Renttropolis Online Property Management

First, let’s think about the mathematics behind it. Granted each market or city is going to have a different result, but for where I live in the Philadelphia area this holds true. By doing a little research and finding comparable apartments in your market, you can find out what the magic number is. What are the three features that are going to stick out about any apartment? The condition of the rugs, the bathrooms, and the kitchens. If any of these items look worn or beat up, it is going to be harder to rent and you won’t be able to get as much for it… that is just a fact of life. So let’s say you spend $3,000 to upgrade the kitchen and bathroom(s). Yes, it is possible to spend that little on upgrades and I will show you how later on. Assuming the rest of your unit/building is in good condition, that $3,000 investment can produce an extra $200 a month in rent for me per unit. At $200 a month, you made your investment back in just over a year and you are now making more money per unit. Think about it. If a prospective renter is looking at two apartments: one with a dated kitchen and one with a modern kitchen and bathroom, which one is he/she going to choose? Not only that, but a nicer apartment is going to command a higher rent which in turn brings in a higher income renter who is less likely to abuse and destroy the apartment.

For some of you, I am sure that $3,000 to renovate a kitchen and bathroom(s) probably made you chuckle. If you are still shopping at the big box stores for your supplies, then you have a reason to laugh. To update both the kitchen and the bathroom in an apartment using their cabinets could easily cost you double if not triple. After doing a lot of research, I found a source for cabinets that saves me at least 30-40% per apartment. I started buying my cabinets on-line. If you do a search for RTA Kitchen Cabinets, you will find my secret. Not only are they cheaper, but they are also made of stronger materials and easier to assemble and install. By buying cabinets on-line, direct from the importer/manufacturer you can get them much cheaper because they don’t have the high overhead cost of a retail store. I have been using them for years now in my apartments, and you wouldn’t be able to tell the difference if you put them side-by-side with store bought or store ordered cabinets. The biggest benefit is that you don’t have to wait 6-7 weeks for cabinets like you do if you go to Home Depot or Lowes. These are delivered straight to your office or property in around 2 weeks.

So the next time you are trying to figure out why you empty units, or the guy across the street is renting his units for hundreds more, take a look at your kitchens and bathrooms. I simple upgrade will not only get you a quick return on your investment, but it will also continue to generate more revenue for years to come.

When you own rental property, you may spend money on advertising. Promoting the vacant site, whether in small print ads in newsletters, newspapers, magazines and the Web, or in big signs and billboards, can be a necessary expense. It’s also a deductible one. So are the expenses you incur to maintain your property in good condition.

Remember that because you are a rental property owner, the fees you pay related to that property can also be written off. For instance, if you pay a management company to collect rents and take care of your property, that cost can be subtracted on your tax return. Of course, every savvy real estate investor knows about the magic of depreciation. This is an expense that is really just a gift from the IRS to real estate investors. There is no out of pocket expense and everyone expects the property to increase in value. But the IRS still gives investors a deduction as if the property were decreasing in value. That’s about the best kind of deduction you can get.

“Magic?” you’re asking. “Isn’t depreciation just a loss in value of my property? So how is this a good thing?” Simply put, depreciation is the biggest tax break for real estate investors – money in your pocket for things you already buy and there is minimum effort needed to collect on it. How does depreciation work? It is the distribution of the cost of a long-lived asset over the estimated life of that asset. In the case of a residential rental the time period is 27.5 years. You may deduct 3.636% (1/27.5) of the purchase price each year. This will be a steady deduction over the life of this property.

Sometimes we desire to speed up the process of depreciation to put more money in our pockets. In the case of land improvements or personal property also called “chattels” the life span can be as short as 15 all the way down to 5 years. Appliances, cabinets and carpets are all examples of things that depreciate over 5 years. A $1,000 refrigerator yields roughly 20% or $200 in depreciation each year. Total this up over all your personal property and just like magic money comes rolling back to you.

Now that you know what depreciation can do for you, I’m sure you’d like to know how to do it. Chattel Appraisal is a strategy to separate out land improvements and personal property components from the real property owned. You must be careful not to value the land too high or too low, make sure you are depreciating the property over the right period of time, and verify you are utilizing the right foundation for depreciation (many will use a basis that is too low, missing out on $$$.) These are all things you can do yourself – simple, but time consuming. Now that you know the wonders depreciation can do for you, get out there and make some magic!

Now if you are a business owner, the rental fees you pay to support your business should be recognized. Your business may work out of rented space. If so, the cost of the location is deductible. So are any property taxes you may pay for the landlord as part of the lease. Maybe your business has a parking facility that you rent. If so, the same rule applies.

Perhaps your business requires storage of goods. If you are renting warehouse space don’t forget to deduct the fee. Even storage of a much smaller kind-a safety deposit box that contains business-related papers-qualifies.

Paying rent is usually a part of being both a real estate and a business owner. Make it work for you.

Warmest Regards,

Tom