THE SUCCESSFULLY MANAGING CONTRACTORS
Presented By Jim Shapiro, Weybridge Property Management Services, LLC
May 5 Early Meeting The Down and Dirty on Appraisals! Presented by Guy Wesselkamper, Signature Appraisal, LLC Bring your toughest appraisal questions and attend the next Real Estate Investors Association of Greater Cincinnati (REIAGC) session beginning at 6 pm on May 5 at the Crowne Plaza in Blue Ash.
At the May 5 main meeting at the Crowne Plaza in Blue Ash beginning at 7:30 pm, guest speaker Jim Shapiro will teach you the ins and outs of selecting, hiring, and managing contractors. He’ll cover statement of work, contracting agreements, lien waivers, and the allimportant process of how to handle payments and track progress. Whether you are landlording or retailing, you are managing contractors. Doing it right can drive your success. Poor management can mean that the only person making money on your investment is the contractors. Jim has renovated dozens of houses, turned over hundreds of rentals and contracted for millions of dollars in work over the last decade. He’ll
share some of the lesson’s he’s learned and help you manage what can be the biggest risk in the business. Learning the language and process of facilitating improvements to your properties may be one of the most challenging tasks an investor can face. Juggling contractors to get things done can be daunting. Jim Shapiro has been successfully managing contractors and properties for longer than many people have owned investment properties. In this session Jim will share his secrets on successfully managing contractors which should in turn, improve your appraisals and property value!
Guest speaker Guy Wesselkamper is a 30+ year veteran in the appraisal field. His knowledge is your gold nugget! Guy will be presenting an overview of this critical process and answer your specific questions. Questions can include any appraisal topic including: What are the different approaches? What all is reviewed? How can I maximize the value? How do I best work with an appraiser? This is your chance to spend a solid hour learning from one of the appraisal industry’s most seasoned appraisers because as we know, knowledge is power!
VENDOR NIGHT ON MAY 19
Come to the County Fair and find more than 70 vendors focused on your real estate business needs. Join us for networking and contacts that are priceless,over $3300 in individual prizes and two MEGA prizes of over $800 each! Free and open to the public, the 2016 Vendor Night is at the Sharonville Convention Center on May 19 from 5 pm to 9 pm. 10945 Reed Hartman Hwy | Ste. 113 Cincinnati, OH 45242 P: 513 407-3137 www.cincinnatireia.com
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2016 BOARD OF DIRECTORS & COMMITTEE CHAIRS President Anita Johnson 513 334-0444 Secretary Jim Shapiro 513 515-6717 Board Members Eric Kottner Narendra Mundhe Cheryl Long Linda Hull Tom Terlau Drew White Vendor Coordinator Karen Wessel 513 371-6953 Association Manager Nancy Terry 513 407-3137 Cincinnati REIA 10945 Reed Hartman Hwy | Ste. 113 Cincinnati, OH 45242 P: 513 407-3137 | F: 844 734-2472 www.cincinnatireia.com
Disclaimer
The REAL ESTATE INVESTORTM is published 12 times a year by the REAL ESTATE INVESTORS ASSOCIATION OF GREATER CINCINNATI. The subscription cost is $120 per year. First class postage paid. © Copyright 2016 by the REAL ESTATE INVESTORS ASSOCIATION OF GREATER CINCINNATI. All rights reserved. Reproduction or dissemination in whole or in part, in any form whatsoever, is expressly prohibited. Printed in the USA. The information contained herein and information shared at meetings and events is believed accurate, but it is not guaranteed or warranted in any manner. The information is provided with the understanding that neither the author(s), program speaker(s), nor the publisher (or its directors, officers, employees or agents) are engaged in rendering legal, accounting or other professional advice. REIAGC does NOT pre-qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. We recommend you perform your own due diligence and seek appropriate legal, accounting, or other professional advice before making any investment.
