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.
FALL 2023 THE ESSENTIAL RENTAL TAX GUIDE
7 QUESTIONS TO ASK YOUR CPA PAGE 43 TAX AND LEGAL EXPERTS SHARE END OF YEAR REAL ESTATE ADVICE PAGE 51
THE SHORT-TERM RENTAL TAX SECRET
CREDITS AND DEDUCTIONS TO MAXIMIZE RENTAL PROPERTY PROFITS TOP 10 PAGE 62
THE TAX CONSEQUENCES OF MISSING OUT ON BONUS DEPRECIATION PAGE 66
UNTIL YOU KNOW ABOUT THE DEFERRED SALES TRUST PAGE 24
THE OFFICIAL PUBLICATION OF THE AMERICAN APARTMENT OWNERS ASSOCIATION
TEAM VP Robbie Cronrod Editor in Chief Alexandra Alvarado Contributing Editors Allen Artcliff-Cronrod Nancy Abrams Contributors Adrian Smude Allen Brodetsky Amanda Han, CPA Ashley Wilson Bilal Mehanna, CPA Charles Dobens Dan Lewkowicz Daniel Sharabi David S. Fisher Dwight Kay Elizabeth Campbell Gary Lipsky Gemma Smith Gita Faust Jason Kogok Jesse Baily, CPA Joshua Christensen Kathelene Williams, Esq. Kim Garcia Margaret Stagmeier Nancy Abrams Richard D. Gann, JD Robert Anderson Scott Varney Stephen Morris, CPA Ted Sutton, Esq. Tom Wheelwright, CPA Tony Bonifacic
05 10 14 20 24 28
FIVE SIGNS IT MAY BE TIME TO EXCHANGE YOUR RENTAL PROPERTY LEGAL ALERT! RULES FOR USING CRIMINAL HISTORY TO SCREEN TENANTS A COSTLY MISTAKE FOR RENTAL OWNERS: OVERLOOKING COST SEGREGATION DON’T SWITCH TO KEYLESS ENTRY WITHOUT ASKING THESE 5 QUESTIONS
DO NOT TRANSACT A 1031 UNTIL YOU KNOW ABOUT THE DEFERRED SALES TRUST
6 COMMON UTILITY BILLING MISTAKES: LEARN BEST PRACTICES FOR UTILITY RECOVERY
Yes, as impossible as it seems, we have reached the beginning of the end of 2023. That means it’s time to think about taxes and how to minimize the amount we will have to pay come next April. That’s why this issue of RENT features advice from dozens of tax and legal experts. Learn how to reduce your tax obligations through cost segregation, charitable tax deductions, and the short-term rental tax secret. You’ll also learn the top 10 tax credits and deductions and five ways specialized accounting software can boost your tax savings. We also discuss in depth the subject of 1031 Exchanges and Deferred Sales Trusts and their tax benefits as well as how to tell if your CPA might be wrong for you. On the property management side, there are articles on keyless entry, new rules for using criminal history to screen tenants and the three most important forms to update when renewing a tenant’s lease. In addition, we have included reviews of excellent books for real estate investing and for some light reading, Celebrities on the Move. Have a wonderful holiday season and a successful new year from the folks who bring you RENT . Welcome to the 4 th Quarter of 2023!
5 WAYS SPECIALIZED ACCOUNTING SOFTWARE BOOSTS LANDLORD TAX SAVINGS HOW TO MAKE SMART REAL ESTATE INVESTMENT DECISIONS WITH A 1031 EXCHANGE ASK THE RIGHT QUESTIONS: A GUIDE TO HIRING A REAL ESTATE TAX CPA
43 48 51 58 62 74 79 70 66 83
CELEBRITIES ON THE MOVE
TAX AND LEGAL EXPERTS SHARE END-OF-YEAR REAL ESTATE ADVICE
LEVERAGE YOUR CHARITABLE TAX DEDUCTIONS: TURN A $500K DONATION INTO A $200K DEDUCTION TOP 10 TAX CREDITS AND DEDUCTIONS TO MAXIMIZE RENTAL PROPERTY PROFITS THE TAX CONSEQUENCES OF MISSING OUT ON BONUS DEPRECIATION
TOP BOOK PICKS: REAL ESTATE INVESTING MUST-HAVES
UNLOCKING THE SHORT-TERM RENTAL TAX SECRET FOR MASSIVE TAX SAVINGS TREAD CAREFULLY: THE REAL ESTATE TAX DEDUCTION MINEFIELD (REAL ESTATE PROFESSIONAL) 3 CRITICAL 2024 LEGAL FORMS YOU NEED FOR LEASE RENEWALS
s F e d e r a l I n co m
Accelerate your Depreciation Expense and Increase Cash Flow through Cost Segregation Why have so many building owners missed this IRS approved method to lower their taxes? How many building owners continue to send extra money to the IRS? Articifial Intelligence replied...
“As a rough estimate, a relatively small percentage of building owners, perhaps in the single-digit percentage range, are likely to have used cost segregation. Many property owners may not be aware of the benefits, or they think their properties might not meet the criteria for cost segregation to be cost-effective.””
