RENT Magazine discusses the latest investing, legal, screening, and tech trends in the rental industry. Contributors include attorneys, tax experts, investors, and real estate influencers. Stay in the know and read RENT Magazine for FREE.
PROPOSED PET LAWS THAT WILL IMPACT LANDLORDS PAGE 49
THE ART OF RAISING RENT PAGE 15 REPLACE YOUR RENTAL WITH A REIT… WITHOUT TAXES!
SPRING 2024
AAOA CELEBRATES 20 YEARS PAGE 53
PAGE 6
LEGALLY SET OCCUPANCY LIMITS HOW TO
PAGE 64
PAGE 24 SQUATTERS ARE TAKING OVER: MEET THE SQUATTER HUNTER FEARS OF UNPAID RENT? PAGE 44
SECURE TOUR PROTOCOL WITH TENANT IDENTITY FRAUD ON THE RISE PAGE 10
Photo Credit: L.A. Times
PAGE 1
THE OFFICIAL PUBLICATION OF THE AMERICAN APARTMENT OWNERS ASSOCIATION
AAOA.COM
TEAM VP Robbie Cronrod
Editor in Chief Alexandra Alvarado
Contributing Editors Allen Artcliff-Cronrod Nancy Abrams Contributors Amanda Han Bradley Barth, Esq. Brian Burke Daniel Sharabi
CONTENTS
06 10 15 20 24 31
REPLACE YOUR RENTAL PROPERTY WITH A REIT… WITHOUT TAXES!
Dave Mencel David Fisher
SECURE TOUR PROTOCOL WITH TENANT IDENTITY FRAUD ON THE RISE
Frank Jachetta Garrett Sutton Georgeanne Barret J Scott Kathelene Williams, Esq. Kim Lisa Taylor, Esq.
THE ART OF RAISING RENT WHILE KEEPING YOUR TENANTS
DO NOT LET UNCLE SAM DICTATE WHEN AND HOW TO DEFER YOUR CAPITAL GAINS TAX
Leah Maher Lisa Russell Liz Faircloth Nancy Abrams Norm Spivey Richard D. Gann, JD Robert Knakal Scott Wymer, Ph.D. Tony Bonifacic
SQUATTERS ARE TAKING OVER: MEET THE SQUATTER HUNTER
UNRAVELING UTILITY BILLING MYTHS AMONG HOUSING PROVIDERS
PAGE 2
Welcome! Here at AAOA, we are in a celebratory mood as we commemorate our 20th year of serving the rental community. Now numbering 147,500+ members, AAOA is proud to support the interests of landlords, real estate brokers, property managers, real estate property owners and apartment building owners nationally. Our cover story features Flash Shelton, known as The Squatter Hunter, who shares with us how he removed squatters from his mother’s empty home and what his team does to help others in the same situation. This issue of RENT also offers articles that will help your business succeed from retaining your tenants when you raise their rent to learning about new pet laws and fair housing and occupancy rate limit policies. We have an interview with Georgeanne Barrett of Archway Communities who describes how the affordable housing developer established phenomenal supportive services to help their residents, even giving cash back when they pay their rent on time. Also, learn which Celebrities are on the Move and the latest on 1031 Exchanges, REITs, cost segregation and making property showings safer. Happy reading!
CELEBRITIES ON THE MOVE STATE OF THE RENTAL INDUSTRY: A LOOK BACK INTO THE FUTURE 39 36
44
FEARS OF UNPAID RENT? TOP 5 PROACTIVE STRATEGIES EVERY LANDLORD NEEDS
49 54 58
PROPOSED PET LAWS THAT WILL IMPACT LANDLORDS
TOP 6 ESTATE PLANNING TOOLS ALL REAL ESTATE INVESTORS NEED
USING LOW-INCOME HOUSING TAX CREDITS TO TRANSFORM LIVES: ARCHWAY COMMUNITIES
64
HOW TO LEGALLY SET A LIMIT ON THE NUMBER OF OCCUPANTS IN A RENTAL
69
INVESTER CON: EMPOWERING WOMEN INVESTORS THROUGH REAL ESTATE
74
UNLOCKING OPPORTUNITIES: ESSENTIAL READS FOR REAL ESTATE INVESTORS
77
HOW TO DOUBLE COST SEGREGATION BENEFITS ON COMMERCIAL DEVELOPMENTS, RENOVATIONS, AND CONVERSIONS
PAGE 3
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PAGE 4 Ready to list your property with AAOA?
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PAGE 5
The paramount principle of a 1031 exchange is to defer capital gains tax when you replace your business/investment real estate with other business/ investment real estate. This is known as a “like-kind” exchange, and today all real estate (including mineral rights and fractional interests) is “like-kind” with all other real estate. Click here for a summary of 1031 exchange requirements. REPLACE YOUR RENTAL PROPERTY WITH A REIT… WITHOUT TAXES!
