With an expanding budget deficit, the addition of fantastically expensive social programs, a skyrocketing national debt and a “tax-friendly” presidential administration at the helm, many of my investors are wondering what their taxes will look like in the future.  This month’s article takes a look at what’s in store for us in 2011 – and beyond.

On May 28, 2003, President Bush signed the third-largest tax cut in U.S. history, the Jobs and Growth Tax Relief Reconciliation Act of 2003.  Those tax cuts, unless renewed, are set to expire on December 31, 2010.  And we can be pretty sure they won’t be renewed.

Nothing is set in stone, yet – but these changes have been mentioned:

What We May See In 2011:
• An increase in the top marginal Federal Tax brackets from 33% and 35% to 36% and 39.6%.
• An increase in the Capital Gains tax rate from 15% to 20%.
• An end to favorable treatment of dividend income.  Rather than the current 15% rate, expect to pay your marginal tax rate.  (Up to 39.6%.)
• An increase in the estate tax from zero to as much as 55%.

Heirs of those “lucky” enough to die in 2010 will owe no estate taxes.  In 2011, the Economic Growth and Tax Relief Reconciliation act of 2001 will have expired.  If no additional legislation is passed, the estate tax will be assessed on estates in excess of $1 million with a maximum tax rate of 55%.  Incidentally – California does not have an estate tax; a rare bit of good news.

What Could Be Waiting For Us In 2013:
• An extra 0.9% increase on W-2, (salary) income over $250,000.
• An extra 3.8% on investment income over a $250,000 threshold.

That investment income one is tricky – this particular $250,000 threshold includes all other income.  So – if in 2013 a married couple earns $250,000 of salary income, $50,000 through mandatory IRA distributions, and $200,000 through rental real estate, this 3.8% will be charged on the $50,000 + $200,000; an extra $9,550 on your tax bill.

Unfortunately, Capital Gains are included in this new “investment income” concept – If the couple above also sold investment real estate in 2011 for a $500,000 capital gain, and did not complete a 1031 exchange, they would pay 3.8% on that entire amount, PLUS the higher 20% (not 15% anymore) capital gains rate.  This is what I call a tax “double whammy.”  This IRS is hitting one source of income with 2 different tax increases.  Just these two taxes will be $119,000; a $44,000 increase! This is before recapture of depreciation (25%) and state taxes (in CA – that’s an extra 9.3%) are levied.  The future could be taxing indeed – unless proper planning is done.

Source:  Tax Policy Center; Urban Institute and Brookings Institution, Washington, D.C. http://www.taxpolicycenter.org .

Tax Advantaged Investments May Be More Attractive

When taxes are rising, tax-advantaged investments can become more attractive.  These sort of assets are my specialty; investments backed by hard assets that feature income and growth potential along with tax advantages.  These tax advantages can offer immediate tax write offs, fully or partially tax-sheltered income, or can avoid reporting a tax.  (As in a §1031 exchange.)  Some products can do two or more of those things.

Investing in real estate and energy has historically offered a great way to keep more of what you earn.  As a bonus, they can prosper in times of high inflation as well.  Many believe that higher inflation is in our immediate future.  Still more think that higher taxes are.  Tax advantaged investments could be a great way to address both problems.

If paying less taxes on your investment earnings appeals to you, perhaps tax advantaged investments are worth a look.

This does not constitute an offer to buy or sell any security. Securities sold through American Beacon Partners, Inc. Member FINRA/SIPC.

Christopher Miller is a Managing Director with Specialized Wealth Management in Tustin, California and specializes in tax-advantaged investments including 1031 replacement properties.  Chris’ real estate experience includes work in commercial appraisal, in institutional acquisitions for a national real estate syndicator, and as an advisor helping clients through over two hundred 1031 exchanges. Chris has been featured as an expert in several industry publications, and on television, and earned an MBA emphasizing Real Estate Finance from the University of Southern California. Call him toll-free at (877) 313 – 1868.

By Tim Carter

Summary: A roof leak is a major nuisance for most homeowners. Finding a leak can be frustrating or relatively simple, depending on location and weather conditions. Leak detection may go easier with these tips for locating a water leak and roof leak repair.

Ten Most Common Roof Leak Locations

Roof leaks are a nuisance for many homeowners. They can be difficult to diagnose – that is a fact. To make matters worse, different weather conditions will produce leaks in different locations.

The vast majority of roof coverings operate using the principal of gravity. This can be a big help in locating a leak source. However, horizontal roof boards can trick you. A leak may actually be eight to 10 feet sideways from where you see the wet ceiling or spot in the attic.

Finding the source of some leaks is easy. Others will require detective work and possibly a garden hose and an inside spotter. If you don’t feel comfortable on a roof, you will have to find an honest roofer to assist you. Sometimes this can be as hard as finding the smallest leak! Here are some tips that may help you find a pesky roof leak:

The Field of Shingles

If your roof is older, it is possible that the leak is within the roof field. This means the expanse of shingles, slate, shakes, whatever. If your roof is asphalt, then you can walk around with ease. Other materials such as slate, concrete tile or clay tile may not be so forgiving. You can crack roofing if you walk on it, so be careful. With regular shingles, look at the tops of the vertical knockouts. Look for missing colored granules. Look for cracks. Possibly a nail has backed itself out of the roof sheathing. Simply take your time and hunt.

