CT Real Estate Today - May 2021 Edition by CT Real Estate Today

Tsunami of Evictions? - No! Tsunami of Deadbeat Tenants Seeking New Apartments? - Yes!

Should Housing Providers Accept Pets In Their Rental Units?

May 2021 Edition

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FEATURED ARTICLES Page: Pushed To The Brink - Eviction Moratorium Must Be Lifted: The eviction moratorium is negatively impacting both good tenants and landlords while inadvertently helping the renters that would have been evicted anyways.

News & Views From The Capitol - Connecticut’s Eviction Moratorium Will Be Extended Through At Least May 20th: Governor Ned Lamont has extended the eviction moratorium to May 20th and plans to keep it active until the public health emergency ends.

Realtor Report - The US Is 3.8 Million Homes Short of Buyer Demand: First time homebuyers are having trouble getting into the market as the housing inventory shortage continues. Prices for homes continue to soar.

Insurance Insights - Understanding Landlord Insurance: Rental properties require their own type of coverage - landlord insurance, which is different than the homeowners policy you buy when you live in the house yourself.

Page: Property Managements Tools, Tips & Techniques - Should Housing Providers Accept Pets In Their Rentals: Adriane Angel, the owner / broker of Pro Property Management, breaks down the pros and cons of allowing pets in your rental units.

Financially Speaking - Rental Property Tax Deductions: Being a landlord can significantly bolster your savings but it is a lot of work. Make sure you are taking full advantage of all the tax deductions you can use as a rental property owner.

Get Energy Efficient - Spring & Summer Energy Saving Tips: Spring is here and Summer is right around the corner! Here are some tips to saving money by being energy efficient.

The Legal Corner - 10 Legal Mistakes Landlords Should Avoid: There are common legal mistakes that landlords make that can have serious repercussions. Here are 10 common mistakes landlords make and tips to avoid falling into these traps.

Publisher’s Message “ Helping Property Owners Since 1994” - Bob De Cosmo, President

Bob DeCosmo began purchasing and managing rental real estate in 1982 and is a strong advocate for private property ownership right's in Connecticut.

Published by CTPOA Our goals; Educate our members on “Best Practices” for maximum efficiency. Increase profitability by lowering operating expenses via vendor discounts. Provide access to “Core Services” needed to better manage and maintain properties.

Our Team: Carmine DeCosmo Melissa DeCosmo Paul Jenney

Eviction Moratorium. One Year Later - What We Know So Far Tsunami of Evictions - No! Tsunami of Deadbeat Tenants Seeking New Apartments? - Yes! The American economy has been stimulated, perhaps even over-stimulated. With Federal Unemployment benefits being added to extended State benefits, businesses now face a perplexing problem - they cannot find workers! Many people are happy sitting at home earning $1,000 a week on unemployment. Why should they get up and work when they can collect this amount of money until September? Therein lies the problem, there is plenty of money floating around and there has been since late last spring. Today, most housing providers report they are hurting a bit, but they are surviving as most renters are trying to cooperate and pay. However, there are those property owners that will surely lose their property when the banks can foreclose because they have several tenants that normally survive by getting over on people. These are repeat eviction specialists who will simply not pay rent. The nonpaying tenants have been entrenched for over a year, living rent-free and there has been little ability for their landlord to remove them.

Daily I hear the same story. My tenant never lost their job (or lawful source of income), took advantage of the eviction moratorium and just stopped paying rent. Most of these debts exceed $10,000 and have caused tremendous financial harm to many property owners. Necessity being the mother of invention, COVID has led to the development of new tools to help housing providers identify non-compliant renters. TenantTracks now offers the ability to report through their screening service how timely a tenant pays their rent. It also tracks evictions in real time from notice-to quitserved to summons issued and other important situations like cash-for keys and late or partial rental payments. TenantTracks also provides its OPTIMUM-10 clients the ability to upload a tenant’s monthly rental payment history to the credit bureau, like a credit card payment. Additional tools now include the Landlord Collections Agency (LCA) which integrates with TenantTracks. Any collection account placed through LCA is prominently displayed on the tenant screening reports to warn the next housing provider that a previous landlord is owed rent. These new tools will help warn the housing provider community to be careful with whom they rent to. Another common call / complaint we receive is about the landlord and tenant relief program run by the CT Department of Housing. Almost everyone states it has been a huge disappointment thus far, leaving both landlord and tenant advocates scratching their heads and frustrated. The simple solution Is lifting the current CT Eviction Moratorium and let those facing eviction become eligible through the court mediation process for these relief funds. If a landlord cannot evict, then why would a tenant apply for the funds? Apparently, this simple fact was missed by our policy makers at the Department of Housing.

