Common Property Management Mistakes (and How to Avoid Them)

Working as a property manager involves juggling a number of real estate related responsibilities. Property managers must take care of everything from the maintenance of a property through to the collection of rent payments.

However, with such a wide scope of duties, there are some common pitfalls that can hold property managers back from achieving their full potential. So, let us discover 3 property management mistakes while discussing ways in which these errors can be avoided altogether.

Failing to Screen Tenants

Screening tenants is one of the most important rental property management services out there. Without a tenant a rental property can start to become an expensive burden on the owner, especially when there are utility bills and insurance costs that must be paid. A lot of time and effort should therefore be put into finding the most suitable tenant for a property. After all, you do not want to run the risk of sourcing a bad tenant only to realize the error of your ways too late into your agreement when it can be much harder to remove a troublesome tenant.

In your role as a property manager, and as part of the screening process, you can conduct checks for credit eligibility and employment status, and you can also ask for references from previous landlords. Ideally tenants should be able to pay their rent in a timely manner, they should remain committed to keeping the property in a good condition, and they should also want to stay for a medium to long term period of time. By carrying out a rigorous screening process, you can find the perfect tenant for the property owner, ensuring that you can both receive a constant cash flow without encountering any major difficulties.

Not Keeping on Top of Maintenance and Repairs

When maintenance issues arise, it is only natural to want to get things fixed as quickly and economically as possibly. That being said, sometimes this can lead to delays if you have not yet built a network of highly trusted and responsive contractors. While it is always sensible to shop around to ensure that you are not overpaying for any maintenance or repair work, you do not want to risk upsetting tenants or the property owners if there are any delays in getting things fixed.

Sometimes, tenants even decide to fix maintenance problems on their own, especially in larger properties. The cost of any repairs can even be deducted from their rent in some cases. While this can seem like an attractive solution when faced with the burden of mounting maintenance and repair tasks, there is always a possibility that a tenant could injure themselves while carrying out the work and you could be liable for damages. Poor handiwork can also prove costly if larger problems are created. Consequently, to avoid mishaps, always try to get repair work done by a licensed contractor.

Skipping Routine Inspections

As your portfolio of rental properties starts to grow, your calendar can start to seem overcrowded with routine inspections. Correspondingly, the busier you get, the more tempting it can be to let these inspections fall by the wayside. This is especially true for properties that have passed inspections without fault in the past. Although this might be the case, it is still important to complete inspections of rental properties in order to identify any structural damages, or instances where preventative repair work needs to be carried out.

Of course, tenants should be noting and reporting any issues, but there is a high chance that they might not have noticed any potential problems. Property managers have a large amount of experience dealing with these types of issues and are therefore better equipped to discover any issues. Similarly, postponing or even rushing through inspections can lead to problems, especially if time becomes limited thanks to other responsibilities or if issues are missed and allowed to progress. To combat these risks, ask for help from your team, and if no one is available to assist, it might be time to recruit new members to your office.

Ultimately, it is undeniable that the role of a property manager has come a long way in recent years. Nonetheless, by running your business in a responsible and efficient way, you can avoid and remedy some of the most common real estate rental mistakes, keeping both rental property owners and their tenants happy for longer, and saving time and money in the process. Hiring a property management company is one step that rental property owners can take to protect their investments. To learn more, check out this article that lists some common situations where hiring a property management company is for the best.

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Advantages and Disadvantages of 1031 Exchange for Realtors

Nothing is certain in life except death and taxes. These famous words by Ben Franklin were said before the introduction of the 1031 exchange.

While death is still inevitable today, the same is not true of taxes.

Investors have various options when it comes to avoiding taxes, and the 1031 exchange is one prime option that can help save hundreds in taxes.

In this blog post, we will let you know more about a 1031 exchange, explain the requirements, and highlight some of the benefits and disadvantages of the investment incentive.

What Is a 1031 Exchange?

A 1031 exchange is described under Section 1031 of the US Internal Revenue Code (IRC). Realtors who structure their property exchange meeting the 1031 exchange rules can avoid or minimize taxes.

The gains from most property swaps are taxable. But if yours conform to the needs of the 1031 exchange, you can reduce or avoid taxes altogether.

Also known as a like-kind exchange, the 103 exchange in effect allows you to swap of one property for another without having to pay any taxes.

While you may actually profit from each profit swap, you won’t have to pay profit until you sell the property years later. You can then sell your property and pay only one tax at a capital gains tax that ranges from15 to 20 percent for most taxpayers and even 0 percent for low-income taxpayers.

Legal Requirements for 1031 Exchanges

The IRS has laid out a number of requirements for availing the 1031 exchange tax benefits.

Time Limit

You can carry forward gains from one real estate property to another for unlimited periods. There is no limit as to how many 1031 exchanges you carry out.

However, as per the IRS rules, you are allowed about six months (or 180 calendar days) between the sale of one property and the purchase of a replacement property.

Also, you need to identify the replacement property within one and a half months (or 45 calendar days) of the closing of the sale of a property deal.

You must identify the replacement and relinquished properties in a letter sent to the Exchanger. The Exchanger will assess whether the properties mentioned in the letter meets the requirements.

