StarPoint Tenant Screening

Latest Posts

Your Credit Report and Renting – What You Need to Know

If you are looking to rent an apartment or a home, you need to be aware that one of the first things that landlords and property managers look at is your credit history and your credit report score as part of the application process. The landlord alone determines what an acceptable credit report score is, so your best offense is knowledge of what your credit report says.

Landlords specifically will look at your employment history, your history of payments with creditors and if you’ve paid these on time or late, and if you’ve declared bankruptcy or struggled with any sort of financial hardship. Any negative feedback on the credit report indicates that you are a financial risk to the landlord. The landlord will also look at how many, if any, credit report requests have been made within a certain time period. This is a sign that you have applied for credit frequently, and as a result that you have many potential debts, either secured or unsecured. The landlord also will see exactly how much debt you have and to whom you owe it, and for how long you have owed it. The landlord considers all of these things when you apply to rent a residence.

The negative items on your credit report that might give a landlord reason or cause to deny your application are many, but all are somewhat related. If you have balances on loans or credit cards that are very high and you are paying only the minimums, or if you have too many creditors, the landlord sees that as low cash flow and you may not be able to afford the rent payment. Even having too little credit history with no references or background information could affect a landlord’s decision to accept your rental application.

Your credit report and score are your financial history. Landlords cannot usually afford to take risks, as they also have bills to pay on their rental properties in the form of taxes, fees, and maintenance. If you do not pay on time, they cannot pay on time, and their credit is subsequently affected. Make sure that you are familiar with what is on your credit report, and be able to discuss it with your landlord. Some may accept a trial period in the form a short-term lease to allow you to prove your financial worthiness. Others may accept an offer of an increased security deposit as an offer of good faith and confidence in ability to pay. Whatever the reason for a landlord’s decision, you should be aware before the process begins of the potential warning signs on your credit report, so there are no surprises for you at the outcome of the application process.

To obtain a free copy of your credit report visit www.annualcreditreport.com

If you are a landlord or property manager interested in screening a prospective tenant view your tenant credit report options at www.starpointtenantscreening.com

FAQs about the Fair Credit Reporting Act

Consumer credits scores profoundly impact a landlord’s decision in screening tenant applicants. Based on the information in the rental application, landlords may run a credit report or credit screening to examine payment history as well as other prior renter information. The Fair Credit Report Act outlines the requirements for credit reporting agencies and the rights that consumers have in accessing and verifying their credit reports. The importance of an accurate credit score cannot be understated; there are a number of common questions about the FCRA and what protections it affords.

What is the purpose of the Fair Credit Reporting Act?

Congress approved the Fair Credit Reporting Act in 1970 because of the growing power of credit reporting agencies and the importance of accurate reporting for the banking system. It requires reporting agencies to follow reasonable procedures in keeping consumer credit reports private and accurate. Furthermore credit reporting agencies are required by law to disclose the information collected to that individual. It sets an important tone for the private companies that collect personal data, and outlines the responsibilities they have for maintaining and sharing that sensitive information.

How accessible is my credit report?

Under the permissible purpose doctrine, a credit report can only be accessed by those with a valid reason for doing so. Additionally, individuals are entitled to a free copy of their credit report once a year from the private companies that collect and compile those reports. A report can be requested online from www.annualcreditreport.com; however it is important to note that there are additional companies that track renter and financial history. Any company that tracks such information is required to disclose a free report once a year. The landlord can assist in confirming what reports they utilize in tenant screening.

Can I change the information in my credit report?

The Fair Credit Reporting Act requires landlords to notify prospective tenants if their application is denied on the basis of their credit report. The law guarantees that people are not denied based on what may be a deceptive report. If the information is correct regarding prior evictions, damages, or late payments, then better habits can be implemented to improve the report over time. Credit reporting agencies are obligated to expunge any negative information from an individual’s report after seven years. The seven year requirement creates more reasonable expectations of a renter’s ability to make payments. Furthermore, individuals have the right to challenge inaccurate information; credit reporting agencies are in turn required to verify and provide the basis for any negative information in their reports. Regularly accessing your credit report reduces errors associated with outdated information, inaccurate data, and poor ratings stemming from identity theft.

The best place to begin is by accessing your most recent credit score online. First, make sure that the information in the reports is correct. Viewing the report helps clarify what information is collected on you and how it appears to landlords. Understanding the basis for a good credit score is fundamental in creating good habits moving forward. It is just as important to check your reports annually to verify that the information remains correct.

2013 Tax Deductions – Rental Income and Expenses – Real Estate Tax Tips

You generally must include in your gross income all amounts you receive as rent. Rental income is any payment you receive for the use or occupation of property.

