Our plan is to add value through reno or sq footage, in hopes to repeat the process in the future. 1st Home Purchase Strategy Inquiry-From the other forum posts in the OC area that I've read, it seems investors are more into fix and flips, but when it comes to rentals it's out of state.

We do bill back our tenants, but we use a square footage and per capita calculation.   

Let me make sure I understand it correctly: Owners use it when utilities aren't sub-metered and base the fee on square footage, # of tenants, etc.

@Salil SurendranFirst you need to calculate the area that you rented to the full house.This can be done using square footage or roomsExamplesquare footage of room(200)/ total square footage of house(1000) = 20%Then you need to prorate it further since you only rented it for 3 months(3 months / 12 months = 25%If your property taxes were $10,000 for the year. the property taxes deductible related to the rental would be$10,000 x 20% x 25% = 500You would do something similar with home owners insurance and mortgage interest.You also can't double dip - so make sure that the total real estate taxes deducted on schedule A and Schedule E isin't greater than the total amount of real estate taxes paid.

The insurance premium is based on the square footage to rebuild the house today.

Sold properties in the last 90 daysSold properties within a 0.5 mile radius of the subject propertySold properties within 20% square footage range of subjectIf I can't find at least 5 properties that match this criteria I broaden days sold from 90 to 180 to more than that if necessary.

In my case the rental unit is approx 33% of the homes square footage so I can only write off 33% of those items.

Square footage may need to be adjusted....or it may have no effect at all.

- Any idea how much did it cost per sq footage only for the construction part (i.e. all the way from excavation/concrete to final finishes)Thanks!

I would definitely investigate the way the property is piped & wired now to see the extent of modification required to get each unit independent utilities, it may not be bad at all or may be terrible.If it's terrible I would see if the local utilities provider has something equivalent to a "RUBS program" (ratio utilities billing system) which bills tenants directly based on usage in proportion to the square footage of each unit.