|The U.S. Department of Housing and Urban Development (HUD) Secretary Ben Carson is seeking action against online companies that profit from selling false assistance animal documentation.
In a letter sent to U.S. Federal Trade Commission Chairman Joseph J. Simons and Director of the Bureau of Consumer Protection Andrew Smith, Secretary Carson expresses several concerns in line with those of the property management industry and asks the Federal Trade Commission to investigate some websites selling assistance animal verification documents. As HUD General Counsel Paul Compton states, “These websites are using questionable business practices that exploit consumers, prejudice the legal rights of individuals with disabilities, dupe landlords, and generally interfere with good faith efforts to comply with the requirements of the Fair Housing Act.”
This announcement should not interfere with an applicant or resident’s right to ask for an accommodation for an assistance animal, remember rental housing providers have the right to request reliable documentation when the disability or disability-related need is not readily apparent. We will await further guidance from HUD before altering any policies or procedures for evaluating reasonable accommodation requests but this news is encouraging.
A very important part of being a landlord is the property management side. Property managers are a HUGE and amazing asset. The thing to remember when finding a property manager is not everyone is created equally. You want someone you can trust not only with your asset or liability, but also with your money.
Below is a list of 70 questions to ask a potential property manager.
Note: Many of these questions can be solved by examining the lease/property management contract first.
1. Will I have one specific property manager? Who will be my property manager?
2. Who is the head of the office?
3. How long have you been a property manager?
4. How many units do you manage?
5. What is the average length that clients stay with you?
6. Do you just manage or do you sell too?
7. What do you offer that sets you apart from other companies?
8. What do you expect from me as the owner?
9. How often do you communicate with the home owners?
10. Do you provide the owner’s information to the tenant?
11. Do you have a policy about landlords contacting the tenants?
12. Do you have a requirement for your property management clients to use you? Do you charge if the tenant decides to buy the house?
13. How often do you reach out to the owners? Can you give me examples of how and when you would communicate various problems?
14. What is your turn around time on phone calls and emails from owners?
15. What is your Monthly Charge?
16. Who is the lease between?
17. Do you provide a copy of the lease to the owner and when?
18. How long of lease do you do?
19. Do you charge extra for month-to-month lease?
20. Do you do a break-out clause?
21. Do you offer a reverse military clause?
22. Do you have a rental deductible?
23. Do you have lease language that requires the tenant to pay for any damage they cause that is not wear and tear?
24. Do you trouble shoot with your tenants when they call for repairs?
25. Do you do site unseen leases? If yes, do you have a special addendum?
26. Who pays for pest control?
27. Do they do as/is Appliances?
28. How much notice do you require at the end?
29. Is the lease automatically renewable?
30. What is your renewal policy?
31. Do you charge for renewals?
32. Do you do a market evaluation every renewal?
33. How do you determine to raise the rent or keep it the same?
34. What does the monthly fee include?
35. Do you have any additional charges or fees (pet, placement, maintenance, etc), IE what does my monthly charge not cover?
