Tag: rentals

User Question: How and where do I advertise my available rental property?

Written on June 13, 2022. Posted in Blog Post, User Questions.

To Mike K. of Delaware:

There are many approaches to advertising an available rental property. First, word of mouth is a good and inexpensive approach. Let other landlords know of your available rental and if they are approached and have no available units themselves, they will recommend your property to inquiring prospective tenants. Also, let local store owners and post office personnel know of your available rental property as they are often asked by prospective tenants looking for a rental in the area. Purchase business cards and hand them out to all you know or meet. The second is to draft a “Flyer” containing all relevant information regarding the available rental (Don’t include the actual address as it may invite bad actors to enter and ransack the property – give a general location – i.e.: “On Second Avenue”). Post these flyers on community bulletin boards located in supermarkets, local stores, and post offices. I found this approach to be a great source for prospective tenants. The flyer should include relevant information about the property (# of bedrooms, general location, access to public transportation/shopping/schools, etc.) and included amenities for the property (I.e.: large fenced-in rear yard, washer and dryer, finished basement, enclosed front porch, etc.). This flyer can also be used as a reference when returning calls from prospective tenants left on your answering machine/service to consistently describe the property. The third is to post the rental to online neighborhood bulletin boards and some may even use “Craig’s List” (but I don’t recommend this as there are many issues surrounding this approach). Again, as stated above, be careful what you post and provide the basic information but don’t include the address but a general location as listed on the flyer. Fourth and finally, take out a classified ad in the local newspaper(s). This will cost money based on the size and duration of the ad. Many newspapers will also have an online presence and will be the broadest outreach for prospective tenants.

If not already done, establish a dedicated phone line or answering service for your business. The dedicated phone line should be covered by an answering machine to capture prospective tenants calling to inquire about the property. Post this business phone number on your business card and all flyers and classified ads so you will not have calls go to your personal phone. With the exception of business cards, only post your first name and business number on all ads and flyers.

For further information, consider purchasing my book. You can find further information in the book at:

Chapter 5

Securing Tenants

User Question: How do I set the price for a rental property?

Written on June 13, 2022. Posted in Blog Post, User Questions.

To Jennifer L. from Florida:

There are several approaches I use to establish a rental price based on the size of the rental (1/2 bedroom apt., 2/3 bedroom house, etc.). I first check the rental prices of similar units within the area of the rental. I may adjust the rental price up or down based on the condition of the rental property and any amenities offered as part of the rental (washer/dryer, large fenced-in rear yard, garage, etc.). I would also talk to other landlords to determine their prices of similar units. I then call local apartment complexes for their prices for a 1/2/3 bedroom apartment and adjust the price up based on the factors described above. Finally, I would “back into” a rental price based on my monthly costs, set aside, and profit margin.

“Backing into” the rental price and comparing it to comparable units in the area will determine if the rental will be viable or not based on the market prices. In order to “back into” the rental price you need to understand the costs that go into the rental property. Such items to consider for the analysis include monthly mortgage, adjusted monthly costs for real estate taxes/homeowner’s insurance, adjusted monthly utilities (gas, electric, water/sewer, etc., as included in the rental), inspection fees, advertisement costs, regular maintenance (i.e.: Lawn services, trash removal, etc., as needed), 15% set aside for larger maintenance needs (repair/replacement of appliances, hot water heater, heater/Air Conditioner, and structural items – i.e.: roof), adjusted 2-month vacancy (for eventual change of tenants), and finally desired profit margin. If you utilize a property management company or real estate company to manage your property, you may need to include their adjusted costs. After your analysis, you may find that the comparable rental price may not meet the calculated “backed in” rental price. If it is close but still under, you may consider using the comparable rental price to meet the market and with the understanding that the rental price will most likely increase in subsequent years.

You should also guard against unexpected increases in utilities, taxes, and insurances by stipulating within your lease that any increases in these costs will lead to appropriate increases in rental costs as they are generally unexpected. Keeping the rental price within the comparable zone will attract potential tenants for consideration as you will be similar to other rentals in the marketplace. However, if the analysis if far higher than the comparable price, then you may need to increase the rental price to come closer to the calculated. Remember, prices over the comparable rental price may cause fewer or no prospective tenants to apply for your rental. One way to alleviate this is to include and advertise amenities that will attract prospective tenants. Advertising the amenities as well as some of the benefits will greatly add to prospective tenants applying for your rental. Such items to include in your advertisement may be: Large fenced-in rear yard, near public transportation, near a public park, near shopping centers, near schools, etc., as appropriate. Be careful as additional details add to advertising costs as it goes by the size or word/character count. Remember, rental prices near or slightly under the comparable rental price will bring in more prospective tenants whereas rental processes over the comparable rental price would generally yield fewer prospective tenants.

For further information, consider purchasing my book. You can find further information in the book at:

Chapter 3

Pre-Requisites
Property Purchase Costs
Rental Market

Chapter 4

Getting Ready
Setting Rental Prices

User Question: Should I use an accountant or can I handle the bookkeeping and taxes myself?

Written on June 13, 2022. Posted in Blog Post, User Questions.

