It’s tax season again. If you own a rental property, your tax strategy is more complex than for the home you live in. Here are some important tax tips for rental property owners.

Rental property tax considerations each year

Here are some points to keep in mind when you file your annual return:

• Your rental property shows up on Schedule E of your tax returns, which logs rental income and expenses. The expenses include mortgage interest, property tax, maintenance, repairs, utilities, property management fees, depreciation, and all other costs associated with owning the property.
• If you pay points when you close your rental property purchase loan, you cannot fully deduct them the year they were paid like on a primary residence purchase. Instead, you must deduct points over the life of your loan.
• If your rental income exceeds expenses each year, the income is taxable just like any other income.
• If expenses exceed rental income on Schedule E — which is common because of the depreciationexpense line item — you can deduct rental losses if your non-property income is up to $150,000 per year. If your non-property income is up to $100,000, you may be able to deduct rental property losses up to $25,000 annually. If you earn between $100,000 and $150,000, this potential deduction benefit is cut in half. And if you earn above $150,000, you cannot deduct rental property losses.
• If you earn too much to deduct rental property losses, the losses can accrue as an offset to capital gains taxes when you sell.
• Ask your tax adviser whether deductions or accrual of rental losses fits your tax profile.

Rental property tax considerations when you sell

When you sell a rental property, you will pay capital gains taxes on your appreciation. You must consult a tax adviser to get accurate figures, but here’s a simplified formula for estimating capital gains taxes and net profit on a sale.

Subtract purchase price, cost of improvements you made, and total selling cost (including realtor, title, and local tax fees) from sales price. The resulting number is your capital gain, and you’ll pay federal and state taxes of about 25 to 30 percent (based on your tax profile) on the capital gains.

Let’s see what this formula looks like if you bought a home eight years ago for $200,000 using 20 percent down and a 30-year fixed rate of 6 percent (the rate at the time). A quick mortgage calculator analysis tells us that your balance is now $140,435.

Suppose you made $10,000 in improvements to the home along the way, you earn less than $100,000 per year (so you didn’t accrue any rental losses to offset capital gains), and you’re now selling the property for $300,000. In a county that has a total of 7-percent selling cost (including real estate agent commission, transfer taxes, title, and settlement fees), your estimated capital gains would be about $69,000.

Using the capital gains tax formula above, you’d have about $17,250 to $20,700 in taxes due, and you’d therefore net about $117,865 to $121,315 on the sale.

How to avoid capital gains taxes on rental property

You can avoid this tax hit if your intent is to buy a new rental home immediately after you sell.

You do so with an IRS benefit called a 1031 Exchange, which is named after the IRS code number. This allows you to defer paying the capital gains taxes at closing as long as you identify a new rental property to buy (in writing) within 45 days, and close the new purchase within 180 days of closing your sale.

To get the full tax benefit, the new purchase must be of the same or greater than your sales price, and you must put every penny of net proceeds from the sale into the new purchase.

A 1031 Exchange defers rather than eliminates the tax hit in your sale.

If you plan to convert the new rental property to a primary residence at some point in the future after the exchange, the IRS has no specific rules prohibiting you from doing so. If this is your strategy long term, consult your tax adviser on capital gains tax implications before you enter into your exchange.

Source: zillow.com

In recent years, the number of renters increased as homeownership declined. According to the Joint Center of Housing Studies at Harvard, this country is enjoying the highest proportional rental demand in half of a century. As demand has grown, rental rates have spiked across most large markets in the United States. Average total rates have increased, and they have also grown as a percentage of the average renter’s income.

Of course, property owners and managers benefit from high rental demand and increasing rental prices. Still, rental affordability has become a serious concern with urban planners and housing departments. Rental demand is expected to keep growing during the next decade and maybe even after that. There might be some concerns that both the issue of affordability and an increased inventory supply will put a cap on that growth in the future; however, that doesn’t mean that demand is expected to decline.

Why Affordability Might Constrain Rental Prices

Despite recent growth in rental prices, according to the Urban Land Institute, these are some signs that affordability may start putting the lid on increasing prices soon:

Millennials: One of the major populations to favor renting over buying more than they used to has been 25- to 34-year old adults. Getting married and having kids tend to be the kind of life events that are associated with purchasing a home. These events were also declining, but that trend seems to be reversing. An increase in homeownership is expected to follow.

Interest rates for mortgages: Interest rates did increase a little, but they rose only slightly from historically low levels. If borrowers can obtain low-interest mortgages, homeownership might seem cheaper than renting for some individuals and families. This may be particularly true for the high-end rental markets where most renters do have a choice.

Rental inventories: Right now, many U.S. markets enjoy occupancy rates of 95 percent or more. However, these occupancy rates have attracted more investors into the market. As more apartments get built or single-family homes get converted to rentals, supply will increase. If supplies begin to overtake demand, rental rates could soften.

Renter incomes: In addition, about 46 percent of renters paid more than 30 percent of their household rents in 2014. Typically, rent between 25 to 30 percent of income is considered affordable. This is an increase in rent as a percentage of income from about 40 percent for renters in 2004. At some point, unaffordable rents could force people to find some other housing alternative, and this could decrease demand.

There is Still Plenty of Room for the Rental Market to Grow

Despite these concerns, there’s no reason to feel pessimistic about the U.S. rental market. Officially, rents have increased by about three percent a year, but that calculation includes some rent-controlled areas. According to investment trusts, the true rate of increases has been approaching five percent. In 2009, there were only a little over 100,000 multifamily starts in the entire country. That number should increase to over 400,000 this year and approach 460,000 in the next couple of years.