Type of Properties

The properties that are sold and bought must be held for use or investment in a business. The term ‘like-kind’ is used by the IRS for qualified properties. You can exchange any property that is held for business use or investment with another ‘like-kind’ property.

Both developed and underdeveloped properties come within this definition. You can exchange a ranch for an apartment or farmland for a mall. The laws are liberal regarding what properties you can exchange. But it excludes primary residence of the realtor and ‘held for sale’ properties.

The properties that are sold and replaced do not need to be identical. You can sale a commercial property and buy a residential property. The main point is that both the properties must be held for business use or investment. The size and type of property are irrelevant for determining the 1031 exchange criteria.

Number of Properties

Investors can identify multiple replacement properties. The 1031 exchange’s Three Property Rule allows investors to identify up to three properties. There is no limit to the total market value of the properties.

Alternatively, you can identify any number of properties as per the 200 Percent Rule, as long as the market value of all the properties is less than twice the value of the relinquished properties.

Qualified Intermediary

The 1031 exchange rules require investors to work with a “Qualified Intermediary”. The intermediary who is approved by the IRS will prepare the necessary documents for the exchange of properties. Moreover, the intermediary will also structure the exchange of like-kind properties to ensure that it meets applicable laws.

Investors have to spend all the proceeds from the sale of property in buying another property. The proceeds can be greater or less than the value or the sold property. Any amount that is not invested in buying a replacement property will be taxable.

What Are the Benefits of 1031 Exchanges?

The foremost benefit of the 1031 exchange is that helps in deferring taxes. Investors can defer depreciation recapture, income, and capital gain taxes. These taxes can be significant particularly in the case of a low adjusted cost basis.

Another benefit of the 1031 exchange is that it allows you to have more money for investment. You will have increased purchasing power to buy attractive real estate properties. The tax incentive allows you to invest in one or multiple properties that have higher return potential.

You will have more money in the bank when you use this option as compared to selling a property and paying the associated taxes and buying a new property.

With 1031 exchanges, you can accelerate the wealth building process. The option will lead to significant cash flow improvement, particularly for commercial property investors.

The 1031 exchange can help realtors save thousands of money on taxes. You may never have to pay taxes on the sale of properties. You can defer the taxes by investing for as long as they want thereby availing better investment opportunities.

What Are the Cons of 1031 Exchanges?

While 1031 exchanges are a great tool to boost investment returns for realtors, you should also know about certain disadvantages. Most investors hit roadblocks when it comes to meeting the 180/45 days rule. Finding replacement property within 45 days and buying the property within 180 days of a sale is not always possible. What’s worse is that the IRS does not allow any extension to the time limit.

Another con of this option is that losses are also deferred. You cannot realize the losses at the time of purchase of a new property. This can have a negative effect on your overall tax due to the IRS. That’s why it’s important that you consider the option carefully before using it for investment purposes.

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How To Make A Property Yours After You Move In

When you purchase a property, there will always be something of the previous owner left behind. This doesn’t necessarily mean in a physical sense (although furniture and other belongings do sometimes get left behind), but more so in a feeling, or a style of décor, for example. If you want to make your property feel like your home, you need to do something about this and make some changes. Here are some ideas of what you can do.

A Coat Of Paint

There is one particular way that you can change the entire look of a room, or even an entire property, without having to spend too much money to do so. All you need to do is put a fresh coat of paint over the walls, ideally changing the color that used to be there and that the previous owners chose. Pick something that suits you better, and you will instantly have changed the look and feel of your home, making it much more like you.

Even if you like the color and want to keep it the same, by adding a fresh layer of paint, everything will feel new and exciting, and again it will feel a lot more like your own home rather than someone else’s. As an additional benefit, paint is a relatively inexpensive way to brighten up a new home, which can be useful after the expense of moving.

Kitchen

A new kitchen can make a huge difference in your new home, especially if it is replacing something old and worn out. If you choose the right kitchen, you will find that it will last many years, so although this might be an expense, to begin with, it will be worth it over time. A kitchen is one of the most important rooms in your property and one in which you will necessarily be spending a fair amount of time. Therefore, making it look good will make you feel good too.

How you design your new kitchen will depend on the space you have and what you want to use the kitchen for, as well as your own tastes when it comes to color and décor. Some people use the kitchen solely for cooking and nothing more, but for others, this can be an important family space, or where entertaining takes place. Think about your use for the kitchen and you can design your new space accordingly.

Bathroom

The bathroom is a personal space, so it is somewhere that many people feel they want to change when they move into a new property. You don’t necessarily have to take everything out and start again – although this is certainly one option if your funds allow – you can freshen things up somewhat.

Tiles can be painted so that you change the color without having to re-tile the room; you just need special paint to get the job done. Plus, replacing a shower curtain, or putting up blinds, or even switching medicine cabinets can all make the room look different.

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The Real Cost of Buying a Home

Owning your own home is considered by many to be a rite of passage to adulthood. There are many benefits to owning your own home, but it’s also rather scary. A mortgage often costs less than renting, but there are other considerations to take into account when deciding to buy a new home. Having all the necessary facts is going to make this important decision much easier.

