Welcome to the StarPoint Tenant Screening Blog. This blog is dedicated to sharing valuable and helpful info with property managers and individual landlords about tenant screening, state tenant laws, useful forms and more.
Most landlords realize that tenant screening is only part of the formula for success as a real estate investor. Knowing how to minimize the amount that has to be spent in taxes at the end of the fiscal year while still operating within the tax laws is equally as vital to your success as a landlord. Here is a look at some of the tax breaks that are available to landlords.
COVID-19 Related Tax Breaks for Landlords
Since the economic landscape has changed for everyone with the emergence of the COVID-19 pandemic, the federal government has allowed for tax breaks pertaining to the virus. Most notably, the deadline to file Q1 and Q2 estimated tax payments for 2020 was pushed back until mid-July. In another attempt to minimize negative financial ramifications associated with the virus, landlords can also apply their net operating losses from five years ago.
Other COVID-19 related tax breaks include an increase in the amount of loan interest that can be deducted, the ability to claim any AMT tax payments that were made in 2020, and the ability to write off any improvements that were made to the subject property over the course of the year.
Standard Tax Deductions for Landlords
Experienced landlords realize that the depreciation of their property is one of the largest and most important deductions that can be made every tax season. In order to maximize the amount of depreciation that can be claimed, landlords should allocate as much of the purchase price of the property to the building itself, as land can not depreciate.
Maintenance and Repairs
Depending on the significance of the renovation, some improvements to a rental property can be claimed as a tax deduction. Larger projects have to be classified as capital improvements which depreciate over multiple years, thus reducing the amount of the current year’s deduction. To ensure that your CPA can more easily sort through deductions, landlords are encouraged to sort all of their repairs, renovations and other projects by vendor so their CPA can streamline the classification process.
A great deal of any landlord’s time is spent traveling. Not only do they need to make regular trips to the rental property, there are also trips to the bank, meeting with their broker, trips to the hardware store and more. Landlords who use an official home office and plan to claim transportation costs on their taxes should have an IRS-compliant mileage log that can track any business-related travel expenses.
1099 Contractors and Employees
Any wages that are paid to independent contractors and other employees who help with the running of a rental property are fully deductible for the landlord. While regular employees will require a W-2 Form for tax purposes, independent contractors should receive a 1099 Form for their own records and those of the landlord.
Tax Forms for Landlords
Landlords who are filing the income that they have earned over the course of the previous year should fill out a Form 1040 and attach a Schedule E: Supplemental Income and Loss form. A schedule E form allows a landlord to file their financial income and losses for up to three properties. In addition to these forms, landlords should also provide a 1099 form to any tenant who pays them more than $600 in rent over the course of the year.
While being a landlord provides the opportunity to make steady income, there is a lot of responsibilities associated with the position. In addition to regular tenant screening, landlords also need to be aware of the tax ramifications of what they’re doing to ensure they they maximize their savings while operating within the law.
What can Landlords and Property Managers do during the Coronavirus to help tenants
Most of us are currently living in unprecedented times. The Coronavirus pandemic has taken the world by storm and is affecting us in many ways. The state and federal government are taking steps to prevent the virus from spreading exponentially. It has been declared a national emergency. This pandemic is already affecting tenants. Many of them aren’t able to work and are already experiencing financial distress. There are a few things landlords and property managers can do to help tenants at this time.
Be Flexible With Rent Payments
It would be morally wrong and possibly even dangerous to evict tenants who can’t pay rent during this pandemic. We don’t want any more displaced people in the world. The virus will definitely spread faster if people are misplaced. If they are able to live with family members or friends, they will not be able to practice social distancing and isolation. Churches and many alternate housing residences aren’t even open. Landlords and property managers should be flexible with their tenants at this time. Some landlords are taking it upon themselves to offer leniency to their tenants. A couple states, California and New York, have already mandated flexibility and have passed laws that state landlords and property managers cannot file for eviction because of non-payment of rent right now. In addition, many courthouses are closed anyhow.
Don’t Schedule Preventative Maintenance Work Unless Absolutely Necessary
Many landlords and property managers schedule preventative maintenance for their rental properties in the spring. Landscaping cleanup and lawn services are one example. Some landlords and property managers have the furnaces and air conditioners in the properties cleaned and checked. We are supposed to be practicing social distancing and isolation. Landlords should not be scheduling this work to be done right now.
Honor Tenant’s Requests For No Showings
If your property or the property you manage is for rent right now, and there are tenants living in the property, you should be accommodating if the tenants request that there be no showings during the coronavirus pandemic. In fact, if the property is occupied, you should voluntarily put the properties on a temporarily no showing status. Again, we are all supposed to be practicing social distancing and isolation. Tenants shouldn’t be required to have other agents and prospective tenants looking at the property they are living in at this time.