To Mike P. of California:

This truly depends on you and your understanding of the tax laws and your commitment to maintain the appropriate records and perform the calculations yourself. Although I had taken Micro- and Macro-Economics, I went to the IRS website and downloaded IRS Publications on Rental Properties, Bookkeeping and Depreciation/Expenses and read through them thoroughly. These publications also give examples many of which closely represented my position which were helpful in understanding how to handle my records and prepare my own taxes. These publications walk you through the relevant scenarios which were easily transferable to my specific situation. Following these processes described within the publications will normally ensure IRS acceptance although you may not secure all possible deductions which an accountant might identify. However, an accountant costs money and I am not sure it would be worth the extra cost. Even hiring an accountant still requires a lot of work on your part to gather and identify the receipts/records. I find that unless there are significant tax changes, the tax preparation and submission process are the same or similar each year so experience preparing taxes in previous years will assist in preparing the taxes in the current year (if you forget, you can always look up what you did in previous years and model that approach for the current year with the exception of current year tax changes). I have developed forms for gathering, logging and categorizing receipts and developed Excel spreadsheets for calculating depreciation for each property. The spreadsheet was developed when tax software was not available and I still use it today. Many tax software packages will do some of these calculations for you and you may consider purchasing one software package and getting the update each year. This may be extremely beneficial in place of an accountant. Just beware that even using tax software, most of the preparatory work is still needed in managing and recording receipts. So, forms like I created do assist in tax preparation whether it be for yourself, an accountant or utilizing tax software. Like stated when using an accountant, there is a cost to tax software for the initial purchase as well as yearly purchases of the same brand for continuity. However, like an accountant, the tax software may get you additional deductions that you may otherwise miss when doing you own taxes and that may cover, or exceed, the cost of the tax software. When I started my business, tax software was not available and thereafter for many years after starting my business. I tried utilizing tax software in later years but it was not convenient for me as previous depreciation could not be entered. However, this may have changed. I still do my own taxes utilizing the same approach each year and utilizing the forms and spreadsheets I had previously developed. Over the course of my business, I have not had any issues with the IRS so I must have been doing something right.

In summary, utilizing a tax accountant or tax software is a decision you need to make with your comfort or level of knowledge of bookkeeping and/or tax preparation. If I were to start my business today, I would still download the relevant IRS publications, read them thoroughly, prepare the necessary forms for categorizing receipts and then purchase tax software to prepare my taxes.

For further information, consider purchasing my book. You can find further information in the book at:

Chapter 2

Commitments
Tax Implications

User Question: Should I allow the tenant to do work on my rental property and reduce their rent for the work performed?

Written on June 13, 2022. Posted in Blog Post, User Questions.

To Erik A. in Pennsylvania:

Unless the tenant is a licensed contractor who is insured, NO, you should not allow the tenant to do any work over and above the lease-defined responsibilities (yard work, snow removal from steps and sidewalk and minor repairs, etc.). Many municipalities require permits/inspections for much of the work performed to a rental property. They often require that only licensed and insured contractors perform this work. You also do not want to reduce the rent for work performed because you will need a valid receipt in order to list the work as an expense or capital improvement in order to be able to depreciate it for tax purposes. Receipts are necessary to document the work performed. I note all my receipts for the property it was performed on and save the receipts in a box for tax time where it is retrieved and collated with other receipts for each property. I have heard of some landlords “looking around” Home Depot/Lowes or other home improvement stores for discarded receipts that they can use for their properties but I don’t recommend this practice. At tax time, I go through my box of receipts, mark a number on each receipt, list them as an expense or capital improvement, and log the receipt by number on a spreadsheet. I then collate all the receipts for a given property/type of receipt and list/summarize them together so that I can enter them appropriately on my tax forms for that property.

I also keep a list of qualified contractors to utilize when I need them.

In summary, I strongly suggest that you not use a tenant to perform any work unless specifically defined within your lease.

For further information, consider purchasing my book. You can find further information in the book at:

Chapter 3

Pre-requisites
Local and County Regulations

User Question: Should I rent to family or friends?

Written on June 13, 2022. Posted in Blog Post, User Questions.

To John B. from Ohio:

Generally, I would say NO for the following reasons:

Friends and especially family members would take advantage of the relationship when it comes to paying rent on time and contacting you for every little problem which your lease should have them address. Friends and family members may not treat the property well thinking “You can afford to fix it” and will expect you to take care of minor issues.

They may also call your personal phone line as they would likely know this number and want to ensure that they get you to complain or request that you come over to repair something.

I have heard of friends or family members not paying the rent in full or on time because of hard times or other priorities, figuring that you won’t evict them and “give them some slack”.

It is really up to you if you want to rent to them as you know them better than I. If you know them well and you feel that they will not take advantage of the relationship, then you might want to take a chance. If you decide to take this chance, keep it a business relationship and make sure they understand that approach that you will be taking for the rental and BE SURE TO ENFORCE THE LEASE AT ALL TIMES as you would with a normal tenant. Be sure that they understand the lease and know what is their responsibility and what is your responsibility.

So, in summary, I would not recommend renting to friends and/or family.

For further information, consider purchasing my book. You can find further information in the book at:

Chapter 5

Securing Tenants
Tenant Selection
Poor Tenant Trends