One thing that property investors must
analyze when considering a rental property is the cost of utilities. As a
landlord in Snohomish County, Washington, it goes without saying that your
goal is to maximize the potential profit and income you make from your rental
maximizing your profits usually means transferring the utility costs to residents.
have the option of including the utility costs in the rent at a fixed price.
said, there are certain pros and cons of having utilities included in the rent.
In this article, we’ll help you know what you’re getting yourself into prior to
making the final decision.
Pros of Including Utilities in Rent
Pro #1: Utility costs are tax deductible.
If you decide to include utilities
in the rent, you’ll be charging a higher rent. Which ultimately means you’ll
have higher taxes… Right?
depends on how you look at it.
are properly charging your tenants, then you’ll be making more profit, and therefore,
paying higher taxes.
However, the costs of your rental’s utilities qualify as a tax-deductible. Utilities are a great expense for landlords and qualify as a genuine business cost associated with property ownership and management.
need help filing your tax deductibles, hire a professional accountant who’s
well-versed in the rental property business.
Pro #2: Including utilities can set you apart from the competition
Many potential renters love the
idea of having their utilities added in their rent.
As a landlord, you will no longer have to get into what is included and what’s not included in your rental listing.
As a renter,
having all utilities included in the apartment or house’s rent provides peace
of a mind. Utility bills usually vary month to month, which makes budgeting
difficult. More so for renters in the lower-income bracket. By having a fixed
payment that includes both the rent and the utilities renters will not have to
pay any additional bills.
another way, it may help your Snohomish
County, Washington property stand out from the competition.
Pro #3: You can set a monthly utilities cap.
Say, for example, the normal
utility bill in January for your unit is $100, but the tenant’s bill comes in
at $150. Who is responsible for the extra $50?
Well, this is where you lease, or
rental agreement terms become important.
If you haven’t stated anything about the monthly utility bill cap, then you’ll have no other option than to pay the extra cost.
if your agreement specifies what the utility bill cap will be, your tenant may pay
more attention to their utility usage. In other words, it’ll prevent the
“all-you-can-eat” mentality from taking hold.
As a side
not, make sure you adjust your cap depending on the season. Obviously, the
costs of utilities go high during the hot and cold seasons.
Pro #4: You can charge more.
This is the most obvious reason of
including utilities in rent.
By including utilities in the rent, you can charge more than the actual rent price. This is precisely the reason why many landlords entertain this idea in the first place.
Including utilities in rent essentially
means taking on an extra liability and responsibility. Thus, it only makes
sense to get something back as compensation.
To cover your bases, do some
research. Try and figure out what landlords in your neighborhood charge for
utilities for comparable units. If you are unable to find any, then consider
taking your search online.
Cons of Including Utilities in Rent
Gee whiz! These are a lot of reasons why
you should include utilities in rent. Makes sense why many landlords in Snohomish
County, WA consider it, right?
said, there are some drawbacks to doing it. They are as follows:
Con #1: You may have a hard time filling a vacancy.
This is usually the case in
markets that are exceptionally price-sensitive. Tenants looking may be willing
to pay a maximum amount, and not anything more.
Remember, nowadays, tenants search
for apartments online and usually set the search filter to a specific price
This means that a good number of
potential renters may never get to see your property listing. Or, if they
actually do get to see it, they may not understand that the rental price also
Con #2: It’s another thing to add to your list of management responsibilities
landlord isn’t easy. There are a lot of responsibilities involved. So, you may
not find managing utility bills that worthwhile for you.
to pay the utility bill on time will mean incurring late fees. In such cases,
the costs will come right out of your cash flow.
Con #3: A rise in utility costs may mean fewer profits
costs can sometimes go up. Say, for example, the gas and electricity rates rise
by $50 per month. Guess who is going to be liable for that extra cost?
right, it’s you!
have the option of raising the rental price every time the lease is up for
renewal. But that could be a year away!
Con #4: You become liable for your tenant’s utility bills.
If your Snohomish County tenant is normally liable
for their own utility bills, the utility company will go after them should they
fail to pay.
if you decide to take on the responsibility of handling the tenant’s utility
bills, it is now your problem. You’ll need to keep paying the bills even if
your tenant defaults on the rent.
just cut off their gas or electricity supply to compel them to pay up. The only
option you’ll have is to file for their eviction in court, as you continue
paying their bills.
have it. 4 pros and 4 cons of including utilities in rent. Is there a
straightforward “right” answer here? Of course not. As such, you’ll need to
evaluate both options to see which one can work out for you.
