Tag Archives: apartment owners

Top 10 Tax Deductions for Landlords

Every year, millions of landlords pay more taxes on their rental income than they have to. Why? Because they fail to take advantage of all the tax deductions available for owners of rental property. Rental real estate provides more tax benefits than almost any other investment.

Often, these benefits make the difference between losing money and earning a profit on a rental property. Here are the top ten tax deductions for owners of small residential rental property.

1. Interest

Interest is often a landlord’s single biggest deductible expense. Common examples of interest that landlords can deduct include mortgage interest payments on loans used to acquire or improve rental property and interest on credit cards for goods or services used in a rental activity.

2. Depreciation

The actual cost of a house, apartment building, or other rental property is not fully deductible in the year in which you pay for it. Instead, landlords get back the cost of real estate through depreciation. This involves deducting a portion of the cost of the property over several years.

3. Repairs

The cost of repairs to rental property (provided the repairs are ordinary, necessary, and reasonable in amount) are fully deductible in the year in which they are incurred. Good examples of deductible repairs include repainting, fixing gutters or floors, fixing leaks, plastering, and replacing broken windows.

4. Local Travel

Landlords are entitled to a tax deduction whenever they drive anywhere for their rental activity. For example, when you drive to your rental building to deal with a tenant complaint or go to the hardware store to purchase a part for a repair, you can deduct your travel expenses.

If you drive a car, SUV, van, pickup, or panel truck for your rental activity (as most landlords do), you have two options for deducting your vehicle expenses. You can:

  • deduct your actual expenses (gasoline, upkeep, repairs), or
  • use the standard mileage rate (55 cents per mile for 2009; 58.5 cents per mile for July 1, 2008 through December 31, 2008 and 50.5 cents per mile from January 1, 2008 through June 30, 2008). To qualify for the standard mileage rate, you must use the standard mileage method the first year you use a car for your business activity. Moreover, you can’t use the standard mileage rate if you have claimed accelerated depreciation deductions in prior years, or have taken a Section 179 deduction for the vehicle.

5. Long Distance Travel

If you travel overnight for your rental activity, you can deduct your airfare, hotel bills, meals, and other expenses. If you plan your trip carefully, you can even mix landlord business with pleasure and still take a deduction.

However, IRS auditors closely scrutinize deductions for overnight travel — and many taxpayers get caught claiming these deductions without proper records to back them up. To stay within the law (and avoid unwanted attention from the IRS), you need to properly document your long distance travel expenses.

6. Home Office

Provided they meet certain minimal requirements, landlords may deduct their home office expenses from their taxable income. This deduction applies not only to space devoted to office work, but also to a workshop or any other home workspace you use for your rental business. This is true whether you own your home or apartment or are a renter.

For the ins and outs on taking the home office deduction, see Home Business Tax Deductions: Keep What You Earnor Every Landlord’s Tax Deduction Guide, both by Stephen Fishman (Nolo).

7. Employees and Independent Contractors

Whenever you hire anyone to perform services for your rental activity, you can deduct their wages as a rental business expense. This is so whether the worker is an employee (for example, a resident manager) or an independent contractor (for example, a repair person).

8. Casualty and Theft Losses

If your rental property is damaged or destroyed from a sudden event like a fire or flood, you may be able to obtain a tax deduction for all or part of your loss. These types of losses are called casualty losses. You usually won’t be able to deduct the entire cost of property damaged or destroyed by a casualty. How much you may deduct depends on how much of your property was destroyed and whether the loss was covered by insurance.

9. Insurance

You can deduct the premiums you pay for almost any insurance for your rental activity. This includes fire, theft, and flood insurance for rental property, as well as landlord liability insurance. And if you have employees, you can deduct the cost of their health and workers’ compensation insurance.

10. Legal and Professional Services

Finally, you can deduct fees that you pay to attorneys, accountants, property management companies, real estate investment advisors, and other professionals. You can deduct these fees as operating expenses as long as the fees are paid for work related to your rental activity.

Did You Know?

Did you know that:

  • Landlords can greatly increase the depreciation deductions they receive the first few years they own rental property by using segmented depreciation.
  • Careful planning can permit you to deduct, in a single year, the cost of improvements to rental property that you would otherwise have to deduct over 27.5 years.
  • You can rent out a vacation home tax-free, in some cases.
  • Most small landlords can deduct up to $25,000 in rental property losses each year.
  • A special tax rule permits some landlords to deduct 100% of their rental property losses every year, no matter how much.
  • People who rent property to their family or friends can lose virtually all of their tax deductions.

If you didn’t know one or more of these facts, you could be paying far more tax than you need to.

by: Stephen Fishman , J.D.

Holding an Open House Saves Time & Money!

In my dreams I fill my vacant units with the best tenants on earth who pay their rent on time, keep the apartment clean, and never move out.  But unfortunately my dreams aren’t reality.