Valleys

A valley is a line where two roof planes intersect. Here in Cincinnati we use a metal flashing in the valleys. Some areas use rolled roofing. Other places simply lace the shingles together. Valleys can be big problems if you do not trim the shingles correctly. When you trim a shingle for a valley you end up with a chisel point on the end of the shingle. If a second cut is not made to make this point like an arrow point, then water can travel along the top of the shingle and find its way inside your house. The shingle wrapper tells you how to make this simple second cut.

Head Wall Flashings

Some roofs stop at a vertical wall. A metal flashing must be in place to direct water streaming down the wall away from the stopping point of the shingles. This flashing may be behind wood siding or in front of a brick wall. The flashing should extend over the shingles at least three inches. If the wall is brick or other masonry, the flashing must bend and extend one inch into a mortar joint. Tar, caulk or roofing cement should never be used in conjunction with these materials. If you see them, it is a sign that someone tried to patch a leak!

Wall Step Flashing

Some roof leaks happen at step flashings. You find these flashings where a roof climbs alongside a vertical wall. As each row of shingles is laid, a step flashing is installed over the shingle next to the wall. Part of the flashing turns up on the wall and the other portion gets covered by the next row of shingles. Look for rust or holes in these flashings. In reality, if all is well, you will be able to see only the smallest portion of these flashings.

Chimneys

These devils are the source of many a leak. Chimneys contain four different types of flashing. All must be right or you will have a leak. Plus, the counterflashing that goes into the brick mortar joint must be right. A hairline crack above the flashing can allow vast amounts of water to run behind the flashings. Look for soldered corners of flashing that might have broken or have holes. Do not use caulk to repair these flashings!

Plumbing Vent Flashings

Newer vent flashings are a concern of mine. Many of these incorporate a rubber seal with an aluminum flashing. The rubber can fail in as little as 10 to 15 years. Look for cracked rubber around the plumbing pipe. The flashing should dive up and under the shingles that extend up roof from the middle of the plumbing vent. The bottom half of the flashing should be exposed and actually cover the shingles.

Furnace or B-Vent Flashing

These flashings are basically identical to plumbing vent flashings. However, they sometimes have a metal storm collar. These simply fit tightly around the vertical pipe that exits the roof. If they become loose, the storm collars can cause leaks.

Ice Dam Leaks

Ice dam leaks plague people in the snow belt. These leaks can happen even if everything on your roof is just fine! Ice dams block the natural flow of water down a roof. The water begins to back up under flashings, shingles, tar paper, etc. Once water begins to flow into the house, it can drip for days. The only means of prevention is to install membranes under the roofing. The membranes won’t stop the ice but will stop water leaks if installed properly.

Wind Blown Rain Leaks

Wind driven rain can also be a major problem. Once again, you could actually have a good roof and wind will drive water up and under your roofing materials. The only lines of defense are tar paper and the ice dam membranes.

If you have metal valleys, you may want to hem the edges. This means that the hidden edges of the valley actual have a 180 degree bend. This creates a channel that directs wind blown rain back to the bottom of the valley.

Roofing cement under shingles on the edges of roofs that face the wind are also a good idea. Don’t underestimate the power of a 70 mph sustained wind-driven rain.

Non-Roof Leaks !

Sometimes you think you have a roof leak when in fact the roof is fine. Attic condensation is a prime example. High humidity can cause condensation and “rain” to fall in your attic. It can also make the underside of the roof sheathing look wet. You think you have a leak instead.

Chimney crowns can develop cracks. The inside surface of the chimney gets discolored or the plaster bubbles. You think a roof leak is the cause.

Siding can be missing above a roof. This can cause water to enter behind head flashings. Be a good gumshoe and snoop around for the leaks!

“The art of negotiation is, practiced by everyone, But the craft of negotiation is, practiced by a few.”
– Anonymous

“12 Keys to Negotiate the Best Deal Ever”
The following keys will unlock how to negotiate the best deals.
In this article, we will tackle the first three keys and in future articles we will tackle the remaining keys.

1. Everyone Negotiates
Every day, we negotiate with our spouses, children, bosses, employees, colleagues, bankers, or even our pets. We all negotiate all the time, every hour of every day whether we want to or not, over loans, projects, raises, dinners, dates, privileges, even the holiday leftovers. Some of us just do it better than others.

When my daughter was 15 years old, she wanted to buy a new phone called the Sidekick serviced by T-mobile. We had a contract for another year with Verizon, to cancel the contract would cost us $250.00. Obviously, my daughter is a good negotiator. She told me, “Daddy, I am a very a good student, am I not? I said, yes. All year I did not ask for anything, did I? No. I never asked for designer clothes or shoes did I?  No. She said, in three months I’ll be 16, correct? Yes. You are going to give me something special when I turn 16, aren’t you? Yes. You don’t have to give me a car yet. All I want is a Sidekick, and I want it now.” Friends, with such negotiation skills, I could not say no.

2. Know what you want and what your options are. As well as your partner’s needs and options.
Do yourself a favor. You hear me saying it again and again: before you enter into the meeting, take a few minutes to know exactly what you want. What are your goals? What are your objectives? What you would like to achieve from the negotiations? And what outcome you desire? What other options are available to you? The more options you have, the better the deals you can negotiate.

