Joe Boylan

q22018

Q2 2018 Market Report for Colorado Springs

Q2 2018 Market Report Highlights

Q2 has brought us both hot weather and a hot real estate market. Although Buyers are still feeling the eects of the low inventory, there is some relief in sight. In the lower price point ranges, the months of inventory has increased compared to Q2 2017. This may be partially due to an increase in the building of single family as well as multi-family units across El Paso County. Like with most regional real estate markets, we anticipate our annual slow down to happen in late Q3 and into Q4.

Market report for Colorado Springs

Don’t forget the Housing and Building Association’s Annual Parade of Homes this year. The Parade of Homes is an annual event showcasing the newest home designs. Take a tour of newly constructed homes from the mid $200’s to $2.8M throughout the Pikes Peak Region. Homes will be open Fridays-Sundays from August 3rd through August 19th. Stayed tuned for our Springs Homes Parade of Homes ticket giveaway on social media. You may be one of our lucky winners!

Colorado Springs Market Reports

Springs Homes has been producing market reports for Colorado Springs since 2010. The benefit of reading through these reports is to gain an understanding of the current market to see trends and to be able to predict what is coming up in the future. Whether you are a home seller, or a home buyer, these market reports will give you an in depth understanding of the Colorado Springs market by area and price point which will give you an edge when heading toward your next sale or purchase of a home.

Visit the archive of our past market reports to take a stroll down memory lane, or download a copy of the current market report.

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Deducting Rental Property Repairs

As the proud owner of rental property, there’s a good chance that you know about and are already using one of the most well-known and popular tax deductions available to landlords:

Repairs are a much-loved deduction, and for many landlords, they represent a significant saving come tax time. They’re popular thanks to their value, as well as the fact that they’re a tangible expense. It’s easy to remember these expenses when you’re doing taxes, and not too difficult to save the receipts throughout the year –especially if you’re organized.

But while this deduction is indeed popular, some landlords aren’t aware that not every repair should be treated the same. While some are able to be fully deducted in the year that they’re incurred, for others, how they’re able to be deducted will vary depending on a few different factors.

The main difference in how these expenditures are treated comes down to one important distinction: is it a repair, or is it an improvement? The IRS also outlines several “safe harbors,” as they call them, under which you can fully deduct many repairs that would otherwise have to be depreciated more slowly over time.

Although making sense of the different distinctions and nuances of the IRS’ guidelines can get a bit complicated, in this guide, we’ll attempt to uncover the main points for classifying and deducting repairs and improvement expenses for your rental.

Repairs Vs. Improvements

While rental repairs and improvements are both able to be deducted, the IRS has different rules regarding how they must be claimed.

Repairs are operating expenses that are deemed ordinary, necessary, and reasonable in amount. As long as they meet these requirements, they’re able to be fully deducted in the year that they’re incurred.

However, certain types of upkeep aren’t considered to be repairs; but instead, need to be classified as capital improvements. Improvements are things that add value to your property or benefit your property for more than one year. Since the benefit to your property will extend beyond one year, they cannot be depreciated in just a single year, but instead must be spread out over the course of a longer period of time and claimed a little at a time on your tax return each year.

In most cases, you’re better off from a tax point of view if you can classify an expense as a repair, rather than an improvement, as you’ll be able to deduct the entire expense all at once instead of having to slowly deduct it over a long period of time. Of course, this doesn’t mean that you should never do improvements on your property, only that from a tax perspective, repairs offer more benefits.

Now, how can you tell the difference between repairs and improvements?

The IRS’ regulations spell out rules for what constitutes a repair and what is considered an improvement. This guide is fairly long, however, and quite complicated as well.

Still, generally speaking, the IRS uses the following categories to define what qualifies as a capital expense.

According to the IRS, expenses that fall under these categories must be depreciated:

  • Improvements: You must capitalize any expense you pay to improve your rental property. An expense is for an improvement if it results in a betterment to your property, restores your property, or adapts your property to a new or different use.
  • Betterments: Expenses that may result in a betterment to your property include expenses for fixing a pre-existing defect or condition, enlarging or expanding your property, or increasing the capacity, strength, or quality of your property.
  • Restoration: Expenses that may be for restoration include expenses for replacing a substantial structural part of your property, repairing damage to your property after you properly adjusted the basis of your property as a result of a casualty loss, or rebuilding your property to a like-new condition.
  • Adaptation: Expenses that may be for adaptation include expenses for altering your property to a use that isn’t consistent with the intended ordinary use of your property when you began renting the property.

Here’s a look at some examples of improvements from the IRS:

Additions:

  • Bedroom
  • Bathroom
  • Deck
  • Garage
  • Porch
  • Patio

Lawn & Grounds:

  • Driveway
  • Walkway
  • Fence
  • Retaining wall
  • Sprinkler system
  • Swimming pool

Miscellaneous:

  • Storm windows, doors
  • New roof
  • Central vacuum
  • Wiring upgrades
  • Satellite dish
  • Security system

Heating & Air Conditioning:

  • Heating system
  • Central air conditioning
  • Furnace
  • Ductwork
  • Central humidifier
  • Filtration system

Plumbing:

  • Septic system
  • Water heater
  • Soft water system
  • Filtration system

Interior Improvements

  • Built-in appliances
  • Kitchen modernization
  • Flooring
  • Wall-to-wall carpeting

Insulation

  • Attic
  • Walls, floor
  • Pipes, ductwork

Three Safe Harbors

For most landlords, being able to deduct expenses all at once in the year that they were incurred is always preferable; and better than having to depreciate them.

Thankfully, the IRS provides what’s known as “safe harbors” –conditions that landlords can use to deduct certain rental-related expenses –in one year.

Here’s a look at these three safe harbors now:

  • The small taxpayer safe harbor
  • The routine maintenance safe harbor, and
  • The de minimus safe harbor

If an expense falls under any of the safe harbors, then it can be treated as a currently deductible expense and deducted entirely in the year that it occurs.

In short, these safe harbors make life easier and allow you to deduct expenses that otherwise would have to be depreciated.

In order to determine whether an expense qualifies as a deduction, first, determine whether it falls under one of the safe harbor provisions. Secondly, if no safe harbors apply, you’ll then want to determine whether the expense is a deductible repair or an improvement.

With this in mind, here’s a look at the three safe harbors now:

  1. Safe Harbor for Small Taxpayers (SHST):The safe harbor for small taxpayers (SHST) could easily rank as one of the most important safe harbors for small landlords. Under this safe harbor, you can deduct all of your annual expenses for your rental –including repairs, maintenance, and improvements –without having to worry about whether or not they qualify as repairs as opposed to improvements

    However, it’s important to note that there are some important restrictions when it comes to using this safe harbor, and of course, you’ll also need to keep track of all of your expenses throughout the year as well.

    In order to qualify, the total amount of maintenance, repairs, and improvements that you’ve paid out during the year must total less than $10,000 or 2% of the unadjusted basis of the building –whichever’s less.

    Additionally, the SHST can only be used for buildings with an unadjusted basis of $1 million or less. Although if you own more than one rental unit or building, the $1 million limit is applied to each separately.

    Finally, in order to qualify, you must have average annual gross receipts of no more than $10 million during the three preceding tax years.

    You can learn more about the Safe Harbor for Small Taxpayers in Nolo’s article: Small Taxpayer Safe Harbor For Repairs and Improvements.

  2. Routine Maintenance Safe Harbor:Under the routine maintenance safe harbor, expenses that qualify as routine maintenance are deductible in a single year. With this safe harbor, there are no dollar limits and any landlord can use it, regardless of the amount spent on maintenance. However, there are a few limits on when this safe harbor can be used

    Take a look:

    Routine maintenance is recurring work done to keep a building in operating condition, and includes two activities:

    • Inspection, cleaning, and testing of the building structure and/or each building system, and
    • Replacement of damaged or worn parts with comparable and commercially available replacement parts.

    There are two main limitations to routine maintenance: the ten-year rule and the no betterments rule.

    • The Ten-Year RuleMaintenance qualifies for the routine maintenance safe harbor only if, when you placed the building or building system into service, you expected to perform this maintenance more frequently than once every ten years.
    • No Betterments or RestorationsThis safe harbor is intended for expenses incurred to keep the property in operating condition, but it does not apply to major remodeling projects. Additionally, you can’t use this safe harbor when you’ve taken a casualty loss.
  3. De Minimis Safe HarborFinally, there’s also the de minimis safe harbor. With this option, landlords can deduct any low-cost personal property items used in their rental business. In most cases, the maximum amount is $2,500 per item.

    All expenses you deduct using the de minimis safe harbor must be counted toward the annual limit; the lesser of 2% of the rental’s cost or $10,000.

Repair Versus Improvements

If your expenses don’t fall under a safe harbor, then you’ll need to determine whether they are improvements or repairs. While repairs can be deducted in one year, improvements must be depreciated and deducted over several years.

In order to determine whether it’s a repair or improvement, you’ll need to delve into the IRS’ repair regulations and determine what the unit of property (UOP) in question is. You’ll then want to decide whether the expense resulted in an improvement.

Under IRS regulations, buildings must be divided up into nine different UOPs.

Here’s a look at them now:

  1. Building Structure
  2. Heating, ventilation, and air conditioning (HVAC) systems
  3. Plumbing systems
  4. Electrical systems
  5. Escalators
  6. Elevators
  7. Fire-protection and alarm systems.
  8. Security systems
  9. Gas distribution system

Generally speaking, the larger the UOP, the more likely the work will be considered a repair, rather than an improvement.

