Author Archives: siteowner

late rent payment

Collecting Rent- Three rules you must follow

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Collecting Rent

Collecting rent is the goal of your property business.  It is the fruit of the labor with respect to renovating and leasing the property.  Being a landlord doesn’t mean you have to be callous. It’s important to be cordial, prompt and exact in every encounter with your tenants. However, there is a difference between being nice and polite, and being your tenant’s friend. Being a friend makes it hard and awkward to collect rent or assess late charges. This is why I follow strict rules and guidelines for all my tenants when it comes to collecting rent.

Number 1: Never accept cash or personal checks.

When collecting rent, personal checks can bounce, and cash doesn’t have a paper trail. For your protection and theirs, only accept money orders or cashier’s checks made out for the exact amount. This way they can never claim payments they didn’t actually make, and the checks can’t be canceled or hot.  You want trace ability of rent payments.

Number 2: Sign up for a P.O. Box.

If you’re like me and have properties spread out over a wide area, you don’t want to spend a whole week driving around and collecting rent. It’s a waste of time and gas. I use a P.O. Box nearby my home and use that address on all my leases, correspondence and instructions. I swing by at 6 p.m. on the due date and if the rent isn’t there, then it’s late. In disputes over when rent was mailed or received, make sure you check the stamp over the postage for a date. The post office marks each envelope with a date when it first goes through their system. If they claim to have mailed a check on the 30th, but the stamp says the 2nd, then you have proof  for court.

Number 3: Use direct deposit.

Collecting rent in the digital age should be electronic.  It’s the 21st century, and while we still need roads to get where we’re going, there are advanced methods of receiving rent payments. You can give your tenant your business account number and they can deposit the rent. Banks are secured, your money is safe, and they don’t have access to your account. This way there is no question about when rent was paid.
Did you find this video on collecting rent helpful?  Please give it a share.

For more advice and landlord training, check out Beware!  Renting to relatives can be a financial disaster.  Also view our video Late Rent Payment- three easy steps to resolution
Thank you.

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house rehab

House Rehab Budget will make your project successful

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Create a house rehab budget

Rehab budgets are critical to your success.  At the end of the day the two biggest factors which determine your profit for rental houses are the price you paid per square foot and the price you charge in rent per square foot.
Your cost doesn’t just stop at the purchase of a house but continues on into your rehab budget. In order to obtain a larger Return on Investment,  You either need a larger rent or a smaller rehab budget.   This video we’ll examine a few basic ways you can create and control your rehab budget.
If you haven’t already watched our video on estimating the repairs of big-ticket items, please do that now.

Number one – Control the materials

Contractors are businessmen to they need to find many ways of making a profit.
One such way is including the cost of materials in their quote.  Make sure you ask for quotes that involve labor only and materials decide whether or not it’s  cost-effective to buy items like paint fixtures orr let your contractor do it.

Number two – Maintain the schedule

If you’re acting as your own General Contractor,  then it’s your job to not only make sure the work is done but that is done on time.  Foundation repairs need to sit for a week before you do more work.  The ceiling fixtures go on after paint and paint happens after the floors are installed.  Knowing when contractors need to work in order is key.
Remember hiring one contractor for many jobs can cause your project to run longer.  It’s important to delegate.
Sign up for a free account to receive your complimentary timeline checklist.

Number three – Know your limit

You might save $1,500 by painting the house yourself but will you save time and a headache? My rule of thumb is that it’s easier and more cost effective to demolition than it is to rebuild. Taking down a fence clearing out clutter and ripping up carpet doesn’t take skill and can be done in a matter of hours.  installing tile and back-splash, painting walls and hanging doors takes patience and precision acquired over years of practice.  Sometimes hiring outside help is the difference between collecting rent next month instead of two months from now.
Did you find this video helpful?  Please give it a share.

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DFW Real Estate Bull Market

DFW Real Estate Bull Market Continues- July Statistics

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DFW Real Estate Market for July is hot. 

