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If you’re like most real estate investors, tax season likely produces sweaty palms, an intimidating “to do” list, and an overwhelming sense of dread.
It doesn’t have to be this way. This is why we are discussing basic tax strategies early in the year so you can make the adjustments needed and do a little upfront work to self-educate on the “best practices” for tax strategy for rental property owners (which is why you’re here).
We are discussing valuable tax strategies you can implement now to minimize your 2024 tax bill—and maximize your annual revenue, making tax season actually enjoyable. After all, who doesn’t like found money?
From common everyday expenses to travel, home office, vehicles, and depreciation, we are going over all you need to know to maximize your deductions and have unexpected funds to use towards your next rental property.
LINKS
👉 QuickBooks Accounting Software. 30% OFF your first 6 months.
👉 Advanced Tax Strategies For Real Estate Book, by Amanda Han and Matthew MacFarland.
👉 12 Month Expanding File Folder (Accordion File)
👉 BiggerPockets: Real Estate Investor Community Forum
✔️State Specific Leases
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👉 IRS: Tips on Rental Real Estate Income, Deductions, and Recordkeeping
👉 IRS: Travel, Gifts, and Car Expenses (Pub 463)
👉 IRS: Residential Rental Property (Pub 527)
👉 CA Earthquake Brace and Bolt Program
👉Help other DIY landlords discover what we have to say… Please leave us a review of our podcast!
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Thank you to BiggerPockets for this informative article.
A real estate attorney is required at closing in many states. Even if your state doesn’t demand that a real estate lawyer appear, having a legal professional representing your interests is usually a good idea.
When you’re investing in real estate, finding the right lawyer is essential. Your real estate attorney assists you in navigating every aspect of the process. If legal issues arise in real estate transactions, you have someone who knows real estate laws fighting for you.
What Is a Real Estate Attorney?
As with doctors, lawyers have their own areas of specialization. While some attorneys are generalists, when buying and selling property, you should hire a true real estate lawyer to advise you and protect your interests. Such an attorney is well-versed in property law concerning state laws.
If you are considering investing out of state, look for attorneys licensed to practice in other states.
What Does a Real Estate Attorney Do?
A real estate attorney represents you in all matters related to real estate law. Your real estate attorney’s role may include the following tasks:
Legal documents preparation
Even simple real estate transactions can involve substantial paperwork. More complicated situations only increase the sheer volume of legal documents.
For instance, a real estate lawyer arranges with a title company to conduct a title search. The property must have a clear title with no third-party claims. Once the title company provides a report, your real estate attorney reviews it and works with your mortgage lender or other relevant parties if any title issues exist.
Ensuring all legal documentation is correct is a primary role of real estate attorneys. Real estate is likely your biggest investment. Working with a licensed attorney is critical.
Make your business an LLC
Structuring your business as an LLC can bring important advantages: It lets you limit your personal liability for business debts and simplify your taxes.
With NOLO, you’ll find the key legal forms you need to create a single-member or multi-member LLC in your state, including:
- LLC articles of organization
- operating agreement for member-managed LLC
- operating agreement for manager-managed LLC
- LLC reservation of name letter, and
- minutes of meeting form.
Form Your Own Limited Liability Company has easy-to-understand instructions, including how to create an operating agreement that covers how profits and losses are divided and major business decisions are made. You’ll also learn how to choose a unique LLC name that meets state legal requirements and how to take care of ongoing legal and tax paperwork.
Contract review
During the review process, your lawyer should catch any errors in closing and other documents involved in the real estate transaction. The start of the deal is the real estate contract.
Often, a real estate agent draws up the initial contract. Real estate lawyers must review the purchase contract carefully, as it sets forth the buyer and seller’s obligations. The attorney then drafts riders, also known as amendments, for their clients’ needs. These amendments may involve financing and appraisal contingencies, personal property included or excluded, and unique provisions affecting the property in question.
Dispute resolution
Real estate transactions don’t always run smoothly. Perhaps there is a lien on the property, a title issue, or a boundary question. Your real estate lawyer works to resolve these disputes so you can move forward with your real estate transaction.
