April 2021
A monthly newsletter published by the Rental Housing Alliance Oregon
rha est. 1927
www.rhaoregon.org
In this issue:
RHA Calendar of Events............................................page 2 President’s Message.............page 3 Dear Maintenance Men....................... ...........................................................page 4 Tax Time!.....................................page 5 It’s Not Us vs. Them................page 6 How to Understand Gains Tax & How to Calculate It.................page 9 Fake Emotional Support Animal???...................................page 10
Rental Housing Alliance Events & Classes Join us for RHA Oregon’s Membership Meeting •Where : Zoom Meeting •When: Wednesday April 21st at 6:00pm
**FREE**
•What : Speaker is Shyle Ruder with Fair Housing Council of Oregon Shyle will speak on Fair Housing Basics plus COVID-19. Followed by Q & A’s
DATE
EVENT
LOCATION
TIME
04/14
Board Meeting
Zoom
4:00pm
04/22
Mentor Round Table
Zoom
6:00pm
05/12
Board Meeting
Zoom
4:00pm
05/15
Mentor Round Table
Zoom
11:00am
05/31
RHA Oregon Office Closed
INFORMATION
In Observance of Memorial Day
DATE
CLASSES
LOCATION
TIME
INSTRUCTORS
04/01
Improve Your Odds of Collecting COVID-Era Rent
Join.me
7:00pm
Robert Collier w/Landlord-Reference.com
04/06 Online Tenant Screening Class
WebEX
11:00am
Marcia Gohman w/National Tenant Network
04/07
Join.me
7:00pm
Robert Collier w/Landlord-Reference.com
04/08 Online Tenant Screening Class
WebEX
7:00pm
Marcia Gohman w/National Tenant Network
04/13
Improve Your Odds of Collection COVID-Era Rent
Join.me
7:00pm
Robert Collier w/Landlord-Reference.com
04/15
Managing During the Moratorium
Zoom
6:30pm
Charles Kovas w/Charles Kovas Law
04/21
Improve Your Odds of Collecting COVID-Era Rent
Join.me
7:00pm
Robert Collier w/Landlord-Reference.com
04/22
Online Tenant Screening Class
WebEX
11:00am
Marcia Gohman w/National Tenant Network
04/22
Applicant Screening/F.A.I.R.
Zoom
11:30
Amber Clark w/The Garcia Group
04/27
Online Tenant Screening Class
WebEX
7:00pm
Marcia Gohman w/National Tenant Network
04/27
Why Consider a Delaware Statutory Trust
Zoom
6:30pm
Austin Bowlin w/Real Estate Transition Solutions
04/29
Improve Your Odds of Collecting COVID-Era Rent
Join.me
7:00pm
Robert Collier w/Landlord-Reference.com
05/04
Online Tenant Screening Class
WebEX
11:00am
Marcia Gohman w/National Tenant Network
05/05
Improve Your Odds of Collecting COVID-Era Rent
Join.me
7:00pm
Rpbert Collier w/Landlord-Reference.com
05/13
Improve Your Odds of Collecting COVID-Era Rent
Join.me
7:00pm
Robert Collier w/Landlord-Reference.com
05/14
Online Tenant Screening Class
WebEX
7:00pm
Marcia Gohman w/National Tenant Network
05/18
Improve Your Odds of Collecting COVID-Era Rent
Join.me
7:00pm
Robert Collier w/Landlord-Reference.com
05/20 How 1031 Exchange Statutory Trust Works
Zoom
6:30pm
Austin Bowlin w/Real Estate Transition Solutions
05/20 Online Tenant Screening Class
WebEX
11:00am
Marcia Gohman w/National Tenant Network
05/25
WebEX
7:00pm
Marcia Gohman w/national Tenant Network
Improve Your Odds of Collection COVID-Era Rent
Online Tenant Screening Class
For additional class/event information visit: https://rhaoregon.org/education All educational classes/seminars are open to members in good standing and the general public. A member in good standing may register and pay for an invited guest at the member rate for the educational class. General public must pay at the time of registration and at the non-member rate. To qualify for the early bird registration rate you must have your registration into the RHA office no later than 4:59pm on the listed early registration date in the advertising for the event. Deadline for refund/credit or cancellation of registration is up until 48 hours prior to the date and time of the class/seminar, up until 48 hours prior you will be refunded 100% of the cost to attend. If a registered guest/member does not cancel and/or does not show to the scheduled class/seminar then the registered guest/member will be required to pay the full amount of the class/seminar. All registrations are non-transferable. Currently all classes are in Zoom meeting format. RHA Oregon is not responsible for attendee’s inability to log into Zoom meeting. The Zoom invite will go out as an email to all those registered. Please check your spam folder email settings to make sure you receive the email invite. RHA is not responsible for lost or spammed emails.