So what is a cost Segregation Study? A cost segregation study is a set of calculations created by an independent firm with extensive tax and construction knowledge. At CSSI®, we create an engineering-based cost segregation study by analyzing your building and its assets within U.S. tax code guidelines. When an engineering-based study is performed, actual cost records and construction documents are reviewed, when available, and a site visit is completed. A quality cost segregation study should include the 13 points outlined within U.S. tax code. Our methodical approach identifies individual components of your commercial property, which are included in your detailed cost segregation study. Time Constraints/Awareness CPAs, thousands of whom we have educated in our classes, are extremely busy and cannot possibly keep up with all 70,000 pages of code, statutes, notes and court cases. One more fact, from 2001 to 2012 there were 4680 changes averaging about one per day. We, on the other hand focus on the eight chapters of the IRS’s audit technique guide.
The Simple Criteria Purchased, Constructed, Remodeled/Renovated a property after 1986 (basically moot today) Cost basis must be over $300,000 (Renovations $100,000) Must be a for profit entity (no charities, churches, etc.) Must have a tax liability or there is no benefit. 1. 2. 3. 4.
Actual Federal Tax Reductions Due to Cost Segregation
Year 1 Cash Benefit*
Retail Strip Center
*2017-22 Bonus = 100% Reduces 20%/yr. thru 2026. Balance reverts to 20,14 & 7% yr. rates vs. 3.74 or 2.56%
This is YOUR MONEY.. Keep it! Now please ask yourself, can you do a better job with your money than what the government did when they spent hundreds of millions of dollars on these actual funded projects: Why do pigs smell; Free Clam Program for those who have never eaten clams; the breeding habits of woodchuck, and one that luckily did not make it, the Bridge to Nowhere.
Can’t scan because you’re on your phone? Click Here
If more than a couple of these factors ring true for you, it may be time to consider selling your property and possibly make a 1031 exchange into a passive replacement property. FIVE SIGNS IT MAY BE TIME TO EXCHANGE YOUR RENTAL PROPERTY
If you feel like your state or local governments are adversarial to your interests as a rental housing provider, you are not alone. Click here to learn more about escaping your state’s regulatory battle against landlords. Your State/Local Landlord Regulations Have Become Intolerable
Oregon and California recently became the first two states to impose statewide rent-control legislation. Not only do these laws cap annual rent increases, but they also impose onerous requirements for removing tenants after 12 months of occupancy.
RECENTLY IMPOSED STATE/LOCAL REGULATIONS INCLUDE:
✓ Screening limitations or prohibitions ✓ Security deposit restrictions ✓ Seasonal eviction moratoriums
✓ Late-fee limitations ✓ Forced relocation assistance ✓ Complicated notice and eviction procedures
Your Risk of Legal Liability Has Exceeded Your Comfort Zone
When you own rental real estate, you expose yourself—and your assets—to a whole new world of potential legal liability. In addition to the dozen ways a rental housing provider can trip over federal fair housing laws and local landlord regulations, state premises liability can be devastating. Courts in California effectively presume that an injury was the result of a breach of duty and shift the burden to the property owner to prove otherwise. This stems from the California Supreme Court’s view that regardless of actual fault, “liability should often be imposed on the party, often a business, most able to implement steps that promote social welfare by enhancing safety, spreading the risk of loss and ensuring compensation.” 1
In other words, some courts promote the notion that you should pay for more than your fair share of injuries occurring on your property simply because you have more money than your tenants or their customers. If you are tired of worrying about being sued in a pro-plaintiff state, you may be ready for a “change of venue.” To learn more, check out Chapter 2 of our book, How to Retire from Being a Landlord.
SOME COURTS PROMOTE THE NOTION THAT YOU SHOULD PAY FOR MORE THAN YOUR FAIR SHARE OF INJURIES
Demographic Trends May Not Be Positive for Your Area
Differences in economic prospects and cost of living can drive migratory behavior. Such differences, in turn, reflect differences in tax policies, business friendliness and right-to-work policies. Click here to see an example of how disparities in living costs impact interstate mobility. If you live in a state whose employers are leaving (and whose employees are following), you may not be able to count on past patterns of upward population growth.
DEMOGRAPHIC/ECONOMIC FACTORS DRIVING RENTAL PROPERTY PERFORMANCE:
✓ Positive migration ✓ Overall population growth
✓ Job growth ✓ Supply of rental housing relative to demand
Your Yield on Equity is TOO LOW
Over the last 12 years, many rental housing providers on the West Coast have watched their equity increase much faster than their rental income. This is particularly true for landlords whose property was once an owner-occupied property, such as an SFR, condo or townhouse. In these examples, prices are driven by the supply/demand for single-family properties, rather than multifamily cap rates.
In the graph on the below, you can see how dramatic the effect can be when values outpace income. Twelve years ago, you may have purchased a property with an 8% yield on equity (aka cash-on-cash yield) and today the same property may only generate a 2% yield. Why would you continue to accept such a low cash flow while bearing all of the risks and burdens of individual property ownership?
Existing Rental Property Value
Equity (Value-Loan Balance)
Growth in Net Rental Income
HIGH Yield on Equity
LOW Yield on Equity
If you feel your current net cash yield— as a percentage of your property’s equity—is too low, you should consider relocating your equity to a market with potentially higher yields.