Joseph Lewis, CPA, and Partner at Isler CPA explains this concept well in his article: Rental Property Repairs: to Expense or to Capitalize? That Is the Question. “Work on an engine of a vehicle is more likely to be classified as an expense that must be capitalized if the engine is classified a separate UOP. By contrast, if the UOP is the vehicle, the engine work has a better chance of passing muster as a repair.”

Any work done to any of the above building systems that improves that system in some way must be depreciated.

Deducting Repairs and Maintenance

Repairs and maintenance are different things, but you’ll want to deduct both of them on IRS Schedule E. You’re required to list each type of expense separately, so try to keep track of them throughout the year as well.

At the end of the day, landlords benefit more from a tax perspective by taking advantage of the safe harbors or making repairs; rather than upgrades. While upgrades can be a necessary part of owning a rental, it’s always a good idea to consider the long-term tax implications when deciding whether to repair or replace an item.

Additional Resources

Here are some additional resources on deducting rental property repairs and improvements.

Please Note: While this article contains information that we’ve learned from classes and from working with our clients over the years, please keep in mind that we are not tax professionals. This information is intended to inform and to guide only, and it is not meant to serve in place of tax advice from a licensed tax professional. These principles should only be applied in conjunction with a CPA. To learn more about depreciation as it applies to your own financial situation, please consult a tax professional.

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We Buy Houses for Cash! Understanding Wholesale Real Estate

What’s with these “We Buy Houses for Cash” signs?

You’ve no doubt seen those “We Buy Houses for Cash” signs planted around medians and near high traffic areas. These are posted by “Wholesale Real Estate” companies.

Wholesale and retail are terms we don’t generally associate with buying and selling houses. These terms are usually reserved for mass-produced, lower cost commodities like clothes, shoes, and cars.

wholesale real estate

Homes, on the other hand, tend to be more unique due to factors like location, landscaping, updates, etc. The sad truth is that some homes just aren’t that special, primarily when they have not been maintained, fallen into disrepair or have been neglected.

Unfortunately, there are homeowners that find themselves in circumstances that don’t allow them to sell their home for what we would call retail price. These are situations where the seller is in crisis, they may have lost a job or developed health issues. Their home has fallen into disrepair and they don’t have the money or ability to make the necessary repairs. In many cases, they are no longer able to make the payments and they are just looking to get out.

This is where the wholesaler comes in. The wholesaler guarantees a fast cash sale for the property at a deeply discounted price. This private cash sale also circumvents issues that would arise from inspections and appraisals. VA and FHA have certain standards and distressed properties usually don’t meet their minimum guidelines.

The wholesaler depends on a number of sources to find these distressed homeowners. Everything from roadside bandit “We Buy Houses for Cash” signs that offer fast sales for cash to direct mail and even plain old door knocking in targeted neighborhoods.

Photo by Lynly Bernstein http://lynleyfaith.tumblr.com/post/4339615997/baltimore-open-city-various-project-pictures

Photo by Lynly Bernstein http://lynleyfaith.tumblr.com

How Wholesale Real Estate Works

When a home seller is facing stress on multiple fronts, the promise of a fast cash sale can very appealing. But is it the best option?  Let’s take a look at how wholesaling works in order to understand why it’s different than a retail sale.

Wholesaling is an umbrella term for an entire category of property transactions. The wholesale landscape consists primarily of wholesalers and investors. You can certainly be both an investor and a wholesaler but this is not generally the case.

A “wholesaler” is often someone trying to break into the real estate investing world. This individual generally has more time than money. The established investor, on the other hand, doesn’t have the kind of time to track down wholesale deals. This doesn’t mean they can’t or won’t, it’s just not the highest and best use of their time.

The wholesaler is essentially looking for deals in order to raise capital to fund their own real estate investments. Additionally, as they gain capital and experience, they may also be looking for properties to add to their own rental portfolio.

In its purest form, a wholesaler locates a homeowner looking to get out of their house quickly for cash. They negotiate a price and then execute a contract. The contract is transferable and will generally close quickly in twenty to thirty days.

This window of time gives the wholesaler a chance to find an investor to ultimately purchase the property. Remember, the investor has cash but not the time to find these kinds of deals.

Let’s say the wholesaler finds a property that in good condition would sell for $250,000 (retail). The repairs required to get the retail price would be $50,000.

The wholesaler agrees with the homeowner to buy the property for $175,000. The wholesaler would then take this deal to a couple of different investors. They would most likely end up selling the house for $180,000 to the investor pocketing the additional $5,000.

At this point the wholesaler would assign the contract to the investor, take their money and start searching for their next deal.

Is Wholesale Real Estate Legal?

The short answer is yes, there is nothing illegal about selling your property to another individual, even if it’s at a discounted rate. Things can get complicated and a little shady (think loan fraud) if there is an existing mortgage, especially if the homeowner owes more than the wholesaler is willing to pay.

If there is a mortgage, the homeowner has an agreement with the lender to pay off the loan either by making all of the payments or initiating a payoff at the time of sale or transfer of the property. If there isn’t enough equity in the property, this payoff can’t happen, unless of course the lender agrees to a short sale and depending on the condition of the market, this may be unlikely.

Another obstacle would be a second mortgage or lien. Any creditors that have a lien on the property must be satisfied before conveying clear title. The best candidate for a wholesale transaction is a single owner with a lot of equity, no liens and no way to get to that cash, besides selling the home.

There are certain organizations out there intended to help underwater homeowners avoid foreclosure. The lender doesn’t want to see the property go into foreclosure. Most lenders have programs or at least take part and bigger National programs set up to save troubled homeowners. Here is a list of such programs.

Retail Pricing of Homes

We Buy Houses for Cash

Retail pricing and sales, on the other hand, are much more common. This is what most real estate transactions look like. Home Sellers looking to get the most money possible from the sale of their home, they take the time to declutter, make repairs and even stage the home prior to sale.

These sellers choose Realtors with strong marketing programs, they invest in professional photographs, put together 3D Virtual tours and spread the word that their home is for sale through the MLS system as well as a wide range of online real estate portals.

The distressed home seller could certainly benefit from the same level of service as the retail home seller but there is a multitude of reasons they choose the alternative wholesale route.

Selling your home for top dollar is a major commitment, there are times when personal issues and the stress of just getting by making the thought of enduring the home selling process intolerable. These examples are certainly rare but common enough to explain the existence and success of wholesaling.

At the end of the day, wholesaling is just an alternative method of executing a real estate transaction. The ultimate goal is usually to rehab the property and of course, end up selling it at a retail price.

If you are considering using a wholesaler to sell your property, you owe it to yourself to at least talk to an established Realtor. The best course of action may end up being the wholesale route but until you exhaust all of your retail options, you may be giving away the farm.

 

Additional Resources:
Pros and Cons of We Buy Houses Flipping Companies-Bill Gassett
We Will Buy Your House For Cash, CLose in Two Weeks- Too Good To Be True?-Kevin Vitali
What Does It Mean When A Home Is Listed As A Short Sale?-Paul Sian
Why Do Short Sales Take Longer Than a Traditional Real Estate Sale?-Karen Highland

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Normal Wear and Tear Versus Damage

The end of a lease is an important event for landlords and tenants alike.

It can also be a time of conflicting expectations.

The landlord will usually expect their property to be returned to them in the exact condition that it was in when the tenants moved in –and if this doesn’t happen, are often happy to use the tenant’s security deposit to make it this way. Tenants, on the other hand, more often than not will expect their full security deposit back, even if there has been some damage to the rental.

In order to help manage expectations, and make the move-out process as simple and straightforward as possible, it’s important for both landlords and tenants to be on the same page. This includes having a good understanding of security deposits, and what they can and cannot be used for.

At the Time of Move-Out

At the time of move-out, the landlord or property manager is responsible for repairing any damages to the property, as well as assessing and documenting normal wear and tear. A good Property Manager will have a move-out routine that includes items like:

  • Making sure the property is clean
  • Replace all furnace filters
  • Check smoke and CO detectors are in good working order
  • Replace burnt-out lightbulbs
  • etc…

They’re also responsible for deciding who will pay for any repairs, maintenance, and cleaning that’s required to bring the property back into rentable condition.

This is the part of the process that’s often full of contention. When it comes to assessing damages, the landlord’s job is to assess the property and determine what falls under the category of damages, and what should be considered simply normal wear and tear. While damages are the tenant’s responsibility, things that fall under the category of normal wear, should not be taken out of the security deposit.

It’s important that landlords not use the security deposit to pay for things that go above and beyond the scope of normal wear. They may attempt to use it for things like worn carpeting or faded paint on the walls, things that aren’t damages, but instead are just the result of normal usage. In most cases, landlords know to use the security deposit as intended, to repair damages to the property, only for the tenant to contest this, and seek to get it back. One important exception to this rule pertains to items spelled out in the lease. Examples might be cleaning or carpet cleaning. If these items are stipulated as tenant responsibility in the lease, the landlord is within their rights to use security deposit funds to pay for them, if the tenant left these items undone.

When it comes to repairs, though, the law stipulates that the security deposit should only be used for repairs to damage that goes beyond what’s considered to be ordinary wear and tear.

Colorado Law (C.R.S. 38-12-102) defines “normal wear and tear as “Deterioration which occurs, based upon the use for which the rental unit is intended, without negligence, carelessness, accident, or abuse of the premises or equipment or chattels by the tenant or members of his household, or their invitees or guests.”

That’s a bit confusing for landlords and tenants alike. To help clear things up, here’s a list of examples of both normal wear and tear and damage.

