I have about $75K currently in a mutual fund. I've been considering adding an extension on to my house as a rental apartment, for which I think I could get $1200 - $1500/month currently. After 10 or 15 years I could then stop renting it out and use it as part of my house. Which is a better investment -- leave the money where it is, or invest in the home extension?
Some issues I'm wondering about: Tax -- Would the apartment be considered part of my house and my property tax would increase? Would it be considered an additional property and taxed separately? How is the rental income taxed? Is it considered a business, and are there expenses that can be written off?
I'm in the third year of a 30 year mortgage. My salary covers expenses for now. United States.