Carlton Sheets (famous for his real estate video and audio course) said “the profit on real estate is made at the time of purchase.” This means that if you buy too high you will never realize a profit and likely never recoup your investment. One can say the same thing about rental property: “the profit on a rental is made at the time of tenant selection.” All tenant selection begins with an application. Rental application processing is more than just ordering a credit report. For rental owners who only do that or don’t do any screening at all, you are taking a big risk. One of the fundamental aspects of tenant screening is verifying applicant identity. Why? There are two reasons:
What Constitutes Identity? There are various ways to check the identity of the applicant. Obtain at least one and preferably two of the documents listed below, and examine at the originals:
Compare these against another item like a bill or pay stub. Before you request a credit check verify that any of these used in the application were correctly transcribed onto the application. Social Security Numbers In years past the social security number (SSN) was used as a universal salient identifier, even though the Social Security Administration (SSA) clearly warned not to use it for identification. Today that waring has largely been acknowledged and is used as a complementary piece of information, which together with an account number, verify identity and ownership. In processing an application the SSN should be used in this way. Credit bureaus and the SSA do not share their information. The SSA, however, will provide information to the credit bureaus about SSNs that belong to individuals who are deceased and numbers that have not legally been issued yet. Establishing Credit Without a SSN When renting to immigrants/non US citizens, there are certain documents that should be examined. Most will have a green card, which is NOT a social security card, but has 9 digits like a social security card. Often, individuals will use the green card to apply for credit because it has the same number of digits. If you receive a credit report indicating that the number provided was not administered by the SSA, this could be the reason or it may be a red flag signaling false identity. Many creditors (i.e. Bank of America) will extend credit to individuals that do not have social security numbers or citizen status, and will assign some other nine digit ID number in order to open a credit file. In a rental application, you are really validating the prospective tenant’s ability to pay. So, a credit history from a bank may be perfectly acceptable. Keep in mind, however, a valid SSN may be needed to find the tenant who leaves owing money. To complicate matters even more, some companies offer to sell “social security cards” to immigrants for a fee (tax ID numbers – 9 digits). These issued cards are not administered by the Social Security Administration, but will look similar to a social security card. There are only two ways for immigrants to obtain social security cards from the Social Security Administration: 1. Applying for one while still in their respective country 2. Visiting a Social Security Administration office in the United States. Cards obtained in this way are the official issue of the Social Security Administration and should be the only ones accepted. Verifying identity is key to establishing the validity of the entire rental application. Without it, the application means you are renting to a phantom. Parts of this blog were excerpted from the website of AMSTies, Inc, a credit reporting company. You may visit them at http://amstiesonline.com/ 77th Meridian, LLC is full service residential property management company. We serve Anne Arundel and surrounding counties, and parts of Baltimore City for a monthly fee of 7.7%. Why pay the 10% others charge? We save you TIME and WORRY. . . .
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Periodic inspections by the Landlord or Property Manager are beneficial to both tenant and Management. If not done, and done property, it’s a disservice to the owner, the tenant, and the property. I used to never do them for my own properties but found that for the properties I had visited often (for other reasons) both the tenant and property became less of a problem source. What I learned is basically this: What gets measured gets improved. This can be expanded as follows: Privacy vs. Attention Tenants like their privacy but they also want to know someone hears them. Regular inspections address both those needs. Inspections at least every six months are necessary to maintain an appreciation of how the property is being treated. Inspections more often than quarterly, become invasive. The inspection process allows the inspector to see first-hand what might need attention but also allows the tenant to point out things that aren’t necessarily visible, like a light switch not working properly. Preventative vs Emergency Maintenance The inspection report gives the management company or owner an opportunity to plan maintenance and not be caught off guard by a large emergency expense. For example, noting water spots on the ceiling of the top floor will avoid that ceiling from caving in under a heavy rain, because the owner can have the roof inspected/repaired when the weather is nice. Guidelines for inspection Notify the tenant at least a week in advance to arrange a day/time for the inspection. This gives the tenant an opportunity to clean up and make the house as presentable as they are comfortable. This also gives the inspector an idea of how good the housekeeping is vs their regard for the importance of being inspected. On the day of inspection have a checklist of things to look for, i.e. Normal wear and tear, excessive damage, maintenance issues. Inspect every room and rate it. In my inspections anything less than average gets a comment. Be respectful to the tenant and do not judge. The written report should speak for itself and issues can later be addressed in a professional manner. The Inspector Owners or whomever interacts most often with the tenant often dislike performing the inspection. It is somewhat awkward as the tenant knows they are being judged even if nothing is said. The owner wants to maintain a good relationship with the tenant and may feel that if they make a comment it may jeopardize that relationship. The easiest way around this is to have a third party do the inspection. It takes a little work up-front to get the inspection form and process together and educate the inspector. The tenant, however, will see the inspector as a disinterested third-party. The owner sees the inspection report without emotion and can grill the inspector for details and impressions. As a property manager you owe it to the client to inspect the property. As an owner/landlord, you owe it to yourself to protect your investment. As a tenant, you should welcome the inspection as an opportunity to notify management of their obligation to maintain the property in accordance with the lease. 77th Meridian, LLC is full service residential property management company. We serve Anne Arundel and surrounding counties, and parts of Baltimore City for a monthly fee of 7.7%. Why pay the 10% others charge? We save you TIME and WORRY. . . . Eviction day is filled with emotion for tenant and Landlord. This blog deals with how to keep that emotion from turning into actions that both the tenant and landlord will regret. Eviction is not a singular event. It is a culmination of weeks or months of work by many people for and against it. Since emotion is a key component of eviction the landlord is the only one who can control how much of that emotion is directed toward the property in damages. So, from the very beginning, the landlord must keep a cool head and make all their responses to tenant actions (or lack of action) business-like and professional. It usually begins with the rent not paid in full or paid at all. From that point forward the tenant must be made aware that they have started down the road to eviction. Name calling, threats, inflammatory messages do not help. My favorite approach is to just send a statement of account with a message on it explaining that if the rent is not paid (or a payment plan discussed) by a certain date then a filing in rent-court will be made. Repeat offenders will get a text message saying “Rent or rent court?” All future actions and interactions with the tenant must be made in this “if you don’t do this, then this will happen” format. So, it is important that the landlord stay committed to making good on all promises. In this way the landlord’s credibility increases, makes the situation more real for the tenant and thus motivates the tenant to take action. I always remind the tenant that it is far cheaper to pay and stay then to be forced out and then face me coming after them in collection court. When all else fails you arrive at eviction day. The landlord must be prepared and be in compliance with the city/county regulations. They must be followed exactly or the tenant can restart the entire process through a technicality. This usually means the following:
