You will be turning your house into a rental property, with the caveat that you will be keeping one of three bedrooms for personal use. Since you will be renting to friends, it is important that you charge market rent, otherwise the entire house will considered personal use and you will only be able to deduct expenses up to the amount of rent you receive. Lets say your house is 2,000 square feet, and the area you are keeping for yourself is 400 square feet. Assuming the two tenants have access to the entire house, you will be renting 80% of your house. You will need to determine your cost basis in the property (typically purchase price, plus acquisition costs, plus improvements). You will allocate that cost between land and building (you can use the same allocation % the tax assessor does). You will then take 80% of your cost for the house/structure and set it up as rental property asset and the program will calculate your annual depreciation which is a deductible expense. You will report your income and your expenses (e.g. 80% of property tax, mortgage interest, etc.) TurboTax does a great job of walking you through the set up of your property as a rental.
Please see the following TurboTax Article on rental property and taxes: Rental Real Estate and Taxes
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