36. Who keeps the fees that the tenants pay?
37. How is the money dispersed?
38. When is the money dispersed?
39. What is your advertising strategy?
40. What rental price do you recommend?
41. Do you recommend any work to be done to get top dollar?
42. How long do you think it will take to rent out?
43. How quickly do you schedule showing/return calls?
44. How quickly does it take you to approve and have a lease signed?
45. What is your schedule for payments when installing a tenant?
46. Do you have a termination clause if it is not rented after so many months?
47. Do you have a trial period?
48. Do I pay any fees when the place is empty?
49. What is your termination policy?
50. What is your late policy?
51. What is your late fee amount?
52. Who keeps the late fees?
53. If fees are not collected from the tenant will you still charge the owner for them?
54. How many “late” payments does it take to have a fee assessed?
55. How many eviction have you had last month?
56. How do you handle eviction process?
57. Is the eviction part of the cost or is it additional cost?
58. What is your application and screening process?
59. What is your screening requirements?
60. Do you run it by me before you approve them?
61. What do you charge for your application process?
62. What form do you use for the move in/move out inspection?
63. Do you take video or pictures? What is your criteria for what you put down on the forms?
64. How often do you do inspections during a tenant’s term?
65. How do you document the inspection and do you send it to the landlords?
66. How do they handle the security deposit (i.e. do they hold it or do you, the landlord)?
67. How do you charge for tenant’s damage during their lease term?
68. If there are damages upon move out who does the accounting (you or the owner)?
64. If the tenant has damages that exceed the security deposit do you come up with the documents and pursue the tenant?
65. When do you return the security deposit? Do you get approval from the landlord first?
66. What is your maintenance minimum/policy?
67. Do you charge for an additional fee for maintenance?
68. What do you consider emergencies What is their definition of an emergency? (heater out, etc.)
69. Do you ask permission or just fix and bill?
70. Do you show the house while the current tenant is in the home?
So now that you have some sample interview questions, you will be equipped with things to ask your property manager. Any professional company is going to be happy to sit down with you and provide answers to your questions.
For more information on property management services in Michigan, check out http://www.rentalmanagementone.com.
Governor Snyder signed Senate Bill 107 into law on November 28, 2017. The bill, popularly called the “Tenant Permission Bill,” was promoted by the Rental Property Owners Association of Michigan (RPOA-M), Apartment Association of Michigan (AAM) and the local Rental Property Owners Association in Grand Rapids (RPOA). The law, now Public Act 169 of 2017, will take effect 90 days from the Governor’s signature which is February 26, 2018. The law changes various aspects of the Housing Law of Michigan rental inspection enforcement regulations.
The most prominent change under the new law is the removal of the right of a municipality to enter a rental premise for an inspection—without the tenant’s permission–under the landlord’s contractual right within a lease to enter the premises. Several U.S. courts, including the Supreme Court, have ruled time and time again that municipalities must obtain permission from a tenant before entering their unit for a rental inspection, except in cases of an emergency. This new law will now require municipalities to obtain permission or an administrative warrant or wait until the unit is vacant before entering for an inspection.
Specifically, the new law requires a tenant to allow a municipality entry in the following situations:
· The lease authorizes an enforcing agency inspector to enter the leasehold for an inspection. (A clause in the lease must specifically state that the tenant agrees to allow the enforcing agency inspector to enter the premises for a municipal rental inspection.)
· The lessee has made a complaint to the enforcing agency.
· The enforcing agency serves an administrative warrant ordering the lessee to provide access.
· The lessee has given consent.
What about units where there are more than one tenant/leasee? Requesting and receiving permission from one leasee satisfies the permission for the entry requirement.
What about a landlord’s rights? The same Federal courts which have ruled that tenants must give permission have also ruled that municipalities have a right to carry out rental inspections for health and safety purposes and may enter a unit if the tenant gives permission—with or without the consent of the landlord.
Under the previous and new modified Housing Law, landlords must, in good faith, seek to obtain permission of the tenant for a municipal inspection. Landlords are not allowed to discourage, in any way, a tenant’s choice to allow entry. Doing so could endanger the landlord’s protections under the law. This does not, however, mean that a landlord cannot inform the tenant of their right to refuse the inspection.
The law also includes two very important protections for the tenant and the landlord, namely that neither the tenant nor the landlord can be discriminated against for the tenant exercising their right to refuse an inspection. For the tenant this means the municipality can’t threaten the tenant with condemnation of their rental unit or otherwise fine the tenant for refusal of entry. For the landlord, this means that the municipality cannot condemn the property, remove a certificate of compliance or otherwise charge a fee or fine for the tenant’s refusal of entry if the landlord has fulfilled their obligations under the other parts of the law.
So, when do landlords have to allow the municipality entry? Here are specific circumstances under the new law when a landlord must provide entry:
· The lease authorizes an enforcing agency inspector to enter the leasehold for an inspection. (A clause in the lease must specifically state that the tenant agrees to allow the enforcing agency inspector to enter the premises for a municipal rental inspection.)
· The lessee has made a complaint to the enforcing agency.
