Digested From "U.S. Vacant Housing Hits Record 19 Million" MarketWatch (04/26/10) by Rex Nutting
The Commerce Department reports that the number of vacant housing units in the United States rose to a record 19 million in the first quarter, an increase from 18.9 million in the last three months of 2009. In total, about 14.5 percent of homes were vacant, with 4.4 million available to be rented and 2 million available to be sold. Meanwhile, the vacancy rate for rentable units slipped from 10.7 percent to 10.6 percent over that same time span. The housing inventory climbed by 1.14 million to 130.9 million in the past year. Also during that time, occupied homes increased by 1.07 million to 111.9 million.
Hindsight may be 20/20, but a little foresight can go a long way.
Every day we make decisions. More often than not there’s a common factor that can tend to guide these decisions. I’ll give you a hint… it’s green and it rhymes with honey (I’d say it’s not as sweet, but some may argue that it’s all relative). We all understand that money is tight these days, but we need to keep tomorrow in sight. As a landlord, it’s important to weigh savings in both the short term AND the long term; both today AND tomorrow.
For example: Your home is 10 years old. Well, so is your stove. Your tenant calls and explains to you that the stove is not working. You now have TWO OPTIONS: 1) You can send a vendor to your home to fix the stove. A typical service call will cost about $75. Add parts and labor on top of that and you’ll be spending $200-$300. Now the stove works, but it’s still 10 years old. Unfortunately, you can’t predict when it will go out again. (We can only hope it’s not during Thanksgiving!) Then there’s option 2) Buy a new stove with a warranty for $300-$500. In this example, let’s say your stove has a 5 year warranty. How many service calls on your old stove are you willing to pay for within the next 5 years??
Your home is a long term investment. It’s imperative we view today’s problems with tomorrow in mind. It’s always important to evaluate each situation by viewing what’s best for today, tomorrow, for you, and especially for your tenant. Because, as landlords, we all know happy tenants tend to stay longer.
Here in the Southeast, termites are a homeowner’s worst nightmare. With spring around the corner we are quickly approaching termite “swarming season.” This usually occurs the first few warm days between March – May. The flying termites are actually male and female reproductive termites that are mating and creating new colonies. Once mated, the queens quickly move into the ground and begin laying eggs. Thus a new colony is formed. If you are seeing swarms around or in your home then that is a pretty good sign you have a termite infestation.
There are 3 basic ways to treat termites: baiting system, liquid treatment with nonrepellents, and liquid treatment with repellents. The baiting system is installed around your home and monitored quarterly. Average cost of the baiting system ranges from $250-$700 depending on the size of the home and cost for the quarterly inspection ranges from $65-$125. Typically, a liquid treatment can cost anywhere between $4-$10 per exterior linear foot of the home. Treatments should come with a 5-7 year guarantee with annual inspections (cost is usually around $100-$150). A termite treatment usually comes with one of two types of guarantees, a retreatment only or retreatment/repair guarantee.
Of course, just because you don’t have active termites in your home doesn’t mean you shouldn’t be worried. Termites can strike at anytime, especially here in Georgia, so the best offense against termites is a good defense. Have your home inspected for termites annually to prevent infestations and major damage.
In today’s difficult economic times, it’s particularly important that both owners and operators watch their dollars closely. When it comes to maintenance issues, cutting corners can be risky, particularly since resident satisfaction and retention can oftentimes be tied to how renters feel about the upkeep of both their apartment and the building in which they live.
And, when residents do move out, it’s nearly impossible to cut corners on the apartment turn—that is, if you expect a new resident to move in. “When you have a line out the door and are raising rents with every lease turn, you could potentially have a luxury maybe to not invest as deeply in solid maintenance. These days you can’t,” asserts Andrew Livingstone, executive director-management, Greystar Real Estate Partners LLC.
The key to driving down costs associated with apartment wear-and-tear is preventative maintenance, he adds. “The reality is, a lot of dollars are wasted on very easy things to monitor.” Such preventative maintenance steps include ensuring that all unoccupied units have their lights turned off, that thermostats are set to an appropriate temperature and that air conditioner filters are replaced regularly.
In addition, certain manufacturers now produce products that are intended to last longer and make apartments more comfortable. Beaulieu of America, for example, has a line of carpets treated with the company’s Magic Fresh technology, which works for the life of the carpet and is designed to reduce and eliminate household odors.
“An odor-free environment is critical for property managers showing apartments. Strong odors are a real turn-off to potential renters,” notes Jeff Meadows, executive vice president, Beaulieu of America. “This economic recession [makes] property management issues like flooring selection, care and maintenance for apartments more important than ever before.”