By: Bob DeCosmo, President of CTPOA Owning a home is a privilege. Having a roof over your head is one of life’s necessities along with eating food and drinking water. On April 10, 2020, Governor Lamont issued Executive Order 7-X and it impacted those that own rental property and tenants that reside in their apartments.

was just a big lie produced by the radicals that want free housing for all and hate private ownership of rental housing servicing the lowincome and working-class voters.

Why no tsunami of evictions? Just about every citizen that was legitimately working before Covid After a year, here’s how the Governor’s Order was not has impacted Connecticut’s apartment rental harmed industry. The eviction moratorium resulting financially. from 7-X has also produced the largest act of The “Government Takings” in Connecticut’s government history and is impacting housing, issued Federal Unemployment insurance, neighborhoods, and people’s lives in a produced three stimulus payments and States negative fashion. The eviction moratorium extended their own unemployment programs. was needed for a few months only. To extend Further, Section-8 never stopped paying rent, it over a year is out of line, overdue for repeal SSI Disability checks never stopped flowing, and helping nobody but tenants that are pension funds kept paying retirement benefits but the majority of the 19,000 tenants that scamming the system. get evicted annually in Connecticut before Most States have lifted their protective Covid simply refused to pay rent because now orders, 32 by last count and more are they could and basically the government said expected to do so soon. There has not been a it was okay! “Tsunami of Evictions” anywhere in the country as tenant advocates predicted. That

For over one-year, non-paying tenants have been holed up, living for free, without worry of eviction at a tremendous expense to housing providers. These “scammers” benefited because of a well-intended idea by an inexperienced Governor that requested input only from the Tenant Advocates before he made his policy decision.

Connecticut’s worst tenants for free.

Clearly before anyone gets elected to the office of Governor, they should have some previous experience in government. Lamont’s lack of political experience caused him to receive input on housing matters from the tenant advocates only. His team should have had the political expertise to ask for consultation from property managers and the housing providers before making his decision. Whenever communication from the housing providers was initiated with the Governor’s office, it simply fell on deaf ears. There was not any back and forth, no substantive dialogue, no let’s talk again tomorrow, in fact, it was a one-way conversation.

Extending the eviction moratorium just benefits the professional non-paying renter, criminals, squatters, drug dealers and gang members. One huge and completely overlooked fact is good tenants also want these troublesome “scammers’ out of their buildings as well.

Lamont didn’t force the grocery stores to provide free food for people or force the municipalities to stop charging for tap-water, both are also life-necessities. He just blew-up housing providers that continue to financially take it on the chin as we speak, and many will lose their properties because of his actions.

This Governor fails to recognize he has hurt tens of thousands of good tenants by forcing them to live with problem tenants. There will be a day that he’ll realize his mistake if he seeks re-election because the housing providers are now finally talking about organizing in a big way! Good tenants and good landlords form an invincible political Yes, this governor kicked rental property alignment, and payback may be painful for owners to the curb as a class of small business Lamont’s re-election efforts. owners and that’s actionable, a lawsuit was Making matters worse, he needs to extricate filed against the State in Federal Court and himself quickly before he’s responsible for that case is still pending. He has forced the more bloodshed of housing providers from governments’ will without fair compensation violent criminal acts. Unfortunately, yes, on housing providers to shelter most of tenants have murdered landlords recently in

rent disputes and more violence will occur the longer they can steal openly from housing providers without recourse. Lamont needs a solution, and the property owner community has just what he needs, a real solution that is a win-win for all. Instead of extending the eviction moratorium he needs to open the courts immediately. Connecticut received a large amount of federal Covid-Relief funds to help prevent homelessness. The problem is most tenants have been paying or trying to pay rent, those that are not trying are just abusing the system. At issue is the tenants that never lost their jobs or subsidies. The Governor’s well intended but misguided Executive Order 7-X wound up not protecting the renters in danger of being displaced by Covid, but it protected tenants that do have jobs and income but choose to gamble, buy booze, buy drugs, and do whatever they want except pay their rent obligation. This irresponsible tenant behavior has been going on for decades, nothing new here, but it should not be rewarded and protected by our government! With the federal funds available to solve some of this financial mess, the CT Department of Housing, again without any

input from the private housing provider community created a program to help pay “back-rent” to prevent homelessness. The hitch is you need tenant cooperation to start the process. Without any threat of being evicted, why would a tenant fill out paperwork and want to start paying rent again? They are already living for free, have no worries about being held accountable or being evicted, so the Unite-CT Program is severely underperforming and has both landlord and tenant advocates equally frustrated. Connecticut needs to open the housing courts and make tenants accountable for their actions. Those deserving help from the Unite-CT funds will be protected as the courts shall make the dollars available through the mediation process that occurs before any eviction is granted. This is a disaster that could have been prevented. The governors lack of political experience showed. His policy advisors did the citizens of Connecticut a disservice by not seeking equal insights into this matter. The result is Executive Order 7-X and the resulting eviction moratorium benefited the element in our state that doesn’t contribute to our society but is the element that costs our society.

