Property Management Blog

Most if not all landlords collect security deposits upon signing the lease agreement to ensure that tenants leave the property in the same condition as it was when they moved in. A security deposit is collected when a new tenant moves in to cover the repairs that are considered to be beyond "normal wear and tear".

What exactly is “normal wear and tear”? 

How is it different from damage? 

Many tenants and landlords have the same questions when it comes to making deductions from the tenant's security deposit. They have their own definition of what it is and it often leads to disagreements and conflict.

As a result, the definition should be clearly defined in the lease agreement. There should be no room for assumptions as they can result in conflict between you and your tenant.

What Is Normal Wear and Tear?

Generally, there are two types. The first one is caused by reasonable use and the other type is the above reasonable use caused by the tenant.

How does this apply to the maintenance of your Torrance, California property?

For example, a hole in the kitchen wall is not considered to be normal wear and tear. Nor are broken windows.

The tenant cannot be charged for the following normal wear and tear:

• Paint fading or chipping from furniture being pushed against it or small holes or marks on the walls - It is normal for tenants to have their furniture against the walls.

• Faded or worn-out carpeting or flooring or showing a trail from the paths - It is normal for the carpet to wear out after constant use. This is also true for scuffed up wood floors.
• Plumbing starting to drip or leak or fittings and washers wearing out - It is normal for things to leak occasionally as well as to have dirty grout or tiles. However, a stain on the ceiling from an overflowed bath is not normal wear and tear.
• Older appliances and fixtures wearing out or breaking down - Every appliance or item has a lifespan and it is normal for these to eventually stop working or break.

However, the following scenarios are not considered normal damage, and the tenant's security deposit will be used to fix them:

• Scribbles, drawings, and scratches all over the walls
• Ripped or marked-up wallpaper
• Badly scratched or gouged floors
• Wine stains on the carpet, iron burns on hardwood, and broken tiles 
• Cracked toilet tanks or broken toilet seats
• Doors or windows coming off their hinges or are broken
• Stain on the ceiling from an overflowed bath
• Broken or missing handles or locks
• Urine or pet odor throughout the property

These instances are damages that are the tenants' fault. 

Normal wear and tear is deterioration that occurs based upon the use for which the item is intended. Furthermore, negligence, carelessness, accidents, abuse, or intentional damage to the premises or equipment is not.

When Is It Considered Damage?

When something is considering damaged, disagreements often occur between the landlord and tenant.

Before signing the lease, both the landlord and the tenant should inspect the property. They should both pay close attention to the section in the lease agreement talking about the return of the security deposit and be in agreement with it before it is signed.

Returning the Security Deposit

Determining whether or not to return the security deposit to the tenant at the end of a lease can be difficult because it is left for interpretation.

Disputes can be minimized, however. The landlord needs to give valid reasons why the damage is not considered normal wear and tear. 

This is where a solid lease agreement will come in handy. It would clearly outline the differences between normal wear and tear and accidental or intentional damages. It would also indicate the state of the property when the tenant moved in to compare it to when he or she moved out.

Experienced landlords in Torrance, California know the importance of setting expectations on how their property should be returned and how tenants can expect to get their security deposit refunded to them. It avoids potential misunderstandings and arguments between you and your tenants, keeping the relationship strong.

The Fair Housing Act gives every American the right to equal and fair treatment in regards to housing. However, in some cases, there are some landlords that are not aware that this law exists.

Due to the lack of information and experience, a property owner can find themselves in court fighting discrimination a lawsuit.

That is why we will discuss the Fair Housing Act in this article. It will cover 8 things that every investment rental owner should know about this law.

1. What's the Federal Fair Housing Act?

The main objective of the FHA is to fight discrimination in the selling, buying, and renting of homes. It was passed to prevent sellers and landlords from discriminating against certain classes of people.

Essentially, the Act ensures that every American citizen is treated equally and fairly in any activity that is related to housing regardless of their class. Such activities include:

• Renting 
• Home selling 
• Getting a home loan

2. When was the law enacted? 

The Fair Housing Act was enacted in 1968, a week after the assassination of Martin Luther King Jr. Historically, discrimination in housing was commonplace.

In 1968, the demand for fair and equal treatment in housing was officially passed as a law.

The series of events that preceded its enactment include the 1964 Civil Rights Act, the 1963 Rumford Fair Housing Act, and the 1960s Civil Rights Movement. 

3. What government body enforces the FHA law? 

The federal executive department with statutory authority to administer and enforce the Fair Housing Act is the United States Department of Housing and Urban Development (HUD). 

HUD enforces the law by using two methods:

A) HUD uses “testers”. The testers are people who pose as tenants or home buyers. Their goal is to test whether or not they will be treated fairly and equally by landlords or home sellers. 

Home sellers and landlords should be cautious and follow the law at all times for this reason.

Examples of discriminatory statements by landlords when advertising their rental units include:

• Great for working folks or students
• Suits mature individuals or couples
• Perfect for female students
• Suitable for single professionals
• Ideal for quiet couples

Other rather openly discriminative statements include: “seeking mature couple,” “must have working income,” and “adult building” or “not suitable for children.” 

B) The other way HUD enforces the Fair Housing Act is through investigating discriminatory claims. Any home buyer or renter that has reasons to believe they have been discriminated against can file a discrimination claim. 

Once a discrimination file has been filed, the next course of action for HUD would be to dispatch a team and conduct investigations immediately. 

4. What are the goals of the FHA? 

The Fair Housing law focusses on 3 main facets of housing: renting, selling, and mortgage. 

Which examples of housing discrimination does this Act protect people from? 

