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Oh god, so much going on right now. I'm in the process of purchasing my second rental unit. Similar to the first, it's a newly remodeled 2-bed 1 bath. I don't know why but the purchase process seems to be going so bad compared to the last one. Every time I turn around some other road block pops up. On top of that, we had a major wind storm rip through our area.. It knocked over part of the POS fence that was in place. I need to replace the fence but there's also a tree that the previous owner built the POS fence around. So $600 to get the tree removed and who knows how much for the new fence. All the tree and fence company's are swamped due to the storm so I'm at least a month out before any work can start. The tenants are still kick rear end though so that makes it better.
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May 6, 2016 19:30
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vulturesrow posted:Follow on question: Does anyone have experience with section 1031 exchanges? I dint know much about them but seems it might be an avenue to not have to pay the depreciation recapture. It is a good route but you need to have both transactions in place because the proceeds need to be held by a third party escrow. I would suspect some title company's can do this for you. You need special language in the purchase agreements though. That was as far as I got before I decided the timing was too hard to pull off for me.
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May 6, 2016 20:09
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Cool, a thread I should probably follow  Last year through inheritance I became 50% owner in a commercial/office property in a fairly upscale Chicago suburb, my partners are my two distant cousins who own 25% apiece. The building has been in our family for 3 generations now, and I'm very lucky in that (1) the building has historically been very profitable (2) I don't see any immediate threats to that and (3) we have a good property manager that we have an excellent long term relationship with. Some things I'm working on: (1) Creating an LLC. Apparently the building has been operating as a partnership for almost 2 decades now, which is terrifying from a liability perspective, a tax management perspective and an operating perspective. I have the draft LLC Operating agreement done and am hoping to finalize the agreement in the next 2-3 weeks. One area we're working on is trying to decide how to manage buyout clauses in/when a partner passes away. We in principle want to keep the ownership in the family and have the option to pass ownership down to our kids. (2) Solving a rental issue with our undesirable spaces: The building is 3 stories with a basement. The 2nd and 3rd floors are small offices that we generally rent out very quickly and at what appears to be a competitive market rate for the area. The first floor is large streetfront commercial units which also tend to rent well. The basement, however, is a problem. The basement is divided in to 8-9 small commercial units in a sort of indoor mini-mall arrangement. Historically we've rented these to older clients (the suburb is pretty old demographically) who run semi-retirement businesses...antiques, knick-knacks, small salons, etc. However in recent years we've had problems renting these units and we're at almost +50% vacancy right now. Since there's almost no monthly cost differences between them being rented and empty, I'm pushing in the short term to drastically reduce the rents. Meanwhile I'm trying to come up with a real plan to turn that area in to something more competitive... (3) Building a P&L projection for the next 3 years based on history Some things I'd like to do: (1) Establish connections with the local government: my parents were pretty uninterested in dealing at all with the goyim running the Village, and I feel like we've put ourselves in the hole with that attitude. The demographics and vision of the downtown is changing, and it's hard for me to see what it will be and how we can best fit in to that. Also I have no idea who to bounce remodeling and enhancement plans off of when we consider capital investments. (2) Develop a Tenant Survey: In general I think our tenants are happy with the building. We have low turnover and outside of the basement spaces we fill vacancies very quickly using virtually not real advertising...we seriously still hang a 'space for rent' sign out there and get walk-ins. However, I'd like to start collecting feedback from the tenants to make sure there aren't developing issues, and also to see where we might find the most value in future improvements. (3) Look for ways to cut expenses: I feel like 'cut expenses' is one of the most easier-said-than-done things to look at, and I think it'll be extra hard given that I want this building to remain a place that provides a great tenant experience. But I'd like to challenge the property manager to find ways we could cut our monthly expenses by $300. Anyways, I'm by no means a smart man nor an expert on property management. I'm mostly a middle class dummy with an MBA who has a smart property manager I can lean on for feedback. I'd love to hear thoughts or suggestions on things I should be considering.
