Is it time to buy a house?

No way. The economy has yet to turn around, and prices are going to keep falling.

Close, but not quite. If the market hasn’t bottomed out already, it’s getting there. It’s definitely time to start looking for a good buy.

Absolutely. There are great bargains out there now. You’ll kick yourself later if you don’t grab one soon.

See what readers have to say.

A property manager is required to look after property management tasks, but also the management of the financial and investment needs associated with the land and buildings. This holds true whether it is a single family home, a condominium complex, or commercial location. On the outside, these jobs appear to take only minutes, but the resources needed for the entire position of property management can be difficult for those who are not prepared.

A property manager is not only responsible for looking after property management tasks, but also the management of the financial and investment needs associated with the land and buildings. This holds true whether it is a single family home, a condominium complex, or commercial location. On the outside, these jobs appear to take only minutes, but the resources needed for the entire position of property management can be difficult for those who are not prepared.

Some Responsibilities of a Property Management Company
Part of a property manager’s job involves looking after the tenants and the rental unit itself. A property management expert is responsible for ensuring all of the units are rented. He or she will advertise any vacancies and select qualified tenants to save the owner’s resources. In fact, a property management professional can often perform this part of the job more efficiently because he already has a series of resources in place to get the most exposure and ensure tenant screening is accurate. This helps to fill empty units faster and increases the property’s revenue. The expert is also responsible for inspecting the space before and after a tenant moves out as well as all the financial and legal aspects of the damage deposits.

The property manager will also look after all of the needs of the building’s tenants. This can include having repairs and general maintenance duties performed in a timely and cost-effective manner, and paying and billing various tradesmen and vendors. He or she will also set the rent amounts, collect fees from tenants, and deal with late payers and NSF issues.

A property manager assumes an important customer service role since he or she is the third party between the tenant and owner. This means addressing concerns from both sides. This can include emergencies, lost keys, and situations that arise between business hours and at night. The quality of service the expert provides will ultimately determine the success of the owner’s investment since this factor is what keeps the home rented and may even build up a waiting list.

Why would you even consider a property manager? For one thing, you decided to invest in a rental property, but don?t know what to do next. You?re not alone. The realities of maintaining and running a rental property can quickly become overwhelming- even to the savviest investor. Many times, people choose to hire a property manager to help them in the day to day tasks, which could be just the answer you?re looking for. To help make up your mind if hiring a property manager is right for you, here are 10 reasons that could help influence your decision.

Why would you even consider a property manager? For one thing, you decided to invest in a rental property, but don’t know what to do next. You’re not alone. The realities of maintaining and running a rental property can quickly become overwhelming even to the savviest investor. Many times, people choose to hire a property manager to help them in the day to day tasks, which could be just the answer you’re looking for. To help make up your mind if hiring a property manager is right for you, here are 10 reasons that could help influence your decision.

Collecting and Depositing Monthly Rent Payments. If you’ve ever worked in the billing department of an organization, you know that securing payment from clients and patients can be difficult, not mention awkward. A property manager has his/her own systems in place to effectively collect rent and maintain on-time payments. Especially if you are a small investor, with a limited number of properties, not being able to maintain consistent payments is going to significantly affect your cash flow.

Rental Rates. A property manager is going to make sure your rental rates are competitive, which is the key to securing (and keeping) tenants in your property. Their job is to know the rental market, knowledge which most likely isn’t your forte.

Housing Regulations and Property Law. There is a multitude of applicable laws and regulations that you are going to need to abide by when renting and maintaining your rental property. These include local, state and federal regulations, as well as fair housing regulations (such as the ADA). A property manager can help you avoid lawsuits by keeping up to date and in compliance with these regulations.

Marketing and Advertising. A good property manager is going to have experience in offline and online marketing, as well as local direct mail opportunities, which will increase the exposure of your properties. Carrying a vacant property can be extremely expensive, and is an expense you want to avoid whenever possible.

