Author: Cyrus Vanover, Provided by Bigger Pockets
When someone passes away without leaving a will, the estate must go through the probate process to determine heirs, settle outstanding debts, and distribute any remaining assets. The laws on how intestate properties are handled vary by state.
As a landlord, it’s important to make sure estate planning is a part of your financial and legal strategy. It may prevent your heirs from experiencing legal difficulties, and it may also give you peace of mind knowing that your assets will be distributed according to your wishes.
What Is Intestate Property?
Intestate property refers to the property of someone who dies without a valid will. Intestate is sometimes also referred to as intestacy. For example, if someone says “he died in intestacy,” it means the person died without leaving a valid will to determine who receives the estate’s assets.
When someone dies in intestacy, the assets and debts are referred to as an intestate estate. Common assets may include:
- Bank accounts
- Business interests
- Debts and liabilities
- Investment accounts
- Life insurance
- Personal property
- Real estate
- Retirement accounts
- Vehicles
When someone dies intestate, the deceased person’s estate goes through intestate succession. This is a process that is used to pay off the estate’s debts and determine its heirs.
Key terms to understand
Here are three common legal terms that will help you understand intestate property:
- Decedent: A deceased person whose estate is being administered in probate proceedings.
- Heir: Someone who is legally entitled to an estate’s assets after someone passes away. Heirs are usually relatives.
- Estate: Everything that was owned by a deceased person. It also includes the decedent’s debts and other legal obligations. The estate is a legal entity that must go through the probate process to determine the heirs, pay off debts, and distribute the assets.
How intestacy occurs
Intestacy occurs when someone dies without a valid will or other legal documents that state who should receive that person’s assets. Intestacy may also occur if a will only covers part of an estate. For an estate to be intestate, the value of the property must be more than the outstanding debts.
Estate Planning You Can Trust
Simple. Easy. Trusted.
Nolo’s WillMaker is America’s #1 estate planning software. Get immediate access to easy-to-use software and create your customized will today. Make a living trust, healthcare directive, power of attorney and so much more. There’s never been an easier, more affordable way to protect your family, home and assets.
How Intestate Succession Works
Intestate succession is when a probate court determines the beneficiaries of an intestate estate. The property is distributed to heirs based on state law, which varies by state.
With intestate succession, a court-appointed administrator will first make a list of the deceased person’s assets and debts. The administrator then uses the estate’s assets to pay off any debts, such as credit card and mortgage debt. A probate court, through its appointed administrator, will then determine the intestate estate’s heirs, who are usually family members.
With intestate succession, the decedent’s surviving spouse may inherit half of the intestate estate if there are other heirs. If there are any surviving children or grandchildren, the administrator may split the remaining assets equally among them.
If there are no children or grandchildren, the surviving spouse may inherit the entire estate. The estate’s grandchildren will inherit the assets if their parents are deceased at the time of intestacy.
The probate court administrator often determines inheritance based on family order. If no spouse, children, or grandchildren survive, next in line is usually parents and siblings. Nieces, nephews, aunts, uncles, and cousins come next.
The intestate succession process doesn’t include unmarried partners or friends of the deceased person. That’s why estate planning with a will is important to make sure your loved ones are taken care of after you pass away.
Intestate Properties and State Laws
Intestate properties are handled differently by each state, which each have their own intestate property laws. In some states, such as Texas, an intestate estate is divided among heirs according to community property law.
With community property law, a married couple jointly owns the assets they acquired during their marriage. If a spouse dies, the survivor inherits the assets. If both spouses die, survivorship, or inheritance, passes to their surviving children.
Some states dictate that an intestate estate must be managed based on where the decedent lived. Others handle it based on where the decedent’s property is located.
Different states also handle “separate property” differently. Separate property is when a spouse owns property that the other spouse does not have a legal claim to. This may involve real estate that someone buys before getting married, for example.
In California, for example, separate property goes to the spouse if there are no other heirs. If there are heirs, the separate property is divided between the spouse and the other heirs.
Because intestacy laws differ by state, you should work with a probate attorney for your estate planning. These legal professionals have expertise in wills and estates and should know the intestate succession laws where you and your property are located.
Identifying Intestate Property
To help you identify intestate property, it’s important to understand what’s included in the decedent’s estate and whether it is probate or non-probate. The estate’s executor also has an important role in identifying intestate property and initiating the probate process.