Normal Wear and Tear vs. Damage

Normal Wear and TearDamage
Worn out CarpetTorn, Stained or Burned Carpet
Faded Window CoveringsTorn, Mutilated or Missing Window Coverings
Worn out KeysLost or Missing Keys
Dirty WallsHoles in Walls
Dirty WindowsBroken Windows

When determining costs, the landlord will also make decisions about repairing versus actual replacement. In some cases, repair is the best choice. A good example of this would be a recent experience we had. A tenant had backed a car into the side of a home damaging a section of masonite siding. The siding was already in rough shape and the product was failing and the particular pattern was no longer available. The owner was planning to reclad the home in stucco in a couple of years anyway, so we just applied a patch using every the favorite body putty of every motorhead, “Bondo”.

 

This repair worked out well because the owner already had a plan in place for new exterior stucco and was willing to kick the can down the road. Had this not been the case, the repair could have cost the tenant a lot more money. It’s important to note that in some cases, a landlord may charge a replacement cost for an item that could be repaired with a short-term fix. So, for example, suppose a tenant punches a large hole in a wall. The landlord may choose to repair it in the short-term by simply patching it. While this temporary fix is fine for the short-term, the underlying fact is the wallboard is not the same, and the owner may choose to go back at some point and replace the entire wallboard so they are within their rights to charge for replacement.

Calculating Repairs Cost

If the item can be repaired, though, in most cases the landlord will choose to go that route. In this case, the landlord will deduct for labor, materials, and travel.

  • Calculating Average Repair Costs-It’s also important for the landlord to determine material and labor costs based off of averages. This will help to avoid conflicts, and in the event of litigation, the courts will also require a list of repairs, and having average costs will make it easier to prove your case.
  • Factoring in Depreciation-Depreciation also factors into how much the tenant ends up being charged for damages. Depreciation takes into account the fact that things have a life expectancy. This includes carpet, appliances, paint, tile, and more. This life expectancy needs to be factored into the cost of repairs or replacement.

For example: if a five-year-old carpet is destroyed and that particular type of carpeting had a 10-year life expectancy, the landlord may only charge the tenant 50% of the replacement cost. This is a good practice, and extremely important as it helps to prevent landlords from using deposit funds in order to upgrade their properties.

Here is a Sample Life Expectancy Chart:

Water Heater10 Years
Carpeting (builder grade)5 Years
Air Conditioning Units7 Years
Ranges20 Years
Refrigerators10 Years
Interior Paint-Enamel5 Years
Interior Paint-Flat3 Years
Linoleum Tile5 Years
Window Coverings (shades, screens & blinds)3 Years

These are estimates are produced by HUD. Manufacturer estimates will vary.

Assessing the Condition of the Property

Assessing the condition of the property is the responsibility of the landlord or property manager.

This will allow the landlord to determine whether there are any damages that are the tenant’s responsibility, and therefore should be paid for out of the security deposit. It also allows them to set the condition baseline before a new tenant moves in.

The challenge is determining and documenting the condition of the property before the damage occurred. This is important in the event that the tenant disputes the damages, or if the case goes to court, as having proof that the affected or damaged area was in good condition before will generally resolve the issue.

Documentation Methods Include:

  • Written Reports: Written reports are an old method, but one that’s still in use today. With a written report, the landlord or property manager does a walk-through of the property and takes notes on its condition. Relying solely on written reports isn’t the best option, since it can be subjective, and doesn’t really provide much proof of the condition one way or the other. In most cases, property managers and landlords would be better served by using another form of documentation in addition to, or instead of a written report.
  • Apps: Some landlords prefer to use an app that prompts them for pictures and notes. Although this certainly is a step above the old-fashioned written report, in that it makes it easy to capture images and notes to go along with your report, in some cases, they just aren’t thorough enough.
  • Video: Video footage is an especially good method of documentation. To capture video footage, the landlord or property manager will perform a walk-through inspection of the home with a video recorder or phone, compiling a detailed video of the condition of the unit. However, this method can be problematic. When it comes to finding the affected item in question, having video footage means that the landlord will have to fast forward and rewind through quite a bit of footage. This can be time-consuming and uncomfortable in court. Just imagine fast forwarding and rewinding while the judge waits! Of course, you could capture image stills before you go to court, but again, this could be a time-consuming process.
  • Pictures: Taking photos is one of the best ways to document the condition of a property. And it’s especially affordable since the advent of digital photography and affordable storage options. You can take hundreds of pictures of a property and if there’s damage, it’s fairly easy to go back and find the photograph that references the newly-damaged area. If you choose this method, just make sure you use your digital camera’s time and date stamp feature.
  • 3D Imagery: Another new method for documenting the condition of a property, using 3D photography like the Matterport 3D camera allows landlords to do realistic virtual walkthroughs on properties. Since the footage is stored in the cloud, you can use the mouse to walk right up to the area that’s damaged and check to see what the condition was prior to their move-in. You can also take additional pictures inside cabinets, closets, and other places the camera can’t see. A secondary benefit from these tours is showing prospective tenants –especially out-of-state applicants, the property before they agree to lease it.

Tenant Should Protect Themselves

Of course, there’s a lot that tenants can do to help ensure that they’ll get their deposit back at the end of their lease.

First, of course, tenants should ensure that they keep the property in good condition while they live there, and avoid anything that might cause damage to it.

Secondly, if a tenant would like to contest the landlord’s decision to apply the security deposit to damage, they can do so. The best way to do this is by being able to furnish proof of the condition of the property. In most cases, tenants should consider taking their own photos. Generally speaking, the more documentation, the better. Photos that are taken at the time of move-in could provide proof of the condition of the property, and images that are obtained, say; a month into the lease could be used as proof of damage caused by movers. It’s also a good idea to use a camera with a time and date stamp feature and to show any pictures of post-move-in damage to the landlord.

It’s also worth noting that if a landlord fails to follow Colorado security deposit laws, the tenant could be awarded up to three times the amount that was wrongfully withheld, plus attorney’s fees and court costs, so it’s important for landlords to ensure that they remain in compliance with the law, and handle the security deposit properly.

Being Clear on the Terms of the Lease

For tenants, it’s important to remember that normal wear and tear versus damage are broad definitions, and much of the detail about the condition that you’re required to leave the property in at move-out will be specified out in your lease.

It’s important to read the lease before signing it and to make sure you ask questions to ensure that you’re clear on what’s expected of you. For instance, in some cases a landlord may state that the carpets are to be professionally cleaned at the time of move-out, others will require you to perform regular, outdoor grounds keeping maintenance, so make sure you fully understand your responsibilities and requirements before you move in.

Successful and straightforward move-outs are always the result of good documentation and communication, from both parties. It’s important for landlords to spell out their expectations in the lease document, and for tenants to ensure that they’ve read the lease –and are clear on their responsibilities both in terms of maintenance, and the condition that they’re expected to leave the property in at the time of move-out.

 Additional Resources:

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Q1 2018 Market Report for Colorado Springs

Q1 2018 Market Report Highlights

Q1 is off and running at a furious pace. With inventory and days on market at historic lows, Buyers in the Colorado Springs market have to be quick to see homes and make decisions almost the same day. In this video, our agents took a look at some of the highlights of the market report and reflected back on the same market indicators both 1 year ago and 5 years ago. It is amazing to see how our area has grown in only 5 years.

Colorado Springs Market Reports

Springs Homes has been producing market reports for Colorado Springs since 2010. The benefit of reading through these reports is to gain an understanding of the current market to see trends and to be able to predict what is coming up in the future. Whether you are a home seller, or a home buyer, these market reports will give you an in depth understanding of the Colorado Springs market by area and price point which will give you an edge when heading toward your next sale or purchase of a home.

Visit the archive of our past market reports to take a stroll down memory lane, or download a copy of the current market report.

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Tax Deductions for Landlords: Operating Expenses

For most landlords, being able to deduct operating expenses can make a big difference on the amount of tax that they owe.

But when it comes to fully utilizing those deductions, that’s where many landlords struggle. After all, there are so many different expenses that you can claim! Additionally, the IRS doesn’t have an exhaustive list of all the eligible expenses, just that they must meet their requirements to qualify as deductible. This means that they must be ordinary and necessary, current, directly related to your rental activity, and reasonable in amount.

Here’s a look at what you should know about operating expenses, and how you can claim them on your taxes.

Deductions: Current Vs. Capital

Deductions fall into one of two different categories: current and capital.

Let’s look at both now.

  • Current Expenses:: These are generally for one-off purchases or expenses to keep the property in good working condition or to help you run your rental business. Current expenses can be claimed in whole on your tax return and deducted entirely in the year that they occurred.

    In order to qualify as a current expense, the purchase or repair must be considered “ordinary and necessary,” which means that it is an ordinary expense that’s considered common in the business. This includes interest, taxes, advertising, and more. It must also be “current,” which means that it must have more short-term value than long-term. A repair to a roof has a short-term value and can be claimed as a current expense. A new roof, on the other hand, has a long-term value. Finally, your current expenses must be reasonable in amount, so be realistic when claiming your expenses. A $400.00 door handle, for example, is likely to raise some eyebrows at the IRS.

  • Capital Expenses: These, on the other hand, are improvements or purchases that are made to the property, that enhance its value –or, that will benefit your rental activity for more than one year. So, for example, a complete kitchen remodel, which would add value to your rental and benefit your property for more than one year, would be considered a capital expense.

    Unlike current expenses that can be claimed in the year that they were incurred, capital expenses must be depreciated, and can only be deducted a little bit at a time over the course of many years. The exact timeframe for depreciation varies depending on the item in question but it will be somewhere between 5 and 27.5 years.

Operating Expenses: What Are They?