Lamont should clearly heed what I am about to say next. When landlords and good tenants align forces, strange things happen politically. His actions will drive up rents, make it more difficult get housing and lead to more hardship. This is equally true with some of the current legislation impacting housing. More specifically, concealing criminal and eviction records, it hurts the decent folks and benefits nobody!

the owners didn’t want to raise rents.

Again, lack of experience in housing was evidenced in New Britain as the question, ‘who was going to pay’ this New Britain landlord tax wasn’t discussed logically. It was going to be put directly on the backs of the tenants. Landlords organized and sought out help from their tenants because

with housing providers and this eviction moratorium needs to be lifted immediately as it is protecting the wrong individuals and is only hurting everyone else.

Once the two forces united, they pulled off one of the biggest upsets in Connecticut’s political history as Erin Stewart defeated Mayor Tim O’Brien by a wide margin despite O’Brien I foresee political pushback and one need enjoying a 6 not look further than right here in to 1 voter Connecticut and to the city of New Britain. registration That’s where a few years ago landlords got advantage. fired-up because they were called, “a bunch This of angry absentee slumlords that didn’t political want to take care of their properties.” That partnership was the message coming directly from city between hall when they created a local landlord tax. good Their words sounded more like a rhetoric tenants and housing providers can be from a bunch of radical socialist social forged once again. engineers than elected officials. Good tenants are suffering equally along

Connecticut’s Eviction Moratorium Will Be Extended Through At Least May 20th Article from: courant.com Gov. Ned Lamont plans to extend the state’s eviction moratorium until the public health emergency expires on May 20.

through June 30. The CDC moratorium also provides some protections from eviction, though court rulings across the The moratorium was set to expire at midnight country threaten to end that order at any time. Tuesday, but a spokesman for the governor said Lamont intends to keep it in place as long The state moratorium hasn’t completely as there is a public health emergency. eliminated evictions, which are now at about half the level they were before the pandemic. “It is extended to whenever the emergency That’s because there are built-in exceptions ends,” said Max Reiss. “It remains an important tool to keep Connecticut families in that allow landlords to evict tenants if they are at least six months behind on rent or if the their homes during unprecedented landlord wants to use the rental unit as their circumstances.” own primary residence. Housing advocates It is not known at this point whether the worry that as the economic fallout of the governor will extend the moratorium past May pandemic persists — and disproportionately 20 or, if he does allow it to expire, whether the impacts lower-income residents — more legislature will act to extend protections people will reach the six-month threshold and against evictions. The Centers for Disease face eviction. Control and Prevention issued a separate, national eviction moratorium that extends 10

“While this is important and will help some and staff around the state to help people fill people, the number of exceptions to the out applications for aid. moratorium make it likely that many people of color will continue to lose their homes,” said Erin Kemple, executive director of Connecticut Fair Housing Center. Landlords are not happy with the governor extending the eviction moratorium. “Dear God, when is it going to end,” said John Souza, the leader of the Connecticut Property Owners Association. “At this point, they’re only protecting the bad people… This is purely political, there’s no other reason. Our economy is mostly open. Is there anything that’s not open anymore to some degree, everything’s open? … It’s not like you can’t find an apartment or a job.” While unemployment rates for Connecticut workers who were making more than $60,000 a year before the pandemic have almost entirely rebounded, employment among those who were making low-wages was still down 28% through the first week of February.