· The leasehold is vacant.
· The enforcing agency serves an administrative warrant ordering the owner to provide access.
· In cases of an emergency.
The changes to the law were necessary to protect tenants from aggressive municipal tactics that used threats of eviction and more to enter a rental premise—all of which were contrary to the rights of all citizens under the 4th Amendment of the U.S. Constitution.
Clay Powell, Director of the RPOA-M and RPOA, stated that it has taken nearly four years to get these changes made and wishes to thank all the legislators that were involved along the way to make the changes reality and bring Michigan into compliance with Federal Law.
As always, except in cases of an emergency, a landlord/property manager must give tenants a 24-hour notice before entry.
- Do you have a client interested in leasing their home while they work abroad for a few years?
- Do you have a client currently underwater on their home but would like to buy a new home?
- Do you have a client who wants to lease their home but is nervous about being a landlord or lives in another state?
- Do you own investment properties and want to see how property management services could make your life easier?
Rental Management One (RMO) is a great resource when dealing with any of the above scenarios. We are a full service property management company and proud to be a part of the Real Estate One Family of Companies. We have the entire state of Michigan covered offering operational oversight, efficient leasing and marketing strategy, financial reporting and top notch Owner and Tenant Services.
Here are a few things we offer your clients:
- 24/7 Online Owner Portal
- 24/7 Online Resident Portal
- Careful 5 Point Tenant Application Screening
- Rent Collection including e-payments
- Direct Deposit of Owner Proceeds
- Emergency, Preventative and Routine Maintenance Coordination
- Lease Docs and Compliance Review
- Complete Security Deposit Handling
- Property Inspections
- Owner Reports & Tax Statements
- Payment of All Property Expenses
- Eviction & Legal Services
What we offer you:
- Agent Referral Fee – We will pay you a referral fee (See attached Agent Referral Program)
- Lead Loyalty – We carefully protect your lead so if the Owner should want to buy another home or sell the current one, you are given back the lead.
- The ability to offer your clients an additional option when selling isn’t possible.
Other Important Information:
- We do not list and sell real estate. At Rental Management One we manage commercial, single family, multi-family and vacation property exclusively. Because we do NOT list and sell homes, local brokers and agents have found us a reliable ally and partner in their efforts to service their customers and clients.
- We have a combined 75+ years in property management experience on our team. When the client you refer experiences our professionalism and quality service they will thank you.
- We can manage all your rental inventory.Most Brokers or Agents manage rentals because they feel they must in order to get repeat listing and sales from their clients. Now you don’t. We will take over your inventory of rentals, pay you a referral fee, give your clients and customers great management service, and when your client is ready to sell, or purchase again, you get the client back. We have done this for other brokers and agents and it works great for the both of us. It really is a win, win.
- You can refer the property management services and still do the lease listing. Many agents don’t recommend management services because they don’t want to lose the leasing commission. However, this is not a problem. You have the option to refer the lease and management services or just the management. Many agents prefer to refer both as a lease listing can be very time consuming but you do always have the option to refer management services only. We will still provide you with support for your lease listing such as lease doc preparation and tenant screening services.
To send your referral to Rental Management One, it’s easier than ever. Just visit our website at www.rentalmanagementone.com and click on “client referrals”.
Your rental portfolio is growing, and managing resident requests is getting more difficult. Maintenance at some of your properties needs extra attention, and renewals are just around the corner. There just doesn’t seem to be enough hours in the day for you. Just keeping up is leaving opportunities on the table.
It may be time to enlist the help of a property management company to handle the details.
The obvious upside to owning rental property is passive income. With owning investment properties comes negotiating obstacles that require time and extra money if not managed efficiently. Failing to efficiently navigate the difficult issues inherent to property management can stall growth opportunities and ultimately stall the portfolio’s growth.
“Property management is a problem-based business,” says Amelia Christensen, Director of Property Management for Homespot Property Management LLC . “If we don’t have problems, we really don’t have a job.”