2015 2 | The Investor ||August May 2016
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WHOLESALING SUBGROUP
7:00 pm | Perkins 7108 Hamilton Avenue North College Hill Michelle Clayton - 513 400-4937
GENERAL MEETING
6 pm - The Down and Dirty on Appraisals 7:30 pm - Successfully Managing Contractors Crowne Plaza Blue Ash
FRIDAY MORNING MEETUP 9 am to 11 am Linda Hull - 513 549-7821 Cheryl Long - 513 429-2583
WEST SIDE SUBGROUP
6:30 pm Thai Taste 5120 Crookshank Road, 45238 Drew White - 513 207-9846
17 19 23 24
INVESTORS LUNCH
11:30 am - 1 pm Century Inn Restaurant 10675 Springfield Pike Dave Jasper - 513 942-5110 or Max Arroyo 513-772-5736
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LANDLORD SUBGROUP
6:30 pm Crosley’s Sports Cafe 4901 Vine Street, Cincinnati Mary Brickler, 513 557-8632
2016 VENDOR SHOWCASE 5 pm - 9 pm Sharonville Convention Center 11355 Chester Road Cincinnati, OH 45246
DEALMAKER FORUM 6:30 pm Perkins, 7108 Hamilton Avenue North College Hill
NORTHERN KENTUCKY FOCUS GROUP 6:30 pm at PeeWee’s Place 2325 Anderson Road Crescent Springs, KY Brandon Brewer - 859-240-7339 Tom Terlau - 859-653-6412
FORECLOSURE NOTE BUYING SHORT SALE SUBGROUP 6:30 pm, Wendy’s Restaurant 5909 Mulhauser Road Deb Meyer - 513 266-4008 or John Dohtery - 859-653-3290
MISSION STATEMENT
OF THE REAL ESTATE INVESTORS ASSOCIATION OF GREATER CINCINNATI (REIAGC) • Encourage our members’ success through education and professional services • Represent REIA members as positive, ethical contributors to the economic and the social well-being of our community
PRESIDENT’S CORNER
By Anita Johnson, REIA of Greater Cincinnati President It’s May, and we are in full swing with having our meetings at the Crowne Plaza in Blue Ash. The first meeting in April was at the new location, and it was a success! The new location is easy to find, centrally located, and offers a number of real and intangible benefits to our members. From members to non-members to vendors, everyone has had favorable comments about our new location and the networking atmosphere it provides. As with any change there are lots of learnings and opportunities to do things better, and we will continue to strive to make our meetings a great experience for our members. During the month of May, we will have one General Member meeting on Thursday 5/5, which is all about Managing Contractors. Our all-day Saturday session will be Asset Protection with John Hyre on Saturday 5/7. Yes, I know that you’ve heard about a lot of fancy entity structures that you can put in place (believe me, I heard them too),
and many times you’ll hear people tell you what you need to do before you even acquire a property. John Hyre will tell you what you REALLY need when it comes to entities for your real estate business so you don’t waste time or money on things you don’t need. Finally, on the second Thursday of May we will have our annual Vendor Showcase, which will be held on Thursday 5/19 at the Sharonville Convention Center. This annual event is open to the public and will showcase the products and services of many local vendors that are of value to our members. This event grows in size each year (which is why we’ve had to move it to the Sharonville Convention Center) and there will be prizes and giveaways so you don’t want to miss this event. Finally, don’t forget to attend one of our 7 subgroup meetings or the Friday Morning Meetup. These are great opportunities for you to learn and get to know your fellow investors. And remember, REIAGC is always looking for volunteers, so if you have an interest in helping with any one of our events please let us know. As I always say, “Everyone has something to contribute.”
Anita Johnson
LOOKING FOR A FEW GOOD MEMBERS: NOMINATION & ELECTION 2016 So, you have been coming to the meetings and see all of the action and activity that happens with REIAGC, right? If not, you should be! The greatest benefits are the education offered and the chance to network with other investors. What you may not know is that this organization is run by volunteer leaders such as yourself. Have you ever wondered when and how you can be a part of growing your education, this industry and your association? Well the good news is that now is the time! REIAGC is looking for volunteer leaders to participate on the Board of Directors and on volunteer teams. We are changing things up a bit and are excited to tell you about it. REIAGC is looking for a couple of committed leaders to serve on the Board of Directors so nominations are currently being accepted. Candidates should bring a solid business perspective along with good critical reasoning skills. We specifically have a need for an active member who has significant experience in accounting or finance who would like to serve as Treasurer and we are looking for fresh faces to participate with a focus on other key areas as well. Each nominee will be asked to complete a simple one page questionnaire on their skills which will then be submitted to the REIAGC Nomination and Election Committee. That committee will be tasked with the responsibility
of developing the slate of candidates for REIAGC Election 2016! Every member will get the opportunity to vote on the slate. We are truly trying to reach out to the members to bring you what you want and need to grow your business so help us to help you. The second area of need is as a team participant. REIAGC can’t grow without the ideas and effort of many folks. What this means is that we have several teams that are looking for members. The team may be for a specific purpose such as developing a slate of nominees for election, for work on a specific short term project, or maybe, for something longer term such as marketing and membership recruitment. The point is we want you to be an active part in the leadership of your REIAGC. Team focus areas include communication, finance, membership development, marketing, volunteer management and more. Whatever your area of interest is, we will match you with a team that needs your talent. If you have an interest in serving on a team or on the Board, contact Nancy Terry at the REIAGC office at (513) 407-3137 or info@cincinnatireia.com. We are accepting nominations now so call today!
The Investor
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LANDLORD SUBGROUP: ELECTIONS AND CONVICTIONS WITH ANDREW HEYMAN
On the sixth day of each month, a report is run to see how many “Pay or Quit” notices have to be handed out this month. ‘Pay or Quit Notices’ are those that warn the tenant that they must either pay their rent or move-out of the premises. This month there’s only three. Down from January when there were six! This included the three from this month and three more that probably over-spent on Christmas.
Join us on May 17th and hear Andrew Heyman speak about how his firm can collect from these delinquent tenants by tracking them down and garnishing their wages. Sooner or later, these tenants will surface whether it’s by getting a job or wanting to buy a car. Then, it’s just a matter of making them pay. This is one meeting you don’t want to miss.