The following are some of them:

• Interfering or threatening someone’s Fair Housing rights
• Using statements that are deemed discriminatory or being biased against a protected class in any form of advertising
• Setting different rules for acquiring a mortgage loan
• Lying about the availability of a housing unit

• Withholding crucial information about a home loan from a person of a protected class
• Performing discriminatory practices during property appraising
• Providing different housing accommodations and amenities for different tenants
• Blockbusting (convincing a property owner to sell their property under false pretense)
• Refusing to rent, sell, or negotiate for housing

5. Which classes of people do the Fair Housing Act protect? 

Originally, the Fair Housing Act protected four classes of people: religion, national origin, race, and color. Later, the list was expanded to include three more classes: sex, familial status, and disability. 

In 2017 we saw the inclusion of two more classes. A judge ruled that gender identity and sexual orientation are protected classes as well. This means that there are 9 protected classes now:

• National origin
• Religion
• Race
• Color
• Sex
• Familial status
• Disability 
• Gender identity
• Sexual orientation

6. Does the Fair Housing Act exempt any groups? 

Yes, the FHA exempts certain groups from its provisions. Such groups include:

• An owner-occupied home with less than four rentable units
• Single-family homes rented or sold without using a broker
• Members-only organizations or private clubs

7. Why do some states have other protected classes not mentioned here? 

At the federal level, there are 7 (and just recently 9) protected classes. Since the law came to be in 1968, individual states have also passed legislation to include even more classes.

Florida, for example, has additional classes such as:

• Sickle cell trait
• AIDS/HIV
• Marital status
• Age
• Genetic information
• Citizenship status

8. What’s the penalty for breaching the FHA? 

Regardless of whether the violation is intentional or not, there are multiple penalties you may face. These penalties vary subject to the nature and severity of the violation committed. 

If the violation is subtle, then it’ll usually attract imprisonment of less than a year or a fine of a few thousand dollars. In case the violation involved threats or bodily harm, then there shall be a large fine and/or imprisonment of up to ten years.

In case of sexual abuse, kidnapping, or even killing, the penalty may include a large fine and long-term imprisonment.

These are 8 aspects of the Fair Housing Act that every home seller or landlord in California should know about. This information is only meant to be the basics of the Act. If you want more help, consider hiring the services of a professional.

Letting a professional manage your Torrance, California rental property is a great step towards running a successful rental business. 

The right property manager understands the ins and outs of the local rental business. He has potentially managed dozens if not hundreds of other rental properties. As such, the manager will be better placed to advice you on the strategies that work. 

For example, he can help advise you on what rental marketing methods will work for your property. As a result, this can help save you both time and money. 

There is one major challenge when it comes to hiring a property manager. As with other professionals, not all property managers are created equal. Some are there to help you succeed while some are there to make money off of you. 

How do you find the best property manager for your Torrance rental property? 

It’s actually quite simple. You need to have questions ready for the interviews. Even without any experience managing properties, these can help you determine whether or not the individual is a good fit as the property manager.

1. What services do you offer property owners? 

Pick a property manager who can handle a variety of services. Good examples of such services include property marketing, tenant screening, property repair and maintenance, and evictions. 

If the property manager is only willing to handle one or two of these services, he may not be a good fit. You would be better off continuing your search. 

2. Are you managing any property right now? 

If the property manager isn’t managing any property, walk away. That’s a red flag. It may mean two things. One, the property manager has lost business due to poor services. Or two, he or she is just starting out in the property management business.

If the property manager is managing some properties, find some more information about that. The goal would be to find out just how many properties they are managing. If they are managing too many properties, you risk getting lost in the shuffle.

If they are managing too few properties, it may indicate they are just starting out. 

You should ideally look for a property manager with a portfolio of between 200 and 600 units. 

3. Do you have experience managing rental properties? 

Don’t get tricked by how well designed their website is or how great their office looks. Looks can be deceiving! 

Choose a property manager that has a wealth of experience based on two important things. One, the years they have been in the Torrance rental business, and two, how many properties they have managed. 

4. Do you know how to set the rent amount? 

If you have been in the landlording business for a while, then you understand how important charging the appropriate rent amount is. It attracts the right type of tenant and vice versa.

If a property manager doesn’t know how to set the rent amount, it’s a sign of trouble. Continue your search.

If they say they do, ask them how they go about it. If they don’t mention anything to do with ‘comparative market analysis’, walk away. 

5. Have you made any investments in the Torrance real estate market yourselves? 

Ideally, look for a property manager that has done so. They will most likely know the challenges of running a rental business there and how to overcome them. 

However, if they haven’t invested themselves, chances are that they lack the core experience to help you succeed.

6. Is your management agreement inescapable? 

As with any other business out there, there are some property management companies that employ rogue business practices. That’s why it always pays to read and fully understand any contractual agreement prior to signing it.

Understand the length of the contractual term, terms of the renewal of the agreement, and what happens should any party severe the contract.

7. How do you price your property management services? 

There are generally two pricing options when it comes to property management. There is the flat rate option and the percentage option.

With the former option, it means that you’ll have to pay the property management company regardless of whether your property is occupied or not. So ask yourself – will the property manager have any motivation to find a tenant for your rental property? 

In most cases, most likely not. Why should they bother themselves when they can just sit back and relax and still get paid? 

The second option is the percentage of collected rent. With this one, it means that the property manager receives a percentage of collected rent. This is usually about 10%. So with a rental income of, say, $3,000 per month, you can expect to pay your property manager about $300. 

The latter option is usually the most preferred by many property owners in Torrance. This is because it motivates property managers to ensure the property is occupied at all times. In other words, they don’t get paid if there is no tenant. 

8. Are there any miscellaneous fees? 

If the company is charging a very low monthly fee, think again. Remember, your property manager is there to make money. 

If he’s not making it via the monthly fee, odds are that he’ll try to make it by charging lots of miscellaneous fees. 

9. Will you carry out property repair and maintenance? 

Buying a rental property is obviously a huge financial undertaking. As such, it only makes sense to hire a property manager who can regularly inspect it for damage. 

