Organizing your landlord life – to make is fun and less liability!

Organizing your landlord life – to make is fun and less liability!

Kathryn King, Owner / Broker, KJK Properties, P.C.

Property Managing and Selling Real Estate since 1998

1. Advertising
   1. Follow fair housing guidelines – when in doubt, call.  503-223-8295
   2. Have a call log – a simple way of tracking how you replied to calls
   3. Have a showing log – a simple way of tracking how you showed unit
   4. Tell them you are an involved landlord to keep them happy and to see to it maintenance. requests are addressed fast!  A bad tenant won’t apply.
2. Keep your delivery of documents in order!
   1. Lead Base Paint and lead booklet first
   2. Screening criteria next – first come first served, fair, complete info to screen
   3. Application last
   4. NOW FOR THE FUN!  Take the screening fee!
   5. Only screen applicants one at a time – and return any unscreened applicant fees.
   6. No requirement to accept tenants that don’t pass or hold units without payment
3. Inspections
   1. Do monthly drive by’s! 
   2. Always keep an eye on the yards – use a yard service and bill back
   3. Interior inspections – we do them after move in – see to it all is well.
   4. Take photos at move in and move out!  Don’t forget the EXTERIOR!  Lawns are expensive to weed and maintain!  Charge for killed plants.
   5. Do a follow up after move in – in writing – letting them know to report any discovered defects within a short period (5 – 7 days).
   6. Bi-annual interior inspections – we do them.  Make sure to tell your applicants you are an INVOLVED LANDLORD.
   7. Have your service personnel keep an eye on interiors while there – drug odor?  Pets?  Dirty? Vermin? Extra inhabitants?
4. Maintenance requests
   1. All in writing – no exceptions
   2. Follow up with habitability immediately

i.      Attorneys will comment on access and notice

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   1. Handle other requests within 30 days

i.      Attorneys will comment on access and notice

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   1. Charge tenants accordingly

i.      Always have your service providers note the cause!

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   1. Log how you handled all maintenance requests. 

i.      Keep a maintenance file.

                                                             ii.      It helps establish what you did when for the long term – helps with resale

1. Funds
   1. Don’t misappropriate funds
   2. Keep separate accounts – one for general and one for “deposits.”
2. Move in / Move out appointments
   1. Take a move in form and do a physical walk through with the tenants
   2. Have them make all notations of condition in their own handwriting
   3. Both parties sign
   4. Take many, many photos inside and out
   5. Make no promises at move out
   6. Be as detailed as possible on move in and move out documents
   7. Take your original move in form to the move out
3. Final accounting
   1. Check all utilities for balances
   2. Transfer all utilities
   3. Check for late fees
   4. Check for damages line up work and get billed by vendors ASAP
   5. Check for unpaid prorated rent
   6. Get the check out in 15 days in Washington and 31 in Oregon
4. Records – keep them all for 6 years.
   1. Current tenancies
   2. Past tenancies
   3. Denied tenancies

Portland Parks and Recreation is asking for budget input!

Portland Housing Bureau is asking for budget input!

For more on the Portland Housing Bureau’s FY 2010-11 budget process, please visit portlandonline.com/phb/budget

Will interest rates rise in 2010?

False Illusions and What You Need to Know

Homebuyer Alert…

For prospective homebuyers who are on the fence about making a home purchase, the next few months represent a countdown of sorts for two reasons.

The first of these, the coming expiration of huge tax incentives, may be a bit more obvious to most borrowers. April 30, 2010 is the last day to enter into a home purchase contract and still potentially qualify for a federal income tax credit of up to $8,000 for first-time homebuyers and up to $6,500 for repeat homebuyers. The credit can be claimed only on contracts that close by June 30, 2010.

Secondly, beyond the waning benefit of the Federal income tax incentive, another form of stimulus will soon disappear, as the Federal Reserve winds down a program that has been keeping home loan rates artificially low.