While there are always the usual suspects that will come up with the money, occasionally you have to evict a tenant for non-payment. While this may be unpleasant, you’ll want to get rid of these tenants before word gets around that you’re a pushover Landlord that let tenants stay and not pay.
The Landlord subgroup meets at Crosley’s Sports Café, 4901 Vine St. in St. Bernard. The presentation begins at 7:00 but plan on getting there at 6:30 to order food, network with other Landlords and make valuable new connections.
So, let’s say they move and you walk into a roach infested property with a lot of damage. Some Landlords walk away and consider this as “cost of doing business.” We did too until we found a good attorney who thinks that tenants should be held accountable to the damage they cause and PAY FOR IT!
HOPE TO SEE YOU THERE!
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May 2016
INVESTORS LUNCH GROUP
Running into Short Sales in your marketing and don’t know what your next step is? Come hear REIA veteran Cheryl Long talk about short sales in today’s market place. Do the banks take decent discounts? What banks are worth not talking too? What do you say to your sellers to get them to sign all the documents you’ll need? What are all the documents you’ll need?
On May 10th we will be reviewing the Cincinnati housing market. Our guest speaker will let us know what types of properties are ‘hot’ and in what areas. Also we will discuss trends and forecasts. Bring your questions! For more information, feel free to call Co-Chair Max Arroyo (513) 772-5736 Location: Century Inn Restaurant, 10675 Springfield Pike, Cincinnati, OH 45215. Phone: (513) 771-4816. Time: 11:30AM – 1:00PM
Cheryl knows lots of secrets that she will be sharing on Thursday, May 26th beginning at 6:30 pm at the Wendy’s Restaurant on Mulhauser Road off of the I75 Union Center Exit in West Chester. Dinner starts at 6:30 pm and Cheryl will start at 7:15pm. You won’t want to miss this meeting!
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The Investor
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“SO NOW I HAVE TO RENT TO FELONS?” WHAT THE NEW HUD GUIDELINES SAY ABOUT APPLICANTS WITH CRIMINAL RECORDS By Vena Jones-Cox
On April 4, 2016, the US Department of Housing and Urban Development (HUD) released a statement entitled, “Guidance on Application of Fair Housing Standards to the Use of Criminal Records by Providers of Housing and Real Estate Related Transactions,” that set social media sites afire with a lot of angry speculation and half-truths regarding what the statement actually means. But, what does HUD’s move mean, and what does it actually require you to do? First, this is NOT a new law. There has been no action by congress or the courts; felons have not been added to the list of protected classes. It’s a statement by the Federal-level policing agency for fair housing law clarifying its intention to interpret and enforce the existing law in a new way. So, while no act of Congress created this, you can assume that HUD WILL prosecute cases based on it. Second, in order to understand why HUD thinks that whether
or not you rent to felons is a discrimination issue AT ALL, it’s important to understand the Doctrine of Disparate Impact. The original Fair Housing laws of the late 60s more or less defined illegal discrimination as an intentional, if not overt, act. But as time passed, fair housing thinking began to evolve to include the idea that even completely unintentional acts, if the effects of those acts served to limit the housing choices of protected classes, could be discriminatory, illegal, and punishable by law. For instance, landlords who created policies that limited the number of people allowed in a unit - for instance, “I won’t rent my 2 bedroom apartment to more than 3 people” - were accused of discriminating against families with children under the Doctrine of Disparate Impact. See the logic? This policy would in no way impact a couple with no children, but would deny a couple with two children, or a single parent with three or more children, access to an
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apartment that could, theoretically, suit their needs for space. Thus, it “disparately impacted” a protected class—families with children. The fact that the reason behind these policies has to do with the economics of owning rentals (more occupants use more utilities and do more damage) does not stop them, under the Doctrine of Disparate Impact, from being illegal. While the idea that you can be prosecuted for unknowingly and unintentionally discriminating might seem dangerous and unfair, the Supreme Court did uphold it in a 2015 decision, saying that the Civil Rights Act does govern any and all policies that create “artificial, arbitrary, and unnecessary barriers” to housing based on “statistical disparities.” And it’s those “statistical disparities” that connect policies against renting to felons to discrimination. HUD’s argument is that, because people of color make up a much higher percentage of the prison population than they do of the general population, they are probably more likely to be kept out of housing by such policies than are whites. So, what we have here is one of those deeply complex, messy, divisive issues that pits the natural and constitutional rights of one group of people against those of another.
