I'm house-hacking?

As an example, I am currently looking at a 4-family multi. 3 units are tenanted but a 2-bed unit is vacant. I was initially planning on living in the 2-bed unit and renovating it as I lived there.

However, I talked to a CPA that deals in real estate (my sister) and she mentioned that I can only have tax deductions on expenses spent on the rented portion of my property, not the one I am currently occupying. So to get tax deductions on improvements for that 2-bed unit, I would need to live in a separate unit and renovate it while it is vacant. In that case, are the tax deductions for the renovation expenses worth the cost of vacancy?

I was planning on remodeling the kitchen (add an island, add a stove vent, change the countertops, touch up the cabinets), demo and move the internal wall of an office space and make it into a 3rd bedroom, and maybe update the flooring.

This might be more of a question for a CPA that is also an RE investor but please let me know if you have some insight on this situation. Thank you!