The demand for rental properties is still expected to increase over the next decade. The Urban Land Institute’s report was very optimistic about the rental market as a whole. Concerns that were expressed centered mostly about the issue of affordability, particularly in some parts of the country. Even though the market for more expensive rentals for high-income families and individuals is expected to increase, it may be more limited than the market for middle-class and working-class housing. The caution was to make sure that the particular market for each type of property was really as large as anticipated.

The post Will Affordability Constrain Rents? appeared first on The Official AppFolio Blog.

Original post on the Hightower Blog

No, not those types of nerds. We’re not talking thick glasses, pocket protectors, or the popularity of The Big Bang Theory. It’s the five office markets you should be keeping an eye on for strong talent, affordability, and investment opportunity.

JLL coined the term at the end of 2014 to describe five hot secondary markets—Nashville, East Bay (California), Raleigh-Durham, Denver, and Salt Lake City—for their ability to attract investors and occupiers as the economy expands and larger metros overheat or tap out on talent. Among their attributes, according to JLL:

• Their populations have grown by an average 7.4% since 2010, more than double the national rate;
• Educational attainment in NERDS is higher than the national average, and they employ a higher percentage of their workforces in corporate office environments;
• In the past year, they recorded occupancy growth of 7.9 million SF, nearly two times faster than the U.S. overall, while still offering close to a 25% discount on office asking rents;
• Investors are able to acquire core product without sacrificing yield, as average PSF pricing for Class-A buildings is between $150 and $300, with discounted cap rates ranging between 4.9% and 6.1%.

If you’re an investor and haven’t been looking at these markets already, now’s the time. JLL recently warned that the window to catch these market on the upswing is beginning to narrow—and you may miss the opportunity to open a satellite office or relocate at a fraction of the price of other popular markets.

Last year, these markets attracted strong corporate demand and population migration—but as this interest grows, so does pricing. And NERDS saw large leasing activity from companies such as Anadarko and URS (Denver), Dell (Nashville), SAP (East Bay), Allscripts (Raleigh), and Health Equity (Salt Lake City), contributing to a dwindling amount of space. Overall vacancy remains well below average at 10.2%, compared to the total U.S. vacancy rate of 14.7%, JLL reports.

Crash Course: The NERDS Today

Nashville: Seeking appreciation? Music City is one of the few markets tracked by JLL that has not exceeded peak pricing. Institutions have taken note, snapping up seven properties for $160 million in 2015, which may rep a shift in Nashville’s buyer landscape. The result: Yield compression was down 81 bp in 2015, to 6.1%.

Vacancy: 6.7% (Class-A, 2.7%)

Asking Rents: $20.32 (Class-A, $26.45)

Under Development: 2.8 million SF (81.9% preleased)

Total Sales Volume: $717 million ($137/SF average price)

East Bay: While previous years saw a focus on Class-A space, 2015 was all about Class-B, which JLL expects to continue. Institutional investment hasn’t been as  strong here as in the other NERDS, but the argument for acquisitions is strengthening as rents go skyward in fellow Bay Area markets.

Vacancy: 13.1% (Class-A, 14.3%)

Asking Rents: $31.46 (Class-A, $35.94)

Under Development: 0 SF

Total Sales Volume: $751 million ($235/SF average price)

Raleigh-Durham: Unlike its fellow NERDS, this part of the Research Triangle saw softening prices and higher cap rates than secondary markets as a whole, JLL reports. But it had the largest transactional increase, from $493 million in 2014 to $1.2 billion in 2015, mainly due the Trinity-Starwood-Vanderbilt JV’s purchase of Duke Realty’s portfolio, $500 million of which was in Raleigh. As the Research Triangle continues to grow, this market will likely have strong positioning in coming years.

Vacancy: 11.9% (Class-A, 9.8%)

Asking Rents: $20.53 (Class-A, $23.71)

Under Development: 629,214 SF (63.3% preleased)

Total Sales Volume: $1.0 billion ($143/SF average price)

Denver: The Mile High City also saw a notable uptick in institutional investment, with institutions accounting for 48% investment activity over 2015. While it compressed to a 4.9% cap rate last year, it’s unlikely that the trend will continue, as the market has reached peak pricing levels (highest since 2000), according to JLL.

Vacancy: 13.1% (Class-A, 11.4%)

Asking Rents: $25.62 (Class-A, $31.53)

Under Development: 2.7 million SF (24.1% preleased)

Total Sales Volume: $2.2 billion ($182/SF average price)

Salt Lake City: Although it is currently the smallest market on this list for investment, Salt Lake City is experiencing a change. The 2014 transaction that brought Goldman Sachs’ largest corporate office outside of New York (222 Main Street) represents the diversification and growth of the city’s tenant base, which will attract further investment, JLL says.

Vacancy: 6.4% (Class-A, 6.0%)

Asking Rents: $25.62 (Class-A, $31.53)

Under Development: 2.7 million SF (58.3% preleased)

Total Sales Volume: $81.1 million ($167/SF average price)

Looking Ahead: The NERDS in 2016

In 2016, JLL expects the NERDS markets to remain some of the most active office markets in the U.S., particularly if they continue to take on demand from markets with high barriers to entry. But if you miss out on the opportunity in the NERDS, there may be other markets to consider. JLL expects similar geographies — such as Austin, Charlotte, Fort Lauderdale, Minneapolis, Pittsburgh, and Portland — to complement NERDS in output and innovation.

ABOUT AMANDA MARSH

Amanda Marsh is the founder of Buzzmaestro, a business writing and editing firm. She has been a commercial real estate journalist for over a decade, with stories published in Bisnow, Commercial Property Executive, Multi-Housing News, Real Estate Weekly, BOMA Magazine, and other industry publications.