When I’m looking to fill a vacancy I prefer to show the unit like I would an open house.  I’ll pick a day, say Saturday, and set aside a period of time for propsective tenants to view the unit.  For example:  Open House, Saturday, 2-4pm!

I’ll tell as many prospective tenants to come on that same day and time too.  This helps create a sense of urgency and competition amongst the fellow renters visiting the property.  Plus it saves me time from having to meet prospective renters at different times and different days.

By creating a buzz, prospective renters feel the unit is special, limited, and could be rented in a blink of an eye.  This is their chance to grab it before anyone else does.  You never want to eat at an empty restaurant, do you?  Well you don’t want to live at an apartment that no one else is interested in either.

The prospective tenants that are interested will fill out an application right there and then.  Depending on which property I am at, I can also run their credit report on the spot (I check eviction, criminal and some other stuff too).  For screening providers I’ve used and others, click here.

Database Plan Aimed at Enabling Reviews of Landlords

thought this was an interesting article to share...

A Penn State student group is planning an interactive, web-based database of State College landlords and apartment reviews — a resource that should reward responsible property owners and hold others accountable, organizers said this week.

They said the new group, Project Blue Pill, has already secured support from Information Technology Services, a university department that will pay two interns and help guide them in developing a website this summer. ITS may also provide a web server for the project, said sophomore Will Sheehan, the Project Blue Pill CEO.

Student organizers hope to have a thorough, searchable list of local landlords and properties available online by the fall, with user-submitted reviews to follow by fall 2011, Sheehan said. He said only Penn State students with active online-user accounts will be able to post reviews.

“We want to put control back with the consumer, with the students,” Sheehan said. ” … We want to reward the landlords who do a great job by keeping their properties up to date, keeping maintenance where it should be. And we want to give students who are looking for off-campus housing some reviews and comments before they sign a binding lease.”

Funding for project, known as Tenant Review of Landlord, or TRL, is still in the works. Sheehan said the leaders of Project Blue Pill — all members of Beta Theta Pi fraternity — will ask Beta alumni for support and seek other sources, including through the Smeal College of Business.

“We realize this will be pretty pricey,” Sheehan said, though an exact price tag is not yet available. For now, he said, ITS will cover the labor cost of the interns.

TRL is a top priority for Project Blue Pill, founded recently by undergraduate David Adewumi. A graduate of State College Area High School, Adewumi lost his bid this spring for the University Park Undergraduate Association presidency.

But Adewumi has said the loss won’t sideline the ideas that he campaigned on, including improved accountability for local landlords. He envisions Project Blue Pill as a local policy think-tank that will collaborate with other student organizations, including the undergraduate association and the Off-Campus Student Union, or OCSU.

Bobby Ryan, the OCSU president, said he is already helping to assemble property listings for the TRL project. He called the concept a great idea. Other U.S. universities have implemented similar programs.

“We’ll see what comes to fruition here,” Ryan said. He said he has filed an open-records request with the Centre County government to collect details about rental properties.

Marcus P. Robinson, the director of IT communications at Penn State, said the university will pair summer interns with Penn State software engineers to help with management and technical guidance for the project. “It’s probable that we’ll provide some web infrastructure support,” he said.

Robinson said the university’s mentoring role will be similar to its contributions to the recent student book-exchange project. That online endeavor, launched within the past few years, also was initiated by students.

From statecollege.com by Adam Smeltz

New Law Will Stick it to Landlords

 

So much for property rights.

A councilman in Prince George’s County, Maryland has come up with a way to stick it to landlords, by making them responsible for law enforcement against their tenants. 
 
The proposed law is part of the county’s new crime reduction program.  Under the rules, landlords, not police, are responsible for dispensing justice on unruly tenants. 
 
Forced Evictions
 
The new proposal requires that landlords evict tenants who have been ticketed for noise violations.  This includes any sort of noise that can be heard a short distance outside the rental property.  The evictions are at the landlords’ expense, in a county where the backlog can take several months to complete. 
 
Landlords who fail to comply will lose their rights to rent in the county.
 
 
Blacklist 
 
Once a tenant has been evicted under this new law, they are to be blacklisted from any rentals in the county, possibly for as long as a year.  It is not clear whether the tenant actually has to be convicted of the noise ordinance violations before they are blacklisted. 
 
Landlords who rent to these black sheep may face penalties, increasing the already difficult burden of screening tenants, and creating possible liability for discrimination.
 
Opponents to the measure point out that law enforcement is not a landlord’s job, nor their responsibility.  But it appears many local residents feel that it is unruly tenants who are ruining their otherwise tranquil neighborhoods. 
 
This law is not unlike other measures proposed in small college towns around the country, where council members are experimenting with zoning restrictions that prohibit unrelated roommates, restrict the number of residents per property, limit parking rights, impose curfews, or beef up police patrols around rental properties.  In a neighborhood adjacent to the University of Colorado, a school that rates high on the party meter, the city attempted to discourage the barrage of raucous keggers and outdoor couch fires by prohibiting all residents of the neighborhood from setting any upholstered furniture on their porches, decks or lawns.
 