There you have it. Best questions to ask a property manager before hiring. 

Remember to only choose the one that meets all or most of your expectations.

Finding rental properties with superior earning potential is one of the keys to be a successful landlord. A profitable rental property will cover the mortgage, property taxes, insurance, repair expenses as well as provide you with returns on your investment. 

That might sound like a tall order, but many property investors enjoy the benefits of their passive income thanks to having made the right selection in their investment property.

To be part of that group, keep on reading to know what the right steps are to take to find a profitable property in Torrance, CA. 

Here are a few to get you started on your investment journey to success. 

1. Look for a reputable real estate broker. 

If this is your first time purchasing a property or you simply lack the time (or patience) to deal with all the paperwork and searching yourself, then consider hiring a real estate agent or broker. 

The right hire can mean the difference between success and failure in your quest to find the right rental property for your needs. 

A good agent should know the area like the back of their hand. They can also tell you which property will meet your investment goals and budget. This is especially important if you are considering an out-of-state investment. 

Not all real estate agents are created equal, though. You should always do your research and a bit of a digital background check prior to hiring one. 

2. Go through your finances thoroughly. 

A real estate investment is a huge financial undertaking. It will require you to go through your finances and see whether they are in order or not. 

In particular, check your credit report. Does it contain any inaccuracies? 

Ideally, you should get copies of this report from all the three major credit reference bureaus – Equifax, Experian, and TransUnion. 

A good credit report can help you gain credit lines, better mortgage rates or even insurance. 

3. Don’t overpay your investment. 

Overpaying occurs when you pay an amount for a property that negates or significantly diminishes its actual value. 

It hurts your investment since there will be not much room for growth, limiting your earnings from the investment. 

So, when looking to buy a property, set for yourself a maximum amount that you can afford to spend, leaving you with some cushion should there be vacancies. 

4. Consider buying a rent-ready property. 

A rent-ready property may be a bit more expensive. On the bright side, it’ll be ready for occupation the moment you buy it. 

You might even find yourself collecting rent at the end of the first month. 

Some buyers, however, often make the mistake of buying a fixer upper. In many cases, the price is often the main attraction. 

But sooner or later, what seemed like a great deal may end up being a costly mistake if you lack the experience or the time to see the renovations and/or maintenance repairs through. 

5. Get your Torrance property inspected. 

Don’t make the mistake of buying a property without having it inspected. It can be a costly mistake. 

A good inspector can find any hidden issues that could end up costing you in the short and long term. 

A good inspector will make sure that the environment is safe for tenants, that the paint is not lead-based, and that the electrical wiring is up to code. 

While you may need to foot the inspection bill, it can certainly save you lots of money down the road in unexpected repairs. 

6. Know the neighborhood. 

Now that you have found a property that meets your conditions, the next step is to research the neighborhood. Remember, location is everything when it comes to your real estate investment. 

It can make the difference between a property that is struggling and one that is flourishing. 

What you should you check in a neighborhood?

The first thing you want to look at is the vacancy rate. Are there many vacant homes in the area? If there are, chances are yours will be, too. 

Another thing you want to look at is the crime rate. No one wants to live in a crime prone area. 

You also want to look out for the quality of schools in the area. For tenants with school-aged children, the school district is a major priority

7. Follow the 1% Rule. 

The 1% rule states that a rental property should rent for at least 1% of the purchase price to yield a positive cash flow. 

For example, a $200,000 house would need to rent for $2,000 per month to be profitable. 

If a property meets this rule, it means that it’ll take 100 months for the property to recoup its cost. That’s 8.3 years. 

8. Don’t forget about curb appeal.

Tenants don’t want to live somewhere they would be embarrassed to bring friends and family to, just like you wouldn’t want to live in an unattractive home. 

Prospective tenants may not even want to apply to occupy your property based on how it looks from the outside or in pictures. 

While it might seem trivial, decorative touches like painting your home or updating your landscaping can be the difference between an occupied or vacant rental unit. 

9. Look at the insurance rates. 

As important as they are, insurance rates cut into your profits. 

Make sure to stay away from properties with extra high rates if possible. A property located in a flood zone, for example, may require you to carry extra flood insurance. 

If possible, buy a property that doesn’t require extra insurance. If you’re not sure whether an extra insurance is mandatory or not, simply call your insurance representative. 

10. Invest in a neighborhood with job opportunities. 

The other indicator of a profitable investment property is the rate of job growth. The reasoning behind this is simple: people tend to follow jobs. 

Job board websites and local business news can help you in your research. 

These are the 10 crucial things that you should consider when looking to find a profitable rental property in Torrance, CA. 

Again, if you simply don’t have the time or lack the industry experience, then consider hiring professional help. 

Buying a rental property is a serious transaction with significant financial responsibility.  

That’s why before signing on the dotted lines, it makes sense to do all you can to get the best possible deal.   

So, how do you make sure you get the most value for your money? Well, for starters, have the property inspected by a professional. With a thorough property inspection, you’ll know the house or buildings true conditions.   

The last thing you’d want is to find out that your newly purchased real estate property has serious structural issues. That just means you’ll have to invest in extensive repairs. 

So, once you’ve found the perfect place, have it evaluated by a qualified home inspector. 

It’s also a good idea, as a buyer, to have a general understanding of what you should look out for when rental property hunting. This doesn’t require any expertise, only keen observation. 

9 Problems Commonly Found During Property Inspections

1. Water Leaks

This is perhaps the most common problem encountered during many home inspections in Torrance, California. Water leakages can be caused by many things. Most common sources include:

• Loose supply line connectors. In most cases, this occurs due to a certain movement. For example, your washing machine hose can develop a leak due to the shaking during the spin cycle. When walking around, keep an eye out for watermarks around the washing machine area.
• Intruding tree roots. Most water leaks occur outside a home. Where the tree roots are able to penetrate beneath the residence and interfere with the water pipes. Signs to look out for include wet patches, sinkholes or trees growing close to the house. 
• Excess water pressure. Most pipes and faucets are only built to withstand a certain degree of pressure. Any additional pressure above the threshold can cause leaks. You can get a small sense of the pressure by testing out the various faucets throughout the property.  
• Clogged lines. Clogged gutters, for instance, can cause water to overflow and lead to serious water damage. 

