Make less income or have more expenses?

Question

One of my tenants is going to do the yard work/maintenance regularly. Is it better to take $100/month off his rent (make less income) or pay him $100/month (have more expenses)? In Hawaii, we pay 4% general excise tax on rental income. From a tax perspective, I'm not sure if it's better to have less income or more deductible rental expenses, or would it not matter either way?

Twana Rasoul · Answer

@Cassie Chun I personally would keep the rent the same, not lower it and pay tenant the $100 each time. It’s easier to not give someone $100 if they are not doing the work and a lot harder to get the tenant to give you $100 more in rent if they don’t do the work. Once they are used to the $100 less rent and they don’t do the work you put yourself in a not so great situation. Hope that makes sense. Best of luck!

Dennis M. · Answer

Words of wisdom right there . Besides 100$ ? Are you kidding me that’s outrageous to mow the grass

Loren Clive · Answer

I'd make the yard maintenance his responsibility and pay him nothing. Most of my leases are written this way.

Matthew McNeil · Answer

You are exposing yourself to liability if you agree to let an unlicensed tenant do any maintenance work.   If he gets hurt, insurance isn't going to cover it and his aggressive attorney will clean you out.

Christina Linn · Answer

@Cassie Chun I completely agree with @Twana Rasoul, plus you can prove your income that way.  Banks usually take your rental income and figure your debt-to-income ratio with a percentage of it, so it will benefit you that way. I don't know how taxes work there, but federally it would be the same either way.

Al Williamson · Answer

Cassie,

Unless it’s a commercial property, five units and more, the income does not affect your properties resale value. It may be best to reduce rent and modify your lease agreement to make the yardwork the tenant’s responsibility.

Logan Ho · Answer

Just curious, for next time, couldn't that have be added to the lease agreement?

Cassie Chun · Answer

@Matthew McNeil

Great point! I don't intend for him to do repair type maintenance, only routine maintenance of the yard.

@Jason DiClemente @Robert Biggerstaff @Christina Linn @Twana Rasoul

Thank you all for your recommendations!

Jason D. · Answer

@Cassie Chun keep the rent, pay him $100. If you lower the rent, you cant raise it, mid lease, if he decides to not to the work. You can, not, pay him the $100

Robert Biggerstaff · Answer

Do not lower the rent

Make less income or have more expenses?

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