Business formation
Using the right business formation for investment properties protects you from liability. Your real estate lawyer will work with you to determine whether an LLC, partnership, or some other type of business entity is best for your legal needs.
Financing and refinancing
A real estate attorney may advise you on mortgage financing and when to refinance your mortgage loan. They may work with a mortgage lender or commercial real estate lender to help with financing.
Real estate attorneys also guide you on related legal matters, such as tax implications when selling property.
Equity and debt investment structures
Real estate lawyers assist clients in the structure and management of their equity and debt, focusing on maximizing their returns.
Drafting tenant leases
Your real estate lawyer should draft a strong lease agreement for tenants to avoid potential disputes. All parties benefit from a clear lease agreement that protects their interests.
You could simply use a boilerplate lease agreement and save some money as a landlord. That’s a penny-wise and pound-foolish, as a professional with a thorough knowledge of real estate law ensures your real property is as fully protected as the law allows.
Dealing with tenant complaints
When a tenant complains, you must know whether that complaint is legitimate according to the terms of the lease or applicable local, state, or federal law. Your lawyer will explain landlords’ and tenants’ legal rights and responsibilities and whether the complaint breaches the lease agreement.
The attorney will act to resolve the complaint before it escalates into costly litigation.
Property tax advice
Real property ownership means paying property taxes. Your current property taxes may not reflect the realities of the market. Your lawyer can advise you about filing a property tax appeal to fight an overvalued assessment.
Benefits of Partnering With a Real Estate Attorney
When you partner with a real estate attorney for your investment properties, they can handle virtually all of the process. That leaves you, as the investor, more time to concentrate on obtaining a good return on the investment.
If problems arise before, during, or after the purchase of a property, you can rely on your real estate lawyer to sort them out.
Real estate attorneys will advise you about backing out of a deal and avoiding a costly mistake.
The bottom line is that the real estate attorney you hire is always working to protect your best interests.
How Much Does a Real Estate Attorney Cost?
A real estate attorney’s services may be inexpensive, but remember, you get what you pay for. How much you can afford in legal fees is one of the first things you should determine when considering hiring a lawyer for your investment team.
A real estate lawyer may charge you hourly or flat rates. Remember that while a more experienced real estate attorney will charge higher fees, their expertise is worth it.
How To Find a Real Estate Attorney
You can always find a real estate attorney online. Googling is a great way to get started, but the goal is to find a good real estate lawyer, not an average attorney.
Your best bet is often asking for recommendations from those in the real estate industry, such as a real estate agent or fellow real estate investor. They know the best real estate attorneys in your area. Friends or family with real estate experience are another good source of advice.
Look for lawyers with experience in your particular field. For instance, if you’re investing in commercial property, look for attorneys specializing in that domain. Some real estate lawyers are generalists, doing whatever real estate work comes their way. Because the various realms of real estate investing are so different, these attorneys are more likely to make mistakes. They are not necessarily experts in real estate law.
Rather than go with a larger firm, check out smaller practices. You will work directly with one attorney rather than being delegated to less experienced associates at larger firms.
What To Ask a Real Estate Attorney
Conduct interviews before deciding on whom to hire as a real estate attorney. You seek a long-term professional advisor, so you must know exactly what to expect. Ask the following questions:
- What is your fee schedule? Do you charge a flat fee or an hourly rate?
- Where did you go to law school?
- What is your experience with either residential, commercial, or industrial real estate investing?
- How many real estate transactions have you closed?
- Do you go to court regularly to handle evictions?
- Do you have any potential conflicts of interest?
Save Money in the Long Run With a Real Estate Attorney
Legal fees aren’t cheap, but they are far less expensive than losing a property due to an avoidable legal problem. After all, real estate investing aims to maximize profits while reducing risks. The right real estate attorney helps to fulfill both objectives.
By hiring a real estate attorney as part of your investment team, you should save money over the long term. That’s because the work of the attorney you hire can limit future problems.
Once a real estate attorney is hired, you have someone to advise you on every aspect of your investment strategy while protecting your interests. Smart investors know how valuable the services of a lawyer are when dealing with complicated legal matters pertaining to property.