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May 7, 2016 07:41
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Condolences for your loss. Based on what you've written, I've put together a list of my thoughts. Basement space is tough in commercial, sometimes it has office value like you seen to he getting for it, otherwise you can only get storage rental rates on it, but you manager probably knows the market better than I do. If your property manager's firm has a brokerage operation, they may be someone to reach out to regarding the leasing, although they may want to represent your whole building and collect a fee on new leases and renewals. Usually they are worth it and you may be able to get some discount if they are working with you on more than one service line. Unless the buyout clause is set at a dollar amount and updated fairly regularly, you may have to expect some issues to crop up with that no matter what. What I see in some buyout agreements is to specify having two appraisals done, using the average of those or then getting another one if there is a disconnect over 10%. When it comes down to it though, this is a negotiation question and the valuation of the real estate may or may not reflect the buyout value. With an appraisal though, you'll probably need one anyways for estate tax purposes in the case of a death. Capital calls maybe something you want to talk about in your agreement, for if the roof need replacement for something that isn't covered by insurance or you have a big tenant improvement project for a long term lease, how do you fund that, and how do you dilute ownership in the event that someone doesn't contribute? Alternatively, this can be addressed ad hoc, but should be on the radar as something that can come up. With regards to expenses, are your leases gross or net? If you have net leases, you won't see a significant change in your ownership income until the end of the leases in place, where you can show your tenants that their common area expenses are down so their total rent and CAM charges are down even though the face rent is up. This is also relevant with regards to your comps, where if you have a more efficient building and can show that to prospective tenants, you can charge higher face rents but offer space for less given the lower expenses that need to be passed through. As far as government, there may be a neighborhood group that does a level of government, also your neighborhood local government representative would be a decent person to get to know. All these people are probably good to have on your side if you want to do something like a billboard or cell tower on top of your property that may be in a gray area with regards to the zoning or requires neighborhood input.
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May 7, 2016 16:31
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crazypeltast52 posted:Condolences for your loss. Based on what you've written, I've put together a list of my thoughts. Our management firm is small and doesn't have any sort of operation like that-they're a small operation that has a lot of experience with our building, but otherwise runs a few residential properties around town. The basement units are weird. One of my first suggestions was 'ok why can't we make these more offices?' but the property manager tells me that most renters just don't like the space for that- they want natural light. Commercial renters mostly complain about a lack of signage that can offset their lack of a street-level storefront to drive foot-traffic. That's a focus of my future improvements: I'd like to find something that provides them with an easy way to direct customers through the area. My more immediate plan is just pushing the rental rate down to 66%-50% of our street-level competitors. Since the area basically costs nothing for us to maintain I'd rather get something in there than nothing. In the long run, I think I'd like to convert the space from 8-9 small shops into a single unit and find some sort of franchise to rent it to. There isn't a Walgreens or CVS in the downtown right now, and I think there might be enough space combined that they could fit one there. There's also possibly enough space for a medium sized gym, another thing the downtown area isn't exactly loaded with...and our building's proximity to the regional train line downtown makes it a convenient place for commuters to come to before or after work. This is where some sort of agency or brokerage might useful...I have no idea how to search for possible larger renters like that. quote:Unless the buyout clause is set at a dollar amount and updated fairly regularly, you may have to expect some issues to crop up with that no matter what. What I see in some buyout agreements is to specify having two appraisals done, using the average of those or then getting another one if there is a disconnect over 10%. When it comes down to it though, this is a negotiation question and the valuation of the real estate may or may not reflect the buyout value. With an appraisal though, you'll probably need one anyways for estate tax purposes in the case of a death. The operating agreement does have some rules in place about capital calls, especially in terms of how to maintain the ownership