SMARTERLANDLORDING

ADVICE FROM EXPERIENCE

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Do Not Enter – Respect Your Tenant’s Home

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It can be difficult to find good tenants.  It takes time to show your property, take applications and screen out the bad guys.  Then there is the lease signing and move in processes.  After going through all of that, you want to keep the good tenants for a while right?  Of course you do. So don’t do things that will drive them away such as not respecting their privacy.

Once you find a good tenant, sign a lease and let them move in to your property you have given certain legal rights of possession to your tenant.  You have provided them with a home and as they say “a person’s home is their castle.”  You as the landlord have to respect that, even though you own the building you cannot just go into to a tenant’s apartment any time you fell like it.  If you do, not only are you a sloppy landlord (and kind of a jerk) you could be charged with a crime.

Check out this recent news story headline.

Tenants claim landlord broke into apartment overnight, heat still not on

The story continues:

Sievert rents an apartment for her daughter at a complex in Muskego near Woods Road and Racine Avenue.  She says Wednesday morning the landlord came by unannounced…

“He broke into my apartment.”

Sievert locked the doors to her apartment Tuesday night when she left.  When she came by to get her car this morning, she saw locks were broken.

“We noticed that doorknobs and locks were removed. The screw that we had screwed the door shut with was broken in half. The chains ripped off. The door was broken.

Muskego Police are involved and might give the landlord a municpal citation for criminal trespassing. But they want his side of the story.

“He’s sneaking around. He’s hiding his car in the garage.”

Certainly there is a lot going on in this story such as non working heat, code violations and a hiding landlord.  Plus why did he not have keys to his own property?  Who knows? But the story demonstrates my point.  A landlord can get themselves in trouble by “just going in” a tenant’s apartment.

But, what if there is an emergency such as busted pipes?  If there truly is an emergency, then yes, you are going to be permitted to go in unannounced to protect your property and fix the problem.

Otherwise, your local laws are likely going to dictate when you can and cannot enter a tenant’s home.  Here in Tennessee, the Uniform Landlord Tenant Act does just that.  Section 66-28-403 specifically addresses access by the landlord.  It states in part:

 (e) The landlord has no right of access to the premises except:

   (1) By court order;

   (2) As permitted by this section, § 66-28-506 and § 66-28-507(b);

   (3) If the tenant has abandoned or surrendered the premises;

   (4) If the tenant is deceased, incapacitated or incarcerated; or

   (5) Within the final thirty (30) days of the termination of the rental agreement for the purpose of showing the premises to prospective tenants; provided, that such right of access is set forth in the rental agreement and notice is given to the tenant at least twenty-four (24) hours prior to entry.

Your local rules may be completely different.  Local differences such as these are one reason it is so important to find a local REIA and understand your local laws.

Sure, there are other times when a landlord can have access to the property, such as to do a quarterly inspection, for a property appraisal, for insurance purposes, or if the tenant has requested maintenance.  But a good rule of thumb is to provide at least 24 hours notice and spell out when, where and why you may come into the property in your lease.

So be a smarter landlord and respect your tenant’s privacy.  After all, would you want someone barging into your home unannounced?

Real Estate Tax Benefits – Are You Ready To Claim Yours?

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Real estate investing, especially landlording, can provide you with many tax benefits.  Are you ready to claim yours?

For example:

  • Do you use the internet to search for properties?  Do you read the classified ads in the local paper?  Do you buy notepads, folders, pens, etc?  These are all business expense deductions.
  • Do you work out of your home?  You may qualify for a home office deduction.
  • Do you “drive for dollars” with your car?  Do you travel to and from your rental properties to show them to possible tenants or do maintenance?  You may be able to claim the car mileage deduction.
  • Did you need to make some repairs?  Of course you did, you are a landlord!  Those repairs are likely deductible.
  • Rental income for the most part is not subject to self employment (social security or Medicaid) taxes.
  • Plus the biggest bonus of all, depreciation. 