Inspections. Being extra vigilant in the care of your rental property is critical to the maintenance of your investment. Through routine inspections, a property manager can find and repair problems before they grow into expensive endeavors. It is standard for property managers to perform inspections before a tenant moves in, during their lease, and after the tenant moves out.

Tenants. Securing tenants can be a time consuming process. Depending on the extensiveness of requirements for your rental properties, a property manager can take care of securing all criminal background and security checks, credit reports, employment verification, and previous landlord references. In addition all tenant disputes, conflict resolution and emergency maintenance will all go through a property manager, who will involve you at his or her discretion. In addition,

Access to Professionals. A property manager has existing relationships with maintenance workers, tradesmen, vendors, supplies and contractors that you do not have. This can save you significant time and money when it comes to maintenance on your rental property, not to mention ensuring quality work.

Time Management. By having a property manager that takes care of the routine daily tasks, you are free to focus on other investments and/or your own career.

Remote Locations. If your investment property is in another city or state, it’s simply not possible for you to oversee management and maintenance of the property and its tenants. A property manager can be where you can’t, and can take care of all the details you don’t have access to.

Money. Most property managers charge a percentage of the monthly rental rate which can range anywhere from 8-12%. The cost is actually quite nominal when compared to all the services a property manager can provide, which frees up your personal and professional time.

This article provided by AllPropertyManagement.com

If you’re a college grad about to rent for the first time — or even if you’ve been renting for years — it’s well worth it to plunk down the small monthly payment to cover yourself should the worst happen.

As college graduates begin to migrate from the dorms in a few short months, one item they may neglect in their move to the real world is a critical one: renters insurance. Renters insurance is an often-ignored insurance that covers everything from personal property to personal liability.

If you’re renting for the first time, or have been renting for years without insurance, you’ll want to consider purchasing some insurance. MSN.com debunks four myths about renters insurance, which just might persuade you to buy a plan:

1. My landlord’s covered
In most cases, a landlord’s insurance covers only structural damage to the building itself — and many landlord policies don’t even go that far if the damage is caused by a tenant. If you leave the tub running and it turns your floor into cardboard and dribbles downstairs, damaging your neighbor’s couch, you may be liable for the whole drippy mess. If your building went up in flames, your landlord’s coverage would include repairs, but only to the building, not to the possessions of tenants.

2. It’s out of my price range
Is $10 to $20 per month too much? For lower rates, you can raise the deductible. For more protection, you can pay more for replacement-cost coverage where the reimbursement is based on today’s replacement cost rather than original value.

3. I’m in a great building and I’m not worried about security
Renters insurance extends beyond on-premise theft and hazards. If your suitcase is stolen while you’re on vacation, you’ll likely be covered. Same with property stolen from your car. If you’re prone to barroom brawls, you might need more help than renters insurance, but you’ll probably be covered if you hurt someone. Speaking of injuries, you’ll also likely be protected if someone slips and sprains her ankle at your annual dance-a-thon; you may even receive compensation for legal defense costs in the case of a lawsuit.

4. My stuff isn’t really worth much
You might be surprised at how quickly all those books, CDs and kitchen appliances add up.

This article provided by Marshall Loeb, MarketWatch

The language in rental contracts is often murky, so make things clear with your landlord before you move in and move out. And, of course, your best bet is to leave the premises as you found them.

It’s moving day and you’ve packed up and scrubbed your rental clean. When you hand your landlord the keys, you’re confident you will have your full deposit back in no time.

But after a few weeks without a check or any word from your old landlord, you start to worry. After a month, you start thinking of him as a swindler.

What could be the problem? Well, lots of things, and the majority have nothing to do with your landlord’s character. Instead, experts say most people lose their money over simple — and preventable — misunderstandings.

Taking just a few key precautions can help you avoid forfeiting any future deposits.

‘Normal’ wear and tear
Technically, the laws in most states say that a tenant must return a rental in its previous state minus “normal wear and tear.” That’s where things get a little tricky.