The July Statistics show sellers in control.  

The Dallas Fort Worth real estate for Julu market is still hot and shows no signs of slowing anytime some. 
The most striking metric is the number days on market.

The days on market average for the DFW area is 36.

This is down 7.7% from last year and at the lowest point this century. Homes sales outpace the rate of new listings driving down inventory. Inventory continues for 3 consecutive years of decrease. Inventory is down 6.2% from last year.
According to the law of supply and demand, when we see this kind of pressure on supply should correlate to price pressure. The median house price is up for the third consecutive year.

Overall the median price of a home is up 9.5% from last year. 
Home prices began to rise in 2012 and the rate of rise is accelerating. 
The perfect storm of low inventory, high demand and interest rates remaining and unprecedented lows has meant sellers are in command.

Buyers have little to no negotiating power are paying 98% of listing price.
If you are ready to sell and lock in profit on your capital gains, you need to like the Jody Wall Realtor Facebook page. 
Thank you for watching.

 

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Home Staging

Staging your home- How to sell your house for more

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Home Staging increases sales price and reduces time on market

Learn why staging your home home staging increases your sales price and speed of sale.  The video explains staging a house for selling and when to do it.

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Script

This is Kevin Wall with Jodywallrealtor.com.  Home staging is a low cost way to increase your sells price

What if could you could earn an extra 10% return on your biggest investment without additional cost? Are you motivated to learn how?

According to sites like National Association of Realtors and Home Staging Resources, 46% of staged homes sell for 10% more than comparison properties.

Staged homes sell 43% faster than non-staged homes. That is more money faster into your pocket. Sound interesting? Here are three reasons why you should
stage your home.

Reason number 1- Buyers want to see themselves in the prospective property.

They won’t be able to do that if your things are getting in the way. Many people do not stage their homes because they do not like the inconvenience.

They say to themselves, “It is my house  and I want it the way I have it. Buyers will overlook my mess.”

No they won’t!

Reason number 2 – A well-staged home is visually pleasing. Your home looks comfortable and inviting.

Buyers are able to see themselves living there.
Staging is not decorating. Staging is not remodeling.

Staging is decluttering, re-configuring, and even re-purposing items in your home.

Reason 3 – Home Staging -get a start on your move.

You are moving after all. Why not start packing up as soon as possible? Pack those items that buyers will see as clutter. It will also prevent some collectibles from being accidentally broken. When should you stage?

You should stage your home before it’s listed and before the listing photos are taken. Meet with your Realtor. She will advise you on specific things you can do to stage your home for selling.

You never have a second chance to make a first impression. Staging is a no cost investment in getting top dollar for your house.

Click the link below to to like our Facebook page.

Thank you for watching.

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Fire your mutual fund

Real estate investing: Why I fired my mutual fund.

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Real estate Investing beats mutual funds

I fined my mutual fund for good reason.  A few years back, My husband and I pulled our money out of the company 401K and moved it to a self-directed 401k.  We sold every share of stock we owned and cashed in all our stock options.  I received a call from Fidelity trying to talk me out of it.  He said, “Mrs. Wall, we have a team of financial advisers that can help you invest your money.  If you like real estate, can I have someone talk to you about REIT’s.”

I replied, “I will listen to you if you can meet my minimum conditions.  Are you ready?”  He said yes.  I went on, ” If you can guarantee me a minimum of a 20% cash-on-cash return, in cash, tax free year over year, then I will listen to you.”

He said, “Mrs. Wall, you know I cannot do that.”

“Then what qualified you or your team to give me financial advice.  Please send me my money.”

Mutual funds cannot pay you cash the way real estate does.

