Approaching the long-term tenant with a proposal to increase her rent to $3,000/month while explaining your original intention to convert the unit to Section 8 is a fair and considerate approach.

While this may exempt it from being classified as a rental activity, active participation remains a requirement, necessitating compliance with three tests: spending 500 hours on the property, dedicating at least 100 hours (and more than any other participant), and performing all the necessary work needed.Additionally, long-term viability and consideration of depreciation recapture are important concerns.

Price range, what you intend to achieve in the future, or the preference of managing the two rental units are some considerations for choosing between an apartment complex versus a single house to live in for life.

I plan to rent out the basement but have a couple of questions as this is my first house/house hack:-Littleton rental law considerations (this might fall under JeffCo rather than city of Littleton, can't really tell)-Thoughts on best lease strategy for that area (STR/MTR/LTR)?

I'm also open to moving out of California when I retire from my W2 job - Nevada is a consideration but the median home prices across the country have gone way up in the past 4 years so I don't want a huge mortgage on a primary home when I'm retiring. 

I am also thinking there may be tax advantages because both of the properties I currently own and rent make a considerable amount of money that after all deduction, depreciation etc.

Hi Lamar,  Acquiring rental properties can be a rewarding venture, but it's important to approach it with careful planning and consideration.

Thanks for your consideration,Isa

@Greg TeplanskyThere are several considerations that can go into the analysis of whether you need an LLC or whether a large insurance policy will suffice.

However, still valid and important considerations to make as I continue to evaluate options.