“It’s one of these legal phrases that drive people nuts because there’s no definition,” says Janet Portman, an attorney and author of “Every Tenant’s Legal Guide.”

Normal wear and tear always needs to be evaluated in the context of the tenants living there, Portman says. If a landlord rented a three-bedroom apartment to a family of four, he can’t use the same standards for wear and tear that he would for a single person.

This is a routine problem for renters with children. “There are going to be wear and tear issues with children that you won’t have with adults,” she says.

This doesn’t mean you can let your kids color on the walls with magic markers. But landlords have no right to charge more of a deposit or keep more of one simply because you have children. If they do, Portman says, they could potentially face a discrimination suit.

Robert Griswold, author of “Property Management for Dummies” and manager of 2,500 rental units in California and Nevada, says the following would all qualify as normal wear and tear:

• Some matting of the carpet.
• A few nail holes (This doesn’t include big gouges from where you tried to hang a giant mirror with 16-penny nails).
• Fading or yellowing of the paint.

Griswold says most landlords expect to repaint at certain intervals — often two to three years — to make an apartment look fresh for new tenants. But if you’ve made changes or damaged the paint in the first year, you’re probably going to need to repaint the place — or get dinged on your deposit.

Some things that clearly don’t fall under normal wear and tear include:

• Stains and burns on the carpet.
• Broken windows.
• Broken or missing blinds.
• Gouges in the doors and walls.
• Flea infestations caused by your pet.
• Pet scratches on the molding and on or around doors. (Landlords often vary wildly on whether pet scratches on floors are considered normal wear and tear. Ask your landlord upfront where he stands.)

If you have problems like these, Griswold says, hire a professional to come in and repair — just be sure to clear it with your landlord first. Don’t try to do the work yourself. It might cost more to hire someone, but at least it gives you control over how much you will be charged.

Don’t let little problems go
Another way to avoid losing your deposit is to stay on top of the little repairs when you live there. If you don’t call the landlord to fix the dripping kitchen pipes, he may be able to hold you liable for the mold and rotting wood under the sink later, Portman says.

A clause in most leases requires tenants to “promptly report problems.” “You need to nip problems in the bud,” Portman says.

Gwen Schlenker, 48, a resident of the Northglenn suburb of Denver, wishes she’d followed this advice. While she reported plumbing problems in her rental house to her landlord, he never adequately fixed them, and they eventually caused her basement ceiling to cave in. “This would have never had happened if he had fixed the problem,” she says.

Schlenker paid for her own repairs to get the problem fixed in a timely manner and then tried to withhold rent as a means of being repaid. But since she didn’t get her landlord’s permission to use the plumber, Portman says she may be out of luck. Colorado is one of three states — the others are Wyoming and Arkansas — that don’t require landlords to provide a “fit and habitable” place to live. And there’s no provision in Colorado for withholding rent for repairs. (Half of the states do allow tenants to withhold rent if basic services aren’t provided. But oftentimes, this money must be put into an escrow account until the landlord can rectify the situation.)

Schlenker’s options: work out a deal with her landlord when she moves out or go to small-claims court and let a judge decide how much she pays. The lesson here, Portman says, is to be proactive in dealing with problems and familiarize yourself with state and local rental laws.

Most landlords, Griswold says, are willing to be flexible, as long as you have treated the place with some level of respect. But the bottom line is it’s best to be clear upfront on just what a landlord’s expectations are.

The power of the walk-through
When you move in — even if it isn’t required in your state — walk through the place with your landlord, noting any damage or wear and have him sign off on it.

“Take along your digital camera,” says Portman, and document the condition room by room. “It protects you if you see that the tile is chipped around the bathtub already.”

