My fiancee and I are combining households and we have decided to turn her house into a rental unit. It is a single family, 3Bd/2Ba in a desirable area. The home is 24 years old and need some major maintenance to repair it prior to renting. Listed below are the things I see that need to be done prior to renting:
- Re side and paint the entire house. This must get done prior to a tenant moving in as large portions are warped & badly worn
- At the minimum, replace shingles or tear entire roof off depending on wear & tear on the roof. This one is TBD until I get a roofer’s opinion.
- Replace broken sections of fence
Since these are major repairs and will end up costing thousands of dollars, I would like to claim on my taxes in order to offset other income I have from other rentals. With her still living there, can I make repairs to the house and claim it on my taxes as repairs to a rental unit? Technically, it would still be her primary residence when the repairs are being made, but it would soon (30-60days) become a rental property after we finished up the repairs. Or, does the property need to be vacant & on the rental market or (tenant occupied?) prior to making tax deductible repairs on the home? Thanks so much!!
Very first issue is do the two of you intend to get married before you start work on this property? If not you have to become legal partners in the property before starting the repair work either by partnership agreement or becoming partners in an LLC and transferring title to the LLC.
If you have a home change her residency to your address prior to repair work and treat her as a temporary tenant hopefully packing and moving into your place as repairs are done.
Siding, painting, roofing and fencing repairs can be done in as little as 7 to 10 days as roofing should be done before painting but siding and fence repairs can be done all at the same time as roofing. Painting should be very last so no construction dust ends up in the painting work.
If this home is a 24 year old home with either 3 tab or dimensional shingles the roof is probable very close to needing replacing, the good thing is the building code allows a 2nd layer of roofing installed directly over the existing layer.
Thanks so much for the advice on the LLC and home repairs! Yes, we were planning on working on the property prior to getting married. Yes, I do have a home and plan to move her in once we are married. I like the idea of having her be a temporary tenant. If I understand you correctly:
1.) We would set up an LLC, together.
2.) Have her quit claim the deed over to the LLC and then begin work on the home.
3.) She would be a temporary tenant, therefore paying rent to the LLC? Or would her paying into the LLC to cover the mortgage be a red flag when it comes to taxes? That question is more just cuz I am curious. I would envision then putting the house up for rent, with a notice saying move in date for 2-3 weeks so we can get the maintenance done. I am a diy guy and am going to handle as much of the repairs as I can, so I think 2-3 wks would give me a good window of time to prep everything.
Mainly, my goal is to minimize the vacancy on the unit after she moves out and a tenant moves in. Gotta watch that cash flow!!
If she's paying the mortgage payment and the two of you are engaged and the two of you would make repairs and make this a rental then right now the two of you are paying the payment whether she's there or she's at your place, soon to be you guys place's by marriage.
If things are happening quickly then basically she’s packing as your doing the work over 3 weeks so just create your two party LLC, transfer the deed and then just make the payment like it’s already vacant, she’s going to be out and to your place quickly anyway!