I'm reviving this thread since I just learned more about how to use rental properties to your advantage in tax time.

(Though I'd love someone with experience or knowledge to review my estimates and provide feedback or suggestions!)

If I can get 3 tenants to each rent a bedroom, for a total of $1650/month, the net tax effect looks like this:

Income: $19,800

Expenses: ($7,260) - taxes, insurance, operating costs

Mortgage Interest: ($3600) - 3.375% on ~$107,000 - will decrease over time, obviously

Depreciation: ($5820) - Home value of $160,000 spread over 27.5 years

Total Income/Loss: $3140

Total Tax Increase: $ 785

(With 2 tenants, I still live at home and am not currently reporting tax income. But I wonder if I should. Using the above calculations but with $1000/mo as my guide, I actually show a negative $4660 net tax effect, which should save me $1165 in taxes each year.)

3 tenant plus apartment vs 2 tenant with commute

Rental Income: $19,800 vs $12,000

Taxes: $785 vs ($1165)

Commute: <= $240 vs $1920 ($160/mo based on 28 miles, cpm for 2008 Honda Fit at $0.27)

Utilities: $2160 vs $0 (Estimate for apartment, already pay/include utilities in flat rent at my house)

Rent Cost: $8700 vs $0 ($725/mo)

Total: $7915 vs. $11,245 (positive income)

Or total: $7915 vs $10,080 (since I don't currently get the tax advantage with 2 tenants renting)

Cheaper to stay put and commute unless I can find a place to rent closer to $400, or charge more rent. (Or perhaps I could find a beater of a house for <= $60k to buy and pay just $400/mo in mortgage. Let's start internet searching...)

I found a house near me that's around $40k to purchase. If I take out a 3% 15 year mortgage, I'll pay about $270/month. That'd make renting out my whole house a worthwhile endeavor, especially with the reduced commuting costs.