You would then use this account for your credit from the above transaction.Make sure it's not included with your other expenses because you want your Profit and Loss to look like this:Income  xxxExpenses xxxNet Income xxx  <-----  This number is still really important to keep track ofNon Taxable Transactions xxx <----- This number will need to be added back to the Retained Earnings number as a manual adjustment on the tax return, if this is a multi member LLC, S-Corp or C-Corp. for each year going forward. 

You should have ran the numbers with the rent at 1250 and only offered based on that, any higher rents are just extra icing on the cake. 

I'd read this article before you do anything, including the comments (lots of extra info)-https://www.biggerpockets.com/renewsblog/2013/08/1...Just so you know all of the implications of going the LLC route, especially if you live in CA.Hope that helps!

I've got some extra cash but I don't want to be cash poor with a new property with possible unforeseen issues.   

I'd rather have the extra security on the property, however I don't feel the $89 at home depot are very good, so I'd recommend a stronger door as my units previous had the $89 doors and they look pretty unsafe as people can cut through them pretty easily.

Am I legally allowed to increase his rent a little to cover the extra water usage? 

Then later on refinance out to get your leverage up on it and then use the extra money to go buy something else.

But I plan to tear down part of my house, so re-painting and fixing the damages would cost almost $10k, which would be extra cost and it did not make sense to me. 

That is one market correction, price reduction, or sitting on the property for an extra 2 months. 

Thank you in advance for you helpAfter purchase, how much extra work (money) does it need to bring up to ARV standard?