If the tenant is present, apologize for the situation and emphasize that this is not personal but business. Then ask them for a forwarding address to send a final statement. It is unlikely that anything will be left from their deposit, but as a landlord you are obligated to send a final statement. Do not show any emotion at what you see. Also let them know you will be pursuing them for damages not covered by their security deposit. Of all my evictions, 95% of the tenants have moved out the night before. If they are still moving out on eviction day, have the clean-out crew assist them in moving out their belongings so that the house can be secured as quickly as possible. Evictions can be dangerous if not handled properly and result is a lot of damage if the tenant has been motivated to become vindictive. So, it is in the best interest of all involved to either be disciplined throughout the process or let an experienced property manager handle the situation from the beginning. 77th Meridian, LLC is full service residential property management company. We serve Anne Arundel and surrounding counties, and parts of Baltimore City for a monthly fee of 7.7%. Why pay the 10% others charge? We save you TIME and WORRY. . . . Payment of rent is the most important action identified by the lease. To it is tied a lot of emotion that increases with intensity as the rent date approaches and after it passes, if no payment is received. With late rent the tenant faces fees and the property manager faces pensive owners wondering about their monthly residual check. Making rent easy to pay and easy to collect is paramount. Let’s review the many ways available to the Property Manager, and tenant. Check in the Mail The traditional approach. Check or money order sent through the US Mail gets it to the Property Manager in 1-3 days. The Property Manager must then wait 1-3 days for the check to clear after depositing into the bank. To avoid a late fee the tenant must mail early . Please don’t send cash this way! Pay in Person Often socially awkward. The Property Manager can not appreciate the effort that the tenant expended to earn the rent, nor the things they had to sacrifice. The tenant can’t appreciate the amount of owner‘s debt the rent pays, the expenses carried to offer the property as a rental, nor how on-time payment is fundamental is maintaining good credit. Both think the other can afford more/sooner or doesn’t need the money. Counter Deposit at the Property Manager’s Bank This is very popular with tenants who may not have a checking account. I give them or text them a bank deposit slip. They go to any local branch and make a counter deposit, then text me a picture of the deposit receipt. This is popular because payment can be delayed until the due date. On my end it gives me a good record of the transaction but requires a little extra file manipulation /storage. EFT from the Tenant ‘s Bank The Property Manager must have a bank service that integrates Electronic Funds Transfer (EFT) with the property management software. This allows the tenant to log into their lease account through a tenant portal, and transfer funds from their bank to the Property Manager’s bank. In particular the younger or more tech-savvy tenants love this approach because it can be done on the due date and from a phone or and device. Once logged-in the tenant can see both charges and past payments and, I don’t need to send them a statement. Bank Automatic Bill-pay Many people withy salaries directly deposited into their checking account pay all their bills this way. I set up monthly automatic payments for many bills. They all get paid (something) even if I forget to edit the amount due. Paying rent this way is a "set and forget" action. On-line Credit Card Payment The last resort! The Property Manager must have a bank service that integrates with the Property Management software. Like Pay Pal, a hefty service fee is charged by the bank. In order for the Property Manager to keep from paying the bank fee the tenant is charged that fee at the time of transaction. Fees usually run under 3% but that’s better than the 5% charged if late. Even though late rent payment is entirely the tenant's responsibility and within their control, tenants bludgeoned by late fees quickly come to the notion that the property manager is at fault, and they will be moving at the end of the lease. Offering multiple methods of payment, empowers the tenant. It makes it easy for them to satisfy an onerous monthly task and is the best way to remove excuses for late rent. 77th Meridian, LLC is full service residential property management company. We serve Anne Arundel and surrounding counties, and parts of Baltimore City for a monthly fee of 7.7%. Why pay the 10% others charge? We save you TIME and WORRY. . . . Meeting a prospective client/owner for the first time is one of my favorite activities. It’s rather intense because it means possible new business, but more importantly it’s a test of both my listening and presentation skills. Whether the prospective client has come to you through referral or was attracted in by an internet search, the goal of the meeting is the same. The goal is NOT to “sell” the client on your services but to educate the prospect so that they conclude your property management services are the best value/fit for them. The avenue to that education is to discover the problem the prospective client is trying to solve by engaging a Property Manager at all. Identifying The Need Central to this is recognizing that the client was driven to action by symptoms that may not be pointing to the source of the problem. Often times tenant problems are a result of a misunderstanding, assumptions, not having has the lease explained, or owner involvement that circumvents the current property manager. An experienced property manager will listen to all the symptoms, indentify the problem sources, . . . and then describe how their services will solve that. I refrain from that approach and instead sympathize with the situation and recommend a course of action that the client prospect could take. What I want the client prospect to deduce is that my suggestion is simple, straight forward, logical, . . . . and too inconvenient for them to implement, and instead want me to do it. Respect Swings Both Ways Often a property owner is just looking for the lowest price. They see property management as just collecting rent and have little respect for the project management, people management, and vast contractor network skills needed. In those cases I just wish them luck and know that anyone who is charging less won’t be for long. Investors Have Different Needs Dealing with investors/owners is a significantly different dynamic. Investors who have never managed their own properties are looking at cost only and discount the Property Management services value. In contrast if they have management experience then the discussion boils down to a compare/contrast of management methods, philosophies, and “war stories”. I get hired based on how I can reflect the owner’s philosophies to the tenants (and whether I can make any money at it). There is nothing better than to take on a new client that has reservations or is financially bleeding from an out of control tenant, and then turn around the situation to their surprise and satisfaction. When they then admit their appreciation for taking over or handling an ugly situation that was previously ruining or could have ruined their day, and they feel like they dodged a bullet . .. . . . well that really makes my day. 77th Meridian, LLC manages residential property in Anne Arundel and surrounding counties, and parts of Baltimore City for a monthly fee of 7.7% of the collected rent. Why pay the 10% others charge? We save you TIME and WORRY. . . . Lease signing day is filled with excitement and hopes for both landlord and tenant. Behind all of the emotion are expectations and assumptions. To make the most of that