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5 Need to Knows For Novice Landlords

by Preservation Properties

Every once in awhile I get some really awesome information from InmanNews.com and this acticle is from them.  Really interesting information for landlords or anyone interested in becoming a landlord.

It's an occasionally awkward fact of life in this American economy: Scores of people who never have been landlords suddenly find themselves in the position of collecting rent checks every month because they can't sell their homes and are installing tenants instead.

Then there are the owners of vacation properties who have turned their getaways into sources of income by renting them out.

The situation is sometimes awkward when both of the above categories of property owners find themselves running a business and struggling with the bookkeeping skills and the knowledge of tax-law basics the Internal Revenue Service expects, according to an expert on small-business tax considerations.

"Many novices fail to realize that when you put a place up for rent, you're in a business," according to Abe Schneier, senior manager in taxation with the American Institute of Certified Public Accountants in Washington, D.C. "You have to have a set of books and records that properly reflect your income and your expenses."

Five things for novice landlords to know about keeping their books in a way that will satisfy the IRS:

1. You really do have to keep books, period.

"You can't keep it on a scribble sheet," Schneier said. "When the IRS agent walks through the door, he's going to throw that back at you. It's not his job to do your bookkeeping."

But it doesn't have to be complicated, he said. "It can be as simple as using (an online spreadsheet system) or knowing how to keep a ledger sheet."

Whatever the system, it needs to be exactly that -- a system -- that readily separates income and expenses and clearly identifies and details entries in both categories. Plus, landlords have to retain and organize their receipts.

2. Deductibility can be a nifty thing -- maintenance, repairs and improvements that wouldn't be of any benefit (at least immediately) to the average homeowner can be write-offs for landlords, he said.

Examples of expenses incurred on properties that landlords can deduct from their income include: advertising, cleaning and maintenance, mortgage interest, insurance premiums, legal fees, utilities, property taxes and other costs.

The IRS also allows landlords to claim depreciation on their properties -- that is, that they "wear out" over the years, just as a manufacturer's equipment becomes used or is made obsolete over time. This can be a valuable deduction, but rules are complex. The government explains them at IRS.gov and in Publication 946, "How to Depreciate Property."

3. Landlords also can deduct the costs of traveling to their properties to collect rent or to perform work on them -- but only to a point, Schneier said.

"You have to be reasonable," Schneier said. "If it's a question of driving 50 miles to collect the rent, that's one thing. But if it's a condo in Hawaii and you're going to write off airfare and expenses to visit your vacation rental in Hawaii, you can run into some trouble.

"You have to show that the visit was substantially business-related," he said, with emphasis on "substantially."

The landlord of such a property must be prepared to justify to the IRS that it was important to be there for maintenance or repairs. The rule of thumb he advises landlords to observe is that at least 50 percent of the time spent visiting that property was devoted to its business needs, such as remodeling a bathroom or replacing furnishings, he said.

"You have to be able to show something -- not just a receipt from Home Depot for a couple of light bulbs," he said.

(If you own a vacation home and rent it out most of the time, the IRS allows you to vacation there up to 14 days a year and still considers it a business, he said.)

4. Over the long run, landlords should be careful to differentiate between maintenance and improvements, he said.

That's because when it comes time to sell the rental property, genuine improvements -- the costs of replacing (not just repairing) the roof, windows or furnace, for example -- can be deducted from the basis of your interest in the property and help reduce the capital gains on the sale.

And be careful how long you hold on to the records of such expenditures: The law requires you to keep everything at least three years, but no matter how long you hold the property, at sale time you'll have to have those improvement receipts to justify your capital gains claims, he said.

5. Schneier, of course, urges landlords to seek out a tax professional in order to get the full benefit from rental property deductions, etc.

But the IRS does publish voluminous information at IRS.gov; in addition to the aforementioned guide to figuring depreciation, it also publishes a number of pamphlets that break down the details of legal and bookkeeping requirements.

Those include Publication 527, "Residential Rental Property" and Publication 523, "Selling Your Home," which has tax information on sales of homes that have been partly used as rentals.

10 toughest things to get rid of

by Preservation Properties

At Preservation Properties, we follow A LOT of real estate and green blogs (if you haven't noticed yet).  Today, we bring you an article from Yahoo's Conscioius Consumer blog:

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It’s hard to know what to do with cans of leftover paint or electronics that have seen better days. You know you shouldn’t throw them in the trash, but they’re not typically recycled at the curb. So how exactly do you get rid of them?

Luckily, if you’re armed with the right info, it can be easier than you think to dispose of these things. It’s worth any extra effort because many of the items on this list contain toxic chemicals that can contaminate the environment or cause other damage if not carefully disposed of.

The laws for disposing of household waste vary depending on where you live, but here are some general guidelines and resources:

1. Batteries
Recycling rechargeable batteries is fairly easy. It’s a good thing because throwing out lead-acid batteries is illegal in 41 states, according to Trey Granger at Earth911. Home Depot, Staples, Radio Shack, Best Buy, and many other retailers take them back free of charge.