Help on the way? An influx of federal aid for rental assistance — $424 million — aims to help clear the backlog of missed rental payments before the moratoriums expire. The state launched UniteCT on March 15 to distribute this rental assistance, sending an RV

In the first five weeks of the program, about 14,000 people began filling out an application, of which 102 have been processed and approved for payment as of Monday. About 100 people are applying each day. There are currently 1,900 completed applications under review, and another 5,400 are being prescreened. A state advisory board was told last week that it is taking more than 30 days for each completed application to be processed. Kemple, of the Fair Housing Center, characterized the number of people who have received rental assistance 14 months into the pandemic and the rollout of UniteCT as lackluster and overly burdensome. She said the online application system is not user friendly, doesn’t translate into several languages, and the state is requiring much more paperwork than the federal government actually requires. She added the agency has sent mixed messages about whether those living in public housing or receiving Section 8 vouchers qualify. 11

The US is 3.8 Million Homes Short of Buyer Demand From: RealtorMagazine The U.S. housing market needs nearly 4 million single-family homes to meet the nation’s demand, according to a new analysis from Freddie Mac. The 3.8 million shortfall marks a 52% increase in the housing shortage since 2018. “This is what you get when you underbuild for 10 years,” says Sam Khater, Freddie Mac’s chief economist. “We should have almost four million more housing units if we had kept up with demand the last few years.” Lawrence Yun, chief economist of the National Association of REALTORS®, has been among real estate economists leading the calls over the last few years for greater inventory and more homebuilding to meet demand. “We need to build more homes,” Yun told NPR, adding that since the housing crisis more than a decade ago, homebuilders have been building too few homes. The housing shortage mixed with strong buyer demand since the pandemic is prompting home prices to rise rapidly. The median existing-

home price for all housing types in February was $313,000, up 15.8% compared to a year earlier, according to the National Association of REALTORS®. The housing shortage is most prominent among entry-level homes, and it’s making it more expensive for first-time buyers to enter the market, Khater told The Wall Street Journal. Freddie Mac calculated the housing shortage of nearly 4 million by factoring in the amount of single-family homebuilding that would be needed to match the demand from household formation, second-home purchases, and replacement of damaged or aging homes. Researchers then compared it to the pace of construction in trying to meet that demand. The nation’s homebuilders decreased their building during the 2007-2009 recession and kept construction levels lower in the years following. Builders have been ramping up construction, but they are facing many challenges, such as labor and lot shortages and the rapidly rising costs of materials, notably lumber. Homebuilders need to construct between 1.1 million and 1.2 million single-family homes a year to meet long-term demand. That rate, however, would need to be even higher to remove the existing deficit, Robert Dietz, chief economist at the National Association of Home Builders, told The Wall Street Journal.

Understanding Landlord Insurance From: houselogic.com Rental properties require their own type of coverage--landlord insurance, which is different than the homeowners policy you buy when you live in a house yourself. Landlord insurance protects you against losses from fire, lighting, falling trees, wind and hail, water damage, and injury to your tenants and their guests. But it doesn't cover the renters' household goods. So encourage tenants to buy a renters policy to cover their stuff. You can even include a clause in your lease saying they have to buy renters insurance, so everyone is clear about what's insured and what's not.

Landlord Insurance Cost is High You'll pay 15% to 20% more for a landlord insurance policy than you will for a homeowners policy on the same — house and even more if you offer short-term rentals. Start your policy shopping by calling the company that sold you your homeowners insurance,

then check with an independent insurance agent selling commercial and business policies. Ask how you can get discounts if you have fire prevention devices, burglar alarms, or multiple properties.

What landlord insurance typically covers: 1. Lightning, windstorm, hail, explosion, riot and civil commotion, smoke, falling objects, snow, ice, sleet, vandalism, sonic boom, sprinkler leakage, frozen pipes, water damage, burglary, volcanoes, and sinkholes. 2. Things that belong to you that stay at the property, like appliances, furniture, or lawn care equipment. Keep an inventory of what's on site. 3. Outbuildings, like sheds or garages, although this coverage will have its own limit (probably 10% of the overall insurance policy amount).

4. Costs to defend yourself against lawsuits filed by tenants or guests, as well as the costs awarded if you lose the case. Some policies cover medical bills for injuries; some don't. 5. Lost rental income if the property is damaged and you can't rent it.

Landlord Insurance: Liability Coverage To cover yourself in case you lose a big court case filed by an injured tenant, buy an umbrella insurance policy that gives you liability protection for $1 million to $5 million or more if you have a lot of assets to protect.

What landlord insurance typically does not cover: 1. The tenants' belongings. 2. Your rental property if it's vacant for more than 30 days. Seek an exemption in advance from your landlord insurance company as soon as you know the property is going to When to File a Landlord Insurance Claim be vacant. 3. War and nuclear, biological, There's a limit to how many claims you can file chemical, or radiological attacks. before insurance companies start charging you What optional coverages are available more or canceling your policies. Claims can quickly add up as you buy more rental with landlord insurance: properties. 1. Flood 2. Liability for personal injury, wrongful eviction, wrongful entry, libel, and slander 3. Earthquake 4. Vandalism (if the policy you buy excludes it) 5. Pool and tennis court insurance

One time you always want to file a claim is when someone says they've been injured on your property. One claim you'll want to avoid filing: water damage for less than $10,000 because worries about mold growing in waterdamaged properties will lead some insurers to immediately cancel your insurance policy.