Walmart does not take mutual fund shares

If you want to retire, you need an income stream.  You need hard currency every month to pay bills.  Unless you are already wealthy, you will not save enough principle to live on at 5% return.  The minimum I will consider for an investment is 20% cash-on-cash.  I have one passive investment that pays 30% per year.  Do the math.  If you have $500,000 earning 20%, that is $100,000 per year.  If that same principal is earning 5%, you have $25,000 per year.  Do you like apples?  How about them apples?

Real estate investments have great returns mostly tax free

Municipal bonds? Give me a break.  I might as well put my money in lottery tickets.  My investment properties not only make my house payment and utility payments each and every month, I do not pay taxes on the money.  I have some property rented Section 8, so your taxes pay me every month and I do not pay income taxes on it.  The money hits my bank every month as regular as a German train.  I love our government and tax code.  I look forward to the first of the month.   My mailbox money arrives.

Jodywallrealtor.com is here for you

Jodywallrealtor.com and Cincero Investment Properties, Inc. exist to help the average person retire well.  We teach people the rules of the game.  We are not special.  We learned this business from the ground up.  We are average people following proven principles.  If you follow conventional wisdom, odds say you will end up at the poverty level upon retirement.  I did not want that for us, so we chose the path less traveled.

Give us a shout.  We would love to hear from you.

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How to know what houses are listing for in Grand Prairie

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Be the neighbor who knows

Most home owners are interested in what their property is worth.  Some take that curiosity to the next level.  I have a friend who is the person who pulls flyer’s from FOR SALE signs anytime a property is for sale on his street.  He loves to inform me on what houses are going for in his neighborhood.  Fortunately for my friend, I hooked him up with two tools so he doesn’t have take flyer’s.  He can know at any moment what is happening in Grand Prairie.

Automatic E-mail Alerts on Neighborhood Activity

Jodywallrealtor.com offers a service where you can subscribe to automatic alerts to your e-mail when a house is listed in your neighborhood.  It is easy to set-up and use and you can customize the tool to your level of interest.  Some of the features include:

  • Customize the area of search.  You can go as narrow or as wide as you want.  You will know when something changes within your search radius.
  • Customize the price range of properties listed.  You may not be interested in everything but only properties that would be considered comparable to yours.
  • You can customize any of the property details to make the notification the same as appraisers would use when looking at recent sales.
  • You choose how often you want to be notified.  You can choose immediately, daily, weekly or monthly.

As a real estate investor, I have set-up target areas where I want to invest.  Anytime a property is listed according to my criteria, I am notified.  Start your automatic notification now.

Set-up your email notification now!

Mobile App

Have you ever driven by a house and wondered about the listing price?  Do you want to see the pictures and do a virtual tour.  With my mobile app, you can see the listing from the comfort of your own car without even getting out.  You can quickly screen if you want to continue or move on.  If you want to see the house, you send me a message through the app and I will automatically know the property you want to see.  I can schedule a showing right then.  I use this app when I am prospecting for my own properties.  Sometimes I am driving  and see a property I am interested in.  I can see that property.  While I am out, I can search for any other listings that are close to where I am.  I can get a feel of an entire neighborhood on one quick drive.  I do not have to go back to my office and log on my computer.

Downloard Your Mobile App Now

Jodywallrealtor.com was created with you in mind.  I use the same tools everyday and make them available to you.  Schedule a listing appointment now.

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tax free

Sell your primary residence with a home office avoiding capital gains

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Avoiding primary residence capital gains tax on home office

The primary residence capital gains tax is something you can avoid.  You can even be avoiding capital gains tax when you have a home office.  Your Uncle Sam really favors home owners.  Not only does he allow you some tax free gains on your principle residence.  He also gives you more tax free and deferred cash if you use the home as your office or rental.  You must know the rules and play the game accordingly to avoid the taxes.  It takes some planning but as you will see it is well worth it.  I have been using my primary residence property as a rental for the past 2.5 years.  I will employ these rules to avoid and defer tax liability.  The strategy involves combining Section 121 exclusions with a 1031 exchange

Tax Free Sale of Home with Home Office

You bought a home for $200,000 and sell it for $300,000.  Over that time you have taken $30,000 in home office depreciation, which is 20% of your home.   Your adjusted cost basis in the property is $170,000.  This gives a capital gain of $130, 000.  This is how it breaks out.

