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Property Management Blog

10 Not-So-Obvious Ways to Thoroughly Screen Potential Tenants

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As a property manager and landlord, I have learned that screening can be the most important element in owning a rental property. Picking the right tenant on paper and in character sets the tone for the next 12-24 months for your investment. This means if you have a great tenant with a smooth system in place, you will have an easier relationship with your property manager, easier time self-managing, and/or you will stay motivated to continue to invest in more passive income generating properties.

In realizing how big the leasing/screening step is, we maximize our marketing efforts to make sure we have the exposure to reach the top tier tenants we want to attract. Once we get them through our units and they love our homes, we then swoop in with our screening process that sniffs out red flags and brings truths to the service to eliminate junk applicants fast.

Click on the link to learn about 10 key components to our screening process that we complete with every applicant.

Are the Proposed Lower Corporation Tax Rates Good for Landlords?

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Lately, with all of the buzz about potential tax changes that Congress and the White House have proposed, I have been getting a lot of questions from investors about entity structuring. Everyone wants to know if C Corporations will suddenly become the best entity structure for saving on taxes if the tax law lowers corporate tax rates. Although a potentially lowered tax rate does sound enticing, there are a few other reasons why C Corporations still may not be the best idea for investors. Let’s take a look at some of the details.

Double Taxation

The most notorious criticism of C Corporations is double taxation. This is because C Corporations have their own tax rate, and taxes on net income earned in the business are paid by the corporation with corporation funds. In addition, if any money is taken out of the corporation by the investor, then they have to pay tax on that money as well on their personal returns with personal funds. Essentially, those funds are being taxed twice: once at the entity level when they are earned and again at the personal level when they are distributed as either dividends or payroll.

This is one of the reasons that pass-through entities are often viewed as better tax entities for investors. Instead of paying a corporate tax rate and then a personal tax rate, all of the earnings within the pass-through entity flow through to the personal tax returns where the taxes are paid. Subsequent dividends or distributions are not taxed separately again. They are essentially a tax-free transfer of funds.

11 Problems Only Property Managers Have

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Property managers play a unique role in the world, interfacing as we do between real estate investors and tenants, contractors and city officials, home-seekers and real estate agents. Few people get the chance to see the good—and bad!—sides of people from so many different socioeconomic levels, employment types, and motivation levels. The results are often painful—but even more often, in retrospect, hysterical. See how many of these you recognize!

11 Problems Only Property Managers Have

1. The Case of the Non-Present Money

How many times have you seen a tenant rocking a new iPad or even a new car just after Christmas—and then pay late on rent because all of their cash went toward presents for their friends and family? On the one hand, yes, we know that Christmas does actually work that way sometimes, but seriously, don’t you think it would be wise to maybe ask for help paying your rent?

2. The Incredible Transforming Applicant

This is the end result of poor tenant screening—or perfectly good tenant screening with a tiny bit of bad luck. Unfortunately, the only thing you can do once your rock-solid-seeming tenant has turned into a monster is find the most efficient way to cut your losses.

It Gets Stranger: How Trump’s Tax Plan Impacts Homeowners & Real Estate Investors

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Sound the controversy bells! Politics, economics, and real estate ahead!

Except—wait a second. What is this odd intersection of liberal economic arguments and Trump’s tax proposal? Something strange is afoot.

The Trump tax plan would in many ways level the playing field between renters and homeowners, something that liberal economists have been pushing for decades. Of course, that’s not necessarily good news for homeowners, investors, and the real estate industry at large. Look no further than the National Association of Realtors spending $10.2 million in the first quarter this year, lobbying Congress against proposals like Trump’s. (That lobbying budget was second only to the U.S. Chamber of Commerce for a single organization.)

And what’s this about a depressive effect on home values, particularly in pricey cities like San Francisco and New York? What’s going on here?

Let’s take a deep dive into some of the weirder implications of Trump’s tax plan for homeowners and real estate investors. You may or may not like what you find, but you’ll probably be surprised by it.

5 High-Value Tax Deductions Real Estate Investors Shouldn’t Miss

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Investing in real estate can be a great way to make some extra money or even support your long-term financial well-being into retirement, but it’s also a costly venture. Those in the know, however, understand that they can offset many of expenses associated with real estate investing through tax deductions. From mortgage interest to repairs, there are many accepted deductions for savvy property owners.

Do you know what deductions you should be taking on your properties? Here are five high-value deductions you don’t want to miss out on.