Rising home prices are bringing more house flippers out of the woodwork, and that may be a sign of an overheating housing market. The number of active home flippers last year was the highest in nearly a decade, and it is only growing.

Nearly 180,000 family homes and condos were flipped in 2015, according to RealtyTrac. A flip is defined as a home that is bought and sold again within the same 12 months. Flips made up 5.5 percent of all sales last year, and that is the first increase in the flip share after four years of shrinking. Flipping increased in 75 percent of U.S. markets, and the profits are growing as well.

– See more at: http://www.american-apartment-owners-association.org/property-management/latest-news/home-flipping-reached-10-year-high-can-say-froth/#sthash.xVe1M5ty.dpuf

It’s always smart to prepare for changes in the real estate market, but busy property managers may find that keeping up with the demands of their rental units leaves them with little time to follow industry trends. Take a few minutes to check in with regional and national forecasts for 2016 to make the right decisions and keep your property full all year long.

2016 National and Regional Vacancy Rates

2015 was a good year for real estate, and 2016 is poised to be another. Expect to see vacancy rates dip even lower nationwide, with rents remaining strong. This is good news for property managers in much of the U.S. and tough news for renters. Tenants looking for a good deal will have a difficult time. Compared to 2008, when there was a supply of vacant new construction apartments in need of filling, there are far fewer vacancies to drive rent prices down.

While vacancy rates are low nationwide, some cities may have higher vacancy rates at present. New York City, for example, is seeing an increase in new construction that is driving the city’s vacancy rate up. To stay competitive amidst the wider stock of open units, landlords in the five boroughs area will need to put the brakes on rent increases. If this trend spills over into other metro markets, it could cool the rental market nationwide.

Low oil prices can also have a negative effect on some markets, namely Houston. As oil prices remains stagnant and drilling is on hold in oil-rich states, many who worked in the industry face job cuts that threaten their livelihood. Property managers in affected metro markets may need to keep rents stable or be extra attentive to renters to keep units occupied despite the sector slump.

Urban vs. Suburban Rental Stock

Along with Millennials, who are committed to renting either by personal preference or an inability to quality for a mortgage of their own, expect Boomers to sell off the suburban empty nest and seek to move closer to the city for the full live/work/play experience.

While the suburbs do have a higher vacancy rate, reduced rental unit supply in urban areas along with high costs of rent will help drive some renters out to the suburbs. Look for renewed interest in suburban homes among renters who want more value for their dollar. If you manage units in the city as well as in the suburbs just outside, this renewed interest in the suburbs is good news.

Expect these rental patterns to hold through 2016. Savvy property managers can add value to their rental units and incentivize tenants to continue to pay premium rents by creating an attractive and elegant common area that creates community in the apartment complex.

How Property Managers Can Stay Ahead in 2016

Busy property managers who are still doing things by hand should consider 2016 the year to invest in effective property management software. Such software can help property managers save time, stay on top of vacancies, easily advertise units, quickly screen tenants, and handle tenant applications.

Since low vacancies mean that maximum profit is gleaned from every rental unit, 2016 is a good year to invest in infrastructure and maintenance. If property owners have been putting off needed repairs to common areas, or you know that the building’s HVAC systems are old and inefficient, suggest spending money modernizing the apartment. These improvements are easily offset by the income from rental units, and help to make the apartment or condo complex more attractive in down cycles as well.

Owner-managers who seek additional real estate holdings should invest in multifamily units, which offer a greater return on investment than single family homes. In the second half of 2015, demand for multifamily units was strong and Freddie Mac forecasts that this demand will remain strong into the foreseeable future.

We always want you to stay up on the trends, so don’t miss our upcoming webinar (3/24) with Axiometrics. Register Today.

What other regional or national trends are you watching for 2016? Let us know in the comments!

The post A Quick Check Up on the 2016 Property Management Industry appeared first on The Official AppFolio Blog.

To become a truly successful real estate investor, it’s important to be aware of future predictions for the housing market. Learn how to stay ahead of the curve by joining us at the Income Property Management Expo on March 15, 2016, at the Pasadena Convention Center where real estate experts will be sharing their insight into the current economy and how your investment may be affected.

You’ll also learn more about legal trends, investing strategies, crime prevention, and marketing. Here is a quick snap shot of the speakers and time for each seminar:

MORNING SESSIONS 

The Latest Opportunities

For real estate investments & 1031 Exchanges

Speakers: William L. Exeter, 1031 Exchange Services LLC and Robert Tweed, Tweed Financial Services, Inc.

Sell High, Tax Low

What every real estate investor should know

Speaker: Tony Watson, Robert Hall & Associates

Legal Issues Traps and Trends

Stuff you must know to thrive and survive as a landlord

Speaker: Stephen C. Duringer, Duringer Law Group

Residential Assisted Living Academy

Turn a single family home into a cash flow machine!

Speaker: Gene Guarino, Residential Assisted Living Academy

AFTERNOON SESSIONS

The Southland Rental Market

A macro-to-micro perspective

Speaker: Ralph McLaughlin, Zillow Group

The World at your Fingertips

Important key global market highlights in order to ensure you are set up for success!

Speaker: Elizabeth Reynolds, Owner/Broker of Reynolds Realty Advisors

Building Your Buyer’s Box

Learn how multi-cultural markets have a direct impact on rents, growth, and asset valuations.

Speaker: John Wilhoit, President Wilhoit Investment Network, LLC.