percentage mixes in the process. My lawyer had pushed for a 'buy-sell' agreement where if we at some point couldn't meet an agreement about how to move forward with the building we'd have a non-litigious means to change the ownership, but the other partners didn't really like it. The buyout on death stuff is a weird pain-point for the partnership. As I said the building's been owned by the family for ~3 generations and I think even though my cousins have never lived in the same state as it, they'd like to continue that. On the other hand, when their father, my father and our Aunt were the ownership they went through a huge crisis (financial, legal and family drama) when my father passed away in the 90s. Basically they had all agreed that on death the surviving owners would buy out the deceased's share...but they hadn't made any provisions on how they'd pay for it. My own lawyer finds it obnoxious He thinks we're all too obsessed with keeping a stake in this property.quote:With regards to expenses, are your leases gross or net? If you have net leases, you won't see a significant change in your ownership income until the end of the leases in place, where you can show your tenants that their common area expenses are down so their total rent and CAM charges are down even though the face rent is up. This is also relevant with regards to your comps, where if you have a more efficient building and can show that to prospective tenants, you can charge higher face rents but offer space for less given the lower expenses that need to be passed through. I believe the majority of our leases are gross. The 2/3rd floor units and basement units are gross plus an expectation that they carry renters insurance. The ground floor units are net because we have them cover/chip-in their property taxes for...some reason. quote:As far as government, there may be a neighborhood group that does a level of government, also your neighborhood local government representative would be a decent person to get to know. All these people are probably good to have on your side if you want to do something like a billboard or cell tower on top of your property that may be in a gray area with regards to the zoning or requires neighborhood input. Back in the early 2000s we had an offer from some Cellular carrier to put a tower on our roof. My Aunt and Uncle who were the ownership at the time decided to pass. I think I still have the proposal somewhere in old paper files. I kinda want to dig in to that and see how much money we lost out on. Right now I'd like to make connections to investigate some sidewalk signage for the basement shops, and also keep an ear out for any building code issues we need to fight to get grandfathered in to- the building's now +100 years old and is mostly concrete. Trying to meet sprinkler codes would be a nightmare.
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May 7, 2016 18:19
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My first instinct would be to point you at the local CBRE/Colliers/DTZ-Cushman-Cassidy Turley/JLL and see if they can landlord rep you if you want to go for a national tenant like CVS/Walgreens. Those tenants might not like basement, but those firms will have people who can market your space to a wider range of clients, although there may be a local brokerage operation that could be useful in your submarket. I like the gym, and that may be something you could do by just calling whoever has the local franchise for one of the 24 hour ones and work out a deal for your other tenants to get a discount there as a building amenity. I'm in Minneapolis and we've seen people put speak-easy like establishments into basement spaces, but I have no idea if they make economic returns or are more vanity projects. Also the build outs on them looked very expensive so cutting rents on the basement space may be the way to go if a local broker doesn't think they can get that leased in a reasonable time, and paying mortgages on vacant spaces is no one's idea of fun. It sounds like you want to be a little more involved in the property, do your partners want to be more active with it or do they just want the rent checks to keep flowing without making operational changes? Net/Gross is nice to move incentives around and get your tenants to turn off the lights, but generally isn't hugely different except with property taxes, where reassessments can hurt if you have been historically low and then the assessor increases the value or the taxing jurisdiction starts spending more. As far as towers/boards go, there can be value in that, but they also have really long leases which could complicate things if you think land value might be higher than the improved value late in the lease. It sounds like you are keeping the place up well though, so that seems unlikely. Sidewalk signage is generally going to be somewhere in the zoning code, but actual enforcement may involve a set of conditional use permits. A sprinkler system would be expensive, new they are usually 2-3 bucks a foot if I'm thinking size right but I haven't seen costs on retrofitting, but could be bundled with a larger renovation if you decide to seperately meter spaces for utilities to put in net leases at some point in the future or do a big tenant improvement project.