Should Housing Providers Accept Pets In Their Rentals? Article by: Adrianne Angel, Pro Property Management, Owner / Broker

Pet vs. Assistance Animal First, Housing Providers need to better understand the difference between a pet and an assistance animal. Per HUD, an assistance animal is an animal that works, provides assistance, or performs tasks for the benefit of a person with a disability, or that provides emotional support that alleviates one or more identified effects of a person’s disability. An assistance animal is NOT a pet. For many years, special accommodation requests were abused by Pet Owners. On January 28, 2020 HUD provided Housing Providers, Pet Owners and Medical Providers additional guidance to help with this issue. The new HUD FHEO-2020-01 Assistance Animal Notice now requires Pet Owners to provide a connection between the disability and the need for the animal. Assistance animals must now fall within three HUD defined categories. Below are the categories and a brief description. 1. Service – No proof needed, must have a disability and animal must be trained for a needed task. Only Dogs qualify for this category (except in CA). 2. Support – Proof needed, must be for a disability related need, no-training required and domesticated animals only. 3. Unique – Reasonable accommodation may be necessary when the need for a unique animal involves unique circumstances, such as task that can not be performed by a dog or allergies prevent the person from using a dog. If the proper documentation is not provided to the Housing Provider, the request for the accommodation may be denied. Certificates, registrations, licensing documents from the internet are no longer sufficient documentation. Letters from a legitimate, licensed health care professional are 16

reliable only if the professional has personal knowledge of the individual requesting the accommodation. HUD advised Medical Providers to provide in their accommodation letters information about their relationship with the patient, type of animal, disability related information and need for the animal.

Pets Equal More Profit On average 60% of residents have a pet/assistance animal. Of those households, only 9% are an assistance animal so 91% are traditional Pet Owners. With COVID it seems like many people became first time Pet Owners so that percentage will only increase. By not renting to Pet Owners, you are losing out on a large percentage of potential qualified applicants which may lead to longer vacancy time. Pet Owners are usually willing to pay more to have their pet which increases your revenue and tend to stay longer which decreases your turnover expense. When considering the cost vs. the benefit of renting to a Pet Owner, you should consider ways you can mitigate the risk associated with pets. You can charge a pet fee based on the level of risk (charge more for a big dog than for a cat). You can charge the Pet Owner for a mid-lease pet inspection to catch any issues early. You can add into your lease fees associated with not cleaning up after their pet. You can require extra pet insurance to reduce your risk of the pet biting someone. As you can see there are many creative ways you can rent to Pet Owners in the future, while mitigating your risk and making a bigger profit.

Pet Screening Protection Many Housing Providers do not have the time or the knowledge to accurately assess and document these type of accommodation requests. Professional Property Managers have access to an exclusive professional pet screening tool that was designed in accordance to HUDs guidance. This can take the stress out of the evaluation for the Housing Provider. Having a consistent Pet Policy and properly documenting the results of the screening will also reduce your risk of being sued for not following the appropriate reasonable accommodation laws for assistance animals. In conclusion, know the current laws that protect Residents with assistance animals, follow the new HUD guidelines, hire a Professional Property Manager if you do not have the time to do the proper pet screening/documentation and consider implementing pet policies that allow you to accept pets while reducing your risk and increasing the profitability of your investment. 17

Rental Property Tax Deduction From: smartasset.com Being a landlord can significantly bolster your savings, but it’s also a lot of work. On top of the finances and responsibilities of your own living space, you have to find tenants, secure insurance and pay a mortgage and property taxes. Renting a home can also complicate your personal tax situation. Luckily, Uncle Sam allows you to deduct some expenses associated with running a rental property. The IRS stipulates that deductible expenses must be ordinary and generally accepted in the rental business, along with being necessary for managing and maintaining the property. From mortgage interest and insurance to utilities and repairs, we’ll walk through some rental property tax deductions landlords should take advantage of. Consider also working with a financial advisor who can help manage the tax and financial impact of your real estate holdings.

Loan Interest Most homeowners use a mortgage to purchase their own home, and the same goes for rental properties. Landlords with a mortgage will find that loan interest is their largest deductible expense. To clarify, you can’t deduct the portion of your mortgage payment that goes toward the principal loan amount. Instead the deduction only applies to payments towards interest charges. These components will be listed separately on your monthly statement, and are therefore easy to

reference. Simply multiple the monthly amount by 12 to get your annual total interest. In addition to mortgage interest, you can deduct origination fees and points used to purchase or refinance your rental property, interest on unsecured loans used for improvements and any credit card interest for purchases related to your rental property. Come tax time, you must have already spent money on these purchases to qualify. Since it can be tricky to determine what counts and how to file these extraneous interest charges, consider consulting an accountant or financial advisor to help.