Generally, you may find yourself asking “Should I hire a property manager or self-manage my rentals?”
There’s no straight answer to this.
However, this post covers a few pros and cons of self-management and how it
compares to professional property management.
The Pros of Self-Managing Your Rental Property
You’ll have 100% control over your investment.
Self-managing a rental property means that
you are responsible for everything.
Whether it’s marketing, tenant screening,
tenant management, maintenance, and repairs, you’ll get to handle it all.
Therefore, you’ll be able to make
decisions that you feel are the best for your business. Decisions that will get
you even closer to achieving your investment goal and objectives.
Also, there won’t be a middleman or third-party
person between you and your rental revenue.
2. You don’t need to pay
property management fees.
Seven to fifteen percent of your rental income
each month is payed to your property management company.
So, if you manage your own property,
you’ll be able to save on property management fees.
For example, let’s say your local property
manager charges 10% of the monthly income. That means that by the end of the
year they’ll have charged you more than 1 month’s rent, and that’s 10% X 12
months = 120%.
3. You’ll get the chance to
learn and gain experience in the rental property industry.
The more you learn about your property
investment, the easier it will be for you to grow it.
Now, despite some setbacks in the
beginning, self-management can help you to become sharper and smarter in the
rental industry. Hence, making it easy for you to expand your investment over
You’ll have more reasons to manage your property well.
When it’s your money on the line, you’ll
be highly motivated to make things work and to grow your investment. If you, by
chance, hire a bad property manager, your rental won’t be given the property
amount of care and attention.
After all, if it fails, they won’t be the
Now if you want something done perfectly,
do it yourself, right?
Self-managing your rental offers you the chance
to grow your investment as per your vision. Whether it succeeds or fails will
solely depend on you.
5. Your rental property will
be in good hands.
Unlike self-managing, hiring a property
manager is never a guarantee that your property will be well taken care of.
Your property managers can fail to take
good care of your rental.
That being said, you should also consider
the downsides to managing your own rental.
The Cons of Self-Managing Your Rental Property
This job is often very demanding.
Unless you are a retiree or unemployed
with lots of time to spare, you may find it difficult to properly manage your
There are so many tasks that will require
From maintenance requests to dealing with
bad tenants, it can be overwhelming.
And if that’s not bad enough, you’ll have
to respond promptly to your tenant’s complaint and maintenance issues. Even
when they call you at three in the morning because of a plumbing issue.
Also, when dealing with a large number of
tenants, there’s a high chance that you’ll forget to do some things. In other
words, you’ll do a poor job of managing your rentals.
Unfortunately, without proper experience,
knowledge, and resources, you may end up with bad tenants.
A bad tenant is someone who:
pay their rent on time
take care of your property
nuisance to other renters
be easy to reason with when there’s a problem on the property
On the other hand, property managers have
the skills, information, and manpower it takes to process the pile of
applicants fast and efficiently. That means they have a trained eye in spotting
good potential renters out of the many who apply.
More importantly, they have methods of performing
thorough background checks. This includes credit checks, employment history,
public records, eviction records, criminal history and more.
3. You’ll have to face rent
collection and eviction issues on your own.
DIY rental management means that you’ll be
responsible for collecting rent. It can also mean playing “cat and mouse” with
some of your renters every month.
This can be frustrating, tiresome, and time-consuming.
Moreover, you’ll have to deal with lengthy and expensive legal proceedings if you must evict a bad tenant. Not to mention the marketing expenses you’ll incur to get new tenants.
That’s why hiring a property manager may
be ideal. Since their job is to take over all property management responsibilities,
they will :
rent on time
Some of your mistakes can be costly.
It’s true that self-managing presents you
with an opportunity to learn and gain experience.
However, it also means that you’ll be
experimenting with your rental property.
Too many mistakes can lead to massive
loses or even closure. And that’s not something you want, is it?
Therefore, instead of self-managing your
first rental property, you should hire a professional manager.
That way you’ll learn a few things from
them up until you’re confident enough to do it yourself. It’s cheaper and safer
that way and you’ll get to enjoy the benefits of owning a rental property.
