Advice for newbie sitting on $1 million in equity

[Jessica M.]

Hello all. Even though I am not new to being an home owner I am new to real estate investing. I currently own 2 homes in Bay Area California for 10+ years and sitting on $1 million in equity. 
 
First home I purchased with my mother who recently got into financial trouble. In result I refinanced the house under my own name and had to pull out money to cover her debt and leans on the house. I owe 325k and house is comped at 700k. She rents the house under market value at mortgage cost so I gain no extra income nor have any rental tax write offs. She also rents out the spare room to help with her own living expenses. 

I also own my primary residence in highly desirable neighborhood. I owe 375k and it’s worth  around 1 million. I have around 60k in savings for a much needed  remodel on the house and have access to another 50k in 401k as last resort  I been going crazy trying to strategize the best scenario that makes financial sense to gain passive income to cover both mortgages and then some and gain a greater tax write offs/incentive.  

Thoughts on how to achieve this? By Building an ADU or house hacking on my primary or second home? By continuing to save and purchase investment property in a year or two? by moving in a box and renting my own house out for top dollar? : P

Thoughts please as well as any financial or tax recommendations. 

[Amit M.]

@Jessica M. you’re receiving lots of varied long term advice to mull over. But I’ll offer one tangible tip: yes you can absolutely write off all the rental expenses for the home your mom rents from you. Of course you need to declare the rental income, but you should be able to realize a paper loss big time, as you have significant mortgage interest not to mention the significant depreciation you can take. That will materially reduce your tax burden. you do this by filing a schedule E form with your 1040. 

Also, kudos for taking care of your mom ;)