Rate Alert…

The lowest rates of 2009 were driven down to their attractive levels because of the Fed’s Mortgage Backed Securities (MBS) purchase program. Home loan rates have an inverse relationship with the value of MBS. When these securities trade higher on the market, rates move lower and vice-versa. So when the Fed originally agreed to be a big buyer, it helped provide a market for MBS, which helped keep prices high and, as a result, helped push home loan rates low.

And while the Fed continues that program through the end of March 2010, the reality is that the Fed‘s “extension” was really more of a rationing intended to prevent home loan rates from spiking as the program is phased out. It’s sort of like weaning the market off of its life-saving treatment instead of forcing it to go cold turkey.

Already, some in the media have mistakenly reported the extension of the program through March as good news, telling consumers that rates will continue to decline, and remain low into the spring. This gives a false sense of security that homebuyers and refinancers simply cannot afford.

The problem is…

Those reports do not accurately report what’s going on or where rates are really headed. That can have a very costly impact on consumers who may miss out on historically low rates if they listen to these media outlets.

Here’s what’s really going on…

In May 2009, the Federal Reserve’s purchases of MBS peaked at an average of $25 Billion per week. As of November, the average weekly purchases dropped down to $14 Billion. At the end of November, the Fed had already used over 80% of the allocated funds for MBS, meaning less than 20% remained to be used over four months.

Making the problem worse is that the Fed now has less money available to purchase MBS while at the same time, the supply of these securities has increased as a result of refinance and purchase activity that was triggered by lower rates.

Why is that important?

As the Fed now has fewer funds to last through the remaining months of the program, its ability to keep rates low will wane.
As the Fed’s program winds down and ends, we’ll likely see two things happen.

First, we will probably see higher levels of volatility—with rates sometimes shifting dramatically in the middle of the day. That means it is more important than ever for buyers to work with a knowledgeable mortgage professional who has a finger on the pulse of the market at all times and can provide trusted, proven advice.

Second, since MBS will have less support from the Fed, rates are likely to rise over time.

In short, while rates are still very good, they may not be for long.

What should you do to protect yourself?

First and foremost, work with a knowledgeable mortgage originator who studies and monitors the market.

Second, don’t be fooled by media stories that only report the headlines and don’t understand the underlying implications of the Fed’s actions. If you ever hear something in the news but aren’t sure what it means to your situation, feel free to call or email me for in-depth answers and advice.

Finally, if you haven’t yet explored how the current rate environment might benefit you or someone you know, let’s arrange a time to sit down and discuss your unique situation as well as your short- and long-term goals. Remember, rates are still very good, but they may not be for long.

**Reprinted courtesy of Cecelia Kern of Mortgage Trust.  For more information contact me at kathryn@kjkproperties.com.

Estate taxes got far trickier for property owners January 1.

IRC §1031 as a Potential Solution for Return of Carry Over Basis in 2010

Unless Congress acts quickly, the estate tax will be eliminated from January, 2010 until Dec 31, 2010.  The failure of Congress to pass an extension of the current estate tax law is unfortunate for taxpayers.   With elimination of the estate tax comes elimination of the “stepped up basis” which currently permits taxpayers who inherit property to use the decedent’s date of death valuation as the taxpayer’s new basis.  This means that taxpayers who are selling inherited property will now pay more capital gains taxes.  However, utilizing a §1031 Exchange may be helpful in minimizing this increased tax bite.

Example 1 (2009 rules): Decedent purchased property in 1970 for $35,000.  Decedent died on Dec 1, 2009 when property was worth $500,000.  Taxpayer who inherited the property has a “stepped up” basis of $500,000 (its fair market value on the decedent’s date of death). Therefore, if the Taxpayer sells the property for $500,000 there will be no gain on the sale and no capital gains taxes due.

Example 2 (2010 rules):  Decedent purchased property in 1970 for $35,000.  Decedent died on Jan 1, 2010 when property was worth $500,000.  Taxpayer who inherited the property assumes the taxpayer’s “carry over” basis of $35,000 and inherits property with a built-in taxable gain of $465,000.   If the Taxpayer sells the property for $500,000 capital gains taxes will be due on $465,000 of gain realized by Taxpayer.