5. You may end up spending
more than you should to run and maintain your rental property.
To get better and higher returns from your investment, you have to make sure you mitigate your expenses. That means exploring your tax benefits, getting discounts from vendors and service providers, avoiding legal disputes, minimizing maintenance costs, and so on.
That may be hard for you, especially if
it’s your first time.
Reputable property managers know what to
do and how to minimize operational costs while doing it.
Plus, some of them often have partnerships
with local vendors. Therefore, they have a higher chance of getting discounts.
At the end of the day, your decision will
be highly dependent on the costs you’ll earn; to self-manage or hire a
professional management company.
However, aside from the costs and risks of hiring a bad company, property managers are your best bet. They’ll not only give you more time and freedom but also help you to learn a thing or two about rental management.
Taking full advantage of tax breaks is one
of the best ways to maximize your rental income.
What most landlords don’t know is that
there are quite a number of tax benefits that come with investing in real
Unfortunately, filing taxes for rental properties
is not optional. And sometimes it can be very expensive.
But, that’s only if you don’t know how to
use tax benefits to your advantage. Real estate tax breaks can actually save
you thousands of dollars every year.
So, if you are looking for ways to maximize your rental income by minimizing
your tax expenses, you are in the right place.
This post explains how four of the
best tax benefits can help your bottom line.
Four of the Best Tax Benefits for Real Estate Investors
Of course there are more than four tax
breaks available for real estate investors. That’s why it’s wise to familiarize
yourself with each one, keeping in mind where your investment is located, and
its surrounding legislation.
It could mean the difference between paying
or saving thousands of dollars in tax. Here are four of the best tax breaks to
start you off on your money saving journey:
Well, there are a number of investment property mortgage options available. Each of them comes with their own set of features, requirements, pros and cons. That’s why it’s wise to ensure that you know everything about these different mortgages so you can find the best one for you.
Taking up a mortgage for a rental property is ideal for people searching for a way to lighten their financial burden. It’s also a way to minimize risks.
So, what are your investment mortgage options? Read on to find out.
Common Mortgage Options for Rental Property Buyers
Generally, there are many mortgage options for you to choose from. Knowing how each of them works is the best way for you to find a good and cost-effective mortgage plan.
Below is a list of popular rental property mortgages that most property investors in Seattle choose.
1. Federal Housing Administration (FHA) Mortgage
Arguably, it’s one of the best and most convenient types of mortgages to finance your investment property.
Unlike most mortgages, FHA loans come with little requirements, low-interest rates, and easier terms.
In fact, the only major requirement worth mentioning is that this real estate investment loan only applies to owner-occupied rentals. This means that for an applicant to get such a loan, they have to show interest in residing in the property.
Furthermore, the FHA doesn’t issue the mortgages directly. Instead, the agency insures loans against losses given to applicants by private entities. Therefore, lenders get more incentives and feel safe issuing high-risk applicants with mortgages.
And that’s not all. FHA mortgages allow for applicants to provide extremely low down-payments of up to 3.5%. Awesome, right?
Unfortunately, due to the high number of applicants for this kind of real estate loan, processing and approval may be a bit slow. Therefore, it’s not ideal for time-sensitive purchases.
2. Investment Property Mortgages
Another way to finance your purchase is by applying for an investment property mortgage.
Unfortunately, getting these loans is almost never easy. And to make matters worse, the costs can be pretty steep.
These real estate investment loans are often ideal for applicants with impressive credit histories and sizeable down payments. If you are wondering why this is, well, it’s because investment property mortgages are tailored to accommodate investors with:
High credit ratings
Decent debt-to-income ratios
A sizeable down payment (at least +20% of the buying price)
And full documentation of their pay stubs, W2s, and tax returns
Also, applicants must have enough cash or assets to cover the first six months of the mortgage. Naturally, very few people meet these investment property loan requirements.
If you’re lucky enough to meet these, you have to make sure you have less than four current mortgages. That’s because most banks and lenders don’t offer investment property loans to applicants with more than four mortgages.
These mortgages are often great because of a couple perks including:
On average, it takes less than a day to get a hard money loan processed and approved. This makes it ideal for investors handling time-sensitive or urgent purchases.
