Monthly Archives: October 2017

What Is A Landlord’s Responsibility For Hotel Bills?

Landlords are responsible for ensuring that a rental property is habitable. A habitable unit is structurally sound and has adequate water, heating and electricity.

Sometimes, circumstances arise that make the rental unit uninhabitable for a time. Usually this is due to serious repairs, natural disasters or other significant problems. During these times, tenants often stay at a hotel until the work is done.

When this happens, what is a landlord’s responsibility for hotel bills?

When Would Tenants Acquire Hotel Bills?

In the event of a fire, leaky pipe or other unplanned emergency that makes a place uninhabitable, tenants have to move out for a while. Most stay in a hotel until the damaged unit is repaired.

Some tenants want their landlord to reimburse them for the cost of the hotel. They often mistakenly assume that the landlord’s insurance policy will cover their relocation costs. Or they assume that because the unit is not habitable they automatically get put up into a hotel of their choice and the landlord foots the bill. These assumptions often lead to conflict.

The truth is that landlord’s homeowner insurance will not cover costs associated with tenant relocation. Nor will it cover a tenant’s damaged belongings. However, most renter’s insurance policies will cover both for the tenant. That’s why many landlords insist that their tenants carry an active renter’s insurance policy.

In most states, tenants can break a lease agreement without penalty if the rental property becomes uninhabitable due to no fault of the tenant. If the tenant is at fault, other laws come into play.

Unfortunately, this situation is not often outlined in a lease agreement. Landlords and tenants often don’t discuss hotel bills and relocation until something big happens.

When is it a Landlord’s Responsibility for Hotel Bills?

Landlords are usually not bound to cover the hotel bill for a displaced tenant when the events are out of their control. They can reinforce this in several ways. The most common way is to include a clause in the lease agreement. The clause should state what happens in the event the unit is uninhabitable due to unplanned circumstances.

If the unit is uninhabitable for just a few days, landlords should prorate the rent for the number of days it could not be occupied. The tenants would be responsible for their own lodgings in the meantime. If the problem arose out of something the landlord did or didn’t do, then the tenants could petition for hotel reimbursement directly or through small claims court.

When the unit is uninhabitable for an indeterminate amount of time, many states require that the landlord release the tenants from the lease agreement and prorate any rent already paid. Plus, the tenants must receive their deposit back. There is generally no landlord’s responsibility for hotel bills.

Sometimes landlords schedule things like fumigation or a fast remodel that require the tenants to vacate for a short period of time. In these instances, landlords often cover reasonable hotel costs for good tenants for a few days. They may feel it is worth it to them to keep the tenants and accommodate them. In other cases, they prorate the rent only for days that the unit was inhabitable. This is completely up to the landlord, however.

RentPrep’s Take On a Landlord’s Responsibility for Hotel Bills

Here at RentPrep, we feel that landlords across the country should include a clause in the lease agreement that requires tenants to carry renter’s insurance. It’s the easiest way to deal with relocation in case of emergencies in addition to liability and reimbursement for any damaged or destroyed property.

Landlords should also include a clause about what happens if the unit is not habitable. It’s a good idea to put reasonable time limits on repairs, fumigation and remodels. For example, the lease could say that if the property becomes uninhabitable for more than 5 days, then both parties bear no more commitment to the agreement without penalty.

It’s important for landlords to be fair about prorating rent. After all, if a tenant can’t live in a unit they have paid rent on, they should be compensated. However, that compensation should usually not extend to paying for hotels, especially when an affordable renter’s insurance policy will do so.

What Are Other Landlords Saying About the Responsibility for Hotel Bills?

Every landlord needs to comply with local and state laws regarding uninhabitable properties. There’s always peace of mind in consulting with a landlord/tenant attorney as well.

Here’s a screenshot of landlords discussing this question in our private Facebook group for Landlords.

landlord's responsibility for hotel bills

You can see even more comments on that post by checking it out in the group.

The post What Is A Landlord’s Responsibility For Hotel Bills? appeared first on RentPrep.

Thinking of Switching to a Tankless Water Heater? Here’s What You Need to Know

I was impressed the first time that I saw a tankless water heater. The owner must have really invested in this property if he was going to make such a forward-thinking upgrade.