Relationships are everything in property management
Christensen, who has been a property manager since 2011 at the family-based business in Portales, N.M., says even the smallest of single-family owners can benefit from letting someone handle the details. Property managers can be a buffer between owners and the resident and help find common ground with issues that concern both parties. In addition, companies like Homespot Property Management, LLC, can help with the entire scope of asset management so owners can improve their portfolios.
The key, Christensen says, is to work with a property manager that focuses on relationship-based management. Forging mutually beneficial relationships is how Homespot Property Management, LLC, has organically grown from managing 35 single-family properties in 2011 to more than 350. A couple of owners have about 30 properties, but smaller portfolios compose the rest the company’s business.
“Working with a property management company is a relationship based thing,” she said. “You need to have a good relationship. There are going to be mistakes made, there are going to be problems and you want to be working with someone who you’re comfortable working through problems with.”
A strong working relationship also helps create a greater bond with residents. With a property management company, the owner can let someone else help with unpleasant issues while improving relationships with residents.
“I have owners who talk to tenants and they’ll always say, ‘Go talk to Homespot for the details’,” Christensen said. “They don’t want to be the bad buy, they want to be the happy, good guy.”
It’s also a good idea to clearly understand the fees for the property management company’s services.
“You want to know what they are going to charge, how they charge it,” Christensen said. “Do they charge whether the property is rented or not, are there flat fees involved, or is it a percentage based off of rent, are there associated fees for handling maintenance repairs, that kind of thing.”
5 Benefits of working with a Property Management Company
Here are five benefits of working with a property management company, according to Christensen:
1. Keeping an eye on the details
A property management company keeps an eye on the little things entailed in day-to-day property management. Managing leases and renewals are key functions, as well as handling maintenance issues. Also, PMCs help plan for bigger maintenance issues like tree trimming, painting, repairs and owner improvements.
2. Charting a path
Determine what you want your rental portfolio to look like and enlist the help of a property management company to help plan for the future. A PMC can help the property owner take a look at the bigger picture and ultimately determine how the asset will be used toward achieving an end goal.
3. Asset and financial planning
In addition to handling the books through a property management system like Propertyware, PMCs can help owners know what to ask of their accountant for tax planning.
4. Handling the dirty work
Christensen says owners can empower experienced PMCs to do the background checks, collect money and manage the tough issues that go along with rental properties. She said often unknowing owners can duped by residents who want to take advantage of the system. “Most owners want to be the hero, you want to help someone out, but sadly there are people who take advantage of kindness.”
5. Provide that special touch
Christensen says good property management revolves around great relationships with owners. When the PMC and owner work in harmony, good things are accomplished. A PMC should be able to work with you to provide a level of service everyone is comfortable with.
“You have to have someone you can work with during the good times and even in the bad times,” Christensen said. “You have to be able to celebrate wins but be able to trudge through the losses. It’s part of owning rentals.”
Original article here.
According to Real Property Management’s economic report for landlords, which analyzes market conditions expected to contribute to the health of the rental industry. It predicts 2017 to be a bright year for single-family property investors, with key factors being rental and vacancy rates.
“Rental rate increases will outpace inflation in the coming year, while vacancy rates will remain stable,” said Bob Pifke, CMO of Property Management Business Solutions, LLC. “The market conditions that have made single-family home investments attractive in the past will continue in 2017, though it may be more challenging than before to find new rental properties. Foreclosure rates, housing price changes and mortgage rates will be important for those planning to buy or sell rental units.”
The following are predictions for investors in rental and single-family residences in the coming year:
- Rental rates will increase faster than inflation. The current $1,459 rental rate for a three-bedroom single-family residence will exceed $1,500 in 2017. The supply of single family rentals is unlikely to increase enough to offset new household formation and population growth. Meanwhile, the consumer price index was 1.6 percent for the twelve months ending October 2016. Moving forward, inflation is likely to exceed 2 percent, but will still lag the year-over-year 4.8 percent rental increase at the end of the third quarter of 2016.