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May 7, 2016 19:10
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crazypeltast52 posted:My first instinct would be to point you at the local CBRE/Colliers/DTZ-Cushman-Cassidy Turley/JLL and see if they can landlord rep you if you want to go for a national tenant like CVS/Walgreens. Those tenants might not like basement, but those firms will have people who can market your space to a wider range of clients, although there may be a local brokerage operation that could be useful in your submarket. I like the gym, and that may be something you could do by just calling whoever has the local franchise for one of the 24 hour ones and work out a deal for your other tenants to get a discount there as a building amenity. I didn't know CBRA/Colliers/etc did brokerage work like that. That might be a path worth investigating I think my strategy is to think short-term and long-term, with the risk that the short-term will delay any long-term plans. Short-term: if I can fill the existing units at a below-market rate, it still adds to our net revenue. Long term, if I can find a tenant that values the amount of space (~5000 sqft) and a pretty good location for the area, then I think I can get that rate up to a higher level. I guess the risk is getting a bunch of below-rate tenants in, and then suddenly the market taking off for...some reason. I think it's pretty low likelihood. quote:It sounds like you want to be a little more involved in the property, do your partners want to be more active with it or do they just want the rent checks to keep flowing without making operational changes? I think they're open to new ideas and are responsive, but they don't really want to be more involved...and to an extent they're already more involved than me in that they've been owners for almost a decade now and have a better grasp of the ebb-and-flow of leases, maintenance and other regular occurrences. And my increased involvement is still only limited to actually being at the property 1-2 times a month max, since I work a normal job too I think we're coming out of a bit of a dark-ages in ownership. My aunt, who I inherited my share from, didn't maintain the best relationship with my cousins (the other owners) because of all the issues about buyouts and deciding future ownership. So far we've gotten off on a much better foot I think. Neither my aunt nor my cousins are business-professional thinkers, and my aunt was very much not a computers person. Things like 'we can keep a p/l statement in excel to do modeling on' or 'we should advertise our space on the world. wide. web." are still kinda new thinking to everyone. I think if the property starts showing signs that it's just not making money they'll want out, but I also think they're mostly happy with the current income and don't mind some new thinking to moderately increase profits as we've been pretty flat on distributions for the past 5-6 years apparently. quote:Net/Gross is nice to move incentives around and get your tenants to turn off the lights, but generally isn't hugely different except with property taxes, where reassessments can hurt if you have been historically low and then the assessor increases the value or the taxing jurisdiction starts spending more. Property taxes is a big concern. Our taxes had spiked almost 25% (~6% of assessed value to 8%) over the past 5 years, and it's probably been the most significant expense driver. Early on someone suggested a bad assessment could be the problem, but I think we're actually good on that. Part of why I want to get more connected to the local government is to understand where that raise came from, and how others have been dealing with it. quote:Sidewalk signage is generally going to be somewhere in the zoning code, but actual enforcement may involve a set of conditional use permits. A sprinkler system would be expensive, new they are usually 2-3 bucks a foot if I'm thinking size right but I haven't seen costs on retrofitting, but could be bundled with a larger renovation if you decide to seperately meter spaces for utilities to put in net leases at some point in the future or do a big tenant improvement project. I think we conservatively estimated an improvement project to meet some new fire code aspects at $50-$75k...and even then I don't think that got us all the way.
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May 8, 2016 03:39
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As a thread full of landlords/potential landlords, I figure this is as good place as any to ask, is my landlord being a ridiculous dick or is it just me? Situation: On the first I paid my rent like I always do (on the 7th month of my lease), the funds got withdrawn from me and my wife's joint "Bill Paying" checking account, I thought all was well. The only way our rental agency allows rent payment without ridiculous fees ($28 for using a debit card) is in person or E-Checking, since theyre notorious for not being at their office, we always use E-Checking. Fast forward to friday, the property company goes to "cash" the E-check, and due to a bank error, it bounces (bank placed an erroneous fee, causing the account to go into the negative, so despite the money for the E-check already being withdrawn, it bounced). Without as much as knocking on our door, or calling either of our phones, we learned of this by the maintenance guy serving us intention to evict paperwork, stating we have 3 days to pay our full rent + $50 NSF fee + $100 late fee + $10 per day late fees. They had him serve the paperwork after their office was closed for the day. The maintenance guy is also my neighbor, so after I look over the paperwork, call the bank to find out wtf happened (the bank admitted fault and revered their $20 NSF fee), I knock on his door and tell him what happened and tell him I have my rent money and want to pay it, but that it's unreasonable to charge all of those fees without at least talking to me first. He calls the property manager, who then tells him to tell me to come into the leasing office tomorrow during business hours. I go into the leasing office today shortly after they open, and the only employee there is a temp worker who can't do anything and doesn't know anything, she informs me that the manager won't be in at all today and that I could turn in a Cashiers Check for my rent (notice for eviction proceedings stated payment of Rent + Fees must be certified funds). I go to the bank and get a cashiers check for my rent amount minus fees and turn it in, expressing to the temp that I was paying my rent, but wanted to talk to the manager before I paid the other fees. She tells me that the lease office is closed tomorrow and I'll have to come in monday morning. The manager called my wife's phone when we were out with the dog, and left a voicemail saying she couldn't accept the check because they don't take partial payments, and that I needed to pay the additional fees or they would continue accruing and the eviction proceedings would begin, but that their office was closed for the day when she was leaving the voicemail so I'd have to pay online. I like to think that me and my wife are great tenants, we are quiet, keep to ourselves, and before this incident had never had any issues paying our rent/bills, it seems a bit out there that the landlord would be dodging us and immediately trying to evict us over something like this. We suspect that it might be related to them raising the rent for new tenants by $100, which if the case, is pretty stupid since we only have 4 months left on our lease.
