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5 Questions and Answers About 1099’s

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Happy New Year!

Now, with that out of the way, let’s get to work.  And by work, I mean taxes.

The New Year means it is tax season again.  It’s time to close the books on 2013 and get all that paperwork together for Uncle Sam.

Part of that paperwork, is IRS Form 1099, specifically form 1099-MISC.

Why Should Landlords Care About Form 1099-MISC?

As a landlord, you are engaged in what the IRS calls a “trade or business” (I am assuming here that you are in the business to make a profit, well so is the IRS).  Therefore you are required to file form 1099-MISC. 

What Is Form 1099-MISC?

Form 1099-MISC is a form for reporting miscellaneous income to the IRS.  The IRS uses this form to help them determine how much a taxpayer made during the past year.  You are basically helping the IRS enforce the law.  The form has three parts.  One part goes to the IRS, one part goes to the payee and you keep the other part.  It’s pretty easy to fill out and the instructions can be found here.

Who Do You Fill Out Form 1099-MISC On?

You must fill out a 1099-MISC on anyone who provided you with a good or service in the past year worth over $600.  Did you have painters paint a house for $1,000?  Fill out a 1099.  Did you have a plumber do various jobs totaling over $600?  The plumber gets a 1099-MISC.  You get the picture.

One good thing, if your contractor or plumber is part of an incorporated business like an LLC, you likely do not have to file a 1099-MISC.  You can learn more here.

Will I Need Any Specific Information To File a 1099?

Yes, you will need the taxpayer’s tax identification number (TIN).  Usually this is a social security number but may not be.  To get that information you should have another form in your records, form W-9.  Get your contractors and others to fill out this form.  You can get and use form W-9 here.

When Do I have To File These Forms and Where Can I Get Them?

Yeah I know, that is two questions but they are important.  You have to file form 1099-MISC by January 31st.  But if you want to be a good guy, file it as early as possible as your contractors may need them to get a refund.

You cannot download the forms from the internet since the IRS uses special forms for their scanners.  You have to get and use their specific forms.  You can get the forms for free from the IRS, but they often get backed up.  I would suggest going to your local office supply store.  Go now however because they will sell out.

Let me close by saying that I am not an accountant.  I am a landlord who has done their own taxes over the years.  I seek competent advice from my CPA regarding taxes, and so should you.  The above are just some highlights regarding 1099’s, please seek advice if you have further questions. 

 

Axl Rose – Best Tenant Ever?

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According to landlord Steve Fishman,

“People have mixed views of Axl Rose, but as a landlord, I loved him. If he ever needs a recommendation, I’ll happily write: Quiet, undemanding, and pays his rent.”

Read more here.

Top 5 Smarterlandlording Posts in 2013

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Here are the top five posts for 2013.  Thanks for reading Smarterlandlording.com and look for lots more in 2014!   Have a Happy New Year!

 

Jenna’s Real Estate Resolutions for 2014

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If you’ve ever read anything on building businesses or obtaining personal success, you know that statistics show that you are more likely to achieve a goal if it is specific, measurable and written down somewhere.

With that in mind, here are my 2014 Real Estate Resolutions, all of which should be accomplished no later than December 31, 2014. Some are simple; some are not—but they are all important to my success as an investor.

  1. Buy a ladder and a water key.
  2. Purchase another multifamily property.
  3. Complete the wooden fence around my triplex.
  4. Read at least 3 new books on investing and/or entrepreneurship.
  5. Purchase an external hard-drive to store all of my RE documents.
  6. Every week, schedule time for house work, exercise and friends/family.
  7. Create a home-office to include a locked file cabinet and paper shredder.
  8. Develop a close relationship with 5 more contractors and 5 more investors.
  9. Renovate the kitchen of my apartment with new cabinets, floors and counter tops.
  10. Review my credit report and dispute all inconsistencies no later than June 30, 2014.

 

What are your Real Estate Resolutions for 2014?

 

Rents Are Up, But Can They Pay?

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There is some good news and some bad news out there for landlords recently.

Let’s look at the good news first.

The rent is going up. 

 

According to an article in USA Today

Rents will increase 3.1% nationally next year, about the same as this year, apartment market researcher Axiometrics says.

Meanwhile, researcher Reis sees rents rising an average of 3.3% in 2014.