Unlike investment property mortgages, hard money loans don’t have a lot of steep requirements. Basically, anyone can apply regardless of their credit status or the number of mortgages they have.
Sounds great, right? Unfortunately, these loans also have their fair share of disadvantages. For example:
This investment property loan comes with high-interest rates. If you decide to go with hard money loans, you should prepare to pay higher interests.
Also, they are short-term. This means that you’ll be expected to repay the mortgage within a short period of time. In most cases, it’s often two to three years.
4. Conventional Mortgages
Now, if you are looking for a better alternative to investment property and hard money mortgages, a conventional mortgage will do.
Read on to find why.
Generally, conventional loans are less costly and are tailored to conform to guidelines set by reputable mortgage lenders like Freddie Mac and Fannie Mae.
The main difference between conventional and investment property loans is that the former accepts high-risk applications.
But the higher the risks, the higher the interest rates and down payment for the investment property, among other fees. Therefore, applicants with unfavorable financial profiles may end up paying more for such mortgages.
5. Veterans Authority or VA Mortgages
For veterans and those currently serving, getting financial backing is easy thanks to VA Mortgages.
A VA mortgage is a housing loan offered to people who’ve been – or are currently – serving in America’s armed forces.
The biggest perk of VA mortgages is that this investment property loan comes with no down payment requirements. Plus, they have very generous and lenient rates and terms.
But it’s worth noting that there are a few conditions that applicants must meet in order to get these mortgages. For example:
The applicant must be a veteran or currently serving in the army.
They should reside in one of the rental units for not less than one year.
Also, the property has to be ready for occupancy and approved by legitimate VA home appraisers.
Obviously, there are other means that investors use to get investment property financing: These are just a few of the most common ones.
That being said, what can you do to make sure you are on the safe side as far as investment property mortgaging is concerned?
A Few Useful Mortgage Tips for Rental Property Buyers
Research is key. It helps you to compare and contrast all available options then make a decision based on your facts.
Consider making a large down payment. It can help reduce your interest rates.
Make sure you read and understand the fine print. It will save you a lot of trouble and inconvenience in the future.
Also, ensure you have at least six months’ worth of assets or cash. It gives lenders more incentive to loan you money.
Stick to your budget. This ensures that your investment plan goes smoothly and as planned.
There you have it. A quick run-down of what your mortgage options are when buying an investment property in Seattle, Washington. All you have to do is to figure out which one of the options above comes closest to your preferences, budget, and plans.
Thanks to the Fair Housing Act, every American has the right to equal treatment when it comes to housing. Unfortunately, there are still some people in Seattle, WA who know very little about this law.
That’s why it’s not rare to find property landlords and sellers fighting lawsuits due to discrimination.
So, if you are a landlord looking for more information about the Fair Housing Act, here are answers to eight of the most common questions.
1. What’s the Fair Housing Act?
The Fair Housing Act is a law that deals with discrimination in the housing sector.
It was established to deter landlords and property sellers from discriminating against members of a particular class in society.
Basically, it ensures that every American, regardless of class, is treated fairly and equally in any housing-related activity including:
Selling a house,
getting a mortgage loan
2. How long has the Fair Housing Act been in play?
Officially, the Fair Housing law was enacted in 1968. But, in truth, the fight for fair housing begun in the mid-1800s.
Sadly, back then housing discrimination was very rampant. That’s why it contributed to a series of actions, including:
The Civil Rights movement (1960s)
Rumford Fair Housing Act (1963)
The Civil Rights Act (1964)
And finally, leading up to the Fair Housing Act (1968) which was established a week after Martin Luther King Jr.’s assassination.
Evidently, this Act is one of America’s most significant milestones. And the fact that it affects so many lives makes it a necessity.
3. What are the Fair Housing Act’s primary goals?
So, what exactly does the Fair Housing Act do? Or better yet, which examples of housing discrimination does this Act protect people from?
Well, as stated earlier, the Federal Fair Housing Act touches on three main aspects of housing including the selling, renting, and mortgaging of a house.
