All Forum Posts by: Matt R.

Hi Kathy,
if you have a decent lease it shouldn't matter if there are 4 members of the same family, or 4 unrelated people.

Everyone's name goes on the lease.

They all get credit and history checked.

They are all responsible (jointly) for the deposit and the rent. It's not your business to work with them on splitting the rent or the deposit.
If one guy is tardy with his portion of the rent, that's not your problem. If the rent is not paid in full to you by the agreed date, they are all under notice to Pay or Quit.

Of course, cost vs benefit is something to consider, and each person's situation is different.

But running a business through an LLC is not too hard. Yes, you need separate bank accounts and a certain amount of documentation to support that the LLC is an entity that is actively being used. But these should be things that you would have as part of running any business (?)
Even if I didn't have an LLC I'd be having a separate bank account to keep personal funds separate from business funds. And for good practice I'd be trying to keep some sort of notebook or log to describe weekly/monthly activities.
So, there shouldn't be too much overhead - if any - on running an LLC.

Hi Andrew,
search on BP for LLC and you'll see there are many, many discussions around LLCs and the need for them, as well as setting them up.

For me, an LLC is for ***(et) protection, so I feel better having paid a real lawyer to set one up for me. I fear that the standard versions one might get from legalzoom or through other web sites may not protect me enough.
I'm not saying they are inadequate - I just feel more secure having paid the extra to get mine done. For me, it's insurance that I hope to never use - but finding out it's not properly set up when the stuff hits the fan is too late.

Hi,
sorry to hear about your situation.
Seems like your stuck where you are for a while, although you don't clarify how long your lease is.

So this would be your main contact for getting things done.
Document, document, document.
Although the previous agreement was verbal, carefully write it down point by point. Then present it to H and ask him to provide a response on each point.
If his response is verbal, write it all down and send back to him for his confirmation of what is now being said.
For repair requests - make them in writing and ask for a target date for when it will be fixed. Follow up for when it's not done on time -in writing.

No doubt, the response might be along the lines of "We're a happy family here, we don't need this level of documentation."
You are not a happy family, this is a business transaction and this is YOUR HOME. Explain that previous verbal discussions seem to get confused or points forgotten, so you feel better having things written down so that it's clear who needs to do what. I'm sure they will want to make sure that you feel comfortable and happy with their services.

Hi Richard,
I've seen some folks put a limit on how big the dog can be - liability for bigger, aggressive dogs. Your insurance company might impose a limit on how big a dog they are willing to accept.
Something else to consider is the cost of making the place ready for the next tenant afterwards.
Obviously this is dependent on the tenant and the dog. I just paid for new carpets after a dog-owning tenant moved out. Ordinary cleaning wasn't going to get the stains and the urine out of the carpet.
I assume that the dog did that, and not the tenant :D

You can ask for an additional pet deposit, but it's unlikely to cover the added cost if there's major replacements to be made. Of course, we're trying to get the extra costs back from the tenant, but I'm not holding my breath on that. Just the cost of doing business.

Hi Brian,
probably the easiest way to do that would be with a DBA (Doing Business As).
So you, Brian, can operate as a business called "Best Landlord in the World" where your business bank account, business cards, etc, etc can now use that name and thus be more professional looking. Your individual name doesn't have to be visible to your renters since everything goes through your business name.
(As far as they know, you're just the handyman, rent collector, who's employed by the company "Best Landlord in the World".)
It also provides additional evidence to the IRS that you are indeed running a separate business.

Profit and loss would still go through your individual tax forms on Schedule E, so no changes there.

Something else to consider - insurance coverage in case a renter (or their guests) has a slip or fall. If they sue you, are you covered for that ?

Hi Mark,
Always, always thoroughly screen the tenants before hand.
The easiest way to deal with 'crazy tenants' is to make sure you don't have any.
Always, always thoroughly screen the tenants before hand.

There's a lot of good discussions on BP about the experience that others have had with pesky tenants - most are remedied by having good, well written leases; documenting all interactions with the tenant (request by you for access in writing, request from tenant for repairs in writing) and always, always screen the tenants thoroughly.
If you don't get a good vibe from the tenant applicant, move on. The extra hassle and cost easily outweighs the benefit of having the rental occupied immediately.

Did I mention the point about screening the tenents ?

I would guess there is a correlation.
Being a PM is a tough job and the pay can be low for the associated hassle.
For low income (and high hassle rate ?) properties it may be more trouble than most good PMs are willing to put up with.

Regardless, like all business relationships they should honour their contract with you. Layoffs, drought, hurricanes - doesn't matter - that's what they are paid to deal with. Pay me MY money on time.

Hi Steve,
start up costs and cost of doing business are two different things.

If you have a business already running then you look at your repairs and improvements and try to categorise what you can claim as a repair. A repair, or other day to day cost of doing business, can be offset against this year's income.
By finding as many legitimate costs as possible you can minimize the taxable profit that you have to report at the end of the year.

But, before your business is active you're not 'in business' from an IRS perspective. Therefore, you have no costs of doing business. You have to be 'in business' to have those ofsetting costs against income.
Example :
I spend $10k setting up a website; getting business paperwork done; printing business cards; upgrading my house intending to rent it out but... I never go through with the idea. Is this a business, do I have business costs I could offset against income ? No.
Since my business never actually started I have no business costs (and no startup costs).

To demonstrate an active business I would have to actually offer the property for rent - and be able to document that I did so. Usually a local paper advert covers you since you have dated documentation that you're offering the property for rent.
OK I do go ahead and have the property rented to a little old lady from Pasadena. Now what ?
Since you're now 'in business' you can go back and assess how to categorize your $10k.

Improvements to the property would add to the tax basis of the property and would depreciate over 27.5 years.
But repairs and getting those business cards made up BEFORE you were in business are classed as startup costs. ie these are items you paid for before you were actually in business and would be treated as startup costs for your first year of business.
You can offset up to $5k of startup costs in your first year, anything above that has to be amortized over 15 years. So clearly it's best to minimize what you pay for BEFORE you're in business. Avoid doing anything except the minimum to get into business.
Once your business is active THEN you can buy that new cell phone, print those flashy business cards, buy the Armani suit - the usual things that all landlords have 8^)

Similar to the discussion on immediate repair costs vs long term depreciation for improvements you can do the same for the start up costs. Take the $5k this year - if you have enough income, you lucky dog - or amortize the start up costs over 15 years to offset future income.

Hi Steve,
something else that will factor into the options that you have - when did you 'start the business' ?
If you are already renting property then these repairs would be the cost of doing business.
But if this is your first rental then you don't actually have a business operating until you have the property ready for renting. Work and expense in getting a home ready BEFORE it's offered for rent would be start up costs, not day to day business costs.
Note that the business start date is when the property is available - advertized for rent - not when the first tenant moves in (which could be much later 8^)