- Vacancy rates will remain in the low 5 percent range. Vacancy rates for three-bedroom single-family residences through the third quarter of 2016 was 5.2 percent, down slightly from the 5.3 percent rate at the end of 2015. We expect vacancy rates to remain at this level, because rental increases will stabilize demand.
- Mortgage rates will increase. In December, the Federal Reserve announced its second Fed Funds rate increase in ten years. It is extremely likely that additional increases will be made during 2017. That means mortgage rates in the 3% range will disappear. We expect rates to be in the 4% range for 2017.
- Foreclosures will remain at a low level. Per CoreLogic, the seriously delinquent rate for foreclosures is currently 2.6 percent – the lowest level since August 2007. Barring a shock to the economy, Real Property Management expects foreclosures to remain low in 2017. This will make it more challenging for investors to find deals.
- House prices will increase faster than inflation. According to S&P CoreLogic Case-Shiller, the national home price increased 5.39 percent through September 2016, and is now $274,000. However, housing prices have not yet returned to their 2007 peak. With an improving economy, it is likely housing prices will continue to grow. As mortgage rates increase, many homeowners who previously refinanced will find a replacement home more expensive. This will dampen their willingness to sell their existing house and limit the supply of existing homes for sale. Builders did not increase new home construction in 2016 compared to 2015.
Call Rental Management One to assist you with your Michigan investment properties!
View source version on businesswire.com: http://www.businesswire.com/news/home/20170105005077/en/
Copyright Business Wire 2017
LANSING, Mich. — Michigan Gov. Rick Snyder has signed legislation that lets landlords prohibit medical marijuana patients from growing or smoking the drug on leased residential property.
The law enacted Tuesday adds another exception to a 2008 voter-approved law that legalized the use of marijuana for medical purposes.
That law already does not require insurers to reimburse people for medical marijuana, nor does it mandate that employers accommodate employees’ use of the drug for medical purposes.
The bill’s sponsor, Republican Sen. Rick Jones of Grand Ledge, says two rental homes in his district were destroyed after they were “turned into greenhouses to grow marijuana without permission.” He says growing marijuana for medical purposes “doesn’t trump safety or private property rights.”
Jones says the law codifies a 2011 state attorney general opinion.
When you hire a professional property management company, you save time, money, and lots of hassles. They can handle all aspects of your properties daily operations, legal aspects, and transactions, ensuring efficient management. There are many things you should know about such a service.
1. They screen the tenants
Every property owner wants to ensure that they have the best-possible tenants who pay their rent on time. Timely rent is the key to generating regular income. You want to find the kind of tenants who are careful about how they use the place and not cause any damages. Thus, you will not have a tenant who doesn’t pay on time or causes damage to your property.
2. They manage all the repairs & maintenance
Another good thing about a good property management company is that they manage all the repairs and maintenance for your property. Whether it’s the plumbing, electrical systems, equipments or building, the manager will arrange for the job work. They will also monitor the work to ensure quality compliance.
3. They Fill Up Vacancies & Ensure Optimal Retention
This is something that you cannot do on your own like a professional. No one wants properties to remain vacant. You will not have to spend all your time marketing your property. An experienced manager will shorten vacancy time by getting the right tenants. Besides, they will also work to ensure longer average retention.
4. They Deal with Legal Issues
An experienced property management service can handle one of the biggest challenges as an owner – legal issues. They know about the latest tenancy laws and can take the right action to prevent or alleviate legal tussles.
5. They handle all Documentation
Property management is not just about handling the day to day operations, it also involves a lot of essential paperwork. When you hire a professional service, you will not have to spend all your time dealing with potential-tenants’ credit reports, drawing the lease agreements, doing background checks, and dealing with the billing, and notices.
6. They already have Lists of Contractors
When you hire a property management service, they already have lists of contractors in the area. Whether it is fixing the plumbing, cleaning, or removing the snow, they will already know the right people to call for the job. They can also help you save more by getting special rates due to their well-established relationships.
A property manager will ensure that everything keeps running smoothly and efficiently. They will negotiate and secure contracts for clean-up, landscaping, trash removal, mowing, and other services.