Top 10 Things Today’s Landlord Must Know

Everything you need to know from marketing vacancies to minimizing litigation.

Speakers: Brian Gordon and Vincent Medina, Lotus Property Services

Maintenance, Habitability & Landlords Rights of Entry

Learn about your rights as a landlord and how to get back in control of your unit.

Speaker: Mike Brennan, Brennan Law Firm

Crime Prevention and Tenant Selection

Get education on how you can take steps to reduce crime on your rental properties.

Speaker: Leslie Born, Managing Attorney FastEvict.com Law Group

We had such an overwhelming number of great questions during a recent webinar with Puneet Singh on How Not to Get Sued. So here you go! Your questions, answered by various attorneys at the Law Offices of Kimball, Tirey, and St. John LLC.

Kimball, Tirey & St. John LLP specializes in business and real estate law, landlord/tenant, and collections with offices throughout California. This article is informational only and should not be used as legal advice. Check with your attorney before acting. If you have any questions regarding the answers provided below please call (800) 525-1690.

Service Animals

Q. Can you ask for paperwork showing that a pet is an assistance animal? May we ask for proof on assisted animals and not take the word of the applicant? What type of proof will do?

A. You are entitled to verification that the resident has a disability and needs the animal due to the disability, unless the disability and need are apparent. The verification does not need to be in any particular form or format and can come from a health care provider or a non-health care provider source such as a credible third party in a position to know about the person’s disability and needs, a peer support group, or a non-medical service agency.

Q. The TAA conference says even if it’s an ADA pet, it’s a good idea they sign the TAA pet addendum. Do they need to or not?

A. Since pet addenda often contain things that are not appropriate for assistive animals (such as pet deposits, pet rent, restrictions on size, type, breed or numbers of pets and restrictions on where the resident can take the animal in the community) we recommend utilizing a separate addendum of rules of conduct for assistive animals that covers behavior issues such as keeping the animal leashed, cleaning up after it, making sure it doesn’t create a nuisance or act aggressively, etc.

Q. I’ve seen online that people can buy an emotional distress animal form for $150. Is that something that can be used or do the pet owners have to have a form from a medical professional?

A. The HUD and Department of Justice Joint Statements on Reasonable Accommodations and Assistance Animals state that verification can come from a medical professional or other sources: a credible third party in a position to know about the person’s disability and needs, a non-medical service agency, a peer support group or a self-statement such as proof that a person under 65 is receiving SSI or SSDI (which would prove the disability itself, but you would still be entitled to verification of the disability-related need for an animal). A certificate or card showing that the animal is registered as an emotional support animal does not meet the verification test as those certificates and cards can be purchased without any proof of disability and disability-related need.

Q. Do accommodation pets still have to follow community policies?

A. Landlords may establish reasonable rules of conduct for assistive animals. Since pet addenda often contain things that are not appropriate for assistive animals (such as pet deposits, pet rent, restrictions on size, type, breed or numbers of pets and restrictions on where the resident can take the animal in the community) we recommend utilizing a separate addendum of rules of conduct for assistive animals that covers behavior issues such as keeping the animal leashed, cleaning up after it, making sure it doesn’t create a nuisance or act aggressively, etc.

Q. Are we able to charge a Pet Deposit for Service Animals?

A. No, you cannot charge a pet deposit or an increased security deposit for an assistive animal.

Q. If I charge two times the rent for an unfurnished property can I also add a pet deposit?

A. It depends on the laws of your state regarding security deposit. In California, you would not be able to charge an additional pet deposit because the maximum total security deposit allowed by CA law is 2x the rent for an unfurnished unit. You can never charge a pet deposit for an assistive animal, regardless of what state you are in.

Security Deposits

Q. Does a tenant lose the right to dispute the deposit if the payment was made electronically? Do you need to have them accept the amount of the deposit before transferring?

A. No, the tenant does not lose the right to dispute the deposit if the payment was made electronically. The second part of the question is unclear so more information is needed before an answer can be provided.

Harassment/Discrimination

Q. What is the landlord’s obligation to address harassment of protected classes by other tenants?

Landlords should have a zero tolerance policy towards harassment of any kind. When tenants are harassing others based on their protected class, the landlord can be held liable for discrimination if the landlord does not take affirmative action to stop the harassment. The harassers should be warned in writing that the behavior is unacceptable, that it constitutes discrimination (which the landlord does not tolerate from anyone) and that if it continues, the landlord may have to terminate the tenancy. If the harassment doesn’t stop, the landlord should take steps to terminate the tenancy in accordance with relevant state landlord-tenant law.

Disabilities

Q. I have a senior apartment building and I only have room for 3 handicapped parking spaces. What can I do if I have more than 3 tenants with handicapped tags?

A. The first thing you should do is have the property evaluated by a Certified Access Specialist (CAsP) to make sure that the current parking configuration complies with all applicable accessibility laws. Assuming the parking configuration is in compliance, then your only obligation would be to try and accommodate any resident that asked for a parking accommodation. This can include things like giving a resident an assigned space if parking is not normally assigned; giving the resident a different assigned space (if one is available); putting the resident at the top of any wait list for the next available space that meets his/her needs (behind anyone on the list that does not have a disability-related parking request, but ahead of any other parking accommodation requests already on the list); or offering to let the person out of their lease without penalty if you cannot meet their disability-related parking needs.

Q. If we were built in 1988, then we do not need handicap parking, correct?

A. Not necessarily. If you have any public parking (for example, future resident parking) the property must have disabled parking in order to comply with the ADA, which does not grandfather-in older properties. If all of your parking is private (i.e., reserved for residents) then you may not need disabled parking under the federal Fair Housing Act. However, some states and local jurisdictions may require it. The best way to ensure that your property is in compliance with all relevant accessibility laws is to have the property evaluated by a Certified Access Specialist (CAsP).