To check the yield on your own property, try out this handy calculator: https://1031-capital-solutions.involve. me/yield-calculator. At 1031 Capital Solutions, we offer a more in-depth version of this analysis as a complementary service for AAOA members.
to passive investors. There are multiple options for investing in real estate without the weekly headaches of self-managed rental properties. Check out our video series on: Passive Real Estate Investing. The Burdens of Operating Your Property are Affecting Your Life
Sometimes, enough is enough. Younger landlords simply have more energy to cope with the trials and tribulations of property ownership than the older versions of themselves. And sometimes, the wrong property manager simply exacerbates the problem. Whether your hot button is problem tenants, overwhelming bills/accounting, unending property maintenance or looming capital expenditures, you may be ready to “tap out.” You are in good company. Each year, thousands of people make the transition from active operators
EACH YEAR, THOUSANDS OF PEOPLE MAKE THE TRANSITION FROM ACTIVE OPERATORS TO PASSIVE INVESTORS.
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.
Footnotes: 1 - https://www.mcgeorge.edu/documents/ Publications/_06_Steiner_ MasterMLR39.pdf, p. 177
Disclaimer : Because investor situations and objectives vary, this information is not intended to indicate that an investment is appropriate for or is being recommended to any individual investor. This is for informational purposes only, does not constitute as investment advice, and is not legal or tax advice. Because investors’ situations and objectives vary, this information is not intended to indicate suitability for any particular investor. Please consult the appropriate professional regarding your individual circumstance. There are material risks associated with investing in real estate including illiquidity, general market conditions, interest rate risks, financing risks, potentially adverse tax consequences, general economic risks, development risks, and potential loss of the entire investment principal. The views of this material are those solely of the author and do not necessarily represent the views of their affiliates. Statements concerning financial market trends are based on current market conditions, which will fluctuate. Potential cash flows/returns/appreciation are not guaranteed and could be lower than anticipated. Past performance is not a guarantee of future results. 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.
Access the power of AAOA's trusted network:
Use AAOA-vetted realtors from premier brokerages Send e-blasts to AAOA’s national broker & investor network
Connect with AAOA's 1031 exchange & tax deferral experts
Earn up to a $1,000 rebate when your property sells*
*Conditions apply. Ask an AAOA representative for full terms.
In a landscape that continually evolves, the U.S. Department of Housing and Urban Development (HUD) has once again brought to light an important regulation by reinstating the Discriminatory Effects Rule. This development holds far-reaching implications for those who navigate the property management sector. It not only applies to public housing providers but ALL housing providers. LEGAL ALERT! RULES FOR USING CRIMINAL HISTORY TO SCREEN TENANTS This article seeks to illuminate the intricacies of this recent move by HUD, charting its trajectory and the subsequent effects it may cast upon property management professionals.
UNDERSTANDING THE DISCRIMINATORY EFFECTS RULE
Central to the ongoing battle against housing discrimination, the Discriminatory Effects Rule emerges as a paramount framework. Its primary objective is to clarify the concept of disparate impact in the context of the Fair Housing Act. Under the purview of this rule, a policy, even when neutral on its face, can be flagged if it disproportionately hampers or affects any protected group. In layman's terms, the Discriminatory Effects
Rule is a key tool in the fight against housing discrimination. It helps explain the idea of "disparate impact" related to the Fair Housing Act. Basically, this rule says that even if a housing policy seems fair at first glance, it can still be considered discriminatory if it ends up hurting a specific group more than others. According to HUD’s press release, “[The Discriminatory Effects Rule] has long been used to challenge policies that unnecessarily exclude
THE HISTORICAL BACKDROP: RESCINDING AND REINSTATING A POLICY, EVEN WHEN NEUTRAL ON ITS FACE, CAN BE FLAGGED IF IT DISPROPORTIONATELY HAMPERS OR AFFECTS ANY PROTECTED GROUP. people from housing opportunities, including zoning requirements, lending and property insurance policies, and criminal records policies.” For example, a blanket rule that excludes anyone with a criminal record from living onsite seems fair in light of resident safety. However, this rule can have a discriminatory effect based on race, national origin, and disability. Although it is not unlawful to have a rule about criminal history, there are other ways to achieve resident safety without discriminatory effects. For example, reviewing how long ago the crime occurred, the nature of the crime, and efforts to rehabilitiate should be considered, instead of simply using a “no felons” policy. The Discriminatory Effects Rule was initially adopted by HUD in 2013. With the turn of a new administration, the rule was recalibrated in 2020, which left some feeling that the new stance was more amenable or helpful to landlords and not so much of a protection for residents. The new stance added new pleading requirements, new proof requirements, and new defenses that would have made it more difficult for a protected class plaintiff to start and win a disparate impact case. So, what catalyzed the recent return to the 2013 understanding? Following the 2020 alterations, a series of litigations emerged, championed by various advocacy groups. Additionally, a federal judicial intervention halted the execution of the 2020 modifications, prompting discussions about their alignment with the foundational court case that set the initial standards. This evaluative process subsequently led HUD to reinstate the 2013 version of the rule, deeming it more in line with established precedents.
WITH THIS REINSTATEMENT, PROPERTY MANAGEMENT PROFESSIONALS BEAR THE ONUS.