Understanding the decedent’s estate
When you think of someone’s estate, you may think of real estate. Someone’s home or investment properties may just be a small part of the estate, however. An estate can include anything that someone owns, such as furniture, vehicles, and even virtual assets like domain names, websites, and royalties from creative works.
In addition to assets, someone’s estate may also include its debts and unsettled legal claims. An estate may have unpaid credit cards, mortgages, personal loans, taxes, and other outstanding bills, for example. It may be necessary in some cases to sell property to pay off the debts.
An unsettled legal claim—such as a lawsuit, divorce settlement claim, or challenge to the validity of the will—could delay the probate process. The administrator will have to settle the disputes, which could substantially reduce the remaining assets to be distributed to heirs—or wind up leaving nothing to them.
Probate and non-probate assets
When someone dies, that person’s assets become either probate or non-probate assets. The asset type will determine how the ownership is transferred.
If something is a probate asset, it means it must go through the probate process. A court will oversee its distribution. If there is a will, for example, the court will appoint an estate administrator, who will pay off any outstanding debts and distribute the asset to heirs.
If something is a non-probate asset, it means it will bypass the probate process and go directly to a co-owner or beneficiary. An example of a non-probate asset is a home where someone is designated as having a “right of survivorship” on the deed. When the owner dies, the ownership of the home automatically transfers to the beneficiary and avoids the probate process.
The role of the executor in identifying intestate property
An estate’s executor has an important role in identifying intestate property. When someone dies, the court will appoint an administrator (also known as an executor) to pay off any outstanding debts and distribute the assets to heirs. In the management of the estate, the executor must determine whether there is a will. If there isn’t a will, the property is intestate.
If a property is intestate, the executor will initiate the probate process by first filing a petition with the probate court. The assets will then be identified, secured, and appraised if necessary. All debts, including taxes, will then be paid. Any remaining assets will then be distributed to beneficiaries. The executor will then file a petition with the probate court to close the estate.
Final Thoughts
As a real estate investor, it’s vitally important to plan your estate so you will know who will receive your assets. You don’t want to leave it up to a court-appointed administrator to decide for you. At the very least, you should have a will. You may also want to consider having “right of survivorship” on the deeds to your properties.
In addition to including all of your long-term assets in your estate planning, like multifamily properties and mobile homes, you should also consider including your short-term investment properties. Although you may have to frequently amend your estate planning documents if using such strategies as fix-and-flip and BRRRR, it may be worth it to make sure your loved ones are taken care of.
Because estate planning can be confusing and complicated, consider hiring an attorney to help you. This is something you don’t want to risk getting wrong by doing it yourself. A professional can make recommendations and take care of the paperwork for you to make sure it’s done correctly.
Did you enjoy this article?
This is an example of what is included on our FREE weekly newsletter, Landlord Weekly.
Subscribers get access to our free forms, email templates, and guides! As well as…
▪️Landlord Tips ▪️ Early Access to Our Blogs ▪️ Landlord Specific Articles by Other Industry Pro’s ▪️ Podcast Links
To check out a sample of our newsletter, click one of the links below👇
Written by David Bitton, provided by doorloop
Older carpets can devalue a rental property if they look work out and covered in stains. Looking new requires maintenance and deep cleaning.
The problem is carpet fibers seem to suck in and hold onto dirt and odors. There could be dust, animal fur, dirt, spills, soil, and even stains from furniture placement. These can make a carpet look like it needs to be replaced. Luckily, there are tools to deep clean rental property carpets that otherwise are going to the trash.
Carpets are the go-to flooring option for any landlord seeking to create and lease a warm, cozy, and homey feeling for their rental property. Incredibly versatile in design, textures, colors, and quality ensures that there are carpeting options to suit all types of tastes. Comparing carpet vs vinyl flooring, carpets are a cost-effective flooring solution for rental properties.
When to hire a professional cleaning company?
As a rental landlord, you probably experience high anxiety levels every time your rental units are empty. When an old tenant leaves, their security deposit is often not enough to cover significant renovations. If your apartment is beautifully maintained, your turnaround time between tenants should be low, thus ensuring you receive an income from your real estate investment.