Q. What notification is required from a tenant in the event of a change of disability status, i.e. if in mid-lease he or she becomes disabled, or now requires a service animal?

A. The only time a tenant would be required to notify you of a disability would be if the tenant was requesting a reasonable accommodation (such as an assistive animal) or a reasonable modification (a physical change to the unit or common areas to allow the resident full and equal use and enjoyment of the property). If the tenant makes an accommodation or modification request, then you are entitled to verification of disability and disability-related need for the accommodation/modification, unless either or both are readily apparent.

Q. We are an historic building and we do not have elevators or parking spaces and we only have stairs. Are we in danger of ADA Laws?

A. Possibly. The best way to ensure that your property is in compliance with all relevant accessibility laws is to have the property evaluated by a Certified Access Specialist (CAsP).

Q. If someone breaches the lease and we have multiple complaints in writing, why can’t we evict them? Since we are not allowed to ask about their mental illness?

If a resident’s behavior is caused by a known or suspected mental disability, there is generally a responsibility to try and accommodate the person before evicting. This generally means giving the person extra opportunities to comply with the lease before taking steps to evict. If the person still doesn’t comply, you may ultimately have to evict.

No-Smoking

Q. Can tenants who use e-cigarettes be denied for tenancy in a non-smoking building?

A. Tenants who use e-cigarettes cannot be denied housing (Fair Housing issues), even in smoke-free complexes, based on their use of e-cigarettes, however, complexes can regulate smoking on the premises, including the use of e-cigarettes. Existing laws in California restrict or prohibit the smoking of tobacco in various public places, including residential dwelling units. Senate Bill 648 was proposed in 2013 to expand the definition of smoking tobacco to include e-cigarettes and “vaping.” Many California cities have ordinances that prohibit smoking (including vaping) in multi-unit housing complexes, including, Santa Rosa, Foster City, San Mateo County, El Cerrito, Los Angeles County, Corte Madera, and Mammoth Lakes, and many leases will individually regulate smoking and vaping within their buildings and/or common areas.

Q. If a tenant is smoking pot in a unit and then produces a medical card, must I allow him to smoke in the unit?

A. There are arguments to be made for not allowing it. Even if your state has legalized marijuana for medical purposes, marijuana is still an illegal drug under federal law. Also, if the drifting smoke is bothering other residents, you may be able to argue that this is a nuisance. Some landlords decide not to focus on the issue of state vs federal law and instead focus on the drifting smoke. If the resident can find another method of using the medical marijuana that doesn’t involve smoking (and thus doesn’t disturb the neighbors) then the landlord will allow it. Other landlords take a “zero tolerance” approach due to the illegality under federal law and the issue of drifting smoke.

Cleaning/Maintenance/Inspections

Q. What would you suggest we do if a tenant is not cooperating with management’s efforts to perform pest control (bed bug) treatments?

If a resident is not complying with management’s efforts to perform pest control for bed bugs, such as not preparing their unit, first look to the lease agreement to see if it contains language that would make it possible to enforce the necessary treatment. However, if the lease agreement does not include specific language about bed bugs, or pest control in general, it may be possible to serve a 3-Day Cure Covenant or Quit Notice for a breach of some other provision of the lease agreement, such as failing to maintain a clean and sanitary household, in order to either obtain possession of the unit or to force the resident to comply with pest control requirements.

Q. Are bed bugs a tenant-caused problem therefore it’s there responsibility to get rid of them?

A. Bed Bugs are known as the hitchhikers of the insect world. They are most often carried into the unit on someone’s clothing or by hiding in used electronics, furnishings, or other items. It is often very difficult to determine the source of a bed bug infestation unless it can be pinpointed to one specific unit. However, even then, the resident may not even know how the infestation occurred or that they are the source. Because California Civil Code Section 1941 states that a landlord must repair items that make the property uninhabitable, it is the landlord’s responsibility to obtain and provide proper pest control treatment unless the lease agreement provides specific language that places the responsibility on the tenant to pay for, or reimburse the landlord for, the cost of necessary treatment.

Q. What if you can certify that that you did not rent the unit infested with bed bugs? That the resident brought them in?

A. Many landlords now use leases that include a bed bug addendum that states, among other things, that the unit was free of any bed bug infestation at the time the resident took possession of the unit. The addendum will often shift the burden of the cost of any bed bug treatment needed after the resident takes possession of the unit to the resident, unless it can be shown that the source of the infestation is another unit. Absent specific language to that effect, the landlord remains responsible under California law to provide a habitable property and provide necessary treatment and/or repairs for uninhabitable conditions, including a bed bug infestation.

Q. Under the new mold law, if a tenant requests a mold test by a third-party are we required to have it done? Is it only considered mold when code compliance says it is mold?

A. The new mold law does not require testing by a third-party if requested by a tenant. The new law also provides that in order for suspected mold to be considered a substandard condition, it must be identified as mold by a health or code enforcement officer.

Q. What about mold in a garage? Is that enough for a tenant to break a lease?

A. A tenant may terminate the lease in situations where defects in the premises (including the garage) are serious and directly related to the tenant’s health and safety and the defect was not of the tenant’s own making. In order for the tenant to utilize this remedy, the tenant must first give the landlord oral or written notice of the defect and a reasonable time to make repairs.

Q. On the topic of hoarding, would you recommend contacting the city officials to help with the residence being unsanitary?