IMPLICATIONS FOR PROPERTY MANAGEMENT PROFESSIONALS
Navigating the maze of housing laws can be a formidable challenge. A critical takeaway is the absolute necessity for property management professionals to insulate themselves from disparate impact claims. This demands an acute awareness and meticulous evaluation of occupancy policies and criminal history screening practices given their susceptibility to challenges. As we step into the future, the onus remains squarely on property management experts to stay abreast of fair housing legislation. Periodic training and continued education become non-negotiable, ensuring preparedness and adherence. With knowledge as the guiding compass, property managers can adeptly steer clear of complaints, CHARTING THE PATH AHEAD
The revival of the Discriminatory Effects Rule serves as a poignant reminder of the commitment required to eliminate housing discrimination. With this reinstatement, property management professionals bear the onus of ensuring their operations align seamlessly with the stipulations of the rule. By recognizing the intricate dynamics of disparate impact and proactively amending any unintentional biases, they can foster an inclusive housing environment. ensuring a compliant and inclusive housing landscape for all. In conclusion, as housing regulations evolve, professionals in the field must remain vigilant, informed, and proactive in their approach, ensuring fairness and equality in housing opportunities.
KATHELENE WILLIAMS Attorney and President The Fair Housing Institute
Kathi Williams is one of the founders of Fair Housing Institute. FHI is the accomplished vision of Kathi who views its educational courses as the best method housing providers can use to accomplish compliance and avoid litigation. Kathi is also a partner in the Law Firm of Williams Edelstein Tucker, P.C. providing defense and preventative representation for the housing industry in all civil rights matters. During the many decades Kathi has been advising her housing provider clients, she developed a unique understanding of the most effective methods of communicating fair housing best practices through training.
Adding PayRange to your laundry machines can reduce the need for quarters while improving satisfaction and increasing revenues. Plus, PayRange offers loads of payment options for apartment laundry. From 100+ store gift cards with balances that can be used, to earning free credits in the PayRange in-app Marketplace, plus crypto currencies, “Buy Now, Pay Later” options, and, in select states, EBT users can even access those funds in-app for laundry. Not to mention Credit, Debit and ACH/Checking. When customers have access to more funds, they spend more! Allow Tenants to Discover More Ways to Pay for Laundry It’s like finding quarters in the couch cushions!
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Most rental owners have not taken advantage of one of the best things the government has ever provided to rental owners – cost segregation. That’s simply because they weren’t informed. A COSTLY MISTAKE FOR RENTAL OWNERS: OVERLOOKING COST SEGREGATION Below are answers to frequently asked questions about cost segregation that reveal how much money you could be needlessly paying the IRS.
What is cost segregation? Q:
It is an IRS-approved method of accelerating your depreciation and yields approximately $50,000 to $80,000 in cash per million dollars of building value. Instead of depreciating your property as one unit over 27.5 years (or 39 years for commercial non- residential property), cost segregation breaks down your property into its parts and pieces. To put it into perspective, look at it like a Big Mac. When asked, most people would identify it as a hamburger. Not McDonald’s. To them it is “Two All Beef Patties, Special Sauce, Lettuce, Cheese, Pickles, Onions on a Sesame Seed Bun.” A cost segregation study does the same thing to your building. It separates its components, i.e., the flooring, wallpaper, crown molding/trim, cabinets,
counter tops, landscaping, etc. If you purchased or built a building after September 27, 2017, when the Tax Cuts and Jobs Act came into existence, you are allowed 100% bonus depreciation until January 1, 2023, when it drops to an 80% deduction on any identified personal property assets. It drops by 20% per year until “bonus” depreciation is gone and it goes back to the original benefits of doing a cost segregation study. So, don’t miss out on using cost segregation on the extra cash benefits. Assets that can be affected include hundreds of items and represent somewhere between 20-40% of your building that can be expensed, thereby reducing your taxable income.
Q: This is a separate function; cost segregation specialists are not accountants. Cost segregation specialists perform engineering-based studies and work hand in hand with your CPA/ER. When the study is complete, the cost segregation specialist hands off a one-line 481a adjustment for incorporation into your tax filing and should coordinate it with your CPA/ER. Some tax professionals provide an “accounting study,” which usually only includes obvious items, like rugs and landscaping, whereas cost segregation specialists review hundreds of items including parking lot striping, wallpaper, specialty plumbing and wiring, etc. Most tax professionals don’t have the expertise to conduct a comprehensive cost segregation study. Their job is to apply thousands of pages of tax code. Cost segregation experts only focus on one aspect of the tax code – cost segregation. They prepare an engineering-based study, which the IRS calls the “certain” method. Shouldn’t my CPA do this? A:
Is the cost worth it? Q: A good cost segregation firm prices each project individually, and it is based on the type of building and the complexity of the project. It is not a cookie cutter one price fits all process. The return on investment typically falls between 10:1 and 20:1. Before you decide to start the cost segregation study, you will be provided with a return-on- investment estimate. A company such as Cost Segregation Services, LLC (CSSI) can provide you with a complimentary analysis, a Net Present Value Schedule, and other materials to help you determine your value in doing a study. It has to be right for you! A cost segregation study taps into the time value of money because you’re able to depreciate your property faster and take advantage of tax deductions now versus in the future. A: • Will you be alive 40 years from now to use future deductions? • If you won the lottery, would you take the payout today or spread it out over 27.5 or 39 years? • What will your dollar be worth in the future, given inflation? 75¢, 50¢? Isn’t it better to get to use the full value now? QUESTIONS TO ILLUSTRATE THE TIME VALUE OF MONEY:
DEPRECIATE YOUR PROPERTY FASTER AND TAKE ADVANTAGE OF TAX DEDUCTIONS NOW VERSUS IN THE FUTURE.