critical meeting, it’s so important to have both parties attend with their eyes wide open. That means clarifying or correcting any assumptions and expectations before you meet. Making that happen begins in the previous week and is the responsibility of the property manager or owner/landlord. Funds at Signing It is so important that the to-be-tenant understand what funds should be brought to the lease signing. I always send them a breakdown showing total funds due (rent and security deposit), what has already been paid in deposits, what is due at signing, and what subsequent security deposits might be due and when. Also important, is to identify the form of payment (cash, personal check, money order, or cashier’s check). I never take personal checks at signing, the risk is too high. So cash, money order or cashier’s check is only acceptable. Once the keys are handed over, personal checks are accepted. Move in Condition Capture the property’s condition with a move-in-move-out form, video, or still pictures. Explain to the tenant what can be considered damage so only those things are noted. In Maryland if the tenant has been there a few years they can’t be charged for repainting or normally dirty walls (unless the tenant has changed the color). Explain the Lease Leases can be long, complex, and confusing. I always email a sample lease to the tenant several days before the big day. At the top of the lease is a summary table that outlines all the charges, their due dates and consequences for ignoring them. It’s used to capture the spirit of the lease and expedites the signing process. Also, I always bring two copies of the first and last pages. The last page records the appliances and any special agreements that might take a few tries to get the words right. It makes for a clean final document. All cross-outs in the lease need to be initialized by all parties. Receipts and Keys Bring a receipt book for any cash collected. It’s professional and is good business. When you hand over the keys, make sure there are at least two sets (each adult should get one key), and have the tenant try all the keys, in all the locks, in all the doors. Details and preparation are important and minimize trouble-causing assumptions. Articulating expectations by stepping through the lease are important to begin a business relationship without surprises. 77th Meridian, LLC manages residential property in Anne Arundel and surrounding counties, and parts of Baltimore City for a monthly fee of 7.7% of the collected rent. Why pay the 10% others charge? We save you TIME and WORRY. . . . The tenant turnover process typically focuses on repair of previous tenant damages and unit improvements. Changing the locks on the property is often forgotten or ignored. As tedious as this might be, there are some good reasons to go the extra distance, and there are some shortcuts. When a previous tenant leaves the landlord or property manager should ALWAYS change the locks on the property: both knob and deadbolt. If it is a small apartment building, everyone should get new front door keys. The now vacant apartment should also get a new key. This not only protects the other tenants in the building, but protects the new tenant from an easy break-in using an old key. It also protects the owner’s property from vandalism, while repairs are being made or theft of tools/supplies that might be left by the workman doing those repairs. There are several ways to change the key: Change the lockset- This can be the most expensive method as there is both a lockset purchase and installation labor component. If the landlord manages several properties then after a while the same locksets are just rotated between rentals and there is just the labor cost. If each door has a knob and deadbolt (as shown above) the materials alone (front and back doors) will be about $100 with at least $50 in labor. Re-key the lock- This can be as expensive as buying and installing a new lock if you choose the wrong locksmith. Shop around. The cost will be much lower if you have the locksmith change all the locks in the house in one visit. My locksmith will re-key two double cylinder deadbolts and two knob-sets for around $50-$75. Cylinder replacement- This technology has been around for awhile. Thee entire cylinder can be replaced within seconds using a special key. The special key allows the user to quickly pull out the existing cylinder and insert a differently keyed cylinder. The downside to this technology is that the investment is rather expensive ($50-075 per lockset), and you have to keep an inventory of cylinders. KwikSet SmartKey- This is my favorite. It’s rather recent technology where the user inserts the existing key and turns it a quarter turn. Then a special tool is inserted and through a small slot, then extracted. The old key is pulled out and the new one inserted. Turn the key a quarter turn back and you’re done! After the initial investment of about $40/ lockset all you need is a new key for future changes. What I do is replace the locks on one door with every tenant change. The doors without this new lock system I physically swap with an old lockset from another property. Over time the house gets everything changed and your re-keying costs go to zero! Another advantage of this KwikSet lock system is that if a tenant loses the house key and fears a break-in, it takes seconds to give them back that piece of mind and a new key (for a fee of course). 77th Meridian, LLC manages residential property in Anne Arundel and surrounding counties, and parts of Baltimore City for a monthly fee of 7.7% of the collected rent. Why pay the 10% others charge? We save you TIME and WORRY. . . . All homes are subject to infiltration of insects and rodents. The most common visitors are ants, roaches, mice, and rats. Nobody likes to talk about any of these or even admit that such unwelcome visitors have even been guests. Depending on property location and age it may be a fact of life. Fear not, the expense of an exterminator is not always warranted because there are home remedies. Here are a few that are low cost and toxicity: Ants Most people make the mistake and use sprays, liquids and traps where the ants are seen inside the house. The liquid ant traps are very effective but they are best placed outside, directly beneath the window or wherever they are seen coming in inside. I struggled with ants for months and out of exasperation placed the trap outside at the foundation and the ants disappeared the next day! Roaches These are ugly robust creatures but they can be kept at bay using one of many recipes found on-line using Borax. Borax is a wonderful low toxicity product. Simply mix equal amounts of sugar and borax and sprinkle sparingly in the corners near water supplies (under the sink). Adding a little flower and water to make a paste creates dough balls that can be set on counter tops or under refrigerators (roaches like the hum of the compressor transformer). Water the balls periodically to keep pliable. City dwellers are often plagued by these and the most effective way to treat them is to call a professional to treat the entire row of townhomes at one time. After treatment wash all your clothes to rid the eggs that might be attached. Also vacuum the carpets regularly and throw out the bag. Mice Mice are typical visitors at seasonal weather changes, but once inside they may set up baby hospitals! The key is a two-step process: Block entrances from the outside and trap those living inside. If you can see light under or around the door then that is a possible entrance. First replace the worn door sweeps, thresholds, and door weather-stripping. Also look for holes in the exterior walls. Caulk around hose bibs, broken bricks, rotting doorjambs. Dryer vents not connected to a dryer are also entry points. Inside, use old-fashion traps. Bait with peanut butter and place the trap in a corner of the room or along a wall (mice are corner runners). Place a 2x4 block along the long side of the trap so the mouse must approach the trap from only one end and then step on the paddle to reach the bait. Rats Ugly is their middle name. Keep your trashcan lids on tight and tie the can to a fence so the rats can’t push it over (they are smart!). Also keep the grass cut short. Bait the yard with poison (not for yards with pets or children) or use bait houses. If they persist call a professional. All of these are easy inexpensive safeguards or tools against these visitors. The key is to deny them what they want: Easy food and water or shelter. 