Expenses of renting property can be deducted from your gross rental income. You generally deduct your rental expenses in the year you pay them. Publication 527 includes information on the expenses you can deduct if you rent a condominium or cooperative apartment, if you rent part of your property, or if you change your property to rental use.

When to Report Income

Report rental income on your return for the year you actually or constructively receive it, if you are a cash basis taxpayer. You are a cash basis taxpayer if you report income in the year you receive it, regardless of when it was earned. You constructively receive income when it is made available to you, for example, by being credited to your bank account.

For more information about when you constructively receive income, see Publication 538.

Advance Rent

Advance rent is any amount you receive before the period that it covers. Include advance rent in your rental income in the year you receive it regardless of the period covered or the method of accounting you use.

Example:

You sign a 10-year lease to rent your property. In the first year, you receive $5,000 for the first year’s rent and $5,000 as rent for the last year of the lease. You must include $10,000 in your income in the first year.

Security Deposits

Do not include a security deposit in your income when you receive it if you plan to return it to your tenant at the end of the lease. But if you keep part or all of the security deposit during any year because your tenant does not live up to the terms of the lease, include the amount you keep in your income in that year.

If an amount called a security deposit is to be used as a final payment of rent, it is advance rent. Include it in your income when you receive it.

Expenses Paid by Tenant

If your tenant pays any of your expenses, the payments are rental income. You must include them in your income. You can deduct the expenses if they are deductible rental expenses. See Rental Expenses in Publication 527, for more information.

Example One:

Your tenant pays the water and sewage bill for your rental property and deducts it from the normal rent payment. Under the terms of the lease, your tenant does not have to pay this bill.

Example Two:

While you are out of town, the furnace in your rental property stops working. Your tenant pays for the necessary repairs and deducts the repair bill from the rent payment. Based on the facts in each example, include in your rental income both the net amount of the rent payment and the amount the tenant paid for the utility bills and the repairs. You can deduct the cost of the utility bills and repairs as a rental expense.

Property or Services in Lieu of Rent

If you receive property or services, instead of money, as rent, include the fair market value of the property or services in your rental income.

If the services are provided at an agreed upon or specified price, that price is the fair market value unless there is evidence to the contrary.

Example:

Your tenant is a painter. He offers to paint your rental property instead of paying 2 months’ rent. You accept his offer. Include in your rental income the amount the tenant would have paid for 2 months’ rent. You can include that same amount as a rental expense for painting your property.

Personal Use of Vacation Home or Dwelling Unit

If you have any personal use of a vacation home or other dwelling unit that you rent out, you must divide your expenses between rental use and personal use. See Figuring Days of Personal Use and How To Divide Expenses in Publication 527. If your expenses for rental use are more than your rental income, you may not be able to deduct all of the rental expenses. See How To Figure Rental Income and Deductions in Publication 527.

2012 Tax Deductions for Landlords

As 2012 is wrapping up, so is the tax year. It’s a good time to focus on the tax deductions for landlords you can claim as a rental property owner.

Below are seven key 2012 tax deductions for landlords rental property owners can look forward to:

1) Mortgage Expenses

Rental property owners can write off the interest paid on their mortgage. The mortgage company will send you a Form 1098 that tells how much interest you paid the previous year.

Unfortunately, one-time expenses at closing — such as commission and appraisal — aren’t fully deductible in the year that you pay them. Instead, you can amortize them over the life of the loan, still leaving you with a hefty deduction.

2) Repairs

When something breaks, you have to fix it and the landlord foots the bill. The good news is that repair and maintenance costs are tax deductible.

The distinction is a repair that keeps your property in good working order. If something breaks or could potentially break and you spend the money to replace or update it, the cost is considered tax deductible.

3) Travel Expenses

Keep tabs on any time you travel to the property to make improvements or collect rent. On your taxes, you can either take a standard mileage rate (55 cents per mile in 2012), or deduct actual expenses including gas, upkeep and repairs.

4) Taxes and Preparation Fees

If you have someone else prepare your taxes, like attorneys or accountants, those expenses can also be written off.

5) Insurance and Losses

The cost of insuring the property can be written off along with any losses from casualties, like burglaries or natural disasters such as tornados, hurricanes or floods.

6) Lawn Care or Association Fees

If have a lawn service cut the grass or maintain the landscaping of your rental property, those expenses can be written off as well. Association fees that condo associations often use to cover lawn care, exterior maintenance and the upkeep and maintenance of other common areas are also deductible.