Now that we’ve got that out of the way, let’s take a look at some of the deductions that you may be eligible for. Make sure you’re not forgetting anything this year!

Some valuable deductions that landlords can claim include:

  • Mortgage Interest – Interest from mortgage payments and even interest on credit cards that are used for the rental can be deducted. If you have a mortgage on your property, this expense could easily represent one of your largest and most valuable deductions.
  • Depreciation of the Property Depreciation is another significant deduction. Depreciation of the property itself is considered a capital expense, and can’t be claimed all at once. Instead, it must be spread out over the course of 27.5 years.Just note that depreciation that you claim must be recaptured and paid should you sell the property at some point down the road. The IRS also doesn’t give you an option to opt out of claiming depreciation on the property, it’s a deduction that you’re required to claim. If you don’t, you could still be held liable for paying depreciation recapture tax when you sell your property.
  • Mortgage Insurance (PMI/MIP): If you have a mortgage on your property, you can deduct mortgage insurance from your rental income.
  • Taxes – Taxes, including property tax, city tax, and even taxes for any employees that you hire for your rental properties can all be claimed on your tax return. If you have a mortgage, your taxes will often be paid through this. You can find amounts on your 1098 form. If you’ve paid off your mortgage, you’ll have to keep receipts yourself, or look up your tax records online.
  • Advertising: The cost of advertising your property, including online listings or ads that you take out, can also be claimed on your tax return.
  • Insurance: Insurance for the rental or rental property business can also be deducted. This includes fire, theft, liability, and more.
  • Utilities: If you pay the utilities for your rental, you can deduct them as well.
  • Repairs and Maintenance: Repairs and maintenance for your rentals can also be deducted. Just remember that improvements must be treated as depreciation, and will have to be paid back at the time of sale in depreciation recapture.
  • Professional Services: If you hire an accountant, attorney, property manager, or other professional –their fees can also be deducted.
  • Travel Expenses: Whether your rentals are local or long-distance, your cost of travel to and from the property; including gas and airfare, can be deducted.
  • Losses From Theft or Other Casualties: If your property was damaged in a fire or flood, or if valuables were stolen or the property vandalized, you may be able to deduct a portion of the loss.
  • Tenant Screening: When it comes to tenant screening, all of the expenses associated with that can also be claimed. Credit reports, criminal background checks, identity verifications, employment and income verification, and more can all be claimed if you paid for them.
  • Commissions: Commissions can also be deducted. This includes incentives that are paid to managers and salespeople, or any commissions that you pay for tenant referrals –say you offer outgoing tenants a bonus if they find a replacement tenant for you.
  • Equipment, Supplies, and ExpensesNew equipment and supplies including a phone, laptop, camera, tablet, and even internet service, printer toner, paper, and more –as long as they’re used specifically for your rental business, can also be deducted. Just make sure you keep good records and are able to demonstrate that your purchases and expenses are for business purposes.
  • Home Office Deduction: If you use a room in your home for conducting business, you can deduct this expense as well. You can use the IRS’ simple method for calculating this deduction and deduct $5 per square foot up to 300 square feet.

Learn more about available deductions for landlords here.

Business Vs. Personal Use

If you purchase something or subscribe to a service that you use for both business and personal use, you can deduct only the portion that you use for business-related purposes. To determine this, you’ll need to pinpoint how much time you use your item for rental-related purposes, and how much for personal use. Then, divide the cost between the two purposes and deduct the rental-related portion. So, say for example that you use your internet connection for official business purposes 60 percent of the time. In this case, you can only deduct 60 percent of the cost of service.

Special Rules for Certain Expenses

The IRS has created specific rules for certain operating expenses, that spell out which expenses are deductible, how much is able to be deducted, and in some cases, even stipulate specific record-keeping requirements.

Here’s a look at the main areas that include special rules and requirements.

  • Home Office Expenses: There are strict requirements for taking this deduction. Learn more here.
  • Meals and Entertainment: There are some IRS requirements for meals and expenses. Including the requirement that someone who can benefit from your rental activity must be present. These expenses are usually 50 percent deductible.
  • Travel: Travel expenses can be deducted from the IRS guidelines. The amount you can deduct will vary depending on the length of your trip and the time you spend on business while away. See this page for more information.
  • Vehicle Expenses: The standard mileage rate for the cost of operating your car changes from year to year. For 2017, standard mileage is 53.5 cents (0.535) per mile.
  • Business Gifts: The IRS limits business gifts to $25 per person.
  • Bad Debts: Some bad debts are deductible, but unpaid rent is generally not one.
  • Interest Payments: In most cases, you can deduct interest on money that you borrow for a business or investment activity –however, rules and restrictions apply for other types of interest.
  • Casualty Losses: For losses due to a casualty, like theft, vandalism, or fire –you usually won’t be able to deduct the entire cost of the property destroyed. Instead, how much you’ll be able to deduct will depend on whether the property was stolen, completely destroyed, and whether the loss was covered by insurance.
  • Taxes: While you can fully deduct your current year state and local property taxes on real property as an operating expense, any prepaid taxes must be deducted the following year.
  • Education Expenses: In order to qualify for an education deduction, you must be able to show that they education maintains or improves skills that are required to be a successful landlord, or is required by law or regulation to maintain your professional status.

For more information on these deductions, and the rules surrounding them, visit the IRS Publication 463: Travel, Entertainment, Gift, and Car Expenses.

Get Organized

Okay –so you have a lot of deductions that you can work with now. Your best option when it comes to claiming them is to be diligent with your record-keeping. This means keeping track of all of your receipts, invoices, and bills as expenses arise. Likewise, be sure to use a separate checking account for your expenses, and try to obtain documentation for every transaction that occurs.

So there you have it! As a landlord, there are a lot of deductions that you’re most likely eligible for.

Since taxes can easily eat into a significant portion of your rental income (up to 50 percent according to some estimates!) experienced investors know that taking advantage of the available deductions is key to maximizing their profits. Don’t miss out! Make this year the year that you save.

And don’t forget, if you’re stuck, it’s always a good idea to work with an experienced CPA –ideally someone who’s experienced in preparing taxes for landlords. A good accountant will be able to inform you of tax deductions that you may be eligible for and can keep you from making many common pitfalls that landlords often make when filing, helping you to save when tax time rolls around.

Please Note: While this article contains information that we’ve learned from classes and from working with our clients over the years, please keep in mind that we are not tax professionals. This information is intended to inform and to guide only, and it is not meant to serve in place of tax advice from a licensed tax professional. These principles should only be applied in conjunction with a CPA. To learn more about depreciation as it applies to your own financial situation, please consult a tax professional.

Buying a Home in a Seller's Market, Your Survival Guide

Buying a Home in a Seller’s Market, Your Survival Guide

The Colorado Springs Real Estate market has quickly shifted from a strong buyer’s market to a strong seller’s market. Home buyers had just gotten familiar with the jargon and practices of a buyer’s market, like short sales and foreclosures, when suddenly, the market changed.

Now a few short years later, buyers have a whole new set of jargon and practices to deal with. If you are considering purchasing a home in Colorado Springs, read on to learn everything you need to know about our new seller-friendly landscape. Consider this your survival guide in a seller’s market.

How to Be a Competitive Buyer

Buying a Home in a Seller's Market - Be A Competitive BuyerBefore we discuss some of the seller’s market tactics you need to understand, let’s talk about how to increase your chances of getting your offer accepted.

Pre-Approval

Back in the buyer’s market days, buyers had the option of being pre-qualified and/or pre-approved for a home loan before house hunting.

This was helpful when the buyers were ready to make an offer on a home. Pre-qualification, and especially pre-approval, strengthened offers. They indicated to the sellers that the buyers would most likely be able to secure the funding needed to close the deal. This made the sellers more comfortable accepting the offer.

But in today’s seller’s market, pre-approval is a minimum requirement (pre-qualification no longer carries much weight in getting your offer accepted). Before you even begin your home search, you should contact a lender to get pre-approved for a home loan.

Buying a Home in a Seller's Market - Cash offers

All-Cash Offers

In many instances, buyers are now competing with all-cash offers.

And if the deal falls through, the seller has to put the house back on the market and start from square one. So, all other factors being equal, sellers would prefer to work with a buyer who can pay cash so no one has to worry about obtaining financing.

If you’re competing with an all-cash offer, a personal letter to the seller could be useful. You could assure the sellers of your strong financial position and ability to secure financing. You could also express your plans for the house as a loving home. Many all-cash offers are made by real estate investors, who would flip or rent out the house. So you could sway a seller who has an emotional attachment to the house and wants the future owner to love and care for the home the way they have.

Tactics Employed in a Seller’s Market

Buying a Home in a Seller's Market - Deferred showings Now let’s discuss some of the tactics you’ll see sellers and their agents use under today’s market conditions.

Deferred Showings

Deferred showing is a tactic used to create a sense of urgency and demand for a particular property.

The tactic works like this:

The listing agent puts the home into the Multiple Listings Service (MLS) early in the week, ideally on a Monday morning. This timing brings the listing to the attention of all those buyers (and buyers’ agents) who are currently in the market for a home but didn’t find one over the weekend. The showing instructions for the property state that there will be no showings until the upcoming Saturday or Sunday at a particular time, usually 10 or 11.

The idea is to create a busy “Open House” environment with lots of potential buyers waiting to get in to see the property. The listing agent and home seller are hoping to generate and sense of urgency that will produce multiple offers and maybe even start a bidding war. This tactic is especially successful for the sellers in a seller’s market when many of those buyers have most likely lost out on previous homes because they were outbid.

There are a few additional details that make deferred showings even more effective.