A big part of taking responsibility for maintaining an apartment is ensuring that your rental unit is clean and in good condition. Without furniture in the unit, a potential renter may focus on the walls and floors, looking for any flaw or damages to bargain and bring down the price. There may be a small carpet stain, for example.
Choosing to clean the carpet is a solution any landlord can offer. However, a professional cleaning company should be the go-to option between tenants. These companies have the tools and know-how to deep clean and remove stains in the shortest possible time and safely without any damage to the carpet.
Deep clean rental property carpets
There are three main ways to go about cleaning the carpet in a rental unit, all of which use the method of extracting dirt from the carpet with suction. A landlord’s preferred option will be based on various factors, including their budget, the carpets’ age, type of carpet stain, environmental concerns, and more. Look at these three examples and choose the one that suits you best.
Commercial grade carpet cleaners:
- Hot Water Extraction – The JaniLink portable carpet extractor machine is a potent tool to use when you want a deep clean carpet and get rid of debris, dust, and dirt. Hot water is an environmentally friendly option, and you can choose whether or not you want to add in any cleaning agents or chemicals. Water is pushed into the carpet at high pressure dislodging dirt, and then sucked back out with a strong vacuum. The final result is a reduction in odors and residue-free carpeting. The only downside, of course, is the price.
PRO TIP – Don’t confuse hot water extraction and utilizing a steam cleaner. Though they are similar, hot water extraction uses less water and offers excellent results. It also reduces shrinkage or visible damage to the carpet.
- Cold Water Extraction – When a rental landlord chooses to deep clean carpets themselves, cold water extraction is a safe and effective option. One tool that always gets the job done is the CleanFreak ® Non-Heated Rug & Carpet Cleaning Machine. From a health perspective, there is no need to worry about inhaling chemicals, since there is no steam. Furthermore, drying time is cut down significantly, allowing the carpet to revert to its natural dry state faster. They use less power, making them more cost-effective too. A cold water extraction is a fantastic option if a quick turnaround time between tenants is needed.
PRO TIP – There is one primary instance when cold water extraction may be ineffective, and that is if there is a high soil load on the carpet. Cold water extraction is better suited to cleaning rather than deep stain removal.
- Dry Extraction – Sometimes, you do not need to do a deep clean on the entire carpet. When focusing on just one small area, then dry extraction is ideal. With dry extraction, a chemical-based cleaner in dry or crystal form is sprinkled over the area that you want to clean. It acts by absorbing grime, grease, and dirt. After a set time, these crystals are vacuumed, and all the dirt is extracted. The Von Schrader LMX Low Moisture Soil Extraction System an excellent heavy-duty option, ideal for large spaces. It’s also the most expensive on this list.
We use QuickBooks daily in our rental property business!
It’s used to invoice tenants for their rent, track expenses by property and unit number, and our tax advisor can log on anytime to get information he needs for processing taxes or analyzing our data for goal setting meetings!
QuickBooks is the #1 accounting software for small businesses, and today you can take advantage of 30% off your first 6 months of QuickBooks Online using our exclusive Business Affiliate link.
Affordable cleaning options
Preventative care should always be your first line of defense against new stains. The second step is finding products and tools to remove stains. Removing carpet stains requires stain removal solutions that can permeate through dirt and eliminate it.
I personally own all the following tools I am going to recommend, and they do wonders for the numerous carpets and rugs I’ve maintained over the years. If you do any cleaning yourself, or hire your own cleaning crew, these items are a must.
- Stain Protector – Scotchgard Rug & Carpet Protector should be the first level of defense for any spills or stains on carpets. It protects carpets or rugs by creating an invisible layer of protection – making it easier to clean any spills when they happen. It can also be used together with Scotchgard Fabric Water Shield on expensive furniture, couches, curtains, and pillows. These two items are a must-have for costly carpets or furniture in your common areas.
- Vinegar and Water – Putting together one-part white vinegar and two parts water creates a fantastic cleaning solution. The vinegar causes a natural chemical reaction that draws out dirt from the carpet’s fibers. It is best applied using a spray bottle to direct the solution towards the stained area. Once you spray onto the carpet, leave it for thirty seconds to one minute. Combined with hot water extraction, this solution can eliminate even the most stubborn stains, including a red wine stain.
