Occupy myself and renting rooms

[dsconja]

I'm glad to see that there is a forum such as this located in the mkt i live in since i am a beginning investor. I am strongly considering purchasing a 3 bdrm home and renting out 2 of the rooms. I'm trying to examine this at every angle from a financial and tax viewpoint.

By renting out the 2 rooms, do i file a Schedule A & E when doing my taxes, or is it just Schedule E. And what about depreciation. I think i know the answer to the 1st question, but would love to here from other people's experience who are familiar with this arrangement and some benefits and drawbacks to this.

thanks,
bennie

[Admin]

Bennie,
I assume we're just going to ignore the physical, emotional, spiritual, etc. aspects of this decision?  

I've never rented a room out where I live.  If it were a duplex, you get to partition the depreciation and the homestead exemption, so I would assume something similar here.  Perhaps it will be based on square feet rented versus total square feet, I don't know.

Initially, I'll punt on the tax questions and say "I don't know", but will give a layman's guess anyway.  I'm not sure that your primary residence with room rentals is going to qualify as an investment property.

Another guess is that the vast majority of folks who do room rentals with their own residence do not view it as an investment and don't report the income.  I'm not advocating that; it's just a logical guess.  I would think folks are just looking for extra income to help with the bills and aren't even considering tax implications.

Therefore, I think it's a limited number of folks who've been down that path and could provide an informed response.  I'm sure a quick call to an educated CPA could get you your answer.

my view...

[jfpen]

I'm glad to see that there is a forum such as this located in the mkt i live in since i am a beginning investor. I am strongly considering purchasing a 3 bdrm home and renting out 2 of the rooms. I'm trying to examine this at every angle from a financial and tax viewpoint.

By renting out the 2 rooms, do i file a Schedule A & E when doing my taxes, or is it just Schedule E. And what about depreciation. I think i know the answer to the 1st question, but would love to here from other people's experience who are familiar with this arrangement and some benefits and drawbacks to this.

thanks,
bennie

Bennie,
         In your area it may or may not be legal for you to rent out property by the room. Find this out. If you want to buy a house and have roommates that pay you that's up to you. However, people who rent rooms are usually young, irresponsible, or just passing through. Do you want that when you are 10 years older? Be ready for turnover. In my area, it's hard to find single family homes that cashflow.  If you buy a single family home make sure it cashflows with market rent. If possible, I would look at buying a 2-3-4 family home and rent out the other units.

JP
         

[justin0419]

jfpen,
Did you really mean to resurrect this old of a post or is this website acting funny for you too?
Yesterday I noticed I can't scroll thru previous threads using the "previous" link.  Then when I click on the forum link again, it goes to the oldest posts rather than newest.

[tatertot]

This is an old one, isn't it. But given the current economy, it's probably timely. I'm sure there are people out there taking in roommates or renting out rooms trying to save their home.

I think it is a good plan for college students. Buy a house near the college, take in roommates to pay the mortgage, and then sell the house when you graduate (or keep it as a rental).

I don't know the tax issues since I've never rented out rooms. However, I do know that landlord law still applies, and maybe some additional rooming house laws apply, so anyone who wants to do this needs to read up on their local landlord law before they start.

Also, anyone who thinks about renting out a room in their house, should read every word about screening tenants that they can find before they start. Believe me, there are a lot of people out there looking for a place to live that you do not want inside your house.

[rachel]

Hi,

I think renting the room is good option.
I'm sure there are people out there taking in roommates or renting out rooms trying to save their home.
Thanks.

[RErookie]

I'm actually looking to do this, I just put in an offer on a 3 bedroom home and if it goes through, I hope to rent out 1 bedroom.  PITI would be $1450 and I plan on renting out the room for $400 (verified market rent for 1 bedroom).  Sounds like a good deal to me, any thoughts?