Property Tax Almost every state and local government collects property taxes. Depending on your rental property’s location, they can range anywhere from a few hundred dollars to hundreds of thousands. You can find the exact tax rate in your area by checking your escrow summary or inquiring with your tax professional. If your state has rental licensing requirements, you can also deduct any accompanying landlord or vacation rental license fees. If you manage short-term rentals, your state, city, county or town may charge a kind of fee known as an occupancy tax. Very similar to sales tax, you can deduct occupancy taxes too. Speaking of which, if you pay sales tax on business related items, wage and social security taxes for employees or inspection fees, be sure to deduct those as well.

Insurance Premiums

Maintenance and Repairs

Lenders can stipulate that homeowners get an insurance policy before securing their mortgage. Luckily, any form of insurance is considered an ordinary and necessary rental property expense and is thus deductible. The deduction applies to basic homeowners insurance as well as special peril and liability insurance.

While home improvements are deductible through depreciation, the tax code does allow you to deduct certain repair and maintenance costs separately. The big difference is that these efforts keep your property in rentable condition, but do not add significant value. Think painting, tuning the plumbing, cleaning HVAC filters, spraying for pests and landscaping. If you hire someone else to do the work, you can If you have employees, you can deduct the cost of deduct the labor costs. The same goes for property or their health and workers’ compensation insurance too. on-site managers, should you choose to hire one. If Although insurance premiums tend to be a bit higher you take the “do-it-yourself” approach, you can for rentals, this boost can help offset that. Landlords deduct any rental fees for tools and equipment. can also deduct losses, including those caused by Homeowner association and condo fees would are hurricanes, earthquakes, flood and theft. also deductible following the same principle.

Depreciation

Utilities

Over time, wear, tear and obsolescence lowers the value of your rental property and its contents. This process, known as depreciation, is tax deductible. You can claim depreciation as soon as your home or apartment is available for rent, even if you don’t have any tenants yet. The deduction can be taken for the expected life of the property, but it must be spread out over multiple years. It’s important to note here that the value of the structure can depreciate, but not the value of the land.

Every landlord handles utilities differently. If you choose to cover things like gas, electricity, water, heating and AC for your tenant, they’ll be tax deductible. If you pay for internet, cable or satellite, you can deduct those as a utility expense as well. Even if your tenant agrees to reimburse you for utilities later, you can continue to file the rental property deduction and claim the reimbursement as income.

You can also claim the value of equipment that helps you run your rental business, like your computer or automobile, as well as improvements you make to the property that add value, adapt its use or extend its life. This could include installing a new roof, adding furniture or updating the household appliances. To qualify as a deductible expense, it must be expected to last for more than a year, be valuable to your rental business and lose value over time. IRS Publication 946, “How to Depreciate Property,” can help you navigate this sometimes convoluted process.

Landlords can deduct certain professional fees in relation to the rental property. If you use a CPA or computer software to prepare your tax return, be sure to deduct the cost.

Legal and Professional Fees

Hire a lawyer to oversee rental paperwork at any point in the year? Deduct those exorbitant hourly fees. Use a real estate agent to find your tenants? Deduct the commission. Advertise the property in the newspaper, over the radio, or online? Deduct those ad dollars.

Even advisor services can be written off so long as you software and anything else you use to get the job done. meet to discuss the rental property. If you have to evict someone, this deduction would help cover the legal Keep documentation of the purchases you make and and court filing fees. records for the time you spend managing your rental property. Since this is one of the most commonly These are all considered operating expenses, and flagged deductions, be sure you’re keeping yourself should be deducted as such. You cannot, however, honest about the breakdown between business and deduct legal fees used to defend the title of your personal use. property or recover and improve property.

Travel and Transportation

How to Claim Rental Property Tax Deductions

If you’re a landlord that travels to multiple properties or your rental is located far from your residence, your transportation expenses are deductible. This includes paying to show your rental property, collecting rental income and conserving your rental property throughout the year. Excluded from this policy, however, are any reasonable commutes made regularly.

In general, you should file rental property tax deductions the same year you pay the expenses using a Schedule E form. The process will be much more manageable if you keep detailed records of all income and costs related to the property as they occur. Plus, if you’re ever audited, you’ll have to provide proof for every deduction you claim.

