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.
WINTER 2026
Adam Dunn Multifamily Broker
Amanda Han
Avery Carl
David Holland Multifamily Recovery
Betsy Cunningham Multifamily Advocate
Real Estate Tax Expert
Short Term Rentals
Best of 2025 Awards
Eric Sharpe
Joseph Cordeira Multifamily Lending
Justin Jones Multifamily AI Expert
Kym Kurey
Mendy Minkowitz
Multifamily Marketing
Housing Non-Profit
Leasing Expert
Rae Nomura
Rick Albert
Selling Buildings Real Estate Book
Shelby Moore
Tina West
Multifamily Investments
Real Estate Podcast
Multifamily Development
Property Management
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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 Adam Dunn Alexandra Alvarado Amanda Han Avery Carl Betsy Cunningham Bradley Barth David Holland David Lazarra Eric Sharpe Grant Burwash Joseph Coreira Justin Jones Kyle Devillier Kym Kurey Larry Pendleton Leslie Tucker Mark Cunningham Mendy Minkowitz Mike Orlando Mitch Speigle Nancy Abrams Rae Nomura Richard D. Gann, JD Rick Albert Shelby Moore Tina West
CONTENTS
05 12 18
LANDLORD TRUSTS FOR DUMMIES: HOW TO PROTECT WHAT YOU’VE BUILT
TOP 5 MISTAKES LANDLORDS MAKE WHILE HANDLING DELINQUENT TENANTS
Q&A WITH DWIGHT KAY, AUTHOR OF THE FIRST BOOK WRITTEN ON 721 EXCHANGE UPREITS SHOULD LANDLORDS USE AI FOR LEASES & LEGAL NOTICES? READ THIS FIRST.
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Welcome to RENT! As 2026 begins, we wish you a bright new year filled with quick lease-ups, great tenants who pay on time and easy maintenance. The Best of 2025 Awards recognize individuals who have achieved excellence through such fields as writing, podcasting, education, property management and more. We announce the AAOA Awards for distinction in the multifamily industry over the past year. We also offer articles meant to protect multifamily investors from financial risk, such as rent collection, rent reporting and insurance, as well as legal and compliance exposure, including fair housing, AI and Section 8. You will learn how to protect yourself from operational and portfolio risk from articles about market outlook, trusts and 721 exchanges What do Ricky Gervais, Ricky Martin and The Weeknd have in common? They all bought or sold homes in the last quarter of 2025. Read about them in Celebrities on the Move. We hope you enjoy this issue of RENT and find the articles useful in your day-to-day business. You can send your feedback and ideas for future articles to nancy@aaoa.com. Happy reading!
28 35 42 58 53 63 68 71 78 80 85
WHY APARTMENTS ARE BRINGING BACK TV AND STREAMING PACKAGES
HUGE RISKS OF NOT REQUIRING RENTERS INSURANCE
BEST OF 2025 AWARDS
THE #1 LEASE CLAUSE THAT ENSURES RENT GETS PAID (AND HOW TO USE IT CORRECTLY IN 2026) HOW TO VERIFY YOUR TENANT’S INCOME HISTORY THROUGH THE IRS
UNDOCUMENTED RESIDENTS: CAN YOU LEGALLY REQUIRE AN SSN?
THE RENTAL RADAR
HOUSING’S NEXT 12 MONTHS: WHAT INVESTORS, DEVELOPERS, AND BUYERS SHOULD EXPECT
CELEBRITIES ON THE MOVE
SECTION 8 HOUSING: IS IT WORTH IT FOR LANDLORDS?
SCAMS THAT CAN DESTROY YOUR RENTAL BUSINESS
Disclaimer: All content provided here-in is subject to AAOA’s Terms of Use . Nothing contained on this website constitutes tax, legal, insurance or investment advice, nor does it constitute a solicitation or an offer to buy or sell any security or other financial instrument. AAOA recommends you consult with a financial advisor, tax specialist, attorney or other specialist who is able to properly advise you.
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HOW TO PROTECT WHAT YOU’VE BUILT
When Todd and Angela bought their first rental home in Denver fifteen years ago, it was supposed to be a side hustle—a way to build equity, get a little extra income, and maybe fund a better retirement. Fast forward to today: they own five properties spread across three states. They’ve dealt with leaky roofs, late rent, and long nights juggling property managers. Like many “mom-and-pop” landlords, they’ve built a solid portfolio through grit and consistency, not big corporate teams or private equity money. What happens if a tenant sues? Or if something happens to one of them and the other needs to take over management instantly? And down the line, how will all this real estate be passed on efficiently without losing income or control? That’s where two cornerstone estate tools come into play: the revocable living trust and the irrevocable trust. BUT NOW, THEY FACE A NEW CHALLENGE: HOW TO PROTECT IT ALL.
DOWN THE LINE, HOW WILL ALL THIS REAL ESTATE BE PASSED ON EFFICIENTLY WITHOUT LOSING INCOME OR CONTROL?
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The Revocable Living Trust: Control, Flexibility, and Peace of Mind 1 For most rental owners, the first trust they’ll ever need is the revocable living trust. It’s called revocable because you can change it, update it, or cancel it at any time during your life. You remain the trustee and beneficiary, which means you still call all the shots. You manage your rentals, refinance, collect rent, and pay expenses just as before.
FOR MOST RENTAL OWNERS, THE FIRST TRUST THEY’LL EVER NEED IS THE REVOCABLE LIVING TRUST.