7) Depreciation

The IRS allows rental property owners to deduct depreciation of the value of a rental property. The assumption is that since property is useful for a long time, over that time, it wears out and is worth less money. You should not be taxed on the same value as when the property was purchased.

You calculate depreciation by adding up the total costs of the property and dividing it by the useful life of the property Anchor. For residential rental real estate, the useful life expectancy is 27.5 years. You would take the total value and divide it by the useful life to discover the depreciation.

For example, if you purchased a rental property for $120,000, you would divide that number by 27.5 for a depreciation of $4,545 per year.

Remember

As with all tax-related details, it is vital to keep excellent records to back up all your  tax deductions. If you are audited, you will get penalized and pay more because you don’t have the proper documentation. For further peace of mind, consult a tax professional to help you get the most tax deductions you deserve and organize your documentation.

 

The Protecting Tenants at Foreclosure Act

 Background 

The Protecting Tenants at Foreclosure Act of 2009 became effective on May 20, 2009. This new law protects tenants from immediate eviction by persons or entities that become owners of residential property through the foreclosure process and extends additional protections for tenants with U.S. Department of Housing and Urban Development Section 8 vouchers.2  The law is self-executing; no federal agency has authority to issue regulations implementing the law or to interpret the law. The law was originally set to expire on December 31, 2012 but The Dodd–Frank Wall Street Reform and Consumer Protection Act revised the Tenants Protection Act by adding a definition for the date of a notice of foreclosure and by extending its expiration date to December 31, 2014.

The fundamental purpose of the Protecting Tenants at Foreclosure Act is to ensure that tenants facing eviction from a foreclosed property have adequate time to find alternative housing. To that end, the law establishes a minimum time period that a tenant can remain in a foreclosed property before eviction. The law does not affect any state or local law that provides longer time periods or other additional protections for tenants.

 

Definitions

Bona Fide Lease or Tenancy 

A lease or tenancy is bona fide if the tenant is not the mortgagor or the parent, spouse, or child of the mortgagor; the lease or tenancy is the result of an arms-length transaction; and the lease or tenancy requires rent that is not substantially lower than fair market rent or is reduced or subsidized due to a federal, state, or local subsidy.

 

Requirements

Under the law, the immediate successor in interest at foreclosure must (a) provide bona fide tenants with 90 days notice prior to eviction and (b) allow bona fide tenants with leases to occupy property until the end of the lease term, except the lease can be terminated on 90 days notice if the unit is sold to a purchaser who will occupy the property.

1. Title VII of the Helping Families Save Their Homes Act of 2009. Public Law 111-22, effective May 20, 2009 (www.gpo.gov/fdsys/pkg/PLAW-111publ22/pdf/PLAW-111publ22.pdf). 2. www.gpo.gov/fdsys/pkg/FR-2009-06-24/pdf/E9-14909.pdf

and www.hud .gov/offices/pih/programs/hcv/about/fact_sheet.cfm#6

 

What is a Conditional Acceptance Letter?

A Conditional Acceptance Letter is a letter that specifies additional requirements such as additional deposit monies or that the tenant applicant has to meet to be accepted as a tenant.  The Fair Credit Reporting Act requires that a form of this conditional acceptance letter must be provided to any rental applicant you choose to accept with conditions if that decision is based solely or partly on information in a consumer report. Use our free conditional acceptance letter now.

The notice must include:

  • The name, address and telephone number of the Credit Reporting Agency (CRA) that supplied the consumer report, including a toll-free telephone number for CRAs that maintain files nationwide;
  • A statement that the CRA that supplied the report did not make the decision to offer a conditional acceptance and cannot give the specific reasons for it; and
  • A notice of the individual’s right to dispute the accuracy or completeness of any information the CRA furnished, and the consumer’s right to a free report from the CRA upon request within 60 days.
  • Disclosure of this information is important because some consumer reports contain errors.

The Conditional Acceptance Letter is required even if information in the consumer credit report was not the main reason for the increase in security deposit or rent or other adverse action. In fact, even if the information in the report plays only a small part in the overall decision, the applicant still must be notified.

 

What is a Denial Letter With Reasons?

A Denial Letter with Reasons is also known as an Adverse Action Letter with Reasons.  It’s very similar to the Denial Letter but it provides specific reasons for denial based on information in the applicant’s a consumer report. A form of this denial  letter must be provided to any rental applicant you choose to deny residency to if that decision is based solely or partly on information in a consumer report. While oral adverse action notices are allowed, written notices provide proof of FCRA compliance. Use our free denial letter with reasons now.

