All Forum Posts by: Kyle Meyers

John Briggs

The IRS does not want security deposits to be included as income when received unless you plan on keeping the deposit.

"Security deposits. Do not include a security deposit in your income when you receive it if you plan to return it to your tenant at the end of the lease. But if you keep part or all of the security deposit during any year because your tenant does not live up to the terms of the lease, include the amount you keep in your income in that year.

If an amount called a security deposit is to be used as a final payment of rent, it is advance rent. Include it in your income when you receive it. "

-http://www.irs.gov/publications/p527/ch01.html#en_US_2010_publink1000218959

I am applying for a mortgage right now. The first proposal from the lender was to escrow T&I, but I have a commercial insurance policy with multiple properties. I asked the lender if they could remove the requirement and they said it would cost .25 points, but when I explained the commercial policy, they dropped the escrow requirement with no additional cost to me. I don't think there are any disadvantages to getting the escrow removed, just make sure you make the payments yourself.

Rental properties are usually valued based on the income. So the best way to increase value is to increase the income. Buy in a strong area, make improvements to make the units more attractive and rent faster and for more, and find ways to cut expenses.

I have a checking account for rental income and expenses and an account for security deposits. You do not claim deposits as income when you receive it. While having separate bank accounts for your business and personal finances is a good idea and may help at tax time, it is not a substitute for good bookkeeping. I also have several credit cards for my rentals (Menards, Lowe's, and Home Depot).

I am about to open a third account for my rentals because I am in the process of getting a cash out refi mortgage and the IRS requires keeping the proceeds of the loan separate and tracking them in order to deduct the interest.

I am getting a couple of tax deeds in December and my insurance agent told me to just let him know the date they are mine and he will add them to my commercial policy. My policy also covers newly acquired properties for a few months in case I don't get them added to my policy on day one. I would expect most insurers offer a similar commercial policy with a provision for new properties.

I have a rental condo in an HOA where we considered sub-metering. Our reasoning was based on savings from conservation since people would not waste as much water and would fix running toilets and dripping faucets. We got estimates from the water company and some sub-metering companies of what the normal usage should be and our use was much higher. We were able to find a sub-metering company which offered a monthly rate to rent the meters instead of purchase and we estimated owners would pay less each month even with the submetering charges than they had been paying for water because of the savings from conservation. As you are experiencing, we had a lot of backlash and many owners seemed tho think this was a scheme to take more of their money. We could not get approval from enough owners to get the submetering done and we will likely have to raise dues or have a large special assessment in a few years because we are unable to properly fund our reserves. In our case, we have a bank loan from several years ago when we did not have enough reserves for needed repairs and if we are unable to maintain the financial levels the bank requires the bank could take over the association. If that were to happen they would increase the dues. If your association does not have a loan, I believe a similar takeover could occur through receivership, but I don't know all the legal information about that. I think your association needs to consult an attorney about changing the bylaws or whatever it is you need to do in order to increase dues to a sustainable level.

Jeff S. and Steven Hamilton II - Am I not required to send 1099s even if I am a real estate professional? I thought that was the one way that guaranteed my landlording is a trade or business in the eyes of the IRS.

Do you get a W-9 for your property insurance company as well? And for big box stores, is the reason you don't get the W-9 because they are corporations or because they do not provide a service? I had Lowe's install a water heater for me this year, do I need a W-9 from them?

I agree it is best to have tenants pay for their own utilities so they are in control of their costs. The first thing to check is whether the units are sub-metered, if they are not, you have to factor the cost for that work into your investment. I would expect most of the current tenants to leave if you switch to them paying for their own utilities without a rent reduction, so you will have to budget for one of those options. Other than that, I think you have a good opportunity to add value by changing how you handle the utilities.

I think these are good ideas, but I wouldn't go too far on any one of them. You want to have your buyers pool remain large. I think you can implement a lot of your ideas without eliminating buyers though.

For green housing, installing water saving fixtures, tankless water heaters, and energy efficient appliances will appeal to many buyers, including more eco-minded buyers, without scaring many off. I think rain barrels would keep some people from buying.

I don't think many banks will consider potential future income from a rental suite to approve a borrower, so the added apartment may not help you that way. It could help get a buyer who likes the idea of owning their own home and a rental to help with their expenses. If you can find a way to add a suite in a way that the owner could use it as their own space and integrate it into the main unit, that may work, but the costs will still likely outweigh the benefits.

Senior housing could be a tough market because if the senior needs assistance, they will likely be searching for a facility that specializes in that, and if they don't need assistance, they probably will not be as hooked by your senior housing benefits. Keeping seniors in mind while deciding what work you do and considering different options to keep your rehabs senior friendly could open up your market to include these buyers, but I am not sure there is enough of a market for them to make it worth it to design your rehab solely for seniors.

I still keep the water in the tenant's name. If they don't pay, it will get shut off. I get a notice if the bill is not paid and I can follow up with my tenant then. If the tenant leaves with an outstanding balance, I can apply their deposit to that and/or take the tenant to court.