A. This is a possibility. However, you need to realize that many city agencies (such as fire, health, or code enforcement) will cite the landlord for violations, rather than citing the tenant. You might check to see if there is a hoarding task force in your area as sometimes they can point you and/or your tenant in the direction of resources that can help without getting the property cited for code violations. If you Google “hoarding task forces” it will direct you to a website that has a list of all hoarding tasks forces in the U.S.

Q. How do we accommodate hoarding? Health and Safety, Fire Hazard. Why should a landlord spend money cleaning up their messes?

A. Because hoarding is a mental disability, landlords are generally required to try and accommodate by working with the resident to give them time to remedy the health and safety issues. The goal is not for the landlord to spend money cleaning up the unit, but rather to get the tenant to clean up the unit. This can involve breaking what needs to be done down into manageable tasks and giving reasonable time periods for accomplishment of each task. You should consult with an attorney who has experience dealing with fair housing and hoarding situations for specific advice if you encounter a hoarding situation, as no two situations are exactly alike and mishandling the matter can result in potential fair housing liability.

Employment

Q. What would you do if an employee request to have a dog in the office and some of your employee are allergic to pet?

A. The Americans with Disabilities Act (ADA) does require employers to make “reasonable accommodations” for employees with qualifying disability if doing so won’t impose an “undue hardship” on the operation of the employer’s business. An allergy is likely to be covered as a disability under the ADA (which covers “a physical or mental impairment that substantially limits one or more of the major life activities”). If a doctor can come up with some reasonable accommodations to address the allergy, the employer has to either grant the accommodation, engage in the interactive process with the doctor and the employee to come up with an alternative accommodation, or demonstrate an undue hardship.

If there is no accommodation that would allow the employee to work in the presence of dogs, then the other question to ask is of the employer, namely, whether the dogs are an accommodation for anyone else’s disability. (The ADA also covers emotional support dogs and service dogs, so you have a real problem if the dogs are there due to disabilities of coworkers.) If not, then a reasonable accommodation might be to ask that the dogs be kept at home or in a doggy day care.

One accommodation that would work would be banning all the dogs (except service dogs) from the office. That is something the employer needs to consider seriously. An accommodation is not reasonable and does not need to be offered if it would create an ‘undue hardship’ for the employer. Usually that means an unreasonable expense to the employer. But here, there would not be a direct expense of banning dogs from the office. Rather the employer should consider the impact of the accommodation upon the operation of the facility, including the impact on the ability of other employees to perform their duties and the impact on the facility’s ability to conduct business. Banning the dogs would lower morale, but it would not appear to harm the business itself or the business’ operations. This is not a veterinary clinic where it is necessary to have dogs in the workplace. The business can presumably operate without animals in the workplace. So while banning dogs may be a drastic change and hurt morale, the employer must consider doing this in order to comply with the ADA.

Other

Q. Can you give example of an out of pocket loss for late rent? And, is this California law? Does it apply to all states?

A. An example of “out of pocket loss” for late rent would include time and money a landlord may spend on collecting rent from a tenant when they pay rent late. Late fees are allowed only if they are specified in the lease and only if the actual cost to the landlord can be determined. In this case, it is important to only charge the tenant the actual cost and keep back up materials used to calculate the actual cost.

Under California law, if the exact cost to the landlord for a tenant breach can be calculated, only the actual cost may be charged to a tenant. If the actual cost to the landlord cannot be determined with certainty then consider refraining from charging any amount, or be very conservative when setting the amount. You should also keep backup materials used in your unsuccessful attempt to calculate the actual cost to the landlord. If you decide to list an amount in the lease as a liquidated damage amount, include specific language in liquidated damage clauses to increase the likelihood of surviving judicial scrutiny. Your attorney can assist you in drafting the appropriate language for your lease.

Lastly, before imposing late fees, the landlord should conduct a risk/benefit analysis. Keep in mind that if a late fee is challenged, a landlord may be required to defend itself in a lawsuit and will incur defense costs even if the charge is later deemed by a court to be acceptable

This advice is specific to California only, we recommend you contact an attorney in your state to determine which laws apply to late fees.

Q. Regarding outdated leases which were signed in a time period where the details WERE legal, should they be resigned with currently legal leases?

A. The legal terms of the original lease would still apply. However, the costs of outdated leases with provisions that are no longer legal, could lead to unwanted rent claims, attorney’s fees and litigation costs, therefore, whenever possible it is best to execute new, updated leases with updated provisions. For a comprehensive list of prohibited items, see California Civil Code Section 1953.

Q. Can a tenant deny requests for showings after giving notice to move out?

A. Under California Civil Code Section 1954(a)(2), a landlord has a right to enter a rental unit to show the unit to prospective tenants after giving at least 24-hours written notice to the tenant, or if the tenant consents to the entry. Entry must be made during regular business hours and should otherwise be reasonable. This is the case whether the tenant gives the landlord a notice of intent to vacate the unit or the landlord terminates the tenancy. However, it is never a good idea to force the issue and demand entry into a unit if a tenant makes it clear that they do not consent to entry into their unit, as they might try to claim that the landlord is invading the tenant’s privacy or using the entry as a means to harass the tenant.

Q. Would like to know if the 21 day security deposit refund requirement refers to the day the deposit is mailed and what about ACH payments that take an extra day to process. Tenants often think they should “receive” the deposit in 21 days.

A landlord must provide an accounting of a security deposit to the tenant no later than 21 days after the tenant has vacated. The accounting, and any refund of the deposit, must be postmarked on or before the 21st day. If you are returning the refund via automated clearinghouse (ACH), you must initiate the transfer before the end of the 21st day.