On the one hand, your rental houses are your private property, and you should be able to decide that, as a blanket policy, you don’t want criminals living there for your safety, the safety of your property, and the safety of your other tenants and neighbors. On the other hand, it’s unforgivably naïve to refuse to admit that America has systemic problems that are nobody’s fault and everybody’s fault - but which lead to a system that’s stacked against the poor and minorities. And when this
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stacked system becomes an impediment to ďŹ nding a place to live, it becomes HUD’s concern. These new guidelines are an attempt to use HUD’s policing powers to remedy a perceived social injustice - the blanket denial of housing to ALL people with a felony criminal record, regardless of the details of that record - that impacts some categories of Americans more than it does others. And yes, the way in which the powers that be are attempting to “remedyâ€? this situation further restricts your rights to control your private property. So, while it’s not fair that you should personally be burdened with having to right the wrongs that other people perceive with the world, you ARE the one with the ability to deny housing. So, of course, the responsibility to â€œďŹ xâ€? it falls upon you. But the good news is the new guidelines don’t say that you MUST rent to felons, nor do they say that you can’t take criminal history into account. What they say is that a policy that bars ALL felons, no matter what the nature of their crime or when it was committed, might be considered to be discriminatory. You CAN have policies regarding renting to felons that protect your property, your safety, or the safety of your other tenants and neighbors. What you can’t do is have a no-fel-
ons policy based on generalizations like “all criminals are bad tenants.â€? For instance, you might have criteria like this: • No violent or drug-related felonies • No crimes against children • No felonies committed within the last 10 years, and no imprisonment for felonies within the last 5 years • No crimes against landlords or rental properties • No convictions or pleas to any crime involving metal theft, vandalizing properties, or otherwise damaging properties. • No arson convictions or pleas And, as always, you’ll need to have these policies in writing, update them as they change, keep written records of how any application rejections violated your policies, and above all, they must be applied equally to all applicants of all races, religions, disabilities, familial statuses, and so on. In other words, don’t be what the folks who’d like to further impinge on your property rights think you are. Don’t use your crime-related applicant policies to discriminate against applicants because of their membership in a protected class. Vena Jones-Cox is a full-time real estate entrepreneur, real estate broker, and past president of the Ohio Real Estate Investors Association and National Real Estate Investors Association. She publishes weekly articles about real estate investing, wholesaling, and the legal environment at www. REGoddess.com
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HOW TO PROPERLY REJECT AN APPLICANT By Ron Bailey, National Tenant Network If you screen your prospective tenants carefully, you will need to reject many of them. The key is to do it right, incurring as little ire as possible and without tripping over the Fair Credit Reporting Act and your local jurisdiction's antidiscrimination laws. The best way to reject an applicant is to say so, directly, at the point at which the decision to reject is made. Mealymouthed statements neither insulates you from any liability, nor do they ease the disappointment the prospective applicant might feel. They only lead to argument and hard feelings. But that is not all there is to it. Beyond letting the prospective tenant know, unequivocally, that he cannot have the unit, you must, under the law, let him know certain other things. This article will give you a thumbnail sketch of what you must and should say and how to say it, as well as to provide a form (see insert) you can use if you do not want to draft the rejection letter from scratch. In some instances, the information on which the adverse action is based need not have come from the credit report. An adverse action is defined in the FCRA as an outright denial, or a demand for more security, or any other increased burden to the prospect, in order to be approved. An example of
this last might be the demand for an increased security deposit, or prepayment of several months rent, to compensate for greater perceived risk from a tenant who has undergone an eviction. The exact course of action the landlord must take depends on the source of the information that leads to the adverse action. There are three possible sources of such information: 1. Credit reporting agencies, 2. Third parties which are not credit reporting agencies, and 3. Internal records or records of affiliates. CREDIT REPORTING AGENCIES If the landlord takes adverse action in response to information in a credit report, then 15 USC 1681m(a) specifies: If any person takes any adverse action with respect to any consumer that is based in whole or in part on any information contained in a consumer report, the person shall; 1. Provide oral, written, or electronic notice of the adverse action to the consumer, 2. Provide to the consumer orally, in writing, or electronically A. The name, address, and telephone number of the
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The Investor
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consumer reporting agency (including a toll-free telephone number established by the agency if the agency complies and maintains files on consumers on a nationwide basis) that furnished the report to the person; and B. A statement that the consumer reporting agency did not make the decision to take the adverse action and is unable to provide the consumer the specific reasons why the adverse action was taken; and 3. Provide to the consumer an oral, written, or electronic notice of the consumer's right A. to obtain, under section 1681j, a free copy of a consumer report on the consumer from the consumer reporting agency referred to in paragraph (2), which notice shall include an indication of the 60 day period under that section for obtaining such a copy; and B. to dispute, under section 1681i, with a consumer reporting agency the accuracy or completeness of any information in a consumer report furnished by the agency. If the reporting agency does not provide an appropriate notification letter to the applicant, you may use the following language in any form letter: "We regret to inform you that your application to rent 1234 Main Street has been declined. This action was in whole or in part the result of information contained in a credit report. This report was supplied
10