Leaks can waste water, damage your home, and encourage unwanted organic growth. 

2. Faulty Electrical Wiring

The most significant danger of faulty wiring is fire. When electrical wires are cracked, frayed, loose, or overheated, they become unable to properly conduct electricity. This usually causes a fire to break out. 

So, when checking your potential Torrance, CA home, be in the lookout for the following signs of electrical problems. 

• Improper grounding
• GFCI outlets missing or faulty
• Bad electrical outlets
• Inadequate power
• Old or damaged electrical panel

A professional property inspector will be able to tell if there is faulty wiring inside the panel. 

3. Poor Drainage and Land Grading

Without the right slope (grade) around the property, many problems can occur. You may find leaks in the basement and the ground near the foundation may feel spongy. 

Over time, the home’s foundation may start experiencing issues. The excess water may cause the ground to move beneath the structure. This can consequently impact the foundation and cause cracks in its structure. 

Besides potential foundation damage, poor drainage may also lead to rot and mold.

Signs of improper land grading include:

• Floors that visibly slope to one side or the other
• Interior doors that visibly swing to one side or the other, when left ajar
• Interior doors with large, uneven gaps at the top, when closed
• Windows that look off-kilter

4. Roof Damage

Fixing a damaged roof can be among the list of costlier home maintenance expenses. Roof damage can cause water leaks, decrease your home’s value and even cause a home to collapse. So, when looking for a rental property to buy, always observe the roof. 

Roof issues that are commonly found in property inspections include:

• A sagging roof deck
• Staining on interior ceilings or walls
• Blistering or peeling exterior paint
• Wear and tear around roof objects and openings
• Shingles that are curled, cracked, or absent

5. Foundation Issues

While often overlooked, the foundation of a home is an important structural component. It provides strength and integrity to the rest of the building. Therefore, without a strong foundation, you’re bound to have structural issues.  

When at a property viewing, be on the lookout for:

• Separation of counters and cabinets from the wall
• Floors being out of level or sagging, bowing or dipping
• Gaps around window frames or exterior doors
• Sticky doors and windows
• The slab foundation appearing to have moved upwards
• The house appearing to be sinking or having settlement issues
• Cracks on the foundation, wall and/or floors

If you notice any of these things, it’s likely the building is experiencing foundation problems. That said, not all foundation problems are a deal breaker. Some can be simple to fix. 

6. Poor Overall Upkeep and Maintenance

When maintenance issues are deferred, the costs to bring the home back to its former glory can be high. Some telltale signs that the home has had poor overall upkeep and maintenance include:

• Stained decks
• Cracked paint
• Worn carpeting
• Loose caulk

7. Heating System Problems

Related to the point above, proper maintenance of a home’s heating and cooling systems is crucial. That said, not many homeowners service their systems regularly or even as required. 

The lack of maintenance, unknown to them, can end up leaving serious damage to the system. And, as you probably know, fixing heating system problems can easily run the gamut. 

8. Exterior Issues

Exterior issues are also common problems that property inspectors in Torrance encounter. Good examples include poor fencing jobs, cracked driveways, and damp damage. 

9. Improper Ventilation

There are many benefits to having a good ventilation system. It’ll help remove dampness, and expel contaminants, germs, and nasty odors. 

Most ventilation problems typically involve bathroom vent fans. In some cases, though, kitchen vent hoods can also be the culprits. 

Poor installation of a bathroom fan, for instance, can lead to the accumulation of moisture in a property. Over time, this may encourage mold and mildew to grow, leading to the overall deterioration of the property’s condition. 

These are the main problems home inspectors often come across. Doing your due diligence about your potential new investment property can save you huge amounts of money down the road. 

Remember, though, not all home inspectors are created the same. As such, make sure you do your homework in this area as well.

Tax benefits can help you to cut down on your rental expenses by thousands of dollars each year. 

How much do you know about the tax benefits that are available to you? 

If you’ve been searching for ways to maximize your rental income, you’re in the right place. 

This article will show you how by exploring the tax benefits related to your California real estate investment.

You may be wondering; what are my tax incentives in California? Keep on reading to learn more about the tax benefits you can use to maximize your rental income.

Common Real Estate Tax Benefits in California

It’s said that “a dollar saved, is a dollar earned.” And this concept greatly applies to California’s rental property taxes. 

Where to start?

1.   Tax Deductions

Tax deductions can be your biggest source of tax benefits. 

That’s because the government allows you to deduct all expenses you incur to maintain, sustain, manage, and repair your property. 

What are these expenses?

• Depreciation

According to the IRS, rental properties have a productive lifespan of 27.5 years. That means that – to them – your property loses value each year.

They allow you to deduct a depreciation expense each year to cover your property’s exhaustion (wear and tear).

To calculate your depreciation expense, here’s the formula: 

Depreciation expense = Actual value of the property divided by 27.5 years.

For example: If you own a $200,000 rental property, your depreciation expense would be:

Annual depreciation expense = $200,000 / 27.5 = $7,273

Under these conditions, you’ll be allowed to deduct $7,273 depreciation expense from your gross taxable rental income each year.

Impressive, right?

• Interest Payments

Interest payments can also be huge deductible expenses for you. This simply means that you can write-off your:

• Mortgage interest payments.
• Home improvement loan interests.
• And even credit card interest on products and services used in your rental property.

Note that this only covers the interest payments and not your monthly loan repayments. 

