All Forum Posts by: Jerry Rubinow

This is great information from everyone. To clarify for those who asked, it is correct that the realtor would not be locating the prospective tenant - the current tenant would do that. But I do not live in the area and the realtor would be handling:

- credit/criminal checks, checking references, any other screening (I have to read the article Michael linked)

- the new lease with the other tenants + the new one

So more than just a background check, but not quite a full tenant placement. This realtor and I have a good relationship so I'd prefer not to alienate her if that's a possibility, and I expect to use her again in the future once the current tenants leave at the end of their lease.

I know reference checks are one of the things the realtor does as well.

I have a tenant that I'm letting out of her lease early - she is one of three people collectively renting a house. In exchange, she is going to locate a replacement that is acceptable to the other tenants and will pass a tenant screening.

Initially I was going to have the realtor I used for initially finding and screening the current tenants to screen this new person. That realtor said the fee for screening would be a third of a months rent, which I'd pass on to the exiting tenant.

The tenant feels this amount is excessive and asked if it would be acceptable for her to locate a different local realtor to do the screening, assuming another would change a substantially lower fee.

So my questions are:

1. What kind of things does a screening typically consist of?

2. Is $600 or $700 an excessive fee to charge?

3. Do I have any obligation to have the original realtor do the screening?

4. What kind of things are essential to include on a screening?

Thanks,

Jerry

Hi Marcia and Kathryn,

Thanks for the advice.  My impression after reading what you said (and talking with a real estate lawyer) is that while there probably isn't added risk to me with allowing a sublet, it does add complexity (there now being an extra person between me and the one paying the rent).  I'm leaning towards doing the following:

- do not allow sublet, but allow the tenant who wants to leave the option to terminate the lease early
- as a prerequisite to early termination, the tenant must locate a replacement who will pass a credit/reference check and is acceptable to the other tenants
- the departing tenant must pay a termination fee to cover the credit/reference check plus a little more for my legwork
- the tenants can work out any transfer of their shares of the security deposit among themselves

I'm renting a house (in Mass. if it matters) to a group of three tenant, three friends on the same lease.  One of them just informed me she is purchasing a house for herself and wants to know if she can sublet.  The existing lease requires the written approval of the landlord if there's going to be a subletter.  What are the risks and other things to consider with this?  I'm a new landlord and don't have experience with subletting.  Questions that come to mind:

1. is there any paperwork or legal documents for me for a subletter, or is all the burden on the existing tenant?
2. is the original tenant legally responsible for rent payment to me and not the subletter?
3. if there is a problem with the subletter with rent payment or they don't want to leave at the end of the lease, are there any additional legal complications with eviction than with a regular tenant?
4. Anything else?

The tenant who wants to sublease would do the work of finding the subletter, and I'd require the subletter to go through the same screening the original tenants did, of course.

I suppose the other option is to swap out the potential subletter as a full tenant on the lease.  

Any info or advice appreciated - Thanks.

-Jerry

Thank you Karen, I intend to.  I figured until I'd was able to do that I'd see if anyone here had any knowledge about such matters.

The house has been in our family since the late 1960's. Last year our mother passed away and we decided to try turning the house into a vacation rental, the thought being if we can at least break even with upkeep, we'd be satisfied. We spent a lot of summers growing up there and didn't want to sell it at this point. We made an LLC to prevent liability to ourselves in the even of any bad things happening.

We put a bit of money in upfront this past year for lead abatement and now the boiler, and will certainly have less income than costs this year, hence the desire to depreciate costs.

We are turning our house into a rental property and have put it into an LLC in preparation for that. We need to replace the boiler/hot water tank, and the cost of doing that qualifies for a 0% Massachusetts improvement loan (Mass Save HEAT loan). Do I want to put the LLC name or my name as the loan applicant?

If it's the LLC name, it has no credit history, so I'm worried there wouldn't be any basis for approving the load.

If it's my name, would there be any issue with depreciating the cost at tax time? Or any other tax issues with the LLC taxes?

Any advice appreciated.

As someone in the process of setting up a vacation rental, I'm trying to understand how net operating loss works with respect to whether or not the property is considered a "home".

Let's say I put $15K into the house replacing the windows with lead paint in them in order to get the house ready to rent. I rent the house for 4 months at $2K a month. For the sake of this example, let's say there are no other expenses.

If there is no personal use of the house, does the $15K get depreciated over (say) 15 years, and I have to take $1000 of expenses a year from it? Do I take $15K of expenses now and carry the $7K operating loss forward to the next year? Or is it up to me which one I do?

If there is enough personal use to classify the house as a "home", how does that change things? If the $15K is not depreciated, I'm pretty sure I can only take $8K as expenses and cannot carry the $7K forward - it goes poof. If it is a home, am i still allowed to depreciate the $15K and take $1000 of expenses this year?

What other considerations are there in the options here?

Note: I realize whatever expenses there are need to be split proportionally between the rental days and personal use days, but let's ignore that aspect for now. I also realize I can pay fair market value rent for personal use of the house to make it not personal use.

Thanks for the replies.

Marcia - yes, it's in a vacation area, and the realtor has advised us weekly renters are much pickier and the house would need a bunch of upgrades to appliances, etc, to make them happy.  The problem is that I live in PA, almost 400 miles away, so I wouldn't be able to be there for the kind of small issues that arise with short term renters.  We are near a large scientific institution (several, actually), and the realtor we're using to locate tenants thinks a yearly rental won't be a problem.

Jonathan - so depreciation is one of my big questions.  If the house is a home, does this mean we cannot take the window replacements as depreciation?  So we'd only be able to take them as an expense for this year and we'd be limited to the amount we took in in rental and lose the rest?  If that's the case, then ouch, things are starting to make sense.

It's my understanding that if we pay the LLC something close to fair market value for the time we stay there for personal use, it's not considered personal use. Is this correct?

Not that I would do this, but how would the IRS even know whether we used the house?