First, it helps if the property is in a popular price range. This means the price should be close to the median sales price for the neighborhood. This ensures that many buyers will be interested because many buyers are looking in that price range.

Secondly, the location needs to be desirable. The property needs to be in an area that will appeal to many buyers.

An overpriced listing in an unpopular area isn’t a great candidate for deferred showings.

Deferred showing is a tactic used to create a sense of urgency and demand for a particular property.Click To Tweet

The Upside of Deferred Showings

Creating a potential bidding war isn’t the only upside of deferred showings for the sellers.

First, the schedule created by deferred showings is far more convenient for the sellers. Rather than working their schedules around multiple showings on multiple days for multiple buyers, the sellers can simply work around the Saturday/Sunday showings. They may even go away for the weekend and return to multiple offers.

Deferred showings also create an environment where the sellers feel in control. If they receive multiple offers, they can compare the offers and vet the buyers side-by-side to find the best offer. This is much easier on the sellers than receiving a single offer and deciding whether to accept, counter, or wait to see if a better offer comes in.

When a property is well-priced and well-staged in a hot seller’s market, buyers’ agents will often write a good offer with a short timeline for acceptance. This gives the sellers an appealing offer, but it also creates a sense of urgency for them to accept the offer before it expires.

The Downside of Deferred Showings

Buying a Home in a Seller's Market - Deferred showingsOne of the notable downsides of deferred showings is missing out on buyers because of simple scheduling conflicts.

Consider well-qualified, but out-of-area buyers, for example. It’s quite common for out-of-area buyers to schedule trips to Colorado Springs specifically to buy their new house. These relocation buyers (called “relo” for short) are often assisted with the move by their new local employer, so they are serious buyers and are able to secure financing. But if the deferred showing date doesn’t coincide with their buying trip, the seller could miss out on these well-qualified buyers.

Another significant downside of deferred showings is buyer’s remorse.

A bidding war environment creates buzz and excitement (especially for the winner!). But once the excitement wears off, buyer’s remorse usually sets in. Bidding wars pressure buyers to make hasty decisions and take advantage of the human impulse to win. This can leave the buyer with regret and maybe even a feeling of having been taken advantage of.

Unlike most bidding situations, sales of real estate aren’t final as soon as the bid is accepted. The escrow process typically takes 30-60 days, and offers buyers many opportunities to back out of the deal based on any of the many contingencies found in a real estate contract.

And if the buyer backs out, the seller is left at a serious disadvantage. And not only because they are back at square one in terms of finding a buyer. The real disadvantage is that the market will assume the buyer backed out due to a defect with the property.

After all, that’s the most common reason homes fall out of escrow: something is found during the home inspection which causes the buyer to walk away from the deal. So even if a buyer walks away because of buyer’s remorse or cold feet, the house will still be stigmatized. Once the buyer backs out, the house is categorized as Back on Market (BOM). And many of the homes on the BOM list are ignored by buyers and buyer’s agent because of the assumption that there was a problem with the inspection.

So this BOM category is bad for the sellers but could be a good opportunity for buyers. During a hot seller’s market, savvy buyers and their agents will ignore the deferred showings circus and will watch the BOM list instead. They know many of the BOM listings are simply the result of a bidding-war buyer getting cold feet, not a problem with the property. And they know they’ll have lower buyer competition for these properties because of that BOM stigma.

Highest and Best

The term “highest and best” has become very popular in the Colorado Springs Real Estate market. It’s the listing agents’ way of saying, “offers should be the top dollar you’re willing to pay with the most favorable terms you’re willing to offer the seller.” Then the listing agent will present these “highest and best” offers to the seller and help the seller choose the winner.

This has created a fair bit of controversy in the local market for a few reasons.

First of all, good Realtors pride themselves on correctly pricing listings. This includes pricing properties in a rapidly rising market. When you say highest and best as an agent the message being conveyed is that you have no idea what this home could sell for, so let’s just let the market dictate the maximum value.

On one hand that sounds like a decent idea, the problem with this approach is that it creates a feeding frenzy, you might end up with a great offer and terms that ultimately end up closing. You are more likely to end up with a deal falling out due to a case of “buyer’s remorse”.

A Realtor’s role is to give pricing advice and guide a contract through to closing. This type of pricing model alleviates the real estate professional from their responsibility of correctly pricing a home. If the deal goes sideways and the buyer develops remorse, the agents don’t have a firm pricing foundation to stand on.

In a strong seller’s market, good agents will advise their clients to present their best offer if they are serious about owning a particular home.

Highest and best also indicates that the listing agent may be uncooperative. They may be unwilling to work with buyers’ agents to find solutions which are fair to both parties (buyers and sellers) because they know they have the upper hand in a seller’s market. And remember, the offer and acceptance is only the first round of negotiations in a real estate deal. Another round may be necessary after inspections to address any issues with the property. Agents need to be willing to work together throughout the transaction to ensure that both parties are getting a fair deal.

We should note that the term “highest and best” may actually be somewhat useful in those few areas of the country where real estate has gotten out of control (Silicon Valley or Manhattan, for example). In those extreme markets, prices may be on the rise faster than buyers can keep track of fair market values. So offers for the same property can vary widely between buyers offering rates in line with last month’s sales and buyers anticipating next month’s prices.

This is simply not the case in our Colorado Springs market. Offers the sellers receive will all be similar (it’s rare to see an extreme outlier).Additionally, we have enough new construction in the region so that buyers can choose to build if they become too frustrated with the resale Market. Commute times are not as severe in Colorado Springs as they are in other big cities.

Highest and Best Survival Tips

The most important thing to remember in a highest and best scenario is the you need to keep your emotions in check. Don’t get so attached to a property that you take the attitude that you must have it at any cost.

Base your offer and terms on numbers and conditions you are comfortable with. If you are working with a good agent, they will advise you of what the property is actually worth. It’s ok to stretch a little but don’t set yourself up for remorse and regret. Remember, markets rise and fall, you just might have to wait a little while to get what you want.

If you lose out on a property as the result of a highest and best war, don’t give up. Both you and your agent should keep an eye on this home to see if it closes or more likely comes back on the market. Back on the market might mean there was an inspection or financing issue with the house. The more likely scenario is that the winning bidder got cold feet and decided to back out. This creates a great opportunity for you the buyer, to swoop back in and put it under contract, maybe for better terms.

“Coming Soon” Signs

“Coming Soon” signs are another tactic used by listing agents and sellers to create buzz around upcoming listings. This tactic requires the seller to authorize the listing agent to pre-market the home before actually listing it on the MLS.

Buying a Home in a Seller's Market - Coming Soon Sign

Here is the stance taken in by our local Pikes Peak Association of Realtors. This comment speaks to just how controversial this practice is:

The RSC Board of Directors, with legal counsel, has concluded the following with respect to this practice:

  • Per NAR, the PPMLS cannot make a rule concerning the posting of signs. Therefore, the PPMLS cannot prohibit a broker from posting an “Available Soon” sign.
  • PPMLS Rules require that all Exclusive Right to Sell listings be submitted within 72 hours of seller signature.
  • If RSC receives a written (or emailed) violation complaint that a property is listed, but is not in the PPMLS, then the RSC can request a copy of the listing agreement which would confirm whether or not there is an office exclusive. If RSC verifies that a listing is in force, and there is no “pink slip/office exclusive” then RSC will ensure that the listing is input into the PPMLS. (Note: currently there is no fine or sanction for not having put the listing in within the required 72 hours.)
  • If the broker has an office exclusive agreement, then the listing is not required to be input into the PPMLS computer system (although a copy of the listing agreement is required to be filed with RSC).
  • The RSC will not prohibit a listing broker from inserting additional terms in the contract such as withholding the listing from the PPMLS for a specified period of time.
  • The RSC will not prohibit the listing broker from submitting the listing to PPMLS, but then, with the Seller’s authorization, temporarily withdrawing the listing from the PPMLS.
  • If there is no listing agreement, but the seller has simply agreed to allow the broker to place a sign on the property, then the RSC has no jurisdiction in the matter, and no action will be taken.

The listing agent installs a sign with an accompanying rider that advertises “Coming Soon”. Seems innocent enough, right?

Well, the goal of this tactic isn’t only to build hype. It’s also to prey on anxious buyers looking to get the jump on the competition. Buyers who see the sign think, “I should contact the agent on that sign to see when the house will be on the market.” So they contact the agent on the sign directly, and that can lead to trouble.

You see, when buyers contact the agent on the sign directly, they are actually reaching out to a real estate professional that has an agency agreement with the home sellers. This means that until you enter into some type of agency agreement with that same Realtor, anything you say can and will be passed along to the sellers and used against you.

If you do end up deciding to buy that house and work with the listing agent you contacted from the sign, that agent will represent you as a “transaction-broker”. This means the agent facilitates the transfer of the property but doesn’t advocate for the buyer. It also means they receive a much higher commission.

In cases where the buyers and sellers each have their own agent, the real estate commission is split between the two agents. But if the agent working with the sellers (either as a seller’s agent or a transaction-broker) can close this deal as a transaction-broker for the buyer, they are the only agent involved, so they get to keep the full commission themselves.

What’s Wrong with Using a Transaction-Broker?

The problem with using a transaction-broker is that you miss out on representation. You won’t have a professional advocating for your interests. A transaction-broker must follow certain legal requirements regarding disclosures and communication, but they do not work on your behalf.
Many buyers think this arrangement is acceptable as long as the agent is also acting only as a transaction-broker (not a seller’s agent) for the sellers. That way the agent isn’t advocating for anyone, so it will be a fair transaction.