There are fewer options for single-use batteries, but look for bins at your local library. Otherwise, your best bet is a nearby household hazardous waste (HHW) drop-off site.

2. Electronics
Every retailer that takes back rechargeable batteries also accepts mobile phones, as do most wireless providers. For computers, cameras, televisions, and others it's worthwhile do a little homework because some stores charge fees depending on item and brand. Check out Best Buy, Staples, and Office Depot to see what's the best fit.

Some places, like Radio Shack, have trade-in programs where you can receive store credit for your old gadgets. You can also turn your old electronics into cash thanks to a growing number of websites designed to help you easily sell them.

3. Paint
This is among the harder items to dispose of, but it's still totally doable. Some ideas to try first: Do your best to make sure it gets used. Give it to a friend. Use it for primer. Donate it to a charity, such as Habitat for Humanity or a school theater group. If you can't reuse it, then search to see if you can recycle it.

If you just can't reuse it, you might need to throw dried paint in the trash if it's not against the law in your community. Remove the lid from a latex paint can and let it dry out until it's completely hard. Take any oil-based paints directly to your household hazardous waste center.

4. CFLs
Fluorescent bulbs contain tiny amounts of mercury that can leach out if broken, so it’s important to properly recycle them. Luckily, these energy-sipping light bulbs are relatively easy to get rid of. Just drop old bulbs off at any Home Depot or Ikea for free recycling, or search for other nearby solutions.

If you have absolutely no other options and must throw them in the trash, then the Environmental Protection Agency suggests sealing CFLs in two plastic bags before disposing.

5. Medications
Don't flush them down the toilet or pour them down the drain because tiny amounts of pharmaceuticals are making their way into our streams, rivers, and lakes. Your best bet is to find a program that will take back unused medications. Check with your local government to see if it's hosting a collection event. Ask if your pharmacy or HHW collection program will accept old prescription drugs.

Otherwise you’ll have to throw them in the trash. Remove all personal info before chucking bottles to avoid identity theft. Crush pills and try these other tricks to make medicines unusable in case they accidentally get into the wrong hands.

6. Cooking oil
Bacon grease or cooking oil can clog up your pipes and ultimately back up sewer systems. Rinsing with hot water as you pour it down the drain won't help. Once that grease cools down, it solidifies and sticks to pipes. Your best bet is to absorb small amounts of grease with shredded paper or kitty litter before throwing in the trash.

Or you can pour oil or bacon grease in a coffee can or other metal container and throw it out once it solidifies. Here are some other suggestions on disposing and recycling.

7. Aerosol cans
Empty cans can be recycled fairly easily through your curbside program or at your local recycling facility. Partially full cans are harder to get rid of. Don't try to empty them yourself. Instead, see if your recycling or HHW drop-off center will take them.

It's also not a good idea to send pressurized cans (empty or not) to a landfill because they can explode if a fire breaks out.

8. Appliances
Most retailers will take away your old refrigerator, dishwasher, or other large appliance when you purchase a new one. Also check with your municipality because many cities and towns offer free curbside pick-up. For small appliances, try Best Buy or Goodwill.

9. Packing materials
Bring packing peanuts and bubble wrap to a local mailing center (such as the UPS Store or Mail Boxes Etc) if you don’t have room to store them for future use. You can also give them away by listing on Freecycle or in the free stuff section on Craigslist.

Here are tips for what to do with annoying clamshell packaging, non-paper FedEx envelopes, and more.

10. Car stuff
Wal-Mart, Autozone, JiffyLube, and others recycle used motor oil. Ask if they'll take your old filters back for recycling too.

Return dead car batteries to the store where you are purchasing a new one and ask if they'll recycle it. If not, check with your local HHW center.

Home Depot and Habitat to Build 5,000 Green Homes

by Preservation Properties

The Home Depot Foundation and Habitat for Humanity have announced the national expansion of Partners in Sustainable Building (PSB), a five-year $30 million green building initiative that will help incorporate sustainable building practices in 5,000 green homes nationwide. More than 135 Habitat affiliates across 42 states will receive 3,000 for each home built to ENERGY STAR standards and up to $5,000 for each home built to a higher green standard. The Home Depot Foundation president, Kelly Caffarelli, states that she hopes their partnership with Habitat for Humanity is able to bring the "practical financial and health benefits of green building and maintenance to families of modest incomes."

