It is time to start preparing for freezing temperatures and Excalibur recommends having your property professionally winterized if it is vacant and not yet on the market.  Here is a list of items that should be addressed:

- Drain all water supply lines and water heater

- Put antifreeze (usually a RV type antifreeze) in drains and toilets

- Inspect roof and gutters to make sure they are in good repair and clean

If at all possible, the heat should be left on set at no less than 55 degrees.  While this will no doubt have a small cost associated with it; it is nothing compared to the cost of a repair due to damage resulting from frozen pipes, etc…  It is also a good idea to insulate any exposed pipes including water lines and hose bibs, as well as, the hot water heater.

For properties that are vacant and on the market for rent it is best to have the heat on and water on.  It will market better to prospective buyers and tenants if they are focused on the property as opposed to how cold it is inside.  It will also be necessary to have the water on to clean the property and inevitably someone will need to use the bathroom from time to time during showings.  In these situations, the heat will be on at a minimum (55 degrees) to protect against freezing pipes and to keep the property in showable condition.  Please contact your property manager for more information about having your property winterized today.  Don’t wait until it is too late.

Blog Post by John Durham, Marketing Director with Excalibur Home Management
Excalibur is an Atlanta Property Management company

Fertilize your lawn in October before the first heavy freeze, no matter if you have a cool or warm-season grass – but use a winterizer fertilizer.  Common winterizing fertilizer formulas are 18-6-12 or 15-5-10 which come in organic and non-organic products.  The winter weeds are germinating a lot in the fall, and getting ready for next year, so make sure you apply a pre-emergent as soon as possible. The best time to apply a pre-emergent to combat winter weeds is in August or September, but if you haven’t done so yet, do it now!  By attacking the weeds now, you can do more about weed control than you can in the spring or summer. There are winterizer fertilizers that include pre-emergents so you can knock both out with one shot.  If you have a lot of leaves, mulch them up and apply them to your lawn. They won’t contribute to thatch and they act almost as another fertilizer application for the turf.

If you don’t want to do it yourself, you can hire a company, Excalibur uses TruGreen, to complete the service.  If you are an Excalibur client, contact your property manager today to get on the list for TruGreen service.  You can submit an online maintenance request if you would like by clicking this link: http://www.excalhomes.com/ContactUs.html.

Lastly, mowing is the single most important thing you can do to manage the vigor of your grass and its ability to compete against weeds. In the fall, the best results are obtained by mowing at the highest setting on your mower. In no case should the mowing leave the grass less than 1.5 inches tall. This will help insulate the grass during the winter.

Blog Post by John Durham, Marketing Director with Excalibur Home Management
Excalibur is an Atlanta Property Management company servicing the Metro Atlanta area

1. Turn on the furnace at your rental properties, and make sure it runs.  Change the furnace filters. You could even leave several behind to motivate tenants to change them on a regular basis.  If your property is vacant, leave the temperature on 55 to prevent frozen pipes. If you are an Excalibur client, contact your property manager and schedule to have the Fall Preventative Maintenance completed.
2. Speaking of frozen pipes, locate all water shut-off valves. Prevent water emergencies by showing tenants where the water main, water heater, and any other valves are located. Then instruct tenants on how to turn them off in case of emergency.
3. Remove any hoses and cover outside faucets. Install inexpensive insulators to prevent freezing pipes—and expensive repairs. 
4. Have chimneys inspected by a chimney sweep so there aren’t any issues when the fireplace is used.

Blog Post by John Durham, Marketing Director with Excalibur Home Management.

Foreclosures are up in August according to several online forecasters.  According to ForeclosureRadar.com, “Foreclosure starts jumped significantly, reversing what had been a declining trend over the past several months. Investors bought more properties on the courthouse steps in August than in July everywhere except in Washington.” They go on to state that the primary factor may be Bank of America, “This appears to have been primarily driven by Bank of America and related entities, where we saw an overall 116 percent increase from July to August.” 

According to the Atlanta Business Chronicle, “RealtyTrac reported Thursday Georgia posted the fifth-highest state total with 11,743 properties with foreclosure filings in August — an increase of 2 percent from July, but down 28 percent from August 2010. Irvine, Calif.-based RealtyTrac defines a foreclosure as default notices, scheduled auctions and bank repossessions.”

This is the main reason that Excalibur has been asking our new clients and just started asking our existing clients for a copy of their mortgage statement.  We are trying to avoid putting tenants or keeping tenants in properties that may be under foreclosure.  As you can imagine that can be quite burdensome to find out as a tenant that you may be losing your home and it is out of your control.  The earlier we can prepare the tenants regarding this situation, the better.  Another reason is some owners have been accused of fraud for renting a property to a tenant when the owner knew the loan was in arrears.  We want the owner to avoid the risk of facing a criminal complaint from a new tenant.