In theory, this sounds fine. But in practice, humans find it very difficult to be entirely impartial. Even if the agent doesn’t intend to favor one party over the other, they may do so subconsciously. This conflict of interest is the reason dual-agency (where the agent advocates for both the buyers and the sellers) has not been allowed in Colorado since 2003.

For a fair transaction in which each parties’ interests are represented, it’s best for buyers and sellers to each retain their own agents.

Protecting Yourself as a Buyer in a Seller’s Market

The best way to protect yourself and your interests as a buyer in a seller’s market is to engage the services of a buyer’s agent. Buyer’s agents are advocates, working on your behalf to get you a fair deal.

It just takes a few pages of paperwork to confirm that you wish to be represented by your buyer’s agent, then he or she can get to work for you. Their services include:

  • Offering professional guidance throughout the buying process
  • Negotiating on your behalf
  • Assisting with the required legal documents
  • Overseeing the transaction through to closing

And here’s the best part: their services won’t cost you anything. The seller traditionally pays the real estate commission, so it costs you nothing to add this important layer of protection.

And once you’ve engaged the services of a buyer’s agent, take advantage of their knowledge and experience. Heed their advice, and you won’t fall victim to these seller’s market tactics!

Here are some additional resources that support the ideas in this post:

Rental Property Depreciation

Rental Property Depreciation

Rental Property DepreciationWhen it comes to investments, real estate can offer some solid benefits. Property appreciation, tax breaks and in the case of rental property, recurring cash flow can turn your property into a money generating investment. You can take advantage of these benefits whether you use a Property Management company or self-manage your own rentals.

In many ways, the law seems to favor real estate investors and rewards those who make this type of investment with a number of opportunities for different tax breaks.

One tax break that many landlords benefit from is depreciation; which allows you to recover some of the cost of income-producing property through yearly tax deductions. You can do this by depreciating the building, and in some cases, the personal property inside by deducting some of the cost each year on your tax return.

Generally speaking, depreciation results in more money in a landlord’s pocket. Since the single largest expense that most landlords have is the cost of the rental property, being able to depreciate it allows you to claim a significant portion of that expense by spreading it out over the course of a number of years, thereby reducing the amount of tax that you owe.

If you’re currently a landlord or are thinking about buying an investment property, having a basic understanding of the deductions that you may be eligible for can help you to save significantly on your tax bill. In the case of depreciation, it can also help you to prepare for unexpected costs down the road, allowing you to manage your portfolio and structure your deals in a way that will benefit you the most.

With this in mind, let’s take a look at depreciation for rental property, and see how you can use this deduction to reduce your tax bill.

What Is Depreciation?

Depreciation, in a nutshell, is based on the concept that some assets are depreciating in value.
While real estate in most areas is an appreciating asset increasing in value, the truth is that the building itself along with some of the property inside the building, like appliances, are things that’ll wear out over time. As the years go by, property wears out, decays, or becomes otherwise unusable.

Depreciation is an annual tax deduction that landlords can take that reflects this cost.

With depreciation, landlords can depreciate the value of the building, land improvements, such as landscaping, as well as personal property items that are inside the building, but not physically part of it; for example, refrigerators, stoves, and carpet.

One thing that makes depreciation so valuable for landlords is the fact that you get to take it year after year. In the case of most rental properties, the cost of depreciation is spread out over the course of 27.5 years, making it a long-term benefit. Additionally, unlike many deductions, landlords don’t have to pay anything in order to claim depreciation, aside from the cost of the original asset, and owners are entitled to depreciation even if their property goes up in value over time, as is often the case.

Here’s a practical example of how depreciation works:

Example: Denise purchases a rental property with a depreciable value of $100,000. Because of this, she is entitled to a yearly depreciation deduction of $3,636 for the next 27.5 years (excluding the first and last year, when it will be somewhat less). The only thing Denise has to do to get these annual deductions is to keep the property as a rental, file a tax return, and do some simple bookkeeping. She doesn’t need to spend an additional penny on this property.

Rental Property Depreciation

Depreciation Recapture

Now, there’s a downside to depreciation that most people tend to overlook, that is, depreciation recapture.
Depreciation recapture is a small “Gotcha!” from your friends at the IRS, which requires you to pay 25% tax on any gain realized through depreciation.

So if you were to sell your rental property down the road, you’ll have to pay 25% tax on the total amount of depreciation deductions that you took over the years.

Of course, there are a few alternatives to this tax.

One alternative is using what’s known as a 1031 deferred exchange, or a “like-kind exchange”, which allows you to defer this payment. With an 1031 exchange, when you sell your property you can roll the depreciation into the next property that you purchase. The downside to this option, though, is that you’re simply deferring the tax. You’ll still have to pay recapture taxes when you sell the exchanged property in the future.

Another option is not selling the property at all, but instead keeping it as a rental and then passing it on to your heirs. When they inherit the property, they won’t have to pay your depreciation recapture taxes.

A third option is to sell the property at a loss, but of course, this is a far less popular option.

In most cases, the longer you wait before you sell, the less of an impact the depreciation recapture taxes will have. This is because you’ll have had many years to make use of the additional tax savings that accrued from using depreciation. Additionally, you may not be in the same tax bracket that you would have been in had you made the sale earlier on.

Keep in mind that there are a number of different ways that you can structure your investment properties and use tax deferral strategies to avoid depreciation recapture taxes. It’s a good idea to speak with an accountant to see what your options are and to find out how you can best take advantage of depreciation.

Depreciation Is Not Optional

At this point, you may be thinking, “Ok, I’ll just skip depreciation, and not claim it”.

Unfortunately, depreciation is not optional. You must take a depreciation deduction if you qualify for it. If you don’t, the IRS will still treat you as though you had. This means that if you sell your property, you’re still going to be taxed on depreciation deductions, even if you didn’t claim them.

If you have unclaimed depreciation currently, you can deduct the entire amount in one year. To do so, you’ll want to make what is known as an I.R.C. Section 481(a) adjustment and file IRS Form 3115 to request a change in accounting method. Generally, this type of change is granted automatically by the IRS, and you won’t need to file any amended tax returns. You may need to seek out an accountant, though, as it’s a confusing form.

What Can Be Depreciated?

First, there’s depreciation on the rental building itself. This usually accounts for the largest depreciation deduction that you can take.

With this deduction, the rental building itself (the structure) can be depreciated. The land that it’s sitting on, however, cannot. This makes sense when you think about it. While the house may be slowly wearing down with time, land doesn’t wear out or “depreciate” in the same way.

Secondly, personal property that’s a part of your rental business, can also be depreciated. This includes things like appliances or furniture in the house, as well as office or construction equipment, cars, and other vehicles that you own, and use for the rental properties.

Of course, only property that you own is able to be depreciated. You can’t depreciate property that you lease for your rental activity such as office space. Additionally, you aren’t able to depreciate property that’s solely for personal use. So no depreciation for your personal residence, and should you convert a rental property to a personal residence, you must stop taking the depreciation for the property. If a property serves as both a rental and for personal use, you may depreciate only part of its value; the percentage of the property used for rental purposes.

Finally, the amount of your depreciation is based on the cost of the property itself. The amount that you borrowed to purchase –i.e. the interest rate on the loan is irrelevant. You can, however, deduct interest on the mortgage, or for HELOCs that are used for the property.

How Does Depreciation Work?

Practically speaking, how do you go about claiming it on your tax return?

First, you must determine what’s known as your property basis, that is, how much the property’s worth for tax purposes.

Usually, your basis is the cost of the property, and any expenses of the sale such as real estate transfer taxes.

Land cannot be depreciated, so it must be deducted from the cost of the property.

Next, you must determine the depreciation period, or “recovery period” of the property or aspects in question, that is –how long the IRS says you must depreciate it for.

Real property placed into service after 1986 is depreciated under what’s known as the Modified Accelerated Cost Recovery System (MACRS). Under this system, the depreciation period for residential real property placed in service after 1986 is 27.5 years. Prior to 1987, different depreciation methods with different depreciation periods were in effect.

The periods are the same whether the property being depreciated is old or new. When you buy property, you start a new depreciation period beginning with year one, even if the prior owner previously depreciated the property as well. This makes no difference to you, though, your depreciation period starts when you purchase the property.

You then deduct a certain percentage of its basis each year during its recovery period.

Next, you’ll want to calculate your deduction amount. Your depreciation deduction is a set percentage of the basis of your property each year.

This percentage varies, depending on the depreciation method you use. All real property must be depreciated using the straight-line method. Under this method, you deduct an equal amount each year over the depreciation period, generally 27.5 years.

At the end of the day, depreciation can be a useful and often-necessary deduction that landlords can take. Just make sure you work with a good accountant, who can fill you in on depreciation, as well as depreciation recapture if you’re planning to sell the property down the road. This will allow you to structure your purchases in a way that will benefit you the most and will help to keep you from being hit with any unexpected taxes in the future.

To learn more about depreciation, be sure to check out the IRS Publication 946 (2017), How To Depreciate Property.

Here are some additional resources about Real Estate Tax Deductions and 1031 Exchanges:

Please Note: While this article contains information that we’ve learned from classes and from working with our clients over the years, please keep in mind that we are not tax professionals. This information is intended to inform and to guide only, and it is not meant to serve in place of tax advice from a licensed tax professional. These principles should only be applied in conjunction with a CPA. To learn more about depreciation as it applies to your own financial situation, please consult a tax professional.

accounting-bankbook-business-921783

Landlord Tax Deductions: What Every Landlord Should Know

Taxes aren’t exactly something that we look forward to, but for landlords and real estate investors, at least, there may be some reason to rejoice.