How do I know if my property qualifies for a cost segregation study? Q:
The following requirements must be met for a cost segregation study:
✓ It must be a property that was purchased, constructed, or remodeled/renovated after '86. ✓ The property’s cost basis must be over $250,000 (renovations $100,000). The choice can be amazingly simple: keep your money or send it to the IRS. However, you need facts to judge the value of doing a study. CSSI’s predictive analysis will give you those facts so you
✓ It must be a property owned by a for-profit entity (not charities, churches, etc.). ✓ You must have a tax liability or there is no benefit.
can weigh your options and do whatever you think is best. You’re a savvy investor and you owe it to yourself to find out how much money is available to you. Click here for more information or click here to schedule a 15-minute discussion to find out how much you can shave off your federal income tax bill.
TONY BONIFACIC National Account Representative Cost Segregation Services (800) 344-7671 email@example.com
As a former accountant Tony has been involved as a financial manager, sales manager, administrator, accounts receivable consultant, and trainer for thousands of clients. He has saved millions for his clients including everyone from mom and pops to NYSE companies. In 2007 he began promoting cost segregation to his clients and new contacts. Today he devotes all his time and his representatives’ time to cost segregation.
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MIDTOWN OMAHA, NE | 6 UNIT SFR Community, each 780-936 sq. ft. All utilities tenant paid, separately metered Central AC, in-unit laundry
PALM SPRINGS, CA | 12 UNIT + RETAIL North Palm Canyon Uptown District All units 2/2 townhouse style, avg 1,457 sq. ft. Newer 2007 construction
SUBJECT TO OFFER
FORT WORTH, TX | 52 UNIT Value add through renovation Free and clear of debt Rental assistance burnoff
MEMPHIS, TN | 48 UNIT 7.03% Cap Rate, 10.56 GRM Class B, renovated in 2023 5.7% YOY rent growth for submarket
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GULF OF MEXICO LOTS 4 lots, option to purchase 1 or all 4, 60' X 202' Delivered with water, sewer, and electric taps
NORWICH, CT | 5 UNIT
(4) 1/1, (1) 2/1 Class C, value add with under market rents
PAGE 18 Ready to list your property with AAOA?
CONTACT AN AAOA REAL ESTATE AGENT
PROPERTIES FOR SALE
HARTFORD, CT | CAST IRON BUILDING Restaurant, commercial, office, residential Tenant paid utilities Current owner willing to stay as tenant to manage
MORGANTOWN, WV | 12 UNIT PFL. 4 properties, including 1 commercial All within walking or 5 min drive to WVU 1 vacancy (being renovated)
WEST PALM BEACH, FL | 5 UNIT Unit mix (1) 1/1, (4) 2/1 5.4% Cap Rate, 10.30 GRM Grandview Heights Historic District
MIAMI, FL | 8 UNIT PORTFOLIO 2 fourplexes within 3 blocks CBS construction, hurricane shutters Electrical, plumbing, roo f replacements
$350,000 MARKET BID
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NAMPA, ID TOWNHOME CLARKSVILLE, TN | 86 UNIT New build, avg 1,075 sq. ft., 5.68 acres 45 miles from downtown Nashville 1,114 sq. ft., fenced backyard 3 bedrooms, 2 bathrooms
ORLANDO, FL | ASSISTED LIVING 131 units, licensed for 185 beds Class A, opened July 2016
Interested in one of these investment opportunies?
Whether you’re just beginning to explore smart locks or looking to upgrade an existing access control system, there are five essential questions to ask first. Read on to discover just what to ask and more importantly, discover helpful answers to guide you to the successful implementation of a keyless entry solution. DON’T SWITCH TO KEYLESS ENTRY WITHOUT ASKING THESE 5 QUESTIONS WHAT KIND OF COVERAGE DOES MY CURRENT INTERNET PROVIDE? 1
Most multifamily communities these days are equipped with some level of Wi-Fi. According to a 2023 report from research firm Parks Associates, 88% of renters of multiple dwelling units (MDUs) and multifamily properties in the United States report having access to Wi-Fi through their property, either in unit or in a common area. Determining whether or not your existing network will support smart locks is often a question for a professional. Internet providers who specialize in multifamily properties can perform an assessment to uncover the way your building’s layout and construction impacts your network, pinpoint performance issues and suggest any improvements. When it comes to keyless entry, just know that outfitting an entire property with Wi-Fi- enabled smart locks may not be possible. Property owners and managers may discover that the building’s Wi-Fi network won’t stretch to connect to a smart lock on a pool gate or an outbuilding. Off-line locks provide great solutions for these outliers. For example, ReadyPIN-enabled smart locks work on or offline. ReadyPIN-enabled smart locks do not ever need to connect online to validate the PIN because the PIN code itself is encrypted with all the access permissions needed. This allows users to bring remote access control capabilities to any door, with or without a Wi-Fi network connection.
READYPIN ALLOWS REMOTE ACCESS CONTROL WITH OR WITHOUT A WI-FI CONNECTION.
CAN EVERY DOOR ON MY PROPERTY ACCOMMODATE A SMART LOCK?