• Maintenance and Repairs Expenses

Provided that they are necessary, reasonable, and ordinary, you can also write-off maintenance and repair expenses. These expenses include cleaning costs, repainting, plumbing, and electrical repairs, broken window replacements, and so on. 

Basically, any maintenance and repair expense that maintains the value and state of your rental property counts as a deductible. 

• Travel Expenses

Did you know that you are entitled to a tax deduction on all the travel expenses you incur for your rental activities? 

You are allowed to deduct your expenses whenever you travel to your rental property to:

• Deal with tenant issues
• Deliver supplies
• Collect rent
• Purchase a spare part for a rental repair task

Fuel, vehicle repairs during your travel, airline tickets, hotel accommodation, and meals if you stay overnight also count as travel expenses. 

You can deduct vehicle-related expenses as the actual expenses you incur (repairs, upkeep, and gasoline), or using the standard mileage rate as per the IRS. 

You can check their website for more information. 

However, you have to be very smart with how you deduct travel expenses. The IRS will need proof of these expenses.

Make sure you have sufficient and legitimate receipts/documents to back your travel expenses. 

• Home Office Deductions

If you use a home office to manage the affairs of your rental property, all expenses you incur to maintain that office count as deductibles. 

This write-off applies regardless of whether you own the office property or are just renting it from another landlord. 

• Insurance Premiums, Utilities, and Employee Salaries

The government allows you to deduct premiums you pay for insurance on your rental property. 

Fire, floods, theft, and landlord liability insurance all count as tax deductibles.

You can also deduct your property’s utility expenses and on-site employee salaries from your gross taxable rental income.

• Professional and Legal Services

All expenses you incur to hire attorneys, accountants, real estate investment advisors, and property managers are deductibles.

However, these services and professionals must be there for rental-related activities such as:

• Attorneys to help you with tenant eviction proceedings. 
• Accountants to manage your property’s finances.
• Property management companies to look after your rental property and so on.

As you can see, there are so many tax deductions you can benefit from to lower your tax obligations.

2.   1031 Exchange

As per Section 1031 of the Internal Revenue Code, you can swap your rental property for another with little to no tax obligations. 

The 1031 exchange allows property investors to pass on their capital gains from one property to another without having to worry about taxes. 

You have to meet a few conditions in order to qualify for this tax benefit. 

For example:

• Both properties – the new and the old one – must be considered “like-kind.”
• The new property’s value must be greater than - or equal to - the value of your old property.
• Neither of the properties should have been held for personal use.
• The new property must be used for productive business purposes only.

4.   Long-term Capital Gains

Long-term capital gains are the profits that you make from the sale of a property you’ve held for more than a year. 

How do you benefit from this tax-wise?

Unlike short-term capital gains (profits from the sale of properties owned for less than a year), long-term gains have lower tax obligations.

Think of it as a discount from the IRS. 

The longer you hold your rental property, the lower they’ll charge you in taxes when you decide to sell. 

There you have it. 

From the tax benefits above, it’s quite easy to see how you can cut down your tax obligations. 

In fact, if you employ smart tax strategies, you can end up saving thousands of dollars each year. Sounds amazing, right? Then you start applying these tips as soon as you can and keep track of all your expenses that can be deducted. 

Investing in a multi-family property can be an exciting opportunity with promising returns. It offers unique advantages that aren’t possible through a single family home investment.

But as with any other type of investment, it can be risky if you don’t know what you are doing. That’s why, in this article, you’ll learn 8 tried-and-proven tips on multi-family investing from the pros.

Tips on multi-family real estate investing

Tip #1: Choose your location wisely. 

Location, location, location – it’s the real estate mantra. Buying in high demand areas is undoubtedly the pathway to property investment success.

Your preferred location should be near establishments like hospitals and schools and be close to public transit. 

Once you’ve chosen where to buy a multifamily property, talk with the locals. This will help you to get a somewhat realistic take on the area’s pros and cons.

For instance, you might have read about a new community project. You can get to know what the locals think about it. Will it be good for the community? 

Tip #2: Set financial goals before buying.

Setting financial goals for your property investment may seem tedious. However, it’s crucial for your success. Aside from setting your goals, you should evaluate the multifamily unit. To start that off, you must choose which financial metric to use. There is an internal rate of return (IRR), cap rate, gross operating income (GOI) as well as many others. If you need help finding which metric is right for you, click here. 

Next, you’ll need to decide what is more important for you. Is it the current return or the property’s appreciation? Once you figure all these things, set a blueprint on how you are going to achieve them.

Tip #3: Know the area’s rental market. 

Before buying multi-family real estate, it’s in your best interest to know what the area’s rental market is like. The last thing you want is to invest in an area that prospective tenants find unappealing.

So, how are you supposed to determine whether your multi-family investment will be viable or not. Well, you need to do research on the area’s rental rates and average vacancy. This information existing in newspaper classified ads, online rental listings, or by visiting the community itself.

Tip #5: Determine the best rental price. 

Setting the right rent can be a bit of a Goldilocks Paradox. If you charge too much, you risk having little inquiries. If you charge too little, you risk leaving money on the table.

The right rent price is beneficial in a number of ways. Not only will it help attract the right tenants, but it’ll ensure that your rental business succeeds.

You should pay attention to the competition. Focus on multi-family rentals in the area that are similar to yours. From there, you can compare the units and their rental rates. Compare things like the square footage, updates, and surroundings.
 

 You can either do this yourself or hire a realtor to do it for you.

Tip #6: Screen all prospective tenants. 

Bad tenants miss payments, damage property, and can be downright miserable to deal with. To avoid tenant problems, you must screen all your prospects. 

Screening should begin the first moment you make contact. Whether it’s through a phone call, a text, or even via email.

Having a set of pre-screening questions prepared can help weed out bad tenants beforehand. For example, it’s good to find out if they own pets in case you have a “no pets” policy in the lease. Of course, service pets are allowed following the Fair Housing Act. 