by National Tenant Network, 1810 Broad Ripple Ave 2A, Indianapolis, Indiana 46220, 1-800-249-4399. National Tenant Network did not make the decision to take this adverse action and is unable to provide the specific reasons why the adverse action was taken. You have a right to obtain a free copy of a report by making a written request on National Tenant Network within 60 days of your receipt of this letter. You also have a right to dispute with National Tenant Network the accuracy or completeness of any consumer report furnished by them." Despite what the federal code says, the landlord should make the disclosure in writing, in hard copy, never orally or electronically alone. Nothing can substantiate compliance more effectively than a hard copy of a letter with the notation "mailed 4/29/00." The landlord should do this disclosure whether or not he has discussed the adverse action and the contents of the report informally with the applicant. THIRD PARTIES WHICH ARE NOT CREDIT REPORTING AGENCIES If the information is supplied by a third party, not a credit reporting agency, then 15 USC Sec. 1681m(b), quoted here in relevant part, applies. The landlord's duties differ depending on whether the information is received from an independent source or from an entity affiliated by ownership or common corporate control. In the event the information is received
May 2016
from an independent third party, then the following language from the cited section applies: "Whenever credit for personal, family, or household purposes involving a consumer is denied or the charge for such credit is increased either wholly or partly because of information obtained from a person other than a consumer reporting agency bearing upon the consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living, the user of such information shall, within a reasonable period of time, upon the consumer's written request for the reasons for such adverse action received within sixty days after learning of such adverse action, disclose the nature of the information to the consumer. The user of such information shall clearly and accurately disclose to the consumer his right to make such written request at the time such adverse action is communicated to the consumer." In the event the information is received from a third party which is afďŹ liated by ownership or common corporate con-
trol, then the obligations differ depending on the nature of the information. If the information is based solely upon the business experience of the applicant and the afďŹ liate, then the disclosure cited above as to third parties in general sufďŹ ces. Imagine a situation in which the landlord is the principal shareholder in two corporations, each of which owns an apartment building. The applicant applies for an apartment
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in the building owned by corporation B. The manager of that building consults the manager of the building owned by corporation A and discovers that the applicant had a poor rent payment history while he was a tenant there some years before. This results in a denial. Because this information is based solely on the business experience of the applicant and corporation A, the disclosure described above is sufficient. Assume the same situation, but in this case, the manager of building A faxes to the manager of building B a report on references in an application obtained six months before when the applicant applied for an apartment in building A. Based on derogatory information contained in the report, the manager of building B denies the application. In this instance, the applicant is not supplied the disclosure required for information from third parties. However, affiliates may only share third party reports, as opposed to actual business experience, if the possibility of such sharing was disclosed to the applicant AND the applicant was given an opportunity to prohibit the sharing. Because of the difficulty of keeping track of who prohibited sharing and who did not, the sharing of credit reports between affiliates is not recommended as a safety precaution. If, however, the landlord intends to permit it, the following language in the credit application, in addition anything else which has been recommended so far, should suffice: "I/we, the undersigned (check one) ____authorize
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[name of landlord] to share the contents of any credit reports or other information, or the reports themselves, which may be obtained in connection with this application with any other person, including any affiliates as that term is used in the Federal Fair Credit Reporting Act." A landlord who presides over a network of interlocking corporations or partnerships owning multiple buildings would be well advised to obtain a written opinion in this regard from an attorney sophisticated not only in the FCRA, but also state and local privacy laws. INTERNAL RECORDS OR RECORDS OF AFFILIATES If the information from the affiliate is not based on direct experience, then a third procedure applies. This type of information might include information gleaned from references included in a credit application, or personal knowledge of an employee of the affiliate. In this instance 15 USC 1681m(b) (2)(A) requires that the landlord: i. notify the consumer of the action, including a statement that the consumer may obtain the information in accordance with clause (ii), and ii. upon a written request from the consumer received within 60 days after transmittal of the notice required by clause (i), disclose to the consumer the nature of the information upon which the action is based by not later than 30 days after receipt of the request."
May 2016
In this example, and the first example, the form of the notices may be the same, as it is only the time frame which differs. An example of the denial notice might be as follows: "We regret to inform you that your application to rent 1234 Main Street, Apt. 9, is denied. This action was taken in whole or in part because of information obtained from a third party. You have 60 days to demand in writing a disclosure of the nature of such adverse information. Send any such demand to the address given above." It is unlikely that the applicant will respond. The circumstances of rental applicants are such as to make finding another residence more pressing. If the landlord does receive a response from the applicant the landlord is only required to disclose the "nature" of the information relied on, not to specify the information in detail, nor to provide its source. This disclosure, in the letter responding to the applicant's demand in our example above, might be this: "Adverse history of repayment of debts."
"Adverse references regarding relations with neighbors." This is as far as the landlord is obligated to go and should go no farther particularly in the case of information obtained from independent third parties. The landlord should not get between the applicant and one of his putative friends or a former landlord or employer. It is not recommended that you orally inform the applicant of his denial, in person or over the phone. Write a letter (see below). If you do talk to the applicant, inform him that his "app is being processed" or that he will "be receiving a letter in the mail." TIP: Keep the application, credit report, notes, and a copy of the denial letter your files. Find out more about this same subject by Landlord.com. See our other articles in the tenant screening section on developing and applying qualification standards for applicants.
Let us take other examples. Suppose the landlord learned that the applicant had done considerable damage to a previous landlord's property. In that case, the disclosure might be: "History of damage to other rental properties."
The landlord may always rely on internal information, not obtained from credit reporters or third parties, without making any disclosures whatsoever, although, as part of the application process, a letter advising the applicant of any adverse action is advised, this is not because of anything in the FCRA.