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May 8, 2016 10:01
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Ace of Baes posted:As a thread full of landlords/potential landlords, I figure this is as good place as any to ask, is my landlord being a ridiculous dick or is it just me? Assuming your situation is what you say it is, that does seem needlessly onerous on a tenant. I wish I had some sort of recourse to suggest, but sadly I think you may be stuck waiting out the lease.
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May 8, 2016 17:52
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Sounds like you've got things pretty well in hand Slime Bro. Hope things work out with the operating agreements.
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May 8, 2016 18:04
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Slime Bro Helpdesk posted:Assuming your situation is what you say it is, that does seem needlessly onerous on a tenant. I wish I had some sort of recourse to suggest, but sadly I think you may be stuck waiting out the lease. I paid the full amount plus fees today online, Im going to go in monday and speak with the manager and then most likely talk to their main corporate office and explain the poor customer service of the manager and request the fees be applied as rent credit towards my next months rent.
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May 8, 2016 19:25
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Ace of Baes posted:I paid the full amount plus fees today online, Im going to go in monday and speak with the manager and then most likely talk to their main corporate office and explain the poor customer service of the manager and request the fees be applied as rent credit towards my next months rent. You could also try getting your bank to cover the fees. Not sure they will but its worth a shot.
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May 8, 2016 21:11
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Ace of Baes posted:As a thread full of landlords/potential landlords, I figure this is as good place as any to ask, is my landlord being a ridiculous dick or is it just me? What state are you in? Some states don't allow $150 + $10 a day in late fees, Some states have a grace period, in some a 3 day pay or quit notice is not proper. In some states the landlord has to start the eviction process right away to make up for delays from the courts. Are all of those fees outlined in the lease? Is it the landlords fault or the banks fault for the transaction not going through?
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May 9, 2016 00:03
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Ace of Baes posted:I paid the full amount plus fees today online, Im going to go in monday and speak with the manager and then most likely talk to their main corporate office and explain the poor customer service of the manager and request the fees be applied as rent credit towards my next months rent. You probably won't have any luck because 1) corporate landlords have many levels of "sorry it's policy nothing I can do" employees 2) corporate landlords run the risk of being accused of discrimination or wasting time in eviction proceedings if they selectively apply fees, policies, and eviction procedures and 3) they have little to lose by demanding the fees from you with the leverage of eviction hanging over your head. A pay or quit is where you really find out how broke your tenant is or not, and if they got some reason ended up actually proceeding with the eviction each day they wait is another day of lost rent before the tenant vacates or a writ of possession is executed. BEHOLD: MY CAPE fucked around with this message at 01:14 on May 9, 2016 |
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May 9, 2016 01:09
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lampey posted:What state are you in? Some states don't allow $150 + $10 a day in late fees, Some states have a grace period, in some a 3 day pay or quit notice is not proper. In some states the landlord has to start the eviction process right away to make up for delays from the courts. Are all of those fees outlined in the lease? Is it the landlords fault or the banks fault for the transaction not going through? CO, the 3 day pay or quit is legal, they have no statute on fees, so I guess I could try to take them to small claims for that, its the banks fault though, not theirss, the fees just seem ridiculous, I pay $850 a month for rent and they charged a cumulative $180 in fees for it being a couple days late, $160 of those fees being applied to my account before I was even told the payment I sent didnt go through.