In the last category are structures that seem like real estate—partnerships, real estate operating companies, LLCs and REITs—but do not qualify because technically the investor owns an interest in a company or partnership, not an interest in the underlying property. More specifically: in a 1031 exchange, you cannot sell a rental property and re-invest the sales proceeds into a REIT. This may seem counterintuitive, but 1031 rules explicitly require taxpayers to replace their relinquished property with real estate they own directly. The only exception to this rule is found in IRS Revenue Ruling 2004-86, which treats a beneficial interest in a trust created under Delaware law (subject to certain caveats) as a directly-owned fractional interest for 1031 purposes. Click here for a detailed overview.
However, not all real estate satisfies the “business or investment” requirement of a 1031 exchange. Common exclusions are:
• Primary residence
• Property used as personal vacation property
• Developer inventory
• “Flip” property
• Investment vehicles that own real estate
PAGE 6
But there is good news for those hoping to do a 1031 exchange today and own REIT interests in the future—without triggering capital gains taxes. This is known as the “1031/721 combo strategy” or simply the “UPREIT conversion” strategy. Here’s how the 1031/721 Strategy works:
Sell your rental property today
Conduct a 1031 exchange by investing your proceeds into a passive replacement property
Own a fractional interest in an institutional property for 2-3 years The Operating Partnership (“OP”) of an “UPREIT” then acquires the property UPREIT stands for Umbrella Partnership Real Estate Investment Trust Your interests in the property convert to REIT OP units under a tax-deferred transfer per IRC §721 Thereafter, you own REIT OP units, which can be redeemed partially or entirely on a periodic basis beginning 12 months after the conversion REIT investors continue to claim their pro-rata share of depreciation (subject to personal cost basis) and ultimately benefit from a “step up” in cost basis upon death, thereby avoiding the deferred capital gains taxes altogether
PAGE 7
In most cases, investors are committing to the REIT at the outset, while some programs may provide an option to cash out when the REIT acquires the initial 1031 property. The same institutional real estate operator (known as the “sponsor”) who arranged the 1031 program will control the disposition of the property and also is affiliated with the target REIT. BOTTOM LINE Trading your rental property for REIT interests is a two-step process, with 3-4 years before your shares become redeemable. When the dust settles, you have the opportunity to own (fractionally) a diverse portfolio designed for the potential of consistent income with continued depreciation and estate planning simplicity. Additional Resources: ✓ For more information on the 1031/721 combo strategy, click here. ✓ To watch a video on this topic, click here ✓ For general information on passive replacement strategies, please visit our website at https://1031capitalsolutions.com/category/ literature/
RICHARD D. GANN, JD Managing Partner 1031 Capital Solutions (800) 445-5908 1031CapitalSolutions.com
Richard (Rick) Gann is an attorney, licensed real-estate broker, and general securities principal specializing in 1031 exchange solutions and he is co-author of the book How to Retire from Being a Landlord.
Disclosures : UPREITs may impose one or more of the following fees on 1031 investors: conversion fee, ongoing asset management fees, liquidation fee. Consult with your legal or tax professional before investing. This is for informational purposes only, does not constitute individual investment advice, and should not be relied upon as tax or legal advice. Please consult the appropriate professional regarding your individual circumstance. There are material risks associated with investing in DST properties and real estate securities including liquidity, tenant vacancies, general market conditions and competition, lack of operating history, interest rate risks, the risk of new supply coming to market and softening rental rates, general risks of owning/operating commercial and multifamily properties, short term leases associated with multi-family properties, financing risks, potential adverse tax consequences, general economic risks, development risks, long hold periods, and potential loss of the entire investment principal. Potential cash flows/returns/appreciation are not guaranteed and could be lower than anticipated. Diversification does not guarantee a profit or protect against a loss in a declining market. It is a method used to help manage investment risk. A listed REIT is a security that sells like a stock on the major exchanges and invests in real estate directly, either through properties or mortgages. Non-listed REITs also invest in real estate directly, but their shares are not listed on an exchange; redemptions are limited and may be suspended. REITs receive special tax considerations and typically offer investors high yields, as well as a highly liquid method of investing in real estate. There are risks associated with these types of investments and include but are not limited to the following: Typically no secondary market exists for the security listed above. Potential difficulty discerning between routine interest payments and principal repayment. Redemption price of a REIT may be worth more or less than the original price paid. Value of the shares in the trust will fluctuate with the portfolio of underlying real estate. Involves risks such as refinancing in the real estate industry, interest rates, availability of mortgage funds, operating expenses, cost of insurance, lease terminations, potential economic and regulatory changes. This is neither an offer to sell nor a solicitation or an offer to buy the securities described herein. The offering is made only by the Prospectus. Securities offered through Concorde Investment Services, LLC (CIS), Member FINRA/ SIPC. Advisory Services offered through Concorde Asset Management, LLC (CAM), an SEC- registered Investment Adviser. 1031 Capital Solutions is independent of CIS and CAM.
