All Forum Posts by: Stanley Bronstein

A lot of what you ask depends on what your lease says. Some leases allow you to bill for reserves for future expenses and some don't. Some allow for inclusion of management fees and overhead fees and some don't.

Even if you have standard leases, sometimes tenants (especially ones with a strong negotiating position), will negotiate caps on their expenses and even negotiate out some of the expenses.

There is software out there that handles all of this, but if all you have is an 11,000 SF shopping center, I'm guessing it's going to be cost prohibitive to buy it.

The main advice I can give is to write down everything single category of expense you plan on billing for and see if your lease form (or forms) allows for you to bill for it (or says you can't bill for it). Look for any leases that might have special provisions.

You say you currently only have 1 lease, so that makes it less complicated.

If it turns out you overbilled, I usually don't issue refunds (unless the lease says you're supposed to). Instead, I just adjust the NNN rate downward by the appropriate amount for the next year. Tenants usually are happy with that.

Hope this helps.

Putting your properties in separate LLCs gives you some insulation from potential legal claims on a given property. For example, if something happens in Property #1 (Owned by LLC #1), they generally can't go against Property #2 (Owned by LLC#2), etc.

Having plenty of insurance is also important.

The main thing is that everything gets done on the up and up and get done properly.

As for state income tax liability, a lot of it depends on how the LLC is set up.

For IRS purposes (and many states) by default, a LLC that's owned by one person (or a husband and wife in a community property state), is usually what they call a Disregarded Entity. This entity does NOT generally file a separate federal return and all of the activity from it gets reported on your personal return and will undoubtedly also be shown on your state income tax return (depending on your state requirements, as some states have no individual tax return requirements).

For IRS purposes (and many states) by default, a LLC that's owned by two or more people (except for husband and wife in a community property state), is usually taxes as a partnership and it has to file a partnership tax return.

A LLC can also elect to be taxed as a corporation and even as an S corporation, but that's too complicated of a topic for this discussion.

Even if you wind up having a Disregarded Entity, many states might have annual filing requirements (such as California, Texas, Nevada and many others). California has a annual minimum tax of $800.

I probably should put together a webinar on this topic if there is enough interest among the BP members.

@Aaron Smothers Agreed. However, I've sometimes encountered resistance because tenants don't want anyone looking in on them.

I went through this a year ago in my personal home in bright and sunny Arizona. In my case, I signed a 20 year lease for the panels and there were zero installation charges.  I basically locked myself into a rental rate for the panels that averages roughly $180 per month of the 20 years, plus a roughly $25 minimum to the utility company.

In my opinion, this actually increases the value of my home, as I have basically locked in my electricity rates for the next 20 years. During the summer in AZ, bills can easily get up to $500 and more per month. I consider this to be a plus.

The solar lease is fully assumable, and all the Buyer needs is a 650 credit score in order to qualify to assume the lease.

The way I look at it is that this is an educational thing. It's a new business model and realtors are going to have to explain it to buyers and the buyer's agents. But, I think it's a good thing, especially since I'm not planning on moving anytime in the near future.

On investment properties, it's obviously a little different. I would think you should just attempt to estimate the costs as accurately as possible and plug the numbers into your projections. You may also need to revise your lease as well to cover this.

While I am not licensed in Oregon, my thoughts are that you are navigating a mine field with this issue. In this day and age, just about anyone can sue just about anybody for just about anything. They may not win, but they can make your life quite unpleasant and wind up costing you some money.

Of all the ideas posted on this thread, I like the ones involving conducting regular inspections and promptly repairing any damage and promptly billing your tenants for said damage (in accordance with the terms and provisions of your lease. That way you can't be accused of discriminating against anyone (because you won't be).