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Even if you spend hours washing the floor, dusting furniture, and vacuuming the nooks and crannies around your home, your home isn’t really clean until you attend to the grime, dust, and pet hair that has accumulated on the baseboards. Cleaning the trim around the floors in your home should be done at least seasonally. Because vacuuming, mopping, and other household chores stir up dust, you’ll want to save the baseboards for last if you don’t want to clean your baseboards twice.
TOOLS & MATERIALS
- Vacuum
- Sponge
- Dish soap
- Vinegar
- Wood cleaner
- Cotton swabs
- Dryer sheets
- Duster
- Dust rags
- Mr. Clean Magic Eraser
- Baby wipes
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Before You Begin
For a lighter cleaning, there’s no need to move furniture, but be sure to check for visible grime wherever the baseboard heads behind a piece of furniture. If you can see the dirt, everyone else can too.
Step 1: Vacuum the area.
Photo: istockphoto.com
Begin the process by removing as much dust and dirt as you can from the area. If your vacuum has a brush attachment, use it to suction along the length of the baseboards. Pay special attention to the crevice where the trim meets the floor. In lieu of a vacuum, you can rely on a duster or dust rag to do a decent job of freeing up debris, which you can then corral and remove with a broom and dustpan.
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!
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Step 2: Wipe down the baseboards.
Once you’ve removed all loose dirt and dust, you can begin to address stains and stuck-on grime. (Particularly in the kitchen, baseboards are the notorious hosts of unidentifiable splatters.)
Dip a sponge or rag into a mixture of warm water and dish soap (vinegar works well too), then go about scrubbing any marks that you can find. Alternatively, consider using a Mr. Clean Magic Eraser. If you’re in a hurry, you can just run a baby wipe over the trim. Note that if the baseboards are stained, not painted, it may be better to use a cleaning solution formulated specifically for that application.
Step 3: Clean the crevices.
We know a good trick to cleaning baseboards in those hard-to-reach-spots, like the crevice between the trim and flooring. Just grab a cotton swab from the bathroom and dip it in the cleaning solution, gently wiping away the dirt. The swab is small enough to fit into those tight spaces and corners, and absorbent enough for cleaning. A toothbrush can also come in handy for getting gunk out of crevices and corners, and it’s particularly good at loosening dirt stuck to the caulk.
Step 4: Rub the baseboard with a dryer sheet.
Photo: prohousekeepers.com
Once the baseboards are clean, here’s how to keep them dust- and hair-free: Rub them with a dryer sheet. Not only will this leave a fresh scent that lasts a few days, but the sheet’s antistatic properties also repel dust.
Baseboard Cleaning Tips
Photo: istockphoto.com
- Clean your baseboards about once a month.
- If your baseboards are particularly dusty, you may need to run the vacuum or a broom over the surrounding floors a second time after your baseboard cleaning.
- If moving heavy furniture isn’t feasible in your situation, try using a duster on a long handle to reach behind it. Some duster kits come with extension poles that are ideal for this purpose.
- As always, consider the environment when cleaning your home, choosing nontoxic products when possible.
Final Thoughts
Even if your baseboards are so grimy that you’re tempted to tear them out and replace them at any cost, there’s really no need for such drastic measures. While cleaning baseboards isn’t the most enjoyable task, with the tools mentioned above plus a little elbow grease, your trim will look as good as new.
Article provided by Bob Vila and Gretchen Heber
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As we enter the new year, it is crucial for professionals in the property management industry to recognize the vital importance of fair housing education. A well-rounded understanding of fair housing laws and practices is not just a best practice but a fundamental aspect of professional development that can significantly impact the success and integrity of your business.
Understanding the Essence of Fair Housing Training
Fair housing education goes beyond mere compliance. It represents an investment in your company’s future. Thorough training ensures that every team member is equipped with the knowledge to navigate complex situations, uphold the law, and provide exemplary service to prospects and residents from diverse backgrounds.