PAGE 8
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PAGE 9 Kurt Kelley - President
While seller impersonation scams dominate news coverage, calls for better security come from across the industry. In the rental sector, identity theft and rental application fraud have property owners footing the bill for increasing eviction procedures. According to RealPage’s study on multifamily market crime, 97% of property managers voted fraud reduction their top priority. While technology lightens our workload with convenience and automation, the same gains are available to criminals. Without equal advancement in security, unchecked tech is a disaster waiting to happen. In real estate, we’re past waiting—tech-related crime is rampant. SECURE TOUR PROTOCOL WITH TENANT IDENTITY FRAUD ON THE RISE BRINGING AWARENESS AND SOLUTIONS TO THE DANGERS THAT REAL ESTATE PROFESSIONALS FACE WHILE SHOWING PROPERTIES
PAGE 10
KNOCK, KNOCK. WHO’S THERE?
THIS BEGS THE QUESTION - WHO ARE YOU PEOPLE? that’s 5-6 fraudulent tenants. Five evictions amounts to $37,500 in potential eviction costs. It’s estimated that the national average rose around 40% in 2023 (RealPage). with an average cost of $7,500 per eviction (Snappt, 2024). Outside major metro areas with higher rates of fraud and expense, the fraud rate was estimated at 3.6% in 2022. Of 150 units, Are you certain the applicants on the doorstep are who they claim to be? For ages, realtors have been keen to the arrray of threats they face during property showings with good reason to be wary. Exponential growth in multiple forms of identity fraud is wreaking havoc. Recent survey data claims 93% of property managers reported fraud in 2023 ( National Multifamily Housing Council , 2024). It gets worse. 73% of RealPage report respondents claimed over half of all rental application fraud goes undetected until after residents move in. Eviction procedures can take 6 months or longer, With listing platforms touting “tenant screening for guaranteed quality applicants,” how are these bad actors making the cut? It’s a hard pill to swallow, but tenant screening software is helpless against identity theft. Catching unskilled scammers and the unqualified-but-honest, it stops short at fraudulent applicants. The 5 most difficult-to-detect fraud types: 1. Income misrepresentation 2. Fake or manipulated renter identities 3. Identity theft 4. Staff pushing through unqualified candidates 5. Fraudulent co-signers or guarantors
EVICTION PROCEDURES CAN TAKE 6 MONTHS OR LONGER, WITH AN AVERAGE COST OF $7,500 PER EVICTION.
Source: (RealPage, National Multifamily Fraud Research Study , 2024)
PAGE 11
WHAT CAN BE DONE TO PREVENT WRONGFUL ACCESS TO RENTAL PROPERTIES? Showings already take a daunting amount of time from property managers. How can we ensure that that time isn’t wasted on scammers? Regarding property tours in 2023, 51% of realtors reported fearing for their safety and 9% reported crime (NAR). How can we protect them? When a fraudulent tenant turns up, what leverage should we have on hand? As a catch-all for worst-case scenarios: have Most property owners will find the security advancements they need in one place with a listing platform designed for self-tours. Self-tour platforms require built-in, automated, and amplified security measures, while facilitating both types of tours. This state-of-the-art technology is available at the same cost or less than competing services. Biometric Identity Verification
The industry standard for self-tour platforms, it’s the only way to patch the hole in tenant screening that fraudsters scam through. Only 17% of property managers reported using facial recognition, providing great insight as to how these scams have become so prevalent (RealPage). Real-time facial recognition software is a guard against identity theft.
insurance. Homeowners’ insurance covers damage incurred during guided and self-tours. With fraud rates expected to continue rising, lease insurance is more advantageous than ever. Services like LeaseGuarantee reimburse losses from legal fees, damages, and unpaid rent.
Here’s a step-by-step description of how it works for InstaShow, an industry-leading self-tour platform.
STEP 1
To create a profile, the applicant uploads an official government-issued form of photo ID.
STEP 2
The applicant is then required to take selfies in real time. Facial recognition software must deem that the selfies match the ID.
STEP 3
Level 1 Background Check and Global AML Watchlist Clearance run automatically.
STEP 4
These steps complete, the profile becomes verified and they can request self or guided tours of listings in-app.
STEP 5
Property managers may add requisite credit and loan pre-authorization checks. When verified, these checks on the applicant are automated before they can schedule a tour.
STEP 6
Upon arrival for a scheduled tour, whether self-tour or guided, the applicant must take another real-time selfie and pass the same facial recognition check to match the ID on file in their account. This step is repeated at the beginning of every tour facilitated by the app. For self-tours, this allows the applicant to unlock the door themselves.
