On January 18, 2019, the Internal Revenue Service (“IRS”) issued final regulations and three related pieces of guidance, implementing the new qualified business income (“QBI”) deduction (“section 199A deduction”). One part includes rental real estate activity and certain safe harbor guidelines to follow. The safe harbor, however, excludes triple net leases mentioned below. Lastly certain planning has been recently recommended by Alan Gassman, a nationally known tax expert and speaker, to tax advisors after the final regulations were issued regarding triple net leasing.
I previously wrote an article titled “Would You Buy Your Property for What it is Worth? If Not, Why Aren’t You Selling?” I was looking at local apartment listings recently, and was shocked at the extraordinary values that I saw. CAP rates in the 3% range, and GRM numbers above 20! If you have a property that you are thinking of selling “someday,” perhaps today is a good time to cash in on these high values. If you, understandably, don’t want to pay taxes on your gain and lose a large chunk of your principal; a 1031 Exchange is an option. But what sort of property would you want to buy as your replacement property? That is the topic of this month’s article.
By Stephen C. Duringer, Esq., The Duringer Law Group, PLCQuestion Normally I love the smell of garlic, but enough is enough! I’ve been receiving escalating complaints from my residents concerning a housing tenant on Section 8, who seems to use a bit too much garlic and curry when cooking meals. The smell permeates the building and has been bothering the other residents. Other than the garlic and curry complaints, she is a great tenant, don’t want to lose her, but I certainly can’t lose the other tenants! What to do?
I have heard the terms “Preventive Maintenance” for as long as I have owned apartments. But, I’m not sure how it applies to me. I own a small four-plex, I’m handy and just fix things as they come up. Preventive maintenance just sounds like more work and expense to me and no doubt invented by a hardware store owner!
Bed bugs are a nationwide epidemic. Legislation has been recently amended in not just one but five civil codes to address the growing problems of bed bugs. They’re also known as the traveling bugs. We need to educate ourselves and everyone we know, because if it’s a nationwide problem it’s not a matter of if, but a matter of WHEN we all get affected by the bed bugs. They are considered vermin in the eyes of the court.
Bed bugs move similar to ants, they go where they want, when they want, they even move it about the same speed as an Ant. They’re not just in beds they’re everywhere they go through switch plate covers, common area walls. The baby bedbugs are about the size of the letter E in Liberty on a copper penny. Bed bugs are attracted to the air that we breathe out CO2. They feed off of our blood. The feeding cycle is from about midnight to 5 am. The most common place that we stay still for the longest period of time is your bed. Eight hours of sleep only if we’re lucky right?
The most common places to get bed bugs are
A commonly asked question is why new furniture? If you have the new furniture delivered it could be the moving van that brings the new furniture that is infested as it also hauls away people’s old furniture.
When it comes to the rules
The number one thing to remember is Even if the tenant brings them in.
As of July1, 2017 All new incoming tenants MUST sign a bed bug addendum. This notification must have specific language and be in 10 point font. Civil Code §1954.603
All existing tenants must have bedbug notification on file by 1/1/2018.This notification must have specific language and be in 10 point font. Civil Code §1954.603
The owner has a responsibility to remedy bed bug infestation upon notification.
The tenant can withhold daily rent until it is remedied. As vermin bed bugs are considered a habitability issue.
The owner must give written notification of Bed Bugs within 2 days of actual knowledge. When infestations are found in common areas the landlord must provide notice to all the tenants. Civil Code §1954.605
You must use a bed bug certified exterminator.
In the eyes of the court a landlord may not terminate tenancy for a period of six months after the notification of the bed bug infestation or it would be considered a retaliatory evection. Civil Code §1942.5 unless it is for nonpayment of rent or failure to comply with the exterminator. Landlords are required to give notice of intent to enter, and tenants are required to cooperate with inspection and requests for information to facilitate bed bug detection and treatment. Civil Code §1954.604
A landlord cannot knowingly rent a unit with a bedbug infestation.Civil Code §1954.602
A better business practice would be to have it certified bed bug free prior to tenancy, to protect you in the event they arise during tenancy. It may also be helpful when a judge is deciding who is responsible for the expenses.
Tips and trick:
Lint rollers pick up fuzz, hair and bed bugs. Use it at the movie theater before you sit down. Look at the tape if it’s got bugs stuck to it. Don’t sit there. Use at a hotel along the baseboards. Check under the rib of the mattress. Along your pant legs and even the bottom of your shoes can hold their eggs, so after you walk units with a suspected infestations use that lint roller. Don’t be a litter bug, but please don’t put the bug infested yucky tape in your purse either.
A Commonly asked question is; are the tenants responsible for the expenses of a bed bug infestation? That would be up to a judge in a court to decide. If anybody feels they have been the victim of any wrong doing, you can have your day in court. Small claims should do the trick, but always ask an attorney.
Patti “Widget” is the marketing director for Fast Evict.com Law Group. She has 22 years’ experience as a regional property manager. Patti teaches several training classes, and has published articles for various apartment associations.
By Stephen C. Duringer, Esq., The Duringer Law Group, PLC
Question I just closed escrow on a small building and I’m trying to figure out who’s who. I received the rental agreements, but the tenant information seems incomplete. The applications, the few that I’ve found so far, are old and outdated. I can’t seem to find any telephone numbers for the residents, and I’m not real sure that the names on the agreements are the same people who actually live in the units. I’ve read your articles before and I know the importance of reviewing the files and doing thorough due diligence before closing escrow, but this deal just happened too fast. Now that I’ve closed escrow, what can I do to clean up the records?
“Federal Reserve officials have outlined risks to the U.S. financial system, reports the Wall Street Journal. U.S. apartments are getting smaller, while rents are rising, according to MarketWatch.” National Real Estate Investor (November 29, 2018)
Zillow recently published their 2019 market forecast, and according to their analysis, property managers and landlords have a lot to smile about as we head into a new year. Thanks to rising interest rates and shrinking inventory, rent growth will pick up. Competition for affordable housing is expected to get even tighter, as people search for a home they can afford. While the summary sounds like a landlord’s dream-come-true, this is no time to get complacent. Dominating the rental market means planning for the best, and preparing for the worst. Here are five tips to help you think about changes your property might make to increase revenue without alienating renters who need budget-friendly housing.
Application Process and Screening perspective tenants
Answer your phone “Property Management” when advertising a unit for rent. Deceiving applicants will simply hang up if they think a management company will be reviewing their application, instead of a private owner that they may be able to hide information or be deceiving.
When you own a rental property, tenants rely on you to provide certain basic amenities,
including hot water. Not only is it desirable for showering, but it’s also needed for household
tasks like dishwashing and laundry. To keep renters happy, make sure you know how to
recognize these signs that you may need water heater repair services soon.