Some of the questions you can ask prospective renters are: 

• “What’s your reason for moving?” - Look for reasons such as wanting more space and changing jobs.
• “When do you intend to move in?” - If it’s very soon, it may be an indicator that the tenant isn’t responsible. Responsible renters usually start their search well in advance.
• “How much is your monthly income?” – It is best if a renter is making at least three times the rent amount. For instance, if you charge $1,200 for rent, then look for renters making at least $3,600/month.
• “How many people will be living with you?” - When it comes to the number of occupants, the lesser the number the better. Among other things, more people generally create more wear and tear.

Once you have shortlisted the number of applicants, the next step is to:

• Perform a credit check. A renter with a good credit score shows they are responsible as regards to their finances.
• Contact their previous landlords. This will help you get a real sense of the tenant. 
• Contact the tenant’s employer. Verify whether the renter is employed where he or she claims to be employed.

Screening all prospective tenants will help ensure that your multi-family property gets the right occupants.

Tip #7: Make your multi-family property attractive to tenants. 

Ever wondered why some properties are rented within days and others sit vacant for weeks on end? More often than not, it all boils down to how desirable a property is. 

The more desirable it is, the less time it’ll take to get it rented. But, the less desirable it is, the longer it’ll sit vacant. It goes without saying that a vacant rental property generates no rental income. 

The following are some tips to help your multi-family real estate stand out:

• Paint: A fresh coat of paint and your property’s appeal will instantly rise. 
• Clean-up and repair: Imagine the standards that you have set for your own home. Good quality tenants will not settle for a less-than-superior property.
• Curb appeal: If you want your rental property to stand out, you must focus on revamping its curb appeal. Some flowers are always a good idea. https://www.pinnaclepmc.com/blog/include-rental-agreement-torrance-california. 
• Details: These are the little things that nobody thinks about – except your tenants! So, pay attention to things like your home’s décor, hardware, and furniture appliances.

Tip #8: Hire the right team.

Being a landlord is a team effort, especially when you have multiple tenants to manage. As such, you need to have the right team of real estate professionals if you are investing in multi-family homes. The team should include people that will help keep your property in top-notch condition, solve legal problems, secure reliable renters, and help balance books.

There you have it. Eight tips on multi-family real estate investing. Remember, having a successful multi-family property investment requires a lot of time, effort, experience, and knowledge. If you don’t have these, please consider hiring a property manager.

Buying an investment property can be a lucrative strategy for many people. It is for this reason that so many people are attracted to real estate investing.

You’ve probably heard “location, location, location,” when it comes to buying an investment property. As cliché as it may sound, choosing the right location can make the difference between a thriving rental business and a struggling one.

The city of Torrance, Ca has become one of the most desirable cities in the South Bay region of Los Angeles. In fact, the city has consistently been recognized as one of the safest communities in the greater Los Angeles area.

Aside from being tagged as safe, Torrance also offers good schools, a variety of parks, and a beach close-by. All these and more, make the city attractive for families to live in as well as a place for tourists to visit. And as more and more people move there, property investors see this as a good opportunity to invest in rental housing as well.

So, in today’s article, we are going to share with you some tips for buying an investment property in Torrance, Ca.

7 Tips When Buying Investment Property in Torrance, Ca

Tip #1: Look at the Metrics

When wondering what to study when investing in rental properties, consider its wealth potential. Things like demographics, population growth, historical growth trends, employment opportunities, and vacancy rates can help you with this.

You also want to lookout for red flags. For example, job cuts from a major employer in the community spell disaster for rentals.

Lastly, you want to predict the kind of tenants who may be searching for a home in that particular neighborhood. For instance, consider retirees, families, or young professionals. By doing this, you’ll have an idea on the type of home to invest in.

Tip #2: Perform a Rent Survey

Basically, a rent survey helps ascertain competitive market rents in any particular location. The survey will help you decide how much rent you need to charge so that your property is cash-flow positive.

Determine what comparative properties in that neighborhood are charging for rent. Next, check to see whether the demand exists for the kind of properties you are considering investing in.

Tip #3: Inspect the Property

When looking to buy real estate, inspecting a property can help you decide whether it’s worth pursuing or not. Are the appliances in working order? Is the roof in good condition? Does the basement have a musty odor, or does it flood after a rain?

Additionally, you’ll also need to assess whether the plumbing is up to code and if the electrical system meets local building codes.

Unless you’re an expert, it pays to hire professionals to evaluate the home for you.

Tip #4: Judge Cash Flow Properly

“Cash flow” – and for good reason – is a term that comes up in most conversations on real estate investing. Cash flow can mean the life or death of your Torrance rental business.

But what is cash flow? Simply put, it’s the amount of money, cash and non-cash, moving into and out of your business. In this case, the rent is the money travelling into and property expenses are the monies travelling out of your rental business.

It goes without saying that for your rental business to be profitable, the rent amount needs to exceed your property expenses. Examples of property expenses include property management fees, repairs and maintenance, taxes, mortgage, and insurance. 

Tip #5: Assemble a Team of Real Estate Professionals

Being a landlord is a team effort. To be a successful one, you need to have a team of reliable professionals that will be there when you need them.

The team can include these professionals:

• Property Manager: A qualified manager can manage tenants, handle maintenance, and pay the bills. In fact, if you hire the right one, he or she may be the only professional you’ll need.
• General Contractor: You need someone who can handle maintenance and property emergencies when they occur in your property.
• Property Inspector: You need someone who can alert you to structural problems and code violations that require attention.
• Real Estate Agent: A real estate agent is familiar with the local market and can help you, among other things, set rent prices.
• Real Estate Lawyer: Yes, legal issues may not crop up often. However, when they actually do, you’ll need someone to file the paperwork and represent you in court. 
• Certified Public Accountant: A good accountant will help you keep your files in order and your tax return accurate.