Excalibur’s management agreement does require all owners to inform us within 15 days as soon as the mortgage payments are not current.  Please provide the mortgage statement to our office when requested.  We thank you in advance for your cooperation.  Please let your property manager or our office know if you have any questions. 

Blog post by John Durham, Marketing/Communications Director
Excalibur Home Management, an Atlanta property management company

During the past two years several of our clients have lost property to foreclosure.  Often they don’t notify us or consult with us about their circumstances.  They just decide one day that they are no longer willing to carry a property with a negative cash flow so they stop making payments.  But there may be significant tax consequences for the client that loses the property thru foreclosure or a short sale.  The investor may still owe Capital Gains Tax, tax on Cancellation of Debt (COD), and/or tax on the recapture of depreciation deductions taken on the property.

 What is Cancellation of Debt? (From IRS.gov)

If you borrow money from a commercial lender and the lender later cancels or forgives the debt, you may have to include the cancelled amount in income for tax purposes, depending on the circumstances. When you borrowed the money you were not required to include the loan proceeds in income because you had an obligation to repay the lender. When that obligation is subsequently forgiven, the amount you received as loan proceeds is reportable as income because you no longer have an obligation to repay the lender. The lender is usually required to report the amount of the canceled debt to you and the IRS on a Form 1099-C, Cancellation of Debt.

Here’s a very simplified example. You borrow $10,000 and default on the loan after paying back $2,000. If the lender is unable to collect the remaining debt from you, there is a cancellation of debt of $8,000, which generally is taxable income to you.

Here are a few quick examples to illustrate the problem:

Scenario 1 – An investor buys a rental house in 2005 for $160,000 and gets a $152,000 mortgage (we saw several deals like this in our market back then).  Now the investor is experiencing a negative cash flow of about -$300 per month.  So the investor stops making payments on the property.  The lender forecloses and the property is bid in at the courthouse steps by the lender for the mortgage balance of $150,000.  Since it “sold” for the amount of the mortgage, there is no cancellation of debt.  The investor depreciated the property over 5 years for a total of $27,000.  Now the investor will owe the tax (25% Federal) on recapturing those depreciation deductions which would be approximately $6,750. 

Scenario 2 – An investor buys a rental house in 2005 for $160,000 and gets a $152,000 mortgage.  Now the investor is experiencing a negative cash flow of about -$300 per month.  So the investor stops making payments on the property.  The lender forecloses but since the property is now worth much less today it is sold on the courthouse steps for $130,000.  The investor’s outstanding loan balance at the time of sale is %150,000.  So the investor has a $20,000 cancellation of debt which could be taxed as ordinary income.  The investor depreciated the property over 5 years for a total of $27,000.  Now the investor will owe the tax (25% Federal) on recapturing those depreciation deductions.  The investor’s total tax obligation may be as much as $11,700 for just Federal tax.

Scenario 3 – An investor buys a rental house 10 years ago for $160,000.  Over time the house appreciates in value and 3 years ago the investor does a “cash out refinance”.  Based on the new higher value the investor gets a new loan for $200,000 and uses the additional proceeds to send a child to college.  Now decreasing rents or other financial problems have made it uncomfortable for the investor to keep the house with a negative cash flow.  So the investor stops making payments and the lender forecloses and the property is “sold” on the courthouse steps for $200,000.  The investor has no cancellation of debt but there is a capital gain.  The investor bought the house for $160,000 and sold it for $200,000 so there is a gain of $40,000.  The Federal capital gains tax rate for 2010 is 15% (it is expected to go up in 2011 plus we have the new 2.9% Medicare tax on capital gains from our most recent health care legislation).  So the Federal capital gains tax will be $6,000 in 2010.  The investor also depreciated the property over 10 years with total deductions of $49,000.  So the tax on recapturing those depreciation deductions will be approximately $12,250 for a total tax obligation of $18,250.

Then there are other ramifications due to the negative impact the foreclosure has on the investor’s credit.  This could lead to higher interest rates from lenders or being denied some types of financing.  All to get away from a -$300 per month negative cash flow.  Based on the above examples, it may well be cheaper to “tough it out” for the next 2 – 3 years then sell the property as the market gets a little stronger.  Do the math first – not once it is too late.

Several caveats:  Some investors may choose to take advantage of their rights under the American Recovery and Reinvestment Act of 2009 to delay the recognition of some of these taxes until 2014.  The tax obligation is still there but payment is postponed.  Other clients that started out as frustrated sellers may be able to classify the house as their personal residence (they lived there at least 2 of the past 5 years) and take advantage of some protections under the Mortgage Debt Relief Act of 2007.  The investor may have a lot of accumulated losses which might offset some of these capital gains.  Each person’s situation will be unique.  It may be best to consult with an accounting professional.