And boy, did it open up space in the basement! The owner converted the free space to an on-site laundry room for residents. A smart move, I thought, as the coin-op laundry could be used to generate additional revenue.

When I started telling a colleague about the tankless water heater, he stopped me in my tracks.

“Do you know how expensive it is to install a tankless water heater? And have you ever lived in an apartment served by one?” he asked. “It takes FOREVER to get hot water!”

Maybe I didn’t know as much about tankless hot water heaters as I thought. So I decided to do some digging. In fact, I became somewhat obsessed with learning about tankless hot water heaters. Here’s what I learned in the process.

Tankless Water Heater Frequently Asked Questions: #1

Traditional vs. Tankless Water Heaters

A traditional hot water heater typically holds 40 to 60 gallons of water that is collected in a tank and then continuously heated until it’s needed. As a result, the hot water comes on quickly–but it comes with a price. The tank is constantly using energy, which drives up your utility bills.

Meanwhile, a tankless water heater (as the name implies) does not actually have a tank. Instead, it heats water as it’s needed, then pipes that water to a unit’s shower, faucet, or appliance. Because water is only heated when it’s needed, it uses much less energy. By some estimates, a tankless hot water heater uses 22 percent less energy than its traditional counterpart.

Tankless Water Heater Frequently Asked Questions: #2

Tankless Water Heater Pros and Cons

However, these cost savings can be offset by the upfront costs of a tankless water heater, which are far greater than a traditional system. While a traditional tank costs anywhere from $300 to $600 (not including installation costs), most tankless units cost at least $700 and can vary widely in price from there. That said, the tankless system may qualify for state or federal tax rebates for energy-efficient appliances. Many utility providers also offer incentives and discounts for owners who invest in tankless water heaters–so if you go this route, be sure to see what’s available in your neck of the woods!

What’s more, there are certainly cost savings to replacing all traditional water heaters with tankless water heaters at the same time. Landlords, HOAs, and property managers can realize greater efficiency and savings by making the conversion to tankless systems all at once: One call to the plumber, one set of paperwork for tax rebates, and so on.

It would seem that rebates, discounts, and incentives would make the two systems comparable in price. On the surface, that’s true. However, that’s only the case when you consider the actual cost of the system. Installation is a whole different ballgame.

Installing a tankless hot water heater can be pricy. The installation process is more time-consuming, and fewer plumbers know how to install them correctly. Anyone who can often charges a premium for doing so.

Another consideration is the fact that tankless hot water heaters are powered by gas. So if your property does not already have a gas connection, the cost of making this connection will negate any cost savings of a tankless system. Even if you have an existing gas line, it may need to be upgraded to a bigger pipe in order to accommodate the power needed to fuel the tankless unit.

One of the primary benefits of a tankless hot water heater, though, is its ability to free up physical space in a rental unit. Think of a multifamily rental property with four units: It’s possible that each unit has its own massive, 60-gallon tank. If these tanks are replaced with tankless hot water heaters, newfound space can be converted into another resident amenity, such as on-site storage or laundry–both of which can bring in extra revenue. Some apartments have in-unit hot water heaters disguised by a storage closet, which can also be converted to additional in-unit storage.

Tankless Water Heater Frequently Asked Questions: #3

How Long Do Tankless Water Heaters Last?

Although a tankless water heater can cost more to install, many still consider it a worthwhile investment because tankless systems can last up to 20 years. Compare this to a traditional water heater tank, which usually only gets 7 to 10 years of life before it needs to be replaced. If you plan on holding onto the property for some time, a tankless water heater might be a good option.

Tankless Water Heater Frequently Asked Questions: #4

Do Tankless Water Heaters Take Longer to Heat Up?

This gets to one of my colleague’s concerns: how long it takes for a tankless water heater to deliver hot water to its final destination.

Remember that a tankless system does not continuously heat water. As a result, it can take some time for water to warm up. Depending on the tankless water heater’s physical location (and the length of pipes in between), it can take up to two minutes for hot water to reach the point of outflow–which can be frustrating to residents. This is particularly true in cold weather climates: If the ground water being pumped into the tankless system is already very cold, it will take longer to heat up than a traditional system.