Also important is for managers to focus on their company’s national buying power, as well as its procurement process, which could result in the ability to drive down costs significantly. Livingstone believes that owners and operators should work as closely as possible with national vendors, focusing on product selection, to ensure both that they are picking products that are going to give them the price point that is appropriate to their portfolio, as well as give them the service life they expect.
“Where you can really get the economics and power around that, you can control that spend and make individual properties go and purchase those products that follow the specifications,” Livingstone adds.
Another area to focus on is green initiatives. Even if your portfolio is not particularly sustainable, there’s no time like the present to start greening it. For example, rather than simply replacing burnt-out light bulbs with the same variety, replace them with the energy-efficient variety.
“There are good opportunities, as you are doing repairs, to put green-friendly parts in place,” asserts Livingstone. “And they are not only friendly for the environment, but they are also cost-cutting.”
Beaulieu of America’s Property Management Carpets  are treated with Magic Fresh to reduce and eliminate many household odors, including those from smoke, cooking and pets. The technology is self-renewing because it is not decomposed. Bliss by Beaulieu Healthy Home carpet can be treated with Magic Fresh, as well as Silver Release, which embeds silver and copper ions into each carpet fiber to inhibit the growth of bacteria, mold and mildew (www.beaulieu-usa.com)…Executive Coatings and Contracting  is a repainting and renovation contractor specifically targeted toward apartment communities in the Western United States. The company offers painting, trim and siding replacement, carpentry, stucco and drywall repair, and gutter repair, replacement and cleaning services (www.executivecoatings.com)…ReNew Coating Systems’  ReCoat Tub and Tile is a water-based epoxy refinishing system that can be used on porcelain bathtubs, sinks, formica/culture marble countertops, oven doors, refrigerators and dishwashers. The zero-VOC two-part epoxy, which can be applied as a spray or roll on, is odor-free, non-flammable and non-toxic (www.recoattubandtile.com).
Every year, millions of landlords pay more taxes on their rental income than they have to. Why? Because they fail to take advantage of all the tax deductions available for owners of rental property. Rental real estate provides more tax benefits than almost any other investment.
Often, these benefits make the difference between losing money and earning a profit on a rental property. Here are the top tax deductions for owners of small residential rental property.
Interest Interest is often a landlord’s single biggest deductible expense. Common examples of interest that landlords can deduct include mortgage interest payments on loans used to acquire or improve rental property and interest on credit cards for goods or services used in a rental activity.
Depreciation The actual cost of a house, apartment building, or other rental property is not fully deductible in the year in which you pay for it. Instead, landlords get back the cost of real estate through depreciation. This involves deducting a portion of the cost of the property over several years.
Repairs The cost of repairs to rental property (provided the repairs are ordinary, necessary, and reasonable in amount) are fully deductible in the year in which they are incurred. Good examples of deductible repairs include repainting, fixing gutters or floors, fixing leaks, plastering, and replacing broken windows. Improvements are typically not deductible but the depreciation of the improvement can be.
Local Travel Landlords are entitled to a tax deduction whenever they drive anywhere for their rental activity. For example, when you drive to your rental building to deal with a tenant complaint or go to the hardware store to purchase a part for a repair, you can deduct your travel expenses.
Long Distance Travel If you travel overnight for your rental activity, you can deduct your airfare, hotel bills, meals, and other expenses. If you plan your trip carefully, you can even mix landlord business with pleasure and still take a deduction.However, IRS auditors closely scrutinize deductions for overnight travel — and many taxpayers get caught claiming these deductions without proper records to back them up. To stay within the law (and avoid unwanted attention from the IRS), you need to properly document your long distance travel expenses.
Employees and Independent Contractors Whenever you hire anyone to perform services for your rental activity, you can deduct their wages as a rental business expense. This is so whether the worker is an employee (for example, a resident manager) or an independent contractor (for example, a repair person).
Casualty and Theft Losses If your rental property is damaged or destroyed from a sudden event like a fire or flood, you may be able to obtain a tax deduction for all or part of your loss. These types of losses are called casualty losses. You usually won’t be able to deduct the entire cost of property damaged or destroyed by a casualty. How much you may deduct depends on how much of your property was destroyed and whether the loss was covered by insurance.
InsuranceYou can deduct the premiums you pay for almost any insurance for your rental activity. This includes fire, theft, and flood insurance for rental property, as well as landlord liability insurance.
Legal and Professional Services Finally, you can deduct fees that you pay to attorneys, accountants, property management companies, real estate investment advisors, and other professionals. You can deduct these fees as operating expenses as long as the fees are paid for work related to your rental activity.
Any questions concerning taxes should be addressed by an accountant or real estate attorney.
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River City Property Management317 Sylvan StreetChattanooga, Tennessee 37405