Some states actually require landlords to give you move-in or move-out checklist where you can document the condition of the apartment (you can find a good move-in list here). Keep a copy of all these documents and do another walk-through prior to move-out so you can discuss any problems and expectations for cleaning or repairs. If you want to hire professionals for repairs, make sure you have the documented approval of your landlord. Then, keep any invoices and mail your landlord a copy to verify that you’re taking care of the problems and expect to receive your full deposit back. (A note on mailing your landlord: Certified mail is best because it requires your landlord to sign for it. But if you find that your landlord is somehow avoiding the mail, resend your letter and get a certificate of mailing from your local post office. This doesn’t require your landlord to sign anything and it verifies that you actually mailed it.)

Portman also recommends doing a final walk-through after your furniture has been loaded onto the moving truck, so your landlord can’t claim that your big overstuffed couch was hiding a problem.

Is it really clean?
Like beauty, cleanliness is often in the eye of the beholder. But “if you bring in the dirt, you have to remove it,” says Griswold. “Clean it like a hotel. (Then ask yourself) if you were the next guest, would you accept it like this?”

That means, he says, using germ-killing chemicals like bleach, rather than water and a damp rag to wipe down counters. Tenants should also clean the oft-overlooked places like tile grout, shower tracks and the broiler pan and oven.

“People should be capable of cleaning (their own apartments), but most do such a poor job of it that is it unfair to the next tenant,” says Paul Marokus, a landlord with properties in Colorado, Utah and Texas.

Many tenants, even those who cook regularly, fail to clean the oven. Others, he says, give their hardwood floors a beating, and don’t spiff them up before moving out.

Like many landlords, Marokus copes by subtracting a cleaning fee from the deposit — $80 in his case — that he specifies in the lease. Ask your landlord if he regularly does this, and make sure it’s similarly documented.

Where’s the money?
If everything looks pristine and your landlord has signed off on the condition of the apartment, you should reasonably expect to get your deposit back within a month. In a few rent-controlled areas like Los Angeles, landlords may even be required to pay you interest for the time they have held onto your deposit.

If you haven’t gotten a check, send a letter to your landlord — again, by certified mail — asking for your money back and providing any invoices for repairs you made to the place.

If you get no response, your recourse is to take your landlord to your local small claims court. These courts handle disputes over amounts of $10,000 or less. Fill out the forms (available online or at your local county courthouse) and mail them in. The court can notify your landlord or you can do it yourself, Portman says.

On the day of your hearing, remember to bring all your documentation, including any pictures you have that show the condition of the place, records of cleaning and repairs and any other communication with your landlord.

“They are pretty efficient and they can give you a decision right from the bench,” Portman says, though they could require you to go to mediation first.

With deposits running as high as two months’ rent in many markets, there’s a lot of incentive to fight for your money. “A lot of tenants just don’t realize that they have options,” Portman says.

This article provided by Melinda Fulmer of MSN Real Estate

Many of the households affected by the foreclosure crisis are actually renters, and a federal law is designed to keep them from being evicted with little or no notice.

A federal law enacted this year offers renters more protection from eviction if their landlord loses the property through foreclosure. The law has some fuzzy requirements, but should be a boon to renters who otherwise might have been evicted with little or no notice.

“The fundamental purpose of the Protecting Tenants at Foreclosure Act is to ensure that tenants facing eviction from a foreclosed property have adequate time to find alternative housing. To that end, the law establishes a minimum time period that the tenant can remain in a foreclosed property before eviction,” a Federal Reserve memorandum states.

The national foreclosure crisis has not been kind to renters, despite their seeming bystander status. Indeed, the National Low Income Housing Coalition (NLIHC) has estimated that some 40 percent of households that have lost their homes due to foreclosure have been renters.

The law should provide some relief from immediate evictions, according to NLIHC President Sheila Crowley. “This bill brings long overdue relief for the most blameless victims of the foreclosure crisis — the families who, after paying their rent each month, are suddenly told they must move out of the homes because their landlords have been foreclosed on,” Crowley said in a statement.