Tankless water heaters also have limited output. So in a larger unit with multiple residents–or several units sharing a water heater–it can be tricky to get enough hot water for everyone to shower at the same time, or to do laundry and run the dishwasher at the same time. Tankless units can only supply a few gallons of hot water at a time.

Tankless Water Heater Frequently Asked Questions: #5

Should You Switch to a Tankless Water Heater?

There are certainly pros and cons to both types of hot water heaters.

Our advice? Weigh the pros and cons before it’s time to replace your traditional hot water heater. Usually, when a hot water heater gives out, owners are forced into making a split-second decision to make sure that residents get their hot water back ASAP. This may force someone down the cost-saving route before they’ve fully considered the benefits of a tankless system. Do your homework now so that you can be informed (and financially prepared) if and when it’s time to replace your water heater.

The post Thinking of Switching to a Tankless Water Heater? Here’s What You Need to Know appeared first on APM.

4 Home Staging Horror Stories to Haunt You This Halloween

By Jessica Santina, guest contributor from MoneyGeek.com As little ghosts and ghouls appear on every corner, how about settling in for a few scary stories of home staging horrors? The following tales of botched staging jobs, homeowners from hell, and nightmarish décor will likely give you some real-life shivers. The Scary Screamer Lori Matzke, owner […]

7 Ways to Keep Your Property Safe This Halloween

Ghost, ghouls, and goblins–beware! Your property is ready for any of the scares they might try to bring your way this Halloween night–or at least, it will be, assuming you take a few steps before trick-or-treaters hit the streets.

Here are 7 Halloween safety tips for rental properties and homeowners associations.

Halloween Safety Tips for Rental Properties & HOAs: #1

Tidy Up the Landscaping

Be sure to walk the property and pick up any branches that may have fallen, roots that children could easily trip over, or other debris that might get in the way of trick-or-treaters trying to make their way to the front door. Trim any overgrown hedges, mow the lawn one last time for the season, and rake up dead leaves. All of these tasks will make your property safer on Halloween night–and they’re tasks that are likely already on your fall maintenance checklist.

Halloween Safety Tips for Rental Properties & HOAs: #2

Ensure the Property is Well-Lit

Outdoor bulbs should be replaced and lighting should be installed along the most likely traveled path of youngsters. For instance, your residents may typically enter through a garage or back door; but on Halloween, children are likely to head to the front entrance. Consider installing motion-sensing lights to enhance visibility for costumed guests. This will also reduce the likelihood of vandalism and mischief.

Be sure to check the lighting in the parking lot as well. Here’s a little known fact: Children are twice as likely to be hit by a car on Halloween than any other time of the year. You should also remind residents to drive slowly around the neighborhood on Halloween. Always check twice for kiddos!

Halloween Safety Tips for Rental Properties & HOAs: #3

Secure Loose Railings, Steps & Pavers

If you’ve ever stumbled over a loose stair or brick at your property, just imagine what it will feel like for an excited child fiddling with a costume. Now is a good time to take care of these small maintenance repairs before they turn into bigger issues. Not only will this protect trick-or-treaters, but it will improve safety for your residents on the whole.

Halloween Safety Tips for Rental Properties & HOAs: #4

Lock Doors, Garages & Gates

Take care to prevent access to unauthorized areas on Halloween. This is particularly true for landlords or HOAs who have vacant properties, since intruders will be less obvious to observers on Halloween night. At larger apartment communities, you may want to ask neighbors to keep an eye out on vacant properties as an extra precaution.

Halloween Safety Tips for Rental Properties & HOAs: #5

Leave a Bowl of Candy Out

If one of your rentals is vacant, consider leaving a front porch light on with a bowl of candy outside. Even though there might not be someone there to answer the doorbell each time it rings, the outdoor light and bowl of candy will help to ward off pranksters or disgruntled teens who were hoping to receive a treat.

Halloween Safety Tips for Rental Properties & HOAs: #6

Keep Pets Indoors

While it’s tempting for residents to have their pets join them in handing out candy, some children can be easily scared by animals–and vice versa: Even the friendliest animals can become skittish around children in costumes. Keep everyone safe by asking residents to bring their pets inside for the night. This will prevent any erratic behavior that could scare or injure a trick-or-treater.