The Importance of Comprehensive Training
Superficial or incomplete training methods may seem sufficient in the short term, but they fail to impart the deep understanding necessary to handle real-world scenarios effectively. Effective fair housing training involves more than just taking a quick free course or watching a few basic videos.
A comprehensive training program includes detailed courses, engaging content, and practical assessments that ensure retention and understanding. It should encompass a range of learning methods, including interactive sessions, case studies, and regular updates on new laws and best practices. This holistic approach ensures that employees not only learn but also internalize the principles of fair housing.
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Identifying Areas for Improvement
Regular evaluations of your training program are essential. If employees are making mistakes or showing a lack of understanding, it could indicate the need for a more robust or engaging educational approach.
Another common misconception is that once trained, always trained. As we all know, fair housing can be very complicated to navigate. Add to that the fact that emerging court cases can create new precedents, resulting in adjustments to understanding or even complete law changes. As a result, more and more companies are shifting to annual training. The benefits of this are easily identifiable. Having a team that is fully and annually trained reduces the risks of a costly fair housing complaint, some of which can cost into the millions of dollars.
The Cost of Not Training
The cost of defending a fair housing complaint can vary significantly based on the specifics of each case. Defending against a fair housing complaint can involve significant legal fees, compensatory damages for the plaintiff, along with civil penalties.
Beyond monetary penalties, there can be other costs like the impact on a company’s or landlord’s reputation, as HUD keeps a public record of all charges filed through them. This can affect future resident relations and business operations.
Commitment to Continuous Learning
The dynamic nature of fair housing laws and the diverse challenges faced in property management require a commitment to continuous learning. As we embark on a new year, it’s the perfect time to assess, update, and improve your fair housing training programs. This will not only protect your company from potential legal issues but also foster a culture of respect, inclusion, and excellence in service.
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Thank you to the Fair Housing Institute for providing this informative article!
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So, you know how there’s laws in most states now pertaining to the health and safety of rental properties using smoke detectors, dealing with mold, about lead based paint, and how to handle tenants with bed bugs?
Several years ago, California passed a law, SB-721 which basically said rental property owners of certain sized properties had to have their decks and balconies inspected and remedied by 2025 and then within every 5 years thereafter.
This was in response to a deadly balcony collapse with several other instances across the state severely injuring people just hanging out to have a good time.
The point is, many other states have also experienced deaths and serious injuries from decks and balconies that collapsed since California has passed this law. Now, those states are now following suit to force landlords to repair dry rotted or damaged decks or balconies.
And this my friends is the subject of this week’s podcast.
You may think it doesn’t apply to you but at some point, it will.
It’s risk management at its best!
Listen to what we have to say about the law pertaining to deck and balcony inspections regardless of what state your rental property is in.
LINKS
👉 Apartment Maintenance Guide, Deck and Balcony Inspections
👉 Get your California deck and balcony inspected! Call Dan Cronk and let him know Your Landlord Resource sent you!
(916) 238-0618
DAN@DECKANDBALCONYINSPECTIONS.COM
👉 California Senate Bill 721: Building Standards, Decks and Balcony Inspection
👉 SB-326: Condominium Complex Health and Safety Code for Decks and Balcony’s
👉 San Francisco Housing Code 604
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The most important person in your financial life — outside of your spouse if you’re married — is your tax advisor. Taxes represent one of the largest expenses you’ll face in your lifetime. And, if you understand the tax law, they are also one of the most straightforward expenses to reduce.
The right tax advisor will work with you to design our real estate business in a way that helps you reach your financial goals while legally (and permanently) reducing or eliminating your taxes. Choose the wrong advisor, and you’ll find yourself paying more taxes and missing out on some great wealth-building opportunities by investing in ways the government incentivizes. What exactly does the right advisor look like? As you evaluate your options, here is a guide with seven questions to consider when hiring a real estate tax CPA.
1. What are their credentials?
It’s easy to call yourself a tax advisor. You want to avoid someone who claims to be a tax advisor simply because they are authorized to prepare federal tax returns. Instead, look for a Certified Public Accountant specializing in tax.