The IRS defines the order on which the exclusions are made:

  1.  Section 121 comes first.  It cannot be applied to depreciation claimed after May 6, 1997.
  2.  Tax on gain is imposed on gains over the Section 121 limits.
  3.  1031 exchange is applied to the business portion to defer business tax liabilities
  4.  You add the Section 121 exemptions to the adjusted basis of the new property.
Total Home Office
Basis of Property $200,000 $160,000 $40,000
Depreciation ($30,000)  NA ($30,000)
Adjusted Basis $170,000 $160,000 $10,000
Gain from sale $130,000 $104,000 $26,000
Section 121 exclusion (1, 2) (120,000) ($104,000) ($16,000)
1031 Exchange (3) ($10,000) NA ($10,000)
Gain subject to tax Zero Zero Zero

The example shows that 15% capital gains tax was avoided and the 31% tax on ordinary income.

 If you found this article useful maybe you will enjoy

How to Deduct More Than $25,000 in Passive Losses Per YearTax Benefits of the Home Office How to Deduct 100% Business Entertainment Meals

Make Your Next Sports Utility Vehicle Tax Deductible With Section 179

DISCLAIMER

This article is for training purposes only.  Jody Wall does not warranty the accuracy of the training.  It is not intended to be legal or accounting advice.  Seek competent consultation for your particular situation. Readers assume all responsibility for their decisions.

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tax deductions for rental property travel

How to take tax deductions for travel to rental property

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Deduct Mileage to and from Rental Property

You can take tax deductions for travel to rental properties if you know the rules.  Under normal circumstances travel from home to rental property would not be deductible.  The travel would be considered personal.  Traveling from home is commuting like driving to a job.

Like most things it is not black and white.  The key word in the sentence is the word “home.”  There is a provision to take a deduction for the travel if you meet certain criteria.

You can deduct mileage when traveling to your rental property if you meet two criteria

1)  You are engaged in the business of owning rental property

2)  You have a home office from which you commute.

So if you are in business and the primary location of the business is your home office, then the travel to the rental properties is deductible as a business expense.  You have to love our tax laws.

Rental Property is either Business or passive investment

26 U.S. Code § 1231 – Property used in the trade or business and involuntary conversions

(1)General rule The term “property used in the trade or business” means property used in the trade or business, of a character which is subject to the allowance for depreciation provided in section 167, held for more than 1 year, and real property used in the trade or business, held for more than 1 year,

Rental Property Business Activity

The rental properties meet the Section 1231 definition of property used in a trade or business.  You qualify as a business when you materially participate in running rental properties.  Material participation should be ongoing and regular to qualify.  Participation includes activities such as maintenance, hiring contractors, collecting rent, keeping accounts, screening tenants. Etc.  See How to claim passive loss limitation exemption for more criteria on being considered a business with active participation.

Rental Property Passive Investment

If you do not participate in the running of rental property, the IRS will see the activity as a passive investment.  Passive investments ae not running a business.  For example, I own stock in my 401k.  I do not participate in the decisions of the portfolio or manage the fund.  I am not a mutual fund manager Therefore; I am a passive investor.

Home office

If my regular place of business is my home office, then travel to the rental property is deductible because I am traveling as an active part of my trade or business.  I must let contractors in for maintenance.  I show the property to prospective tenants.  In fact, travelling to the properties to conduct these activities is one way to prove I am actively participating.

Benefits of Real Estate Businesses

The tax benefits of owning real estate are accelerated and enhanced if running them is treated as a business.  Jodywallrealtor.com and Cincero Investment Properties, Inc. exist in order to make real estate investing available and easy.