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May 9, 2016 02:12
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BEHOLD: MY CAPE posted:You probably won't have any luck because 1) corporate landlords have many levels of "sorry it's policy nothing I can do" employees 2) corporate landlords run the risk of being accused of discrimination or wasting time in eviction proceedings if they selectively apply fees, policies, and eviction procedures and 3) they have little to lose by demanding the fees from you with the leverage of eviction hanging over your head. A pay or quit is where you really find out how broke your tenant is or not, and if they got some reason ended up actually proceeding with the eviction each day they wait is another day of lost rent before the tenant vacates or a writ of possession is executed. Like I said, Im going to call their main corporate office and keep going up the ladder, I paid all of the rent and fees today so they have no legal standing to evict me, and if at the end of the goose chase they refuse to credit me back any of the fees I paid, I guess ill just leave bad reviews on all their social media and gtfo when my lease is up in a few months.
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May 9, 2016 02:34
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Ace of Baes posted:CO, the 3 day pay or quit is legal, they have no statute on fees, so I guess I could try to take them to small claims for that, its the banks fault though, not theirss, the fees just seem ridiculous, I pay $850 a month for rent and they charged a cumulative $180 in fees for it being a couple days late, $160 of those fees being applied to my account before I was even told the payment I sent didnt go through. Ace of Baes posted:Like I said, Im going to call their main corporate office and keep going up the ladder, I paid all of the rent and fees today so they have no legal standing to evict me, and if at the end of the goose chase they refuse to credit me back any of the fees I paid, I guess ill just leave bad reviews on all their social media and gtfo when my lease is up in a few months. So the fee schedule in your lease for a missed first payment is being followed by the landlord? It kind of sucks that the terms of your lease are so onerous, but when you're dealing with a corporate landlord you will find yourself with a lot less slack. Sometimes you can get a late fee waived after 6 or 12 months of on-time payment, but for your first month's check bouncing it's probably understandable that they follow the terms of the contract strictly. Especially if you're only on a short term (you mentioned months?) lease. This is a problem between you and the bank, as you pointed out.
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May 9, 2016 04:49
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Ace of Baes posted:Like I said, Im going to call their main corporate office and keep going up the ladder, I paid all of the rent and fees today so they have no legal standing to evict me, and if at the end of the goose chase they refuse to credit me back any of the fees I paid, I guess ill just leave bad reviews on all their social media and gtfo when my lease is up in a few months. Take the notices ans reciept to your bank and ask the banker to process a refund for the amount of the fees. If it truly was a bank error they need to make it right.
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May 9, 2016 05:33
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Devor posted:So the fee schedule in your lease for a missed first payment is being followed by the landlord? It kind of sucks that the terms of your lease are so onerous, but when you're dealing with a corporate landlord you will find yourself with a lot less slack. Sometimes you can get a late fee waived after 6 or 12 months of on-time payment, but for your first month's check bouncing it's probably understandable that they follow the terms of the contract strictly. Especially if you're only on a short term (you mentioned months?) lease. Im on month 7 of a 12 month lease with every previous payment being on time, Im in the military and have discharge orders though so I may use those to break my lease early
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May 9, 2016 06:36
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My property management company just found a new tenant for my rental. The tenant just sold their home, and are building a new home but haven't broken ground yet. The tenant would like to move in June 1st, and would like to sign a 9 month lease. At which point they would go month to month. They are offering to pay all 9 months of rent up front. My rental is very high end for the market. Everything seems great about this arrangement. Is there anything I'm not catching?
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May 28, 2016 19:10
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I Love Topanga posted:My property management company just found a new tenant for my rental. Sounds like a good deal as long as you don't mind finding a new tenant rather than trying to find a long term tenant. If I were you I'd write the lease contract as a fixed term lease with a single, non-refundable lump sum payment due at signing, and then an option at the end of the fixed term lease to enter into a month-to-month lease. I am a landlord and not a lawyer, but way you word the contract may protect you if the tenant changes their mind or wants to move out early and wants their money back.