Mike Nelson, GRI, RMP, MPM is the managing broker of Excalibur Home Management, LLC  which currently represent over 1200 rental houses in the Metro Atlanta area.
Blog posted by John Durham, Marketing & Communications Director with Excalibur Home Management, LLC.

Comparing the number of days a rental property sits on the market can tell us alot especially when looking at the “asking rent” for the same time period.  The rental market in Cumming is much improved from the same time period in 2010.  The average number of days on the market for 3-4 BDR houses in Cumming this time last year was around 160 days compared to around 45 days now.  As you can see below the rent has adjusted down slightly but is close to what it was this time last year.  Both number of days on the market and asking rent are better than the national average.

The statistical information was provided by www.rentalhomepros.com and www.narpm.org.  Rental Home Professionals provides a comprehensive database of available rental properties and property managers throughout the United States offered by members of the National Association of Residential Property Managers for the benefit of Renters, Landlords, and Property Managers.

According to research conducted by Zelman & Assoc., single family detached houses comprise approximately 28% of all rental housing in the US today.  Condos and townhomes represent another 6% of the rental housing market.  Whether a tenant will choose to live in an apartment or a rental house has more to do with their age and lifestyle than any other factors.  Young singles are much more likely to rent apartments.  As they get married and have children they are much more likely to rent a house.  And toward their later years, as they enter their retirement years, renters are more likely to live in multi-family housing again.  Most single family renters are moving from other single family housing and will move on to other single family housing – 58% as renters and 15% move out to buy a home these days.  Approximately 31% of tenants renting houses today have been homeowners that lost their home to foreclosure.   Conclusion – landlords need to be open to renting to victims of foreclosure since they represent such a large segment of the market.  Of course you still want to conduct a thorough background check.  But don’t let the fact that your applicant has been thru a foreclosure automatically rule them out as your new resident.

Blog Written By: Mike Nelson, President/Broker, Excalibur Home Management, LLC and Excalibur Realty, LLC

In many markets across the country it is less expensive to rent a house than it is to buy these days.  According to research conducted by Wall Street analysts Zelman & Associates, if one were to purchase a house at the average sales price (approximately $170,983 today) with the minimum down payment, assuming the buyer is in the 15% federal tax bracket, this buyer’s  monthly cost to own is $1171 to $1280 per month (depending on the mortgage FHA vs. Conventional).  The average cost to rent the same house is only $1004 per month.  However, the average home price in Metro Atlanta is only $111,300.  The average rent for this Atlanta house would be $808 but the monthly payment would only be about $689.  Conclusion – it’s a good time to buy a house in Atlanta.

Blog Written By: Mike Nelson, President/Broker, Excalibur Home Management, LLC and Excalibur Realty, LLC

Written By Mike Nelson

We have discussed the topic of Fair Housing before on this blog.  One of the most important fair housing concerns as property managers is Disability; specifically, having applicants with pets, any kind of pet, claiming that their pet is a “service animal” and you, therefore, MUST permit the animal to live with the applicant.  Some people have abused this law. Effective as of March 15, 2011, the ADA has a new and specific definition for “service animal.”  ”Service animal” means any dog that is individually trained to do work or perform tasks for the benefit of an individual with a disability, including a physical, sensory, psychiatric, intellectual, or other mental disability. Other species of animals, whether wild or domestic, trained or untrained, are not service animals for the purposes of this definition. The work or tasks performed by a service animal must be directly related to the handler’s disability. Examples of work or tasks include, but are not limited to, assisting individuals who are blind or have low vision with navigation and other tasks, alerting individuals who are deaf or hard of hearing to the presence of people or sounds, providing non-violent protection or rescue work, pulling a wheelchair, assisting an individual during a seizure, alerting individuals to the presence of allergens, retrieving items such as medicine or the telephone, providing physical support and assistance with balance and stability to individuals with mobility disabilities, and helping persons with psychiatric and neurological disabilities by preventing or interrupting impulsive or destructive behaviors. The crime deterrent effects of an animal’s presence and the provision of emotional support, well-being, comfort, or companionship do not constitute work or tasks for the purposes of this definition. Note that it must be a dog (no cats, iguanas, etc.) specifically trained for the task.

Now with that being said, please remember you can NOT ask the applicant what their disability is!  However, you can ask how the animal helps them and you can require them to provide documentation from a medical professional that they have a legitimate need (there is a HUD form). Here is a link to an article in the Wall Street Journal on this issue you might find interesting: http://online.wsj.com/article/SB10001424052748703652104576122461180284204.html

Blog posted by John Durham, Marketing and Communications Director with Excalibur Home Management, LLC.