What if a personal reference stated that the applicant was noted for late night disturbances? Then the response would be:
This article is intended to supply only the requirements common to all landlords in the United States. Individual states
STRIVING TO REACH YOUR FINANCIAL GOALS TOGETHER
Investing in real estate is a serious decision. Don’t go it alone. • Investment Analysis and Due Diligence Assistance • Accounting Services Different levels of service to match your budget • Clean, organized records means less hassle at tax time • Tax Planning and Compliance
Ellsworth & Associates 513-272-8400
What you’ve always dreamed of, someone else who knows accounting and tax to handle it for you. The Investor
9624 Cincinnati Columbus Road Suite 209 West Chester, OH 45241
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also have privacy laws, and some states and localities have laws and ordinances governing certain aspects of applications and rejections, such as holding deposits, charges for credit reports, and so on. The landlord should consult his local apartment or rental property owner's association or a real estate attorney for insight as to any of these requirements. SELECTING AMONG SEVERAL APPLICANTS How does a landlord choose between several applications received within a short time frame, all of which satisfy his minimum requirements for qualification for the rental unit, and what does the landlord tell the applicants when he has made his choice? Four or five written applications with checks for holding deposits and credit check fees may have been received during a Sunday afternoon of showing, for example, and now the landlord must choose among them on Monday morning. The choice must be made in such a way as to avoid both the actuality and appearance of fair housing law violations. We can only speak in general terms here, you will need to check with your local enforcement agency to ensure you are in compliance with regulations they have in force, but the following should be of value as a general approach. Keep in mind what fair housing laws are designed to do. They are designed to prevent you from discriminating against applicants on prohibited grounds. These are usually race, sex, handicap, etc. You, as a landlord are not in the business of providing preferences for such protected classes, nor should you try to do so even if you want to. Your task is not to allow their status to enter into your decision making process. There are two distinct schools of thought on how to do this. One says that you should take the applications on a first come, first served basis, so that the first in time gets the unit if his application checks out in the screening process, even if there is a better qualified applicant who came in later. The second says that you should sort the applicants by the strength of the information on the application that is important to you, and select the first one whose information is verified. Realty professionals tend to favor the first method, for the same reason that human resource managers in big companies like racial quotas and oppose legislation to eliminate them. By using an arbitrary number or event to make the selection for them, they think they can avoid being sued for discrimination. In your case, if a housing investigator comes to see you, you just say, "I didn't decide anything, I just took the first one that came in and qualified." Then you show him the applications and the date and time written on them. In reality, a resourceful housing advocate will find a way to sue you if he wants to anyway, so this is not a route to lawsuit proofing. 14
There are strong advocates for the second method. They point out, quite rightly, that there is nothing in the fair housing law that precludes you from judging applications on the basis of their quality, as opposed to their rank in time. As John observes, "I think one angle to consider is that many of us are "moms and pops" who live in (or very near) the property and have a more one on one, face to face relationship with our tenants (and neighbors) and can be hurt more easily if we don't look for the best possible tenants." This is a telling point from the financial point of view alone. A landlord with 3 or 4 units is much more severely injured by a deadbeat than a landlord with 100 or 200. You could also use either method depending on the situation that confronts you. If all the applications are pretty much the same, so that no one or two stand out, then use the first come, first served method. The second part of the question is, what to tell the ones who do not get the apartment. This applies to whatever method you choose to select among them. Obviously, if you check the first applicant, and in the course of doing it, you find his credit report is lousy, you send the appropriate letter. If the second applicant is selected, you are left with three who may well be fully qualified, but who will not get the apartment. It goes without saying that you will have told all the applicants that Sunday that you expect to have several, and that you will select them either on the basis of the strength of their application or first come, first served. Since you have not considered their credit reports nor checked references on them, you do not have a federal fair housing or FCRA issue, except to tell them the basis for your decision in the hope of avoiding a complaint to the local enforcement agency. We would suggest the following, with their deposit check, uncashed, enclosed. “Thank you for applying for the apartment at __________________ last Sunday. As I explained, there were a number of applicants for the unit, and one of those ahead of you qualified for it. Enclosed, uncashed, is your check for a holding deposit. Please be advised that we have run no credit report nor have we contacted any of your references.” Keep it short, friendly, but to the point. This is, after all, a putatively qualified applicant and he may be interested in a future vacancy. Put him on your follow up list and contact him when you have another vacancy coming up. Remember, it is OK to reject a member of a protected class, as long as you are not rejecting them because they are members of a protected class. All you can really do is to adopt a rational and legal method of discriminating among applicants, apply it, then keep good enough records to show how you did it.
May 2016
REIA GC Vendor Members Directory
Type of Business
Accounting
Accounting
Company + WebSite
Contact Info
Type of Business
Chuck Vonderhaar, CPA
Chuck Vonderhaar 513-563-0598 chuck@cpvcpa.com
Floor Restoration
Scott & Deanna Ellsworth 513-272-8400
Flooring
www.cpvpa.com
Ellsworth & Associates, CPA’s www.ellsworthcpa.com
Building Supplies
Butler County Edge-Co
Building Supplies
Pease Warehouse
Building Supplies
Surplus Warehouse
www.edgcowholesale.com
www.peasewarehouse.com
www.surplus-warehouse.com
sellsworth@ellsworthcpa.com
Company + WebSite
Contact Info
Olmec Reflections, INC.