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taxcut

How to claim Passive Loss Limitation Exemption

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Passive Loss Limitation Exemption

Passive Loss Limits

If you are invested in multiple residential properties and an active buy/fix/ hold investor, then you will come up against the $25,000 passive loss limitation imposed by the tax code in section  IRC § 469(g).  It is imperative that you understand IRC § 469(c)(7) for real estate professionals.

My Real Estate Professional Story 

Here is my story.  Two years ago I first became very active in buy/fix/ hold.  I studied the rules

Get your $50 card now.

Get your $50 card now.

on capital gains vs. expenses.  I trained my contractors on what to do.  I kept meticulous records.    I was set to deduct my passive losses against my regular income and did I need it.  My husband got a new job and as part of the severance he had to cash in his stock options or lose them.  We had a lot of capital gains and did not withhold money to pay the taxes since we did not expect a job change.  We sent our records to our accountant and crossed our fingers.

The day came when the phone rang.  I knew it was our accountant before I picked it up.  I asked, “Bob, give it to me strait.”  He said we owed over $15,000 in taxes.  When I picked myself off the floor, I asked him how that could be?  We had so many deductions?  We kept good records.  I expected something but not that much.

He said, “Jody you are maxed on your passive loss deductions.  Your AGI put you over the amount for the $25,000 loss.  We will carry the deductions to the next year.”

“No way Bob! I cannot be maxed on the passive loss deductions.  I am a real estate professional.”

“I know.  You gave me your Realtor® number but that does not count.”

“Bob, you did not understand me.  I am an agent but I AM a real estate professional.  My occupation on the tax form says property manager.  According to IRC § 469(c)(7) for real estate professionals I am exempt from passive loss limitations.”

Bob agreed to re-figure my taxes and said he would get back with me at the end of the week. Later that week he called and said we will get about $5,200 back on our return.  After I came down from the ceiling I thanked Bob and asked for him to e-file our return.  Knowing this one section of the tax code saved me over $20,000 in taxes in one year.

Passive Loss Exemption Rules

Here’s what you need to do to qualify as a real estate professional.  It is not about being a Real Estate agent.  To qualify as a real estate professional, the taxpayer must spend:

  •  more than 50 percent of his/her time in real estate activities; AND,
  •  more than 750 hours in real estate activities.
  •  A real estate professional must materially participate in each rental activity for the loss to be deductible

How to qualify as a real estate professional

Real Estate Professional

Real Estate Professional

To be a real estate professional, you must spend the majority of your time in real property businesses:

  •            Development or redevelopment
  •            Construction or reconstruction
  •            Acquisition or conversion
  •            Rental
  •            Management or operation
  •            Leasing
  •            Brokerage, not sales agent

One spouse alone must meet both tests. In addition, services performed as an employee do not count unless the employee is at least a 5 percent owner in the real estate business.

You can show your real estate business activities in many ways. Like with anything, it takes good record keeping.

Hint:  Reduce the amount of time you work on your job.  You only have to count hours as work that you actually spend doing work.  Deduct vacation time from the total.  Travel time does not count as work.  You can deduct time you spend at meetings.  In all, you may not work a full 40 hours a week for 52 weeks. 

Achieve the real estate professional time requirements

Capitalize on down time to run your real estate business.  Education is material and necessary for your job.  You can listen to tapes to and from work.  You can search for properties during lunch.  Going to conferences and networking also count.  Did you show a property?  Place an ad?  Do tenant screening?  Select, hire and pay a contractor?  These activities will help you get to the 750 hours.

I document all of my appointments, viewings and travel in my Tax Bot.  I keep all of my expenses in there as well.

Finally, before rental losses are deductible without being limited by the passive losses rules, the taxpayer must materially participate in each rental.  This can be difficult to document.

