News and Events

New state laws that will affect the rental housing industry in 2022

via CAAnet.org Landlord-tenant laws taking effect next year address a variety of topics, from code enforcement to emotional support animals to how tenants access the property. Below you’ll find summaries of these laws, which take effect Jan. 1, 2022, and details on CAA’s upcoming New Laws Webinar. Code enforcement response: AB 838 by Assemblywoman Laura Friedman, D- Glendale, will prohibit local code enforcement agencies from placing restrictions or preconditions, such as mandating that the rent be paid in full, before responding to habitability complaints. Read More..

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Can LA landlords get to Supreme Court on evictions?

via TheRealDeal.com The residential real estate market could know in a matter of weeks whether the highest court in the land might give Los Angeles landlords a hearing on eviction moratoriums. It’s a legal fight that began in what seems now like a different era, soon after Covid 19 pandemic’s first terrifying wave. Read More..

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What to Know Before Creating an LLC for a Rental Property

Interested in joining the more than 11 million real estate investors making money off rental properties? It’s a form of potentially passive income with great appeal, but like any investment, it also comes with potential risks. One way to mitigate risk is by setting up a business that would own the property rather than buying it in your own name. Creating an LLC for a rental property can help manage income, taxes, and liability for your rental business. If you’ve been wondering, “should I put my rental property in an LLC” this guide should help you answer that question and others related to the LLC business structure.

What Is an LLC?

LLC stands for limited liability company and is one of several business structures you could choose for your rental property. The structure ensures you are not held personally liable for any claims against the company or any debts owed. It allows you to be taxed as a partnership while getting the limited liability benefits of a corporation. An LLC can be you alone, with a partner, or with a group, and the LLC holds ownership of any assets placed in it. It can have a separate tax ID number, open a bank account, and conduct business transactions.

Benefits of an LLC

Starting an LLC for rental property makes good business sense for four key reasons.

1. Limited Liability

When you own a property as an individual, you are personally liable for any legal actions, which means your personal assets are at stake. By operating through an LLC, only the LLC’s assets would be at state should there be any lawsuit or claim made. This is one of the primary benefits of an LLC for rental property holdings since your tenants could claim the business.

2. Separate the Assets

Because an LLC is easy to set up, creating a new one for each property makes sense. This insulates each property from liability claims made on any others. It provides the same separation protection you get for your personal assets.

3. Pass-Through Tax

An LLC allows you to take advantage of what is called pass-through taxation. A business structured as a corporation would typically be taxed on its profits, then you as the owner are taxed again when you take out income. With an LLC, the company income passes straight through to you, and you claim it on your individual tax return. Your rental income is only taxed once instead of twice.

4. Personal vs. Business

Any corporate structure is going to allow you to keep your personal and business expenses separated. This allows you to write off and claim business expenses on your taxes since you will have separate bank statements for yourself and the LLC for investment property.

Creating Your LLC

What’s involved in setting up your LLC for a rental property? It’s important to understand when the best time is to do it, along with the potential costs in doing so.

When To Create Your LLC

The good news is whether you have your LLC set up before or after you buy, it’s a relatively simple process to transfer ownership over to the LLC. However, if you plan to finance the purchase rather than pay cash, there are definite benefits to having the LLC set up before the purchase. Transferring a mortgaged property could result in some additional headaches and costs.

• Notifying your mortgage holder of the title transfer
• Mortgage holder could close the loan and issue you a new one, which creates closing costs and potentially a higher interest rate
• Notifying tenants that the LLC now owns the property
• Update rental agreements
• Transfer could trigger new taxes like a title transfer tax

Creating the LLC first means the property deed is in the company name from the start and keeps you from dealing with these issues.

How To Create Your LLC

Because the LLC is regulated at the state level, the rules and regulations for setting up a company might vary. But the basic process involves the following:

• Choose an available business name
• Fill out the Articles of Organization
• Create an LLC Operating Agreement
• Obtain any necessary licenses and permits
• Register your LLC with the state

Once you’ve done all that, you can issue leases in the business name and set up your bank account. Costs involved in setting up the LLC can come from registration fees, title transfer fees, and legal fees for creating or reviewing your operating agreement.

Pros and Cons of an LLC

The LLC is a good structure for rental property businesses, especially if you are going into business with other people or entities. But there are some drawbacks to be aware of as well.

Pros

Limit your personal liability Separate and protect individual properties if you set up an LLC for each one Pass-through taxation keeps your income from being taxed twice Easily separate business and personal expenses

Cons

Additional paperwork for initial setup and bookkeeping Can be more difficult to get a mortgage as an LLC Potentially higher interest rates on your mortgage Annual filings and fees Despite the downsides, keeping your rental property in a dedicated business structure sets you up for success.