You can deduct travel using two methods: actual expenses or the standard mileage rate. For 2020, the standard mileage rate for business use was 57.5 cents per mile.

Office Space Whether you conduct business in a commercial property or the spare bedroom, you can deduct the accompanying costs. Square footage or rental cost will probably be the largest expenses, but you can include the price of a printer, ink, a phone line, computer

While we’ve reviewed several rental property tax deductions above, the filing process gets more complicated if you use the rental property as your primary residence at any point in a given tax year. Each year’s Schedule E form denotes the number of days that you can personally use your home and the percentage of days that the property can be rented out at fair market value before anything changes. In most cases, you won’t be able to deduct expenses or losses for personal use on the Schedule E. You may be able to file them using a Schedule A form, though, if you choose to itemize your deduction rather than take the standard option.

From: energy.gov Here you'll find strategies to help you save energy and keep costs down during the spring and summer when the weather is warm and you are trying to keep your home cool. Some of the tips below are free and can be used on a daily basis to increase your savings; others are simple and inexpensive actions you can take to keep energy affordable through the spring and summer. For more ways to stay cool while saving energy, check out our Energy Saver 101 infographic, covering everything you need to know about home cooling.

OPERATE YOUR THERMOSTAT EFFICIENTLY

1. Set your thermostat at a temperature you find comfortable and that provides humidity control, if needed. The smaller the difference between the indoor and outdoor temperatures, the lower your overall cooling bill will be. 2. Keep your house warmer than normal when you are away, and lower the thermostat setting when you return home and need cooling. A programmable thermostat allows you to do this automatically and without If you haven't already, conduct an energy audit to find out where you can save the most. sacrificing comfort. 3. Avoid setting your thermostat at a colder setting than normal when you first turn on USE YOUR WINDOWS TO KEEP OUT your air conditioner. It will not cool your home HEAT any faster and could result in excessive cooling and unnecessary expense. 1. Install window coverings to prevent heat gain through your windows during the day.

USE FANS AND VENTILATION STRATEGIES TO COOL YOUR HOME

KEEP HOT AIR FROM LEAKING INTO YOUR HOME

1. Turn off ceiling fans when you leave the room. Remember that fans cool people, not rooms, by creating a wind chill effect. 2. When you shower or take a bath, use the bathroom fan to remove heat and humidity from your home. Your laundry room might also benefit from spot ventilation. Make sure bathroom and kitchen fans are vented to the outside (not just to the attic).

1. Seal cracks and openings to prevent warm air from leaking into your home. 2. Add caulk or weatherstripping to seal air leaks around doors and windows.

LOWER YOUR WATER HEATING COSTS Water heating accounts for about 18% of the energy consumed in your home.

KEEP YOUR COOLING SYSTEM RUNNING EFFICIENTLY

The Consumer Product Safety Commission recommends setting your water heater at no more than 120 degrees Fahrenheit to prevent 1. For maximum energy affordability, schedule scalding. The lower setting will also conserve energy and save money. regular maintenance for your cooling equipment. Find other strategies for energy-efficient 2. Avoid placing lamps or TV sets near your room air-conditioning thermostat. The water heating. thermostat senses heat from these appliances, which can cause the air conditioner to run longer than necessary. 3. Vacuum your air intake vents regularly to remove any dust buildup. Ensure that furniture and other objects are not blocking the airflow through your registers.

CONSIDER A RANGE OF APPLIANCES AND LIGHTING OPTIONS 1. Consider lighting options that operate at cooler temperatures. 2. If convenient, take advantage of daylight instead of artificial lighting, but avoid direct sunlight. 3. Wash full loads of dishes and clothes for better efficiency.

10 Legal Mistakes Landlords Should Avoid From: Findlaw.com

Being a landlord is a complicated job. There are common legal mistakes that landlords make that can have serious repercussions under state laws or landlord-tenant laws. Here are 10 common mistakes landlords make with tips on how to avoid falling into these traps yourself.

1. Asking Prospective Renters Discriminating Questions The federal Fair Housing Act prohibits a landlord or property manager from refusing to rent property to a tenant for discriminatory reasons such as: • • • • • • •

Race Color Religion National origin Gender identity Disability Familial status

It would be best if you avoided all questions or conversations that may appear discriminatory or suggest discriminatory intent. Tenant screenings are allowed for non-discriminatory things like background checks, income, job history, and past evictions.