Why landlords across the U.S. rely on revocable trusts:
• Avoid Probate Nationwide: Real estate in multiple states often means multiple probates when you die, one in every state where property is held. A revocable trust eliminates that, allowing for a seamless, private transfer of ownership. • Continuity in Case of Incapacity: If you become ill or unable to manage your affairs, your successor trustee can immediately step in with no court approval needed.
• Flexibility: You can add or remove properties, change beneficiaries, or restructure how assets pass to family members or charities.
However, a revocable trust does not provide asset protection while you’re alive. Since you still control everything, a lawsuit or creditor can generally reach trust assets. For landlords dealing with potential tenant disputes or personal guarantees, that’s a major limitation.
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The Irrevocable Trust: Protection and Long-Term Strategy 2 An irrevocable trust changes the game. Once property is transferred in, it’s no longer legally yours and that’s exactly the point. Because you relinquish direct ownership, the assets are generally shielded from future lawsuits, creditors, and in certain cases, even estate taxes. For rental property owners with larger portfolios, this can be a smart second-layer of protection and planning. How landlords use irrevocable trusts:
• Asset Protection : Rental real estate can attract liability. Placing high-risk properties into an irrevocable trust can create a legal barrier between you and potential lawsuits. • Tax and Wealth Planning: Property appreciation inside an irrevocable trust can be structured to occur outside your taxable estate, reducing potential estate tax exposure. • Family or Charitable Legacy: Some owners use irrevocable trusts to direct long-term benefits such as rental income to support heirs or charitable causes for decades.
PLACING HIGH-RISK PROPERTIES INTO AN IRREVOCABLE TRUST CAN CREATE A LEGAL BARRIER BETWEEN YOU AND POTENTIAL LAWSUITS.
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Which Trust Is Right for You? 3 For most independent property owners, the right move is not one or the other, but a combination of both. A revocable living trust serves as the foundation of your estate plan by making sure your properties transfer efficiently, your affairs stay private, and your family avoids court intervention. As your portfolio or risk profile grows, layering in an irrevocable trust can add the next level of defense, protecting select properties from liability and helping manage taxes in the long run. Limited liability companies can also serve as an additional asset protection tool.
A REVOCABLE LIVING TRUST SERVES AS THE FOUNDATION OF YOUR ESTATE PLAN
Here’s a simple framework used by many landlords:
Situation
Recommended Approach
Revocable Living Trust
Own 1–3 rentals, focus on avoiding probate
Combine Revocable + Irrevocable
Own 4+ rentals or high-liability units
Isolate risk properties in Irrevocable Trust and/or LLC’s
Concerned about tenant lawsuits
Advanced Irrevocable Trust planning
Concerned about estate taxes or long-term wealth transfer
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YOU NEED BUSINESS-LEVEL PROTECTION AND A PLAN THAT SURVIVES YOU.
Case Study: Building the Two-Layer Plan 4 When Todd and Angela worked with their estate planning attorney, their plan was built in layers. Their revocable living trust became the master plan, holding title to most properties, ensuring a clean handoff if one spouse became incapacitated, and avoiding probate in all three states. For their oldest duplex, located in a tougher rental market with more liability exposure, they established a separate irrevocable trust. The property’s income still flows to them through structured distributions, but its value is protected from direct legal risk. As a result, this plan keeps them in control of operations today, while building a fortress around their future wealth. Why It Matters 5 If you own rental real estate, you’re a business owner, not just an investor. That means you need business-level protection and a plan that survives you. Trusts aren’t only for the ultra-wealthy. They’re for anyone who’s built something worth protecting, whether that’s two single-family homes or a dozen small apartment buildings.
A thoughtful combination of revocable and irrevocable trusts and/or LLC’s can:
• Keep your real estate private and out of court
• Shield your assets from lawsuits and creditors
• Ensure income continues for your spouse or heirs
• Give you confidence that your years of effort will live on
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FINAL THOUGHT You spent years building your rental portfolio, so it makes sense to put the same level of care into protecting it. A well-structured plan using revocable and irrevocable trusts can safeguard your properties, support your family, and ensure your hard work continues paying off long after you stop managing the day to day. Taking the time to understand your options now can give you clarity, security, and confidence for the road ahead. You spent years building your rental portfolio, so now it’s time to protect it!
YOU SPENT YEARS BUILDING YOUR RENTAL PORTFOLIO, SO NOW IT’S TIME TO PROTECT IT!
Click here to schedule a complimentary consultation to learn which trust structure is best for your situation.
BRADLEY BARTH, ESQ. Partner BarthCalderon, LLP (714) 704-4828 ext. 114
Bradley Barth is a partner and Supervising Attorney of the firm’s Transactional and Estate Planning Department encompassing business formations and transactional matters, estate planning, domestic and offshore asset protection, probate, trust administration, tax and real estate law. He views his role as a trusted and long-term advocate of asset protection planning in helping his clients achieve and protect their financial goals and lifetime accomplishments.
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What begins as a single missed rent payment can quickly turn into a complex and emotionally charged situation with financial and legal consequences. While delinquency never feels routine, the way a landlord responds can make the difference between a manageable setback and months of lost revenue. The following five mistakes can quietly undermine even the most diligent property owner. MISTAKES LANDLORDS MAKE WHILE HANDLING DELINQUENT TENANTS TOP 5
MISTAKE #1 WAITING TOO LONG TO ACT
HOPING THE TENANT WILL “CATCH UP NEXT MONTH” AND DELAYING NOTICES OR COMMUNICATION.