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May 29, 2016 02:09
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BEHOLD: MY CAPE posted:Sounds like a good deal as long as you don't mind finding a new tenant rather than trying to find a long term tenant. If I were you I'd write the lease contract as a fixed term lease with a single, non-refundable lump sum payment due at signing, and then an option at the end of the fixed term lease to enter into a month-to-month lease. I am a landlord and not a lawyer, but way you word the contract may protect you if the tenant changes their mind or wants to move out early and wants their money back.
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May 31, 2016 04:49
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We are currently renting a house which has a detached in-law suite (we call it the cottage). When we started renting the house our landlord said that we were welcome to rent the cottage out to someone else if we wanted (most of her previous tenants had done so). My question is about taxes. I believe that we would have to claim the rent we collect as income and then we could deduct the rent we pay for the cottage using some reasonable justification: square footage of the cottage a percentage of the total house + cottage sq footage for example. We'd also then deduct a portion of the utilities and cable, etc. I'm fine with doing this but I'm curious what would happen if the sub-tenant were to pay their rent directly to the landlord instead of to us. We'd then subtract their rent from our monthly payment so that the landlord ended up with the same monthly rent we currently pay. It'd be a lot easier tax-wise on our end but would it be legal? Our landlord already wants to have the sub-lease be through her that way if we were to move out, she would have a legal relationship with the sub-tenant. Apparently in the past, previous tenants had sub-leased the cottage without her knowledge then moved out resulting in a weird arrangement with the sub-tenant. We love our landlord and have a great relationship with her, want to keep it that way. I'm hoping to minimize the hassle on her end but at the same time make sure she's appropriately involved. If I can do that while keeping my taxes as simple as possible, that'd be grand too. Does anyone have any experience with sub-leasing?
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Jun 18, 2016 16:40
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Just let your landlord deal with it and reduce your rent, you really do not want to assume the liabilities of dealing with a tenant if you don't have a profit or ownership interest in the property
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Jun 18, 2016 17:33
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Why not just amend the lease to reduce the rent and exclude the in law suite from the area you're renting, letting the landlord deal with finding a tenant? Seems a lot simpler, and you don't have to bother with the tax issues or dealing with a bad tenant.
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Jun 18, 2016 22:04
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I expect that the liabilities are different and the landlord doesn't want to deal with renting out the properties separately and having to find tenants for both themselves.
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Jun 18, 2016 23:35
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Rurutia posted:I expect that the liabilities are different and the landlord doesn't want to deal with renting out the properties separately and having to find tenants for both themselves. I guess it sort of feels like a roommate situation where one person pays the full rent every month and the roommates cut checks to that person rather than everyone paying their portion to the landlord directly. Technically, would that person who pays the full amount have to claim their roommates rent as income? Or is it not like that because those people are on the primary lease, whereas here they would not be. Maybe I'm making it all more complicated than it needs to be.
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Jun 19, 2016 17:39
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You report all rent received on your schedule E as income. This is the same whether you are subleasing or own the home, except some of the expenses are different. Then you can deduct a proportional share of your expenses, rent, utilities. Proportional could be divided based on how many square feet the cottage is, how many rooms, how many people, or any other way you can reasonably justify it. Really, it is worth hiring a tax professional to make sure you have enough expenses that you do not pay any extra taxes on the rental income and you are safe in case of an audit.
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Jun 19, 2016 22:02
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lampey posted:You report all rent received on your schedule E as income. This is the same whether you are subleasing or own the home, except some of the expenses are different. Then you can deduct a proportional share of your expenses, rent, utilities. Proportional could be divided based on how many square feet the cottage is, how many rooms, how many people, or any other way you can reasonably justify it. Really, it is worth hiring a tax professional to make sure you have enough expenses that you do not pay any extra taxes on the rental income and you are safe in case of an audit. I don't think it's complicated enough to warrant hiring an accountant. Filling out a schedule E is pretty straightforward. You are not going to get audited for reporting some nominal amount of income from a sublet. Taxes are really the least of your concerns when it comes to assuming responsibility for a subletter.
