All Forum Posts by: Mandeep S.

Hi,

It seems this is hotly debated on the internet.

If I have a single family home and rent rooms out, are proportions of common areas allowable in calculation of depreciation and expenses?

For example,

Let's say there's a 1000 sq foot house with two bedrooms - one for the tenant and one for the landlord.

100 sq foot is for landlord exclusive use.

100 sq foot is for tenant exclusive use.

800 sq foot is common areas (kitchen, living room, dining room, etc).

Is the business use 50% (100 + 400 [common area divided into 2]/1000) or 10% (100/1000)?

Most seem to say it would be 10%. "Only the exclusively used areas are considered rental areas. The common area is available to all and is not a factor in the allocation of expenses."

Others say it would be included. "If an expense is for both rental use and personal use, such as mortgage interest or heat for the entire house, you must divide the expense between rental use and personal use. You can use any reasonable method for dividing the expense."

It seems IRS Publication 527 (2023), Residential Rental Property would say it's 10% based on their example. Or maybe they oversimplified it, for sake of example?

"Example. You rent a room in your house. The room is 12 × 15 feet, or 180 square feet. Your entire house has 1,800 square feet of floor space. You can deduct as a rental expense 10% of any expense that must be divided between rental use and personal use. If your heating bill for the year for the entire house was $600, $60 ($600 × 10% (0.10)) is a rental expense. The balance, $540, is a personal expense that you can’t deduct."

Hi,

I recently closed on a house, and signed my first tenant in my house hack a few days ago. I have a few more rooms to rent out, and I was wondering what the best way to find quality tenants is. Most don’t pass my screening because I don’t allow for pets or smoking. I’m priced well below the average for my area, and my property looks much better than comparable properties. It seems to me to be good value for the quality of the property. I posted on the following:

1. Furnished Finder

2. Facebook Marketplace

3. Airbnb (31 nights or longer)

4. Craigslist

5. Facebook groups

Has anyone found other successful avenues for finding good quality tenants. I’ve spent a few hundred on FB marketplace advertising and furnished finder (this has the worst leads).

Thanks! 

Hi,

I was looking to house hack in Las Vegas, and I was wondering if you can still rent the property by the room if you move out a year later and get a second house?

1. House hack house 1 (live in landlord) in year 1.

2. Buy house in year 2 and move to house 2. Rent out all rooms by the room (in house 1) in year 2 (landlord no longer lives in house 1).

@Felicia - My apologies if the rough numbers were offensive. Do you think perhaps $1,800-$1,900 might be a more reasonable amount for the properties that I’m discussing? What do you think would be a reasonable all-inclusive number?

Perhaps there may be a lot of partying – not that I’m opposed to having fun, as long as it doesn’t take place during work hours. Having lived with graduate students for the last 3 years, I can’t say that’s been the case.

Pharmacists typically make around $120k per year today in California, and I’m somewhere down that range. However, you must also account for undergraduate loans, which in California can easily be around $100k + 4 years of pharmacy school, which amounts to $250k, and we’re just talking about tuition. Rent, food, etc adds up. It is not uncommon to find a pharmacist saddled with $400k of debt out of school. Now since we enter the workforce in our late 20s, we’re already behind in 401k/Roth/HSA investing. We typically haven’t bought houses and are usually not married, so there’s a lot of cash that needs to be funneled into savings/investing to “catch up” financially.

Yes sir, it is in Henderson, Nevada. Is that a non-ideal location? I graduated from pharmacy school in 2019, so I am done with the education part of my life. Most that go to pharmacy school already have a bachelors, and it's a more mature demographic than your average college student, as it is a doctoral level degree. @Felicia – I don't know if I would agree, although it really would depend on the person on a case by case basis. Typically dorm style housing is for undergraduate students, not graduate students – the school website explicitly states that on-campus housing is unavailable. I'm not married to the idea, but just thought that the pool of students would be replaced continuously as there's always another graduating class. Alternatively, perhaps purchasing next to the medical school might a good idea as well – again since there is a continuous pool of students that will need to live close by. I'm just thinking the other alternative would be to find someone to rent a room or two through hotpads/craigslist that is a sane professional and purchase a house in an area that is in at least modest demand. If I purchase a 300k house (3 bedroom) close to the Whitney Ranch Area, a 30-year loan at a 2.8% interest rate with 75k down would translate to about $1400 per month. If I get a 3 bedroom and rent out two bedrooms at about $500, I would end up paying about $400 a month on the mortgage itself, which isn't too bad of a scenario (of course property tax, maintenance, homeowner's insurance, gas, electricity, HOA fees, etc is not included in this calculation).

Wow. I am blown away by the replies that y'all have provided. Thank you so much for your wisdom and expertise. In such a case that I am looking to rent out to someone over a year lease or so, is it difficult to find renters in Las Vegas? I have not gone about this before, and thought it would be a good idea to become well informed. Would it potentially be more beneficial to buy housing close to a college or even pharmacy school? I think buying a property and renting out to other graduate students may not be a bad path to go - I understand Roseman School of Pharmacy is located in Las Vegas, and I think I might have a lower vacancy rate if I can rent out to future colleagues, as they'd be leasing for a year minimum.

Hi all,

I’m new to the biggerpockets community.

I am a 28 year old licensed pharmacist in California (becoming licensed in another state is a non-issue, and I work 100% remotely) and have been saving up cash for a property. If I moved to Las Vegas, I would be getting paid approximately $800 more because I would be paying no state tax (California is expensive), so I could essentially live rent-free relatively speaking (I see a ton of rentals for around this price online – sharing with a roommate). I was thinking of, instead, maybe purchasing a property and living in one room or unit and renting out the other rooms/units. I figured paying $1,000 in rent in California would be similar to paying $1,800 in Las Vegas for a property (not including down payment, maintenance, potential HOA fees, property tax, etc. for simplicity's sake). We could adjust this down to say, that I could afford $1,400-1,500 ($600/$700 per month due to tax advantages of living in Las Vegas) in Las Vegas if you find that comparison offensive. I'm relatively new to the world of real estate – please correct me if you think that figure is outlandish. My objective would be to rent out my residence in Las Vegas short (via AirBNB) or long-term to help pay for the mortgage, so that I could live here paying little to nothing relative to California, and have some extra cash that I could use to retire early.

However, I understand there are many issues with rentals due to regulations in the city of Las Vegas (including most of the housing market for SFH being tied to HOAs which explicitly do not allow for short term rentals (those less than 30 days). Additionally, I hear there are additional licensing fees and that they are outright prohibited in Clark County. I hear North Las Vegas has fewer regulation, but the area has higher crime and is overall not conducive to this type of strategy.

After reading a lot of the doom and gloom, I was wondering if there are any investors or agents that think there are certain parts of Las Vegas, where an in-house landlord could still profit from renting out other rooms long-term (perhaps renting out a room or two to another working professional also in Las Vegas on a 1 year lease) or short term via AirBNB? I figure the worst-case scenario is I could become a homeowner in 30 years in Las Vegas vs renting in California and losing out on $800 per month.

If you are experienced with this type of arrangement, I’d love to connect with you.

My apologies in advance if my thought process/opinions are uninformed, as I am here to learn about an industry I currently know very little about 😊