5 High-Value Tax Deductions Real Estate Investors Shouldn’t Miss

1. Interest Paid on the Mortgage

Very few real estate investors have the capital on hand to purchase properties without taking out a mortgage, and you shouldn’t be penalized for that. That’s why it’s an accepted financial practice to deduct interest paid on the mortgage on your taxes. If you pay any part of the utilities for your rental properties, you can also deduct those costs.

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Landlord Knowledge Base

If you’ve ever considered investing in a few rental properties in Philadelphia or Bucks County, PA now might be a good time. Prices are still low in Philadelphia, but have been on the upswing. According to the National Association of Realtors, the median price of an existing home in a US metropolitan area grew 13.7% between July 2012 and July 2013, the latest in a 17-month streak of year-over-year price increases. 

New landlords can choose from properties that are likely to appreciate and a large pool of potential renters.Licensed realtor Pat Mueller cites a few reasons for this trend: “Many families have lost their homes to foreclosure and are entering the rentals market for the first time in years. Mortgages are also harder to get now, so fewer people are qualifying for a new one.”The more skills you bring to the table to get into Houses for Rent in Philadelphia Philadelphia or Bucks County, PA and the more time you have to devote to your properties, the faster you can make a return on your investment. 

But investing in rentals can also be disastrous (or too stressful to be worthwhile) without expertise. Here are three professionals you may consult about your new rental properties, and what you can do to mitigate how much they cost you:Handyman:  You may need to hire a specialist for some work on your rental. If you need new outlets or new pipes, for example, hire an electrician, plumber or licensed contractor. Handymen usually tackle smaller, more manageable tasks, like:

  • Painting and paint removal
  • Drywall repair
  • Minor appliance repairs (fixing a leaky toilet or faucet, among others)
  • Installing tiling or flooring, moldings, windows, doors
  • Refinishing decks, cabinets and other wood items

When You Could Skip It: You could do any (or all) of these projects yourself if you have the time and interest in learning. Of course, this only works if you live relatively close to your rentals and are flexible enough to service them on short notice. And if you’re willing to respond to the occasional 5 AM basement flooding.

Average Savings: Any base rates or costs-per-hour vary from location to location in Philadelphia or Bucks County, PA , but nationally, you can expect to spend an average of $60 to $85 per hour for repair costs. It general costs less to hire an individual handyman than a handyman employed by a company. Expect an additional charge if your job requires a trip to the store for materials.

Resident Property Manager As the owner of a handful of rental properties, you may be able to manage them yourself, but if you want help, a single resident manager would probably be more cost efficient than a property management company. Resident managers may:

  • Serve as a handyman
  • Advertise vacancies in your units
  • Show apartments to prospective tenants
  • Review rental applications
  • Collect rents

When You Could Skip It: Again, the closer you live to your properties and the more spare time you have, the less likely you are to need a manager. The obligations of being a boss will also cut into the time you save on maintenance.

Average Savings: The national median wage for residential managers is just over $25 per hour. Research the wages in your community and adjust according to how much responsibility your manager will take on. 

Real Estate Agent: Once you’ve gotten your financials in order and done your own research on the neighborhood(s) you’re considering, you might contact a realtor to show you potential properties. You can also arrange for a realtor in Philadelphia or Bucks County, PA to show rentals once they’re ready to rent.

When You Could Skip It: It depends. Even if you’re a local, or have thoroughly researched the neighborhood(s) you’re considering, a realtor is a great resource for a first-time rental buyer. Realtors have access to data and statistics not necessarily available to the general public and first-time buyers may not know all the right questions to ask. Using a realtor to fill your Houses for Rent vacancies is less of a no-brainer, depending on your other time commitments or whether you plan to hire a resident manager who could do the same thing.

Average Savings: As a buyer of rental properties, as when buying your own home, sellers typically pay most, if not all, of the buyer’s realtor fees. In this case, Mueller points out there’s little reason not to work with a realtor. For help in filling your units in Philadelphia or Bucks County, PA, the services of a realtor would set you back between 10-20% of the unit’s rent per month.  Mueller recommends interviewing with several brokers before making your final decision to invest into Houses for Rent .

The Bottom Line: As a new landlord, you can’t necessarily control the flexibility of your schedule or the amount (and cost) of unexpected repairs to your properties. Rentals are a long-term investment. However, to maximize profits from your Houses for Rent, new rentals, you can buy close to home and start small. It is best to begin with just one or two properties. This will allow you to maximize the time you spend on your properties’ needs, and minimize the amount you’ll have to pay anyone else.

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