Tax benefits for co-signer

[Michael Dallas]

Hey I am a D1 baseball player that is going to buy a house in my college town to house hack for the next 2 years. I was wondering if my dad who is co-signing on the loan with me would get any tax benefits from the property. Thank y’all so much for helping!

[Bruce Lynn]

The long answer is maybe.....depends a lot on what his goals are, his financial situation, and perhaps if there is even any cashflow from a 2 year house hack hold.

The simple tax savings is if he is buying this as an investment property, then gets depreciation to offset any cash flow.

Maybe depending on where he lives vs where the property is, there's some chance that if he visits the property occasionally he could deduct those expenses.  Not sure what is considered reasonable, maybe your CPA can tell you that.  I don't think he gets to fly in from NYC to see you play 2x a week, swings by the house, and then gets to deduct airfare, hotel, and meals as a business expense.

Maybe if there is income in the venture and you set up as an C corp, he could potentially pay you to manage or maybe better yet, add some of that into a Roth for you.

I think the real trick here is that on a 2year hold on a house hack, there could very well be NO income, no appreciation so maybe none of that really matters or the savings/benefits so minimal it doesn't really make a difference.

I like the house hack idea, but you may be creating more headaches on a 2 year hold than you accomplishing benefits.   Maybe it saves you personally some rent over the next couple of years.

Some of the risks are:

Friendships....if you are renting to friends and you have to be the bad landlord/PM getting them to clean and evicting them if they don't pay rent and bills.   Even worse if they are teammates.  Are you going to allow them to have pets/girlfriends move in?  Are you willing to be the bad guy?

Rent---do people ever drop out or quit mid-season?  Anyone ever get kicked out of the program or transfer for a better opportunity?   How do you replace roommates mid-semester?

Cleaning/condition....I don't think I've every been in a house with 4 college students in it that was clean and well taken care of....so remember that when you sell.  Normally I'd say those sell for 5-10% under the comps.  Rare the yard is well groomed.  Too often there are bedroom doors locked so we can't see inside.  If you have 4 people there, that probably means 4 cars, so driveup can often look a little messy.

Do they stay there during the summer and want to pay rent, or are D1 players out of town doing something else?  How do you fill those spots and collect rent for the summer.   Seems like most college students I talk to really just want September-May leases.  So how does that fit in your pro-forma or how do you overcome that.