All Forum Posts by: Andrew S.

@Ashish Acharya

Thanks for the response and clarifications, this is very helpful. 

Renovating both sides, I did the vast majority of the work myself. There were no invoices or purchases in my renovation to either side of the duplex over $2000.  I was planning/ hoping to expense many of the improvements using the 2500 de minimis safe habor limit.

The other half was advertised for rent and was rentable when advertised.  I replace the countertops and cabinets afterwards but everything was operable beforehand. 

If my half had roommates for 1.5 months in my side - how do they quantify what portion of the my expenses are deductible as they are for an investment property vs labeling it an improvement for my personal property? 

Great, I'll plan to look for a roommate on my side!

Good morning,

Thanks @Ashish Acharya for the detailed display.  I'm an engineer by trade so I like getting into the details as well.

1. 10k on my side: Thanks, I thought I was able to deduct a portion of common area expenses; however this is my first property so I'm still (and always will be) learning.  I thought since it was a rental during the time of the renovation, that I would be able to deduct the expenses purchased and installed during the time it was rented, even though it was short term?

2. 7k on another half: The asset was in-service (advertised for rent) for most of these purchase.

Strategies to use:

A. I plan to use the section 121 exclusion for my personal side. But if I decide to hold longer term after moving out then I'll need to reduce my taxable gain. Your statement "do not do repairs because they are personal?" -  Since I'm not able to deduct repairs; however if an expense is claimed as a capital improvement then I'm able to minimize my taxable gain if I'm not eligible for sec 121, correct?

B. Makes sense, agreed.

50k gain tax calculation: Sorry for the lack of clarification - 125k for the purchase + 17k in repairs/ improvements = 142k. Estimated ARV is now 190k. So 190k - 142k = 48k or ~50k in sweat equity.

My concern comes from research with one reference below on tax implications from house hacking.

1) My understanding is:  If I have a roommate, I'll have a portion of my side operating as a rental; which will create a future tax liability. So if I rent out one bedroom (spare bedroom is 9% of sq footage in my side) then my understanding is I'll be taxed on 9% of the gains - I can claim all the common areas as "mine".  So I'd have to pay taxes on 25k x 9% = $2250 x 25% in taxes worst case at a ~$562.  Rental income from a spare bedroom for 1-2 years will easily pay for the $562 so it's definitely worth it to rent a room.

But it sounds like from your experience - 100% of the 25k gain on my side is sec 121 exclusion eligible even if I rent out one bedroom?

2) I double checked, my W2 AGI is in the new 22% bracket.  I'll pay taxes on this side's gain unless I 1031 exchange it. 

Reference for tax liability on my side:

https://www.biggerpockets.com/renewsblog/2016/02/21/tax-implications-house-hacking/

Let’s say you live in 10% of a property for three years and you rent the other 90% out. You decide to sell at the end of year three because your area has appreciated and you are going to net, after selling costs, $150k. Ten percent of the property will qualify for the Section 121 exclusion, while the remaining 90% will be subject to depreciation recapture and capital gains tax. Assuming you’ve taken $25k in deprecation over the last three years and you are subject to a 15% capital gain tax rate, you’re looking at roughly $26k in taxes.

Thanks,

Andrew

Good morning BP,

I'm currently living in a house hack duplex/ live in flip.

I closed on the property 125k in August, put 10k to make my side 90% complete, then put 7k in the other half. I had my old roommates move in to my half Oct 1st to Nov 15th so I should be able to deduct some of my half's expenses. The other half I should be able to deduct normally. 

My realtor gave me a quick comps for my duplex at ~190k after the renovation. I'm planning to live in it for 2 years to avoid taxes. Possible it will appreciate and I'll fix it up more over 2 years. 

I'm debating if it makes financial sense to get a roommate. I could rent a room for ~$400 per month $4800 per year. If I'm expecting 50k in gains and in the 28% tax bracket - my half 3 bed ~75%? vs other half 1 bed 25%? 

75% of 50k x 28% tax is $9375 in tax due. I'm just doing rough math but it seems like $4800 rent x 2 years isn't worth a $9375 tax bill. And it would make sense to not get a roommate. 

Another question is should I purchase new kitchen cabinets and countertops for my half this year while i have a large deduction already? I assume it doesn't matter because i no longer have roommates so I can't deduct the repairs to my side unless i get a short term roommate?

Thanks for the advice

Andrew 

I'll have the tenant contact their phone provider to obtain a free one.  The cell booster option I was looking at is the multiple carriers so it works for this and future tenants.

SureCall Flare Cell Phone Signal Booster Kit for All Carriers 3G/4G LTE up to 2,500 Sq Ft - $300

Hey everyone, 

I have a up/ down split duplex and the bottom unit has very bad to no cell service in half of it. Should I provide a cell booster to provide the tenants phone to work? I feel like cell service in the bedroom is a reasonable expectation. However the boosters I'm looking at online are like $500.

Thanks, 

Andrew 

I'm pretty sure I know the answer to this question as well but what about a smaller 1 bedroom where the best spot to mount a TV is on the wall - should I provide a wall mount TV stand?  I assume not.

Hey BP, 

I have just finished renovating my first duplex house hack and the other half is under a lease and will be rented soon.  I'm curious on what home furnishings I should provide and what to expect of the tenant?

-Microwave - unsure if I should provide this or not

-Floor mat for inside the front door - Montana winters

-Rubber shoe tray - Montana winters.

-Broom - providing will encourage more often cleaning hopefully

-Swiffer - apartment is all Vinyl plank or vinyl tile, providing will encourage more often cleaning hopefully

-Kitchen garbage can - unsure if I should provide this or not

Thanks,

Andrew

congrats! I'll be posting a summary of my first live in rehab house hack soon! Working on getting a quality tenant in and I'll be into my second deal hopefully

Great tips and great podcast @Mandie Holmes. Thanks everyone, I'm going to post it online without pictures to start gaining interest.

@Jim Cummings I'd like to start putting "lines in the water", just trying to determine the proper/ fair way to do it...  Can't figure out if it's too soon to post online since I can't show the property.  I estimate the renovation will be completed in 2 weeks ideally, maybe up to 4. When I used to rent, I would start looking for available properties 4-6 weeks out, so I think I could market to those similar (prepared) tenants now.  

Part of my interest in putting the lines in the water is to gauge interest in the property and the rental price that I have estimated from comps.  This is my first rental so I may be putting the cart before the horse?

If I post on Craigslist, listing available for rent 4-5 weeks out (worst case) without pictures to gauge interest - would you see any harm in that?  And if it's ready sooner than I can work with my applicants and adjust the online ad accordingly?

Thanks.