Here are some examples of discrimination that the FHA shields tenants and property buyers against:
Refusing to rent, sell, or negotiate for housing
Lying about the availability of a housing unit or making
Treating different people with different terms and conditions when renting or selling a home
Blockbusting (convincing property owners to sell their homes under false pretense)
Offering different housing amenities and accommodations for different renters
Setting disparate terms and conditions on a mortgage loan
Refusing to purchase or make a loan
Practicing discriminatory practices during property appraising
Refusing to make information about a mortgage loan available
Setting divergent requirements for purchasing a house loan
Using discriminatory statements or being bias against a protected class in your property adverts
Threatening or interfering with someone’s Fair Housing rights
4. What classes of people are protected under the Fair Housing Act?
The FHA currently protects tenants categorized by seven classes.
The list of protected classes includes:
Familial Status (1988) – Pregnant women and having children under 18 in a home.
In addition, the year 2017 saw the addition of two more classes to the list. Despite the fact that these classes are not yet explicit in the Fair Housing Act, they are also considered as protected classes. These new classes are:
5. Who enforces the Fair Housing Law?
You may be wondering; who enforces this law?
Well, for many years, enforcement has been a major concern among housing advocates. This is mainly because of inconsistencies across local jurisdictions. Although, anyone whose rights have been violated can file a lawsuit in a federal district court or file a claim with HUD.
Officially, the U.S. Department of Housing and Urban Development or HUD is fully responsible for the Fair Housing Act.
But, how do they enforce this law?
HUD employs two methods of enforcement:
Investigating discrimination claims – Obviously, anyone who feels like their Fair Housing right has been infringed can file a discrimination claim. Thereafter, HUD dispatches a team to investigate the claim. If they find any merit to the case, they’ll decide on the best course of action.
Fair Housing Testers – HUD uses this technique to check whether sellers or landlords are compliant with the Fair Housing Act. They do so by hiring ordinary people to pose as tenants and home buyers. Therefore, as a landlord or seller, you have to be extra cautious with the things you say on the phone, face-to-face, or on an advertisement to your prospective tenants or home buyers.
6. Are there any exemptions?
Does the Fair Housing Act apply to everyone in Seattle, WA?
No. There are a few exemptions worth noting including:
A members-only private club or organization,
Single-family homes sold or rented without using a broker, and;
an owner-occupied home with less than 4 rentable units.
7. What are the penalties for violating the Fair Housing Act?
In case you innocently (or not so innocently) violate the Fair Housing Law, there are a few penalties you may face.
A simple discrimination charge attracts a fine or imprisonment for at most a year or both.
In case there are bodily injuries, the use/attempted use/threatened use of dangerous weapons/explosives/fire, there shall be a fine to be paid or imprisonment for at most ten years or both.
Lastly, if the discrimination results in a death/attempt to kill, kidnapping/attempted kidnapping, aggravated sexual abuse/attempted aggravated sexual abuse, the penalty may be a fine or imprisonment for any number of years (sometimes life imprisonment), or both.
8. Are there ways to avoid an accusation of discrimination?
There are a few things you can do to steer clear of Fair Housing charges. For example:
Treat every prospective tenant as a HUD agent trying to bust you for discrimination. Therefore, choose your words carefully when talking to prospects or creating an advertisement.
Despite the fact that you are expected to comply with the Fair Housing Law, there are a few qualities you can use to deny the sale or renting of your property. These things include criminal records, poor credit, inability to pay the rent, or even unhealthy lifestyles like smoking.
Maintain consistency at all times. Vetting your prospects using the same process minimizes the chances of you being accused of discrimination. Also, treat everyone with respect, dignity, and kindness.
In summary, these are eight of the most common questions people ask about the Fair Housing Act. If you are a landlord or a property investor in Seattle, WA, the information provided above can greatly help you to avoid legal issues with your prospects due to discrimination.
Turning your home into an investment property can be a fantastic way to start making extra income. But, the transformation should be treated as a financial decision rather than an emotional one.
Emotional decisions tend to be reactive. They are fast, reflexive, and don’t always have our long-term well-being in mind. Sure, it’s understandable that people develop strong connections with their houses. It is their home after all.
The dining room has been the setting for many a great dinner parties. You’ve spent many hours on the backyard patio. Your kids grew up in the house; you can still see the pencil marks made on the door frame marking their growth. Perhaps, you may even have grew up in the house, and it’s been in the family for over half a century.
However, when considering turning your former home into an investment property, your decisions should be based on the financial benefits. By hanging onto a “love affair” with your home, you are subconsciously sabotaging your chances for success.