Next, do your negotiating partner a favor: Know what their objectives are. Learn as much about them as you can: wants needs, aspirations, fears, limitations, etc.  What other options are available to them? Then the negotiations will go smoother and you will get much better results.
Find out why they have to sell: Personal, financial, family challenges, moving out, partnership dispute, etc?  Motivated sellers are excellent sources of bargain properties.
They have special reasons for wanting to close deals with you, which means you can buy at a reduced purchase price and/or attractive terms.
Look beyond the other party’s ‘position’ to learn their ‘interest’. Their position only outwardly declares what they want. Like a $2.5 million sale price.

However, their interest reveals the motivating need for that sale.

Story:
Paul is in the garment business. He needed to raise capital to buy inventory for his business. His inventory turnover was at least four times a year. The banks were tightening their credit and Paul was not able to get as much money from his bank as he needed. Paul wanted to sell his property for $2.5 million in order to get immediate capital. When I learned that, I told him he could put his building on the market and maybe if he is lucky it would take him 3-6 months and maybe get $2.3 million. Or, he could sell it to me at $2.1 million and I could close fast.  Of course, he sold it to me and we both won.

Know the Sellers and Their Motivation
Ask the seller a lot of questions to lean as much as you can about their motivation. Make sure you gather as much information as possible. Ask everything that has to do with the property, why he is selling and what he wants to do with the money.

Here are some questions:
Are you the owner?
Are there other people involved in the decision-making?
Why are you selling, what do you want to accomplish?
What kind of finances do you have?
What is the loan balance; is there more than one loan?
Do you need all cash or will you consider carrying some papers?
What will you do if the property does not sell?
How long have you owned the property?
How long has it been for sale?
What improvements have you made since you bought it, and by when?
Tell me the property advantages.
What about the disadvantages, if any?
What kind of problems have you faced since you bought it?
What kind of people live in the area?
Remember, you can improve the building, but it’s very difficult to improve the whole neighborhood.

3. Always, ask to negotiate with the decision makers.
Do not negotiate with someone who does not have the power to make the final decision, and if you have to don’t show all your cards. In other words, don’t give your final concessions unless you are in front of the decision makers. Otherwise, you will be wasting your time and it can hurt your position because you are exposing your cards without the other party exposing theirs.

Story:
A few years ago, I was negotiating to buy an industrial building in Ontario, Riverside.  After several offers and counter-offers, the owner and I thought we should meet face-to-face at the building to hammer out the final details. However, when I went there, the owner himself was not there, only his son and an officer of the company. I chose not to go through with the negotiations and arranged a lunch meeting with the owner halfway between Ontario and Brentwood on another date. At that lunch, we sealed the deal.

About the author
Karim has founded and operated 19 successful companies, and made his first million by age 26, by buying and fixing distressed properties and businesses. For 45 years Karim has developed, invested in, financed, brokered, and managed properties in 8 countries. Karim is the author of “The Smart Real Estate Investors Guide: Your Road Map to Wealth in Any Economy”. Karim hosts monthly real estate seminars in Los Angeles and Orange County.  He mentors, writes, teaches, and speaks about real estate frequently and has been published in 115 business and real estate publications nationwide. Contact info: 310-471-0650, karim@dynamicscapital.com, www.dynamicscapital.com

You and your spouse decide to purchase a vacation home with a couple who are your best friends.  You have always had a wonderful relationship with them.  How do you protect yourself if for some reason having this couple as friends is not the same as having them as co-owners of a vacation home where you have to decide on how you determine schedules on use of the vacation home, furnishings, cost of upkeep and maintenance?  A well written tenancy in common agreement (“TIC Agreement”) agreed to by you, your spouse and the other couple is essential.  To an extent this may protect you legally, but may not prevent the emotional differences which may be encountered in this sharing arrangement.  The case of LEG Investments versus Thomas and Donalee Boxler (the “LEG-Boxler case”) decided by the California Court of Appeal on April 1, 2010, illustrates these difficulties.

In 1976, Thomas and Donalee Boxler (the “Boxlers”) and Carl and Judith Bumpass (the “Bumpass’”) purchased a lakefront vacation home in Lake Tahoe, California.  Each couple owned a fifty percent undivided interest in the property as tenants in common which essentially gives each owner the right to use all of the property in conjunction with the other owners.  In 1993, the Bumpass’ transferred their one-half TIC interest to Raymond and Sharon Schwerdtfeger (the “Schwerdtfegers”).  The Schwerdtfegers and the Boxlers signed a TIC Agreement which was intended “to establish their rights and duties with respect to each other as tenants in common.”  Thereafter in 1998, the Schwerdtfegers conveyed the property to LEG Investments, a general partnership (“LEG”), who is the other party in this legal action with the Boxlers.

Among other provisions, the TIC Agreement had a provision that if one party wished to sell their TIC interest, the selling TIC party had to present a bona fide offer from a third party to the other owner and the other owner shall have the right of first refusal to purchase the selling owner’s interest in the property on the price and terms provided in the bona fide offer from a third party.  If the other party refused to purchase the other one-half of the property, then the selling party would have the right to sell the property to a third party at the price and terms no less favorable than that set forth in the notice of the offer given to the other owner.  The TIC Agreement also had the provision that the agreement would be binding on subsequent owners of the property.