Smart locks are wonderful and convenient, that’s for sure. But that doesn’t mean every door on your property can or should accommodate one. What about glass doors like those often found on commercial buildings? The vertical metal frame on each side of a glass door is known as a stile. To align with the sleek aesthetic of a glass door, these stiles are often too narrow to accommodate a connected smart lock. Instead, these doors often require hardwired access or a door system that’s hardwired into your property’s power supply, requiring its own panel and wiring to operate. The same is true for high-traffic doors like main entrances at a commercial or residential building. The batteries in even the best smart lock would wear out quickly with this constant traffic, so hardwired access is the solution instead. Because such solutions require a powered connection, they must be installed by an electrical professional. In fact, any hardwired door requires guidance and installation by an access control specialist.
DO I NEED WEATHERPROOF HARDWARE AT ANY OF MY DOORS?
Just imagine buying and installing a smart lock only to find it doesn’t function when it rains heavily or freezes on very cold winter days. Remember, each area of the country has its own climate challenges requiring certain grades and types of smart locks. Again, relying on expert guidance ensures you’ll find the right solution. Such professionals are well versed in lock grades (developed by the American National Standards Institute) and their corresponding applications.
HOW MANY PINS SHOULD MY SMART LOCKS HOLD?
It’s not uncommon for a property owner to become enthralled with a certain brand of smart lock, purchase their favorite, and then discover it only accommodates 100 PINs. If your property has a full staff and hundreds of employees, you can very quickly run out of codes. So, be sure to check PIN code storage and err on the side of more PINs if you think your business will grow.
DO I NEED SOFTWARE TO MANAGE MY SMART LOCKS?
Many people don’t realize that features like remote control, integrations with property
REMOTELY MANAGE ALL YOUR SMART LOCKS FROM YOUR SMART PHONE OR LAPTOP.
management systems and visibility tools are enabled by access control software, not the smart lock. A cloud- based access control platform, like RemoteLock, makes your smart lock even smarter by centralizing all of your properties, doors and locks onto one dashboard, allowing you to remotely manage all your smart locks from your smart phone or laptop. When looking for access control software, make sure you are selecting a solution that can grow with you over time. For instance, a solution like RemoteLock offers compatibility with a slew of the most popular lock brands and hardwired access systems, too. Even better, RemoteLock’s open API also connects you to 3rd-party software providers you already know and trust, with others added all the time. Software solutions that give you a choice when it comes to hardware and integrations with other software means your solution can evolve as your portfolio grows.
AVOID MISTAKES WITH THE HELP OF EXPERT GUIDANCE
Just like any other technology, smart locks and access control software are always evolving. That’s why it’s wise to ask for help. The experts at RemoteLock can help guide you through details like user experience, security, connection technology, lock grades and more. Having served
thousands of customers in multifamily, vacation rental and commercial sectors, they understand that every property has unique needs. Reach out to RemoteLock today to discover your ideal access control solution.
KIM GARCIA Director of Marketing RemoteLock
Kim Garcia is the Director of Marketing for RemoteLock. She has over 17 years of strategic marketing management and sales experience in the security industry. She specializes in corporate communications and product marketing with specific expertise in wireless security, access control, and integrator perspectives. Prior to joining RemoteLock, she led marketing for PSA Security Network and Inovonics.
When selling your apartment building or any real estate, there are taxes to be paid on your gains on the sales proceeds. You will pay a 20% capital gains tax, 0-13% state tax, depreciation recapture and the 3.8% Medicare tax. So, depending on where you live, taxes will range from approximately 27% to 40% and I think that’s criminal. DO NOT TRANSACT A 1031 UNTIL YOU KNOW ABOUT THE DEFERRED SALES TRUST
I am a big fan of the old Westerns—Hoot Gibson, Clay Hollister, John Wayne, Jimmy Stewart, the great Audie Murphy and so many more. I always envied them because they almost always came to the rescue to save the “good guys” from the “bad
guys.” I always dreamed of coming to the rescue, but I don’t even own a horse! But now I can come to the rescue, and I don’t need a horse. I am here to rescue apartment owners from the “bad guys”—the tax people.
WHAT IS A DEFERRED SALES TRUST?
The Deferred Sales Trust is based on Section 453 of the tax code, the installment sale or seller financing. The trust has a 30- year track record of successfully deferring taxes. The IRS has conducted 20 tax audits where the trust had been used, and every time, the IRS issued a “no change” letter. So, we know that this type of trust is on solid tax and legal footing. Many attorneys and CPAs don’t know about the Deferred Sales Trust and if they do, they may have some misconceptions about how they work. In many cases the Deferred Sales Trust may be a better option than a 1031 or Delaware Statutory Trust.
Here’s how a Deferred Sales Trust compares to a 1031: No 1031 requirements No 45-day period
No equal or greater debt No like-kind properties Sell today and defer taxes today Receive a 5% cap rate on the sales proceeds today Get an unlimited amount of time to buy another property when it makes more sense to buy
GET A NEW DEPRECIATION SCHEDULE
RESOLVE CONFLICTING GOALS BETWEEN BUSINESS PARTNERS Say you have a partnership with 2 or more owners, and they want to sell. One or more of the partners want to sell and defer taxes. One or more of the partners want to take the money and run to Las Vegas. The bottom line is that a 1031 won’t work, but the Deferred Sales Trust will. The partners that want to defer taxes can do so and those that want to go to Vegas can do so, too. THE DEFERRED SALES TRUST CAN CREATE A MUCH GREATER DEPRECIATION BENEFIT. When buying a replacement property using a 1031, you do not get a new depreciation schedule on the replacement property. You may get a partial schedule, but not a new one. However, when selling and then buying with a Deferred Sales Trust, not only do you have no 1031 requirements on the new property, but you also get a new depreciation schedule. The Deferred Sales Trust can create a much greater depreciation benefit which in turn translates into more real estate wealth.
