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Is it beneficial to convert non-investment real estate to rental if I need to make major repairs? (USA/Missouri)
I don't have a direct answer for you, but here are some other things you might consider to help you decide on a course of action in addition to Joe's note about consulting a CPA...  Get a couple contractors out to look the place over and give you some quotes on the work needed, most will do so for free, or a nominal fee.  Everything about the extent and cost of repairs is complete guess work until you have some firm numbers. You might also consider getting an up-to-date appraisal, particularly if you can find someone willing to give you an "after improvements" estimate as well.  The housing market has fluctuated a bunch in the last couple years, your current value may have shifted significantly from where you think it is if you haven't done one recently.  You will definitely have to pay for this service, I would estimate around $500 based on one I got in St Louis a few months ago.   You might also consider reaching out to a local property management company to find out where they think you would fall in the scope of the current rental market and what improvements they would recommend.  You will probably want to be onsite to talk to any of the above people about the work they are proposing, and your intended goals, so figure some travel costs and time into your evaluation. As one of your noted concerns was the state of the roof, I can tell you that in St Louis County, and the spec sheet for most shingle manufacturers, you are limited to two layers of shingles, then the roof is supposed to be stripped and redone from the bare wood.  Personally, I won't even do the second layer, I always go to bare wood and start over, if for no other reason than it gives me an opportunity to inspect the deck and deal with any minor problem areas before they become big problems. I don't know Greene County to know what the local code may be like, but odds are high that the shingle manufacture would not honor any warranty with this installation. Another potential gotcha that may be lurking out there is your ex may still have a lingering claim to the home if you go to sell it.  I don't know the rules in Missouri off hand, but where I grew up (with family in the real estate and title insurance businesses) there was a law regarding homestead rights.  If a spouse spent even one night in a property, they had an interest in it and an explicit waiver had to be signed to release said interest.  Review your divorce settlement and/or contact your attorney to confirm your status in this regard. Also consider the potential of refinancing your mortgage to either reduce the payment, or get funds for the improvements/repairs.   Final note, I understand wanting to help out a friend (I have done similar things more times than I can count), but seriously look at the situation and see if you can't get the rent or other compensation up to the level of the mortgage at least.   You mentioned that you have belongings still on the property, what would a storage unit for said items cost? In terms of juggling the numbers you could potentially use that value as justification to adjust the friends rent as a caretaker fee without any issue.  (Verify with your CPA) Talk to the friend and see if there are other parts of the job they would be willing and able to take on as consideration for the reduced rent (make sure you have at least a simple contract on any such agreement).   Or if none of the above are sufficient to balance the numbers, see if they would be willing to take on an actual room mate to help make up the difference.