Lots of folks are still looking to rent, while the supply of rental housing remains tight.  Look for more multi-family construction in 2014.

On the bad side, some tenants may not be able to pay these increased rents.  A recent study by Harvard University notes that:

the number of renters paying more than 30 percent of income for housing (the traditional measure of affordability)reached another high in 2012. Excessive housing costs strained the budgets of more than half of all renters, or 21.1 million households—a slight increase from the year before.

Lots of factors come into play here.  But look for a continued squeeze on renters in 2014.

 

The Best Gifts a Tenant Can Give

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When you read the title to this post, I bet you thought I was going to say “the rent.”  But “the rent” is not a gift.  Rent is simply a contractual obligation.  Rent is paid in return for a place to live.

Gifts on the other hand are given without any expectation of a return.  A gift is freely given.  No one forces you to give a gift and no one will evict you if you do not give a gift.

Since this is the season for giving, what are some of the best gifts that a tenant can give?

  • Their Continued Tenancy – There are a lot of choices out in the market place.  We know you have a lot of options.  You could move but you choose to keep renting from us.  Thanks!
  • A Good Reference –People still need to move sometimes.  When they do, we want to get those vacant units rented as quickly as possible and a good reference from a good tenant goes a long way.  Your recommendation to your friends means a lot to us and we do appreciate it.
  • Return Business – Every once in a while, we have a tenant move only to have the situation that caused the move not pan out.  More than once these tenants have wanted to come back and rent from us again.  That says a lot.  Again there are a lot of choices in the market place and we appreciate your repeat business.

Want to get more of these types of gifts?  Here are some tips.

  • Keep Your Properties Maintained – Nothing says “run away” or
    ”I don’t really care” more than a poorly maintained property.
  • Respond Quickly To Tenant Concerns – Be it noisy neighbors or a leaking roof, at least acknowledge the concern.  If something needs to be fixed, fix it.
  • Be Firm, But Fair – Have policies in place that treat everyone equally and do not play favorites.  Be sure to explain what is expected of your tenants and hold them to it.  Trust me, they like to know that that are a part of a tightly run ship.
  • You Can Catch More Flies With Honey – This old phrase is really true.  Sure you can yell and scream.  You may even be 100% correct, but where will yelling and screaming get you?  Will you really “win” the argument?  Remember a little kindness can go a long way.  We are all human and that brings ups and downs.  Try not to add to the downs.

Remember that landlording is ultimately a people business.  Take that extra step for your tenants and many will give you one in return.

Happy Holidays Everyone!

Online Rental Payment – A Must Have Tool

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I have a question for you.  What is the one thing we landlords want?  I’ll give you a hint. It usually comes on or about the first of the month.  Yep, you guessed it, the rent.  We want to collect the rent.

So here is another question.  Why do many of us in this day and age make it so difficult for the tenant to get us the rent?  Think about it.  How many of you still require your tenants to mail you a check?  Why do you make your tenants go through the process of finding an envelope, stamps and a check month after month?

There is an easier way.

Set up a system to allow your tenant to pay their rent online.

Almost nobody writes checks anymore.  In fact, your tenants are already paying most of their bills online anyway.  They do not have to find stamps for their utility bills or car payments.  They don’t write checks at the grocery store.  I’ll bet many of them do not even carry much cash and instead use electronic debit payments for almost everything.

Setting up a system for online rent payments is easy to do.

We used a system at clearnow.com for many years.  I highly recommend them.  We would still be using it today but our cloud based property management software has an electronic bill payment system included.

The clearnow.com system is a great tool all smarter landlords no matter what your level of experience or how many properties you have.  Using this system will save you, and your tenants, time and effort.  There are many other benefits as well.

  • It is a great marketing tool for the landlord.
  • Rent payments get directly deposited into your bank account.  No more running to the bank every time a check arrives in the mail.
  • Rent collection is much easier.
  • You get a heads up e-mail if a tenant cancels their automatic payment.
  • You can set up different debit days working with your tenant’s pay schedule.
  • Tenants can build their credit histories.

On the down side, there is a small fee charged for this service, but I believe the fee is well worth it for the amount of time you will save.  Plus, this service will not work in all markets or with all segments of the population.  Some tenants simply are not going to have checking accounts.  Tenants in those markets will still need to bring you a money order.