7. They Deal with the Tenants
Your property manager acts as the contact with the tenants. A property manager will address all problems at all hours so that you will not have to drive over to the place. This means a lot of convenience and a hassle-free owner experience.
8. They Ensure Timely Payments
Another good thing about hiring the services of property management companies is that they take care of rental collection and bill payments. They will also enforce the lease policies if your tenants fail consistently to pay rents.
9. Get Tax Deduction
Property owners can also claim a tax deduction for the professional services of a property management company. Thus, hiring a property management service can help save money in several ways.
10. They Keep Everything Well Organized
One of the best things about hiring a property management service is that they keep everything organized for the owners. It can be almost impossible for you to keep track of all the details on your own.
Call Rental Management One for your free property evaluation and management quote today!
Owning property is a huge part of the American dream, and at times it seems the IRS is trying to reward such behavior. In this article, I review the best federal tax deductions available to rental property owners in the United States.
What Qualifies as an Expense?
There are two types of expenses: Current Expenses and Capital Expenses.
These are generally one-off items that help keep the property in good working condition and habitable, or help you operate your rental business.
The entire expense can be deducted from your taxes in the same year that it was incurred – hence “current” expenses. Repairs are generally expected to restore an item to its previous working condition.
To qualify as a current expense, it must be considered:
- Ordinary and Necessary
Ordinary expenses are those that are common and generally accepted in the business. Necessary expenses are those that are deemed appropriate, such as interest, taxes, advertising, maintenance, utilities and insurance.
Must have more short-term value than long-term value. Fixing a hot water heater has short-term value. Replacing the appliance has long-term value.
- Directly Related to your Rental Activity
The expense must be business related.
- Reasonable in Amount
If you claim to have paid $500 for a toilet seat, you will get audited.
Anything that increases the value of the property or extends its life is categorized as a “capital expense” or “improvement” and must be capitalized and depreciated over multiple years.
My general rule of thumb is any item that costs hundreds of dollars (or more) to replace should probably be deducted as a capital expense.
For a more detailed explanation and specific examples of each, read the article: Repairs vs. Improvements – What Can I Deduct from my Taxes?
Top 12 Tax Deductions for Landlords
Before claiming any of these deductions, be sure to have detailed and thorough records to back them up. Rental Management One provides all these records and documents for you to supply to the IRS. The IRS scrutinizes these deductions (some more than others), and you need to be prepared should you get audited. If you fail to have proper receipts and cannot validate the business necessity of each expense, you will have to pay the amount due, with interest, if you get audited.
1. Loan Interest/Points
If there is a mortgage on the property, the loan interest will probably be your single largest deductible expense.
In 2013, I paid $19,000 in interest on one of my mortgages. Further, if you paid buy-down points on the property purchase or mortgage refinance, you’ll be able to deduct those as well.
- Mortgage Interest (primary & secondary)
- HELOC Interest for loans used to repair or improve the property
- Credit card interest on items used for the property
- Mortgage Points to purchase or refinance a rental property
Keep in mind, you can only deduct interest on money that was actually spent on your rental business. Therefore, you wouldn’t be able to deduct the interest of a withdrawn line of credit that is sitting in your bank account.
2. Depreciation of Assets
There are, in general, three types of costs you need to capitalize and depreciate:
- The value of the structure, not the land
- The value of improvements – such as appliances, carpet, windows, countertops, etc.
These expenses cannot be deducted in a single year, but rather must be spread out (depreciated) over multiple years.
Otherwise, people would abuse the system by claiming $100K in repairs in a single year to remove all tax liability, and then sell the property the next year to recoup their renovation ROI.
Often the real estate taxes are paid through the mortgage company, and therefore show up on the Form 1098 that is sent from the bank.
If the property is free and clear of any mortgage, CONGRATULATIONS!, but you’ll have to look up your tax records online if you didn’t keep receipts of those payments. Other business-related wage taxes, permit fees, or personal property taxes are considered allowable deductions as well:
- State, County and City Taxes
- Social Security Taxes for Employees
- Medicare and Unemployment Taxes for Employees
- Personal Property Tax/Vehicle Tax
- Permit Fees/Inspection Fees
Repairs are defined as any effort to maintain the current condition of a property or asset.