PAGE 12
CONCLUSION Crime rates are expected to continue rising for the foreseeable future. Meeting strangers inside private residences literally opens the door to risk as does signing their lease. To combat tech-savvy scam artists and desperate rental applicants that beat average tenant screenings, leverage technology with biometric identity verification, verifiable access records, and tie-in surveillance devices to guard your doors in real time and in court. departures) and record audio. Some actually transmit audio for 2-way communication, allowing remote property representatives to assist self-tours in real time. Automated Chain-of-Custody Log Modeled after police protocol for accessing evidence lockers, top-tier self-tour platforms retain a “chain-of-custody log” for each property. Accessible to the property owner, this is a stored, time-stamped record of access enabled by the app. This record has various uses from tracking tours, logging the comings and goings of maintenance crews, and as evidence in court should the need arise. Smart Surveillance Devices Beyond classic security cameras, these are pairable devices that send disturbance notifications (or self-tour arrivals and
Fraud on the Rise
97 % 93 %
Of property managers voted fraud reduction their top priority
Of property managers reported fraud in 2023
Of realtors reported fearing for their safety Regarding property tours in 2023
51 %
Regarding property tours in 2023
9 % 17 %
Reported crime
Of property managers reported using facial recognition
LEAH MAHER Marketing Consultant InstaShow | Boxlty Access Systems
Leah is a marketing consultant and copywriter in Pennsylvania, currently working with InstaShow to articulate how their software solutions are designed by and for real estate professionals to make their lives easier. With a degree in Media Studies and Business from Temple University, exploring and understanding the symbiosis between society and technology is a longtime passion for Ms. Maher.
Sources: 1. The Almanac. (2024, January 24). Showing property can be a dangerous job. https://www.almanacnews.com/real-estate/2023/09/20/showing-property-can-be-a- dangerous-job/ 2. Jugo, K., & Thomason, J. (2024, January 19). 9 Ways of dealing with property management fraud in 2024. RentPost. https://rentpost.com/resources/article/ property-management-fraud/ 3. Novo, T. (2024, February 1). Save Time with Self-Tours. InstaShow. https://instashow.app/save-time-with-self-tours/ 4. RealPage. National Multifamily Fraud Research Study. (2024, March 26). RealPage. https://www.realpage.com/ebooks/uncovering-impact-of-rental-application- fraud/58aabc2a-eba3-11ee-b189-005056ae66af/ 5. Rothstein, E. (2024, January 24). Apartment owners report surge in rental application fraud. Bisnow. https://www.bisnow.com/national/news/multifamily/apartment- owners-report-surge-in-rental-application-fraud-122537 6. TransUnion (2023, July 13).Fraud in the rental housing industry. https://www.mysmartmove.com/blog/rental-property-industry-fraud-infographic 7. TransUnion (2023, July 13).Fraud in the rental housing industry. https://www.mysmartmove.com/blog/rental-property-industry-fraud-infographic 8. Yun, L., Lautz, J., Dunn, M., Snowden, B., National Association of REALTORS, & Holmes, S. (2023). Member Safety Residential Report. https://cdn.nar.realtor/sites/ default/files/documents/2023-member-safety-report-residential-09-18-2023.pdf?_gl=1*16cpjr4*_gcl_au*MTA1NTc0NjYyNS4xNjg5NjIzNDI5
PAGE 13
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PAGE 14
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Navigating the complexities of raising rent is a task that requires finesse, understanding, and a strategic approach. As landlords, we aim to ensure our investments are profitable and maintain a harmonious relationship with our tenants. This guide aims to equip you with the knowledge and tools to achieve both outcomes. THE ART OF RAISING RENT WHILE KEEPING YOUR TENANTS
UNDERSTANDING LOCAL RENT CONTROL LAWS
The foundation of any rent increase strategy is a thorough understanding of local rent control laws. These laws dictate the parameters within which you can operate, ensuring that your actions are both legal and fair. The value is two-fold:
Legal Compliance:
Tenant Trust:
Staying within the law protects you from potential legal repercussions and reinforces your credibility as a landlord.
Demonstrating your commitment to legality and fairness can significantly enhance trust with your tenants, fostering a positive landlord-tenant relationship.
Where to Find This Information:
• State and local government Housing Authority websites for up-to-date regulations
• Landlord and Property management associations, like AAOA, for expert advice
• Your trusted legal professionals for complex scenarios
Adhering to rent control laws is not just about compliance but also about trust and respect with your tenants. By fully understanding and respecting these laws, you set the stage for a transparent and fair rent increase process.
PAGE 15
ANALYZING THE MARKET
Setting the rent price is a delicate balance, you want to maximize income without losing tenants. A great start is to analyze the current real estate market. This analysis ensures your rent is competitive, fair and reflects your property’s value.
RESEARCH TOOLS: • Online platforms like Zillow and Rentometer • Local real estate listings for a closer look at comparable properties • Economic news sources for trends in the real estate and rental markets A well-researched understanding of the market ensures your rent increase is justified and aligned with current trends, making it easier for tenants to accept and understand the changes. It also gives you great background for discussions with tenants if that becomes necessary.
THE THREE MAIN FACTORS TO CONSIDER ARE:
• Location: The desirability of your property's location can significantly affect rent prices. • Property Type: The features and amenities of your property compared to others in the area. • Economic Trends: Keeping an eye on the regional and broader economic landscape can help you anticipate market shifts.
LEVERAGING PROPERTY MANAGEMENT SOFTWARE
Property management software can streamline the process of managing rent increases and tenant communications. For example, Doorspot’s software provides multiple benefits including:
• Broadcast Notifications: Efficiently inform tenants about rent increases. • Communication Logs: Keep a detailed record of all tenant interactions.