NO RUSH TO BUY A REPLACEMENT PROPERTY
Using a Deferred Sales Trust, you can make “real time” decisions. In a 1031, you have to make decisions upfront that may affect you in the following years. In a Deferred Sales Trust, you can make decisions at any point in the future. You can make investment decisions, such as buying more real estate, taking money out of the trust in the future and much more. With advanced planning, we can also save a failed 1031.
RETIRE FROM REAL ESTATE
You want to sell your rentals and retire completely from real estate. A 1031 won’t work for that, but a Deferred Sales Trust will. Sell today, defer taxes today and retire today with a larger pretax lifetime retirement income than if you paid taxes first. And everything can be passed on to your heirs and they can continue to receive the 5% cash flow from the trust for as long as they like. If, at some point in the future, you want to buy more property, that is certainly an option.
EVERYTHING CAN BE PASSED ON TO YOUR HEIRS AND THEY CAN CONTINUE TO RECEIVE THE 5% CASH FLOW.
DIVERSIFY YOUR INVESTMENTS
Another advantage over a 1031 is investment diversification. In a 1031, everything must be in the real estate basket. With the Deferred Sales Trust, we can diversify across investment assets such as stocks, bonds, fixed income, and yes, even more real estate. There are several additional opportunities that this trust can provide. If your property creates a federal estate tax burden, our attorneys may be able to take the property when selling out of your estate to reduce the federal estate tax burden to the family. Well, that’s the story. Help me come to your rescue and make John Wayne and “the boys” proud. I still don’t own a horse, but my car has a herd of horses under the hood.
To find out if a Deferred Sales Trust is right for you, call (713) 702-6401 for a complimentary consultation.
DAVID FISHER Founder and Tax Strategist Creative Real Estate Strategies (713) 702-6401 firstname.lastname@example.org
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.
Special I NSURANCE P ROGRAMS with Industry Leading Value
Manufactured Home Retailers Manufactured Home Community Owners
Protect your Investments
• Retailers • Communities
• Developers • Transporters
800-458-4320 email@example.com Call or email today for a free consultation
PAGE 27 Kurt Kelley - President
Utility cost recovery is critical to maximizing a multifamily property’s NOI. Non- payments and late payments impact cash flow and the homeowner or property manager’s ability to properly budget. COMMON UTILITY BILLING MISTAKES Of course, several factors impact utility cost recovery. But arguably, the most important – resident billing itself – is too often overlooked. Why does billing matter so much? The answer is a mix of logistical and psychological factors. Even a 6 LEARN BEST PRACTICES FOR UTILITY RECOVERY
simple mistake in your billing system can end up costing thousands. Avoid these common utility billing errors to keep your investments healthy:
- Mistake # 1 - USING THE WRONG UTILITY PRICING
You can't recover the right amounts from your residents if you're using the wrong utility rates! And those rates increase regularly. If the rate rises but you don't stay on top of the changes, you'll be responsible for the difference. Verifying prices is just too simple to overlook, requiring only a monthly check for each utility.
- Mistake # 2 - SENDING UTILITY BILLS LATE
Cost recovery is hampered by late invoicing. Residents who are expected to pay on time are thrown off when utility bills arrive late. Livable, a utility billling software, allocates for water, sewer, trash, and more based on multiple factors to ensure that fair, accurate, and automated billing is sent directly to your residents - on time. With this customizable system utility bills can be sent out directly to your residents. And they have multiple ways to pay, including online, via phone or by mail.
UTILITY BILLS CAN BE SENT OUT DIRECTLY TO YOUR RESIDENTS.
- Mistake # 3 - NOT FOLLOWING PREDICTABLE TIMING AND CADENCE OF BILLING
It is crucial to send utility bills at the same time every month, ideally on the same day of the month. You wouldn’t want bills arriving randomly and neither do your residents. This consistent timing and cadence can prevent financial hardship for your renters and reduce the likelihood of delayed payments. Establishing this cadence early in the homeowner- resident relationship and sticking to it is vital. The easiest way to do this is to engage with a professional billing company dedicated to just that.
- Mistake # 4 -
SENDING UTILITY BILLS LATE
Residents not paying or paying late can be a significant financial burden for housing providers. It is essential to have fair and defensible utility billing practices in place to ensure that tenants receive bills they feel are justified. A well-planned Ratio Utility Billing System (RUBS) can capture and bill a resident's actual usage as accurately as possible. This system creates a sense of ownership among residents, as they can see how their actions affect their expenses month-to-month. Studies have shown that individually calculated utility bills can reduce water, gas, and electric usage by up to 35%. If a tenant receives a bill they feel is unjustified – “How could I have used that much?” – the likelihood increases that the utility bill will go unpaid.
THIS MEANS TWO THINGS:
Residents save money – and have the ability to directly impact their savings. This creates a differentiating factor for properties where billing is perceived as fairer.
Your master utility bill is lower. There will almost always be some percentage of utility costs that can’t be recovered because of things like lobby lighting and lawn watering.
INDIVIDUALLY CALCULATED UTILITY BILLS CAN REDUCE WATER, GAS, AND ELECTRIC USAGE BY UP TO 35%.
