All Forum Posts by: Tom Malloy

You can get gas and water meters that will monitor how much is used by each tenant. A plumber will have to install them and they aren’t particularly cheap. Also, you will have to check them each month and divide the bill accordingly. If you live close and don’t mind going out to check each month (which also gives you a chance to check out the property) it’s a fair solution. However, I would look at the bills over the last year and split the water up according to occupants (upstairs=1.5, downstairs =2.5).  Gas can be similar if both have the same heating systems. 60-40 is pretty close and unless the gas and/or water goes way up for some reason, it’s pretty fair. Also, based on previous year, I would try to give a stated amount and put it on the lease instead of dealing with dividing up the bill each month. Put in extra for your time to manage and pay the bills. Some months may be slightly short and other months should be over. Lean more to “over” when you present the lease increase to the renters. This should also be an increase each year because the utilities will bump you up each year. 

Bryan Nelson, Nelson Business Advisors. 
(435) 890-2434

[email protected]

http://www.nelsonbusinessadvisors.com/

Bryan is part of the Wealthability Network of REI CPAs. Very knowledgeable and has saved us a ton in taxes. It's important to use a Real Estate CPA. Most CPAs have a specialty. He's part of Tom Wheelwright's Wealthability. You should read his book Tax-Free Wealth to really understand what taxes are all about. It's kind of life changing.

We have found great success with the Wealthability CPA's. Tom Wheelwright wrote the book Tax-Free Wealth (you should buy and read immediately to orient yourself). Wealthability CPA's work 95% with real estate investors and really know and understand depreciation, 1031 exchanges, cost segregation, Real Estate Professional status (allows you to offset passive losses against W-2 income), etc. They saved us their first year's fee for monthly consultations and doing our taxes by examining our previous year's tax return and finding missed opportunities that our previous CPA missed because they weren't REI specialists. PM me if you want our guy. We live in Houston and he's from Utah but he understands and is licensed in TX.

Check with Wealthability. They are our CPA and have made a night and day difference. Tom Wheelwright wrote a book Tax-Free Wealth. He is the founder and CEO of Wealthability, a network of CPAs that primarily handle real estate taxes. CPAs are like doctors. You need a real estate specialist. DM me and I will give you the name of our Wealthability CPA. I highly suggest you read the book first to get oriented. 

Interested in your properties in Houston. The link didn’t work for me. Please send link for properties to [email protected].
Thanks,

Tom Malloy 

Inspectors can be fickle. (I’ve been in construction for 35 years) Try talking to him a little more personally. If you can become his friend instead of his opponent you might find out what’s going on. Fighting the inspector is a fool’s game unless you plan to go to your mayor to complain. But be prepared for backlash. Politicians work for the public but you can open a can of vipers at the building department. Good luck. 

The AC fan is probably still under a manufacturer's warranty.  Check the packet of warranties for the AC unit and the dishwasher.  You may be covered for some of the equipment costs.  

If the builder is still on site you might be able to get him to fix the other little problems.  

However, the septic tank--if it's still bubbling up--should be inspected by a septic tank inspection company.  3 years is kind of quick to have to drain it.  If the leach field is bad or the tank isn't functioning properly it can be expensive to fix.

Similarly with the windows.  If they are leaking water, the flashing around them could be installed wrong.  That's a big problem that could require removing all the windows and redoing the flashing around each one.  If the "leaking" is air, it means either very cheap windows or installed improperly.  

I would get on this quickly in case the builder decides to go into bankruptcy.  Either way, you need to know what's happening with the septic tank and windows ASAP.  It might not be a bad idea to have a home inspector check the entire house out for things like: improperly sloped drainage from the house, plumbing, electrical, proper roof installation and flashings around roof penetrations, exterior door seals, etc.  The home inspector may be certified to do window leak tests.  Ask them.

Even if you don't get any help from the builder, at least you know what to expect and can set a schedule for repairs over the next few years instead of getting calls from tenants and having to come up with big unexpected repair money.

If you're not sure what your CPA does for you then you have the wrong CPA. CPAs do not all know about every type of business so you may be missing some valuable tax strategies because your CPA simply doesn't specialize in REI. We recently changed our CPA to one that primarily works on REI taxes and business strategies. Night and day difference! Our previous CPA did not know about accelerated depreciation and other key REI strategies while actually missing the deduction on a 1031 exchange last year. Our CPA is Wealthability and the CEO, Tom Wheelwright has written some great books through the Rich Dad Poor Dad series. They also have great referrals for cost segregation engineers and asset protection attorneys. We are really seeing a huge difference. Note: I would get Tom Wheelwright's book on taxes and read it just to start educating yourself on REI taxes. There's a lot to know and you want to have a foundation of understanding before you start talking to your new CPA. I also read The Tax Cure. A very valuable book on REI taxes too.

You can get a meter installed that will measure electrical usage for an individual unit. A good brand is E-mon D-mon. Get an electrician to install it and you can measure individual unit usage. (Need one for each unit) this will allow you to set a threshold for what you will pay for as the landlord and what will be charged back to the unit per KW hour. You will have to check the meters each month and assign additional charges based on the electrical pricing on your monthly bill. Additionally, in the future leases you could make the tenants responsible for their entire electric bill because you will have a way to measure exactly how much they spent each month. Reading the meters and billing the tenants takes only a couple hours but why not make it an added income source (or expense reduction) to the tune of 4x$150 per month?