• Financial Tools: Easily update future invoices to reflect the increase. • Flexibility For Tenants: Some of these softwares offer payment options for tenants.
Click here to book a demo and learn how Doorspot can help you handle your rent increases and more.
PAGE 16
COMMUNICATING RENT INCREASES How you communicate a rent increase can significantly impact how it's received. Clear, transparent communication is essential for maintaining a positive tenant relationship. The fundamentals of this messaging are: • Advance Notice: This shows respect for your tenants' need to plan their finances, and gives time to resolve any tenant issues before the increase. • Clear Explanation: Transparency about the reasons for the increase can prevent misunderstandings. This is where your market savvy comes into play. • Written Documentation: A formal rent increase letter is an official record of the change. Even with the best preparation and communications, tenant objections can happen. How you handle these objections has a lasting impact on your landlord-tenant relationship: • Listen and Empathize: Understanding tenant concerns and acknowledging their impact is a great first step toward resolution. • Flexibility: Offering solutions, when possible, like payment plans, shows consideration for tenant circumstances. • Documentation: Keeping a log of all communications helps ensure clarity and accountability. Effective communication is the key to a smooth rent increase process. It not only ensures legal compliance but also maintains the trust and respect of your tenants. Addressing tenant objections with empathy and flexibility reinforces your commitment to a fair and respectful relationship, helping to mitigate concerns and maintain tenant satisfaction.
PAGE 17
CONCLUSION: KEY TAKEAWAYS FOR LANDLORDS Raising rent is a multifaceted process that, when done correctly, can enhance your property's profitability without sacrificing tenant satisfaction. The key lies in understanding local laws, conducting thorough market research, communicating transparently, addressing tenant concerns with empathy, and leveraging technology to streamline the process. Remember: • Compliance with rent control laws is foundational. • Market analysis ensures your rent increase is justified. • Clear, transparent communication is crucial. • Flexibility in handling objections can preserve tenant relationships. • Property management software can be an invaluable resource. By embracing these principles, landlords can confidently navigate rent increases, ensuring their properties remain competitive and their relationships with tenants are strong. Raising rent doesn't have to be a contentious process. With the right approach, it can be an opportunity to reinforce the value of your property and the strength of your relationships with your tenants.
SCOTT WYMER, PH.D. COO and Co-Founder DoorSpot (502) 480-1897
Scott is a landlord himself and has a great interest in PropTech. Having evolved into a software guy over the last 25 years, he is very excited about the company DoorSpot, which he co-founded. He is active in designing the innovative feature set DoorSpot offers fellow landlords in the property management space.
PAGE 18
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PAGE 19
When it comes to using a 1031 exchange tax deferral, it often feels like Uncle Sam holds all the cards. If you sell your property and use a 1031 exchange, you must find another property in only 45 days. That property must be of equal or greater value, and you must obtain equal or greater debt even if that debt is more expensive. DO NOT LET UNCLE SAM DICTATE WHEN AND HOW TO DEFER YOUR CAPITAL GAINS TAX
The overwhelming majority of the time, depreciation plays an important role in owning real estate, but when transacting a 1031 exchange, you may only get a partial depreciation schedule. In other words, your depreciation benefits will be reduced. But what if there was a way to regain control over your tax obligations, allowing you to make
decisions on your own terms? Enter the Deferred Sales Trust, a powerful tool based on Section 453 of the tax code that offers individuals a flexible alternative to the traditional 1031 exchange. Let’s break down how the Deferred Sales Trust works and explore its benefits compared to the constraints of a 1031 exchange.
1
FLEXIBILITY IN TIMING AND REQUIREMENTS
With a 1031 exchange, sellers are bound by strict deadlines and criteria. From identifying a replacement property within 45 days to ensuring equal or greater value and debt, the process can feel restrictive. In contrast, the Deferred Sales Trust provides sellers with the freedom to sell today and defer taxes immediately, without the pressure to meet specific requirements within a tight timeframe.
PAGE 20
2
ENHANCED RETIREMENT PLANNING
Planning for retirement often involves strategic tax management. Unlike a 1031 exchange, which limits reinvestment options to real estate, the Deferred Sales Trust offers a diversified approach. Sellers can allocate proceeds into various asset classes such as stocks, bonds, and REITs, providing greater flexibility and potentially reducing investment risk. This diversification can lead to a larger pre-tax lifetime retirement income compared to traditional tax payment methods. In a 1031 exchange, all decisions must be made upfront, leaving little room for adjustments down the road. With the Deferred Sales Trust, sellers have the freedom to make decisions in real-time. Whether it’s waiting to re-enter the market, accessing funds for unexpected expenses like medical bills, or borrowing from the trust for future investments, the trust offers unparalleled flexibility to adapt to changing circumstances.
3
REAL-TIME DECISION MAKING
4
INDIVIDUAL PARTNER PREFERENCES
Unlike a 1031 exchange, where all partners must agree to participate, the Deferred Sales Trust accommodates varying preferences. Each partner can choose whether to defer taxes or pursue other financial goals, providing greater autonomy and avoiding potential conflicts of interest.