Delays weaken your legal position and increase financial loss. You may think that waiting shows goodwill. In reality, delays weaken your legal standing because notice periods and procedural requirements begin only when official notices are served. The instinct to be patient is understandable, but delaying communication or waiting to send a required notice often results in larger losses. For example, a landlord who waits several weeks before making contact may discover the tenant has already lost a job or moved out without notice, leaving little chance of recovery. Why it’s a problem
• Contact the tenant immediately after a missed payment. • Send required late notices or pay-or-quit notices on time based on local laws. DO INSTEAD
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JUDGES OFTEN REQUEST PROOF THAT THE LANDLORD ATTEMPTED RESOLUTION IN GOOD FAITH.
MISTAKE #2 NOT DOCUMENTING EVERYTHING
RELYING ON VERBAL AGREEMENTS OR INFORMAL CONVERSATIONS.
Why it’s a problem
If the situation escalates to eviction or court, lack of documentation hurts your case. Some landlords rely on memory or quick conversations to manage delinquency issues. This is one of the costliest mistakes because courts require clear documentation of every step taken. A landlord who cannot produce a written record of communication, notices served, or payment attempts risks dismissal of the case. For instance, a tenant may claim the landlord verbally agreed to accept late payments without penalty. Without documentation proving otherwise, the court may side with the tenant. A little known pitfall is failing to log each attempted communication, even if the tenant does not respond. Silence from the tenant still contributes to your timeline, and judges often request proof that the landlord attempted resolution in good faith. • Keep a written log of communications, dates, notices, payment attempts, and any promises made. • Store copies of the lease, payment ledger, and notice receipts. DO INSTEAD
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MISTAKE #3 ACCEPTING PARTIAL PAYMENTS WITHOUT UNDERSTANDING THE CONSEQUENCES
TAKING PARTIAL PAYMENTS BECAUSE IT SEEMS BETTER THAN NOTHING.
Why it’s a problem
In many jurisdictions, accepting partial payments can reset the eviction timeline or weaken your legal claim. Partial payments can feel like progress, yet they often work against the landlord. A typical example is a tenant who pays fifty dollars toward a much larger balance. The landlord accepts it, believing it shows good faith, only to discover that the court now views the delinquency period as restarted. Issues can also arise from rent payment platforms that automatically label payments as the current month’s rent or accept partial payments. Be sure to update your rent payment platform settings if your tenant is delinquent. • Contact the tenant immediately after a missed payment. • Send required late notices or pay-or-quit notices on time based on local laws. DO INSTEAD
ACCEPTING PARTIAL PAYMENTS CAN RESET THE EVICTION TIMELINE OR WEAKEN YOUR LEGAL CLAIM.
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MISTAKE #4 VIOLATING TENANT RIGHTS (EVEN ACCIDENTALLY)
CHANGING LOCKS, SHUTTING OFF UTILITIES, ENTERING THE UNIT WITHOUT NOTICE, OR HARASSING THE TENANT.
Why it’s a problem
These are often considered illegal “self-help evictions” and can lead to fines, lawsuits, or dismissal of your eviction case. Even well intentioned behavior can cause serious consequences. A landlord who stops by “just to check in” may unknowingly violate entry laws if proper notice was not given. Courts are quick to penalize these violations, and they can result in fines, lawsuits, or dismissal of an eviction case.
• Follow the formal legal process, step by step. • Give required notice before entering the property. • Let the court and law enforcement handle removals. DO INSTEAD
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MISTAKE #5 NOT KNOWING THE LOCAL EVICTION LAWS
ASSUMING ALL STATES OR CITIES HAVE THE SAME RULES OR USING OUTDATED TEMPLATES.
Why it’s a problem
CONCLUSION Avoiding the above mistakes allows landlords a clear and legal path towards having the right to collect any unpaid rent. Once the proper steps have been followed, the use of a collection agency that understands rental laws and maintains full compliance can significantly improve the chances of successful recovery. An experienced agency understands rental laws, follows strict compliance standards, and has the resources to pursue payment even after a tenant moves on. For landlords ready to take the next step, you can click here to start the collection process. Eviction laws vary widely, and mistakes can cause cases to be dismissed or restarted. For example, a landlord may post a three-day notice based on an old requirement, unaware that the jurisdiction now mandates a longer timeline along with mandatory legal disclosures. These errors are avoidable yet extremely common. Another overlooked mistake involves improper service of notices. Some areas require both posting and mailing, while others have strict rules about who is legally allowed to serve the notice. Using the wrong landlord entity name on forms is another detail that can cause delays, especially for owners with multiple properties under different LLCs. • Learn your state and city’s specific notice periods, service requirements, and court procedures. • Use updated forms from local housing authorities or landlord associations. DO INSTEAD
MIKE ORLANDO Founder Synergetic Communication Inc (Syncom)
As an accomplished professional in the Accounts Receivable Management (ARM) industry, Mike Orlando brings 37 years of expertise in managing collection agencies. He began his career immediately after college, rapidly advancing from Collection Manager to Vice President of Operations. In 1996, Mike founded Syncom, initially focusing on the banking and finance sectors. Over the years, he expanded Syncom’s reach to include various verticals such as credit cards, automotive, equipment finance, powersports, rental collections, security/alarm systems, among others. Known for his integrity and relentless drive for excellence, Mike successfully helped position Syncom as a leading performer in the industry.
