All Forum Posts by: Dan Perrott

The Indiana Business Journal published an article on the Landlord Registry System:

Indiana Business Journal

City council acts to close loopholes in landlord registry system

June 5, 2017

Hayleigh Colombo

The city of Indianapolis is hoping to get derelict property owners into shape with new changes to its landlord registry.

The Indianapolis City-County Council on Monday night approved changes to the registry it first passed back in 2014 to "close the loopholes" in the current system, said Vice President Zach Adamson.

That meant changing the definition of a rental to include units advertised as rentals and units offered for sale as rent-to-own properties. The proposal passed 19-3.

"The city lost a case or two or more where a landlord said, 'You can't prove I'm renting," said Republican City-County Councilman Jeff Miller. "Of course the city's not going to go tear down the door and figure out if there's a tenant in there. If you're advertising, now it's black and white."

Under the landlord registry ordinance, IBJ reported in 2014, owners of rental units must provide their names, telephone numbers and addresses. Those who aren’t Indiana residents must provide the same information for an in-state property manager.

The registration will require affirmation that the rental units and any other property titled to the owner are not violating city code. Landlords also must attest there is not more than one delinquent tax payment associated with their properties. Finally, the registration must state the number of rental units on each parcel of property.

The city also is trying to solve another problem with the changes: it hopes to add more people to its list of rental property owners. The landlord registry once had about 22,000 properties on the list. Now it has around 13,000 properties.

Miller and Adamson said since owners can list 100 rentals and process them through the registry for a nominal sum, it appears some people could be leaving the registry to avoid accountability as they notice loopholes.

"This is an attempt by the city to gain control over a runaway situation that is costing taxpayers enormous sums of money," Adamson said. "We aren't trying to put a hammer on the good players. We wanted to be able to have an accountability system for the scofflaws."

Adamson said the changes "fall back to the premise that with property ownership comes responsibility." He said run-down rental properties, many with out-of-state owners, create negative consequences for neighborhoods.

He said it's also an attempt by the city to prevent properties from becoming "wards of the city."

Indianapolis under Mayor Joe Hogsett is attempting to tear down, rehab or otherwise rehabilitate vacant and problem homes throughout the city.

"Before those properties become derelict properties, they were poorly maintained rental properties," Adamson said.

Tenant screening and the use of level set rental criteria.  Set the criteria and do not lower your standards for any tenant.  The tenant must agree to the standards and all screening must meet or exceed the standards.  

Secondly, maintain the properties.  Poor properties does equal poor quality of applicants.

@Kristi Davis I have not had an issue with the tenants on fixing the appliances.  I would say issues have occurred 6-8 times over 10 years and it usually has been an electric element (usually oven).  I usually get the parts (they pay for) and install them for a minimal fee.  It works out well.

Will a refi bring a lower payment and larger cash flow?

One of my favorite clauses:

Appliances - The appliances have been supplied in complete working order. Appliances included are a refrigerator and electric stove. The use of these appliances is not included in the rent. If Tenants wish to use these appliances, they agree to assume all responsibility for care and maintenance. Tenants agree to return the appliances in the condition supplied less any normal and reasonable use.

I live in Indianapolis area. I purchased a duplex (2br/1ba each side) for 42500 in a c+/b- neighborhood in August 2016.  I had to add 20k additional funds (roof, gutters, windows, electric, flooring, 1 AC unit, appliances, basic maintenance) and I have it fully rented for $600 a side.  $1200 a month on a $62500 investment.  If you have the patience, you can find the deals.  All of my properties are at least 1.8 rent/all-in cost.  

The deals are out there if you look and you are willing to put some work into the properties.  I think that it is harder for out of town investors to get the same deals because of their lack of area knowledge.  Investment areas can change street by street in Indianapolis. 

Being from Indiana - you need to realize that there are 3 taxing levels dependent on the property type.  If the property was purchased from someone who previously was living in the property, your taxes will at least double (you lose homestead level).  Most residential rental property is at 2x taxing rate capped by the assessment values.  If it is commercial, they can triple.  Maximums are set based on the use of the property.   Additionally, the taxes in most areas have been increasing year after year.  As suggested - you probably should get some assistance from an organization that works through property taxes.

Can you explain what landlord insurance is?

I have property insurance and security deposits.  Not sure what your question is.  Both of these are required is you ask me.

I am looking for a QuickBooks expert/accountant local in Indianapolis that I could meet with to assist me with closing my books in preparation for taxes.  All books are up to date and balanced.  Need to perform year-end closing activities including depreciation entry, equity adjustments and closing the books for 2016.  Any leads of a good resource at a reasonable price would be appreciated.

@Lucky B.

I am not giving legal advice but I am talking from my experience.

All of our properties are split between 2 LLCs. This is done to reduce the "everything in one basket" issue. All properties are in the names of the LLCs. Some investors think they need to put each property in its own LLC - in my case this would be overkill based on how lawsuits are usually handled in the courts in my area.

Additionally, we carry good insurance with high liability limits as well as additional business blanket insurance. This is another line of defense. My insurance did not go up because it was an LLC - it remained exactly the same.

You need to talk to your legal advisor as to how your local courts handle lawsuits.  This can tell you what strategy you should use.  For example, the court may limit liability to your insurance policy limits - as is the case with 95% of the cases in my area.

But the best defense against legal issues is to run your business at the top level.  Have a good tenant screening process, good tenants have less issues. Take care of all maintenance issues on your properties before they become an issue.  Have a solid lease that is specific to your location.

Now another issue that you need to be aware of is that LLCs are handled differently when processing your taxes.  You need to talk to your legal advisor and your tax accountant to guide you through the requirements.  It is not that difficult, it is just different from personal taxes. 

Hope this helps.