The notice must include:

  • The name, address and telephone number of the Credit Reporting Agency (CRA) that supplied the consumer report, including a toll-free telephone number for CRAs that maintain files nationwide;
  • A statement that the CRA that supplied the report did not make the decision to take the adverse action and cannot give the specific reasons for it; and
  • A notice of the individual’s right to dispute the accuracy or completeness of any information the CRA furnished, and the consumer’s right to a free report from the CRA upon request within 60 days.
  • Disclosure of this information is important because some consumer reports contain errors.

The Denial Letter with Reason is required even if information in the consumer credit report was not the main reason for the denial, the increase in security deposit or rent or other adverse action. In fact, even if the information in the report plays only a small part in the overall decision, the applicant still must be notified.

 

What is a Denial Letter?

A Denial Letter is also known as an Adverse Action Letter.  The Fair Credit Reporting Act requires that a form of this denial letter or adverse action letter must be provided to any rental applicant you choose to deny residency to if that decision is based solely or partly on information in a consumer report. While oral adverse action notices are allowed, written notices provide proof of FCRA compliance. Use our free denial letter now.

The notice must include:

The name, address and telephone number of the Credit Reporting Agency (CRA) that supplied the consumer report, including a toll-free telephone number for CRAs that maintain files nationwide;

A statement that the CRA that supplied the report did not make the decision to take the adverse action and cannot give the specific reasons for it; and

A notice of the individual’s right to dispute the accuracy or completeness of any information the CRA furnished, and the consumer’s right to a free report from the CRA upon request within 60 days.

Disclosure of this information is important because some consumer reports contain errors.

The Denial Letter or Adverse Action Notice is required even if information in the consumer credit report was not the main reason for the denial, the increase in security deposit or rent or other adverse action. In fact, even if the information in the report plays only a small part in the overall decision, the applicant still must be notified.

When Your Tenant Won’t Pay

There comes a point when apartment owners find that despite their best
efforts at resident screening, they will have to grapple with evictions and
collections in response to non-payment of rent.

The weak labor market is currently contributing to greater numbers of people
encountering difficulty with paying their rent compared to just eight years
ago—so owners beware.

Where evictions for nonpayment of rent is concerned, property owners should
first make sure they are thoroughly familiar with the local landlord-tenant
laws and regulations. Every jurisdiction has its own rules governing, for
example, the minimum number of days the rent is delinquent before late notices
can be sent out.

The company’s procedures should be to file the papers for a court date in
connection with an eviction as soon as that is permitted by law—whether or not
a payment plan is being worked out with the resident concurrently.

It is important to take action at the earliest possible opportunity because
each step in the eviction process can take time, and it can be at least
one-and-a-half to two months before the resident is evicted. If the resident
appeals, that will cause further delays. And if the property owner wins the
case, it will take at least another 15 to 30 days before the resident is made
to vacate the unit by the marshall.

Follow eviction rules closely

Property owners need to be consistent and regimented in complying with their
companies’ own rent payment rules and procedures, aspects of which may also be
contained in the lease agreements signed by residents. For example, after the
grace period, the notices need to be sent out.

There are absolutely times when residents have genuine and temporary
problems paying the rent. In such cases, the company can deviate from the rule
books and work with them to help them make the payments.

Property owners need to refrain from clearing out residents’ belongings too
early—a common pitfall when a resident skips the rent and moves out. If there
is no court order in place to evict them, the residents may want to be
reimbursed for the items. Landlords can clear the apartment and hold the
belongings in a separate location, but the danger is that things can be stolen.

The other aspect of evictions is collections. The accounts receivable of
residents who leave an apartment, but still owe back rent, may be sent to debt
collectors. The fact is, most property owners may be reluctant to go after
their residents for backrent. A study released by TransUnion late last year
finds that about half of property managers (46 percent) have had renters skip
out on their rents, with 19 percent having had that experience in the past
year. According to the study, which received 476 responses, only 46 percent of
property managers pursue residents who skip out of their apartments and leave
with unpaid rent or damages.

Steve Roe, vice president in TransUnion’s rental screening division, says it
is a mistake for property managers not to try to claim that bad debt. There are
two philosophies with regard to whether the account is turned over to the
collections agency. The first says that “if we have the wherewithal, let us get
a shot at going after someone in the first 30 days. We are not splitting the
recoveries with a collections agency.” The second school of thought says that
“the account should be turned over to a collections agency immediately. There
will be less time spent and aggravation on the part of your staff.”

Property owners can expect recoveries, on average, of 15 percent to 18
percent if the agency is doing its job correctly. The proportion of recoveries,
of course, also depends on the profile of the portfolio. For example, in the
case of affordable portfolios, recovery percentages may be less.