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D wight Kay, founder and CEO of Kay Properties & Investments, recently authored a pivotal book on the increasingly popular 721 Exchange UPREIT strategy. This important guide, titled “721 Exchange UPREITs – What Investors Need to Know BEFORE Investing,” sheds critical light on important caveats investors must understand before committing capital to these complex structures. As the Delaware Statutory Trust (DST) market matures, the 721 UPREIT exit has become a focal point for thousands of investors seeking a path forward. To provide clarity on this essential topic, we sat down with Dwight Kay for an in-depth Q&A on the motivations behind the book and the crucial insights every investor should possess. Q&A WITH DWIGHT KAY, AUTHOR OF THE FIRST BOOK WRITTEN ON 721 EXCHANGE UPREITS
GET YOUR FREE COPY
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Q:
Q:
Can you explain what a 721 Exchange UPREIT is and why it attracts investors?
What inspired you to write this book?
A: The decision stemmed from a glaring gap I saw in investor education. Despite the 721 Exchange UPREIT becoming an increasingly popular and often recommended exit strategy within the DST and 1031 exchange landscape, there has never been a published volume solely dedicated to educating investors on its intricacies and potential pitfalls. This lack of a definitive resource left many investors navigating a sophisticated tax and investment strategy without a comprehensive map. I view this book as that essential map—the definitive guide for investors. It provides the critical knowledge, from foundational concepts to advanced due diligence, that is necessary before committing capital. My goal is to empower readers with education, real-world insights, and a structured framework for evaluation. At Kay Properties, we have always believed that education is the bedrock of intelligent investing as it builds trust and enables informed decisions. This philosophy has been central to our firm’s growth. Consequently, I wrote the book to be accessible and non-technical, ensuring that investors at all experience levels can grasp the potential benefits, inherent risks, and subtle nuances of 721 Exchange UPREITs.
A: Certainly. Let’s break it down. “UPREIT” stands for Umbrella Partnership Real Estate Investment Trust. It is an operating partnership, subsidiary to a REIT, that holds and manages real property assets. Section 721 of the Internal Revenue Code allows an owner of real estate to contribute that property to a partnership in a tax-deferred exchange, receiving partnership interests in return. In the context we’re discussing, this allows an investor holding interests in a DST property to contribute those interests to the UPREIT partnership. In exchange, they receive Operating Partnership Units (OP Units), which represent an economic interest in the broader REIT portfolio. Investors are drawn to this strategy for several compelling reasons. Primarily, it offers a solution to defer capital gains taxes that would otherwise be triggered upon the sale of their DST asset. Simultaneously, it provides a pathway to potentially achieve greater diversification, moving from a single-asset DST into a multi-asset REIT. Other perceived benefits include ongoing income potential through distributions on the OP Units, the potential for increased liquidity, and potential estate planning advantages. The relevance of this strategy has skyrocketed alongside the historic growth of the DST market. Equity placed into DSTs expanded from approximately $2 billion in 2015 to an estimated $7.5 billion in 2025*. This growth means a significant wave of DST investments are now nearing the end of their lifecycle. For tens of thousands of investors, the 721 exchange has shifted from a peripheral option to a critical strategy they must understand as they evaluate their exit paths.
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downsides or risks investors might overlook? Q:
That all sounds straight forward. What are some of the potential
A: This is precisely why the book was necessary. The benefits are often highlighted, but the complexities and dangers are frequently buried in fine print or not fully appreciated. Let’s unpack a few key areas: 1. Tax Advantages & The Crucial Role of Tax Protection Agreements (TPAs): While the exchange itself is tax-deferred, the long-term tax protection is not automatic. A critical due diligence item is whether the DST’s Private Placement Memorandum includes a robust Tax Protection Agreement. A TPA is a contractual safeguard that protects investors from future tax liability if the REIT later sells the contributed property without completing a subsequent, internal 1031 exchange. Without a strong TPA—ideally with a duration of 20 years or more—investors could face an unexpected capital gains tax bill years down the line, triggered by a decision of the REIT sponsor over which they have no control. 2. Diversification & Systemic REIT Risk: Yes, moving from one property to a portfolio offers potential diversification**. However, it also exchanges property-specific risk for sponsor-level or systemic REIT risk. A single REIT, even with diverse assets, can be exposed to portfolio-wide risks. These include blanket loans or credit facilities, often with adjustable rates, where rising interest costs can pressure cash flows across every asset simultaneously. Furthermore, poor strategic decisions at the REIT level, such as overpaying for acquisitions, taking on excessive leverage, or mismanaging properties, can impair value regardless of the quality of the original DST asset. Investors also must consider the "perpetual life" nature of many REITs where they can be sold to new sponsors with different strategies and risk profiles, fundamentally altering the investment an investor originally entered. 3. Income Potential & Sustainability of Distributions: The promise of ongoing income is attractive, but investors must scrutinize the source of the distributions. Is the REIT paying dividends from genuine property operating cash flow, or is it subsidizing payouts through borrowings, new investor capital, or even a return of capital? Some perpetual life REITs may promote attractive yields by drawing on credit lines, a practice that can mask underlying weakness and jeopardize long-term stability. The key metric to analyze is the dividend coverage ratio, specifically as measured by Adjusted Funds From Operations (AFFO). A distribution not fully covered by AFFO may not be sustainable.