- Vacuum – For common areas or units less than 4,500 sq feat, I use the Dyson Cyclone V10 cordless vacuum. It lasts at least 45 minutes on a single charge and cleans exceptionally well. The best part is – it’s cordless. Convenience makes it much easier to clean small messes more often. The Dyson may be overkill, but I highly recommend a cordless vacuum, at least for your common areas.
PRO TIP – Buy the extended warranty or insurance protection from Amazon, Best Buy, Bed Bath & Beyond, Costco, or anywhere else with excellent protection or return policies. We’ve had to replace it once for a faulty battery after two years.
- Carpet wash cleaner – Instead of hiring a costly carpet cleaning company, you can try doing it yourself. An affordable carpet cleaning machine will thoroughly clean your carpets with a combination of water and soap. Use the Hoover AH30925 Paws & Claws Deep Cleaning Carpet Shampoo with the Hoover FH52000 Smartwash carpet cleaner for great results. Other great options are any of these upright carpet cleaners reviewed by Wirecutter, mostly for residential use.
How to remove smells from carpet
Pungent smells can be a real turn-off for any tenant, leading to discomfort and, in rare cases, illness. When carrying out a deep clean, begin the process by making use of baking soda. Sprinkle the baking soda over the entire carpet and lightly brush it into the carpet using a brush or broom. Once it’s spread, allow the baking soda to stay in place for at least 36 hours. Finish off the process by vacuuming up the baking soda and finishing off with cold or hot extraction.
This solution should work well with most odors, though sometimes, a faint hint of the smell still lingers. For a total deep odor extraction, create a solution that includes one part isopropyl alcohol, one part vinegar, and one part carpet shampoo. Top up this mix with water and use it with a hot water extractor or carpet steamer.
PRO TIP – Add a few drops of essential oils into your deep odor extraction mixture, and in addition to getting rid of an offensive odor, you will introduce a calming or fresh scent to the carpets. Excellent options are orange, lemon, or lavender essential oils. You can also try an ozone generator which is an all-purpose mold and odor removal tool I personally use. Just make sure to vacate the area during and after the machine is on.
Buying vs. Renting a Carpet Cleaning Machine
Finding ways to save is always top of mind for the landlord or property manager.
Buying a carpet cleaning machine allows you to get the job done yourself, saving you thousands of dollars in the long term. Although it takes time away from you or your staff, it’s an excellent option for cleaning rental property carpets in multiple units. Expect to spend up to $3,000 on a top-of-the-line carpet cleaner. This usually makes sense if you have the time, and the cleaning machine will be used regularly by you or your staff.
Renting, on the other hand, allows you to get the very best carpet cleaner whenever needed. It’s more affordable in the short run, but it most likely will be more expensive in the long run, depending on how often you need it. The primary benefit is – you never need to worry about the machine breaking since you can always rent another one.
Another great option is to rent different carpet cleaning machines a few times and then buy your favorite one now that you’ve compared all the options.
Summary
The decision is ultimately yours – whether you choose to do it yourself and buy or rent your carpet cleaners or hire a professional cleaning company, it all comes down to 3 factors:
- Time
- Money
- Convenience
If you’re cleaning carpets weekly in your rental properties, you may want to invest in a good carpet cleaner and train your staff how to use it. Otherwise, it may be best to bring in a pro every once in a while and not have to deal with it.
Either way, regular maintenance and upkeep could extend the life of your carpets and keep them looking new for longer.
You also want to make sure your next tenant has no complaints or negotiating leverage because of a stained carpet.
Before taking in your next tenant, you should conduct detailed tenant screening with background checks to ensure that they hopefully won’t cause any trouble or damages to your beautifully cleaned carpets! And if they do, you might be able to charge them for cleaning or damages.
Did you enjoy this article?
This is an example of what is included on our FREE weekly newsletter, Landlord Weekly.
Subscribers get access to our free forms, email templates, and guides! As well as…
▪️Landlord Tips ▪️ Early Access to Our Blogs ▪️ Landlord Specific Articles by Other Industry Pro’s ▪️ Podcast Links To check out a sample of our newsletter, click one of the links below👇
Article written by Tom Wheelwright®, CPA
Growing up, I watched my mom and dad manage a small rental portfolio alongside their primary business. The properties were close enough to our house that my dad handled most of the upkeep, and I got an early lesson in what it means to be a landlord.
When I became a CPA, I learned the full beauty of owning rental properties and am now on a mission to help investors of all sizes unlock the power of tax-free wealth.