From the official release:

Through the sustainable building program, participating Habitat for Humanity affiliates have already certified nearly 1,500 sustainably built homes nationwide. By incorporating practices such as creating a tight building envelope and using efficient, durable materials in the construction process, many of these homes achieved green building certification with little additional cost. In many instances, the homes also benefit from landscaping projects that feature native plants, trees and other features that provide valuable shade and ground cover. The homes also include features that help them operate efficiently, including:
  • High-efficiency appliances
  • Water-conserving plumbing fixtures
  • Programmable thermostats
  • Low- and No-VOC paints
  • Quality insulation and ventilation systems
Results from the first year of the program show energy savings, lower utility bills and health benefits for the homeowners. According to the U.S. EPA, by following green building standards, homeowners can potentially see a savings of 30 percent or more in their utility bills.
(http://www.homedepotfoundation.org/assets/files/Yr-2_PSB_Grant_Announcement_Release-FINAL_090810%20(2).pdf)

Real Estate Q & A

by Preservation Properties

This is a recent post with the New York Times with a few Real Estate Q&As.  I follow their real estate section quite extensively so you will surely see many posts from them.

The Parking Meter Will Keep Running

Q My wife and I are rent-stabilized tenants. Included in our lease is a parking spot in the building’s garage. Our car was recently stolen and we might not replace it. Must we pay for the spot until our current lease expires?

A “Yes, the writer must pay for the parking space until the end of the current rent-stabilized lease term," and may even have to continue to pay for the space under a renewal lease, said Thomas P. Higgins, a landlord-tenant lawyer in Manhattan. He noted, however, that since parking spaces are usually in high demand, the landlord might allow the writer to give up the space immediately. “It’s worth asking,” he said.

No Reserve Fund at New Condo

Q I bought a condominium in a new-construction building two years ago. The sponsor did not create any emergency reserve fund for the building. Was there any legal obligation to do so?

A Allen H. Brill, a Manhattan co-op and condo lawyer, said that under state law and regulations relating to new-construction condominiums, a sponsor is not required to establish a reserve fund. In fact, the typical offering plan often explicitly states that no provision has been made for any contribution by the sponsor toward the reserve fund. But, Mr. Brill said, sponsors often provide for a “working capital fund” to be financed by unit buyers in the amount of about one or two months’ common charges to meet immediate expenses.

Landlord’s Liability in a Burglary

Q I moved into my apartment at the beginning of August. The landlord knew the previous tenant left on bad terms and failed to replace locks after telling us he would. Later that month, our apartment was robbed by someone with keys to the outside and apartment doors. Can the landlord be held accountable for the value of our stolen property?

A “I think there may be sufficient facts here to make a claim against the landlord for the damages,” said Kent Karlsson, a Manhattan tenant lawyer. He said that the landlord’s knowledge of the problems with the former tenant, along with his failure to change the locks, would bolster that claim. The tenant can sue the landlord in Small Claims Court if the loss is less than $5,000, and in civil court if it is more. “The tenant should have proof of the facts he alleges, such as testimony or documents, and proof of the value of the property that was stolen,” Mr. Karlsson said.

Dealing With Fees on Security Deposits

Q A landlord of a rent-stabilized apartment is allowed to charge 1 percent of the security deposit as an administrative fee. If the interest rate on such a deposit is less than 1 percent, can the landlord take the fee from the deposit itself?

A “The law that allows for the fee is imprecise and was enacted at a time when interest rates on security deposits were above 1 percent,” said Robert Sokolski, a Manhattan lawyer who represents tenants. He said that while the law is as the writer states, the Legislature apparently believed that there would remain a balance to be paid to the tenant. So, Mr. Sokolski said the intent appears to limit the 1 percent to the interest paid on the account and not on the account itself.

What is Green Building?

by Preservation Properties

Some of you may be wondering why our office is very proud to promote GREEN options in the homes we represent and the people we work with.  The National Association of Realtors has a few great pages dedicated to what Green Building is,
why you should consider "Going Green"
, The Facts on Going Green.

Lots of great information here to share- hope you get a moment to check it out!

-The Team at Preservation Properties

Find Your Carbon Footprint

by Preservation Properties

The National Association of Realtors has a great page on their website that I think everyone should at least check out once.  It measures your carbon footprint annually to help you reduce your environmental impact.

That page can be found here

-The Team At Preservation Properties

Green Classes in Newton

by Preservation Properties

WE’VE JOINED NEWTON’S GREEN DECADE.

It’s an exceptional organization, taking environmental responsibility to the most local level. They began in 1990 when to most of us green = kermit the frog!  Today, they offer a comprehensive array of classes, information and resources towards becoming more eco-conscious. and energy efficient.

Check them out: http://greendecade.org

They put on really inexpensive classes and seminars that educate in how to live greener. (Free to $30)

Check these out! You don’t have to be a Newtonite to go.

  1. Organizing for Change through Energy Efficiency.Sunday, January 18, 7:00 pm
  2. Hope and Change: Socially Responsible Investing and Financial Planning Under the Obama Administration.Tuesday, January 20 at 7:30 pm
  3. Insulating Your Older Home. Saturday, February 7, 1:00 – 4:00 PM

We will also publish a link to the Green News newsletter from the Green Decade in Newton as they are published for you to view.  Here is this month's newsletter.

Displaying blog entries 1-7 of 7

Contact Information

Preservation Properties
439 Newtonville Avenue
Newtonville MA 02460
Office: 617.527.3700
Fax: 617.527.2050