So I had a great idea this year to generate some additional rental income. I have some rental properties targeted to mostly young professionals in Philadelphia. My tenants are all highly educated, well qualified, and gainfully employed. I have in total 20 tenants. When each tenant signed the lease I told them that they would each have exclusive use of a beach house that I rented for them at the jersey shore. I was able to raise rent $50/tenant/month for this option resulting in approx $12,000 in additional income. 16 of the 20 tenants used the house this summer and myself and my fiancée also used it on days that the tenants weren't able to.
So my question is this: where on my schedule E would i deduct the rental? Is this legal? I paid $15000 for the rental for the season and would only be deducting 12,000 of the 15000 paid due to some personal use. Does anyone see any potential issues that could arise?
As of now I haven't profited from doing this, however next year I would like to organize it better and hope to make a nice profit. Not to mention when I give tenants the option for this deal most love it and I've reduced vacancies drastically.
Please advise as I think I might be onto an amenity that would certainly increase my revenue and decrease vacancies.
Thanks in advance!
Now that is a unique idea. Totally outside the box. I like it.
Really innovative strategy Jim! Sounds like something you should discuss with your accountant.
Jim, I would talk to an accountant or other tax specialist for this. I would think, though, that it would be more a percentage of tenant usage. ie Tenants used the property for 60% of your lease term for the rental so $15,000 * .6 = $9000 deduction.
I am not a tax expert... or even a tax novice for that matter.
Brother I don't know if it's legal but that's one BRILLIANT IDEA!
Is there gonna be a next year?
Seems like it's a total write off though. If you step back and look at it. It's a "Company Expense".
Gonna have to talk to my CPA...
yeah it has worked out really well. The tenants have gotten to know one another better due to it and some have actually seem to become friends, which I'm hoping also helps with retention rates. I've also found that at my larger houses, 5-6 brs, dropping off 2 large pizzas and a 12 pack of beer once a month or so, has also helped relations between tenants and myself. I've gotten many referrals this way for other tenants, and it also seems the tenants bother me less with menial tasks.
Any other ideas anyone has? I feel like a lot of people come here to complain about tenants, but just throwing them a bone (or a beach house) seems to go a long way. We all know people despise the landlord bc were typically their biggest expense, I'm just trying to mitigate that as much as possible. After all, they are our clients and we need to maintain that relationship just like an account manager at any business would. I feel like a lot of landlords forget that.