Almost immediately after LEG bought the one-half TIC interest from the Schwerdtfegers, the general partner of LEG, Eppie Johnson, determined that there were disputes and problems with the Boxlers in cooperating in the cleaning, landscaping, maintenance and repair of the property.  Sometime in 2003, LEG offered to sell its TIC interest in the property or purchase the Boxlers interest for $750,000.  The Boxlers declined both offers.  Thereafter, in 2005, C.R. Gibb (“Gibb”), an experienced real estate investor in Lake Tahoe, California, offered to purchase the interest of LEG in the property for $1,400,000, subject to the approval of the Boxlers as co-tenants.  The Boxlers declined to exercise their right of first refusal to purchase the interest of LEG on the same terms as Gibb was willing to purchase LEG’s TIC interest.  After a meeting with the Boxlers, Gibb determined that the Boxlers were unwilling to contribute to renovations and repairs.  Therefore Gibb would not approve the Boxlers as co-owners and withdrew his offer to purchase the Boxlers’ one-half interest in the property.

In March 2006, LEG demanded that the Boxlers agree to list the property for sale or purchase the interest of LEG in the property.  The Boxlers refused to list the property and the Boxlers were not able to work out a purchase price with LEG.  LEG thereafter filed a partition action to divide the property.

A partition action is a legal action which has its roots in common law in England going back several centuries.  It is essentially used in the situation where two or more parties jointly own property and they cannot agree on the operation and maintenance of the property or have other disputes.  The court has a right to divide the property.  This is realistic if it is a property that is easily divisible such as when it is a large tract of land.  Where there is a building such as a house on the land, division of the property is not a viable alternative and therefore the remedy is to have the property sold and the proceeds divided.  LEG contended in its complaint that the relationship between the parties had so deteriorated that partition was the only available remedy since the Boxlers have “refused to pay for and provide reasonable and necessary maintenance, cleaning and repairs and otherwise pay for the reasonable expenses incident to the ownership of the property.”

In the lawsuit the Boxlers argued that LEG had waived their right to partition since the original intent was to purchase the property for a long term vacation home.  The Boxlers further contended that LEG had acquired their TIC interest in the property at a discount because of the fact it was a TIC interest in the property.  (Historically, a partial interest in a residential property is sold for proportionally less than the sales price on 100% of the property.)  They further argued that an action for partition of the entire property at a non-discounted value could result in a windfall to LEG and be unfair to the Boxlers since LEG purchased their TIC ownership interest at a discounted price because it was a partial TIC interest which they purchased.

In addition, the Boxlers argued that there was a waiver of the right of partition because of the unfairness indicated above and also argued that the right of first refusal constituted a waiver of the right to partition the property.  Ultimately, the Appellate Court determined that there was no waiver of the right to partition although the Appellate Court ruled that before the property could be sold, it was necessary to first reopen the right of first refusal offer to the Boxlers.

What this case illustrates is the importance of having a well thought out and drafted TIC agreement when you buy a property with another party.  This applies to the acquisition of both residential and commercial properties.  Whether there should be a right of first refusal included in the TIC Agreement depends on the circumstances or desires of each of the parties.  There is always the right to bring an action to partition the property.  The best remedy may be if the property can be reasonably divided, such as when there is significant acreage.  Even then you may not be able to divide the property because of zoning considerations.  Therefore, the property may be ordered to be sold and the proceeds divided or the court may provide that one party should have a right to purchase the property at a fair market value of the property, i.e., the person who does not want to sell the property.  A right of first refusal can present a marketability problem because of the fact that the right of first refusal dampens the purchase price of the property since a buyer may have to expend a considerable amount of money and time on due diligence to determine the price that the buyer is willing to pay for property.  Then the buyer will have to wait to see if the non-selling co-tenant would exercise his or her right to purchase the property at the same price and terms as the prospective purchaser.  Therefore you have to build in a provision that once your tenant in common refuses to purchase the property, that you have a right to bring a partition action or sell the property at the same price and terms as offered to a third party.

In summary, buying property with others can be complicated whether in the form of a partnership, limited liability or tenancy in common arrangement.  Each has their advantages and disadvantages but whatever the form of entity, it is critical that the documentation is well drafted.

_____________________________________________________________________________________

Stephen B. Fainsbert is a partner in the West Los Angeles law firm of Fainsbert Mase & Snyder, LLP.  Mr. Fainsbert has practiced law in the real estate and real estate exchange area for over forty years and has extensively written and lectured on these subjects both for the real estate industry and for attorneys through the California Continuing Education of the Bar program.  Mr. Fainsbert is co-author of Real Property Exchanges, Second Edition, Continuing Education of the Bar, June 1994, which was published by the University of California Press and is recognized as the leading book on this subject.  Mr. Fainsbert has been designated one of Southern California’s “Real Estate Super Lawyers” in both Los Angeles Magazine and Southern California Super Lawyers magazine every year since 2004.  If you have any questions concerning this article or any other related matter, Mr. Fainsbert may be contacted at (310) 473-6400, by fax at (310) 473-8702 or “E” Mail at

Statements and opinions expressed in this article are solely those of the author, may not represent the views of this publication and may not be relied upon as legal advice – if you desire or need legal advice, you should retain an attorney for that purpose.

There are fundamental reasons why your apartment may not be renting as quickly this year as it may have in previous years. The first of which is the job market, which is no secret, but its effects have been hard felt. National studies have now revealed that only 1 out of 5 graduating seniors had received a job offer in 2009. In 2008, that number was better than half. This dynamic change has drastically reduced the number of new “renters” looking for an apartment.