Q. We are an SRO, if a person or applicant have a child, we tell them that this building is only for one person…is this okay?

A. It may depend on the laws of your state that govern SROs as well as your state fair housing enforcing agency’s position on what a reasonable occupancy standard is for an SRO. You should consult with an attorney in your state that is experienced in handling fair housing matters.

The post How Not to Get Sued (Part 2) appeared first on The Official AppFolio Blog.

Do you have fantasies of becoming a landlord? That is, do you dream that one day, you’ll purchase a promising piece of property, move in some reliable tenants, then kick back and collect rent well into retirement?

If you’ve got the cash and ambition to follow through, there are plenty of condos, homes, and buildings you could buy and rent out—but pinpointing the right one is tough. Don’t give up the dream! Insiders insist there are a few ways to separate the cash cows from the turkeys. Here are some signs a rental property is primed to gush big bucks.

It makes money for you immediately

While many mistakenly size up an investment property by the amount of money it could eventually make them later—once they’ve made a ton of renovations—that’s exactly the wrong approach. As the saying goes in real estate, you should “Make your profit when you buy.” That means: Your income (in the form of rent checks) should cover your costs upfront.

Financial planner and real estate investor Jim Ludwick at MainStreet Financial Planning recommends looking for properties that will generate enough rent in 10 months to cover all costs, including mortgage payments, taxes, and insurance. Another popular rule of thumb is the “2% rule,” which holds that your monthly rent should be at least 2% of the total purchase price of a property. Look at comparable rental listings online to get a sense of what you could reasonably charge for rent. Then, try punching in your numbers, from your rent to mortgage to maintenance costs, into an online investment calculator like this one from CalcXML, to see if you end up in the black.

A dwindling DOM

DOM stands for days on market—how long a property has been for sale. And if the DOM is plummeting across the board in a neighborhood, that’s a key harbinger that this particular housing market is heating up. And since this typically precedes price hikes, that means you can still score a deal on a property that could make you beaucoup bucks in rent (and if you resell down the road).

Another set of listings to check? Rentals in the area. If landlords are offering concessions to tenants, such as a free month of rent or a lower security deposit, those are signs that they’re having a hard time filling apartments, so you may want to steer clear.

Gourmet groceries nearby

Scouts for Whole Foods, Starbucks, and other high-end chains get paid a lot of money to research the up-and-coming neighborhoods with residents (aka your future tenants) who have the disposable income to support their stores. So, if you can buy heirloom tomatoes and a pour-over coffee in a five-block stretch, things are looking good. The presence of Trader Joe’s, Whole Foods, and Starbucks, in particular, bode well for real estate desirability.

“You can’t just look at the numbers,” ways Justin Cohen, chief marketing officer of Pangea Properties, a Chicago-based real estate investment and management company. “You’ve got to really look at the neighborhood and understand what’s happening there.” Get a sense of what type of tenant the neighborhood and property would attract. A property in a college town, for example, might have a high turnover, while one near a desirable elementary school (get stats atGreatSchools.org) might tend to draw families that want to put down roots for years.

And since many millennials favor “walkable” neighborhoods, areas near public transportation are bound to be a good bet. And we’re not just talking about buses and subways in urban jungles; transportation matters in the suburbs and small towns too, although in a different way: Look for towns near (but not right next to) major turnpikes or highways.

A squeaky-clean tenant

If you’re inheriting tenants with the property you’re considering, don’t just trust that current landlord’s word that they “always pay on time.” Run a background check and a credit check (it’s worth paying for a service such as TransUnion SmartMove to do one for you) on any current or potential tenants to see if there are credit issues or a history of evictions, and ask to see pay stubs or a 1099 to show the tenant has the enough income to cover the cost of living there.

And if the tenant has a less than stellar payment history? There actually is a way to turn this into an opportunity to negotiate a lower price for the property, factoring in the cost (and hassle) of a potential eviction. “Whether you keep the tenant or not, by buying someone else’s problem, you’ve gained some equity,” says Jorge Newbery, a real estate investor and the founder and CEO of American Homeowner Preservation.

Source: realtor.com

The supply/demand imbalance and sky-high rents have led to an emerging trend in the apartment industry.

As rent prices continue to rise and a growing number of households are choosing to rent instead of buy, some individuals are looking to alternative options like Airbnb and other short-term living solutions that offer a more flexible lifestyle instead of committing to a year-long lease. Sky-high rents have resulted from demand outpacing supply in most markets, and in 2015, renter households spent $535 billion on rent, up $19 billion from 2014, Zillow reported.

To meet this new demand, some property owners and rental platforms are beginning to list short-term rentals along with long-term rentals. One such company is RadPad, a Los-Angeles based startup founded in January 2013 that caters to younger renters by offering a free mobile app for its listings.

“We’ve seen a lot of changes since we started RadPad three years ago,” Jonathan Eppers, CEO & co-founder of RadPad, told MHN. “About a year and a half ago, we started seeing a lot of people on RadPad looking for short-term leases. We found two-thirds of renters said they were looking for a place for a year or less, which was fascinating to us.”

He added that this demand “isn’t just a couple thousand, we’re talking hundreds of thousands of renters a month telling us they want a place for no more than year.” Renting gives people the opportunity to pick up their bags and move, so “if you’re stuck in a long-term lease, it makes it harder to move. Believe it or not, I think for a certain but growing percent of renters, a one-year lease seems like it could be too long.”