- Painting/Spot Patching
- Plumbing Repairs
- Air Conditioning Repair
- Fixture Repairs
- Labor Costs/Contractors
- Incidentals related to a repair
- Rental Fees for Tools/Equipment
Maintenance costs are often confused with repairs, however with maintenance, you’re not necessarily fixing anything. For example, the lawn will always need to be cut but it is never really “broken.”
You can also hire a pest company to treat the property every few months to prevent further infestations, even if the original pests are long gone.
- Landscaping and Tree Trimming
- Homeowner Association Fees
- Pool Cleaning, Chemicals and Maintenance
- Pest Control and Treatment
- Tune-ups on Lawn Mowers, Chain Saws, Leaf Blowers, etc.
- Light Bulbs
- Smoke Detector Batteries
- HVAC Filters
- Janitorial Items
6. Insurance Premiums
All business-related insurance premiums are tax-deductible. When trying decide if the insurance is business related, I ask myself, “Would I buy this insurance if I didn’t own a rental?”
I have an Umbrella Policy which covers my personal assets and legal liability above and beyond the coverage on my rental properties. Because of the added risk involved with one of my less-polished properties, I decided to purchase this additional coverage.
I would not have purchased this policy otherwise, and therefore I can classify it, in good conscience, as a business expense.
- Homeowners Insurance
- Mortgage Insurance Premiums
- Fire/Damage/Liability Insurance
- Flood Insurance Riders
- Theft Insurance
- Workers’ Compensation Insurance
- General Liability Insurance
- Personal Umbrella Insurance
You can deduct the cost of any rental property utilities that you pay for. You are still allowed to claim utility expenses even if the tenants reimburse you later, but you also have to claim that reimbursement as income.
- Heating Oil
- Water & Sewer
- Trash & Recycling
8. Travel Expenses
50% of American Landlords do not live near their properties. Any long distance travel to visit your assets or to conduct rental business can be tax-deductible as a business expense.
- Airline Fares
- Car Rentals and Taxis
- 50 percent of meal expenses during long-distance travel
When expensing business vehicles, the actual asset must be depreciated over multiple years, however the upkeep can be deducted in the year the expense was incurred.
You have the option of deducting actual expenses, or utilizing a standard mileage rate of 56.5 cents per business mile driven (as of 2013).
- Business Vehicles (depreciable)
- Mileage or Gas/Maintenance/Usage of Business or Personal Vehicles
10. Management Fees
Even the best landlords need help, if you’ve hired a property manager, like Rental Management One, you are allowed to deduct that expense.
- Property Management Companies
- Individual Property Managers
- On-site Manager
- Condominium Association Fees
- Special Assessments
11. Legal and Professional Fees
If you need to hire a pro, be it a lawyer, accountant or tax professional, you can expense the cost. If you ever have to evict a tenant, you can expense all reasonable court and filing fees.
- Accounting Advice
- Professional Tax Preparation
- Tax Preparation Software (like TurboTax)
- Structural Engineering and Consulting
- Legal Fees
- Lease Review and Editing
- Court Filing Fees
Occasionally, I will offer a $50 incentive to my current tenants if they find a replacement tenant upon their departure.
- Commissions to Managers and Salespeople
- Commissions for Tenant Referrals
A $25K Limit on Losses
According to the IRS, if you or your spouse actively participated in a passive rental real estate activity, you may be able to deduct up to $25,000 of loss from the activity from your nonpassive income.
For Example: Lets pretend, you had $60,000 in depreciation and expenses for a given property in a single year, however that property only generated $20,000 in rental income.
This leaves you with a $40,000 loss (ouch!).
You can claim $25,000 of losses that year, but then you are allowed to “recapture” the other $15,000 in losses against your income the next year. If you continue to have losses beyond $25,000 year after year, you can recapture the sum of the unused losses against the gains when you sell the property.