Previously, as in Example 1, taxpayers selling property they recently inherited had a 100% basis and no gain, so no need for a §1031 tax deferred exchange.  Now these inheriting taxpayers will have significant gains to shelter when they sell these inherited properties.  A §1031 exchange may be a viable solution for taxpayers who want to sell the property they have inherited and exchange, 100% tax deferred, into a property that better fits their investment objectives.   Of course, the Taxpayer must be able to demonstrate that the inherited property was held by the Taxpayer for investment or business use prior to sale in order to qualify for §1031 tax-deferral treatment.  

There has been much talk about the possibility of Congress enacting a new law in 2010 and making that law retroactive to Jan 1.  However, if the law is not retroactively remedied, the tax ramifications will be as set forth above in Example 2.  If Congress does not extend or otherwise enact a new law, the estate tax will return as of Jan 1, 2011 with a 55% estate tax rate and a return of the stepped up basis.

This information was provided courtesy of Tojia Beutler at IPX Exchange.  For more information contact me at kathryn@kjkproperties.com.

The improved tax credit: move up buyers and first time home buyers qualify. Here’s the scoop!

Did you know all real estate exchange companies are not the same? The law is leveling the playing field.

 This information was provided to me courtesy of IPX Exchange.  For more information on them contact me for a qualified referral!

EXCHANGE COMPANY REGULATION

TAKES AFFECT IN OREGON

Beginning January 1, 2010 Oregon requires exchange companies to: 

·         Maintain a fidelity bond of $1.0m or, in lieu of a bond, hold the funds in a qualified escrow or trust.

·         Maintain errors and omissions coverage of $250,000.

·         Invest funds in accordance with the prudent investor standard.

·         Prohibits the exchange company from loaning funds to any related entities.

·         Prohibits commingling exchange funds with operating accounts.

Do you wonder what “seasoning” is? A common loan term…

Seasoning, sometimes called flipping means that the common guy like you and me cannot enter in to a contract to sell a property without a given amount of time passing.

This is a requirement of lending.  Lenders do not like to see “flipping,” and require that the title “season” before they will loan on the property.  Without seasoning, the lender cannot package the loan for sale on the secondary mortgage market.

The secondary mortgage market is what we commonly hear called “Fannie Mae” or “Freddie Mac,” two of the largest buyer’s of mortgages in these times.

Recently I learned that this even includes an investor who transfers a title in and out of their LLC for lending or liability purposes.  Doing so renders a buyer unable to obtain a loan, no matter how long the “real seller” has been a constructive owner.  The law only cares that the title transferred.  This is a serious point to consider.

Why would this matter?

If the loan cannot meet underwriting guidelines the lending fails.  The lender won’t loan, the mortgage insurance company won’t insure the mortgage, the lender can’t sell the loan.  All around it makes selling a property impossible unless it is a contract sale, a loan that doesn’t require mortgage insurance (such as a 20% down mortgage), or a cash offer.

For a lenders description of this, I obtained the following explanation from Cecelia Kern, of Mortgage Trust:

“Purchase transaction require the subject property be owned by the seller for at least 90 days from the date of the purchase agreement unless the seller meets one of the following conditions:

Individuals, companies or investors who purchase foreclosed properties and sell them are not eligible for this exemption.”

Breaking News: President Signs Tax Credit Extension & Expansion

Breaking News: President Signs Tax Credit Extension & Expansion
 
President Obama signed into law legislation that extends and expands the first-time homebuyer tax credit this morning. This enacts the legislation into law making the extension and expansion effective immediately after today. To learn more about the jobless benefit extension and the extension of the homebuyer tax credit visit: Obama signs jobless benefit extension.
 
Who Qualifies for the Extended Credit? 

First-time homebuyers who purchase after today and before April 30, 2010, are eligible for the extended tax credit.

(November 6, 2009)

Home Affordable Foreclosure Alternatives Program (HAFA)

Home Affordable Foreclosure Alternatives Program (HAFA)

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