Halloween Safety Tips for Rental Properties & HOAs: #7

Focus on Fire Safety

On one hand, it’s great to encourage residents to celebrate Halloween. Festivities can help an apartment building feel more like home! On the other hand, some residents may be tempted to show off their jack-o’-lanterns by lighting the pumpkins with candles. Remind residents to keep candlelit pumpkins and any other open flames away from doorsteps, walkways and other landings that may be in the path of trick-or-treaters. If someone accidentally knocks over a pumpkin, the flame could ignite nearby leaves or clothing and cause a fire. That’s one scare you’ll want to avoid on Halloween night!

After the pirates and ballerinas have retired for the season, encourage residents to help do a clean-sweep of the property. Pick up any candy wrappers or other items that were dropped by trick-or-treaters; repair any accidental damage; and start putting away Halloween decorations.

While property owners and managers have a heightened responsibility during this time, these Halloween safety tips for rental properties and HOAs will ensure that everyone has fun during this year’s festivities.

The post 7 Ways to Keep Your Property Safe This Halloween appeared first on APM.

#178 We Overreacted Like Many Landlords Do

It’s tough as a landlord because you have so much invested in your business and when a tenant does something to your rental it feels like a personal attack.

We experienced this with an Amazon review on our book “The Landlord Water Cooler.” We talk about not responding emotionally to your tenants (or negative reviews).

Check out this episode of the RentPrep For Landlords podcast

The post #178 We Overreacted Like Many Landlords Do appeared first on RentPrep.

How To Find A Good Contractor For Rental Properties

Taking care of a rental property often means putting in time and money for upkeep and upgrades. Unless landlords have plenty of maintenance and repair experience themselves, they will eventually need to find a good contractor. Electric, plumbing and HVAC needs are the most common.

A good contractor should be reliable, affordable and experienced enough to take on the job. Of course, there are many good contractors out there ready to work, but what is the best way for landlords find them?

How Landlords Can Find a Good Contractor for Rental Properties

There are several ways that landlords can find a good contractor for rental properties. The first is to get recommendations from people that have used particular services. From repairing refrigerators to fixing leaking pipes at midnight, almost everyone has experience with a repair crew. Testimonials are extremely valuable because landlords get first-hand information on the service.

Another way for landlords to find a good contractor is to call their local building supply stores and inquire. For example, if they need a landscaper, they should contact a landscape supply store. These supply stores work closely with contractors in their area and will have some good insight into which operations are the best.

Tips on How to Find a Good Contractor for Rental Properties

Landlords should take the time to find a contractor when they aren’t facing a maintenance or repair emergency. In other words, they should start looking for skilled service providers before they actually need one.

Other important factors in lining up a contractor include their typical response time, price for service, after hours availability, proper licensing and certification and communication levels. Not every contractor will be the same in these regards.

Also, landlords should not always automatically choose the person that is the least expensive. Even though that may seem like the best way to save money, the real value for a contractor comes with how well he or she does the job.

RentPrep’s Take On Finding a Good Contractor

The landlords we associate with agree that finding a good contractor is invaluable. It is one of the most important aspects of managing rental properties.

They agree that getting referrals is important, and that checking in with local supply stores is a good way to make contacts.

What Are Other Landlords Saying About How to Find a Good Contractor

Every landlord needs to have a few experienced contractors within reach to keep the property looking good and operating properly.

One of the most important things is to make sure the contractor you hire is insured. If you’re hiring out to contractors who don’t have insurance you’re playing with fire. If an issue arises or they’re injured on the job than the leaky pipe becomes the least of your worries.

Here’s a screenshot of landlords discussing this question in our private Facebook group for Landlords.

find a good contractor for rental properties

You can see even more comments on that post by checking it out in the group.

The post How To Find A Good Contractor For Rental Properties appeared first on RentPrep.

How to Choose the Right Stain for Hardwood Floors

By Glenn Griffin, guest contributor One of the most commonly asked questions people have when restoring their hardwood floors is: “Should I stain my floor?” That question is closely followed by: “What color stain should I choose?” Staining your floors is a major decision for three reasons: 1) Your choice will have a substantial impact on […]

How Should A Landlord Document Pet Urine?