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THE STRUCTURE OF THE EXIT OPTION IS PARAMOUNT.
Is the 721 UPREIT conversion mandatory, or do investors have a choice? Q: A: This is one of the most important and often overlooked questions. The structure of the exit option is paramount. In many DST offerings with a 721 UPREIT provision, the conversion is forced or automatic upon maturity. Investors are funneled into the UPREIT regardless of their individual circumstances, current performance of the REIT, or market conditions. This loss of optionality means ceding control of a significant financial decision and in many cases, a vast majority of an investor’s net worth. At Kay Properties, we advocate strongly for investors to seek DST offerings that provide a fully optional 721 UPREIT path. True optionality means that at the DST’s maturity, the investor has a clear choice among typically three paths: participate in the 721 UPREIT exchange, execute a new 1031 exchange into another property, or cash out and pay the applicable taxes. This control allows the investor to make a decision aligned with their current financial goals, tax situation, and assessment of the UPREIT opportunity at that future date. Choosing a sponsor that provides this optionality is a fundamental aspect of investor protection and strategic flexibility. CONCLUSION & HOW TO GET THE BOOK The 721 Exchange UPREIT is a powerful, complex tool in the sophisticated investor’s toolkit. Like any powerful tool, it requires proper knowledge and caution to use effectively. Dwight Kay’s book is designed to provide that essential understanding, arming investors with the questions to ask and the pitfalls to avoid. Investors, advisors, and real estate professionals can receive a complimentary copy of “721 Exchange UPREITs – What Investors Need to Know BEFORE Investing” by visiting https://721exchangeupreit.com.
* https://altswire.com/dst-sales-up-40-year-over-year-2025-on-pace-for-best-year-since-2022/ **Diversification does not guarantee profits or protects against losses.
Disclaimer: This material is for informational purposes only and is not to be construed as tax, legal, or investment advice. All real estate and DST investments involve risk, including the potential loss of principal. Investors must consult with their own qualified tax and legal advisors prior to making any investment decision. Securities offered through FNEX Capital, member FINRA, SIPC.
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ADVERTORIAL
SHOULD LANDLORDS USE AI FOR LEASES & LEGAL NOTICES? READ THIS FIRST. Artificial intelligence (AI) has become a normal part of modern property management, from screening applicants to drafting notices to handling tenant questions. But while AI can reduce workload and improve efficiency, recent court cases show that relying on the wrong type of AI can create serious legal and financial exposure. For landlords the message is clear: AI can help you, but only if the system you use is built for legal accuracy. The AI model should use closed-loop, curated information that allows it to understand your business, which will significantly reduce risk and provide a reliable alternative to general-purpose, open-source AI tools.
RELYING ON THE WRONG TYPE OF AI CAN CREATE SERIOUS LEGAL AND FINANCIAL EXPOSURE.
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When AI Goes Wrong AI Hallucinations Reach Housing Court in Los Angeles Eviction Case (2023) A cautionary example comes from landlord-tenant practice in California, where a well-known Los Angeles eviction attorney and his firm were sanctioned after submitting a court filing that contained “an entire body of law that was fabricated.” The firm was ordered to pay nearly $1,000 in sanctions, narrowly avoiding a mandatory bar reporting requirement, and critics warned the incident illustrated how unverified AI output can undermine both legal standards and the integrity of eviction proceedings where the stakes are often people’s homes. (Source) Mata v. Avianca (2023): A Federal Case That Became a National Warning In Mata v. Avianca, attorneys filed a legal brief filled with case citations and quotations that appeared legitimate but turned out to be completely fabricated. The citations were generated using ChatGPT, and when the court asked the attorneys to provide copies of the cited decisions, they could not because the cases did not exist. The judge dismissed the filing, called the content “gibberish,” and imposed a $5,000 sanction, turning the case into a national example of what happens when AI is treated like a legal research tool instead of a writing tool. A Record-Setting $10,000 AI Penalty (2025) In 2025, a California Court of Appeal issued a record setting sanction after an attorney filed an appeal containing numerous fabricated quotations and citations that the court determined were generated by AI. The brief included 21 fake quotations attributed to real cases, along with citations that did not support what the brief claimed. The court imposed a $10,000 penalty warning that relying on unvalidated AI output can cross into professional negligence.
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WHY THIS MATTERS FOR LANDLORDS AND PROPERTY MANAGERS For landlords and property managers, the key takeaway is that courts are no longer treating this as a small technical mistake. These rulings show that judges view AI hallucinations as a serious misuse of the legal process because it forces courts and opposing parties to spend time and money chasing content that is not real. In landlord tenant disputes, this same issue can arise if AI generated documents misstate tenant protections, incorrectly cite rent control rules, or invent notice requirements. A mistake like that can turn a routine eviction or dispute into a costly setback. Once a document is served to a tenant or submitted to a judge, the landlord is responsible for every word in it. This risk matters because landlords and property managers frequently generate documents that carry legal implications, including: • Lease violation letters • Dispute responses • Vendor or contractor notices Using an open AI tool to create any of these documents may seem harmless, but if the output includes incorrect legal assumptions, outdated citations, misleading interpretations, or fabricated legal language, the liability falls on you, not the AI. Courts have already made their position clear: individuals are responsible for verifying AI-generated content. For landlords, failure to verify AI output could result in:
• Exposure to lawsuits
• Delays in eviction or collections
• Fines for noncompliant documentation
• Reputational damage with tenants, investors, or courts
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DRAI SOLVES THESE PROBLEMS BY USING A CURATED, CLOSED-LOOP AI ENGINE
AI systems cannot promise accuracy because they rely on uncontrolled internet data. AI tends to “make this up” when it doesn’t know the answer or have the correct information. Open AI systems cannot promise accuracy because they rely on open-source data that has not been verified.