77th Meridian, LLC manages residential property in Anne Arundel and surrounding counties, and parts of Baltimore City for a monthly fee of 7.7% of the collected rent. Why pay the 10% others charge? We save you TIME and WORRY. . . . This blog was reprinted (and modified) from the original author Sian Morgan who is with Amron Properties in North Tyneside, UK. You can read more on All Things Property Management, Buildium’s official blog. Buildium offers new users a 15 day free trial. Demand for rental property is increasing dramatically every year. This means that it’s becoming more challenging for tenants to find a suitable property in their price range, which means you’re likely to have a backlog of applicants. As a Landlord, you owe it to your property and your other tenants to find the very best applicants among the pool of candidates. Here are some steps to take to make sure your new tenants are lovely, not lemons: Check References and Rental History Look for recommendations from previous landlords. Consider how long the applicant lived in their previous apartment, whether they regularly paid their rent on time, and the condition in which they left the property. Verify this information if provided by the prospective tenant. Other references can include character profiles from employers. Check Credit and Employment History Credit checks are a good indicator of a tenant’s payment history. They will also reveal any bad debts or bankruptcies. This lets you know if the tenant is likely to keep up with rent payments, in addition to preventing your property from being visited by bailiffs and debt collection agencies. Trust Your instincts Even if their references seem to check out, if you feel uneasy about letting your property to them, don’t. There is a lot of demand for properties, so it is unlikely that you will be left with an empty unit for long. This can help prevent trouble, stress, and expense in the long run. (77th Meridian note: Fair housing laws will limit you here. It's a good idea to establish screening criteria before accepting applications. Allow applications to be rejected based on meeting the criteria and save whim to decide between two qualified tenants.) Always Obtain a Deposit Before Handing Over the Keys Different properties will require varying deposit amounts, but the usual fee is between 4-6 weeks rent payment. This should always be placed in a separate bank account. Meet the Tenant Prior to Signing a Lease This can give you the most insight into an individual’s personality and behavior. It also allows you to make an accurate judgment about whether you would feel comfortable dealing with them throughout the duration of the tenancy. Trust between both tenants and landlords is vital, and this can be created through meeting face to face. (77th Meridian note: If an applicant dresses poorly for the showing, it is a good indicator of their respect for the lease) Avoid Making Rushed Decisions Obviously it’s not ideal to have long periods of time when the unit is empty and you are not receiving rent. However, having to take on a tenant you are less than happy with will not solve the problem for long. Remember, it takes time to find a suitable tenant, so bear this in mind when scheduling viewings if your current tenants are planning on vacating once their tenancy has finished. Research Competing Properties If local options are of a higher standard than your housing, it may be a good idea to bring it up to the same level to avoid attracting less desirable tenants. (77th Meridian note: You can rent a good property to a bad tenant but you can't rent a bad property to a good tenant) Know the Property and the Local Area Be prepared for the typical questions a tenant will ask during viewings. It is an opportunity for you to showcase your property and promote yourself as Landlord, so make sure you are friendly and helpful to prospective tenants. A key skill to develop as a Landlord is finding good tenants. They’ll give you far fewer headaches, which means you can spend less time putting out fires and more time creating a rental community that will make you love coming to work. 77th Meridian, LLC manages residential property in Anne Arundel and surrounding counties, and parts of Baltimore City for a monthly fee of 7.7% of the collected rent. Why pay the 10% others charge? We save you TIME and WORRY. . . . At some time in a rental property’s life a tenant will leave and a new one move in. The activities between tenants is called tenant turnover. It’s a lot like preparing the house for rental the first time but there are some differences, so read the blog on that topic. The biggest difference is how repairs are accounted. When a property is first established as a rental all the costs are assigned to the owner. During tenant turnover, some of those costs can be reclaimed from the tenant’s damage deposit or subsequent court action. Knowing which are claimable, and how to document them is the topic of this blog. Documentation After the tenant leaves, as the bills come in for repairs they must be binned into categories: Normal wear and tear, and Damages. The tenant can’t be charged for normal wear and tear. Things like painting, floor abrasions due to walking, loose knobs on cabinets, and leaking faucets are examples. In contrast, clutter, holes in the wall, gouges in the floor, stained carpet, walls painted colors prohibited by the lease, and missing cabinet knobs or doors are clearly damages. Outstanding water and gas/electric bills, prorated for the time the tenant had possession of the property, should also be posted to the tenant’s account. Repair receipts in the exact amount claimed must also be retained. Good photo documentation of damages cannot be stressed enough. Take color pictures of each room before the tenant moves in and then after they leave with particular attention to specific damages. Return of Security Deposit After all the expenses have been recorded and the unit is show-able for re-rent, the landlord must credit the tenant’s account with their security deposit and interest accrued on that deposit. Often the landlord doesn’t credit the interest and the tenant doesn’t know enough to ask about it. In Maryland the landlord must give the tenant 3% APR, simple interest, but only paid in 6-month periods. In other words if the tenant stayed 3.6 years they get 3.5 years of interest, for a 3.4 year stay, they’re only paid 3 years of interest. If security deposit or it’s interest is not paid, the tenant can sue for 3-times the deposit! The Final Statement of Account A final statement of account and any refund must be issued within 45 days after possession was returned to the landlord. Send the statement to the property’s address or a forwarding address given by the tenant. That statement should be sent with a certificate of mailing from the post office. Include a cover letter explaining the charges. If more is owed than covered by the security deposit, give the tenant 30 days to pay or set up a payment plan and then hand the matter over to your collection attorney. Your property manager should handle all the documenting, accounting, and return of the funds, and can guide the owner in deciding if pursuit in court is worthwhile; often it is. Collection is another topic, but carefully documenting the turnover process is key to legitimately reclaiming damages beyond what is considered reasonable and normal. 77th Meridian, LLC manages residential property in Anne Arundel and surrounding counties, and parts of Baltimore City for a monthly fee of 7.7% of the collected rent. Why pay the 10% others charge? We save you TIME and WORRY. . . . Landlords and property managers usually charge a “maintenance deductible” for each unique visit to a tenant by a repairman. This deductible is typically the first $50-100 of the total bill. They do this to reduce costs but primarily to keep down “nuisance calls”. That is, calls from the tenant for frivolous or petty maintenance actions, like securing the screw on a switch plate, a loose cabinet knob, or bi-fold door needing adjustment. The downside of this is, if nothing is done these items just get worse and wind up costing the tenant far more when they move out. Also, living in a house with many things needing repair is frustrating and creates what I call visual noise. The Tenant Tool Kit For the cost of less than $20, however, a very simple tool kit can be assembled that will more than pay for itself and benefit the tenant in two ways: Saving the repair deductible charge and feeling a sense of accomplishment in making the repair. The tools in the kit should be kept together in a place where everyone in the house can access it. Tools are expensive but the ones suggested in the list below are so common they can be found at deep discounts at yard sales, dollar stores, and hardware store annual inventory sales. Include the following:
What Can Be Done With these tools one can accomplish 90% of most repairs that become daily aggravations, and will save the repair deductible, or even more if the repair is deferred until the tenant moves. Minor repairs often become much more costly if left unaddressed because the problem can cause surrounding areas to be damaged. With such easy access to the Internet by most phones, there is no longer an excuse for not knowing how to do most simple repairs. If there isn’t a step-by-step procedure there’s probably a video. Most anything that is secured by screws or nails can be fixed quickly before the screw is lost or the hole in which the screw sits becomes so large from continued use, that it requires the hole to be patched and re-drilled. The channel-lock pliers will even allow the tenant to make minor plumbing repairs. What Shouldn’t be Done Uncertainty is not a reason for inaction; it’s a motivation to learn. Every tenant is encouraged to work to their ability, but leave household electrical, furnace, or appliance repair to the experts. Also, leave any drywall repair, beyond patching nail holes, to someone with the right tools. I’ve seen well meaning tenants attempt major hole repairs and it costing them far more than the repair deductible. Don’t be afraid to try, but be sensible, and be safe. 77th Meridian, LLC manages residential property in Anne Arundel and surrounding counties, and parts of Baltimore City for a monthly fee of 7.7% of the collected rent. Why pay the 10% others charge? We save you TIME and WORRY. . . . The opinion of many rental owners is that property management services are reserved for out-of-sate owners or large investors. Property Managers (PMs) are valuable whether an owner has one or 100 units. Here are four reasons why the owner should consider a PM. 1. Local laws are complicated The PM has to stay current on the changing laws and ordinances within each county they operate. If they don’t, they aren’t a real PM. For example, in Maryland the lead inspection laws are changing January 1, 2015 and will require either a lead inspection certificate or a lead-free certification for any house built before 1978. Smoke and carbon monoxide laws are changing too and vary in each county! 2. There are many hassles to the job It is not a pleasant experience to be woken at 2am to an emergency, particularly if what your tenant considers an emergency is only good information to you! That’s just one reason why having a PM is helpful in making the owner’s life easier. Those are the easy issues, but there can be much bigger problems. For example, a tenant complained that the tile work was coming off the tub surround. After inspection, it seemed a pretty straight-forward job to just re-tile the surround. When the wall was opened, the contractor saw that black mold had engulfed all the drywall and the insulation and right on through to the exterior wall’s sheathing. The PM dealt with the initial contractor, mold remediation contractor, and provided quotes and pictures requested by the insurance company. The owner lived 3000 miles away and only had to pass emails on to the insurance company; the PM handled everything. 3. The PM knows the territory Local PMs know trades people and companies that they have trusted for years. They pride themselves on a wide and deep network of all kinds of professionals. The average 1-2 property landlord just doesn’t have enough maintenance experience to develop as extensive a network. This gives clients comfort in knowing items will get resolved with reputable, reliable, and honest services at below market prices because of the volume of business the PM brings them. When a PM takes over a property, relationships the owner had fostered with his/her contractors are maintained; and that builds the PM’s network as well. 4. The PM protects the owner’s investment The knowledge and experience of a PM allows them to budget for the expected expenses for a home of a certain age, construction, and location. They can run market comps or use similar-tos from their current rental inventory. Sometimes the owner completely overprices the unit to cover their mortgage payment, wants to hold out for a greater rent, or uses unappealing photos in their advertisement. By correctly selecting the rent and properly constructing the advertisement, the PM can get a lease signed quickly and maximize the rent for the year. 77th Meridian, LLC manages residential property in Anne Arundel and surrounding counties, and parts of Baltimore City for a monthly fee of 7.7% of the collected rent. Why pay the 10% others charge? ***** We save you TIME and WORRY ***** Changing the filter on the furnace or heat pump is one of the easiest ways to maintain comfort in your home during the heating and cooling seasons, and save money! The furnace filter’s purpose is to remove dust particles from the air and makes the atmosphere within your home healthier. If you have central air conditioning then the filter also prevents those particles from clogging the A-coil. What’s and A-coil? A central air conditioning system doesn’t vent hot air from inside the house to the outside, it moves heat from inside to the outside. It does that by two finned assemblies similar to car radiators. The radiator inside is called the A-coil because it is shaped that way. The radiator on the outside of the house is much larger but is basically the same thing. The fan indoors moves the inside air past the A-coil and the fan in the outdoor unit moves it past that radiator. A special liquid moves between these two radiators and carries the heat one direction or the other. It’s important to change the in-door filter every three months because it keeps the A-coil from clogging, which degrades it’s efficiency in transferring heat/cold. Regularly changing the filter also keeps the fan motor from struggling to push air through the system, which can raise your electricity costs and burn out the motor! It’s also a good idea to hose off the out-door unit. Grass clippings and dust can clog that coil and possibly cause the compressor to fail. Changing the furnace filter is easy. It’s usually located in a slot in the ductwork close to the furnace. Simply pull out the old filter and place it in a plastic bag because it’s going to be dirty! On the side of the old filter there are dimensions and an arrow. The hardware store should have a variety of filters, so find one like yours with the same dimensions. Observe the arrow on the filter and align it with the direction the air is flowing. If you don’t know which way the air will flow, start the system and feel which way the air is flowing into or out of the slot. Most filters are located in the duct that brings air to the furnace. So in that case the arrow should point to the furnace. If you plan to replace the filter regularly, tape a piece of paper to the furnace with the date the filter was last changed. For the few minutes it took to change the filter you saved yourself energy dollars, improved the comfort and quality of the air in the home, and avoided future repair bills. 77th Meridian, LLC manages residential property in Anne Arundel and surrounding counties, and parts of Baltimore City for a monthly fee of 7.7% of the collected rent. Why pay the 10% others charge? We save you TIME and WORRY. . . . Property owners rent out their home for many reasons. The most popular are:
1. Needed Repairs: A variety of contractors may be needed depending on the deficiencies: Mason, carpenter, roofer, handyman, electrician, plumber, trash hauler, etc. Your property manager already has a network of these contractors and can recommend specific ones depending on the schedule, budget, and quality requirements. 2. Inspections and Permits: Inquire, schedule, or apply for these after the repairs are underway. Depending on the county and age of the house, several kinds of inspections and/or licenses/permits are necessary. They may include: Lead inspection, occupancy permits, and rental licenses. Renting without these is foolish and fines can be expensive! Arrange for the inspections to take place after all the work is done. See more on this topic in last month’s blog. 3. Clean Sells: For the cost of a one-time housekeeping service, it’s worth having the bathroom, kitchen, and carpets cleaned, and the tile floors, porcelain, and plumbing fixtures shine. If the windows don’t have shades, install the inexpensive blinds for about $4 each. They provide privacy and comfort to a new tenant who doesn’t see window treatments as high priority. You don’t want blankets hung across the windows! 4. Advertise: Nobody will know the property is for rent if you don’t announce it. Place an ad in any number of online websites. Your property manager will use several and specific ones depending on the type of house, type of tenant, and location. FOR RENT signs, where allowed, work well in the window or in the front yard. Always leave an email address and phone number with a voicemail message specific to the rental for prospective tenants. Return calls/emails promptly. 5. Record the Condition: Take pictures of all the rooms before the tenant moves in. Add this to the move-in move-out form that the tenant fills out at the time of lease signing. This is so important if you have to chase that tenant in court for damages. 6. Insurance: Your insurance agent will be able change the homeowner’s policy to a landlord policy. This is necessary because the property is no longer owner occupied. The coverage and premium will be different. 7. Get a Lease: Preparing the property for rental creates the vehicle for business, but the lease lays down the processes and terms of how that business is conducted. Standard leases can be found in stationary stores, on the internet, a property manager, an attorney, or you can write your own. Maryland laws only require a few, but specific items in a lease, but experience with local rent court will suggest additional terms. The lease used by your property manager will have all of these provisions. 8. Consider a Property Manager: Many consider a property manager an unnecessary expense. When you engage a property manager you are not just hiring someone to collect rent; you are benefiting from his/her experience, contractor network, gaining a advocate, and a mediator with the tenant. Finding a tenant, collecting late rent, handling emergency repairs, and fielding complaints can all be stressful. Like any professional, the property manager can lay out alternatives in an unemotional way so you can make decisions with confidence. 77th Meridian, LLC manages residential property in Anne Arundel and surrounding counties, and parts of Baltimore City for a monthly fee of 7.7% of the collected rent. Why pay the 10% others charge? We save you TIME and WORRY. . . . As an investment property owner in Maryland, the state and county obligate you to certain licenses and certificates. The specific requirements vary by the type of property, from county to county, and even municipality. Generally licenses and certificates fall into the following categories: Rental Licenses and Lead Inspection Certificates. Rental Licenses Baltimore City, Baltimore County, Annapolis City, and many municipalities in Prince George County require rental licenses. Anne Arundel County generally does not unless you have a multi-unit property, but Annapolis does for all property types. Not all the governing bodies require inspections before issuing a license (Baltimore City does not). Renewal terms generally vary from annually to three years, and the fees are all over the map. It’s a bit confusing so it’s best to check with your property manager who will guide you in applying and obtaining the license and inspections if required. For more information contact the following: Baltimore City http://www.baltimorehousing.org/property_registration Baltimore County http://www.baltimorecountymd.gov/agencies/permits/rentalregistration/ Anne Arundel County http://www.aacounty.org/Fire/FireMarshal/Inspections/MultipleDwelling.cfm#.UfRqQt3wJX8 Annapolis City http://www.annapolis.gov/government/forms-permits-and-licenses Howard County http://www.howardcountymd.gov/DisplayPrimary.aspx?id=708 Bowie City (PG County) http://www.cityofbowie.org/index.aspx?nid=625 Lead Inspection Certificates Leaded oil-based paint, commonly called lead-based paint or lead paint, has been used for centuries. If you have ever painted with it, it goes on like no latex or oil based paint today. Also it was particularly well suited for out-door use, especially near the water. Unfortunately inhaling the dust from lead paint or ingesting the flakes of deteriorating peeling paint creates severe disabling health problems. Creating housing safe from lead paints that were commonly used in the early part of the 20th Century is a big deal in Maryland. The key word here is SAFE. There is nothing wrong with lead paint if it is contained, and kept from chipping, pealing, or abrasion. Today the requirement for inspection and certification only applies to rental property. It’s a shame because there are many private homes in which lead paint is a danger and the residents are unaware. If you own a rental that was built before 1950 an inspection by a licensed inspector is required. Why 1950? Because by that time, the post-war introduction of latex paint had begun impacting the demand of lead paint. This 1950 requirement will change in 2015 to include any home built before 1978. Why 1978? Because that is the year lead paint production was stopped in the United States. In either case, certification must be maintained and the property re-inspected with every new tenant, and the certification must be registered annually. The only exception to this rule is if the property has been determined to be lead-free. Rental property built after 1978 do not require inspection. Contact the Maryland Department of Environment (MDE) for more information at this link: http://www.mde.state.md.us/programs/Land/LeadPoisoningPrevention/RentalPropertyOwners/Pages/Programs/LandPrograms/LeadCoordination/rentalOwners/index.aspx 77th Meridian, LLC manages rental property in Anne Arundel and surrounding counties for a monthly fee of 7.7% of collected rent. Leaving the area? Leaving your home? Leave it to a professional If you are a tenant behind in rent, bet that a rent court notice is bound to show up on your front door sometime soon. Perhaps it already has. The rent court notice is a summons to district court where you can defend yourself against a landlord or property manager, who may be charging you for rent already paid or items not awardable in rent court. It also offers an opportunity to complain about dangerous or unhealthy living conditions from lack of management maintenance. Go to court and come prepared. Bring your lease and a most recent statement of your account (or at least receipts for what was paid). Prepare what to say when the judge asks why the rent wasn’t paid. Finally, have a plan for repayment in mind. If the rent truly wasn’t paid, many tenants just don’t go to court. Some don’t want to lose a day of work, and others just admit defeat. But this is a bad approach, because your attendance just might get part or all the debt paid! When your case is called, the judge will ask if the amount on the rent notice is owed. Saying yes, the judge will want to know why you’re in court. The answer to that question should always be “Because I want to stay in the apartment (or house)”. Then, the most amazing thing may happen. The judge will ask how much money you have toward the rent, then direct you to see a court official about county social programs that can help pay that balance. Be careful, the amount paid has a limit and it can only happen once a year for you. Prior to court also look into other sources of financial help: Churches and private eviction prevention services. Take some initiative, and a solution is at hand. Give up, and in a short time the sheriff will be knocking on your door and an eviction crew close behind. Paying rent on-time and in-full is the best policy. Partial payments are second best. Not communicating with the property management will only land you in court or worse yet, standing on the street looking back at the house you slept in the night before. 77th Meridian, LLC manages rental property in Anne Arundel and surrounding counties for a monthly fee of 7.7% of collected rent. ** WE SAVE YOU TIME, AND WORRY ** Shopping for rental housing should be no different than shopping for a car. When you think about it, as a tenant you are committing to a substantial amount of money (a year’s rent), not to mention the cost of moving. Making an emotional or careless decision can haunt you for a year or longer. Here are some tips on getting the most out of a your search and showing so you have something substantial on which to base your final decision.