The sour job market has also made people more apprehensive about moving in general. There is that underlying feeling, “will I even have my job next month or will there be more layoffs?” In fact, another national survey reflected that 25% less people moved last year than 2008. This again is eating into our pool of renters.

Overall, people are being far more conscientious about how they spend their money. The truth is that it is expensive to move and people are taking this into account. Yes, there is movement in the market due to people downsizing, but a large portion of these people are moving in with friends or back home to save money. Once the job market returns, these people will be back in the market looking for new apartments. We are also seeing that corporate relocation, as you may well have imagined, has slowed significantly. We are no longer seeing professionals renting an additional apartment in a market where they commute.

The Future is Bright
The job market will eventually rebound and things will get back to business as usual. When this happens newly employed individuals will rush to rent apartments. It is unlikely these people will seek purchasing condos given new mortgage requirements and the likelihood that rates will have risen substantially, enough so to discourage buying. I am optimistic that renting apartments will be the trend for the foreseeable future; much like buying has been over the past ten years. The rental market is in a small storm, but the future is extremely bright. Once the job market returns, so will the renters.

Make Renters Fall In Love With Your Apartment
Despite the bad economy there is good news. People are still renting apartments; the overall pool is just smaller. And with fewer renters in the sea, you need to be more skilled at capturing them. I want to share some tips with you to help you fill your investment property faster.

1. Great pictures attract renters
In a market with a higher supply than demand it is crucial that your unit stands out. Great pictures will not only attract renters to your property on our website but also catch the attention of leasing agents when they search through the thousands of listings in rental databases. That’s why I more than anything recommend that you get some very good pictures of your property. And if you want to go the extra yard, you should also provide agents with a description of what makes your property unique, for example that it is close to the beach, has brand new hardwood floors, ample closet space or free parking. Remember this is no different than a personal ad; you have to strut your stuff.

2. Make your property accessible to show
The second most important thing you can do is to make your unit accessible at virtually all hours. Agents have prospective renters that view apartments up until 10 p.m. They find that when renting an apartment, more often than not, people do not have much time and therefore are likely to rent one of the first places they see. Would they have rented your unit if they had been  able to get into it? The answer is maybe, but these are the opportunities, which need to be captured. I therefore strongly encourage you to entrust your agent with a set of keys so they can gain immediate access to your property.

3. Price your property in alignment with the market
We often hear that landlords cannot take less than a certain rent amount or they are losing money. I strongly discourage this outlook. It is far better to collect something than nothing, even if that something is only 85-95% of your target. Nothing costs more than an empty unit. Renters are aggressively negotiating rents, because they know it is a “renters market”. My advice is to not resist this trend and to ride out the storm. Whatever money is lost during this economic downturn, will be quickly recouped as soon as the market rebounds at which point you will be in a commanding position.

4. Make your property presentable for showings
This is simple, but often overlooked or forgotten. Nothing turns a renter off more than a dirty kitchen or bathroom or an entrance area that is cluttered with old newspapers and mail.

5. Think about collecting move in fee’s rather than security deposits
Given the recent number of law suits surrounding the improper management of security deposits, there has been a significant trend of property owners that have phased out security deposits and in lieu are taking a non-refundable move in fee. I strongly recommend this course of action. It will help you to avoid a lawsuit, many of which are above $10,000 in fees and penalties, and you will also receive additional revenue with the “move in fee”.

About the author

Justin Elliot is the CEO and Co-Founder of Chicago Apartment Finders, the fastest growing locator service in the Mid-West.

How long have you been ignoring that pitter-patter coming from the shower or jiggling the handle on that running toilet? Well, you may as well be pouring money down the drain. Fixing easily corrected leaks can save homeowners more than 10 percent on water bills, and it’s good for the environment.

While leaks may sometimes seem like small problems, they waste valuable resources and money over time. On average, a U.S. household leaks more than 11,000 gallons of water per year—enough to fill a backyard swimming pool. Common leaks, such as dripping faucets and aging toilet flappers, are easily correctable. WaterSense, a partnership program sponsored by the U.S. Environmental Protection Agency (EPA), is encouraging residents to fix household leaks:

Be a leak detective. Take a look at your water usage during a colder month when less water is used outdoors, such as February or March. If a family of four exceeds 12,000 gallons per month, there are probably leaks.

Nip that drip. A leaky faucet that drips at the rate of one drip per second can waste more than 3,000 gallons per year. Check faucet washers and gaskets for wear and replace if necessary.

Get a handle on toilet leaks. If your toilet is running constantly, you could be wasting nearly 200 gallons of water every day. The leaking culprit is most often a worn rubber flapper. It’s usually best to replace the whole flapper—a do-it-yourself project that pays for itself in no time.

Make savings a fixture. If you discover a significant leak that requires replacing an older toilet or bathroom faucet, consider a new WaterSense-labeled fixture, which will use at least 20 percent less water. To earn EPA’s WaterSense label, products must be independently tested and certified to save water and work well.

Spring into action. To ensure that your in-ground irrigation system has not been damaged by frost or freezing, consult with a WaterSense irrigation partner this spring; a complete list of irrigation partners is available at the Web site below.

For more tips and information about how to save water, visit www.epa.gov/watersense.