2. Failing to Make Disclosures to Prospective Tenants Every state has different requirements before a new tenant moves in. Standard disclosures you need to discuss include the following: • • • • •

Notice of mold when the landlord knows or has reason to believe that is exists Information about a state's sexual offender registry Notification of sex offenders that live in the area if the landlord knows of them Disclosure of recent deaths that have occurred in the rental unit Whether the rental unit contains lead-based paint if the property was build before 1978

3. Using Illegal Provisions in a Rental Agreement A residential lease agreement shouldn't include provisions that violate state and/or federal laws. A landlord should avoid the common mistakes of: • •

Placing discriminatory conditions in a rental agreement Requiring the tenant to waive the right to a refund of a security deposit • Forcing a renter to waive their right to sue the landlord Any illegal provisions may result in a lawsuit for money damages (a landlord liability case).

4. Failing to Provide a Safe Environment In many states, landlords are legally responsible for keeping renters safe from dangerous conditions. This includes keeping the property safe from criminal activity. As a landlord, you have a legal duty to: • • •

Make inspections Inform tenants (and anyone legally entering the property) of hazards that exist on the premises Take reasonable measures to ensure the safety of tenants from other tenants and from criminals that enter the property Take action right away when you learn a property is unsafe. Otherwise, a tenant that sustains physical or property damage may be able to sue you. They can win, make you pay for their attorney, and recover compensation from you.

5. Refusing to Make Repairs A rental agreement should specify who has to make repairs. Sometimes a landlord must legally make some repairs even if a rental agreement doesn't define these duties. Every state imposes an "implied warranty of habitability" on all rental premises. A habitable rental unit will provide: • • • • • • •

Heating Plumbing Gas Clean water A structurally safe roof Safe flooring Electricity

If a property remains in disrepair, a tenant may choose to: • • •

Fix the problem and deduct the cost from the rent Move out Report the violation to a state building inspector

Failing to make these significant repairs when requested can result in a lawsuit against the landlord.

6. Disregard of a Tenant's Right to Privacy A tenant always has a right to privacy. A landlord shouldn't enter a tenant's rental unit without first giving a 24-hour written or verbal notice. A landlord can enter (after giving notice) when they: • • •

Show the unit to a prospective tenant Make a repair Inspect the property

It is unnecessary to provide notice when an emergency occurs, such as a fire, burst pipe, medical emergency, or domestic violence situation.

7. Ignoring Eviction Rules A landlord can evict a tenant for: • • • •

Nonpayment of rent Failure to vacate the premises after a lease agreement has expired Violation of a provision in the rental contract Causing damage to the property when it results in a substantial decrease in the value of the property. Before throwing out a tenant, a landlord must use the eviction process. Every state has different guidelines, but most require giving the tenant a termination notice before filing an eviction lawsuit. If the landlord attempts to remove the tenant without a court order, the tenant may recover damages for the landlord's actions.

8. Keeping Security Deposits Most lease agreements require a tenant to pay a security deposit to cover damage caused by the tenant. This money can also cover missing rent if a renter does not pay. After a tenant moves out, a landlord can use the security deposit to fix the damage caused by the tenant. A landlord, however, must: 1. Provide the tenant with an itemized list of deductions 2. Pay the balance of the deposit to the tenant

The landlord may owe the tenant for monetary damages if the landlord fails to: • •

Provide an itemized statement Return the unused portion of the security deposit

9. Getting Rid of Abandoned Property Inappropriately When a tenant leaves items behind after vacating the property, the landlord must treat it as abandoned property. The landlord must notify the tenant of: • • • •

How to claim the property The cost of storage Where to claim the property How long the tenant has to claim the items

If the property remains unclaimed, two different processes may happen: 1. If the items are worth more than a certain

amount, the landlord may sell the property at a public sale after publishing a notice of sale in a local newspaper. 2. If the property is worth less than the state-specified amount, the landlord can either keep the property or throw it away.

10. Having Inadequate Insurance on a Rental Property Every landlord should insure a property for any destruction caused by natural disasters. It is also a good idea to insure a property against lawsuits brought by a renter. Insurance will cover the cost of litigation and will pay the damage award if a landlord: • • • •

Illegally evicts a tenant Makes an illegal entry Does not fix dangerous conditions Loses a case when someone legally on the premises is injured

Learn How to Avoid Legal Mistakes That Landlords Make A rental property is usually intended to earn money with only a minor investment of time and energy in property management. But mistakes concerning your obligations to tenants can result in the loss of profits and consume an enormous amount of attention. That's why it's a good idea to consult with a local landlord-tenant attorney to discuss your situation. They can help you learn how to manage rental properties in an efficient and legal fashion. This story is intended for informational purposes only and should not be taken as legal advice. If you are having issues with a tenant please contact a local real estate attorney!

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