Considering Creating an LLC for a Rental Property?

Eager to get started in real estate investing? Creating an LLC for a rental property is a good way to protect yourself and your money from liability issues. Depending on the state you live in, you could benefit by making it easier to manage your income and taxes as well. Here are some good places to invest in property.

The Landlord’s Guide To Rent Collection

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Eviction moratorium case edges closer to Supreme Court

Landlord trade group’s petition gets attention of at least one justice A landlord group’s challenge to the City of Los Angeles’s long-running — and controversial — eviction moratorium has moved a step closer to a hearing before the Supreme Court. The development came when the court requested a response in the case from the City of Los Angeles. The odds of an eventual hearing before the nation’s top court remain long, but the request on January 10 means that the challenge from the Apartment Association of Greater Los Angeles (AAGLA) is still alive — and that at least one justice was interested in the case. “Every week they kick like a couple dozen of these [petitions] without a response, so the fact that someone the court is interested is definitely a positive sign,” said Jared McClain, a lawyer with the New Civil Liberties Association, a legal advocacy group that is supporting AAGLA’s challenge. Numerous amicus briefs that were filed in support of AAGLA, McClain added, supplementary interest that likely helped put the challenge on the justices’ radar. “It showed the court that there’s interest in the community about this case, and probably got someone’s attention on the court,” he said. A lawyer working on the case for the City Attorney’s office declined to comment, referring The Real Deal to an office representative. The representative also declined to comment. A lawyer representing AAGLA did not immediately respond to a request for comment. The Supreme Court’s action was the latest twist in what’s become a protracted, high-stakes legal battle that also illuminates a stark line cutting through everyday life and the economy. Many renters as well as landlords have grown increasingly adamant from opposite viewpoints of the eviction moratorium as the pandemic approaches its third year. “It is, but for the shooting, a war in every real sense,” one district judge noted as part of an opinion related to AAGLA’s challenge. “Hundreds of thousands of tenants pitted against tens of thousands of landlords — that is the tragedy that brings us here.”

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• Silence of the landlords: Upstate owners mute as eviction limit advances
• LA tenants now have more options to sue landlords for harassment
• Meet the 400 landlords that are taking rent laws into their own hands

The City of L.A. issued its first eviction moratorium, and a freeze on rent hikes, in March of 2020, as a response to the sudden economic collapse brought by the early effects of Covid-19 and related shutdowns. The measures were intended to stave off another potential crisis: tens or hundreds of thousands of newly unemployed renters facing homelessness. But the tenant-centered protections meant that area landlords also lost income, and many small property owners have faced increasing economic hardship. “I don’t think legislators understand this side of the coin,” Irma Vargas of RST & Associates, a management firm that works with small property owners, said last summer. “They all think landlords are these fat cats that can withstand, and they can’t.” While federal and state eviction moratoriums have recently expired, the City of L.A.’s — which is tied to a local emergency order and has the strong support of local politicians, including Mayor Eric Garcetti — remains in place. AAGLA filed its first legal challenge to the ordinance in federal district court in 2020. The group lost that case last August, when a federal appeals court also denied the challenge. But the case has found some broader support within the real estate community and certain legal circles. The New Civil Liberties Alliance, a Washington, D.C.-based advocacy group, filed an amicus brief supporting the Supreme Court challenge in late December; the California Apartment Association, California Association of Realtors and the Foundation for Moral Law, a rightwing, Alabama-based legal nonprofit, have also filed amicus briefs in support. Two tenant rights groups – the Alliance of Californians for Community Empowerment Action and Strategic Actions for a Just Economy (SAJE) – are supporting the City of Los Angeles. AAGLA’s legal challenge relates to the U.S. Constitution’s Contract Clause which concerns private contracts and the limits of governmental interference. The landlord group is arguing the City of L.A.’s eviction moratorium, which permits tenants to forestall previously agreed upon rent payments, amounts to an illegal intervention; a potential Supreme Court hearing on the case, or a similar one, could have major ramifications for both the real estate industry and broader economy. The court will likely decide in March whether or not to hear AAGLA’s challenge.