Group properties to achieve material participation

Fortunately, you are able to make a one-time election to treat all of your rental properties as a single activity.   This filing is done once.  Add the statement to your tax return.  Even if you outsource the property management, be sure to have the contract state that you have final say on all tenants and that you must approve all expenses over a certain amount.  I would do this as a matter of good business practice.

Learning these rules and executing a plan can save you thousands in taxes.  I was able to put money down on another property with my tax savings for the one year alone.

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business-travel-deductions-meals

Tax Strategy: How to get 100% business entertainment tax deductions

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Can you deduct 100% of business entertainment?

Saving money on taxes keeps money in your pocket.  Tax savings go directly to your bottom line.  The real estate business is a people business.  You can’t sit in your office and expect to meet clients, tenants, prospects, bankers, adjusters, appraisers and investors.  You are going to be out and about and you are going to eat.  The question is “Can I deduct 100% of my meal costs from my taxes?”  The simple answer is yes, if you follow the rules.  These tax rules are laid out in 26 CFR 1.274-2.  Don’t worry.  This article will explain it.

Business Entertainment Example

The short version says you can deduct your portion of the business entertainment meal if you have business reason to be there.  You must transact business with someone.  For example, you and Bob go to lunch and discussed the latest methods to get listings.  The tab is $30.  You pay your portion and Bob pays his.  You both deduct your amount of the lunch.  In this case, both you and Bob actively pursued future business.

Business Entertainment Rules

Let’s look at the rules.  There are two rules associated with the example above.

1)  The expenditure was directly related to conduct your trade or business.

2)  Either preceding or following the expenditure, there was a genuine business discussion.

How to document business entertainment expenses

As with any tax deduction, you must document that you met the requirements.  In the example above, you will get a copy of the receipt and note your portion of the meal.  You will write down who you transacted business with and what was discussed.  You do not need a long list of notes of the discussion.  Simply stating “discussed future business opportunities” will suffice.

Can you deduct your spouses meal?

A big investor is coming and you want to meet them.  Your husband is with you as you go out.  Can you deduct his meal as business entertainment?  Yes.  The states

The spouse of a person referred to in paragraph(c)(3)(iv) of this tax code will be considered closely connected to such a person for purposes of this subparagraph.

You must document who, what and where.  The expense must be for transacting business.   Good-will events do not meet the test.  You cannot take a group out for the night as a good will gesture and take a deduction.  You also cannot take a group a night club and expect to deduct it.  Nightclubs are loud and the IRS does not anticipate business discussions in such an environment.

Be sure you do not try to tax deduct taking your employee to lunch 5 days a week and deducting it.  The IRS will claim you are trying to offset normal living expenses.  Limit the number of times you take the same person out to less than 30 times per year.  Do not abuse the rule.  If you are deducting 300 meals per year, then you will raise a flag.   Remember, bulls get fed and hogs get slaughtered.

Tips to help you be audit ready

1 The expense must be directly related

  • You intend to do business at the time you spend the money
  • You discuss a topic that is intended to result in future business
  • The main reason you are there is do business
  • You spoke with person with whom you intend to do business

The expense occurs in an appropriate setting

  • The person you are with knows you want to conducting business
  • You spend the money in such a way to further your business
  •  This is not a meaningful social or personal meeting

It is a business setting

  • A nightclub or theater is not conducive for conducting business.  The business discussion can occur before or after the expense.  It must be documented.

Business entertainment can be 100% tax deductible when you learn and follow the rules.  If you found this article useful maybe you will enjoy

How to Deduct More Than $25,000 in Passive Losses Per Year

Tax Benefits of the Home Office

Make Your Next Sports Utility Vehicle Tax Deductible With Section 179

DISCLAIMER

This article is for training purposes only.  Jody Wall does not warranty the accuracy of the training.  It is not intended to be legal or accounting advice.  Seek competent consultation for your particular situation. Readers assume all responsibility for their decisions.

Cover photo from travelhelp-corporatehousing.com

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