Six Steps You Must Take To Avoid Renting To The Proverbial “Tenant From Hell”

Let’s face it, California is over-populated with board-certified, repeat-offender “tenants from hell” who specialize in bilking ignorant, unsuspecting California residential landlords out of hundreds of thousands of dollars in unpaid rent and property damage annually. Here are six steps that you must follow when selecting tenants to avoid being victimized by California’s numerous “tenants from hell:”

Step #1: Establish tenant qualification standards based on legitimate business reasons.

Step #2: Provide all tenant applicants with a copy of your tenant qualification standards.

Step #3: Apply your tenant qualification standards uniformly to all tenant applicants.

Step #4: Require consumer credit and criminal background reports on all tenant applicants.

Step #5: Check, verify and evaluate the rental history and income of all tenant applicants.

Step #6: Deny rent to all tenant applicants who do not meet your tenant qualification standards.

Tenant Selection Is The Single Most Important Aspect Of The Rental Housing Business

Tenant selection is the single most important aspect of the entire residential rental housing business. That’s because no California residential landlord can run a profitable business without selecting mature, conscientious, civilized and financially responsible adults as tenants. The only practical way for a landlord to insure that he or she selects only mature, conscientious, civilized, financially responsible adults as tenants is to screen out immature, uncivilized, financially irresponsible, management intensive people. Fact is, “bad tenants,” usually the result of bad or nonexistent tenant screening, are the number one cause of residential landlord failure in California. And, when landlords fail to properly screen all of their tenant applicants, they not only lose control of their tenants, they also lose control of their rental property which often results in foreclosure and bankruptcy.

Establish Tenant Qualification Standards Based On Legitimate Business Reasons

You must establish tenant qualification standards based on legitimate business reasons and apply them uniformly when evaluating tenant applicants to ensure that only the best qualified tenant applicants are selected. At a minimum, you should require that all tenant applicants uniformly meet the following ten tenant qualification standards:

1. Complete And Sign Rental Application: All tenant applicants must legibly and truthfully complete and sign a Rental Application.

2. Complete And Sign Personal Information Release Form: All tenant applicants must legibly and truthfully complete and sign a Personal Information Release Form authorizing the landlord or landlord’s agent the right to obtain personal information about the applicant’s credit, criminal, rental and employment history.

3. Non-Refundable Cash Rental Application Fee: All tenant applicants must pay a cash, non-refundable rental application fee of $25 for single applicants and $50 for married applicants and couples to have their application processed.

4. Eighteen Years Of Age: All tenant applicants must be eighteen years of age. In California, the legal age of consent to enter into binding written agreements is eighteen. If you enter into a rental agreement with a minor under the legal age of eighteen, the agreement will be unenforceable in court!

5. Valid Personal Photo Identification: All tenant applicants must have a valid form of personal photo identification such as a California Driver License, California identification card, US Department of Defense identification card or United States Passport or Visa. Do not rent to tenant applicants who don’t have a valid form of personal photo identification to prove who they are.

6. Legal United States Resident: All tenant applicants must be legal residents of the United States. Do not rent to tenant applicants who can not provide proof through valid photo identification that they’re legal residents of the United States. Please note that it’s illegal to rent to undocumented aliens or so-called illegal immigrants!

7. Good Credit History: All tenant applicants must be creditworthy and have no charged-off accounts, accounts placed for collection, late payment accounts, or bankruptcy within the past twenty-four months. Do not rent to tenant applicants with lousy credit histories!

8. No Violent Or Repeat Non-Violent Criminal Conviction History: All tenant applicants must have no violent criminal convictions and no non-violent criminal convictions within the past seven-years. Do not rent to tenant applicants who have violent criminal convictions or multiple non-violent criminal convictions.

9. Good Rental History: All tenant applicants must have a rental history with no late payments, evictions or judgments for past-due rent. Do not rent to tenant applicants with lousy rental histories!

10. Verifiable Source Of Legitimate And Sufficient Income: All tenant applicants must have a verifiable source of legitimate income equal to three times their monthly rental rate. Tenant applicants who have no legitimate means of support may be involved in criminal activity. Do not rent to tenant applicants who can’t provide a verifiable source of legitimate income equal to three times their monthly rental rate.

Collect A Non-Refundable Cash Rental Application Fee

You should collect a non-refundable cash rental application fee from each tenant applicant when they submit their rental application to help defray the cost of screening applicants. I suggest you collect $25 for single applicants and $50 for married applicants and couples. However, make certain that you never process a rental application without first collecting the appropriate non-refundable cash application fee. And, also, make certain that you only accept rental application fee payments in cash, and that all application fees are nonrefundable.

Thoroughly Screen All Tenant Applicants

You must thoroughly screen all tenant applicants uniformly to avoid renting to immature, uncivilized, financially irresponsible and management intensive people better known as “tenants from hell!” The best way to weed out potentially “undesirable tenants” is to check, verify and evaluate their:

1. Credit history.

2. Criminal history.

3. Rental history.

4. Income.

Obtain Consumer Credit And Criminal Background Reports On All Tenant Applicant

The best way to avoid unwsittingly renting to professional deadbeats and career criminals is to obtain consumer credit and criminal background reports on all tenant applicants to check, verify and evaluate their credit and criminal histories. To get credit and criminal background reports on tenant applicants, you can contact consumer credit reporting agencies directly, or use a tenant screening service.

Applicants With Lousy Credit And Criminal Convictions Are Not A “Protected Class”

Unlike race, religion, national origin, disability, familial status, color and sex which are all “protected classes” of tenants under the Fair Housing Act, tenant applicants with lousy credit and criminal convictions are not part of any government protected class.

