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How to renovate for maximum income, and least taxes, investment




I’ve been hosting for about a year in my backyard granny unit. Last fall we bought a 2br 1ba house down the street because it was perfect as a STR. We are endless renovators, and have never bought a property so nice before! The former owner died tragically in a car wreck, and her heirs had all moved away. So we purchased the entire property with all of the items inside (after the family had taken away all the items that they wanted.). One of the reasons we jumped on this property is that it has a lovely south-facing 2 car garage that we can renovate into an STR, and it has a full attic where we can add a 2nd bathroom and another bedroom or two. It could potentially be rented as a separate unit if we added a kitchennette. Both tenants would share an entryway, and the stair will have to be small (steep) and probably curved or L-shaped.

Aaaaand, because we could become famous for biting off more than we can chew, we also are planning to convert the falling-down garage on our own house property, so that our backyard will have 2 rentals on it.

We have this new house rented for the next 4-6 months to a traveling professional, so that should give us some time to work on renovation this summer. We are considering which project to break into first, if we are looking to maximize our income long term.

Does it make a difference from a tax perspective whether we invest more in our own property (our primary residence), or whether we invest in this new property which is held in an LLC? All of our income from the properties will just be claimed via this LLC, but the ownership is different.

For reference, We have a 30yr. mortgage on the 2nd property, and our monthly expenses are around $700 for that property. We have rented it out this spring/ summer for $1500 per month. We have about $16K of a high-interest old mortgage on our primary residence, but otherwise it is paid off. Over the past year, I have become disabled to due a rare GI condition, and my workaholic husband is “trying to quit” our solar clients (previously our primary source of income). So our focus right now is sort of long term investment in our properties. We will have low incomes for the next few years, I imagine, as we are doing renovations, trying to get our kids to preschool/ kindergarten, and seeing a shit-ton of doctors. I will start the process of getting on disability as soon as I can face the reality of calling Adult Protective Services, but that should stabilize our income and some of our financial worries. I have thought I may die on various ocassions over the past year, so my main focus is on taking care of my 3-generation family long term via my work with real estate. And my other focus is on just spending time with our kids and trying to disguise our freqent travel to specialists as “vacation.”

In my case , Airbnb has a total godsend, because of the instability of our social safety net in America. I think it has saved us from medical bankruptcy. But I also intend to build the whole thing independently of Air so that I ‘m not dependent on them particularly. My experience as an entrepreneur and as a newly-sick person has taught me to always cover my bases! Thanks in advance for your thoughts


In your situation, you need professional advice from a financial expert, rather than input from a forum, however well meaning.

Get yourself an accountant/tax specialist, tell them about your plans and circumstances and they can advise you on how best to set up your financial affairs so that you minimise your taxes.

In the UK you wouldn’t be able to claim disability benefits as they are means tested and your various property incomes would be taken into account, but it sounds like in the US from what you say you can claim benefits alongside having various other incomes.

With young children and a serious health condition it would make more sense perhaps to do a LTR on the 2 bedroom house, rather rushing into multiple renovations. In my book health and kids always come before property.

You haven’t mentioned your husband’s income, but this would also need to be taken into account when looking at your tax liabilities.


We don’t know where you are, so we can’t tell you squat about your local/regional/national tax liabilities and other personal, local to you items. Consult a local tax expert, not an international forum.


Ahhh @KenH I think the way I said it was much nicer …if less direct :wink:


Ken is more like the blunt American. Helsi is more like the genteel Englishwoman. Yep, it’s an international forum! :joy:

To the OP, your situation is complicated enough that you should consult a professional. Especially with the new crappy tax law that was passed last year. Unless you are in the billionaire class. Then you may relax. :weary::tired_face::moneybag::moneybag::moneybag::rofl:


Hi, Jane, welcome!

You do really need to talk to a tax professional of some sort, state and local taxes are unique.

Here are the things i would be considering in your shoes: if my property value officially goes up (by adding another rental) so will my taxes, even if i can’t find renters. Can i afford that change?

How is your area feeling about str? even if local government is neutral now, lobbyists for hotels might change politicians’ views. I’m in NYC, and the sentiment has changed dramatically just in the last 2 years.

I have a friend with GI issues, and while she is currently doing much better there were days she was lying on the couch and pooping blood. She couldn’t have managed cleaning a unit and prepping it for the next guest. (Maybe your husband will be in charge of that, i’m just going worst case scenario here)

So yeah, no idea about taxes.

As far as income, it seems like people pay a premium for privacy. The more private you can give them (private entrance, en suite bathroom, personal kitchen) the better.

Other things really have to do with your market. My str folks don’t want to cook, though they do need a place to store leftovers. Making a tiny kitchenette (Costco sells matching retro mini fridge and microwaves that i covet) could be a big bang for your buck.

I’m just starting to dream about renovating, so if you want to natter on about that, I’m keen to listen.


Great post @Alia_Gee

I will be renovating some rooms in my new place so will definitely PM you for a natter.


Helsi has the ability to be blunt when and where it’s needed. IMHO, Ken’s response to the OP is more rude than blunt.


I don’t know if Ikea has introduced these into the States but they have a really neat looking, freestanding kitchenette set up available in the UK. “SUNNERSTA”, £99 with a small sink and space for a small fridge.


How is the sink plumbed? Or do you have to install plumbing hookups?


I’ve not seen it in the flesh, so to speak, but there is what looks like flexi pipework in the catalogue picture.

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