All of these deductions came before you even take your standard deduction and other exemptions, significantly reducing your adjusted gross income and the amount of income tax you owe. 

There are many more tax benefits that real estate investing offers.  These can include such things like “real estate professional” classification and cost segregation.

Taxes however, make a lot of people nervous.  But they should not.  Taxes are not rocket science.  Taxes are really are just some basic accounting along with some addition and subtraction.  I have done my own taxes and while they are time consuming they are not that difficult to do.

Two things have really helped me understand taxes.

  1. I am no CPA, but I have one that I can call upon if I hit a road block.  She has experience working with real estate investors and understands my business.  Where did I find her?  At my local REIA group.
  2. This book has been a great help.  If you are new to landlording, have a couple of properties or a couple of dozen, Every Landlord’s Tax Deduction Guide can really help you.  It is written for you, the investor, not the accountant.  It will help you make sense out of income taxes.  I cannot recommend it enough.  Click on the link and order it today (I do get a small commission on every order, just so you know, but I really do think the book is worth every penny)!

 

Better hurry though.  April 15th will be here before you know it.  Are you ready?

The Biggest Obstacle to New Investors – It’s Not What You Think

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I spent 2 years researching real estate and speaking with investors before I jumped in. I saved vigorously because I was convinced that capital would be the biggest challenge to my real estate goals. While capital is still a challenge, I’m not sure that I would call it my biggest challenge.

The biggest challenge to part-time investing is working full-time.

Luckily, I have a job that gives me almost constant access to the internet—not to mention an incredibly flexible schedule. However, those perks come with the understanding that I will most likely be working more than 40 hours a week.

It feels like I’m working all day, every day. It’s a good thing that I really enjoy real estate investing! I can see how new investors could become burnt-out fast. My philosophy at the moment is to maintain the bare minimum of work/life balance that is needed to keep me moving forward. I’m motivated at the thought of a having a more satisfying work/life balance in the future. Fingers crossed that this all pays off!

So, for all of the newer investors out there who have yet to realize your dreams of quitting your day-job and achieving financial independence, this post is for you. These are a few of the things I do to help me get  through a day of work and real estate.

1. Organize Yourself. I use lists for every part of my life and I include ever minute task that needs to be accomplished. If possible, use a list aggregating app, like Out of Milk, so that you aren’t making multiple trips to the store or a rental property.

2. Prioritize Tasks. Decide at least the day before which tasks warrant priority for the day. Are they work-related are real-estate related? Maybe it’s a church commitment that demands your time. Either way, schedule it in and get it done first! If you spend time checking emails and sorting files, you could very well waste the time you had to devote to important obligations.

3. Learn to Say No. I’m no good at this one, but at some point you have to start turning down outside requests. Hopefully you won’t have to turn down a killer deal! Weigh the reward for each request that is asked of you and then make sure you’re able to politely decline if doing so would detract from other high-reward action items. Staying focused on high-reward action items will keep you motivated and energized!

4. Maximize Your Commute. If you are spending all of your time working, your family may begin to worry. Use your commute to and from work to touch base with close family and friends. Even short conversations can boost your energy. I also recommend using your commute to listen to podcasts and audio books about real estate. It will educate you and inspire you to keep going.

5. Schedule Housework. I don’t know about you, but if my house is a mess, my anxiety level is through the roof. If I don’t set aside a specific time to clean house and prep meals, then I will never get around to it. This is an important component for me—one that I intend to devote more attention to in 2014.

6. Blend Work and Play. Any time you can knock out two things at once is a major win. I seriously hate painting. However, I’ve found that inviting friends to paint with me (with promises of wine, beer and pizza breaks) can take the edge off. This way I feel like I have a smidgen of a social life and the daunting task of painting all by my lonesome is lessened.

To new or experienced investors, please comment with recommendations that have helped you. This is a very real struggle for some of us. Sometimes a small suggestion can make all of the difference! These tips sure have.

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.