Quote from @Eli Ling: You are losing over $160 a month or $1,920 a year by keeping a tenant who can barely afford the reduced rent, and he complains even though you provide pest service.

An existing duplex provides immediate rental income and proven market comparables, reducing risk.

If a cost segregation study was performed, the accelerated depreciation may further reduce the property’s basis, potentially increasing taxable capital gains when sold.Depreciation recapture will occur when you sell the personal residence, so it’s essential to keep detailed records of all depreciation claimed while the property was used as a rental to ensure accurate tax reporting at that time.This post does not create a CPA-Client relationship.

A trust transfer allows for smoother estate planning, and if inherited after their passing, the land receives a step-up in basis, reducing future capital gains tax.Each method has pros and cons depending on their estate plans and your long-term goals.

House hacking can certainly be a great way to build equity and reduce living expenses, but it’s essential to have a cushion in case your rental income doesn’t come in as expected or renovations take longer than planned.

Would it make sense to reduce risk and use his connections first and invest it that area?

Employee salary deferrals (pre-tax or Roth) are subject to Social Security (6.2%) and Medicare (1.45%) and must be reported on W-2 Boxes 3 & 5, though Box 1 (taxable income) will be reduced for pre-tax deferrals.

Have you considered creative financing options like joint ventures or seller financing to reduce reliance on outside capital?

The use of the accelerated depreciation strategy helps real estate investors to reduce the tax liability immediately which therefore increases their bottom line due to the offsetting of income.

I suggest focusing on properties that need cosmetic work in order to reduce overall risk, while keeping access to a good ARV.