Doug Culkin, CEO & president of the National Apartment Association, echoed this sentiment, adding that millennials today are attracted to short-term renting because it fits with their mobile lifestyle. “While older counterparts have stayed with one company for an extended period of time, the U.S. Bureau of Labor Statistics found that millennials change jobs three times more often than previous generations—staying with the same employer for an average of three years,” Culkin told MHN. “Millennials do not want the burden of home ownership during this transitional stage of life. A shorter-term rental is appealing to many young renters who aren’t sure they’ll even stay in a particular job or city for an entire year.”

This trend of increasing interest in short-term rentals, and the success of platforms like Airbnb, is reshaping the real estate industry, as Stuart Eisenberg, a partner at BDO USA discusses in his guest column for CPE.

But the demand isn’t only on the renter side, Eppers said. As RadPad expanded its supply side in the last year, the company has “started talking to landlords, and we’re finding some of them—and it seems like it’s been picking up steam in the last six months—have been experimenting with listing short-term rentals,” Eppers said. “They’re taking those rentals off the market that would typically go to renters looking for a one-year lease and putting them up on sites like Airbnb to see if they can rent them out more short term.” He added this also allows property owners to see if they can make more money, with the ones he’s talking to saying they can make 30 to 40 percent more per month on a short-term unit.

“Apartment owners and managers recognize the need to cater to this new generation of renters, and many are now offering at least the option of a six-month lease,” Culkin added. “Independent rental owners tend to be even more flexible than some larger management companies, and often have month-to-month leases available.”

RadPad announced in early February that it was opening its platform to short-term rentals, partnering with rental providers such as onefinestay, which offers weekly luxury home rentals, and HomeSuite, which offers months-long furnished condos to rent. Property owners using RadPad can also list their short-term rentals, though RadPad sets a minimum stay of one week.

With property owners taking long-term rentals off the market, the already strong supply/demand imbalance that is driving pricing up is only made worse, Eppers said. He believes that by offering short-term listings on RadPad, it keeps these rentals “in the hands of renters instead of travelers. We keep the listings in the rental market instead of putting them on sites like Airbnb where the [short-term rentals] go to those who have no interest in living in the neighborhood, who oftentimes treat the place like a traveler would and not like someone who lives there,” Eppers said.

Eppers also hopes that by putting more short-term options on the market, it can convert some of the short-term renters into longer-term renters, “which I think is good for the entire marketplace.”

While Eppers said renter feedback about the short-term options has been positive, a common request is for more inventory. He said the company is working to grow by reaching out to property owners already listing on RadPad—which are mostly small- to medium-sized, owning less than 50 units—to let them know they can now list short-term rentals. RadPad also prompts property owners coming to list their long-term rentals to see if they’d be open to a monthly rental option, which Eppers said many signing up are interested in to see if they can get more renter interest.

Source: multihousingnews.com

– See more at: http://www.american-apartment-owners-association.org/property-management/latest-news/millennials-want-shorter-leases/#sthash.FNTBAJho.dpuf

Every manager and leasing person has experienced the frustration when a new resident challenges a policy or clause in the lease.

I didn’t know:

-The non-smoking policy would apply to my guests.

-I had to have management approval to have a pet.

-There would be a penalty if I moved outt before my lease is over.

Everyone in property management is well aware a lease is a legal binding contract.  Unfortunately, many residents want to overlook this minor detail.

The Importance of the Lease

The lack of respect for the lease as a legal document may start with the management team at the property.  The new resident rushes into the office to pick up their keys. The moving truck is right behind them, along with an entourage of families and friends to help move furniture.  “They don’t have time to sit down for a lease appointment, they’ve signed leases before, and they’ve been working with our staff for weeks, surely if it’s in the lease, we’ve probably already explained it to them, right? “. Sign here, initial, initial, sign and witness.  “Send me my copy by email, or I’ll pick it up later,” close out the lease signing appointment.

Even if the leasing staff was able to point out a few key items in the lease, how much of the resident’s attention was focused on the explanation?  The new resident is thinking about where to place the furniture, will the dining room table make the turn in the hallway and how will they make arrangements to feed the folks that are helping?

Lease Appointment

Scheduling a lease appointment a day or two before the move in creates the opportunity to review the lease and all the supporting documents, without distractions. The resident will be able to focus on the explanation of the lease.

The intent for a move in to be a positive experience may discourage the leasing team from spending too much time explaining policies or rules that may not apply to the resident’s current situation and could be viewed as negative.

-They didn’t have a pet so we didn’t talk about pet rules.

-I’m not going to talk about moving out on the day they move in.

-They didn’t ask about…..

Legal Document

Allowing an individual to sign a lease without a general understanding of the most important aspects of the rules will create problems and frustrations matching the term of the lease.   It is an individuals responsibility to “know” the content of a contract before signing but most leases are multiple pages of the smallest font size. Giving a new resident a copy of the document they’ve signed, with the offer, “Call if you have any questions,” does not provide any type of orientation for the new resident. Since the leasing staff is not qualified to offer legal advice, some questions or concerns may need to be directed to an attorney. However, holding a resident accountable for the content when no effort is made by the management to point out the items most likely to affect occupancy is poor customer service.

Encouraging the early appointment to review the lease, but insisting on a half hour to hour lease review appointment will eliminate many points of confusion. Referring to the lease as a contract, and described the term as binding, will assist in reinforcing the legal status of this document.

Lori Hammond | Company Website | LinkedIn Connect | Lori has 30+ years’ experience in the Property Management Industry, working with both market rate and affordable housing.  Lori has been privileged to work with some tremendous industry leaders during employment tenures with Oxford Management, NHP Management, AIMCO, Alliance Residential, Boston Capital, The Sterling Group, P.K. Housing and currently Management Resources Development.