Collection agencies typically do not report to credit bureaus in the first
30 to 60 days of receiving the delinquent account. Individuals are more
inclined to pay if their accounts have not yet been reported to the credit
bureau, as they find it important to maintain their credit files.

Successful recoveries depend on four factors: the applicant screening
criteria of the property management company; the use of nationally licensed
collections agents; how effective the agency is in skip tracing, that is, in
locating the individual who skips out on the rent; and the initial conscientiousness
of the property management company in gathering vital information—such as
social security numbers, emergency contacts and places of employment—from the
resident.

When it comes to choosing a collections agency, it is important that the
company has a national reach. A little over half the states in the country
require collection agencies to be licensed or bonded in the state in which they
operate. So if the agency is not licensed in that state, it would not be able
to contact individuals who have moved there. Larger collection agencies may
also have the resources to pay for, and sophistication to obtain, national data.

Indeed, the reputation of the collections agency is a prime consideration
for the apartment firm. The apartment company should make sure the financial
security of the agency is sound—as there are cases in which collection agencies
collect on bad debt but do not remit the collections to the property owner.
Checking references for collection agencies is also critical.

Apartment companies may also want to make sure the collections agency does
not mistreat its customers. A professional and courteous manner on the part of
the staff yields better responses and results. Also, the apartment company
would “not want to see its names or our names in the papers. You must protect
the image of the agency and the client.

Obtain the information needed by the agency to do its job. And even more
important, get the accounts to the agency as soon as possible instead of
sitting on it.

Government seeks to sell foreclosures as rentals

The Obama administration said on Wednesday that it was soliciting ideas on how to turn the federal government’s inventory of foreclosed houses into rental properties that could be managed by private enterprises or sold in bulk.

The goal, the administration said, is to stabilize neighborhoods where large supplies of empty, foreclosed properties have hurt property values. In addition, the plan is an effort to clear the nation’s balance sheet of real estate holdings that, because they have been difficult to sell individually, have hung over the housing market and stunted sales of existing homes and new construction.

The Federal Housing Finance Agency, the Department of Housing and Urban Development and the Treasury Department are jointly requesting ideas for sales, partnership ventures or other strategies that would help to unload approximately 250,000 properties owned by Fannie Mae, Freddie Mac and the Federal Housing Administration. Those properties account for about half of all properties that have been foreclosed upon and are still awaiting resale nationwide.

As it considers the proposals, the government-sponsored enterprises that now own the houses will continue to offer individual properties for sale, Edward J. DeMarco, acting director of housing finance agency, said Wednesday. But the government says it believes that given the slow pace of those sales, it must find new ways in which properties can be pooled, sold and privately managed as rentals.

Greater flexibility in disposing of the houses will have other benefits as well, Timothy F. Geithner, the Treasury secretary, said. “Exploring new options for selling these foreclosed properties will help expand access to affordable rental housing, promote private investment in local housing markets and support neighborhood and home price stability,” he said in a statement announcing the new program.

While home prices have remain depressed since the 2008 financial crisis, rental prices have not come down. The Joint Center for Housing Studies at Harvard University reported in the spring that more than 10 million households — or one-quarter of all renters — pay more than half their income for housing, a record level.

“We have to find and promote new ways to alleviate the strain on the affordable rental market,” Shaun Donovan, secretary of the Department of Housing and Urban Development, said.

John Taylor, president of the National Community Reinvestment Coalition, said in an interview that an added benefit of such a program would be the creation of construction jobs for rehabilitation of the properties.

The Obama administration and Congress have been working on plans to wind down Fannie Mae and Freddie Mac, which the government took over in 2008 as losses on loans guaranteed by the agencies expanded.

Of the 248,000 homes owned by Fannie Mae, Freddie Mac and the F.H.A. at the end of June, 70,000 were listed for sale, said Corinne Russell, a housing finance agency spokeswoman. The remainder were not yet on the market or the agencies had already received an offer from a prospective buyer.

But it is possible that hundreds of thousands of more homes that are now in the foreclosure process could come into the possession of the federal government in the next few years, housing experts say.

“This is a call for innovation and an opportunity for businesses to not only make money and create jobs, but also provide affordable rental housing for those who need it and strengthen our communities at the same time,” said Senator Jack Reed, Democrat of Rhode Island, who has pushed for such a program.

Contact Us
StarPoint Tenant Screening
520 East Zaragoza
Pensacola, FL 32502

Ph: 850-262-0002
Toll Free: 877-330-2444
Fax: 877-349-2175

info@starpointscreening.com