2. What system do they use for tax reduction?
The best advisors don’t just rely on their knowledge and experience; they follow a proven system for permanent tax reduction. A top-notch CPA should be able to show you evidence that they’ve used this system for many clients with real estate investments. Working with someone who consistently replicates results is a far better predictor of your future success than partnering with an advisor who operates without a system.
3. Who is in their network?
A top-notch real estate tax CPA is not an island. They are connected to a strong network of specialists, including real estate attorneys, mortgage brokers, cost segregation specialists, insurance brokers and more. As your financial plans evolve and become more complex, having access to this vast pool of expertise can prove invaluable.
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.
4. How often will we meet?
To be a true advisor, your CPA should meet with you throughout the year, not just at tax time. You’re looking for someone who will proactively reach out to offer new ideas, get regular updates on your business and check in on your long-term goals. As a rule of thumb, something is wrong if you visit your dentist more often than you speak with your tax advisor.
5. How will they handle an IRS audit?
If you do become audited, you deserve an experienced tax advisor who will go to bat for you and your business. Ask prospective CPAs to share examples of how they’ve handled client audits. If a CPA suggests skipping legitimate tax deductions to avoid an audit, look for a different CPA. You want a CPA who isn’t afraid of the IRS, who will handle all communication with the agency and who is comfortable with the process.
6. What do they think about real estate?
Any good tax advisor loves real estate. It’s one of the best investments you can make to create wealth while permanently reducing taxes. As you listen to the response to this question, also look for signs that the CPA has an entrepreneurial mindset. A CPA who thinks like an entrepreneur can be a game-changer. They will be more innovative when it comes to helping you accomplish your financial goals.
7. Can I check their background?
Before hiring a real estate tax CPA, it’s crucial to conduct a thorough background check. This process should involve checking their credentials, verifying their license, reviewing client testimonials, and even checking for any disciplinary actions or complaints.
THE BOTTOM LINE
Finding the right real estate tax CPA involves more than choosing someone with an impressive resume. It’s about finding a strategic partner who can help you navigate the complex world of real estate taxes, leverage opportunities and ultimately build wealth. By asking these seven questions, you’ll be well on your way to finding a CPA who can take your real estate investment game to the next level.
Provided by Rent Magazine, written by Tom Wheelwright, CPA CEO WeathAbility
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Provide long-term income and boost your home’s value with an income suite or rentable accessory dwelling unit.
Installing an independent housing unit at your property can be a big investment, but if planned well, an income suite (also known as an in-law suite or accessory dwelling unit), can be a terrific way to pay down a mortgage faster, build equity in a home, and increase its resale value. However, there are 10 important things to consider before installing an income suite in your home or property to ensure that you and your tenants have a positive experience.
1. Do you want to be a landlord?
Whether your plan is to have a long-term or short-term rental, being a landlord requires work and effort. Plus, a landlord’s duties often come at short notice or inconvenient times. Tasks can include screening potential tenants, performing regular maintenance work, handling repairs, and dealing with disputes or rental payment problems. Think about whether you are willing to put in the work yourself or if you might prefer to hire a property manager to care for your rental management duties.
2. What are the laws regarding landlords and tenants in your area?
Familiarize yourself with the laws governing residential tenants and landlords in your area. By knowing your rights and those of your tenant and understanding each person’s obligations, you can start the landlord-tenant relationship off on the right foot, avoid missteps, and have a plan in place for dealing with any potential disputes or legal issues.
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3. How will rental income affect your taxes?
Rental income can be a great way to increase your household revenue, but it’s not “free” money. The rent money you earn is subject to income tax. When you file your taxes, you can deduct from your rental income expenses incurred, such as repair costs, operating expenses, and utilities. You should also be aware that capital gains tax may apply if you sell your home, depending on how much rental income you earned while you owned it.
4. What will you be giving up?
Installing an income suite in your home or property may mean giving up more than just extra living space. Having tenants may also mean giving up a portion of your privacy, storage space, and perhaps even some peace and quiet. Consider how having tenants within your property may affect your daily life, and make sure you can live with the inconveniences that may be involved.