77th Meridian, LLC offers professional property management in Anne Arundel and surrounding counties, including Baltimore City. ** EXPERIENCED, ACCESSIBLE, AFFORDABLE** How do you get the security deposit returned after the lease ends? Some tenants assume they never will. Some landlords make it difficult to get it back. To make sure you do, it's helpful to know a little about how it works. In other words: Your responsibilities and the Landlord's obligations. If you are leaving before the end of the lease, that's called breaking the lease. Breach of lease usually results in forfeit of the entire security deposit. But this is about leaving "in accordance with the terms of the lease". So the first step is to stay the entire term. Second, read your lease and determine how much notice must be given to the Landlord or management company. Make sure it is in writing or whatever method is prescribed. Calling the Landlord may not be sufficient. Assuming the notice is properly given, the Landlord is required to send a final statement within 45 days after you return the keys. That statement will show security deposit and interest on that amount (over the term of the tenancy), credited to your account from which all the unpaid invoices, utilities, damages, and allowable repairs are subtracted. Allowable repairs can not include normal wear and tear. For example, you can not be charged for repainting or a leaking faucet. Holes in the wall, however, a room painted by the tenant without permission, or broken windows are examples of legitimate damages. If you were evicted then all legal costs plus the cost to move your belongings out are also chargeable to your account. Let's say, however, you exited normally. To get the deposit back you need to make all the repairs before the management company does their walk-through. Your objective is to restore the property to it's original condition less normal wear and tear. To recall how the house looked when you moved in, use the move-in-move-out form signed at move-in, as a guide to the original condition and damages. Fill all the nail holes, leave the floor clean of debris and sweep with a broom. Repair the screens, repaint rooms that you painted without permission, and clean the carpets. In other words, the landlord should not have to do much except paint and clean in order to re-rent. If all this was done then make sure that your statement and refund are received within the 45 days after the keys were tuned in. If the statement arrives after this period or not at all, you may be entitled to three-times your security deposit in compensation! Getting your full deposit returned takes a little work but it's certainly worth it if you're willing to do your part. Ask your Landlord for specific guidance as to what must be done to get the deposit back. Remember, they rather you do the repairs, major cleaning etc, because the property can be shown and re-rented that much sooner. Another way to look at it is; if it takes you eight hours of cleaning and repairing to get back a $1000, that's $125/hr and probably a better hourly rate than you make at your current job! 77th Meridian, LLC offers professional property management for residential property in Anne Arundel and surrounding counties, including Baltimore City. ** WE'RE THERE, BECAUSE YOU CAN'T BE ** Maryland has one of the toughest lead abatement programs in the country. In fact, it’s indicated as a model for other states to follow. Since the inception of the program lead poisoning of children has come down 98%. As an owner it’s important to know your liability, the lead paint laws, and how they are changing. Currently:
More information can be found at the MDE website http://mde.maryland.gov/Pages/Home.aspx. Click on the picture entitled “Lead Poisoning Prevention”. 77th Meridian, LLC offers professional property management for residential property in Anne Arundel, Prince George, Baltimore counties, and Baltimore City. ** RELAX AND LEAVE THE MANAGEMENT TO US ** Tenants often forget that even though they are renting a property, their belongings are not protected from loss by the owners insurance policy. In the case of a fire, storm damage, or theft, the owner's policy only covers damage to the building and appliances provided by the owner for tenant use. Here's a good example: Let's say the tenant had a kitchen fire and it was a complete loss. The stove, refrigerator, walls, flooring, and kitchen cabinets would all be covered by the owner's policy, but the tenant's food, pots & pans, and wall decorations would not. To protect themselves the tenant should contact an insurance agent and ask about a renters policy. The cost of this protection is inexpensive and well worth it. Call several insurance carriers or an "Independent" agent as they represent several larger carriers. Don't forget to ask the carrier who holds your auto policy, there may be a multi-policy discount. Some landlords require the tenant to take out a renters policy when signing a lease, but tenants often just cancel the policy after they move in. 77th Meridian makes a new tenant aware of risk, that the owner's policy doesn't extent to the tenant, and has the tenant initial that advice in the lease. We assume the tenant is an adult and can make good choices when they are informed with the facts. 77th Meridian, LLC offers professional property management for residential property in Anne Arundel, Prince George, Baltimore counties, and Baltimore City. Let us manage yours. The periodic inspection is one of the best ways to head off major damage problems to rental property, that would otherwise only become known when the tenant leaves. Therefore the periodic inspection is really a lifestyle inspection. It identifies if the tenant sees the property as his home, a temporary residence, or someplace where they physically take out their frustration. Tenants universally view these inspections as an invasion of their privacy. In some respect it is, but it also reminds them that they are borrowing the property for only the purpose and use outlined by the lease. For the owner, however, it allows discovery of illegal activities, and slow acting problems like leaks, insects or rodent infestation, that can be quite costly to address if let go. So how do you couch an inspection in a positive way? 1. It starts at the beginning: the lease signing. At 77th Meridian we indicate in the lease that we “reserve” the right to inspect every six months. That puts the tenant on notice that the inspection could be that often. 2. Announce the inspection and tell the tenant what you are looking for. Things like maintenance issues; Things that they are responsible for and things that they may not be aware of (like slow leaks). The idea here is that it will help make their tenancy healthier and more pleasant when the house is in good repair. 3. Have a checklist of items to look for. It is so easy to be shocked and derailed by how some tenants live (that have nothing to do with the house). A checklist keeps the inspector on-track. 4. Give the tenant fair notice. Allow them to clean up the place if they feel it is necessary to avoid embarrassment. Be flexible in time and date but do not take no for an answer. Such resistance should be met with a threat to use your pass-key to enter. 5. On the day of the inspection, be courteous, respectful and appreciative that you have been allowed into their home. Reiterate what you are looking for and do not criticize their lifestyle. 