Pets can cause a lot of damage in a rental property. In some areas, landlords can charge a pet deposit. Otherwise, landlords can deduct the cost of repairs and replacements from the tenant’s security deposit. In most states, the landlords must provide an itemized list of the expenses. Repair receipts and photos are other ways to prove damage.

Pet urine is especially problematic, but how can landlords document pet urine stains and smells?

Pet Urine is Damaging to Rental Properties

There’s no doubt that pet urine can cause a lot of damage to a rental property. The strong smell is the first indication that animals have urinated on the floor. If the owner doesn’t clean it immediately with the right product, the odor can linger indefinitely. The moisture can get down into carpet or laminate flooring and damage it.

Urine can also discolor flooring. Bacteria, mold and other microorganisms can also thrive in spots where pets have urinated frequently.

Unless the carpet is cleaned by a professional, there will be damage from pet urine. Landlords need to document the pet urine somehow for proof of the damage.

How to Document Pet Urine in a Rental Property

Landlords may be puzzled at how to document pet urine in their rental property. After all, a stain may not show up in a photo. It’s difficult to document a smell, especially after the pet urine has been cleaned up.

Any landlord that is worried that a tenant will dispute the deductions for pet urine should document stains using a black light. A black light emits long wave ultraviolet light and it makes urine glow.

All the landlord has to do is purchase an inexpensive black light flashlight. Then, they dim the lights and shine the flashlight onto the carpet or flooring. If there is pet urine, it will glow brightly. The landlord can take a picture of the stain as documentation. As long as the photos are date stamped, there should be no question as to their authenticity.

RentPrep’s Take On How to Document Pet Urine Damage

Landlords need to comply with the laws of their state when it comes to refunding the security deposit and keeping out any deductions. They should document the stains via photographs, both in natural light and with black light. They can also get a copy of the job summary from the professional carpet cleaner about the pet stains.

If the tenant decides to dispute the charges, the landlord has the proof via the photos using the black light.

What Are Other Landlords Saying About Documenting Pet Urine

Every landlord needs to protect themselves and their property. That’s why doing a walk through inspection before a tenant moves in is good to do. A walk through before moving out is also important. That way, landlords and tenants can discover together any problems with the property.

Here’s a screenshot of landlords discussing this question in our private Facebook group for Landlords.

document pet urine

 

You can see even more comments on that post by checking it out in the group.

The post How Should A Landlord Document Pet Urine? appeared first on RentPrep.

When Should Landlords Start Thinking About Taxes? (Hint: It’s Never Too Early)

It’s time to schedule a sit-down with your tax advisor. Why now? Well, your tax advisor won’t have much time for strategic planning when you turn in an overflowing box of receipts on April 12.

Mid-year tax planning for landlords–well before the April 15 general filing deadline–can pay some big dividends, as your tax advisor will frequently have tax savings ideas that are worth their fees many times over.

Here are 4 more valuable tips on mid-year tax planning for landlords and property investors.

Mid-Year Tax Planning for Landlords: 4 Smart Tips

Invest in Your Business Now

If it looks like it’s going to be a good year, now may be the perfect time to make some long-term investments. These can take the form of newly acquired properties, or renovations to increase the market value of the properties you already have.

The idea is to take ordinary income–taxable at full income rates–and convert it to assets. These generate more future income, but are either not currently taxable, or will generate future tax deductions against income if you are depreciating them over time.

Think of it this way: If your properties have earned you $20,000 so far this year, and you pay an effective income tax rate of 25 percent, you only get to keep $15,000. If you don’t need that cash to live on, why not take that same amount of money and convert it to $20,000 worth of assets? These assets will presumably generate more income later.

In addition, this principle applies to more than real estate–for example, if you think that upgrading your computer system will help you to generate revenue in the future.

Mid-Year Tax Planning for Landlords & Investors:

How to Use Section 179 Deduction

Section 179 allows businesses that put fixed assets, equipment, and machinery into service during the year to fully deduct their costs in the current year, rather than deducting the costs slowly over time. This provides a much better cash flow for the business, and also keeps more cash in the business owner’s hands over time.