5. What are your local ordinances?
Before drawing up plans, research your local zoning laws and building codes. Some municipalities do not allow for certain types of accessory dwelling units, and many have very specific requirements on what constitutes a legal suite.
Your local zoning office can supply you with your jurisdiction’s requirements on things like ceiling height, windows, fire safety, and emergency exits. Make sure you know what you can and can’t do before you apply for building permits.
6. How much will the project cost?
Installing an income suite is a major project that can take a significant amount of time and money. Expect to spend anywhere from $40,000 up to $150,000 or more, depending on the size of the space, whether structural work is needed—such as digging out and underpinning a basement—and whether the suite is a standalone structure or within an existing home.
Resist the temptation to take shortcuts to contain costs. Protect yourself and your future tenants by including the time and money in your budget to do everything legally.
7. How will you access shared utilities?
Many houses have utility access in the basement, which could be a problem if you’re planning on renting the space. If possible, try to place utilities such as the furnace, electrical panel, and water shutoff in a shared space outside of the rental unit so that maintenance tasks and emergency work can happen without having to coordinate access to the unit with the tenant.
8. Will you share an HVAC system?
While most building codes allow for a single furnace to heat an entire house with more than one dwelling unit, you might want to consider installing a separate HVAC system for each unit. Sharing air ducts will likely mean also sharing cooking smells, scents, dust, and noise. Plus, having one thermostat controlling both units may be problematic if you and your tenants have different preferences for temperature.
9. Will you hire an architect or a contractor first?
If contractors in your area tend to book up quickly, you may be tempted to find one before you get an architect to draw up the plans. But hiring an architect first is almost always the wisest course, as the money you spend upfront for an architect can be balanced out by bids from builders that are more accurate and easier to compare.
If you’re not interested in bidding out your project, consider working with a design-build firm. By hiring an architect and contractor at one firm, it may also help smooth the permit and inspection processes.
10. If you were your tenant, what would you want?
Not only do you want your rental unit to be up-to-code and above-board, but you also want it to be comfortable and a pleasure to live in. Long-term tenant
turnover zaps rental profit and adds heaps to your workload, so once you find quality tenants, it’s ideal when they stay a long time.
As you design your income suite, think about how you would use the space if you were living there. For example, if the kitchen area is limited, would you rather an 18-inch stove and 24-inch fridge, or vice versa? If you only had room for either a dishwasher or a laundry machine, which would you choose?
Article provided by Bob Villa. Written by Jahleen Turnbull-Sousa.
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In 2004, I was living in NYC when I decided to start a new career. To identify potential business opportunities, I thought about some of the more frustrating experiences I’d had. I quickly narrowed the list to buying investment properties.
The problem was that all real estate agents could do was send me MLS data sheets for the properties I selected; no analytics, processes, or services. I had to do everything myself. This was time-consuming, and I made frustrating mistakes that cost me time and money to correct later.
So, there was a business opportunity. Now, I need to know where to create this business (not New York or New Jersey).
How I Did My Analysis
I started researching how retail store chains select locations for new stores. Based on my research, I determined the sequence of events necessary for success, as shown in the chart.
My first decision was location. Based on my research, I selected Las Vegas.
The next step was to determine the right tenant pool segment to target. This step is crucial because the only way to have a reliable income is if reliable tenants continuously occupy the property. A reliable tenant stays for many years, always pays the rent on schedule, and takes good care of the property.
Based on my experience with rental properties and what I learned from others, reliable tenants are the exception, not the norm. Because my clients and I plan to hold these properties for many years, we will need multiple reliable tenants throughout the hold time. The best way to increase the chances of always having a reliable tenant is to purchase properties that attract people from a segment with a high concentration of reliable people.
Therefore, my task was to find a tenant segment with a high concentration of reliable tenants.
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As an engineer, I used the standard approach of analyzing data. I tried various (paid and free) data sets and wrote a lot of software, but (I would be embarrassed to tell you how long I persisted) I finally decided that classic data analysis would not work. The fundamental problem is that humans do not behave algorithmically. So, I ditched this approach.
