All Forum Posts by: Steve Bruza

The services I use to manage my properties are the only "fees" that are charged to the properties. The usual management fee is not something I pay to myself. Neither of the commercial loans are on commercial properties. They are both multi unit residential properties. All the income is passive since the management side of the LLC is not actually earning anything. But I do see the point you are both making. I spoke with a real estate lawyer today and he is telling me that the mortgages will make re-titling the properties difficult. I think this answers my question as I didn't think I was making the most of my LLC. But again, each property is properly covered with my insurance and umbrella policies. I guess you are right about mixing the income and expenses, but I am able to keep those transactions separate from my personal accounts. And I have treated them as such from the beginning. I may need to take another look at how I want these setup going forward. I have recently started some estate planning which has brought my LLC under review. I appreciate your comments.

Steve

Are you saying the LLC cannot provide management services to the other ten properties?

My wife and I have a member managed LLC for about ten years. We own two rental properties in the name of the LLC and we own 10 more rental properties in our personal names. All of our properties have mortgages on them with the two LLC properties having commercial loans. All of our leases are managed by the LLC. All rental income and expenses are processed through the LLC bank accounts. Should I attempt to move all mortgages and deeds into the name of the LLC or just keep doing it the way I am and not be concerned about how the deeds are titled? We are protected by very good insurance policies on all properties. Moving forward, we will not be able to purchase any more without larger down payments. I appreciate any thoughts.

Steve

Thomas,

Thanks for your input.  I would be careful throwing out terms like "lazy landlord" to people who are logged in to a forum like Bigger Pockets looking for advice and knowledge.  We are all out to make money and I suspect that we each have developed our business plans based on our own experiences.  I have been doing this successfully for 20 years and I still love to come to a site like this to share experiences and get input from other investors.

David,

I am right there with you on the rent amount. I emailed them this morning to begin discussions so we shall see how it goes. Their lease isn't up until June so they have a little time to consider it. I was wondering about the dispute option as well. I haven't found anything that says you can, but I have found several HUD documents determining CLI (Cost of Living Index), Fair Market Rents by State and County as well Section 8 rent values.

Nicholas,

I have found that waiting on improvements to increase rent works better.  Tenants know the area they are looking in and if you try to charge too much they will pass on your property.  I noticed you are from O'Fallon.  My wife and I met while in the Air Force.  She spent seven years at Scott AFB many, many years ago.

Paul,

Tennessee doesn't have any statutes from the Tennessee Uniform Residential Landlord and Tenant Act regarding rent increases.  I keep a PDF on my desktop of this statute for reference.  Its pretty easy to find, but the two parts I spend the most time with are 66-28-201 and 401.

As for this conversation, the IRS asks if you are charging fair market rent. If you are not, then you cannot claim a loss on that specific property. Your expenses and depreciation are limited to your income on that property. So if you only collect $5000 in rent and you remodel the unit or making significant repairs, you will be limited to that $5000 and your net income will be zero. We use those "losses" to help reduce our taxable income as rental income is considered passive income. In the past, the FMR has usually been lower than local rents, but with the spike in residents and the popularity of Nashville, sales, rents and property values have skyrocketed, as I am sure you are aware.

Interested to hear how many of you handle rent increases. Here is what I do currently. All of my leases are 12 months and are renewed if someone chooses to stay. I contact them 60 days out from the expiration of the lease. I increase the rent every other year and usually I try to keep it modest, around 5-6%, if they have been a good tenant. But with rising CLI (cost of living index), property taxes and insurance, I have fallen behind the FMR (Fair Market Rent). I am a pretty active landlord and probably have higher expenses than some landlords as it has been my policy to take care of my properties to get good tenants. I have a very low vacancy rate and I like to keep my tenants. More than half of my units have tenants that have been with me for more than three years. I have a 3BR/1Bath unit that is currently getting $900 per month on an inherited lease. I know it needs to go up and the tenants know as well. The IRS is saying that FMR is $1,328 but that would mean a near 50% increase in rent. It still needs some additional work and the tenant owns all of the appliances. My debt service is about $540 per month.

Any thoughts?  I appreciate any input.

Thanks for the responses.  As for what my "tax guy" said (who retired this year), the repair is an expense since the original driveway was already asphalt.  The layout of the original driveway didn't change.  Unfortunately, he didn't know much more than that and I obviously need to find someone else for future questions like this.

I ended up doing this on three driveways on properties I have in the same community.  When I asked the contractor what he meant about the deduction, he said he didn't have the details and that would be a question for your "tax guy".  All of the units have tenants in them so I don't know about the highlighted option #5 that Ashish posted.  

The total cost was $8300 for the three ($3300, $2500 and $2500).  I will post an update if I find anymore information.

I will also add that one of these units was just acquired this year while the other was purchased four years ago.

I have several rental properties in a HOA community. The asphalt driveways on several of the units are not good and have not been maintained over the years. I have hired a contractor to put down new asphalt and he has mentioned that tax laws state that I will be able to recoup 50-75% of the cost because it is a driveway. He did say this wouldn't apply to my personal home, but it would be considered a repair expense on a rental property. I agree with the repair part of that statement, but not sure about the deduction.

Does anyone have any insight on this particular expense and tax deduction?