Renters will get 90 days’ notice
The new law allows tenants who have a lease to remain in their home until the end of the lease period unless a new owner purchases the home at a foreclosure sale and intends to occupy it as a personal residence. In that case, the renter can be evicted with 90 days notice even if a longer-term lease is in force.

A rare but potentially important exception occurs if the renter signed the lease before the owner obtained the foreclosed loan. In that case, the lease will still “survive” the foreclosure, according to Janet Portman, an attorney and author of “Every Tenant’s Legal Guide.”

Tenants who don’t have a lease also are entitled to 90 days notice prior to eviction under the new law.

Technically, the law applies to “any foreclosure on a federally related mortgage loan.” That requirement shouldn’t be a burden for tenants because, as Portman explains, the definition of “federally related” encompasses virtually all loans.

The law became effective May 20 and is scheduled to end Dec. 31, 2012.

Only ‘bona fide’ renters are protected
The law protects only a bona fide lease or tenancy, which is defined as a situation that meets three criteria:

The renter may not be the former owner of the home, or the former owner’s spouse, child or parent.

The terms of the rental must be at arm’s length between the landlord and renter.

The rent cannot be substantially less than the fair-market rent, unless the rent is subject to a government reduction or subsidy.

The arm’s-length and fair-market rent requirements “are designed to prevent a sweetheart deal” between a defaulting landlord-owner and a renter whom the landlord wanted to protect from eviction after the foreclosure, Portman says. For example, if a landlord and renter signed a two-year lease at a very favorable rent just prior to a foreclosure, that likely wouldn’t meet the bona fide requirement.

Broken lease can lead to lawsuit
Renters who have a lease and are evicted may be able to bring a breach-of-contract lawsuit against the former landlord to recoup the costs of their forced move, according to Portman.

“You go to court and say, ‘We had a deal, and he didn’t deliver,’ ” Portman says. “The guy may be long gone. But if you get a judgment, that’s good for many years, and you could probably eventually collect on it.”

New law doesn’t affect rents, deposits
The new law doesn’t pre-empt any state or local laws. Instead, it specifies that it won’t affect “the requirements … of any state or local law that provides longer time periods or other additional protections for tenants.”

State laws apply to most landlord-tenant issues that are beyond the scope of federal law. Examples include prepayment of a last month’s rent and reimbursement of a security deposit. Neither of those issues is mentioned in the new law.

“Many states, including California, protect the tenant at any cost. They say basically that it is up to the buyer and seller, or in this case, the bank and the (former) owner, to figure out how to (handle those sums),” Portman says.

The bottom line is that landlords and renters have new rights and responsibilities in foreclosure situations. While renters may face challenges in their attempts to exercise those rights, knowledge and action can prevail.

This article provided by Marcie Geffner of Bankrate.com

President Obama has signed into law legislation extending the $8,000 first-time home buyer tax credit beyond its scheduled November 30 expiration and creating a new, $6,500 credit for longtime homeowners who buy a new home. With thousands of dollars at stake, it’s not surprising that potential home buyers have lots of questions. We have the answers.

How does the extension of the first-time buyer credit work?

It’s simple. The old credit was scheduled to expire November 30, so folks who hadn’t already signed a contract faced a daunting task to get a deal closed by the deadline. Some real estate agents were writing provisions into contracts making the purchase contingent on closing in time for the buyer to get the credit. Failing to do so would kill the sale.

Under the new law, the credit is available to qualifying buyers who sign a binding contract by April 30, 2010, and who close by June 30, 2010. The 60-day period should offer plenty of time for last-minute buyers to get to the closing table.

Are the rules exactly the same, except for the later deadline?

Of course not. There are a few differences that apply to deals closed after November 6, the day President Obama signed the bill into law. First though, the similarities:

The first-time buyer credit isn’t really restricted to first-timers. You’re considered a first-time buyer if you have not owned a home for at least three years prior to the date you settle on your new home.

–The credit is available only for the home you live in. It’s not available for rental properties or vacation homes.