Help Tenants Seek Financial Assistance
Landlords and property managers should offer their tenants avenues in which to seek financial help so they can continue to pay rent or partial rent. They can provide them with information on applying for unemployment and other government aid, grants and the like. Utility companies have programs available to those who can’t pay their bills. Churches may have financial assistance available. Landlords and property managers can point their tenants in the direction of food banks and schools that are providing meals.
It’s understandable that property owners have to pay property taxes, mortgage payments and homeowner’s association dues. It’s just a matter of time that there will be financial assistance extended to property owners, as well. These are uncertain times for sure. It’s time to pull together and help each other. People need to be flexible, creative and lenient in instances where there is great financial stress. We will get through this.
TransUnion is one of the top three credit reporting agencies. They have recently announced that they will no longer support selective lifts of frozen credit files.
A credit file is usually frozen when someone is worried about identity theft. Freezing the file made it so the reporting agency couldn’t sell your information to creditors, and so creditors wouldn’t open new accounts in your name.
Consumers used to be able to obtain an access code they could give to a creditor. When the creditor put in the access code, they could see a frozen credit file. This allowed the consumer to have more control over who would access their information to start a new account.
TransUnion is no longer supporting these codes. As of September 2018, if consumers want creditors to be able to see their information, they must request a global lift to the security freeze on their credit file. The consumer can set a specific length of time that the lift is in place, so they can limit the timing for how long the freeze is lifted. However, while it is lifted, any creditor will be able to see the unfrozen credit file.
Finding a new tenant for a residential property you rent and manage is not always a simple task, especially if you want to ensure your property is taken care of throughout the duration of any new lease agreement that is signed. Knowing what to look for before selecting a tenant for one of your rentals is essential to help prevent problematic issues from arising in the future.
Whenever you are searching for a new tenant to rent your home or apartment unit to, it is imperative to verify the income they claim to make before providing them with a leasing agreement. If an individual is unable to provide proof of their income with a bank statement, 2 paychecks, it is difficult to determine whether or not they are capable of remaining financially responsible when their rent is due to you each month. A tenant credit report can be ordered on the prospective tenant not to verify income, but instead verify they make timely payments on debt and to check their monthly debt range to see if they will be financially able to pay their rent.
Reference Check Problems
If you are unable to speak with references that were provided to you by potential tenants, it is not always a great idea to continue considering the individuals a prospective resident. Reference checks help you to determine the type of character a prospective tenant has, which is why it is so important that you are able to speak with multiple friends and family members who are willing to vouch for anyone who is interested in becoming a potential tenant of yours.
When you are not able to reach a reference of a prospective tenant, ask the individual if they have alternative contact information available to provide. If an individual does not have alternative contact information, this may be a red flag and a surefire sign to avoid allowing him or her to move into your home or apartment unit.
Running a background check and checking the criminal history of any and all applicants who are interested in living in a rental that you own is a must to truly determine whether or not an individual is a potential problem tenant. If an applicant has a history of run-ins with the law or has a criminal past, it is highly advisable to find another prospective tenant, especially if the applicant themselves was not upfront about their past while submitting their information to run a background check. Include a section for potential applicants to inform you of their criminal past in your original application if you want to learn more about prospective residents before running a tenant credit report or tenant screening.
Repeated History of Evictions
If you are able to determine that a prospective tenant has a history of evictions, it is important to inquire to learn more if you are still considering allowing the individual to move into one of your properties. When an individual has a repeated history of evictions, it is best to steer clear to avoid the potential risk of losing out on rent money, causing you to invest more of your own finances in order to maintain your properties over time.
Taking the time to conduct a thorough tenant screening and tenant credit check on your potential future tenants is a way to ensure there are no issues when it comes to receiving your rent money on time throughout the duration of any leasing contract that is in place. When you know what to look for while eliminating potentially problematic tenants, avoid headaches, repair fees, and other eviction-related charges and instead, opt for a tenant that is trustworthy and reliable.
Contractors for landlords are perfect for large remodels, such as a kitchen or bathroom, but a handyman for rental property keeps the home running smoothly by tending to wear-and-tear repairs. Several online resources help make this process easier by collecting contact information and reviews from other property owners and landlords.
Angie’s List is one such service, and they do not allow anonymous reviews. All the reviews on their site are certified. The reviews are grades, A through F, so they are quick and easy to understand.
There are three membership levels. The Green Membership is free and includes the worker’s information and ratings. The Silver Membership cost $24.99 a year. Silver has more benefits, such as special discounts and a fair price guarantee, which allows you to receive a refund for the amount exceeding Angie’s List Fair Price (terms and conditions apply).
Angie’s List Gold Membership costs $99.00 annually. Along with all the benefits of the Green and Silver plans, Gold offers a service quality guarantee. This guarantees some workmanship up to $100,000 (terms and conditions apply). The Gold plan offers more perks too, like an emergency service phone line, which could come in handy with rental homes.
