This Page is to Help Landlords & Tenants.
With Information on Changes in Rental Land Lord Tenant
Law concerning evictions, security deposit, walk through inspections, written notices, a new definition for security deposits and if 60 Day Notice to Vacate Required
Laws Affecting California Rental Property: Walk through, return of security deposits, enter the rental unit without written notice and other issues. Changes made on January 1, 2004. A brief overview:
AB 1384: When tenancy is terminated by a three-say notice as allowed in section 2,3, and 4 of Section 1161 of the Code of Civil Procedure, the owner does not have to notify tenant of or provide an initial walk through inspection. (CA Civil Code 1950.5)
AB 1059: Civil penalties have been increased up to $2,000 for each act where a rental property owner influences the tenant to vacate the dwelling by violating Sections 484 or 518 of the Penal Code, wrongly retains or appropriates the tenant's property, or uses threats, force or menacing conduct that interferes with the tenant's right to quiet enjoyment of the premises that would create an apprehension of harm in a reasonable person. (CA Civil Code 1940.2 and 1942.5)
SB 90: Existing law requires the landlord to return the remaining portion of the security to the tenant. This law requires a landlord to include, with certain exceptions, copies of specified documents showing the charges incurred and deducted, and would prohibit this information from being provided to a tenant prior to the specified time periods. Certain information about the person or entity providing the labor or material must be provided. The law establishes specific methods by which a landlord
may satisfy the obligation to provide this information and remaining security deposit, if any. (CA Civil Code 1950.5)
SB 345: 1.Allows an owner to enter the rental unit without written notice when the tenant verbally agrees to the entry for the purpose of making needed repairs or to show the dwelling to prospective buyers. (Section 1954 of the CA Civil Code)
2.Access to court records on evictions where the tenant is the prevailing party within 60 days after the complaint is filed. (Section 1161.2 of the Code of Civil Procedure)
3.The information that an owner must include in a verified complaint has been revised to include the name of the person verifying the complaint and to state the method used to serve the defendant with a notice of termination, among other items. The owner is also required to attach specified documents to the complaint, with specified exceptions. (Section 1166 is added to the Code of Civil Procedure)
For more information about the new laws join the Rental Housing Owner's Association of Southern Alameda County at www.rhosource.com or (510) 537-0340.
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I found some solid advice about 1031 exchanges I wanted to share with you.
1031 Exchange: Best Practices
As a 1031 Exchange Accommodator we are involved with thousands of real estate transactions every year. As you can imagine, we’ve been witness to some good, some bad and some ugly transactions.
As we start off the New Year we thought it'd be a great time to provide a list of things to consider that may help your real estate investments be more profitable and your life less stressful.
Set Up a Trust
The main advantages of setting up a Trust is to avoid probate and keep your estate private. What is probate? Probate is a court supervised legal process that includes determining the validity of your will, gathering your assets, paying your debts (and taxes) and distributing the remaining assets to your heirs. Probate is part of the public record and probate fees are set by law (and are not cheap). Spending a bit of time now setting up a Trust will certainly pay dividends later. Some people mistakenly think that setting up a trust will help eliminate taxes. It will not (although there are some tax benefits to a Charitable Remainder Trust).
Adding Family to Title
Don’t add your son/daughter/niece/nephew/etc. to the title of your property unless absolutely necessary. Adding someone to title may be as simple as filing a quit claim deed, but it may have unintended tax consequences. When you add a person to title, the IRS views that as a gift. If a son is now a 50% owner of a $1MM property, he just received a $500K gift. The gift giver (you, the owner) may now be responsible for a gift tax. A more cost effective solution may be to simply set up a Trust and name the son as the beneficiary of the Trust. Once you pass away, the son will receive the property (and at a stepped up basis – more of which is discussed below).
Don’t Ever Sell
‘Buy and hold’ can be a good strategy for building wealth and also keeping it. Real estate investors who own property until they die will pass the property to their heirs at a "stepped up basis". Under Section 1014(a) of the IRC, an heir’s basis in a property will equal the fair market value of the property at the time the descendant dies. This can effectively eliminate all capital gains and depreciation recapture taxes saving the heirs a tax bill.
Defer, Defer, Die
Conducting a 1031 Exchange will allow for the deferral of capital gains taxes. Doing another 1031 Exchange will allow for tax deferment again. An investor who cashes out, after doing a series of 1031 Exchanges, will pay taxes on all past transactions. Smart investors, however, take advantage of the step up in basis discussed early and defer, defer and then die. Having never cashed out of real estate all capital gains taxes will be eliminate for the heirs.
Utilize Equity Lines Strategically
In many instances, accessing an equity line may be a smarter decision for raising cash than selling real estate. Cash from an equity line is non-taxable whereas the sale of real estate may trigger capital gains taxes. Obviously the investor needs to be cautious of the extra debt burden on the property, but access to tax free cash via an equity line may be a very smart move.
Make Strategic Acquisitions
The next 1031 Exchange replacement property you acquire may have a pool, an ocean view and a large yard where the grandkids can play. Those amenities may be nice for your tenants, but even better for you after you boot the tenants out and move in. Acquiring a future primary residence via a 1031 Exchange is not illegal, but needs to be done with caution. It is possible however and making a strategic acquisition of that sort can be a nice way to purchase your dream home.
Make Strategic Moves
Moving into a rental property, converting it into a primary residence and then selling it will allow you to reap the benefits of the Homeowner’s exemption. If you are married up to $500K of gain will be tax free. Time of residence and ownership rules may apply, but the strategy has been used effectively by our clients throughout the years.
Diversify
Wall Street has been advocating the benefits of diversification for decades; a diversified portfolio allows you to reduce the volatility of your portfolio and either increase return for a given risk or decrease risk for a given return. Often it isn’t prudent to have all of your eggs in one basket. With real estate you can diversify either by geography, by asset class or both. It may be time to start thinking like Wall Street.
Enjoy Your Investments
Your investments should work for you. If, at some point, they become too burdensome on your life, it may be time to rethink your strategy. This doesn’t necessarily mean cashing in all of your chips (and paying taxes) but it may mean transitioning out of difficult to manage properties and into easier to manage ones.
Build a Solid Team
Ok, I’ll say it: You don’t know everything. You may think you do, but you don’t. That is why building a solid team is going to pay dividends over the long term. Don’t chintz out either. You usually get what you pay for. At Asset Exchange Company, we know our stuff. We price our services fair and we’d love to be part of your team.
If you'd like to discuss a 1031 Exchange either of these year end 1031 Exchange issues, please feel free to contact Asset Exchange Company anytime at 877-471-1031.
Contact Us
Asset Exchange Company
Leonard Spoto Principal
Asset Exchange Company
Tel: 877-471-1031
Fax: 877-480-1031
Email: info@ax1031.com
Web: www.ax1031.com