Next, I decided to mine historical rental data to understand past tenant behaviors. I downloaded about 10 years of MLS rental history data and started over. I tried many things (that failed), and then I plotted monthly rent versus length of stay.
The result was similar to the chart, showing a strong correlation between how long a tenant stays in the property and the amount of rent. This was the starting point I had been searching for.
I investigated the segment of tenants who stayed over five years, converting the low and upper rent range of properties they occupied to approximate gross monthly income using monthly rent/30% = gross monthly wage.
I next interviewed property managers and cruised job boards to determine probable jobs based on gross monthly income. By doing this, I concluded that people earning below a certain wage tended to have lower-skilled jobs, which made them vulnerable to layoffs during economic downturns. Therefore, I raised the lower-income threshold above this wage.
I next looked at the upper-end income range and determined that jobs above a certain wage were primarily administrative. These workers would also be laid off during economic downturns. So, I lowered the upper-income threshold below this wage level.
The result was a narrow wage/rent range that I believed to have secure jobs due to the nature of their work, as shown in the chart.
Each tenant segment has specific housing requirements and is unlikely to rent a property if it does not meet all their requirements. So if you buy a property that matches the housing requirements of a specific tenant segment, most of the applicants will be from that segment.
Creating a Property Profile
To determine the characteristics of properties that would attract my target tenant segment, I used data analytics to determine what and where they rent today. From this, I created what I refer to as a property profile.
A property profile is a physical description of the properties that this segment is currently renting. It has at least four elements:
- Location: The locations where significant percentages of the target segment are renting today.
- Property type: What type of properties are they renting today? Condo, high-rise, multifamily, single-family?
- Rent range: What the segment is willing and able to pay.
- Configuration: Two bedrooms, three-car garage, large backyard, single-story, two stories?
I ran correlations between properties identified by the property profile and actual historical rental data and found a high correlation between the two. After so long, I thought I had what I needed.
And then reality came crashing down.
The issue was that numerous new listings entered the market daily, and the most desirable properties often went under contract within two to three days. This left us only 24 to 36 hours after a property was listed to identify it as a potential option, evaluate it, gather analytical information, and submit an offer.
Doing this process manually for hundreds of properties each day was impossible. So, once again, I turned to data analytics.
Our Data Mining Engine
I’ve worked on data mining engines for investment property selection since 2007. All the algorithms I tried were similar to what Rentometer, Zillow, and Opendoor were using, which was not nearly good enough to make purchase decisions.
Finally, around 2015, I discovered a very different methodology to find good properties. I am still enhancing that software to this day.
Our data mining engine architecture is illustrated here.
After years of improvements, the engine can now find the small number of potential investment properties from among thousands in less than five minutes.
However, data analytics can only go so far because software only deals with data, and we are dealing with humans.
I next put together a team and processes that took the output of the data mining engine and selected properties that matched individual clients’ requirements. These properties are then rigorously evaluated by a team of experts, as illustrated in the chart.
Only if a property matches the client’s requirements and passes evaluation by multiple team members do we send the client a property report containing the analytical information they need to make an informed decision. Due to our software, processes, and team members, we can evaluate numerous properties in a single day and present our clients with actionable information on properties that match their individual profiles within that same day.
Our clients feel our data analytics and processes are effective.
Final Thoughts
Data analytics and processes are the cornerstone of our business. Without data analytics, we could not find the properties needed to meet our client’s specific financial goals. Also, we could not evaluate properties fast enough to make offers before they were gone.
Provided by Bigger Pockets. Written by: Eric Fernwood
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Every new year we all want to focus on some level of change. Maybe it’s to lose weight, read more books, be more active, or grow your business.
Hey, we are right there with most of these people! But over the years we have learned various ways that work well for us and it’s not by creating overzealous and rarely achievable resolutions.
In this episode we are connecting some real-life habits that have helped us in our personal lives which have automatically transferred over to boost our professional focuses as well.
We use common examples for each of the tactics and how they can help landlords achieve organization, strategy, confidence, and growth in their rental property business.
Here is a quick summary of what we discuss:
We talk about intentions and how small actionable steps can help you realistically reach goals you have set for yourself, either personally or professionally.