All members have access to coupons, which are located at the bottom of each contractors profile page. Some business do not have any, while others offer 5% or 10% off.
Thumbtack is a completely free service where you can search for a handyman for rental property and licensed contractors.
They use the traditional star rating system to review the workers, one through five, with five being the best, paired with verified client comments.
Thumbtack also offers a product they have coined The Guarantee, which protect up to $1 million against certain property damage caused by the Thumbtack professional under certain conditions. Work that is not finished and incorrect installations are not covered.
HomeAdvisor is free of charge. The site offers over 500 real estate related services, from foundation repair to roofing.
Property owners rate the service providers with the five-star system. Along with the star ratings, there is a description of the project completed with client testimonies. Additionally, the service provider comments on the project to give an overall view of what may have happened; good, bad, or neutral.
Contractors for landlords can be found on Yelp for free. Yelp is a directory of restaurants, events, and home services. Any discounts offered to consumers will come from the service provider, not Yelp, and there are no guarantees.
The review system is very popular and heavily used on Yelp. Yelp uses a computer to screen all reviews. The system looks at how often the reviewer writes a review. Are they active reviewer, or do they review once every ten months? The program is looking for opinions, good or bad, opinions deemed reliable, and that will be helpful to other people.
Yelp highlights these reviews, but all reviews can be seen at a link at the bottom of the businesses profile page. This process is entirely automated; no humans screen the screener. Yelp displays the traditional five-star ratings and post client comments.
All of these companies have free mobile apps, which makes it convenient to get updates. Angie’s List, Thumbtack, and HomeAdvisor offer tips on how to select a profession, what questions to ask, how to get a quote, and pricing guidelines; Yelp does not. Prices subject to change.
You have a lot to cheer about if you are a landlord. The recent passage of the Tax Cut and Jobs Act (TCJA) means you will have more money in the bank when you pay your 2018 Landlord taxes.
If you are a landlord, you will be able to take advantage of a 20 percent tax break under the law if you operate as what is known as a pass-through company. As a residential landlord and pass-through company owner, you are the sole proprietor and individually own the property you rent; or operate as a limited liability company or LLC or partnership. Landlords who operate as sole proprietors claim or pass through the profit they make on their rental properties on their individual tax returns.
The 20 percent break is in addition to all of your other allowable rental property tax deductions. If you qualify, this means that you will only be paying taxes on 80 percent of the rental profits you make on your 2018 Landlord taxes. The 20 percent break is set to expire on Jan. 1, 2026.
The deduction is gradually lowered if you are a married couple filing jointly with an annual income greater than $315,000 or if you are single with an annual income in excess of $157,500. The deduction completely vanishes for married couples with an income of $415,000 or more and for individuals who earn more than $207,500.
However, if you are married with an income of $415,000 or more or single with an income of $207,500 or more, you may still be eligible for the 20 percent deduction if half of your wages were paid by your rental business or if 25 percent of your wages were paid by your rental business in addition to your company’s paying at least 2.5 percent of the cost of the rental home.
The TCJA also allows landlords to deduct in a single year the cost of the personal property that is used to operate their rental business. This includes such items as furniture and appliances.
And, landlords may now claim 100 percent of the cost of personal property they purchase for their rental business from Sept. 27, 2017 through Dec. 31, 2022. The deduction also applies to used property that landlords may purchase for rental use.
Under the bill, landlords also remain exempt from having to pay self-employment taxes such as Social Security amd Medicare as long as they are not operating what is in effect a hotel or bread and breakfast type establshment for their renters.
The TCJA is a boon for landlords and should result in real estate investors having more money in their bank accounts, which they can use to purchase other properties and help spur economic growth.
As many of you know Equifax announced a cyber-security incident potentially impacting approximately 143 million U.S. consumers and some UK and Canadian residents. We at StarPoint Screening are aware of the situation and want to make our customers aware that we do not have a partnership with Equifax or use their services for consumer information.
From Mid-May through July of 2017 criminals exploited a U.S. website application vulnerability to gain access to certain files. The information accessed primarily includes names, Social Security numbers, birth dates, addresses and in some instances driver’s license numbers.
See if your personal information is potentially impacted.
Equifax has provided a link where you can enter your last name and the last six digits of your Social Security number and based on that information, you will receive a message indicating whether your personal information may have been impacted. If your information was impacted you will have the option to enroll in TrustedID Premier. The enrollment period ends on Tuesday, November 21, 2017.
Summer’s almost here, and that means it’s the peak of the rental season for homeowners and vacationers. Preparing your rental for the warm months ahead is a good idea for luring in prospective new tenants and making sure your property stays in optimal shape.
Before you begin preparing your property physically and restoring the inside and outside, you should think about how comprehensive your tenant screening process is. This process is the only chance you have to filter through tenant options and backgrounds to decide which tenants are the right choice for you.