Donald Boling 513-300-9203
www.olmeccarpetcleaninginc.com
McSwain Pro Floors www.mcswaincarpets.com
OlmecReflectionsinc@gmail.com
Jon O'Connor 513-354-4400 joconnor@mcswaincarpets.com
Brent Fening 513-868-2068 edgcobp@yahoo.com
HVAC, Electrical, Plumbing
Stephen Pease 513-867-9926 Stevep@peasewarehouse.com
Inspection Services
Criterium – Cincinnati Engineers www.criterium-cincinnati.com
Mathew Klein 513-474-9600 criterium-cincinnati@fuse.net
Bill Wiehe 513-245-2222
Property Mgmt
Berkshire Hathaway HS Commercial Division
Max Arroyo 513-772-5736 marroyo@bhhspro.com
swcincinnaticlrn@ecbarton.com
DMG Mechanicals www.dmgmechanicals.com
Scott Lane 513-825-1141 scott@dmgcontractors.com
www.firstcirclepm.com
Deb Meyer 513-266-4008 deb@odorxit.com
Rehab & Restoration
United Installs, LLC
Sasha Allen 513-344-3972 TeamAllen@fuse.net
Rehab Project Mgmt
BildWise
Matt Zecher 513-307-2112 Zecher2112@gmail.com
Real Estate Brokerage
www.bestexit.com.com
Formula Exterminators
Fred & Cindi Goff 513-671-7378 cindi.goff@gmail.com
Real Estate Brokerage
Federle Inc., Realtors
Autumnwood Funding
Chris Knoppe 614-433-0570 Chris@FundingByAW.com
Real Estate Brokerage
Outside The Box Real Estate
Cleaning Products
www.OdorXit.com
Cleaning and Evictions
Swept Away Property Cleanouts
Contractor
KASA General Contracting, Inc.
OdorXit
www.sashaallen.vpweb.com
www.kasagci.com
Exterminators
Financial Services
www.FundingByAW.com
Financial Services
Dayton Capital Partners www.DaytonCapitalPartners.com
Financial Services
Excellent Financial
Financial Services
www.guardiansavingsbank.com
Guardian Savings Bank
Darrin Carey 937-458-3303 Darrin@DaytonCapitalPartners.co m
Kelvin Mitchell 888-493-6075 excellentfinance@aol.com Sharon Altman 513-923-4100 saltman@GuardianSavingsBank. com
Financial Services
ReCasa Financial Group, LLC www.recasafinancial.com
nlawler@recasafinancial.com
Financial Services
Spring Valley Bank
Paula Stenger 513-761-6688
Floor (wood) Restoration System
www.springvalleybank.com
Fabulous Floors of Cincinnati www.fabulousfloorsusa.com
Nancy Lawler 614-221-6770
davidcaldwell@ fabulousfloorsusa.com
www.BildWise.com
Exit Best Realty
www.federleinc.com
www.OTBrealestate.com
Real Estate Services
Auction.com
Real Estate Services
CORE Group
www.aucyion.com
www.coregroupre.com
Real Estate Services
Exit My Foreclosure
Restoration
Icon Environmental
www.ExitMyForeclosure.com
www.IconPropertyRescue.com
Dan Poske 513-301-0247 dposke@cmsllc.com Marty Russell 513-545-1637 martysrussell@gmail.com Dennis Taylor 513-851-4021 dennist123@aol.com Christina Carey 513-509-2705 Christina@OTBrealestate.com Susan Kasaris 949-672-3609 Skasaris.pta@auction.com Jiries Dawaher 513-504-5565 jtd8.re@gmail.com Kristin Caledine 513-509-9814 Kristin@ExitMyForeclosure.com Jeremy Clayton 513-396-6653 clayton@IconEnvironmental.net
Security
ADT Security Services
Kristen McClanahan 513-497-7990 kmcclanahan@adt.com
Wholesale Properties
You Buy Houses
Drew White 513-471-5008 DrewWhitePix@gmail.com
pstenger@springvalleybank.com
David Caldwell 513-453-4006
www.united-installs.com
Josh Appelman 859-916-5201 josh@united-installs.com
The Investor
www.youbuyhouses.com
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Cincinnati REIA 10945 Reed Hartman Hwy., Ste. 113 Cincinnati, OH 45242
PRESORTED STANDARD U.S.POSTAGE PAID
CINCINNATI, OH PERMIT NO. 777
Cincinnati Moved! CincinnatiREIA REIAHas is Moving! th Our General are held at: Beginning Thursday April 7Meetings our general meetings will be held at:
Crowne Plaza- Blue Ash 5901 Pfeiffer Road Ć” Cincinnati, OH 45242
Located at I-71 & Pfeiffer Road Be sure to come and check out our beautiful new location!