HOW DRAI ELIMINATES THESE RISKS
The Problem with Open-Source AI Models
Open models hallucinate because they are trained on massive, non-curated datasets from across the internet. When information is missing or uncertain, they generate the most statistically likely answer, even when that answer is wrong. This is acceptable for casual tasks but dangerous for legal work. In short: open AI tools are not designed to maximize legal accuracy.
DRai: A Closed-Loop, Legal-Trained AI Built for Reliability
DRai solves these problems by using a curated, closed-loop AI engine trained exclusively on verified legal sources. No open-internet data. No guesswork. To date, our AI platform has not hallucinated or generated false information. This approach ensures: Accuracy
Consistency Each analysis is based on the same verified framework.
Safety Our human-in-the-loop ensures the results are not hallucinated.
Because the model only draws from validated legal material.
DRai’s legal-trained engine supports landlords by providing dispute analysis, dispute resolution process, and decision-making assistance.
By removing the ambiguity that plagues open AI tools, DRai helps landlords avoid the very mistakes that led to sanctions in the cases above.
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BOTTOM LINE: AI ISN’T THE RISK, USING THE WRONG AI IS The courts have spoken, and the examples are clear. AI can be an incredible tool for managing property operations, but unverified open-source models create unnecessary risk. For landlords facing disputes, compliance requirements, or documentation needs, accuracy is not optional. This is why DRai exists, to give landlords a trustworthy AI built specifically for legal-related tasks in property management.
To help landlords experience the difference for themselves, DRai is offering AAOA Members one month of access for only $5.
This includes: • Safe, accurate AI trained on verified legal sources • Closed-loop processing with no open-internet data
• Reduced risk, improved documentation, and better decision-making Don’t trust your legal matters to a model trained on the open internet. Try DRai today and see how the right AI can protect your business.
DAVID LAZARRA CEO DRai Solutions david@draisolutions.ai
The DRai Solutions platform allows landlords and property managers to quickly resolve tenant and vendor disputes in a cost-effective, secure portal that reduces friction to preserve business relationships. Through AI powered case law references, documented digital records, and a convenient negotiating portal, DRai offers alternative dispute resolution directly to the property managers without the high upfront costs associated with formal mediation or arbitration.
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ADVERTORIAL
WHY APARTMENTS ARE BRINGING BACK TV AND STREAMING PACKAGES After years of cord-cutting dominance and streaming service proliferation, an unexpected trend is emerging in the multifamily sector: bulk video services are making a comeback. Property owners and managers who once viewed cable packages as outdated amenities are now rediscovering new bulk video solutions
that deliver value to their residents. The initial appeal of "cutting the cord" was simple: lower costs and greater choice. However, the streaming landscape has evolved into a fragmented ecosystem in which accessing content often requires multiple subscriptions. Today's renters frequently juggle Netflix, Hulu, Disney+, HBO Max, Amazon Prime, Paramount+, and numerous other services—often spending more than traditional cable packages while still missing out on live sports, news, and local programming. This subscription fatigue has created an opening for communities to add genuine value through bulk
video arrangements that provide comprehensive entertainment solutions at reduced cost to residents. Modern bulk video offerings bear little resemblance to the basic cable packages of the past. Today’s solutions, like DIRECTV STREAM BULK, integrate streaming capabilities, on-demand content, and traditional linear programming through platforms that residents can access across all their devices. Properties can now offer premium channel lineups, sports packages, and streaming integration that would cost individual renters hundreds of dollars monthly at discounts up to seventy percent.
SUBSCRIPTION FATIGUE HAS CREATED AN OPENING FOR COMMUNITIES TO ADD GENUINE VALUE.
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BULK VIDEO PRODUCTS ELIMINATE THE HASSLE OF SERVICE SETUPS AND ANNUAL CONTRACTS.
These bulk video products eliminate the hassle of service setups and annual contracts, while still providing residents access to all their content in a seamless experience. Critics argue that bulk video forces residents to pay for services they may not want or use. However, successful implementations focus on value creation where almost all residents see savings in video costs while improving content access and user experience. The key is to position bulk video as a premium amenity provided by the community to the benefit of all the residents. As the streaming wars intensify and content becomes increasingly fragmented across platforms, the value proposition of comprehensive bulk
video solutions will only strengthen. Properties that embrace this trend now position themselves ahead of the curve, offering residents a solution to streaming fatigue while creating meaningful competitive advantages The bulk video comeback isn't about returning to the past, it's about applying lessons learned from the streaming revolution to create better, more integrated living experiences. For multifamily properties willing to provide comprehensive entertainment solutions, the opportunity to differentiate and add genuine resident value has never been clearer. The question isn't whether bulk video will continue its comeback in multifamily housing, but rather which properties will be smart enough to embrace it first.