6. If you find a problem, inquire about how it happened and how long it’s been this way. Then discuss the repairs that will be needed for correction and how it’s their responsibility to participate in the cost. Offer them the opportunity to perform some of the correction themselves instead of charging them. 7. After repairs are made, follow up with a re-inspection on just the work done. 77th Meridian, LLC offers professional property management for residential property in Anne Arundel, Prince George, Baltimore counties, and Baltimore City. Let us manage yours. Selecting a prospective tenant is not a roll of the dice. Ideal tenants can turn out bad, but equally so, risky tenants can turn out to be pleasant surprises. The easiest way to swing the odds in the Owner or Landlord’s favor is in the screening criteria set before advertising begins. Remember you are trying to assess risk and eliminate the candidates least likely to pay and stay. To accomplish this, ask the following: 1. Tenant Income: Don’t even bother showing a property unless the rent is less than x% of their monthly gross income (before taxes). There is some judgment in the area. Ask for all income: wages, food stamps, retirement, reliable child support, etc. 2. Time with Current Employer: Do you require one year, six months, or hired yesterday? How long have they been in the industry? Why did they leave their last position? 3. Pet Policy: Will you accept the damages, odors, and calls from complaining neighbors that come with a pet? How large and what breeds will you not accept? Will you charge extra rent or deposit? 4. Reason for Moving: Where are they living now, how long were they there, why moving now, what are they currently paying? Questions like these tell a story of lease commitment, or not. 5. Number of Family Members: How many adults/children and ages? What are the maximum number of people you will accept in the house? Is it likely they will want to use the basement as an illegal bedroom? 6. Criminal Background: What involvement with the legal system is acceptable? 7. How soon do they want to move: And when can they afford to move usually different. Ask if they have the first month’s rent and security deposit saved. How long have they been looking? 8. Credit report: The credit score/report is an indication of how they manage money and use credit. It also implies commitment to debt repayment. Some kinds of debt are ok. 9. Required Security Deposit: By law it can’t be more than two months rent and shouldn’t be less than one. The required amount should be fixed based on overall risk established by all the other factors. The answers to all these questions and the experience of a professional property manager can guide the Owner in establishing the screening criteria to show, interview, and process the applicants that have high probability of paying on-time and in-full. 77th Meridian, LLC offers professional property management for residential property in Anne Arundel, Prince George, Baltimore counties, and Baltimore City. Let us manage yours. Sometimes a water bill can be high due to usage: Doing a lot of laundry, watering the grass, filling a pool. But most times it’s a leak that you can find and fix yourself. Slow drips can waste gallons of water a day where a running toilet can waste hundreds of gallons a month! There are typically seven sources of leaks in the common household: Disintegrated rubber of the flapper at bottom of toilet tank, a stuck flapper or valve, the kitchen faucet, the bathroom faucet, the shower faucet, the outside hose bib, and the dreaded of all, the underground leak. To determine the source of the leak simple tests can be performed: Flapper at bottom of toilet tank: Remove the cover from the toilet tank and place a few drops of food coloring in the tank. Wait about 15 minutes. If the water in the bowl changes color you have a leak. To check without food coloring, flush the toilet and wait 5 minutes. Place your fingers at the back of the bowl and if you feel water running past them then there is a leak. Stuck flapper or valve: Flush the toilet and wait for the bowl to fill. If working properly, you should hear the valve shut off and the “rushing” sound will stop. If the rushing continues you have a leak. If unsure, remove the cover from the tank and look at the pipe coming up from the bottom of the tank. If water is washing into this overflow pipe then you have a leak. Kitchen faucet: Turn off the hot and cold water with the knobs. Look for an occasional drip or dripping. If the knobs are turned all the way off and the dripping persists then you have a leak. Shower faucet: See Kitchen faucet above. Outside hose bib: See Kitchen faucet above. Underground leak: If you have tried everything above and found no other leaks call your property manager. You must be home or allow a plumber to enter the house to perform the test. During the test no water can be used inside the house. The water meter, usually located near the sidewalk, is watched for water usage. If it shows usage then there is an underground leak. Now that you have determined the source of the leak, the next step is the fix or a contact to the property manager. Attempt all repairs that are within your skills and save a maintenance charge. Otherwise contact your property manager. The following is a guide to making that decision: Flapper at bottom of toilet tank: Save the cost of a maintenance visit and simply replace the flapper. You can get a new flapper for a few dollars at a hardware store. It’s best to take the old flapper with you but be sure to first turn off the water at the wall beneath the tank. Read the directions on the package. Stuck flapper or valve: If the existing flapper looks good it may just be an adjustment needed to the length of chain that connects the flapper to the handle. Lift the handle and watch the flapper rise. The chain may be too long and is getting wedged under the flapper. Too short, and the flapper can’t close all the way. Kitchen faucet: There are so many kinds of faucets it’s best not to try this repair. Call your property manager. Shower faucet: See Kitchen faucet above. Outside hose bib: Don’t even try this one! Call your property manager. A qualified plumber is typically needed to re-pack the valve or replace the valve entirely. Underground leak: If your property manager determines that there is a leak then a licensed plumber must dig up the front yard and install a new pipe between the house and water meter near the street. A permit is required for this work. For more detailed instructions, go to the 77th Meridian “Tenants” web page and download the Checking for Water Leaks. 77th Meridian, LLC offers professional property management for residential property in Anne Arundel, Prince George, Baltimore counties, and Baltimore City. Let us manage yours. Owning real estate has big tax advantages for the homeowner, but what if the owner becomes a landlord? It used to be very lucrative be a landlord for as many properties as the banks would let you. Through liberal tax laws the government , encouraged it. Over the years, however, tax laws have changed and it's not as easy nor are the tax advantages as attractive as they used to be. But they are still there. If you are forced to rent your property through professional management or thinking of managing it yourself, here are the general guidelines. According to Lisa Feinman, CPA: "Keep in mind that there are exceptions to everything, but in general, if you own a handful of rental properties and your Adjusted Gross Income (AGI) is less than $150K, you can take a loss on those properties of up to $25K. This would reduce your AGI by $25K. If your AGI is higher than $150K, you're out of luck. Rental activity is considered passive. The only way you can deduct the passive losses in this situation is if it truly is a business, you spend more than 750 hours per year & 50% of your "employed" time on real estate activities, and therefore qualify as a "real estate professional". The "real estate professional" designation allows you to deduct all of your passive losses against AGI, even if they exceed $25K. So, in other words, if you make over $150k and just dabble in owning some properties, there is no current benefit to your AGI. The benefit comes when you sell the property and all of your passive losses would offset any capital gain and/or create a capital loss on your tax return at that point in time. 77th Meridian, LLC offers professional property management for residential property in Anne Arundel, Prince George, Baltimore counties, and Baltimore City. Let us manage yours. |
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