Strategic spending on rental housing

My wife (not legally married) and I own two houses in California. One of them we rent and the other we live in. They are on the same property. When we bought the property in 2014, my friend and I renovated it @ $60k. Plumbing, electrical paint in and out, landscaping, new kitchen and bath etc.

The house we live in needs quite a bit of work. Roof, paint, foundation, plumbing, electrical etc. It also has a massive and not utilized attic which could be 2 big bedrooms and a full bath or 1 master bed and two smaller bedrooms etc. Same with the basement: it could be, for example, a 2 bed apartment and a small 1 bedroom apartment. My line of thinking is to do the basement first, since the foundation needs to be replaced. This would cost ~$300k. A lot of dough. We would gross $42k / year on the income generated by the new rental space.

If the market stays flat, we would break even in about 7.5 years.

What I’m wondering is what the most cost effective way of doing this is, incl. tax strategy, and how to best protect the investment.

Any thoughts?

 

What’s this have to do with a Tacoma, maybe you should post this on real estate world