Section 179 can also provide big tax savings by potentially qualifying you for accelerated depreciation, or even a full first-year deduction–even with depreciable assets. For 2017, the maximum Section 179 deduction is $510,000, subject to a $2,030,000 phaseout threshold.

You can’t use a Section 179 deduction for most rental properties, nor for items that go inside of a rental. (So much for deducting the cost of that sleek marble shower for your luxury condo.) However, you can use Section 179 to generate an immediate tax benefit on a lot of other items that landlords and property managers use on a regular basis. Examples include computers, telephones, office furniture, software programs, maintenance equipment, and vehicles.

There is one exception: While Section 179 prohibits taking first-year deductions on most residential rental properties, you may be able to take deductions on resort or hotel properties where the average guest stays for less than 30 days.

How to Check Your Section 179 Eligibility

To be eligible for Section 179 treatment, you have to be running your property investment practice as a business, as opposed to an investment. If you want to use this strategy, your CPA or enrolled agent will be able to assist you in determining what you need to do for your practice to qualify.

Mid-year tax planning for landlords leaves more time to place equipment in service to qualify for the tax break. This means you have more time to plan, shop, get a good deal, and make smart decisions–which won’t be the case if you let things go and have to scramble at the end of the year.

Incidentally, your business may qualify for bonus depreciation, over and above what you claim under Section 179. Currently, the maximum bonus depreciation amounts to 50 percent of what you claim under Section 179. If you have some capital to work with, now’s the time to take advantage of this provision–because next year, the maximum allowable bonus depreciation you can take will be capped at 40 percent, and then at 30 percent in 2018, before the bonus depreciation allowance under Section 179 expires altogether.

Mid-Year Tax Planning for Landlords & Investors:

Funding Retirement with Rental Income

If you have some extra cash coming in from the rentals you own or manage, now is a great time to set some money aside for retirement.

If you have no full-time employees, consider starting a solo 401(k) plan. Currently, a solo 401(k) plan normally allows for the biggest pre-tax contributions. The max contribution that you can make in your role as an employee of your own company or practice (even if you’re a sole proprietor) is $18,000 as of 2017. Those over 50 years of age can contribute an additional $6000 in “catch-up” contributions.

But for self-employed individuals or those who are owner-employees of their own corporations, you can make further contributions in your role as your own employer. You can contribute up to 20 percent of your compensation if you’re a sole proprietor or own a single member LLC, or up to 25 percent if you own a corporation–up to a combined maximum of $54,000.

The SEP, or simplified employee pension plan, also allows for tax-deferred contributions of up to $54,000 in 2017 (capped at 25 percent of the employee’s compensation). But the solo 401(k) plan also allows you to set it up as a Roth account. While contributions to Roth 401(k)s, like Roth IRAs, come from post-tax dollars, Roth accounts potentially grow tax-free after that point. Roths also spare you from having to make required minimum distributions once you turn age 70, which can be a nice perk when you get older.

Furthermore, if you so choose, you can set up your business with a 401(k) that allows for plan loans. That is, you may be able to borrow up to $50,000 from your 401(k) for any reason you like–just pay it back, with interest, within 5 years. The 401(k) loan option isn’t for everyone, but veteran real estate investors can readily see the advantages of access to this quick line of credit.

Both the SEP and the solo 401(k) allow you to choose self-directed investing. That is, you can use your SEP and solo 401(k) plans to purchase investment real estate directly, while enjoying all of the tax benefits of the retirement plan. Rental income and capital appreciation will compound tax-deferred (tax-free for Roth accounts) for as long as the asset remains within the retirement plan.

What’s more, you may even be able to qualify for a tax credit–up to $500 per year for 3 years–just for setting up your small business retirement plan. This tax credit is designed to offset some or all of the set-up costs.

Mid-Year Tax Planning for Landlords & Investors:

How to Project Estimated Taxes

If you’re filing quarterly–as most businesses should be doing–mid-year tax planning for landlords is a must. Sit down with your tax advisor to ensure that you don’t overpay on taxes, crimping your cash flow until you get a return. You also don’t want to underpay your taxes during the year and risk big penalties. Your tax advisor may be able to help you stay on track with estimated tax payments, including self-employment tax.

The post When Should Landlords Start Thinking About Taxes? (Hint: It’s Never Too Early) appeared first on APM.