- Mistake # 5 -
USING THE WRONG RUBS CALCULATION
Ratio Utility Billing Systems are designed for properties that are unable to use submeters due to physical or practical constraints. However, RUBS is more complicated than simply dividing your utility expenses by a ratio. Bills need to be calculated through sophisticated ratios and precise adjustments.
The bill might be based on the number of tenants or the number of bedrooms. Then there's ratio occupancy, which translates the number of occupants in a unit to a billing number of occupants. Selecting the wrong RUBS calculation can hurt your cost recovery. The right utility billing company can help you customize your RUBS program to suit your specific needs.
THE WRONG RUBS CALCULATION CAN HURT YOUR COST RECOVERY.
- Mistake # 6 - CREATING A NEGATIVE RESIDENT EXPERIENCE
Creating a positive resident experience is crucial in retaining tenants. It’s far easier to retain a good resident than it is to find a new one. The costs of advertising and showing a vacancy – to say nothing of $0 rent when a unit is empty – add up fast. CONCLUSION If you're looking to optimize utility cost recovery, consider trying Livable. The new Livable Pro platform is designed for the independent rental owner. Livable Pro has NO minimum unit requirement and the first month is free.
And while paying a utility bill is nobody’s favorite task, you can make it as painless as possible by using Livable’s custom RUBS billing system. That means a happier resident – one having a better experience and one more likely to renew their lease. The DIY setup allows you to enter building, unit and resident information rather than needing to set up an appointment with a billing expert. Once you’re set up you don’t have to worry about making utility billing mistakes, it practically runs on autopilot. Click here to try Livable Pro.
DANIEL SHARABI CEO & Co-founder Livable
Daniel Sharabi is the CEO & Co-founder of Livable, a utility management company with software solutions designed to save money, as well as the environment. Daniel’s immersive experience working within a multitude of sectors in Silicon Valley offers a homegrown advantage in his vision of leveraging technology to provide benefits for all: the property owner, property manager, the tenants, and our environment. To find out what Livable can do for your property check out livable.com or call 877-789-6027.
Every landlord is intimately familiar with managing the finances of rental properties. While the allure of valuable tax deductions exists, realizing them can be challenging. 5 WAYS SPECIALIZED ACCOUNTING SOFTWARE BOOSTS LANDLORD TAX SAVINGS
Although practical for general financial tracking, generic accounting tools might not highlight property-specific deductions such as depreciation, repair costs, or travel expenses related to property management. As a result, landlords may inadvertently overlook significant savings during tax season. Enter specialized accounting software —platforms tailored to streamline the financial management process to ensure landlords fully leverage all available tax advantages.
In this article, we'll examine how traditional accounting tools can fall short and why specialized software is the key to unlocking these critical tax deductions.
LANDLORDS MAY INADVERTENTLY OVERLOOK SIGNIFICANT SAVINGS DURING TAX SEASON.
WHY LANDLORDS NEED SPECIALIZED ACCOUNTING SOFTWARE
While basic accounting software can record transactions and manage finances, when it comes to maximizing tax deductions, standard tools often don't account for property management's unique challenges and opportunities. Specialized accounting software is more than just another digital tool — it's a strategic partner for landlords in today's competitive real estate market.
STANDARD TOOLS OFTEN DON'T ACCOUNT FOR PROPERTY MANAGEMENT'S UNIQUE CHALLENGES AND OPPORTUNITIES.
The best accounting tools for landlords today are cloud integrated, allowing access to financial overviews from anywhere.
Specialized software offers a comprehensive
Specialized software offers automation capabilities tailored for many financial tasks in property management, such as monthly rent collection or recurring maintenance costs. Landlords can set parameters, such as due dates for rent, categorize types of expenses, and even set reminders for irregular property-related costs.
platform to monitor everything from rent payments to property- related expenses.
For real estate investors looking to maximize their tax benefits, specialized accounting software can be a game-changer. Let's dive into the five key ways these tools can help you take advantage of valuable deductions. 5 WAYS ACCOUNTING SOFTWARE HELPS WITH TAX DEDUCTIONS
ENHANCED ACCOUNTING PRACTICES
REAL-TIME FINANCIAL OVERVIEW
EFFICIENT TRANSACTION MANAGEMENT
Juggling multiple financial tasks is a daily challenge. With specialized accounting software, landlords can manage everything in one place, simplifying data management and allowing for a less complicated and more efficient tax preparation process. INTEGRATED PLATFORM AND SIMPLIFIED TAX PREP
SCALABILITY WITH DETAILED REPORTING
Beyond simply tracking numbers, landlord-centric accounting software offers a suite of tools that brings clarity to the complex financial management by providing landlords insights on potential tax deductions. landscape of property
A landlord's financial landscape can shift rapidly. Specialized accounting software offers immediate insights into this dynamic environment, eliminating the need for prolonged setups.
Handling numerous transactions is an integral part of a landlord's duties. Specialized accounting software streamlines this process, offering intuitive features that minimize manual oversight. As a result, landlords save time and keep potential tax- deductible expenses from slipping through the cracks.
As a landlord's portfolio grows, so must their financial tracking system. Specialized accounting software rises to this challenge, ensuring growth doesn't compromise clarity. With in-depth financial reports and side-by-side comparisons, landlords can gain invaluable insights.
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