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The Future of Electric Vehicles Poses Challenges for CRE

The electric vehicle market is charging up, as Barron’s notes. GM, Ford, Honda, Renault, Volvo, and even consumer electronics giant Sony are in the race. The near future looks to be more than mentions of Tesla. Commercial real estate needs to pay attention because there are some significant impacts on building and facilities design that mean special considerations and, for existing properties, changes that will likely be needed. Whether consumer vehicles that workers or customers would bring to a parking lot or delivery trucks that needed charging, there are practical implications of electric vehicles. “For most commercial and corporate occupiers space impacts should be minimal. EV charging will likely occur in already designated parking spaces converted for use," Chris Willis, vice president at Turner & Townsend, tells GlobeSt.com. “In older urban centers where space for parking is already limited, the desire for charging from consumers may lead to some reduction in attractiveness. Commercial charging is likely to occur either as additions or conversions of existing fuel station networks or in new-build sites." Then there’s delivering the necessary power. “The minimum power requirement will be 100 kilovolt-amps or more, assuming 10 parking spots are dedicated for the commercial installation of chargers," Hemal Doshi, president of Universal Green Group, tells GlobeSt.com. A kilovolt-amp represents the power being used in an electrical system and is less than the available power because of efficiency losses. At best, 100 kilovolt-amps would mean power of 100 kilowatts. More likely, the necessary power in kilowatts would have to be higher. Charging takes time. “It can take 6 to 12 hours to charge a Tesla on a Level 2 (240-volt) home charger," says Adam Lubinsky of design firm WXY Studio. Although the fastest commercial chargers can get the job done in far less—15 to 20 minutes according to Doshi, depending on the type of vehicle, faster charging means more available power. Charging also costs money. “Electric vehicle charging adds significant load to properties and increases demand charges, which can represent as high as 70% of a commercial owner’s energy bill," says James Geshwiler, chief strategy and investment officer at Catalyze, which consults in adding renewable power generation to properties. “In the case of a multi-family or mixed-use property, when everyone comes home from work and charges their vehicles at the same time, the demand charges spike. Converting the blueprint for commercial property to accommodate electric vehicle charging can be deceptively challenging and requires significant scale to be successful." And, as Willis adds, “Advancements in technology may require future upgrades to charging docks, which should be budgeted so the equipment does not become obsolescent." “Monetizing this real estate use or defraying costs for charging is critical to real estate," Lubinsky says. With current technology, electric trucks bringing loads will likely have to recharge before returning to their origin. Power requirements in urban centers can become even trickier as the nearest substation may or may not have the capacity to deliver what multiple companies will all need.

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CRE’s Growth Forecast for 2022

via GlobeSt.com Commercial real estate can be expected to perform well this year despite the prospect of higher interest rates, according to the National Association of Realtors. While interest rates are expected to broadly rise by about 75 basis points, they will still be low compared to historical levels and should not cause a severe decline in investment activity and the ability of companies to service their debt. Bottom line: CRE’s underlying demand fundamentals should more than mitigate the impact of the slightly higher interest rates in 2022, according to NAR’s 2022 Commercial Real Estate Outlook report. Read More..

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Los Angeles Apartment Rents Have Grown 14% in 2021

via GlobeSt.com Los Angeles apartment rents have swiftly recovered from the pandemic. The latest report from Apartment List reveals that rents have increased 14.1% this year and 4.2% since the start of the pandemic in March 2020. The recovery is notable considering that rents in the metro fell 9.6% in 2020 as a result of the pandemic. “Last year, the pandemic created many apartment vacancies across L.A., pushing prices down as properties had more difficulty finding tenants. This year, the opposite has been true,” Rob Warnock, senior research associate at Apartment List, tells GlobeSt.com. “Over the last 12 months, the vacancy rate in L.A. has more than halved, from 8.4% to 4%. This means the market is becoming increasingly competitive, giving landlords the opportunity to raise their prices.” Los Angeles rent growth has been on par with the national numbers. In November, rents in the metro and the nation both increased .1%, and Los Angeles is ranked 63es for apartment rent growth among the top 100 cities. Read More..

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Renting Beats Buying in Eight Major Markets

via GlobeSt.com In Dallas, Denver, Houston, Kansas City and Seattle, consumers looking to build wealth are better off renting a property and reinvesting the money they would have spent on ownership, according to an analysis by professors at Florida Atlantic University and Florida International University. That’s because the total monthly cost of home ownership in those areas is rising faster than monthly rents, the researchers said. Read More..

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Preparing for 2022 and What We Should Expect!

YOU DO NOT WANT TO MISS THIS FINAL WEBINAR FOR 2021!!! It has been a very challenging 21+ months for most rental property owners, and hopefully, things will turn around and vastly improve in 2022. During 2020 and 2021, we experienced an unprecedented global pandemic, dramatic changes in how we conduct our daily lives, economic uncertainty, and more.. Thursday, December 16, 2021 from 11:00 AM to 12:00 PM PST Register Here: https://events.r20.constantcontact.com/register/eventReg?oeidk=a07eixcge5lc5a7fd67&oseq=&c=&ch=

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