The tax code tends to favor real estate investors and having rental property can open the door to a tremendous number of tax deductions and credits that you could be eligible for, all of which can make a significant dent in your tax bill.

The key to maximizing your income with rental property is taking advantage of all of the tax benefits that are offered to you. Yet many landlords are unaware of just how many there are! Some deductions are more valuable than others, but overall, these write-offs can help you to increase your rental revenue considerably. Of course, how much you stand to benefit will vary widely depending on a range of factors including your filing status (married, single, joint-filing-separately?), tax status (business, investment?), tax bracket, the number of properties that you own, and how you structure your investments (LLC, sole proprietorship?).

If you’re a first-time landlord, or even an experienced investor, having a firm grasp of the tax code –as it applies to you will prove to be a tremendous advantage. It’ll help you to know how you should structure your investments, allow you to accurately calculate your taxes for prospective investments to see if a property’s worth investing in, and if you have an accountant, can help you to ensure that you both are on the same page. With this in mind, let’s take a look at the basics of the tax code, as it applies to landlords. Read on for an overview of the tenets of taxes, and to see which deductions that you may be able to claim.

Taxes Landlords Are Required to Pay

First, let’s take a look at the different types of taxes that you’re required to pay as a landlord:

  • Income tax on rental income and property sales
  • Social Security and Medicare taxes (some landlords)
  • Net investment income taxes (some landlords)
  • Property taxes

Here’s a look at each type of tax now.

Income Tax on Rental Income

Rental income that you receive is taxable and subject to federal income tax. When you file your annual tax return, you’ll add your net rental income to your other income for the year, such as income from your job or investment income.

Additionally, you may be subject to state income tax as well. Forty-three states also have income taxes, with the exceptions being Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. For more information on your state’s income tax law, visit Tax Sites, or your state tax agency’s website.

Income Tax on Property Sales

If you sell a rental property, the profit on the sale is added to your income for the year and is also subject to tax. If you’ve owned the rental for more than one year, this income will be taxed at capital gains rates, which in most cases, are lower than income tax rates. However, if you sell your property and use the proceeds to purchase a similar property, using what’s known as a like-kind exchange, or a Section 1031, you can defer the tax on your profits.

Social Security and Medicare Taxes

Many landlords are also required to pay Social Security and Medicare payroll taxes, or the Federal Insurance Contributions Act (FICA). While employees pay half of these taxes and employers pay the other half, self-employed people must pay them all themselves.

These are two separate taxes. Let’s look at each now:

  • Social Security TaxSocial Security tax is a flat tax of 12.4% on net self-employment income or, if you have employees, on their wages up to an annual ceiling –that’s adjusted for inflation each year. In 2017, this ceiling was $127,200.
  • Medicare Payroll TaxThere are two different Medicare tax rates –2.9% tax up to an annual ceiling of $200,000 for single taxpayers and up to $250,000 for married couples filing jointly. All income above this amount is subject to tax at a 3.8% rate.

Combined Social Security and Medicare tax is 15.3%, up to the Social Security tax ceiling –whether you’re self-employed or an employee.

If you hire employees to work in your rental property business, you may have to pay and withhold Social Security and Medicare taxes. Your share of these taxes, though, as an employer is deductible.

However, the income you earn from a rental property is not subject to Social Security and Medicare taxes, even if your rental activities constitute a business for tax purposes. The exception to this is if you’re a landlord who provides “substantial services” to your tenants, such as the services provided by hotels or bed and breakfasts.

Net Investment Income Taxes

Net investment income tax is a 3.8% tax that affects many higher-income landlords. This is a tax on unearned income including rental income and gains from selling property. If your adjusted gross income exceeds $200,000 if you’re single, or $250,000 if you’re married filing jointly, you will be subject to this tax.

Property Taxes

Finally, if you own property, you’ll have to pay property tax. These are taxes imposed by cities, counties, or other jurisdictions, and are a tax on the value of your rental.

What Is Considered Rental Income?

Of course, your rental income includes the rent that your tenants pay, but it can also include other payments as well.

  • Security DepositsSecurity deposits that you plan to apply to the tenant’s final rent payment must be claimed as income in the year that you receive them. However, if you plan to return the deposit to your tenant at the end of their rental term, then do not include it as income. If you end up keeping some of the money because your tenant doesn’t live up to the terms of the rental agreement, you should include the amount that you keep in your income for the year.
  • Interest on Security DepositsAny interest earned on security deposits should also be included in your income unless your state requires landlords to credit that interest to tenants.
  • Advance Rent PaymentsAny rent that you receive in advance, before the period that it covers should be included in your rental income for the year that it was received.
  • Property or Services Paid in Lieu of RentProperty or services that you receive from a tenant as rent must also be included as rental income.
  • Rental Expenses Paid for by TenantAny rental expenses that a tenant pays to you are also considered rental income. This includes utilities, repairs, and more. These expenses can then be deducted by you.
  • Fees or Charges Paid by TenantAny fees that tenants pay are also considered rental income. This includes charges for paying late rent, parking fees, storage facility fees, or even laundry income.
  • Lease CancellationsPayments for lease cancellations are also considered rental income.
  • Leases With an Option to BuyIf your rental agreement gives your tenant the right to buy your rental property, the payments you receive under the agreement are usually considered rental income.

Tax Deductions

One of the great things about owning investment property is the wealth of tax deductions that are available for landlords.

The law allows you to subtract operating expenses for your rental –including repairs and maintenance, as well as other expenses including mortgage interest and depreciation from your gross rental income, to determine your taxable income.

Here’s a look at some of the deductions that landlords are able to take:

In many cases, landlords end up with so many deductions that they show a net loss when calculating their gross rental income. In these cases, you’ll owe no tax on your rental income. This tends to be more common during the first few years of owning rental property, when your rents that you’re charging may be lower, and you may be claiming more for depreciation.

In fact, in some cases, you may show a loss for tax purposes, even if you’ve actually earned more income than you’ve paid in expenses –due to the often-significant deductions of mortgage interest and depreciation.

Your Tax Status Affects Your Deductions

Rental properties can be considered a business, an investment –or in rare cases, a not-for-profit activity.

If your rental activities qualify as a business, you’re entitled to all the tax deductions listed above, however, if your rentals are considered an investment –you’ll lose certain deductions. Of course, tax deductions for not-for-profits are extremely limited.

Your tax status will be determined by how much time and effort you put into your rental activities, and whether you earn profits each year.

Property Ownership Affects Taxes

Keep in mind that how you structure your rental property purchases will affect the type of tax returns that you must file.

The main ownership options for most landlords are:

  • Sole proprietorship
  • General partnership
  • Limited partnership
  • Limited liability company (LLC)
  • Corporation
  • Tenancy in common
  • Joint tenancy

These different types of ownership can be divided into two main categories; individual ownership and ownership through a business entity.

Small landlords, those who own one to ten residential rentals, generally own their properties as individuals. In fact, according to one government survey, individuals owned 83% of the 15.7 million rental housing properties with fewer than 50 units. (Department of Housing and Urban Development and Department of Commerce, U.S. Census Bureau, Residential Finance Survey: 2001 (Washington, DC: 2005).)

Partnerships, limited partnerships, LLCs, and S corporations, on the other hand, are all “pass-through” entities. This means that the entity itself doesn’t pay taxes, but the profits or losses are passed through to the owners who include them on their tax returns. Because pass-through taxation permits property owners to deduct losses from their personal taxes, it’s generally considered the best form of taxation for real estate ownership. And with the new Tax Cuts and Jobs Act, there may be even more incentive for investors to structure their purchases this way. Pass through entities with “qualified business income” are now eligible for a 20% deduction.

Sure, it’s not our favorite topic, but since taxes often one of the single biggest outgoing expenses that we have each year, aside from the mortgage itself, looking for ways to reduce your tax bill can often result in significant savings.

If you’re a landlord, it’s worth spending some time familiarizing yourself with the tax code, to find out if you’re saving as much in tax as you could be. It’s also a good idea to consult with a qualified CPA, to ensure that you’re structuring your purchases in a way that’ll be most beneficial for your tax situation, and to make sure you’re not missing out on any valuable tax deductions that could make a big difference in the amount of tax that you owe.

Many thanks to Stephen Fishman’s Every Landlord’s Tax Deduction Guide, for providing clear, concise information on taxes as they pertain to landlords. See Every Landlord’s Tax Guide to learn more about taxes for landlords.

Please Note: While this article contains information that we’ve learned from classes and from working with our clients over the years, please keep in mind that we are not tax professionals. This information is intended to inform and to guide only, and it is not meant to serve in place of tax advice from a licensed tax professional. These principles should only be applied in conjunction with a CPA. To learn more about depreciation as it applies to your own financial situation, please consult a tax professional.

firstimpression

Putting Your Home on the Market: Making a Great First Impression

Our Springs Homes agents work with a lot of Home Buyers and subsequently, show a lot of properties. This experience makes them an invaluable resource, especially when it comes to advising Home Sellers on how Buyers think, what they see, how they react and how you can make a great first impression when they tour your home for the first time. Especially when if you’re considering putting your home on the market.

We asked a couple of our agents to share something that Home Sellers often overlook or forget to take care of prior to allowing their home to be shown. In other words, what turns off potential Home Buyers during the critical first impression of the home?

Pet Evidence

Nicole Happel:
One detail Sellers often overlook is the importance of removing pet evidence before a showing. Colorado Springs is known for being a dog-friendly city, so most folks here appreciate fellow pet owners. But when those folks are buying a home they do NOT appreciate your dog beds covered in fur, dog slobber on your sliding glass door, claw scratches on your hardwood floors, toys and food bowls in the middle of the kitchen, and especially doodies in your yard (however small).