–The credit is 10% of the purchase price of the home, up to a maximum credit of $8,000. Therefore, if the house costs $80,000 or more, you can qualify for the maximum tax credit.

–Unlike the first-time buyer credit that was available in 2008, this credit does not have to be repaid . . . as long as you live in the house for at least three years. Sell or move out before three years, however, and you have to pay back the $8,000 as extra tax on your tax return for the year you sell or move. (The payback can’t exceed the amount of profit you make on the sale, though.)

Now for the key differences:

–You don’t get a credit if the house you buy costs more than $800,000. (There was no price cap for deals closed before November 7.)

More important, the new law increases how much buyers can earn and still claim the credit. For deals closed before November 7, the right to the credit gradually disappeared as adjusted gross income (that’s basically your income before subtracting your personal and dependent exemptions and your standard or itemized deductions) rose between $75,000 and $95,000 on single returns and between $150,000 and $170,000 for married couples who file joint tax returns. Now the phase-out zones are $125,000 to $145,000 for singles and $225,000 to $245,000 for married couples.

When we signed our contract to buy our first home in October, we were kind of bummed because our $190,000 income meant we made too much to qualify for the credit. We won’t close until mid November. Do we get the credit or not?

You’re in luck. The new, higher income limits apply to deals closed after November 6. Enjoy your windfall.

How does the new $6,500 credit work?

This credit is available to qualifying buyers who sign a binding contract by April 30, 2010, and who close on the new home between November 7, 2009, and June 30, 2010. To qualify, you must have continuously owned and lived in a home for at least five of the eight years leading up to the purchase of a new home. If you have owned and lived in your current home for at least five years, for example, you can qualify. If you bought the home you’re living in now less than five years ago, however, you can’t qualify.

The credit is 10% of the purchase price, up to a maximum credit of $6,500. As with the first-time buyer credit, this one is available only for the purchase of a principal residence – not a vacation home or rental property – and if you sell the place or move out within three years, you have to pay back the $6,500 on your tax return for the year you sell or move away. Homes that cost more than $800,000 are ineligible for the credit.

Income-eligibility rules are the same as for the first-time buyer credit. The right to claim the credit disappears as adjusted gross income rises between $125,000 and $145,000 on a single return and between $225,000 and $245,000 for married couples who file joint returns.

It looks as if we qualify for the move-up credit, but we signed a contract to buy our new home before the President signed the new law. We’re going to close at the end of November. Do we get the money?

As long as you close on the deal after November 6, you can qualify for the credit. The new credit is often referred to as a move-up credit.

We are planning to sell our home and retire to a smaller place. Is the credit available only if you buy a more expensive home?

Don’t worry. “Move-up” is a misnomer often used to distinguish this from the first-time buyer credit. It’s okay to downsize. There are no rules about the cost of the house you sell or the home you buy (except that the new house can’t cost more than $800,000).

What do I have to do to claim a credit?

The procedure is the same for both the first-time buyer and longtime resident credits. Once you close on a qualifying house, you claim the credit on your federal income-tax return. If you close in 2009, you can choose whether to claim the credit on the 2009 return you file next spring or on an amended 2008 return. Choosing the amended return route would bring you a refund of the full credit amount. If you claim the credit on your 2009 return, it will reduce your tax bill for the year by the amount of your credit. This is a “refundable” credits so if the credit reduces your tax bill below $0, you’ll get the difference as a tax refund. If you close on a home in 2010, you can claim the credit on either your 2009 or 2010 return. Sooner rather than later is the choice to make.You’ll need to file a Form 5405 to claim the credit and include a copy of your settlement statement (such as the HUD 1 form) to prove that you bought the house. The settlement statement was not required for deals that closed before November 7.

Is it true that there is an age limit for the credit?

Not on the upper end. But as part of an antifraud effort, neither home buyer credit is available to taxpayers under age 18 at the time of the purchase. The discovery that taxpayers as young as four years old were claiming the first-time buyer credit cast suspicion that some hanky-panky was going on. Married couples can qualify for the credit as long as one spouse is at least 18 at the time the deal is closed.

