Long-Term Strategies for Keeping Rodents Away From Your Rental Properties

No one wants to rent or live in an apartment that's infested with rats. Unfortunately, with highly visible review platforms online, even a single, short-term rodent problem can diminish the long-term marketability of your units. The good news is that there are three easy ways to keep these pests at bay, even when neighboring buildings are riddled with them.

1. Hire a Property Management Service

If you don't live onsite and aren't able to regularly maintain the grounds yourself, consider hiring a property management company. Although you may have fastidious tenants, rubbish that's left in common areas by guests, residents, and passersby is guaranteed to attract animals. The maintenance teams that property management companies dispatch can take ongoing preventative measures such as:

• Patching up holes in building materials and other points of ingress
• Eliminating standing bodies of water or other accessible water sources
• Trimming, pruning, and limbing onsite trees and shrubs to remove hiding areas and living spaces
• Making sure that all outside waste collection areas are clean and securely closed

With property managers handling these and other aspects of your building operations, pest problems of any type are far less likely to crop up. Best of all, management companies work hard to attract desirable tenants. With these professionals screening new applicants, you're more apt to units to people who actually care about their surroundings.

2. Hire a Pest Control Service

Pest extermination and pest control are two vastly different things. Unlike bed bugs and certain species of cockroaches, rats and rodents naturally thrive in the outside environment. Pests like rodents, termites, and ants aren't necessarily brought into buildings. Instead, they're attracted to interior living spaces by inviting property conditions. Pest control is everything that you or an outside party does to deter local inspections and animals from entering your building. Rather than being reactive like pest extermination, pest control or pest management is largely preventative in nature. It's also much cheaper than treating residential units after an infestation has already arrived.

3. Clean Out All Storage Units

If you have storage units onsite, schedule an annual or twice-annual cleaning. Rodents are just as happy munching on non-food items as they are rifling through pantries. They'll eat just about anything organic that they can get their hands on, and they're content to build their homes in empty boxes, collections of old newspapers, and in many other things that are commonly housed in onsite storage units.

Remember, even a single problem with rodents can have a terrible and long-lasting impact on the reputation of your rental property. Taking proactive steps to prevent rodent infestations is always the cheapest course of action. With the tips above, you can eliminate all of the features that are known to invite these unwanted guests in.

Capital Gains and Estate in 2021

Capital Gains and Estate in 2021: Everything You Need to Know:

Capital gains are the taxes you pay after gaining wealth from selling assets that have appreciated (gained value) over time. These assets subject to capital gain taxes include stock, real estate, crypto currencies, and businesses. The capital gains taxes are required to be paid on the profit that you made on the sale. For example, if you invest $5,000 and the return is $5,500, you have to pay capital gains tax on the $500 profit.

Today we are discussing the capital gains taxes that you have to pay on your profits from real estate. 

What Are the Different Types of Gains Taxes?

You have both short-term and long-term gains taxes that can be owed on real estate. The differences between the two types of capital gains tax are the following:

• Short-Term Capital Tax Gains: Short-term capital tax gains are the taxes you pay on your profits from real estate within six months of selling the real estate for profit. For example, if you purchased a rental property and sold it four or five months later, you would owe short-term capital estate taxes on that property.
• Long-Term Capital Tax Gains: Long-term capital tax gains are the taxes you pay on your profits from real estate within six months of selling the real estate for profit. For example, if you purchased a rental property and sold it five years later, you would owe long-term capital estate taxes on that property. 

It's worth noting that the long-term capital gains taxes are usually available at a lower rate than the short-term capital gains tax.

How Are the Federal Rates of Capital Gains Taxes Determined?

Gains taxes are largely determined by the amount of income that you make. These rates are also the same as the seven (7) tax brackets used to file your federal tax returns with the IRS on an annual basis. This means that the more you make, the higher your tax rate will be on capital gains taxes. Capital Gains Tax rates vary from 10% for the lowest income level, $9,950.00 annually for a single person, or up to $19,900 for a couple filing jointly. The highest level of taxation for capital gains is 37% for those who make over $523,000 annually as an individual or over $628,300 as a joint couple.