Ready to make your property the #1 choice for residents? Complete our form to contact a DIRECTV sales representative today. https://directv-mdu.com/
MARK CUNNINGHAM Senior Director DIRECTV Multifamily Sales mark.cunningham1@mydirectv.com
Mark Cunningham leads national sales and distribution strategies for delivering DIRECTV services to multifamily properties across the United States. With a focus on innovation and growth, Mark led the launch of DIRECTV’s new bulk streaming service — a transformative offering that provides premium video content to residents while creating new revenue opportunities for property owners and operators. A forward-thinking leader in the media and telecommunications space, Mark is passionate about driving value at the intersection of technology and entertainment in multifamily properties. His work is redefining how video services are delivered and experienced in multifamily living environments.
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THE WORST STATES TO BE A LANDLORD: 2026 WESTERN RANKINGS Based on objective criteria, we have created a practical, investor-focused Score Card for the prospects of continuing to own residential rentals in the Western United States. The scoring is intended to help answer the question, “How attractive is it to keep owning residential rental units here over the next several years?” Scoring factors are weighted as follows: • 35% Landlord rules and compliance complexity (rent caps, just cause, fees, notices, local patchwork) • 20% Taxation on individuals (state income, property tax trends, unique landlord impacts)
• 20% Migration and demand for basic rentals • 15% Job growth and economic resilience • 10% State fiscal health and future policy risk
Legend • 9-10 = Excellent: simple rules, good demand, solid after-tax returns. • 7-8.9 = Attractive: mostly favorable; mind a few pressure points. • 5-6.9 = Caution: workable, but regulation/costs can sting small owners. • <5 = Defensive: viable only with strong basis/unique asset or exit planning.
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STATE
SCORE
NOTES
No rent control; relatively clear landlord-tenant law; good job & population growth; moderate taxes; fiscally sound. Strong “sleep at night” market for small owners. (Tax Foundation) Pro landlord, strong inbound migration (though cooling), simpler compliance, reasonable property & income tax. Good long-term holds for SFH/duplexes. (Tax Foundation) Repeal of city residential rental tax from 1/1/25 boosts net cash flow and reduces admin. (AZ Department of Revenue). Growing but normalizing demand; laws remain relatively owner-friendly. Great for smaller portfolios if you watch local oversupply. No income tax, strong fiscal position, minimal regulation. Small, thin markets—excellent if you’re local or very selective, but not plug-and-play for everyone. (Tax Foundation) Generally landlord friendly, benefited from migration; modest taxes. Some political/affordability noise, but still simple enough for mom-and-pops who buy right. No income tax; new “junk fee”/disclosure rules (AB 121-style reforms) mean cleaner paperwork but not true rent control. Good overall, but small owners must tighten documentation and prepare for cyclical rents in Vegas/Reno. (World Population Review) Strong jobs & demand; but increasing local regulation (Denver/Boulder- type rules), and political drift toward more tenant protections. Fine for small owners who can keep up with city/county specifics; less “effortless” than UT/AZ/ID. No income tax; niche, volatile markets; demand is very location-specific. Reasonable for hands-on local mom-and-pops; not ideal for remote passive owners. Costs reasonable; demand improving in select metros; some tilt toward stronger tenant protections and weaker overall economy/fiscal profile. Selective holds in better submarkets only. New statewide rent cap (HB 1217) now directly hits small landlords, including many SFHs: capped annual increases (7%+CPI or 10%, lower for some), notice and fee rules, AG enforcement. (Washington State Legislature) Strong job centers help, but regulatory missteps are costly for mom-and- pops with no in-house counsel. Statewide cap (7%+CPI, max 10%) plus detailed notice rules. (LeaseRunner) Layer on local quirks (esp. Portland). Rents and population are softer than peak. Doable for careful owners with strong equity; stressful for casual small operators. AB 1482 rent cap + just cause, local rent control layers, strict deposit rules (with nuanced carve-outs for very small owners), plus high state income tax and ongoing out-migration. (Hoffman & Forde) Fantastic if you have long-held basis in A+ locations; for typical mom-and-pop with 1–4 units, compliance risk + tax drag make “hold vs. 1031 out” a live conversation. High costs, political scrutiny of landlords & tourism housing, slower growth; complex and risky for small owners unless the asset is truly unique with low leverage.
9.1
Utah
8.9
Idaho
8.7
Arizona
8.5
Wyoming
8.0
Montana
7.9
Nevada
7.3
Colorado
6.9
Alaska
6.4
New Mexico
5.2
Washington
5.0
Oregon
4.3
California
3.9
Hawaii
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IN UT, ID, AZ, WY, MT, AND NV, THE RULEBOOK IS SHORTER AND MORE STABLE.
4 KEY INSIGHTS
1
REGULATORY FRICTION HITS SMALL OWNERS HARDER
• In CA, OR, WA, every extra rule (rent caps, notice timing, fee rules, relocation payments, deposit limits) is effectively an unfunded mandate on tiny teams. One mistake can wipe out a year of cash flow. • In UT, ID, AZ, WY, MT, NV, the rulebook is shorter and more stable, which is disproportionately valuable when you are the compliance department.
2
TAXATION INTERACTS WITH PERSONAL BRACKETS • High-tax states (CA, OR, HI, to a lesser extent NM/WA if broader tax changes emerge) reduce after-tax yields for individuals; many mom-and-pops are realizing they can 1031 into AZ, ID, UT, NV, TX, FL, etc. and keep more of each dollar. Tax Foundation • AZ’s rental tax repeal is a clean, easy win for small owners: simpler books, slightly better margins. AZ Department of Revenue
AZ’S RENTAL TAX REPEAL IS A CLEAN, EASY WIN FOR SMALL OWNERS.
