All Forum Posts by: My Nguyen

@My Nguyen

I did "apartment hacking" for years. Advice I would give

1. Be thorough in ur vetting process. Ur not looking for a friend ur looking for someone to pay you on time, so if ur "on the fence" about a prospect....don't rent to them. 

2. Always get at least 1 full month's security deposit upfront. Don't try to be accommodating and only request 50%. Remember you don't know these people, and you'll need that money if they don't pay their rent and you can always use it as leverage.

3. It's ur house. Lay down the ground rules upfront by writing it in the "lease" so there is no confusion. For ex) I told all my "tenants" they could only have overnight guests 2x a week and that the place was for one person only...so if they had a partner that they couldn't live w/o I suggested they get an apartment w/ that person.

4. Make ur place look as nice as possible so you can maximize what you charge. When I started I was only charging 50% of the rent, and breaking even. However, after consulting w/ an interior designer (my cousin) and fixing it up I was able to charge 65% of my rent. Which was perfect for me cause remember I don't own this place... I was just a renter myself:) If you own the place I hear you can make so much more. 

5. If you add utilities into their rent, make sure you give yourself a little cushion cause some tenants are reckless with utilities when they aren't paying for them.

6. Take care of ur tenants and they're take care of you

Overall I would say I had a positive experience, and 80% of my tenants were great! 

Living next to your tenant can cause some dilemmas.  I learned from my house hacking experience that it's important to set the tone early on and be clear on your rules.  Easy to become friends with the neighbor and then get take advantage of down the road.  At the end of the day, you are running a business and tenant needs to know. 

Most importantly: don't overthink it, this is not rocket science and you will figure it out, no problem! 

We work with a lot of duplex buyers in Milwaukee and we have a mini-crash course for our clients to provide the few bits of information you need to get optimal results. I have been managing our rentals for 15 years. 

I'll try to keep this generic:

1.) Your tenant will be as nice as your unit (so put some effort into it!) 

2.) Spend $120 on professional real estate photography - totally worth it

3.) Advertise on Zillow

4.) Run background checks on a platform like Smartmove (by Transunion)

5.) Don't use a homegrown lease (includes homegrown by an attorney) - we have a local service here in Wisconsin, provides all the forms

6.) Train your tenants well - like employees, you make the rules and then educate/train them. Know what you won't tolerate.

7.) Read a couple books on landlording, like Brandon Turner or Mike Butler.

8.) Trust your instinct, rent to someone who is on the same "wavelength" and has a similar rhythm of life
 

@My Nguyen

This can get complicated so be sure to consult a qualified professional or two..  You can basically deduct the pro rated portion of an expense or an actual expense.  So, for example, if you had a separate meter for their usage, you can deduct the actual charges (assuming you paid for them and werent' reimbursed).  Probably more to your point, you can deduct the prorated costs of your house.  We've had mutliple threads on this in BP.  While people think they can go by the ratio of bedrooms, you can't.  Its by the ratio of dedicated space.  For example, if you rented out one bedroom, it would just be that sq ft of the bedroom divided by the whole house sq ft.  The hallways, bathrooms, kitchen, etc. are all common spaces that you use.

I'm not sure of the setup for your house.  If your laundry facilities are in the basement, then that shared space can't be counted as being rented out.

Don't forget that since you have to make a depreciation deduction its usually considered a "good thing."  But, in my opinoin, its making lemonade out of lemons.  Whenever you go to sell you have to pay it back as depreciation unrecapture (unless you 1031).There is no "free lunch" with the IRS.  Good luck.