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Jun 19, 2016 22:22
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BEHOLD: MY CAPE posted:Taxes are really the least of your concerns when it comes to assuming responsibility for a subletter.
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Jun 20, 2016 23:36
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Reporting the income on a Schedule E (or not. I wouldn't. Take cash or cash the checks at their bank.) is the least of your problems if you're set on subleasing a separate structure. I wouldn't enter into a lease as lessor of a property you don't own. It's more complicated than just subletting a room to a roommate informally with a verbal lease. I'd offer to act as agent and liaison to advertise and show the place, but make sure the lease is between the landlord and the other renter. Your landlord could compensate you with discounted rent (get it in writing) or payment as agent/property manager, and it would be to their benefit as a deductible expense.
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Jun 21, 2016 04:52
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Not sure what's the best approach here. Me and my girlfriend both equally own 50% of the property we live in. Our current mortgage on the property is £850/month. It's a 2-bed house. She'll be working abroad for 6 to 12 months and I'll remain living in the house. There was the option of renting out the spare room but I'd rather pay rent to her equal to her portion of the mortgage (425/month) and have the house to myself. To keep thing everything as it has been, we still plan to each put 50% of the mortgage in the joint account and I will just transfer the rent payment to her personal account. For legal reasons, we'll be drafting a rental contract (in case we were to break up and gives her comfort that her mortgage payment will be covered). Will a normal rental contract here suffice?
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Jul 13, 2016 12:32
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Sure, but that's awfully generous of you.
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Jul 13, 2016 12:54
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BEHOLD: MY CAPE posted:Sure, but that's awfully generous of you. EDIT: Let's try that again. Personally, I get the benefit of not having to house share with a random (I'm currently 32) and I earn enough to cover the additional cost. We're fortunate to have jumped on the property ladder early (live in London, UK) so our monthly mortgage payments are a lot less than what it'd cost to rent a 2-bed property in our area. Filthee Fingas fucked around with this message at 14:06 on Jul 13, 2016 |
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Jul 13, 2016 13:21
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You're lucky sure but you're still just subsidizing her portion of the mortgage payment, just giving her $425 a month in free money. Just be aware of that, you're the sugar daddy funding her lifestyle for this trip. Those sorts of situations tend to strain some relationships. I sure wish I could have someone that would hop in and cover my portion of the mortgage every time I had to travel. Must be nice.
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Jul 13, 2016 14:18
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Well if she owns half of the house, she could theoretically rent out her half to a random while she's gone right? It'd be a hassle for her so maybe his offer of paying market rate for rent might be generous, but paying some amount in rent doesn't seem too unreasonable to me.
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Jul 13, 2016 14:26
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I don't think owning half the house automatically entitles you to being able to rent it out. What if it was a 1 bedroom? Would that mean that the OP has to share a bed or get bunk beds? I don't see anything wrong with paying the other half of the mortgage, though as others have said that is rather generous. Maybe after paying for 6 months of rent you get 51% of the equity and after 12 months 52%? Or something similar? That way you get something in return for your principle payments in case of breakup.
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Jul 13, 2016 14:36
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Hashtag Banterzone posted:I don't think owning half the house automatically entitles you to being able to rent it out. What if it was a 1 bedroom? Would that mean that the OP has to share a bed or get bunk beds?
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Jul 13, 2016 15:03
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Couple points 1. She's working abroad on a secondment. It'd be another story if she was on a beach somewhere sipping cocktails the entire time while I'm working over here. Unfortunately she'll be getting paid local rate which is significantly less than she gets in London. As a result, she'll have enough to cover her living costs but won't be generating any savings while she's out there. 2. For the amount of money involved (just over 5k for the year), I don't see it being a significant amount to cause any issues in the relationship. 425/month is less than 10% of my take away each month after tax so I'm not struggling. I will however take on-board the idea of increasing principle amount (in the case of if we do breakup and/or she decides to stay out there longer than 12 months).
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Jul 13, 2016 16:00
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poo poo I just found out my landlord died of a heart attack. She must have been a good landlord because I'm legitimately sad about this. I'm guessing this will not be good for my hope of subletting the guesthouse in the next few weeks.
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Jul 15, 2016 00:58
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