3
MIGRATION & DEMAND: FOLLOW THE RENTERS, NOT THE HEADLINES • Net movers continue to favor relatively affordable, lower-tax markets, strengthening the case for small-unit ownership in parts of AZ, ID, UT, NV, MT, CO while slowly eroding the leverage of small owners in expensive, heavily regulated coastal cores. Tax Foundation
4
JOB BASE & FISCAL HEALTH = POLICY RISK INDICATOR
• States with healthier books and diversified economies (UT, ID, AZ, WY) are less likely to lurch into punitive property rules or surprise taxes. • States with structural gaps (CA, HI; some city budgets in NV/WA/OR) may lean harder on owners via fees, enforcement, or new rules—especially where “landlord vs tenant” is a political narrative.
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If you are interested in exploring options for relocating equity out of your state via a 1031 exchange, please contact 1031 Capital Solutions at 1031capitalsolutions.com or call us at (800) 445-5908.
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.
This information is for educational purposes only and does not constitute direct investment advice or a direct offer to buy or sell an investment and is not to be interpreted as tax or legal advice. All opinions expressed herein constitute the author’s judgement as of the date of this article and are subject to change without notice. Statements made are not facts, including statements regarding trends, market conditions and the experience or expertise of 1031 Capital Solutions. Information is based on current expectations, estimates, opinions and/or beliefs of 1031 Capital Solutions. Such statements are not facts and involve known and unknown risks, uncertainties, and other factors. Past events and trends do not predict or guarantee or indicate future events or 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. Insurance products offered through Concorde Insurance Agency, Inc. (CIA). 1031 Capital Solutions is independent of CIS, CAM and CIA.
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5
HUGE RISKS OF NOT REQUIRING RENTERS INSURANCE
Tenants often assume that because the building is insured, their belongings and personal liability are covered too. In reality, a landlord policy is designed to protect the property owner, not the tenant’s personal property or the tenant’s liability exposure. That gap matters, especially when something goes wrong and it almost always does eventually. Some landlords also hesitate because they believe requiring renters insurance is not legally allowed, or they worry it will create friction during leasing. But in most markets, landlords can require it as part of lease terms so long as it is implemented properly, such as at lease signing or renewal. In general, requiring renters insurance is widely accepted and increasingly common, particularly as insurance costs rise and liability claims become more expensive. Renters insurance is typically intended to protect tenants in four major ways: personal property coverage, personal liability coverage, additional living expenses (loss of use), and guest medical payments. That same protection can also reduce risk for landlords, not because it replaces landlord insurance, but because it adds a crucial layer of coverage between a tenant’s everyday life and a landlord’s financial exposure. Following are five of the biggest risks landlords take when they do not require renters insurance and why this small lease requirement can prevent major headaches later.
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RISK #1
HIGHER RISK OF LAWSUITS AND LIABILITY SPILLOVER
One of the most significant reasons to require renters insurance is liability. A tenant may unintentionally create a dangerous situation: a guest trips over an extension cord, a child gets injured on a loose rug, or a dog bites a visitor. When an injury occurs, lawyers often name everyone in sight: the tenant, the landlord, the property management company, and sometimes even vendors. Even if the landlord did nothing wrong, defending a claim can become expensive and time consuming. Renters insurance can include personal liability protection for the tenant and can help pay legal defense costs and damages when the tenant is responsible. That matters because when a tenant has no coverage, the injured party may try to pursue the landlord’s insurance policy instead, especially if the tenant has few assets. Dog bite claims are a perfect example of how quickly liability exposure can escalate. In 2024, the average cost per dog bite claim rose to $69,272, according to reporting based on Insurance Information Institute data. Without renters insurance, the landlord may face more pressure and more legal exposure, even if the tenant is clearly at fault.
In 2024, the average cost per dog bite claim rose to $69,272
BOTTOM LINE: Renters insurance gives tenants their own liability safety net and reduces the chance that every incident turns into a landlord centered legal fight.
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THE “TEMPORARY HOUSING” PROBLEM (AND RELOCATION PRESSURE)
RISK #2
When a rental becomes uninhabitable due to a covered loss such as fire or water damage, tenants suddenly need somewhere to live. Some states require relocation assistance under certain conditions, and even when it is not required, many landlords feel pressure to help. Meanwhile, the tenant is stressed and looking for immediate solutions. Renters insurance commonly includes “loss of use” coverage, which helps pay for temporary lodging and additional living costs while repairs are made. When tenants do not have renters insurance, landlords may find themselves pulled into situations they did not cause and cannot easily fix quickly: requests for hotel reimbursements, demands for rent abatement, or disputes over who pays for meal costs while displaced. Even with strong lease language, the practical reality is that displaced tenants often look for immediate help from the most reachable party: the landlord or manager. Renters insurance shifts that burden where it belongs and helps tenants get support faster, without turning the property owner into the default financial backstop.
DISPLACED TENANTS OFTEN LOOK FOR IMMEDIATE HELP FROM THE MOST REACHABLE PARTY: THE LANDLORD OR MANAGER.
BOTTOM LINE: Without renters insurance, a property incident can turn into a costly and emotional relocation dispute.
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