PAGE 21
5
PROVEN TRACK RECORD AND IRS COMPLIANCE
With over 30 years of successful tax deferrals in more than 4,000 transactions, the Deferred Sales Trust stands as a reliable and IRS-compliant solution. The trust has undergone rigorous IRS audits, with all trust documents meeting IRS standards. Contrary to misconceptions, the Deferred Sales Trust is not an abusive tax scheme. While the Deferred Sales Trust may be unfamiliar to many attorneys and CPAs, a select group of professionals are well- versed in its intricacies. Seeking advice from knowledgeable advisors can help individuals navigate the process effectively and maximize the benefits of tax deferral.
6
EXPERT GUIDANCE AND SUPPORT
In summary, the Deferred Sales Trust offers a compelling alternative to the constraints of a 1031 exchange, providing individuals with greater flexibility, diversification, and control over their
tax obligations. By understanding the options available and seeking guidance from experienced professionals, sellers can make informed decisions that align with their financial goals and objectives.
To find out if a Deferred Sales Trust is right for you, call (713) 702-6401 for a consultation.
DAVID FISHER Founder and Tax Strategist Creative Real Estate Strategies (713) 702-6401 david@cresknowsrealestate.com
David studied accounting at the University of Texas and has been in the financial services profession since 1977. In 2010, David formed Creative Real Estate Strategies. Using his extensive background in insurance, investments, estate planning, taxes and charitable giving, David has been able to create numerous strategies that have helped his clients buy and sell millions of dollars of real estate in a more beneficial way than they might have otherwise done. David is a member of the Texas Alliance of Land Brokers, National Association of Realtors, Texas Association of Realtors and the Realtors Land Institute. He has held the designations of Chartered Life Underwriter (CLU) and Chartered Financial Consultant (ChFC) from the American College since 1985. He has also been securities registered since 1979.
PAGE 22
PAGE 23
SQUATTERS ARE TAKING OVER: MEET THE SQUATTER HUNTER
A concerning trend is emerging across America: The Rise of the Squatters. Many property owners have been shocked to discover that they can’t simply call the police to have a squatter removed from their property. These squatters often present fraudulent lease agreements when confronted by authorities. They go to great lengths, even moving in furniture, to feign legitimacy. Police then declare the situation a “civil matter,” forcing property owners to initiate a lengthy and arduous eviction process through the courts. In our investigation, we had the opportunity to speak with Flash Shelton, renowned as the “Squatter Hunter,” who bravely confronted a squatter and now shares his expertise to assist property owners across the country in reclaiming their properties. Additionally, we interviewed two AAOA members who have fallen victim to squatters, shedding light on the challenges they faced. THE DIFFERENCE BETWEEN A SQUATTER AND A TRESPASSER
First let’s define what a squatter is. It is important to note that the terms “squatter” and “trespasser” are often used interchangeably. However, there is a difference between the two based on the offender’s intentions. Squatters illegally live in a residence without paying the owner. Squatters may not legally occupy an uninhabited property without the owner’s permission. However, since squatting is a civil matter, landlords are required to evict the offender through the courts. Squatters are not necessarily strangers who have taken up residence in a vacant property. They can
also be tenants who refuse to pay their rent or leave after their lease expires. If a squatter has continuous possession for several years, they may actually acquire legal ownership through “adverse possession” laws. This list shows how many years are required in each state for these laws to kick in. On the other hand, trespassers enter the home illegally to steal or damage the property, which is a criminal offense. The trespasser can be arrested by the authorities, but in most states the property owner must provide evidence of the break-in or damages.
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TODAY SHELTON IS BUILDING A TEAM OF SQUATTER HUNTERS TO HELP MORE PEOPLE ACROSS THE COUNTRY.
FLASH SHELTON, THE SQUATTER HUNTER Known as the ‘Squatter Hunter,’ Flash Shelton has garnered attention for his relentless pursuit of justice in reclaiming properties overrun by squatters, and has been featured on CNN, CBS, Fox News, and the Los Angeles Times. Shelton’s initiation into this realm was not by choice but by circumstance. “Unfortunately for me, it started in 2019, after my dad passed away,” he revealed. “In my situation, I moved my mom in with me to basically be able to sell her house... I discovered that people had broken in the back door of her house. When the deputy arrived, he said, ‘There’s a house full of furniture. It appears as though you have squatters and there’s nothing I can do. It’s a civil matter.’ Those are just horrifying words for homeowners.” This encounter spurred Shelton into action. Armed with his knowledge of squatter laws and rights, he devised a plan to reclaim his mother’s property. “I got there around 4:00 a.m. and noticed three cars in the driveway...After the squatters left, I secured the back door and started putting up cameras and a Ring alarm system,” he recounted. He had his mother put him on a lease agreement, making him a legal tenant. With video evidence, the lease, and a confrontation with the squatter, Shelton successfully ousted the squatters within a day. Today Shelton has helped dozens of property owners do the same and he is building a team of Squatter Hunters to help more people across the country. Shelton emphasized the importance of
tailored strategies. “Every situation is different... I start every process with a Zoom consultation... Anything that the homeowner can share with me is helpful,” he explained. From conducting surveillance to orchestrating squatter interventions, Shelton’s approach is multifaceted and adaptable. Acknowledging the limitations faced by individual landlords, Shelton underscored the need for preventive measures and expert intervention. “Landlords need to be very careful...Never try to do it on your own,” he cautioned. Stressing the importance of legal reform, Shelton advocates for clearer legislation to combat squatter encroachments effectively. He has already been a major influence in the enactment of Florida’s newest law that permits landlords to ask law enforcement to remove a squatter that refuses to leave the property. In addressing common mistakes landlords make, Shelton emphasized the necessity of treating squatters as tenants. “Landlords need to treat a squatter like a tenant... If it’s illegal to do it to a tenant, it’s illegal to do it to a squatter,” he warned, emphasizing the legal intricacies involved. As the interview drew to a close, Shelton expressed gratitude for the opportunity to champion property rights. “You know, this all started because I was just trying to be a good son, and now I’m just trying to be a good American,” he remarked humbly.
