What Counts as a Loss in a Rental Property?
As a property manager, one of your many roles is to monitor residents who are moving in and out of your properties. Typically, you are aware of people moving in and out via the acceptance and the issuance of notices, either a standard renter's agreement or an eviction notice. However, you may notice that particular tenants have overdue rent, and they have not tried to contact you. You call, write letters, and knock on doors with no luck. In some circumstances, people choose to abandon the property altogether rather than deal with their landlord or suffer the consequences of delinquent payments.
Prevent Abandoned Property with Tenant Screening
Abandonment of property is a reality in today's economy when many individuals are struggling to pay their bills, including their rent. This underlines the importance of tenant screening. When communicating with prospective renters, there are a number of tenant screening questions that should be answered. A thorough screening of potential tenants should include a full credit report, including corresponding scores from all three credit bureaus, a nationwide criminal report and a report expanding on past bankruptcies or foreclosures.
You should make your tenants aware that you are paying attention to their behavior. That does not mean you need to nag and constantly be around tenants, but making sure you are taking care of any problems and are readily available will deter abandonment. Tenants are more likely to abandon property if they hardly see you.
Go Back to Your Rental Agreement
Check your rental lease for a clause on abandonment. This should be a component of any lease. Depending on state laws and local legislation, definitions of abandonment differ. The situation has to meet the defined criteria before the rental property can be labeled as abandoned.
In some situations, it can be difficult to determine if the property is actually abandoned. Some residents may leave everything behind, including the house keys, while some will leave behind personal items, but take the keys with them. It is important that you start an investigation by asking nearby tenants if they have seen or communicated with the suspect renters. Check to see if their vehicles are still in the garage or on property grounds. If you tried to contact them via their supplied form of communication, then issue a three-day notice and an abandonment notice.
If you suspect that renters have abandoned the unit, then calculate rent owed plus any incurred damages. Subtract this from the security deposit you received when the tenants moved in. If you see substantial damage that exceeds the security deposit, write a letter tallying losses and expenses. This notice should be signed and dated by you, then mailed to the tenant. Even if the tenant has abandoned the property, legal actions take into consideration that you tried to contact the renters, and you followed proper protocol.
What Constitutes a Loss
Normally, the IRS allows you to write off customary expenses against accrued income. There are specific lines such as interest, insurance and advertising that can be written off on IRS Schedule E. You can add more categories in the other expenses line. This could be used to help alleviate the blow that you suffered due to an abandoned property.
Abandoned property is an unfortunate reality that landlords sometimes have to deal with. Rather than simply suffering through the loss of income, though, you can recoup costs by deducting the expense and taking legal action against the tenant, if possible. Better yet, abandonment can be avoided preemptively through quality tenant screening and a well-written rental agreement.
Many times, there are issues between a landlord and a tenant that need to be resolved but are failed to do so, because both parties have gone too far with their actions, and have retaliated in the... More
Where there is a landlord, there will also be a tenant, and it is no surprise that these two parties can only work together once there is some sort of agreement, contract or a binding deal in place.... More
Many landlords find it difficult to write and draft a lease agreement. Since every State has its own general template, it can also be difficult to make sure your lease agreement meets all the criteria... More
When it comes to being a landlord, one should know that it is not for the unprepared individual. This should be clear that being a landlord does not simply mean that you will be taking the rent and... More
Becoming a landlord is a major deal and no one can simply get up and think, “well, yes I think I should be a landlord and rent out my flat.” If you are thinking that you would like to be a landlord,... More
If you’re a landlord and want to manage your business in a better way, you should endeavor to get in touch with those industry experts who have the experience and the skills to help you do it. This is... More
Landlords and aspiring landlords, do not become as such, without guidance and advice. There is a lot that goes into being a landlord nowadays; in fact, there is so much to learn that it often confuses... More
Renting out an apartment or a house can become a constant revenue source for landlords, but at the same time, it gives rise to several problems. It is a fact that high standards, a strict lease... More
If you are currently thinking of becoming a landlord only because it helps you have a constant stream of income, you should think twice. It’s not that you should not consider offering your property... More