Base Denial To Rent On Legitimate Business Reasons

After you have used consumer credit and criminal background reports and other sources to check, verify and evaluate a tenant applicant’s personal information, you must decide to accept or deny the applicant based solely on whether they’re a good business risk and not on personal prejudices. The following are four examples of legitimate business reasons to deny rent to tenant applicant’s:

1. Credit History: People who don’t pay their bills are a bad business risk.

2. Criminal History: People who have been convicted of crimes are a bad business risk.

3. Rental History: People who don’t pay their rent or have been evicted are a bad business risk.

4. Income: People with no verifiable source of legitimate income, or insufficient income are a bad business risk.

Deny Rent To All Applicants Who Don’t Meet Your Tenant Qualification Standards

Never rent to any tenant applicant if they don’t meet all of your tenant qualification standards regardless of whether or not they’re a member of any government-protected class of tenants. That’s because if you do make any exceptions to your stated tenant qualification standards, you’ll be in violation of the Fair Housing Act for singling out certain groups of people for special treatment, better known as discrimination.

How To Properly Notify Tenant Applicants Who Don’t Qualify

Once you have decided to deny rent to a tenant applicant based on legitimate business reasons, you must send the applicant a Notice Of Denial To Rent listing the sources of the personal information that was used to base the decision to deny them rent.

Protect Yourself Against Discrimination Lawsuits

Screening tenant applicants in California requires more than just a working knowledge of the myriad of fair housing statutes, it also requires a heavy dose of common sense! However, the best way to avoid discrimination lawsuits is to always treat all tenant applicants uniformly by never making any exceptions to your published tenant qualification standards. This way, you won’t be providing tenant rejects or government agencies with any legal basis for filing a discrimination lawsuit against you.

The California Landlord’s Manual, ISBN 0-945343-11-6, Copyright © 2002 Thomas J. Lucier, is a “work-in-progress” that will be available by the fall of 2002.

Japanese beetles are in most states east of the Mississippi River, and partial infestations have occurred to the west in Arkansas, Iowa, Kansas, Minnesota, Missouri and Oklahoma. They entered the country before 1912.

“The beetles like to eat the leaves and flowers of more than 300 plants and trees by eating the tissue between the veins,” says Bayer Advanced garden expert Lance Walheim, co-author of “Landscaping for Dummies.” “It’s a process called skeletonizing. That’s just another way of saying the pests like to destroy all of your hard work.”

Destructive Grubs Become Destructive Japanese Beetles
Japanese beetles start out as grubs that eat your grass roots in the spring. Symptoms include dead grass in brown patches. You can literally lift up the grass if you have serious damage. The grass wilts even when it’s watered. You’ll also see animals such as skunks and birds visiting your lawn to feed on the grubs.

By summer, the grubs become Japanese beetles that feed on flowers, plants and trees. By late summer and fall, Japanese beetles lay eggs that become grubs, and the destructive process begins all over again.

Bayer Advanced™ (bayer advanced.com) offers several DIY products that stop grubs before they destroy your lawn. Season- Long Grub Control protects your lawn during the critical spring, summer and fall feeding and development period. (This product isn’t registered in Long Island, New York.) The 24-Hour Grub Killer Plus (not available in California or Maine) kills grubs overnight if you discover a problem and need to act fast. The company also offers a number of other products that prevent Japanese beetles from damaging your garden or trees. Always read and follow all label directions.

One thing to keep in mind: Japanese beetles release chemicals called pheromones into the air that attract other beetles. So if you have a grub or Japanese beetle problem, Walheim says you need to attack it early. Otherwise, your landscape will suffer the consequences.

Bayer Advanced is a business unit of Bayer CropScience LP. Bayer (reg’d), the Bayer Cross (reg’d) and Bayer Advanced™ are trademarks of Bayer.

ANSWER:  A landlord seeking to pursue an eviction, known as an unlawful detainer, must name and serve every adult known to be living in the rental unit with the unlawful detainer summons and complaint.  An adult such as you who was not named is not subject to the judgment for possession that the landlord apparently obtained against your sister and husband, which in turn generated the writ for the sheriff’s notice.  The only exception is if you were separately served with another paper known as a “prejudgment claim of possession” form which requires you to immediately take certain actions to protect your rights.  However, you are asserting here that you weren’t served with any papers.  To be sure, you should probably go to the office of the clerk of the superior court that issued the judgment and writ to make sure there is no declaration of service listing you as a recipient of these documents.  If there is no claim you were previously served, you can file a post judgment claim of possession in the same superior court, pursuant to California Code of Civil Procedure Section 1174.3.  There is a specific court form for this purpose.  You will be required to pay a court filing fee or else obtain a fee waiver under the “indigency” standards.  Once you file the claim, the sheriff cannot proceed with the physical eviction against you until the court has resolved your status.  A hearing on your claim will be set quickly, although the time will be extended if you also deposit the equivalent of 15 days of rent for the unit.  Without explaining the legal technicalities, we can tell you that the landlord will eventually be entitled to remedy the mistake of failing to name you and to proceed with the eviction.  However, filing the claim may give you some leverage to negotiate a resolution with the landlord either on your own or through your local mediation program, for example to allow you time to vacate or to allow you to become an acknowledged tenant pursuant to a new rental agreement.  You should contact a fair housing agency in your area or call Project Sentinel at 1-888-324-7468 for more information.