In almost every country, the government strongly encourages investing in real estate by offering tax credits and deductions. Investors who use these incentives reduce their taxes, freeing up cash to invest and build wealth.
Here are the top ten tax credits and deductions that can help you maximize rental property profits.
- TAKE THE HOME OFFICE DEDUCTION
Unlike W-2 employees who burn the midnight oil from home, business owners may deduct the expenses associated with having a home office from their taxes. Yet far too many people fail to take this deduction. Work with a CPA who will help you use and document your home office expenses correctly so you don’t miss out. - DEDUCT YOUR TRAVEL EXPENSES
Once you’ve established that your primary office is at home, your deductible travel expenses will increase significantly. Whether you’re driving locally to meet with tenants, check on properties, oversee maintenance, or flying across the country to manage a far-flung portfolio and/or search for a new property, business travel is a significant deduction. - INCLUDE ALL OF YOUR VEHICLE EXPENSES
This category is a little complex, so it deserves a place on the list separate from travel expenses. If you use your vehicle for rental activities, such as driving to your properties or picking up supplies, you can claim either the standard mileage rate or actual expenses like gas, maintenance and depreciation. Work with your CPA to determine which is better for you. - DON’T SKIMP ON PROPERTY MARKETING
Advertising is crucial to attracting tenants. Any money you spend on marketing your rental properties, such as online listings, brochures, etc., is fully deductible. - DEDUCT ANY MANAGEMENT FEES
If you hire a property manager to handle day-to-day operations, their fees can be deducted. This also applies to fees paid to attorneys, accountants and other professionals related to your rental business.
Looking for the next level of landlord software before handing off to a property manager?
Hemlane is a software that is built to grow with your needs as a landlord.
For a minimal amount, there’s a really good basic package but what we love is the option to upgrade and add 24/7 maintenance management on.
Hemlane offers complete financial support as well. You can link multiple bank accounts for direct deposit rent payments, add automatic late fees, sends reminder notifications to your tenants, and has a detailed profit and loss statement that can includes automatic and manual uploads of income and expenses.
It gets better! If you reach a place where you are ready to hand off management to a property manager, Hemlane has that too under their “Complete” option.
You can try Hemlane out FREE for 14 days (no credit card required) to see if it’s a good fit for you!
- DEDUCT YOUR PASSIVE LOSSES While no one likes losses, losses on an apartment rental can offset other income, reducing your overall tax bill. Typically, rental real estate losses are considered passive and must offset other passive income. If your only other sources of income are active, don’t throw in the towel on this item. Work with your tax advisor to see how to restructure your active income to create passive income.
- USE COST SEGREGATION AND BONUS DEPRECIATIONI speak with a lot of real estate investors every year, and I continue to be shocked by how many people avoid a cost segregation analysis because someone told them it would get them flagged for an IRS audit. This is terrible advice (and often a sign the investor needs a new CPA). Cost segregation, coupled with bonus depreciation, is the correct way to depreciate your investment — saving you aton on taxes.
- ADD ELECTRIC VEHICLE CHARGING
STATIONS
Governments offer substantial incentives to people willing to help build infrastructure to support switching from gas to electric vehicles. If you qualify for these tax credits, it’s an excellent opportunity to get the government to help pay for an upgrade to your property that will help you appeal to tenants who drive EVs. - INSTALL A SOLAR POWER SYSTEM
Like charging stations, solar systems come with great tax incentives right now. The federal
investment tax credit for solar systems is 30% through 2032, and bonus depreciation is still available. Use these incentives to get the government to help pay for another property upgrade. - HIRE YOUR KIDS
Rental properties need a lot of regular, unskilled maintenance. Hiring your teenage children to handle basic landscaping, snow removal and other tasks can be a great solution. You’ll deduct the expense of the wages you pay them, and they’ll earn money that’s taxed at a lower rate than yours. Who knows? You could inspire your kids with a love of real estate, just like my mom and dad did.
Did you enjoy this article?
This is an example of what is included on our FREE weekly newsletter, Landlord Weekly.
Subscribers get access to our free forms, email templates, and guides! As well as…
▪️Landlord Tips ▪️ Early Access to Our Blogs ▪️ Landlord Specific Articles by Other Industry Pro’s ▪️ Podcast Links To check out a sample of our newsletter, click one of the links below👇