In all, there are seven (7) different taxation brackets that capital gains taxes can fall within.

How Are the State Rates of Capital Gains Taxes Determined?

Yes, different states have different laws about capital gains tax rates on both short and long-term capital gains.  These capital gains tax rates are usually the same as your state income tax levels. Many states tax capital gains taxes as additional income or as income tax for your family. That means that the rates for capital gains taxes in different states vary by state, and some states do not tax capital gains (or state income taxes at all). 

Conclusions:

It's important to understand what the federal and local capital gains tax rates are for both long and short-term investments. Paying your capital gains taxes on real estate (or any other investment for that matter) is crucial to keep you in good standing with the IRS yearly.

1031 Exchanges

 

Two Key Strategies Using 1031 Exchanges for New Real Estate Investors:

Using 1031 strategies can be challenging as they have quite a few moving parts. Still, they can also greatly benefit real estate investors when increasing their net worth, business, and property profile. Meeting the rules of 1031 is important. Otherwise, your "property swap" won't qualify for the 1031 deal, and you will have to pay the full taxes on the sales rather than paying the few to no taxes that you pay when you meet the requirements of 1031.

Keep in mind that to qualify for 1031, both properties involved in the deal must be located inside the United States. The properties are also usually similar in nature to qualify for 1031.

The following are two key ways a real estate investor can use 1031 exchanges to help them grow their business and property profile:

Use 1031 For A Vacation Home:

Sometimes taxpayers use the 1031 exchange to trade vacation homes. Later, the person sells their current residence and moves into the vacation home. Then, they can make it their primary residence and eventually sell it using their $500,000 capital-gain exclusion. The exclusion lets you sell your home along with your spouse and protect your $500,000 in capital gain if you have lived primarily in that residence for at least two of the last five years.  

Many other investors rent out their vacation property for six months or a year before exchanging their current property for a new one.

Move Into a 1031 Swap Residence:

Many times, people swap their homes for a new second or primary residence. You can't move into these residences right away. The "harbor rule" set forth by the IRS requires you to a) rent the unit out to another person for a fair rental for 14 or more days or b) your own personal use of the property cannot exceed 14 days or 10% of the time for the first 12 months after the swap or trade. 

Conclusions: 

Whether you want to use the 1031 exchange to swap vacation homes or move into a new residence, the 1031 exchange is a great way to build on your current wealth and continue your current wealth. You have to be sure that you are following the appropriate rules of all the 1031 exchange, or you will end up having to pay additional taxes to the IRS that you didn't want to owe. Then you lose the advantage of the 1031 exchange deal. 

FHA Loans

 FHA Loans: Do I Use It to Buy a Property Now vs. Buying a Property In a Year?

FHA Loans: Do I Use It to Buy a Property Now vs. Buying a Property In a Year?:

When you want to become an investor by purchasing additional homes to rent, you have many options to consider when finding funding to purchase those properties. One option is considering an FHA Loan to purchase investment properties now versus waiting to buy an investment home in the future.

In this post, we will examine both the pros and cons of taking an FHA loan to buy an investment property now versus waiting a year to save up your own money to purchase a property: 

Pros of Using an FHA Loan to Purchase Investment Property:

The following are some pros to using an FHA loan to purchase a rental property and how you can do it:

• FHA loans only need a 3.5% down payment to purchase a property, making purchasing an investment property much more affordable for most average investors. You are likely to qualify for an FHA loan before a traditional loan.
• No income minimums have to be met to qualify for a loan.
• Only a 580 credit score is needed to qualify for an FHA loan to qualify for loan.
• Rentals can be anywhere between a single-family home and a 4-plex if purchased with an FHA loan.
• There is an additional loan amount allowed for each unit purchased past one individual residence.
• Income from the FHA loan on the first investment property you purchase can help you purchase your next investment property in the future.
• If you refinance your mortgage, you can often get rid of the mortgage insurance required to carry on a home purchased with an FHA loan to save money in the future.
• Closing costs can be bundled with your mortgage to require less cash for your initial purchase, which means that you can afford to buy an investment property sooner.