The new law also bans anyone who is claimed as a dependent on someone else’s return from claiming a home buyer credit.

Can I claim the credit for the purchase of a vacation home? How would the IRS know whether I was living there full-time?

The credits are available only for the purchase of a principal residence. As for how the IRS might know a new house was a vacation property, the fact that you tax return was filed from a different address than the address of the new property (which will be shown on the settlement sheet) might raise some eyebrows. If the IRS concludes that a claim is fraudulent, it could impose a 75% penalty, which would cost $6,000 on an $8,000 credit claimed for a vacation home.

We bought a home on October 15, 2003, and sold it in August 2008. So we owned the home for slightly less than five years. We are living in Arizona now and renting an apartment. We are looking to buy a home in Chandler, Ariz. Do we qualify for the first-time home buyer tax credit as amended, assuming that we pass the necessary income tests?

Sorry, but based on the facts you present, you’re out of luck. To qualify for the first-time buyer credit, you can’t have owned a home within the previous three years. You sold your previous home just 15 months ago. And it appears that your ownership of that home was a few months shy of five years – the minimum period of continuous ownership required to qualify for the longtime resident credit.

Can I qualify for both the first-time buyer and longtime resident credits?

No. You can only claim one or the other.

My husband’s parents are offering to sell us their vacation home as our first home. Would we qualify for the first-time buyer credit?

Not anymore. The original first-time buyer credit law nixed the credit if the home sale was between related parties, but there was a loophole for the situation you describe. Since you are not related to your husband’s parents – except by marriage – you could have qualified for the credit assuming you bought the home jointly. The new law, however, puts the kibosh on that, effective for purchases after November 6, 2009.

Article provided by Kevin McCormally, Editorial Director, Kiplinger.com

]]> http://www.lakenonarental.com/477/orlando-real-estate-news/faqs-new-home-buyer-tax-credits/feed 0 http://www.lakenonarental.com/468/orlando-real-estate-news/what-to-know-before-you-turn-your-home-into-a-rental-property http://www.lakenonarental.com/468/orlando-real-estate-news/what-to-know-before-you-turn-your-home-into-a-rental-property#comments Fri, 05 Feb 2010 04:20:00 +0000 Joey Guest http://www.lakenonarental.com/?p=468 Here’s what you need to know about taxes and insurance if you turn your home into a rental property.

Here’s what you need to know about taxes and insurance if you turn your home into a rental property.

Q: I will be transferred to a new city soon for my job, but housing prices have dropped so much since we bought our house that we can’t afford to sell it. Our only real option is to rent it out and wait for the market to recover. What do I need to know about insurance and taxes?

A: First on your to-do list: Replace your homeowners insurance policy with rental-home insurance. It covers the building and provides liability protection but doesn’t cover possessions, so it tends to cost about 20% less than a regular homeowners policy, says June Walbert, of insurer USAA. She also recommends including a section in the lease requiring your tenants to buy renters insurance, which will cover their liability and belongings.

When you file your tax return, you’ll generally report rental income and expenses on Schedule E. You’ll be able to deduct your mortgage interest on the rental property, as well as insurance premiums, real estate taxes, advertising costs to rent the house, rental management fees, utilities you pay, travel to and from the property and legal and accounting costs.

And you can deduct depreciation — basically the purchase price of the house (but not the land) divided by 27.5 each year — and the cost of repairs. You can’t deduct home improvements that add value to the property, but you add the cost of improvements when figuring depreciation. If your expenses exceed your rental income, you can deduct up to $25,000 of the loss against other kinds of income. (That loss allowance declines if your income is more than $100,000.)