That’s why in this article, we share 5 tips on how to transition from a home you loved to one that is strictly for business. It is easy to rent our a house, just read on.
Tip #1: Neutralize the home.
Neutralizing your home has two main benefits. One, it can help make the home ‘show ready’. And two, it will help depersonalize you home. It’ll seem more like a house and less like a home, allowing your guests to feel more comfortable.
That bright blue child’s room or red dining room might have pleased you, but your guest might not feel the same way. These personal touches are what people on HGTV refer to as “putting your stamp on something.”
So, essentially, your goal should be to get rid of your “stamp”. Here are some tips on how depersonalize your rental property:
Paint in neutral colors. Neutral colors give off an open-minded and simplistic attitude. They create few distractions. They appeal to a greater mass of people and go with all furniture styles and colors.
Clean your rental property. A clean home conveys a pride of ownership and assumed maintenance.
Get rid of all your furnishings and personal belongings. Pack away “theme based” or ornate pieces of accessories, artwork, and furniture and replace them with nice and stylish objects.
Repair all the quirky home decor you have grown used to: dated light fixtures, stuck drawers, leaky faucets).
Tip #2: Get additional landlord insurance.
Your homeowner’s insurance won’t be enough now that you are transforming your former home into an investment property. Anytime you have someone staying in your property, you assume some degree of responsibility to their safety.
What if there is a gas leak that causes an explosion? What if a tree falls on the home injuring your tenant? Or, what if a natural disaster occurs, destroying the home rendering it uninhabitable?
Landlord liability coverage may help protect you from financial loss arising due to property damage from severe weather, break-in, fire, and more.
In addition, you should also consider making a renter’s insurance mandatory for tenants. It’ll benefit you just as much as your tenant.
Tip #3: Determine how much rent to charge.
You’ll want to set a rent price that attracts tenants and will lead to profits. There are a number of things you’ll need to think about when you’re trying to determine how much rent to charge.
You could start by considering what landlords are charging for similar rentals in your area. This is what real estate agents refer to as comparative market analysis. Websites like Craigslist or Trulia can also prove useful in this regard.
Another way to determine how much rent to charge is by figuring out your former home’s value. You could use a website like Zillow to help you in this regard. However, for a more accurate assessment, a home appraiser is the best option.
The rent amount should be a percentage of the value of your home. Normally, rents fall between 0.8 percent and 1.1 percent of the value of the home. For a house valued at $250,000, for example, a landlord could ask a rent of between $2000 and $2,750 every month.
Also, bear in mind that some states have rental laws that limit how much landlords can ask for rent and security deposits. Places like Washington D.C, California, Maryland and New York, for instance, have rent control laws in place.
Tip #4: Advertise your house for rent.
Once you are emotionally detached and the home is show-ready, advertise it. Gone are the days of simply placing a sign outside a home when you are trying to rent a home. Today, the internet is a critical part of our daily lives and you need to use this to your advantage.
Prospective tenants are looking for dynamic content that gives them more than just a number of baths and bedrooms. They are looking for interactive media, real-time mapping, 3D walk-throughs, social integration, rental reviews, and videos.
Rental listing sites provide the best way to maximize exposure for your rental property. Remember, the goal is to get your listing in front of as many potential renters as possible.
Examples of rental listing sites include Realtor, Rentalhouses, Hotpads.com, Zillow, and Craigslist.
Tip #5: Prepare questions to ask prospective tenants.
Once you begin getting some interest from prospective renters, it’s time set up the showing. Prepare a set of questions to ask them. These will help you screen for good tenants from the bad, immediately. The following are some good examples of questions to ask your prospective tenants.
Why are you moving? Look for legitimate reasons for moving, such as wanting more room and space or changing jobs.
How many people will be living with you? Generally, the fewer the better. It means less wear and tear. As a guide, look for a maximum of two people per bedroom.
What is your monthly income? Look for a tenant making at least two and a half times their monthly rent. The last thing you want is having to evict a tenant for nonpayment of rent.
Will you agree to a credit and background check? If they hesitate to answer, it’s likely they have something to hide or don’t want to commit. Continue looking.
Becoming a landlord is a big step. Your world, like becoming a parent, is about to change; decision making, obligation and duty of maintenance are all matters to consider. Get it right and it can be fulfilling and financially rewarding. Get it wrong and it can become frustrating and stressful.