Tip #6: Have an Exit Strategy

Buying the right property at the right price in Torrance, Ca is key. Be that as it may, it’s only one part of investing. The other part is planning an exit strategy. As the name suggests, an exit strategy is a plan to remove yourself from an investment deal.

It goes without saying that implementing a sound investment strategy is crucial to success. It will result in minimal risks and maximized profits.

Popular real estate exit strategies include:

• Lease Options
• Seller Financing
• Buy And Hold Real Estate
• Flipping
• Wholesaling

Sure, none of the strategies mentioned is right or wrong. Even so, the exit strategy you choose should depend on two important things. One, your level of experience, and two, the amount of cash you want to invest in the project. 

Tip #7: Establish Your Options

There is still a chance that your exit strategy may not work. Just when you were thinking of selling, the bottom might fall out of the Torrance real estate market. And, the local rental market might be flooded at the same time as well.

You’ll be glad you researched your exit strategies before purchasing the rental property. If you can’t get the desired cash flow and the property isn’t selling, you might offer a buyer a lease-purchase deal, for instance.

Or, you can opt for wholesaling and offload the property to another investor, albeit at a reduced market rate. Sure, the profit may be smaller. But this may enable you to cut your losses in monthly carrying costs.

Buying an investment property or investing in real estate rentals is in no way an exclusive matter. Any person can do it. But success is what’s exclusive. To be a successful real estate investor in Torrance, you need to learn the ropes of the business. Hopefully, this article has helped you in that regard.

As a landlord, your lease or rental agreement is probably the most critical document you work with, so it needs to be spot-on.

It’s not easy being a landlord in today’s rental market. Landlords must deal with a plethora of issues ranging from rent collection to property inspections and maintenance.

As a landlord, you’ve worked tirelessly to acquire your rental portfolio and want to offer good homes to deserving tenants. 

When you believe you’ve landed the perfect tenant, you must then issue them with an all-inclusive lease agreement that details all of your expectations, rental rules, and policies from the get-go. 

A lease agreement is a legally binding document. When properly drafted, it can safeguard you from a whole slew of nasty surprises that renters can throw at you. From property damage to rent-related issues – and plenty more random issues. 

This article covers some of the most crucial items to cover when drafting your Torrance, Ca rental agreement. Let’s get started, shall we? 

1.   Lease Term

Simply put, a lease term is the period of time during which the terms of the lease are enforceable. It’s usually expressed in terms of months or years. 

The type of lease agreement is dependent on the type of property. If you are leasing a vacation rental, you’ll typically need to draft a rental lease contract that runs for short periods of time. Usually, days, weeks, or a month. In the case of months, it would be wise to give a monthly rental agreement. 

If leasing a single-family home, you’ll need to draft a “fixed” lease. 

Whether you need to draft a short- or long-term lease, the lease term needs to be defined. It’ll help protect you from “holdover” tenants. These are renters that overstay their welcome. 

2.   Early Lease Termination 

An early termination clause is a statement within some lease agreements that give renters an option to break the property’s lease agreement if they need to. 

When establishing this term, consider the following things:

• Will you permit subleasing/subletting of the property? If so, do the new renter require screening as well?
• What are the fees to market the property again?
• What will the resident be responsible for?

3.   Tenants’ Names

Your rental property lease agreement must also state that all adults living in the rental unit must sign the lease or rental agreement. This includes couples that are married or unmarried. The more individuals there are listed on a lease, the more likely you’ll be paid. 

This is because you can legally seek rent from any of the listed individuals. This requirement also makes it possible to terminate the rental contract in the event any of them violates the lease terms. 

4.   Occupancy Limits

Make sure to indicate that the rental property is the residence of the tenants mentioned in the lease. This helps limit the number of occupants as well as guarantees your right as a landlord to regulate who dwells in your property. 

This means that you can evict anyone who sublets the property without your consent. 

5.   Landlord Entry

Renters have a right to quiet enjoyment of their property. This basically means that the landlord must not interfere (or allow anyone else to interfere) with the tenant’s enjoyment of the property. 

To avoid claims of violation of privacy rights or claims of illegal entry, your rental lease should clarify your legal rights to access the property. For example:

• Pursuant to a court order
• When the renter has abandoned or surrendered the premises
• To inspect the unit before a departing tenant vacates it
• In case of an emergency
• To show or exhibit the unit to potential renters, contractors, or buyers
• To make necessary improvements, alterations, or repairs

6.   Repairs and Maintenance

Clearly setting out each party’s responsibility for repair and maintenance in your Torrance, Ca property is your best defense against rent-withholding hassles and other problems. 

Among other things, you should include:

• Restrictions on renter repairs and alterations. For example, painting walls, installing a burglar alarm system or adding a built-in dishwasher without your permission.
• A requirement that the renters alert you to dangerous or defective conditions in the rental property.
• The tenant’s responsibility to keep the rental premises clean and sanitary and to pay for damage resulting from their carelessness.

7.   Deposits and Fees

Security deposits are oftentimes a source of conflict between tenants and landlords. To avoid any misunderstanding and potential legal issues, your lease or rental agreement should be clear on:

• The security deposit amount. In setting up the amount, make sure it’s within the state’s limit.
• The use and return of the security deposit.
• Conditions necessary for its return at the end of the lease term.
• Any legal nonrefundable fees, such as for pets or for cleaning.

8.   Rent Rate

Your Torrance, Ca rental agreement should also be clear on the rent-related issues. For instance, the rent amount, when it’s due, how it’s to be paid, and late fees, if any.

9.   Protected Classes

In drafting your standard lease agreement, make sure you adhere to local, state and federal rules on fair housing. 

Fair Housing Rules state that landlords should give tenants an equal opportunity regardless of their familial status, disability, sex, national origin, religion, color, and race. 