When a Buyer walks into a home that screams DOG they are pretty grossed out. And then they wonder how much cleaning will be needed in order to make the home sanitary and livable according to their standards.

It seems this culture of “accept our pets” transcends into all price ranges too. I’ve seen some high-end homes which reek of dirty dog. And Buyers are not only turned off by your home, but they begin to question me as to why I would even consider showing them this home. It’s embarrassing to walk into a “dog overload” situation having not seen it coming. And of course, sometimes this stuff isn’t obvious in the online pictures we see prior to showing.

I know it’s a hassle as Sellers, but dog owners have to stay on top of such things while selling. If you don’t, it just might cost you that one solid Buyer. Just sayin!

 

Don’t Slam the Door on a Sale

Jennifer Boylan:
This one seems really obvious and simple, but I’m constantly amazed when a Home Seller completely ignores the front door and entry to the home.

When I walk up to a house with a nasty door or entry with Home Buyers in tow, I say “I hope this isn’t foreshadowing”. A nasty entry and doorway puts the prospective Buyers on alert. It’s like from that point forward they’re looking for problems.

  • The solutions are really simple but require a little attention and time:
  • If the front door is chipped, peeling or faded, paint it.
  • If the doorbell is broken and/or has a hole thru the button, replace it.
  • Check to make sure all glass is clean
  • Repair any broken glass or shutters
  • Replace or repair torn or worn-out screens. Ace True Value Hardware stores here in Colorado Springs make this really easy.
  • Make sure the path to the door is clear; no dirt, trash, toys, newspapers or other obstacles.
  • In the wintertime, make sure the sidewalk and entry are shoveled and clear of snow and ice
  • Add some plants, even if they’re fake. The Buyers usually don’t notice if they are real or artificial and if they do, it still shows that you care.

If you make the entry to the property appealing, you’ve done your best to start out on the right foot. This is just a smart move regardless of what condition the real estate market is in.

 

You Never Get a Second Chance

Brooke Mitchell:

One of the biggest things homeowners overlook when it’s time to sell… and I know it sounds cliché… is curb appeal. I firmly believe that “You never get a second chance to make a first impression!” I’m going to address curb appeal, and a bit more.

Dead or overgrown grass & shrubbery looks like a lot of work to first-time homeowners, so spruce up that front yard. Clean weeds out of rock & mulch beds.

  • According to a variety of experts, front doors tend to yield around 100% return on investment, one of the highest percentages for a minor home improvement. Imagine if you didn’t even need to replace it, but merely give a fresh coat of paint. Pick a neutral or trendy color.
  • Clean windows and glass doors are also in this curb appeal category. It makes your home feel fresh from the outside and helps you enjoy the sunshine while inside! I can’t believe how inexpensive a good thorough window cleaning can be. Once inside (I know this extends beyond curb appeal, but work with me here), Buyers will see the details that you have grown accustomed to while enjoying your home.
  • Worn flooring or carpet that needs to be stretched is distracting to the Home Buyer. First of all, we understand you live here, and it’s a royal pain to move your furniture out, but in the end, it will be worth it. Buyers will discount your home or overestimate the cost of this repair, so it’s better not to give them an opportunity to object. Replace the flooring or stretch the carpet.
  • Smells… pee-ew! When we sold our second home, we’d just had our first child. Sadly, we had grown immune to the grotesque diaper genie smell. Once it was pointed out in a feedback form we got it OUT of the house. Other smells can turn a Buyer off as well. You may have a litter box, but non-pet-owners can smell that ammonia scent right away. Buyers automatically assume it’s in the carpet, pad, sub-floor, floor joist, the room below… okay, I’m kidding, but seriously consider replacing flooring. Again if it’s something you live with all the time, you may not notice.
  • Pet hair and messes. It’s hard for pet owners to not become unaware of the pet hair in their lives. But again for Buyers who don’t own pets or those with allergies, this is an issue. Get a complete professional cleaning, and maybe put Fido in the kennel the first week you have the house on the market. Side note – the barking dog, even safely kenneled in garage or basement bedroom makes some people very nervous and on-edge, so they don’t have a warm feeling when viewing your home. Some people are flat-out afraid of dogs, no matter how small or far away they are.
  • It’s nice if you can “stage” your home. You don’t need a professional; just tidy up, thin out closets, slim down on excessive family photos and personal (religious, political, hunting) décor.

When you list your house, as a Seller, be Switzerland… neutral, lacking strong opinions displayed around your home. Based on our experience, we have far more detailed help that we are happy to share when you’re ready to list. Let us know how we can help!!

 

Smell Ya Later!

Maggie Turner:

Having one answer to this question is tricky. I’d say for first impressions, smells are the most important thing that Home Sellers can overlook. If a Buyer walks into a home and smells something bad, it’s an immediate turn-off. Bad smells create red flags and cause concern for lack of cleanliness, maintenance and overall care of the home. If a Buyer walks into a warm and inviting scent, it’s a pretty good sign that the home is cared for.

I was recently showing homes to an experienced and savvy Home Buyer. We went into a great property and I thought for sure this is “it”. The Home Sellers had left the trash in the kitchen trash can a little too long. There was an odor of decomposing something emanating from the can, it was pretty bad. The Buyer wouldn’t even consider the home and we left immediately. As we continued to look at other less ideal homes, I kept trying to bring her back around to what she now referred to as the “Stinky House”, but there was no interest. I kept thinking to myself, “whatever was stinking up the kitchen just cost the Home Sellers a sale”.

Oftentimes we get really used to smells in our day to day environment. If you question if your home has offending odors, an easy solution is to ask a friend to come over, walk through the home and be honest with you about what they smell in the home.

 

The Big 3-D’s

Kelly Raffelli

Decluttering, De-personalizing and Deep cleaning are the big 3-D’s when getting ready to put a house on the market. A Seller should give potential Buyers the opportunity to see a blank canvas. I recently was showing a house to a client and the downstairs family room was so entrenched with memorabilia and family photos, the entire conversation while we were down there was about that family and all of their stuff. That is NOT what you want the Buyer to be focused on. You want a Buyer to walk in and picture their own family pictures, decor, and life happening in that family room.

It can be hard to declutter and de-personalize, but the more you do you create an opportunity for the Buyer to “paint their lives” on the blank canvas and see themselves living in the home. Sellers don’t want Buyers distracted when they arrive for a showing. They want them focused on the question, “is this the right home for me?”

Deep cleaning is equally important and relatively straightforward. Buyers need to see the home in it’s very best condition. Sellers have to bring their “A Game” when presenting their house to potential Buyers. A deep clean and some light touch-up paint and other small repairs will go a long way to getting your home sold quickly and for the highest dollar.

Don’t Forget the Garage

Joe Boylan
For me, the garage almost always tells the truth. At least when it comes to getting an idea of how the home has been maintained. If The garage is a total mess, packed to the ceiling with boxes and junk, I always figure that the well-staged interior is just a facade. Now, if the garage is neat clean and well organized I always assume (right or wrong) that the house has been well maintained. If this is not the case, we find out at the inspection.

Take the time to clean out your garage, it’s worth the price of a storage space for the time your home will be on the market. Matt Casady from STOR-N-LOCK has some great suggestions about how self-storage services like his can be a huge help.

Most storage units in Colorado Springs can be rented on a month-to-month basis so you can use it for as long or short as you need without being locked into a contract which makes it a great option as a Home Seller looking for a short-term solution. Plus, many local facilities offer move-in specials like one-month free (especially in the fall and winter when they’re less busy) so using the storage space is even cheaper upfront.

Storage units come in a wide variety of sizes with a variety of features so you can store nearly anything you need to there. If you’re just looking to tidy up your garage by getting rid of boxes or junk, a 5’x10’ or 10’x10’ storage unit would be sufficient. If you’re looking to remove clutter from around your whole home by removing excess furniture from multiple rooms, then you may need a larger unit like a 10’x20’ or 10’x30’ unit.

Plan what you’re going to be storing and how long you plan to store it before selecting your storage unit. For example, if you’re selling your home during moderate weather months like in the spring and would only need the storage unit at that time, then a non-climate controlled unit would probably work just fine. However, if you’re selling in the winter and the items you’re storing are more sensitive to temperature fluctuations like electronics or family heirlooms, then a storage space that is climate controlled/heated would be worth the extra few dollars a month.

If you know you’ll be keeping your stuff in storage more long-term while you move and get situated in your new home self-storage can be a great option as well. Many local facilities offer discounts to customers who pay 6-months or 12-months upfront so if you know you’ll be storing for a while that’s a great way to cut down on the storage costs.

Because of the wide variety of storage unit sizes and optional amenities (like climate control), there’s a storage space to fit really any need you have during your selling and moving process.

Just make sure your garage looks like a maintenance ninja lives in the house.

No matter what the condition of the market, there is always competition for the best Buyers.

Don’t fall into the trap of assuming everything sells for top dollar in a Seller’s market. There is always another house and more deals fall out in a hot Seller’s market than in a normal market. It’s in a Seller’s best interest to sell to the most motivated, best-qualified Buyer. One of the best ways to motivate a Buyer is by impressing them every time they see the house.

We hope you have found this information useful. If you have any questions, please feel free to contact any of our agents.

 

Additional Resources:

If there is one thing Realtors love to talk about it’s selling houses and what that takes. Here is some more great information on this subject from some of the best real estate bloggers around the internet.

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We list and sell homes across the entire Pikes Peak region. Additionally, Springs Homes offers property management services. We work with a select few home builders in order to provide our clients with new construction options as well as resale opportunities.

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