Your mortgage is one of the most predictable payments associated with buying a home. However, that’s not the total amount you’re going to be paying. Here are some of the other costs that often get overlooked.

Closing Costs

Your down payment is the biggest initial cost you’re going to be making, but closing costs are another big surprise you need to allow for. They are onetime fees paid to your lender and other third parties and can add up to several thousand dollars. They include an appraisal and survey fee, wire transfer fee, underwriting and origination fees, document prep fee and discount points. On top of that, you’ll be paying a credit report fee, title insurance, and recording fee.

Real Estate Commission

If a property is being sold through a real estate agent commission has to be paid. Generally, it amounts to around 6%, which is split between the buyer’s and the seller’s agent. If you’re buying, however, you don’t need to worry because commission comes out of the seller’s funds. If you’re selling a property, it’s worth asking for a lower commission before signing with a real estate agent.

Property Taxes

Property taxes are paid to the local government. Tax laws and policies can vary by state and county and they can change from year to year. If you undertake any renovations or the property market changes and your home’s assessed value increases, this can also cause property taxes to rise.

Different Types of Insurance

The types of insurance you’ll have to pay differ depending on the state or region where you’re buying. Homeowners insurance is the most common type you’ll need to pay for. Find out more by clicking on this useful page about home insurance. Hazard insurance is something else you’ll need to consider depending on the risk factors in your area. There is a third type of insurance known as private mortgage insurance, but you’ll only have to pay this if your down payment is less than 20%.

Utilities

The size of these payments is going to depend on the size of your new home but expect to be paying a couple of hundred dollars at least. Your real estate agent may be able to give you an estimate of the property’s utility costs so you can include them in your budget.

HOA, Co-Op or Condo Fees

If your new home is in a planned development, that includes shared spaces and a homeowners association you’ll have monthly assessment fees to pay on top of your mortgage. These fees help towards the cost of improvements to the complex. These can sometimes be very expensive so don’t forget to include these in your budget.

Buying a property is a serious financial commitment. Now you’ve got a better idea of the cost you’ll be able to work out a more accurate budget and find the right property to suit your needs.

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More Investments Predicted In Luxury Properties Across Dubai In 2019

Dubai remained a hub for investments in the property market throughout 2018. With a wide variety of luxury properties available on market, ease in securing loans, and low property prices, the real estate market was taken by storm last year. According to estimates, the investors spent somewhere around 14 billion in the property market in Dubai. And, with buying being more beneficial than renting, it is expected that this same trend will continue to flourish in 2019 as well. Furthermore, as the demand for luxury properties in Dubai is continuously on the rise, more and more private advisory services are upping their game to help the prospects in acquiring some exclusive properties as soon as they get on the market.

The Impact Of Policies

Last year, the real estate market in Dubai saw huge success and the new policy implemented by the UAE government which allows for long-term visas granted to the property owners has played an important role in that. The property sales have increased quite a lot and luxuryproperty.com offer the expertise tobuy and sell property in Dubai. A recently conducted study ranks Dubai amongst the top 5 locations around the world where people showed more interest in buying new properties, making more online searches for Dubai real estate. Emirates Hills in Dubai was placed after Beverley Hills, United States as it continues to be most sought after market for luxury properties. And, believe it or not, the Government Policies have a big role to play in that.

The price drop as well as increasing benefits associated with owning real estate properties have lead more investors to go for Dubai mansions and luxury properties more than before. People are attracted more towards affordable units globally. Particularly, the market in Dubai has caught great attention among Chinese nationals. The efforts of the DLD have also attracted increasing number of Chinese Investors to Dubai during last five years or so. As a result, Chinese population seems to be increasing in UAE and stats show a 53% rise. The increase has caused the Chinese population across UAE to grow to around 230000 and there are around four thousand Chinese companies out there. The relationship between China and UAE has seen significant growth since the visit of Chinese President to UAE in July last year. It’s expected to continue on the same uptrend during 2019 as well.

Market Growth Paving Way For Future Success

Due to the growth of property market in Dubai, the experts in luxury property market are coming forward to help the renters as well as buyers in coming up with accommodations that they’ll fall in love with. There are registered luxury property experts that work hard to bring the best properties in Dubai to their clients giving them the ultimate sense of satisfaction. They’re looking forward to helping more and more clients find their dream home in Dubai.

The US News suggests that real estate prices in Dubai could decline by 10%. As far as major developers are concerned, the excessive supply of properties is causing the prices to go down. It is expected that the prices will keep on falling until they may regain stability by 2020. And, with the luxury homes becoming more affordable for the residents, the property market in UAE is expected to keep on drawing more scouters and investors in 2019 even in the most exclusive neighborhoods such as Emirates Hills. Even though the turn real estate market has taken may not be too favorable for the developers and builders in UAE. However, it is very much favorable for the investors who can pave way for their successful future right now. As we move further in 2019, the market is expected to keep on developing as the international hotspot offering plenty of luxury homes.

So, as predicted, with more investments coming to UAE and the property prices on a downward spiral, it’s high time that you consider your options and invest in Dubai’s luxury homes.

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