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Watch the full video with the Squatter Hunter below:
“HE MOVED IN WITH MY 94-YEAR-OLD MOTHER, ATE HER FOOD, AND REFUSED TO LEAVE.”
“The eviction courts are packed full,” Cynthia laments, reflecting on her tumultuous journey battling a professional squatter who preyed upon her elderly mother. Cynthia, an AAOA member, recounts the initial signs of trouble: “He moved in with my 94-year- old mother... seemed like a nice guy... paid the first month.” However, suspicions arose when her mother reported her food was missing, causing her to lose weight rapidly. Despite serving notices when he stopped paying rent and installing security cameras, Cynthia found herself ensnared in a web of legal complexities and bureaucratic hurdles. She made over a dozen attempts to start the eviction in Orange County, but misspellings and technicalities kept preventing her from regaining control of her property. “I finally paid $3,000 for a service to help me file the eviction, but even they encountered court delays,” Cynthia recalls.
Cynthia and her mother.
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THEY FACED REPEATED POLICE VISITS, INTIMIDATION TACTICS, AND PHYSICAL ASSAULT AT THE HANDS OF THE SQUATTER.
With each passing day, Cynthia’s desperation mounted, and she decided to move in to protect her mother. They faced repeated police visits, intimidation tactics, and physical assault at the hands of the squatter. “The biggest problem was the police,” Cynthia laments. Despite providing evidence of assault and illegal occupation, law enforcement failed to intervene effectively, dismissing the situation as a mere civil matter. In her quest for justice, Cynthia turned to the Elder Abuse Court for recourse. In California, the court can grant a restraining order to stop someone who is abusing or neglecting an elderly or dependent adult. She detailed her case, and quickly received a court date. The Elder Abuse Court judge
was appalled when viewing the evidence and immediately issued a restraining order, forcing law enforcement to remove the squatter. “If you have one thing wrong, it all gets invalidated,” Cynthia cautions, underscoring the unforgiving nature of the legal system. “I advise anyone over the age of 65 in California dealing with a squatter to call 211 to report it.” The squatter in question was recommended by another one of her tenants so Cynthia believed she was in the clear. “You have to be really careful who you rent to,” she advises, emphasizing the importance of thorough background checks, even when it’s someone you know or a referral from a tenant.
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HOW TO PREVENT A SQUATTER ISSUE While some states like Florida, Georgia, and Alabama are taking steps to address squatters through criminal law, the burden of dealing with squatters still largely falls on property owners who must navigate the formal eviction process. Though there’s a growing call for more specific laws to combat squatters nationwide, proactive measures to prevent squatting remain crucial. the premises after his son died, the squatter moved in more of her furniture. “She thinks she owns the house and speaks to me as if she is entitled to live there,” Don says. Don’s attempts to seek assistance from law enforcement were met with frustration and disillusionment. “The police say their hands are tied,” he recounts. He has gone through the formal eviction process in Illinois and now finally, after 5 months, the case will be heard. “This blindsided me... I just can’t believe they would pass laws that help criminals,” he reflects. “MY SON DIED, AND HIS ROOMMATE TOOK OVER THE PROPERTY.” While grieving the loss of his son in December 2023, AAOA member Don found himself facing a new tragedy as a squatter conned her way into his property, claiming entitlement to his home. “I have a squatter right now,” Don reveals, his voice heavy with frustration and despair. “She wasn’t a tenant... She conned her way in and slept on the couch, claiming to help my son in his last days,” he recounts, detailing the insidious tactics employed by the squatter to gain access to his property. Despite repeated promises to vacate
Don and his son Tony.
Tony’s house where the squatter remains to this day.