Question:  I recently answered an ad for a vacant apartment.  I have a pet Chihuahua so I was only interested in a community with a pet friendly policy.  When we toured the property, the rental agent would only show me available units on the first floor.  When I asked about units on the second and third floor, he told me that pets were only allowed on the first floor.  Isn’t it discriminatory to restrict pets to only one part of a building?

Answer:   Landlords have broad discretion to allow or prohibit pets in a rental complex, including the right to limit tenants with pets to certain units with the overall community.  Landlords can also impose reasonable rules on pet owners including limiting the size or type or number of pets allowed without being in violation of any laws against discrimination.  The answer is different if your pet is a companion, service or support animal prescribed by a treating physician.  A service animal performs a task or tasks for the disabled tenant to help the tenant perform normal living activities.  A companion/support animal provides emotional support for a tenant with a psychological disability. Under the fair housing laws, a companion, service or support animal is not a pet.  A landlord would not be able to limit the location of a companion, service or support animal to certain units in the complex, such as the first floor.  If a potential tenant meets the applicant financial screening criteria, the landlord must allow the companion, service or support animal as a reasonable accommodation to the tenant’s disability, if the tenant makes a written reasonable accommodation request. The formal written reasonable accommodation request should be accompanied by a support letter from a treating physician.  The treating physician does not have to disclose the actual disability, but must certify that he/she is a physician,  is treating the tenant for an eligible disability, and that part of that treatment plan includes the services of either a companion, service or support animal.  Landlords cannot charge a pet deposit for the companion, service or support animal but can impose reasonable rules to assure proper supervision of the animal’s activities.  Please contact Project Sentinel for assistance in writing a formal reasonable accommodation request at 1(888) FAIRHOUSING.

Rent Watch is provided by Project Sentinel Questions may be sent to Rent Watch, 1055 Sunnyvale-Saratoga Road #3, Sunnyvale, CA 94087. Copyright © 2002, Project Sentinel. All rights reserved.

If a property owner has a growing number of properties, it’s inevitable that a day will come when they ask, “Should I outsource the day-to-day operations of my business to a property management company?”

Deciding when to outsource and which company to hire is one of the most important business decisions a property owner can make. Choose wisely, and an owner will be rewarded with the peace of mind that comes with responsible property management. Choose incorrectly, and an owner will be working harder after hiring a property management company.

Whether an owner has one or one hundred properties, it’s important to consider whether or not they’re prepared to hire a property management company. Handing over the management of property is a major decision. Before making that choice, owners will want to make sure they understand the following:

• The implications of self-owned management;
• The pros of outsourcing management to a third party;
• The corresponding cons; and,
• The alternatives to outsourcing.

Let’s take a look at each consideration in detail.

What’s Involved in Effective Owner Management?
Owning and managing property require two different skill sets. Unfortunately, many property owners purchase property not knowing the full responsibility that management entails. Before a person jumps into purchasing rental properties, they’ll need to understand what is going to be required of them.

• Knowledge of landlord/tenant law. Familiarity with the state laws that govern the landlord/tenant relationship is a must for any property owner. If owners aren’t comfortable with their level of knowledge or experience in this area, they could be leaving themselves open to lawsuits and fines. For example, the federal Lead-Based Paint Hazard Reduction Act requires the disclosure of lead-based paint and hazards before the lease of most units built before 1978. Owners can face a $10,000 fine if they fail to do so. Airtight contracts and leases are also extremely important for protecting owners from lawsuits and recouping lost costs.
• Time and expense spent visiting properties. Rental properties are going to require regular visits to check on the condition of the property, perform emergency maintenance or show vacant units. If owners’ properties are far away from home or each other, they will spend a lot of time in transit. If owners attempt to self-manage too many properties, they run the risk of spending all their time performing routine visits instead of managing the company.
• Responsibility for repairs and maintenance. A landlord needs to have a diverse range of skills to perform maintenance themselves. At the very least, a landlord needs to have basic plumbing, electrical, carpentry and landscaping skills to properly maintain a property. If they’re not well-versed in these areas, they’ll be spending revenue on repair services. While family members and friends can be labor outlets, relying on such help comes with inherent risks.
• Effective tenant screening. An owner will quickly need to become good at weeding out problem tenants during the screening process. If an owner only has a few units and has to replace a problem tenant a few times a year, their profit is likely going to drop dramatically. Credit checks, employment verification and collecting references are key in this process.
• Ability to deal with difficult tenants. Even if landlords screen tenants thoroughly, they will inevitably interact with unhappy or unruly tenants. Whether the tenant is simply unhappy or in violation of rules and facing eviction, a landlord needs to stand firm in the face of adversity and enforce the rules of the lease. If they’re not able to confront people, a property owner risks being taken advantage of by tenants. In the most extreme cases, landlords may even need to rely on lawyers or courts to settle issues and pay hefty fees.
• Good property management software. If an owner is managing a decent number of units, they’ll want to invest in software to manage their properties. Investing in a robust property management system has the ability to increase efficiency by:

o Accepting rental payments online;

o Performing credit and criminal background checks;

o Decreasing advertising costs by automatically posting units to popular listing sites;

o Automatically reminding tenants to pay their rent;

o Eliminating poor record keeping by automating certain processes; and

o Creating letters and tax forms automatically from pre-existing data.

A solid property management system can be a good tool to have, especially for a novice property owner.

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