Online rent payment is the wave of the future however.  Philly.com for example reports that rent payments made online have increased by over 66% in the last three years.

So do yourself and your tenants a favor.  Set up on online rent payment system today.  Once you do, you will never look back.

Which House Pays Me Rent?

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Wall Street once figured out a way to securitize mortgage payments.  That worked out well.   Now they have done it again using rent payments.  This horse is getting ready to leave the starting gate. Any thoughts on where it will end up?  Last time they did not know who owned what.  How will they be able to keep up with who pays rent whom?  Should be interesting to watch in the coming years.  It is not going to be as easy as they think.

Tips for DIY Painting

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If you are new to real estate investing, I’m guessing you will be doing some work yourself. That’s great! This has truly been the biggest learning curve of my life. We have been rehabbing our triplex for 5 months now, and I can say with certainty that I’ve found the task that I would like to hire out, as soon as possible—painting.

Painting is the worst.

It is repetitive on your wrist and wearing on your back. You have to tape and lay down drop clothes. You need to designate an outfit for ruin. The worst part is how long it takes! This is especially true if the room requires multiple coats. One room we painted required 5 coats! Remember those custom colors?…

If you’re like me and you can’t quite afford to hire the job out yet, head this advice. I learned the hard way.

  • Buy good paint brushes. Cheap brushes will shed. Better brushes are easier to clean.
  • Buy one of those 14-in-1 paint tools. I’m not sure what all 14 functions are for but I use it a heck-of-a lot.
  • Clean you brush after every use! 
  • Clean your paint rollers after every use. They are reusable. Seriously… I didn’t know this.
  • Buy drop clothes, preferably the cloth kind. Do not use table clothes—despite how free they may be. The paint will leak through.
  • Pick neutral paint colors and stick with it. This will save money and headache in the long run.
  • Take a picture of your paint color, brand and sheen. Keep it on your smart phone until you’ve memorized it! This way, you know you’re buying the exact same paint each time.
  • Buy paint in 5-gallon buckets instead of gallon cans. You’re going to go through more than you think. If you’re using the same paint colors, you know it will be used at some point. It’s cheaper in the long run, and you can use the empty buckets for so many things.
  • Buy the cheap paint. It doesn’t matter how expensive it is, you are going to need at least 2 coats.
  • Don’t leave the door open if it’s raining outside. It will cause paint blisters on your wall.
  • It’s easier to scrape paint from finished floors than sand them from unfinished floors.
  • Do not use painter’s tape on finished hardwood. It will take the top layer of polyurethane right off!

I’m sure this doesn’t cover all of the painting mishaps that I’m doomed to encounter. If you have other bits of advice, please enlighten us all.

Are You Prepared?

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So I am sitting here in Memphis the evening before a major ice storm is expected to hit.  We have been through one of these before, back in 94 an ice storm wrecked havoc in the city, shattering limbs, and knocking out power for days.

As a landlord, these winter events can cause another types of havoc.  We have to worry about our properties.  Limbs can fall on roofs or even worse utility lines.  If utilities go out, you then begin to worry about freezing pipes and bursting water lines.  Icy roads mean utility crews, work crews and other repair crews may not be able to get out very quickly.

So what is a landlord to do?  How do you prepare?

You can do several little things, but it all must be done beforehand.  Try to keep limbs trimmed.  Make sure pipes are insulated well.  Perhaps have a few water cutoff valves installed so problem areas can be isolated.

But for the most part, you just have to wait.  You have to wait to see how bad the storm gets.  You have to wait to see what breaks or busts.  You have to wait to see what damage is done.  You have to wait for conditions to improve so you, your workers and utility crews can get out and fix the problems.

Your tenants can be a really big help.  Asking them to prepare for potential bad weather and help protect the property through a simple e-mail or text is key.  No tenant wants to be without power and water.  So if they can help keep those services on, they generally will.  Ask tenants to keep faucets dripping and sink cabinet doors open because running water generally does not freeze, thus protecting pipes and keeping the water on.

When you tenants move in, you can begin to get their help then as well.  Showing tenants where their electrical circuit breakers are and how they work is important.  As is showing them how to turn on and off water and gas supplies.  They might just save you a trip out on an icy road.

No matter what happens, do your best to get things back to normal as quickly and as safely as possible.  Communicate with your tenants.  Let them know you are aware of issues and working on the problem and hope for the best.