By Daniel Bornstein, Esq.

There’s a lot to fall in love with the New Year. A clean slate and a fresh start, the feeling that everything is possible, and of course, the best parties.

For the rental housing industry, however, the exuberance over new beginnings should be tempered with the reality there are a new set of laws to obey.

As we look into the back mirror of an eventful year, one of the highlights has been the defeat of efforts to repeal the Costa Hawkins Rental Housing Act. Our fraternity’s successful outcome in the epic battle against Proposition 10, however, has obscured less prominent initiatives that were successfully passed and we summarize some of them here.

Widget’s Way featuring Patti “Widget”

Your tenant has vacated the property and now you have 21 days to account for the security deposit. The law allows landlords to deduct portions of the security deposit to cover the cost of damages caused by a tenant. Landlords cannot deduct normal wear and tear, or the expected depreciation of a property. E.g. If carpeting has been destroyed and it is 8 years old, perhaps no allowance is appropriate as the floor coverings were due for replacement. Similarly, destruction of a brand new carpet may result in full replacement cost to be deducted from the deposit.

by Michael Trainotti

It is very typical for couples who do not have a common family trust to have title in their name as joint tenants when acquiring real property. If one of them die the surviving joint tenant is the 100% owner without having to probate the deceased spouse’s 50% interest. Title is transferred by operation of the law.

By Christopher Miller, MBA
Specialized Wealth Management

Happy New Year!  We are currently in a hot real estate market where properties are selling well.  Why not take advantage of this market to sell some of your less desirable properties?  If you could sell the “dogs of your portfolio” quickly today, why risk waiting until the market turns when they could sit on the market for a long time?  And remember that price cuts often come from sitting on the market for a long time.

By: Steve Haskell, Vice President, Kay Properties and Investments, LLC

A CPA in San Diego contacted Kay Properties & Investments on behalf of his client, Peggy. Peggy owned an apartment building in East San Diego that she and her husband purchased together 50 years ago. Unfortunately, Peggy’s husband passed away five years ago and the maintenance, tenants, and looming threat of rent control had become overwhelming. She had an agent list her building and was pleased to receive the full asking price of $1.4 million the very next day. However, her excitement quickly vanished after her CPA informed her the capital gains tax and depreciation recapture will result in over 35% of her property value and prevent her from maintaining her current lifestyle. They concluded that a 1031 exchange into a passive property was critical.

by Michael Trainotti

I have recently been involved reviewing a family trust executed by a husband and wife who owned a number of real properties besides the family residence. The husband died recently, and the family trust did not provide for his portion of the real estate to utilize either a decedent trust or marital trust (“A-B Family Trust”). Rather, everything is to be distributed to the wife under the terms of the family trust. The family wants to keep all of the real properties after the death of the wife.

When renting a property to a tenant with pets you can pretty much set your own standards. You can ask for pet insurance, charge an additional deposit, require photos of the pet, require current tags, ask for additional pet rent, limit what type of pet’s you allow, you can even exclude pets altogether, etc. With pets the only rules would be yours and the governing parties, as I’m sure a pet alligator won’t fly with animal control or fish and wildlife.

When it comes to animals there are actual guidelines under the Fair Housing Act and The American Disability Act that apply differentiating between service animals, therapy animals, and emotional support animals, which can be both scary and tricky at the same.

By Christopher Miller, MBA
Specialized Wealth Management

During nearly 20 years in the investment real estate business, and while completing a graduate degree emphasizing real estate finance, I have learned a lot about the types of rental real estate that I prefer.  Every day, I try to share this knowledge with my clients to help them grow their real estate portfolio while maintaining their cash flow potential.  I recently wrote a three-part series about Properties that I Don’t Like.  This month, I thought an appropriate topic would be a review of Properties that I Do Like.

By Daniel Bornstein, Esq.

With the holiday season nearing, the traditional images conjured are families gathering to feast and enjoy quality time together, yet we all know that not all families are so harmonious. When conflicts reach a boiling point with family members living in close quarters, the status quo may no longer be sustainable.

Transitioning relatives out of a property can clearly be a gut-wrenching decision that many families face, and with the rising rate of adult children living with their parents and a growing number of multigenerational households, these tortuous decisions are being made with greater frequency.

By Michael Trainotti

In 2018 under current law, the estate and gift tax is $11,180,000 for an individual and $22,360,000 for a couple until December 31, 2025. However, for the closely held business, succession planning for the next generation and continuation of the closely held business is still very important.  The same is true for rental real estate that is owned by either a limited liability company (“LLC”) or a limited partnership (“LP”). This article will discuss both types of ownership.