Investor · Wichita Falls, TX · Member since 2010 · 3k+ posts · 603 votes
Hi all, my tax question isn't as complex as many I've been reading here. Just looking for some advice.
I'm about to close escrow on my first home (primary residence) soon! I plan on renting out one of the rooms to a tenant, and using the other spare room as a home office for that business.
After some research I've decided to just do this as a Sole Proprieter (DBA) so things can seem more professional. Seemed like an LLC would be nice to protect my personal assets, but for my situation I think it would just cost too much. What do you think? I plan on getting a separate business account for all my transactions that involve the business.
Questions:
1. For this situation is there any benefit to getting a separate Tax ID for my business? If so please explain?
2. Can I establish business credit on a DBA with a separate tax ID? or is that just for LLC's and above?
Any advice/pointers would be appreciated also! Thanks so much in advance.
Houston , TX · Member since 2011 · 27 posts · 14 votes
14y
Mehran- more important than anything else is you have a good relationship with the person renting the room
Andrea-
Your own room with a large window & closet. The room is next to the upstairs bathroom with an upstairs view of the back of the house. Male roommates only please; sorry ladies nothing personal just that I am a guy so it's easier to handle this way.
The house is a two-story 2100 sq. ft. residence on a good lot with easy access to San Jacinto College and Beltway 8/ Hwy 90. The house has four bedrooms, all upstairs. Amenities include digital cable, wireless internet, washer & dryer, refrigerator, attached garage, large living room and a full kitchen. Quiet neighborhood and a quiet house with easy access to restaurants and major highways (20 MINUTES TO DOWNTOWN!)...
Room will become available December 17, 2011.
Rent is $___ per month plus an equal share of the utilities. (split utilities per person averages about $___, thus total rent & utilities runs between $___ to $___ per month)
$300 deposit required, payment plans available. Or flat rate if that's preferred.
The best way to reach me is by cell phone or email. You must have your own vehicle and have steady income. Out of country residents need not apply as all applicants will need to meet in person to see the house and room before consideration. Thank you.
Daniel Roddy
Home is in the _________ subdivision. (see Google link below)
Houston , TX · Member since 2011 · 27 posts · 14 votes
14y
i do just what your talking about with the 3 spare bedrooms i have. seems like your taking it very serious, i am not nearly so, my tenants do not sign leases, i rent to guys my age (early to mid 20s) and advertise on Craigslist (ill give you my add, proven to work great), i use an all bills paid structure which allows me to make more money and is easier. basically i try to befriend the people who are LIVING IN MY HOUSE right, and so far i have had zero problems
Electrical Contractor · both, Maine & Florida · Member since 2011 · 129 posts · 53 votes
14y
I don't know if I'd call that a business, especially one that the IRS won't flag for having a home office!!
I'd rent both rooms and do the paperwork on the kitchen table!
Investor · San Ramon, CA · Member since 2011 · 1k+ posts · 569 votes
14y
You're renting them a room in your house... a place where you'll have fights with your wife, laugh at the tv, and make odd noises all men do in the bathroom... how "professional" do you think that will all be in the end?
A DBA allows a certain level of privacy (assuming your state doesn't post them online like mine does for an easy google search). My tenants know me as Nathan... they make their checks or money orders out to my DBA. No need for them to know a last name. But if they're living in your house, well, privacy is out the window anyhow.
Investor · Wichita Falls, TX · Member since 2010 · 3k+ posts · 603 votes
14y
Thanks guys for the quick replies.
Daniel R. - It seems like you are currently doing what I am hoping to do. I just feel like I need the peace of mind of a good rental agreement in case things go awry.
Dick M. - Good Idea, I might just do that. Instead of 900/mo for 1 room I can easily get like 650-700 for each rooms. But I'll also have 2 extra people in my house.
Nathan Emmert - I'm single! I see what you mean about the privacy being out the window. Is there any other benefit to having the DBA?
I'm thinking If I can rent both rooms out it might make sense to incorporate as an LLC ($800/year) that way I can protect my assets and establish credit for when I buy my first rental property. Thoughts on this?
Investor · San Ramon, CA · Member since 2011 · 1k+ posts · 569 votes
14y
My understanding is given the current lending environment, the days of lending just to an LLC are basically out the window for us small time investors. Unless that LLC has massive equity behind it, which completely defeats the purpose of an LLC for most of us, you won't get a loan you don't have to personally guarantee anyhow.
Btw, LLCs shouldn't be an income decision, they are generally a net worth decision. If your net worth is negative, you really don't have anything to lose... you simply declare bankruptcy. It's when you have say $10M in assets they could target that you want to divide it into 40 LLCs to limit your exposure to $250k maximum instead of allowing them to get to everything.
DBAs are really just a low level privacy shield that gives the air of more professionalism when running a business. I don't see them doing much with regards to roommates.
Investor · St Petersburg · Member since 2012 · 62 posts · 27 votes
14y
Daniel R.
Would you mind posting your ad or sending it to me? Ive been looking to rent out the spare room in my house on CL but mostly got scammers multiple times.
Houston , TX · Member since 2011 · 27 posts · 14 votes
14y
Mehran- more important than anything else is you have a good relationship with the person renting the room
Andrea-
Your own room with a large window & closet. The room is next to the upstairs bathroom with an upstairs view of the back of the house. Male roommates only please; sorry ladies nothing personal just that I am a guy so it's easier to handle this way.
The house is a two-story 2100 sq. ft. residence on a good lot with easy access to San Jacinto College and Beltway 8/ Hwy 90. The house has four bedrooms, all upstairs. Amenities include digital cable, wireless internet, washer & dryer, refrigerator, attached garage, large living room and a full kitchen. Quiet neighborhood and a quiet house with easy access to restaurants and major highways (20 MINUTES TO DOWNTOWN!)...
Room will become available December 17, 2011.
Rent is $___ per month plus an equal share of the utilities. (split utilities per person averages about $___, thus total rent & utilities runs between $___ to $___ per month)
$300 deposit required, payment plans available. Or flat rate if that's preferred.
The best way to reach me is by cell phone or email. You must have your own vehicle and have steady income. Out of country residents need not apply as all applicants will need to meet in person to see the house and room before consideration. Thank you.
Daniel Roddy
Home is in the _________ subdivision. (see Google link below)