These are some great reasons to consider an FHA loan to purchase a rental property.

Cons of Using an FHA Loan to Purchase Investment Property:

The following are some cons to consider when using an FHA loan to purchase a rental property and how you can do it:

• You have to make the new property your primary residence for a minimum of 12 months (one year) before you can use it as a rental property for income purposes. (You would have to move into the new property you purchased and rent out your current residence if you get an FHA loan for your investment property).
• You will have to pay mortgage insurance on the property for the first 10 years unless you refinance to get rid of the mortgage insurance on the rental property you purchase.
• Unless you live under special circumstances, you will generally only be allowed to have one mortgage loan at a time, limiting how many rental properties you can have.
• The property you purchase is nationally capped in the US at $822,375, with additional allowances for each additional unit in the building you buy. Your multifamily properties are capped at 4 units per loan.

You have to consider these limits when using an FHA loan to purchase an investment property. 

Conclusions:

FHA loans can be a great way to help you get an investment property to help you increase your income. If you can get a multi-unit property, you will rent out more units and increase your income even faster, as you will have more than one tenant. 

Real Estate Investing and Inventory Recovery

Investing in Real Estate: Should You Wait to Buy a Rental Property Until Inventory Recovers?

There has been an increase in school-at-home and work-at-home situations that have made our houses even more negligible or somehow less functional. However, homeowners looking to augment their learning and working spaces have limited choices because there just aren't many houses on the market. 

According to Black Knight, this year's housing inventory is staggeringly low as of April, with 53% fewer homes on the market and a deficit of nearly 750,000 available-for-sale homes compared to a similar time frame in 2020.

So, What Does This Mean to Today's Buyers?

Limited housing inventory has several implications. First, it's progressively increasing home prices. When a particular commodity tends to be short in supply, its demand rises, increasing its price tag. That's also the case for today's homes. In February, the average sales price for a single-family home rose by approximately 16% from the previous year, and while mortgage rates are modest, they're still not low enough to help offset high prices of homes.

Limited housing inventory also means that buyers may have to accept properties that are not in line with their desires. That could mean compromising on layout, proximity to amenities, outdoor space, or square footage. 

All of this boils down to the question, is buying a home today worth it? Or should you sit tight until inventory recovers?

Buy Now or Wait Until Inventory Opens Up?

One of the major causes of low housing inventory is that sellers have been hesitant to list their property during the ongoing pandemic. While most of that cuts to health-related consequences of inviting strangers indoors for showings and open houses, it's also a result of avoiding any significant moves during a period of extreme recession. 

But as vaccines are given out on a widespread level, we should see housing inventory opening up sometimes later. More people may decide to list their homes once the economy starts to recover and the pandemic begins to improve, hence more inventory to choose from and at a lower price. There's also a good chance mortgage rates will most likely remain stable throughout the year. As such, it could pay for buyers to hold on till housing inventory opens up in the subsequent months. 

Another thing buyers should keep in mind is that, generally, more homes are listed during the spring and summer than during the winter months. That means inventory may pick up this month as it naturally does, then, as from July, prices may start to drop as the market opens up. 

However, buyers who find homes of their choice and can afford them don't have to wait to make an offer, especially while mortgage rates are still attractive. But for anyone who's struggled in the past months may want to back down from their home search and wait things out. 

On that note

Purchasing a home where housing inventory is extremely low is such a hectic and stressful process, especially with all the uncertainty caused by the pandemic. As such, choosing whether or not to invest in rental property is a difficult choice. 

To make your work easier, contact Michael Leafer to find your first rental property or receive short-term lending/funding to rehab your rental property. Great deals are always available on Michael.