Tenant screenings are important because the information it reveals can help you determine whether or not your new prospective tenant is trustworthy, able to pay their bills (and therefore, their rent), on time as well as previous addresses, rental references, and eviction information. It helps complete a clear picture of who they are overall as renters. It doesn’t tell the whole story, but it definitely tells a big part of it.
Inspect Your Air Conditioning Unit
Whether you have window units or a whole-house A/C duct system, it’s important to inspect them for proper operation before tenants start moving in. It helps your visitors stay happy and comfortable, even in the summer heat. For window units, check to be sure the exterior condenser has room to drain and breath by clearing any overgrown shrubs or plants that may be crowding the area. Also, replace and/or clean the filter for the unit. Make sure all interior ductwork is in proper order and that all vents are open and free of obstructions.
Check Battery-Operated Devices
Replace the batteries in your smoke detectors if they’re no longer working, and check your security system’s operation as well, if you have one. Some thermostats also run on batteries, so be sure those don’t need to be replaced either. Most thermostats will have a low battery indicator, so replace them if needed.
If you have a washer/dryer and offer laundry, be sure to clean out dryer vents outside the house. Many fires have started because of clogged dryer vents, so by taking this simple precaution, you can keep your tenants safe through the summer months.
Windows and Doors
Be sure doors and windows are sealed and optimized for A/C use. Open air gaps allows cold air to escape, increasing utility costs. By taking the extra time to seal gaps, you’ll keep your home energy-efficient.
If your summer rental hasn’t been opened or used for months, consider hiring a cleaning service to get it ready for new tenants. They can take care of things like mopping the floors, vacuuming carpets, dusting off ceiling fans, freshening up the furniture, and airing out the interior.
Sprucing up the yard can make a big difference with curb appeal and allows your summer tenants to enjoy your backyard in the nice weather. Do it yourself or hire landscapers to mow the lawn, clear brush and plant flowers if it’s feasible.
Owning investment real estate is a lucrative way to build wealth. Renting out to quality tenants means that you have another form of steady income. However, renting out to the wrong tenants can lead to frustrations and lost revenue. Learn about the tenant screening red flags to look out for as applicants inquire about your rental.
Part of your tenant background screening process must be running a credit check. Look for candidates with a high credit score. These applicants typically show a history of paying their debtors on time. Poor payment history, Bankruptcies, liens, judgements and other collections will all be present on the credit report. Allow this tenant screening strategy to guide your decision.
Verify if the applicants have a criminal history by purchasing a National Criminal Search with a vendor such as StarPoint Screening. As a landlord, you have a right to know if a person has a criminal background. Analyze the tenant background screening very carefully so that you don’t overlook any details. Serious charges, such as robbery or assault can appear as well as minor infractions, including traffic tickets. Multiple violations can mean that an applicant is prone to trouble regardless of the charges. Remember to always get the applicant’s signed authorization before running a criminal background check or credit report.
Any rental application should ask for an employment history and contacting those current and previous HR departments to complete a reference check is always a good idea. You want to be able to verify your applicant’s hire date, term date, salary, and position. Asking for a W2 or the last two paystubs is also a reliable way to verify salary and employment.
Completing a nationwide eviction search of you tenant is an inexpensive way to find out if any previous landlords, property managers or apartment complexes have had any issues with your applicant and had to take them to court. Eviction searches typically are under $10 and can save you thousands if you have to evict that tenant in the future.
StarPoint Tenant Screening, an accredited reseller for Trans Union and an information services company that delivers tenant credit reports and tenant background screening reports nationwide is proud to announce their redesigned Tenant Credit Report. StarPoint expects that the new report format will not only attract new landlords and property managers, but also offer their existing customers a streamlined, logical report format that eases the path to finding the perfect tenant.
“We designed the new report format to be more visually appealing and intuitive and expect the new format to make the tenant screening process a simpler and more informed experience.” Stated Kelly Gontarski, CEO.
Additional system features which benefit property managers include:
- Free online rental forms
- Printer friendly options for reports
- User Administration which allows the account admin to create multiple users accounts
- User Statuses which allows the account admin to change a user status (active, suspended, inactive)
- User Rights which allows the account admin to set other users as admins, give other users the ability/inability to view invoices and balance information, and make other users pay/not pay at time of order
- Viewing Rights which allows the account admin to allow other users to:View all reports ordered by this company, View only reports ordered by this location, View only reports ordered by this user
- Convenient billing options which include pay at time of order, monthly autopay, or monthly invoicing to be paid by check, ACH or credit card.
- Discounted volume pricing for property managers
Property managers need only to fulfill a few simple requirements from StarPoint and TransUnion to be compliant with the Fair Credit Reporting Act in order to be granted credit report access.
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