The important thing to point out is that like you said, this job made it a full bath, which is an improvement/addition, not a repair.

My Business partner wants to move in and we can improve it while we house hack it.

Do investors commonly make capital improvements to boost the amount they are eligible to borrow against?

I have seen up to a 100 point score improvement on some files.

It seems like a lot to someone who is trying to save that on their own from their day job to improve their position, but in all reality, you can make a great ROI on that money in real estate if placed correctly.

Nothing wrong with a two-story but the preference would be a single level to be more rentable.You may want to improve the property while you live there also, do so cautiously and with the intention of making it a better rental property.

There is always something.Why do you expect an ARV $5k higher than what you paid with no improvements?

The leases the tenants sign have a clause stating the landlord reserves the right to make improvements on the property and the construction will be during normal business hours. 

@John TiernanDepending on what you will be able to charge for rent and what the ongoing maintenance costs of your property, you likely got a good investment on your hands if you are all in for $35,000.Regarding your question on what is deductible - It depends.it seems as if your property was not "placed in service" until after the rehabs were completed.If this is true - then the costs to improve the place need to be added to basis and depreciated over it useful life.

All this time at home has spurred some home improvements and getting prepared to sell and also some families have experienced unfortunate events that cause downsizing or selling.