If the Maryland law does take effect, there is some controversy over whether it is constitutional to single out rental property owners. 
 
After all, the homeowner with the chronically barking dog is not being threatened with seizure of their property. 
 
See AAOA”s feature,  Landlord Too Lax on Noise Enforcement.
 
American Apartment Owners Association offers discounts on products and services for landlords.

Landlord Quick Tip!

Re-Key- Without the Fee!

 
Submitted by real estate expert Eleanor Trainor
Re-keying? It’s so expensive— but here’s an awesome new product:

Here in the City of Seattle, it is required that the locks be changed between tenants.

 
Our local locksmiths often charge at very least a $79 trip fee, plus $12-15 per cylinder to change the locks. Yikes! (My company, Rental Restoration, charges a flat $92.50.)

Kwikset has developed a new secure cylinder that anyone can change with the tool that comes with the cylinder.

 
This would be great for high-turnover units and multi-family buildings. More information is here: http://www.kwikset.com/SmartKey/
Very cool! 
 
Eleanor Trainer is with Rental Restoration, the only independent full-service maintenance contracting firm in Puget Sound that focuses solely on serving property managers and rental property owners. 

Bad Economy Turns Renters into Roommates

Recession Has Renters Tripling Up Instead of Doubling Up to Save Money
by Matt DiChiara

San Francisco, CA —Faced with uncertain economic times, renters around the nation are saving money on their monthly housing costs by opting to split a 3-bedroom apartment rather than living alone in more expensive 1-bedroom apartments.

MyNewPlace, one of the largest online apartment listing sites, recently conducted a survey of internal search data, which showed that the share of searches for 3-bedroom apartments made significant gains at the expense of 1-bedroom apartments since the beginning of 2008.
Based on a sample of nearly 10 million searches for 1-, 2-, and 3-bedroom apartments that took place on MyNewPlace.com between January 2008 and June 2009, the percentage of searches for 3-bedroom apartments consistently increased each quarter while searches for 1-bedroom apartments decreased. The share of searches for 2-bedroom apartments meanwhile stayed steady, suggesting that instead of ‘doubling up,’ renters are tripling up for even greater rent savings.

Since monthly rents are often lower per bedroom the more bedrooms an apartment has, the changing search patterns reflect an overall trend of renters looking for more economical housing options without sacrificing ideal locations and amenities.
Top Ten Cities for Roommates Looking to Save on Housing

Where are savvy renters saving money by moving in with roommates? Combining regional search data with average prices for apartments listed on MyNewPlace, MyNewPlace.com put together a list of the top ten cities where renters are saving:

· Washington, DC: Not surprisingly, the cities with the highest rents often offer the highest potential for savings. The share of 3-bedroom searches in the area around the nation’s capital has grown by 87%, with renters saving as much as $800/month by bunking up—nearly $10,000 per year.

· Philadelphia: Faced with high housing costs, renters in the City of Brotherly Love are getting friendlier than ever, with searches for 3-bedroom apartments more than doubling, with average savings of around $490 per month.

· Atlanta: Atlanta saw 1-bedroom searches decline by half and 3-bedroom searches more than double, as eager renters pursued $413/month savings by moving in with roommates.
· San Jose: Silicon Valley renters sought to mitigate the area’s notoriously expensive rents by finding roommates—at a savings of more than $600/month.

· Chicago: Windy City residents braced against the chilly economic climate by cozying up with roommates, doubling up their 3-bedroom searches, to the tune of $560/month savings.

· Denver: Renters are tripling up in the Mile High City at some of the highest rates in the country, and saving nearly $350/month in the process.

· Los Angeles: In the City of Angels, even the beautiful people are moving in together. Three beautiful people under one roof could save more than $525 each.

· Seattle: 3-bedroom search share increased 113% from January 2008 to June 2009, with savings of up to $500/month for each roommate. That’s a lot of cups of coffee.

· Las Vegas: Nevadans aren’t gambling when it comes to their housing costs. Las Vegas has among the highest growth in 3-bedroom searches nationwide, and each roommate could be saving $360/month.

· Boston & Cambridge: Renters in the Boston area aren’t tripling up at quite the rates of the rest of the cities on our list, but they should be—there’s up $880/month to be saved.

For a complete set of graphs, visit http://www.mynewplace.com/press-releases/bad-economy-turns-renters-into-roommates-recession-has-renters-tripling-up-instead-of-doubling-up-to-save-money/.

Matt DiChiara is with MyNewPlace.com is a dynamic online marketplace for apartment rentals, featuring a free-to-use apartment finder to search its database of over six million listings.

American Apartment Owners Association offers discounts on products and services for landlords related to your real estate investment including REAL ESTATE FORMS, tenant debt collection, tenant background checks, insurance and financing. Find out more at joinaaoa.