Keep a close eye on the calendar, recommends Mark Luscombe, of CCH Tax and Accounting. If you rent for more than three years, you’ll lose the opportunity to claim any tax-free profit from the eventual sale. To qualify for up to $500,000 in profit tax-free when you sell a home, you generally must have lived in it for two of the five years leading up to the sale. For more details, see IRS Publication 527

If you had an unlimited budget for upgrading your properties you wouldn’t need an article like this one. In this current economic downturn we have to be creative and financially careful when we are trying to make our units more appealing.

If you had an unlimited budget for upgrading your properties you wouldn’t need an article like this one. In this current economic downturn we have to be creative and financially careful when we are trying to make our units more appealing.

As an investment property owner, you know what it is like to have a tight schedule and an even tighter budget, so I thought I’d share with you some simple and “cheap” ways to spruce up your rental property to attract new residents.

Here are five easy-to-do, inexpensive ways to improve the rental properties that you manage or own.

Paint the Kitchen Cabinets

If the cabinets are over ten years old (or look cheap from day one) they are probably ready for a makeover. Replacing cabinets is an expensive proposition, but painting them can make them look as good as new. Use a semi-gloss paint and don’t bother painting the insides. Just make sure the inside of the cabinets are clean and smell good.

Replace the Shower Curtain

It almost seems like a no-brainer, but replacing the shower curtains and liners with a clean, contemporary look make a bathroom look cleaner and newer. Just go to any large discount chain and you can find nice curtains for $30 or less. While you’re at it, replace the curtain rod as well, which is also a meaningful low-cost improvement.

Upgrade the Switch Plates

For about 50 cents each you can add some shiny new electrical switch plates that look more expensive than the old ones. Spend a little more and you can find ones that look like wood or brass. This can be an eye-appealing feature and can add that special extra touch that nice details can bring.

New Doors

Replacement doors can be as cheap as $20 for the basic hollow-core door. If you can’t afford a new front door at least paint or stain the existing one.

Replace or Paint Trim

If the unit already has trim give it a fresh coat of bright white paint. If it doesn’t, or the trim is in bad shape, add new trim. Trim and molding is around 50 cents per square foot, yet it dramatically improves the appearance of any room.

You’d be surprise how many investment property owners underestimate what a difference these five easy and inexpensive ideas can make.

Few investors have noticed that rents are finally covering mortgage payments again in residential real estate.

In many regions for the first time in years, rental income can pay the mortgage on smaller residential properties. We’ve waited a long time for this opportunity.

We have several friends who steadily became “high net worth investors” while creating significant income for their families. How did they do it? They did one thing right multiple times. They bought rental properties over the years whenever the rent exceeded the mortgage payments. They started during times like these.

Then with the help of inflation and leverage their money grew exponentially. Here’s how that works.

If you believe the government is willing to devalue the dollar, then buying a rental property where the rent exceeds the mortgage payment is very sensible.

You see if inflation arrives and the dollar’s purchasing power keeps crashing, that little $100,000 rental property might someday be worth $175,000. It happened in the 1970s and it will happen again.

As the value of the house goes up with inflation you can keep increasing what you charge in rent. And if you buy it with a fixed-rate mortgage, then your cost in dollars will stay the same.

Yes, your mortgage costs are fixed and your rent can go up while the value of the property rises. By buying a rental property with borrowed money (a fixed-rate mortgage), you’re doing what my wealthy friends did… using inflation and leverage to create great wealth.

As Dr. Steve Sjuggerud recently wrote for The Daily Wealth (www.DailyWealth.com) “Your total return on the small amount you put up for this deal could be extraordinary.”

“Your downside risk is simply that you tread water… since your rent covers your costs. (Of course, there are rental property maintenance issues to watch out for, too.) Your upside potential is huge – in both price appreciation and future rent increases.”

The facts are:

Housing prices have fallen at least by a 30-50%

Mortgage rates are the lowest in many decades.

The government is doing all they can to support home prices.

The government is printing money generously which can cause inflation.

We can take benefit from inflation and leverage. When we see the numbers and how much we can make on our investment, it’s exhilarating.