Then we discuss how decision-making and the choices you make affect the way you achieve those goals. But also, those choices are necessary and if the results don’t work out as planned, you have to adapt and pivot by using those results as a guide on what to or not to do.
The conversation then goes into learning to be flexible, being organized and ways to create more time so you can work on your goals.
Maybe you need to hear this, maybe you’re doing ok but can use a refresher, regardless, we are here to walk you through making this new year, develop a new landlord mindset!
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In recent years, emotional support animals (ESAs) have become an increasingly important part of the administrative tasks involved in managing a rental property. As more and more tenants bring ESAs onto the property, landlords need to become more aware of the emotional well-being of residents and the need for a structured and equitable ESA verification process.
This post covers the evolving landscape of ESA verification and explores how pet management software can revolutionize the verification process while ensuring fairness for all residents.
Understanding the Importance of Fairness
When it comes to support animals, fairness isn’t just a moral obligation; it’s a legal requirement. Treating all residents equally (whether they present with support animals or not) is important to ensure that everyone is offered equal opportunity to housing under the law. Federal guidelines provide clear and standardized procedures for ESA verification. Ultimately, these rules serve to benefit both residents and property managers by creating a level playing field and protecting landlords from potential legal disputes.
Fairness also has a tangible impact on resident satisfaction. When residents feel that their ESA requests are handled fairly and consistently, they are more likely to be content with their living situations. This, in turn, leads to a more harmonious community, reduced conflicts with management, and a more productive rental experience for everyone involved.
Respecting HUD Guidelines
The U.S. Department of Housing and Urban Development (HUD) plays a pivotal role in providing guidelines for ESA verification in rental properties. HUD’s guidelines are designed to ensure that individuals with disabilities have equal housing opportunities, including the right to keep an ESA in their homes. Property managers must adhere to these guidelines to both protect themselves from legal issues and promote equality among all residents.
A key aspect of HUD guidelines is recognizing the importance of emotional support animals in providing therapeutic benefits to individuals with disabilities. Property managers should accept reasonable accommodation requests from residents with disabilities and refrain from imposing unnecessary barriers. By understanding and implementing HUD guidelines, property managers can align their practices with federal regulations and maintain an environment of fairness and inclusivity within their rental properties.
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Confidentiality and Privacy
Respecting the privacy and confidentiality of all residents is an important part of the ESA verification process. This respect upholds ethical standards and protects against potential legal issues. Residents have a right to keep their ESA-related information private, and property managers should ensure that their application information and any related documentation are handled discreetly and securely.
During the verification process, any questions related to an individual disability should be avoided as they can infringe upon a resident’s right to privacy.
The Role of Pet Management Software in Ensuring Fairness
More and more property owners have chosen to invest in pet management software to ensure a fair and compliant ESA verification process. The right applications can streamline the entire process, reducing the burden on both residents and property staff. Additionally, many platforms offer several exceptional features right out of the box, such as centralized documentation storage, communication tools, and automation of administrative tasks. By providing property managers with a structured, consistent approach to ESA verification, pet management software minimizes the risk of discrimination and ensures that all residents are treated fairly and equally.
On popular application, OurPetPolicy, is a leading solution in helping property managers ensure fairness in ESA verification.
Bottom Line
The importance of following federal guidelines and ensuring fairness in the ESA verification process cannot be overstated. Ultimately, it’s up to property managers to implement approaches that allow for a more inclusive, transparent, and harmonious living environment for all residents while avoiding unnecessary legal complications.
That’s where ESA verification platforms can help. OurPetPolicy in particular is an ideal solution that allows landlords to confidently manage ESA accommodation requests while upholding the highest standards of fairness and compliance. Additionally, OurPetPolicy’s proprietary technology helps to streamline the verification process while also providing centralized documentation storage, resident communication channels, task automation, and many other useful features.
Take charge of your ESA verification process. Get started with OurPetPolicy today! If you let them know that Your Landlord Resource referred you, you will receive a discount of 75 cents off per pet each month they are managed! Doesn’t seem like much but as you add more pets, that adds up each month!
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