In addition, California has its own set of protected classes. They include:

• Genetic information: Landlords in California cannot base rental qualification on genetic tests and genetic tests of an individual’s family members. 
• Age: People over the age of 40 are also protected. 
• Source of income: Landlords cannot factor in how tenants make money in their decision to lease their property. 
• Ancestry: Landlords cannot also consider a renter’s family’s ancestral roots in the housing process.
• Medical condition: In California, no medical condition can disqualify tenants from access to housing. 
• Marital status: Whether single, married or widowed, tenants are protected under FEHA. 
• Gender identity and gender expression: Enacted in 2012, California’s Gender Nondiscriminatory Act protects transgender and gender non-conforming people from employment and housing discrimination.
• Sexual orientation: The LGBT community is protected from housing discrimination in California. 

A well-written lease agreement will resolve most foreseeable disputes between you and your tenant. If you have questions or need help drafting one, please contact a competent Torrance property management company. 

In California, as in many states, leases are legally binding contracts. Once you sign one, you must stay for the entire lease term, which is usually one year. But, what are you to do if you are unable to pay rent? Or, when you need to move closer to your new job? 

In such instances, despite your best intentions to stay for the full lease term, you may need to break your lease early.

But first things first – what is breaking a lease? 

Breaking a Lease in California

Simply put, breaking a lease is leaving before the expiry of a fixed-term agreement.

Breaking a lease carries a number of consequences. They include:

• Difficulty renting a new place. Most landlords ask for rental references or review prospective tenants’ credit reports. With information like an eviction, poor payment habits, or breach of contract on your report, getting a new place to rent might prove challenging.  
• A judge can issue a judgment against you. A credit judgment is an order to pay a debt, and after hearing your case, he or she might issue one against you. 
• You may face a civil lawsuit. Sure, a divorce, an illness, or a job loss can negatively impact your ability to pay rent. But sadly, in the state of California, these aren’t legally justifiable reasons to break a lease. In most cases, your landlord will win the lawsuit and a judge will order you to pay off the lease balance. 

Tenant Rights and Duties When Signing a Lease in California 

Usually spanning one year, a California lease agreement is a contract between a landlord and tenant outlining the rights and responsibilities of each party. 

Under a typical lease, unless the lease itself allows it, a landlord cannot raise the rent or alter other terms. Also, the landlord cannot force you to vacate the premises before the lease expires. The only exception is if you breach the terms of the lease. For example, if, for whatever reason, you are unable to continue paying rent. Or, you breach another significant term, such as disturbing the peace of the neighborhood by hosting raucous parties. 

But even supposing these breaches do occur, the California landlord-tenant law requires landlords to adhere to the lease laws when ending the tenancy. For nonpayment of rent, your California landlord must give you a 3-days “pay or quit” notice. Essentially, the notice gives you two options: either to pay due rent or simply move out of the premises. If you fail to do any of these things, the landlord can file for an eviction lawsuit against you in court. 

For illegal activities within the property, California’s rental law requires your landlord to hand you a 3-days’ unconditional quit notice. Unlike the previous notice, this gives you only one option – to leave. 

Once you sign a lease agreement, you are lawfully bound to pay rent for the entire lease term. Here is an example to better illustrate this. Suppose your monthly rent is $1,500 and the lease runs for twelve months, this means you owe a total of $12,000 for the entire lease period. 

Now if you break your lease, say, on the ninth month, you’ll end up still owing your landlord $4,500. 

However, this is not always the case. Not all renters who break their lease in California have to pay the remainder of the rent due under the lease agreement. It depends on whether the reason for breaking the lease is legally justified or not. 

When Breaking a Lease Agreement is Legally Justified in California

1. Your landlord agrees to it 

This is the most ideal way to legally break a lease without facing any consequences. Some landlords may prefer this route as opposed to taking their renters to court. The court process can be expensive, time-consuming, and utterly frustrating for landlords.

2. You are a victim of abuse

If you are the victim of some form of abuse – be it elder abuse, sexual abuse, domestic violence, and so forth – you may terminate your lease early so long as specific conditions are met. 

3. The unit is considered illegal

For a rental property to pass building codes and be considered a legal rental unit, it must meet specific criteria. 

For instance, attached rooms, garages and other types of units that were previously used for another purpose but have been converted to rental units may be deemed illegal if they don’t meet code. 

Likewise, there are many basement apartments that don’t incorporate specific traits and are therefore deemed illegal units. Doesn’t matter if there may already be tenants living in them. 

4. Your unit is deemed unsafe as per California rental law

Under California rental law, a rental unit must be considered safe for habitation. If not, you can break the lease on the basis that your landlord is providing uninhabitable housing. 

Examples of things that can cause a home to be considered uninhabitable include:

• A high level of criminal activity in the building;
• Obnoxious noise from neighbors
• Pest infestation
• Nauseating smells

5. Your landlord is harassing you 

As per California landlord-tenant law, your landlord cannot just barge in on you whenever they feel like it. As a renter, you have a right to the quiet enjoyment of your home. Before entering the property, your landlord must give you adequate notice of entry. 

Similarly, your landlord cannot harass you. For instance, by changing locks on you or shutting off your electricity. 

6. You are starting active military duty

Federal law permits terminating a lease if you enter active military service. You must belong to the “uniformed services.” That includes those serving in the:

• Activated National Guard
• Commissioned Corps of the Public Health Service
• Commissioned Corps of the National Oceanic and Atmospheric Administration
• Armed forces

Once you get the change of station orders or military deployment, you’ll then need to notify your landlord of the same. Your tenancy will then terminate thirty days after the rent is due next.  

Both landlords and tenants have mutual responsibilities under the contracted agreements of a lease. If you must terminate the lease, understand California’s rental law first. Hopefully, this article has helped you in this regard.