SAMPLE REJECTION LETTER (Applicant’s Names) (Applicant’s Address)
Date Dear (Applicant’s name), We regret to inform you that your application for the house on ________________has been denied by the owner for the following reason(s): (List reasons for rejection here) Because the owner’s decision was based in part on credit information, the Fair Credit Reporting Act requires us to make the following disclosures: The credit reporting company who provided us with your information was: (Name and address of your credit reporting company) Your credit score: ____ Date on which the credit score was created: _____ Key factors that adversely affected your credit score: 1. __________________________________________________________ 2. __________________________________________________________ 3. __________________________________________________________ 4. __________________________________________________________ ____ If this line is checked and this factor has not already been listed above, the number of recent inquiries on your consumer report was also a key factor that adversely affected your credit score. The credit reporting company did not make the decision to take the adverse action and is unable to provide you with the specific reasons why the adverse action was taken. Persuant to the Fair Credit Reporting Act, you have the right to receive a free copy of your credit report(s) from the reporting agency within 60 days. You have the right to dispute with the credit reporting agency the accuracy or completeness of the credit report. If you have any further questions regarding your application or this letter, please feel free to call us during normal business hours. Sincerely,
SATURDAY, MAY 7, 2016 9AM – 5 PM CROWNE PLAZA BLUE ASH
Asset Protection Series You will receive: •
•
•
Seven (7) information packed hours of training, no BS, Lots of Q & A, Off the Clock Learn to ETHICALLY and LEGALLY hammer the IRS AND protect your assets! Lunch (Preregistration required for meal counts)
• ALL FOR $99 for one or $129 for two REIAGC Members!
Presented by John Hyre, Attorney, Accountant and Investor! Attend and take advantage of his knowledge and experience to PROTECT YOUR ASSETS!
How to Invest RE via an IRA or 401(k) Object of the Class: Learn the basics of what you can and cannot do with an IRA/401(k), both with your own and when using money from others' accounts. Learn high-yield techniques to balloon income, tax-free of course. How to avoid disqualification of IRA (Prohibited Transaction Rules) and avoid paying tax in IRA (UBIT or Unrelated Business Income Tax). How to use LLC's in IRA, including deciding whether or not LLC makes sense for you. Examples of investments in IRA, including how to super-charge rentals, how many flips can be run and other RE-related techniques. Plain English format, open for Q&A throughout. Prohibited Transaction Rules How Aggressive Should One Be with IRA Tax Rules? Impact of Prohibited Transaction on your IRA Related Parties Related Parties Most Everyone Knows About, Review Traps to Avoid: More Subtle Related Party Rules Designed to Disqualify Your IRA Sole Benefit/Indirect Benefit Rule Much More Subtle & Dangerous Than Related Party Issues, Rarely Discussed For example, why renting IRA-owned condo to your boss at full rental rates with no discounts ruins Issues With Overly Clever Transactions Options Participating Loans Assignments When IRA's Are Taxable: UBIT (Unrelated Business Income Tax) Use of Debt in an IRA When it’s taxable, when it is not Taxable Trade or Business in an IRA Buy/Sell/Flip Transactions as a Trade or Business Rentals as a Trade/Business When Does Eating the Tax Make Sense? IRA-Owned/Checkbook LLC's Asset Protection – does your IRA Need It? Partnering – Advantages & Disadvantages of LLC When Partnering “Checkbook” Privileges – Do You Need to Write the Check NOW?
Bonus Topic:
Basic Bookkeeping for REI
• •
We’ll put QuickBooks up on the screen LIVE and set up a real estate company, step-by-step Learn the SIMPLE accounting for: Funding the company Getting Property Purchases & Sales on the Books Producing an Income Statement for Each Property Producing a Balance Sheet for Each Property How to record everyday transactions – writing checks, making deposits, etc. If you are not keeping excellent books, you: Are subject to AUTOMATIC IRS penalties Are overpaying your return preparer Cannot plan to minimize your taxes Can forget about your entities providing asset protection Don’t know your business!
REGISTRATION Register by May 5th for REIAGC member discounted price of $99 for 1 and $129 for 2! Name: ______________________________________________________________________________ Address:_____________________________________________________________________________ City:___________________________________________State:________________Zip:______________ Phone:______________________________________Email:____________________________________ 2nd Attendee:_________________________________________________________________________ NOTE: Please contact REIAGC staff with any accommodation or special dietary needs. Make your selection: REIAGC Member Pre-registration (before 5/5) Special Rate: ______$99 for 1 –or-
_____ $129 for 2
REIAGC Member Registration (after 5/5): ______ $129 for 1 -or- ______$159 for 2 Non-Member Registration (before 5/5) ______$129 for 1 -or- _____$159 for 2 Non-member Registration (after 5/5) _____$159 for 1 -or- ____$189 for 2 ______Register me free thru Express Success! Check method of payment: ______Check _____Credit Card Number: _________________________________________ Exp. Date: ____________ CID#____________ Signature:__________________________________________________________________ Please return completed form to REIAGC at the address below or register online at www.CincinnatiREIA.com. Cancellations are accepted without penalty up to 72 hours prior to the start of the event.
REIAGC 10945 Reed Hartman Hwy, Suite 113, Cincinnati, OH 45242 www.CincinnatREIA.com | Info@CincinnatiREIA.com | (513) 407-3137