All Forum Posts by: David Y M.

Hi All,

This is lease related, but can there be two Master leases on one SFH in Dallas/Texas? I have a home with an ADU, but local ordinances don't mention anything about any renting requirements for the ADU, and I plan to have two separate leases for ADU and Main home with an addendum for utilities.

I had structured leases in the past using a master lease + addendum because I saw somewhere that multi leases to one unit was not allowed. However, I cannot find information on it atm so curious to see if that still stands and if somebody can provide an authoritative source.

Thanks,

Hi All,

This is lease related, but can there be two Master leases on one SFH in Dallas/Texas? I have a home with an ADU, but local ordinances don't mention anything about any renting requirements for the ADU, and I plan to have two separate leases for ADU and Main home with an addendum for utilities.

I had structured leases in the past using a master lease + addendum because I saw somewhere that multi leases to one unit was not allowed. However, I cannot find information on it atm so curious to see if that still stands and if somebody can provide an authoritative source.

Thanks,

@Ashish Acharya so do we just split the mortgage form even though it’s under my SSN? How do we split the 1098. My understanding that it is okay to file on our own Schedule E

I've read that you can file real estate partnerships without actually filing a 1065.

"The IRS and the courts have stated that mere co-ownership, rental, and maintenance of real property does not create a partnership for federal income tax purposes. Similarly, mere agreements to share expenses do not create partnerships for federal income tax purposes."

How would me and my partner file taxes for 2021 if one person is on the loan, but both are on title? 

1. Do we split the one 1098 form on our own Schedule Es even though one person is on the loan? 

2. Is this something that can be done on Turbotax?

Thanks in advance

@Rob Lee I 100% agree. I've learned so much in the first year of living in a home and househacking. Househacking will significantly lower your risk, especially because you have to overpay right now to win a contract.

The winter storm this year was an extreme example that a lot of people did not know how to turn off their water main. Maintenance is something you don't really think about until you actually do it. 

That can play into your calculations for repairs or capex. 

@Aiden Hatchett 

Definitely agree with Ryan - 4/2 is the way to do it here. Anything under roughly 270k will allow you to live for free if you don't occupy the master - 5/10k more or less depending on the tax rates of your target county/area. Not sure how easy it is to get tenants right now but still see a lot of people looking for places in facebook groups.

If you are looking for FHA and are a first time home buyer - look into TSAHC or SETH programs for 3% Down Payment Assistance Grant. You don't have to pay this money back. Otherwise if you have good credit I suggest conventional.

Interested as well - please connect or PM if this is still going on

@Frank Chin

I figured that was the main risk. I've read read the co-living code by Christine McDannell and she says the main ways to get rid of those uncontrollable risks is through automation - ie. smart home tech, monthly maid service for common areas, and monthly landscaping work. The extra costs should be negligible if you are renting out enough units. 

I've seen a couple startups start to gain traction the last 2 years trying to do this at an institutional level. Big money is entering rent by the room strategies, but I'm concerned they are going to crack down on this harder than Airbnb. It just seems inherently risky since it's so highly dependent on tenants and neighbors. Which leads to my next question.

In your honest opinion - how many landlords actually go through a rental registration program vs renting it out on the shadow market?

With regards to rent by the room strategies, many startups market it as coliving. There are several actually with the biggest one being a company called Bungalow. I don't believe this is going to sit well with cities with large residential families. They have 50+ million in VC funding, but not sure if what they are doing is necessarily scalable. I just can't put my finger on it since I've read through the code in my local jurisdictions and not sure what they could be utilizing to their advantage. 

If you want to chat offline please DM me. I would love to hear your take, because I know this is actually more prevalent in New York where the population density and cost of living is much higher.

I was reading up on a couple of my local city code of ordinances and have a question on the legality of house hacks and rent by room strategies.This specifically is regarding DFW, Texas, and most cities have a provision about rooming or boarding homes. It is defined as the following.

• Boardinghouse, rooming house, lodging house and tourist house shall mean a building arranged or used for the lodging, with or without meals, for compensation, by individuals who are not members of the same family

Additionally, zoning ordinances prevent SFH and most MF to operate as a rooming house.

Do I simply get around this by being at or under the max number of allowed unrelated tenants under one home? I noticed this also may be an issue as many cities have set this at 2 or 3 individuals. Does anybody actually do this by the book and get a special permit license? I haven't heard of many people actually doing this.

Are there any other workarounds?

Thanks in advance

I went down a rabbit hole after putting up a post about tax deductions for a SFH, and I realized that many of us have the wrong idea about house hacking and allowable deductions. This is simply a PSA on the misinformation out there.

Might even contact BP because misinformation is in their blogs -

• https://www.biggerpockets.com/blog/2016-02-21-tax-implications-house-hacking
• https://www.biggerpockets.com/member-blogs/10395/68894-tax-deductions-for-house-hackers

The following is a compilation of all the major topics of discussions within the original thread. BUT - if there is some sort of exception to these rules please let me know. I just find it hard to believe that BP would have these blogs still up without anybody raising any alarms.

OG post if you want a good laugh: https://www.biggerpockets.com/forums/51/topics/865344-tax-schedule-e-questions-for-active-participation-loss?highlight_post=5078038&page=1#p5078038

If you are house hacking a single family home it is considered a "Business Use of Your Home." This means you can't deduct business expenses for any part of your home that you use both for personal and business purposes. Meaning if you want to expense furniture/appliances for your roommates to use, you cannot deduct it.

In other words you cannot expense items directly allocable to shared areas - not even a proportional amount.

Link to IRS Pub 509: https://www.irs.gov/taxtopics/tc509

Depreciation Allocation also seems to be a hotly debated issue and seems like there are a variety of ways to calculate it, but it seems that the above also applies. Per discussions with several accountants it seems like you can only depreciate your rented space.

You probably won't get away with depreciating shared spaces - therefore if you rent 3/4 rooms your depreciation allocation is probably too high if you used 75%. It should probably be around half of that.

You cannot take a loss on a house hack - even if you qualify for the $25k allowable Active Participation Passive Activity Losses. Then again it would be hard even claiming a loss given the limitations on expenses and deductions.

Deductions allowed cannot exceed the excess of gross income derived from such use for the taxable year

Link to IRC 280A: Disallowance of certain expenses in connection with business use of home, rental of vacation homes, etc. https://www.law.cornell.edu/uscode/text/26/280A