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By implementing these preventative measures, you will be less likely to become a target. If you suspect you have a squatter contact an attorney and click here to contact Squatter Hunters to expedite the removal process as much as possible. Establish Neighbor Communication: Build a rapport with neighbors and encourage them to report any suspicious activity or unauthorized occupants on your property. Their vigilance can help you address potential squatter issues early on. Secure Entry Points: Ensure all doors, windows, and other potential entry points are securely locked and monitored. Consider installing security measures such as deadbolts, sturdy locks, and motion sensor lights. Here are a few tips to safeguard your property from potential squatters: Install Security Cameras: Placing security cameras on vacant properties acts as a deterrent to squatters and provides crucial evidence in case of unauthorized entry or occupation. You may want to put up signs that state the property is under surveillance. Regular Property Checks: Conducting daily visits to vacant rentals, either personally or through a property manager, helps ensure that any unauthorized individuals are swiftly identified and dealt with.
ALEXANDRA ALVARADO Director of Marketing and Education American Apartment Owners Association (866) 579-2262 alexandra@aaoa.com
Alexandra has worked for AAOA for 8 years, launching AAOA’s educational division in 2016 and has hosted and moderated over 100 webinars for thousands of landlords nationwide. She also curates breaking news and original content for AAOA Today , a biweekly newsletter with 75,000 readers, and RENT Magazine. Alexandra has been interviewed by national news outlets including The New York Times, CNBC, CNN, Fox News, Business Insider, Wall Street Journal, and Realtor.com. Her extensive sales and marketing background in the rental industry has made her a point person for rental industry professionals who want to learn how to select quality tenants and reduce their rental risk. Alexandra has a BA and MBA in Marketing from Pepperdine University.
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While more traditional methods, such as flat fees or equal splits, offer simplicity, they lack fairness and precision. Enter Ratio Utility Billing Systems (RUBS), an ideal solution for a fair and streamlined billing process. Less-than-seasoned housing providers may share a laundry list of negatives they’ve heard regarding RUBS. Check out these common misconceptions of housing providers surrounding Ratio Utility Billing Systems that we are here to debunk. There is no question that Ratio Utility Billing Systems are a benefit to housing providers. Regardless, conversations around RUBS among uninformed housing providers can lead to confusion and misconceptions regarding Ratio Utility Billing Systems. UNRAVELING UTILITY BILLING MYTHS AMONG HOUSING PROVIDERS
RESIDENTS WILL THINK I’M BEING UNFAIR MYTH #1:
MYTH BUSTED
The right RUBS system can factor in square footage, occupancy and more so that billing is both transparent and fair. Residents should be able to see how their bills are calculated and why the bill is what it is. Housing providers can also offer a “goodwill deduction” for any reason, including for a resident who has concerns about subsidizing other residents unfairly.
A concern among housing providers is that RUBS might not be perfectly fair. Residents who conserve utilities like water might end up subsidizing those who use more. This can lead to frustration and disputes. Explaining the logic behind the formula can be an uphill battle in the eyes of a housing provider. Residents in well-maintained units with newer, more efficient dishwashers and low-flow showerheads might feel they’re subsidizing those who use more water, creating tension between residents and potentially leading to finger pointing and resentment toward the housing provider.
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MYTH #2: COMPLIANCE WILL BE A HEADACHE RUBS regulations can vary by location. Housing providers need to be sure they are following all the rules to avoid legal issues and many don’t want to take on that headache. Maintaining accurate records of occupancy changes, appliance upgrades, and historical usage data is crucial for a fair RUBS system. Housing providers may fear finding themselves dealing with the burden of meticulous record keeping to avoid legal trouble.
MYTH BUSTED
The right RUBS platform has compliance assistance built in. “At Livable, we provide a lease addendum for our housing providers so they are covered legally,” Sharabi explains. “Of course, housing providers need to make sure that they are in compliance with all local ordinances and regulations, but the lease addendum goes a long way toward achieving that.” “We do always recommend that you check with your attorney before implementing RUBS for your residents, but our system is designed to aid with compliance for housing providers.” MYTH #3: IMPLEMENTING RUBS IS MORE TROUBLE THAN IT’S WORTH Setting up RUBS properly requires choosing a fair formula, clearly communicating it to residents, and handling disputes fairly. This can take time and effort and many housing providers are reluctant to try.
MYTH BUSTED
OUR SYSTEM IS DESIGNED TO AID WITH COMPLIANCE FOR HOUSING PROVIDERS.
“Livable Pro is so easy you can do it yourself,” Sharabi says. “We designed a user-friendly interface that makes it simple to set up RUBS. Just plug in the information as asked and you’re all set!”
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LIVABLE HAS NEVER HAD UNIT MINIMUMS OR A REQUIRED COMMITMENT.
MYTH #4:
MYTH BUSTED “We created Livable Pro for the independent rental owner,” says Dan Sharabi, CEO of Livable. “Livable has never had unit minimums or a required commitment. We want housing providers to be able to hold residents accountable for their use, driving conservation, whether they have one rental unit or 1,000.”
RUBS IS ONLY FOR BIG COMPLEXES OR HIGH-RISES, NOT SMALL OWNERS LIKE ME Some housing providers may believe that ratio utility billing only works or makes financial sense if you have a lot of units to bill.
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