2
RENTAL ALLIANCE UPDATE April 2021
www.rhaoregon.org
President’s Message Ron Garcia, RHA Oregon President
How important is the Rental Housing Alliance Oregon to you? I had a disgruntled Landlord write to me this month to say he was terminating his membership because, in his opinion, we have not done enough “with the war perpetrated by Salem and Portland city council on residential property owners” and that “what this all boils down to is it requires that RHA in Oregon take a militant position in conjunction with landlords statewide”. He concluded with this: “You see Mr. Garcia, there’s ’nothing’ to lose by being proactive, but by not doing so everything to lose…” As a longtime landlord and professional Property Manager, and a nearly 20-year member of RHAO with 10+ years as a Director on its Board with a term as Legislative Director and now its current President for a 2nd term, I certainly share his frustration. The amount of regulations, prohibitions, and legislation that have mounted on top of Residential Property Providers in the last few years is unprecedented. So much has happened to Tenant Landlord law that it is not only hard to keep up with, but it is even harder to navigate those simple situations that seemed so commonplace just a few years ago. Advertising. Screening. Move-in’s. Security Deposits. Move-out’s. Final accounting. Rent increases. Lease renewals. For-cause terminations. Repairs. Temporary Occupants. Today, even collecting rent is posing confusing legal challenges! Landlords are trying to survive in a rip tide of overlapping forces. With the Covid-19 Pandemic came multiple Eviction Moratoriums. And before we’ve been able to even absorb those impacts or comply with those imposed restrictions, a new round is headed our way (as we speak) in the current 2021 Oregon Legislative Session. Yet even now, as we begin to readjust to these newest proposals and mandates and hurdles, many Landlords are being caught off-guard and stung by laws that came into effect 2 to 3 years ago. These were equally unprecedented, but so new that we never really got used to them before the next wave of regulations hit. Utility bill-backs, property sales, lease expirations, homeless camps, advertising and application rules, and even consequences of ice storm damages are but a few examples of issues I have heard that are currently being litigated, and that Landlords are being required to defend. But before we get swept out to sea and drown in this swirling drama, it might be worth our time to grab a quick breath of air. Let’s get our bearings towards dry land and try to find a safe port. Here is the new horizon: Change has occurred and will continue to evolve in Tenant-Landlord relations. Accepting that reality is the first step. The rental market is evolving along with the economy, the pandemic, the social justice movement, the prescription drug epidemic, our court systems, the make-up of our local, state and national governments, taxes, the price of oil and timber and the calls for future sustainability. Fill in the blank if you want. Personally, I have spent hundreds of hours over the last 12 months on Zoom calls and in work groups; in testimony at House and Senate Hearings; collaborating with Landlord groups and government entities; personal conversations with Senators and Representatives and Community Action Associations. For several years I have been working to influence decisions and polices that affect Landlords as a representative on behalf of the Rental Housing Alliance Oregon in many public arenas. Am I making any headway? I’m not sure. Am I making any waves? Maybe. Maybe not. However, I have learned this for certain: Our voice matters. My voice matters. Your voice matters. Their voice matters. But screaming voices don’t succeed. Marches are meaningful. Riots are criminal. Self-righteous anger reveals self-defeating contempt. My dad always told me if I want to get respect, I need to give respect. It’s been said that to have successful relationships in life we ought to spend more time considering our overall responsibilities and less time focused on our individual rights. So here is my reply to our disenchanted member: No sir, I do not believe we are at war. I do not believe in the need to become militaristic. I do believe we need to be informed. We each need to be engaged. We need to be educated and where there is an opportunity, we need to educate. The discussion over Tenants’ rights has morphed into one of Tenant Protections. Landlords’ rights must accommodate those protections while continuing to protect their economic health. Providing safe and affordable housing for Renters requires that Owners receive a safe and stable Return on Investment. Let me add a true confession here. I was ready to quit RHA about 5 years ago too… until I realized that I need them as an organization of support a whole lot more than they need me as a self-serving landlord. I know it’s not flattering, but it’s the truth. So instead, I chose to get more involved. In closing, last month I promised that I would teach you the words to the “Great Apartment Song”. It’s really just a melodic hymn, and I hum it to the tune of America the Beautiful. When I am in rough waters I especially like the calm feeling I get as I hum “from sea to shining sea”. www.rhaoregon.org
RENTAL ALLIANCE UPDATE April 2021
3
Dear Maintenance Men by Jerry L’Ecuyer & Frank Alvarez
Dear Maintenance Men: My pest control company has removed a beehive from my property. However, the bees have not left and the tenants are complaining about bees inside their units. I have sealed every hole, crevasse and crack I can find. Yet, the bees still find a way of getting into the units. What is missing or are these bees just too smart? Bert Dear Bert: We have had a similar problem at one of our properties. We also sealed everything we could think of and still the bees found a way in. You may want to look at your roof vents that service the bathroom & kitchen exhaust fans. The bees come down the vent and go into the voids between the ceiling and roof. Most fan boxes are not well sealed below the fan blades. Once they are in the ceiling, it is easy for them to travel to different units, find a hole and drop down into the apartment’s living area. Because the bees may be discovered in an area far from the original entry point, it is hard to track down where they first came in. We now install screening at all bath and kitchen exhaust vent tubes. The material used is 1/8 inch square metal screening and is attached to the top of the vent tube at the roof level. Be sure to extract the hive and any honey you find or you might not only continue to have a bee problem, but an ant problem also.
Dear Maintenance Men: The kitchen counter tops in my rental units are old and tired looking. I want to upgrade but I am confused about which counter top material will be best. Can you go over the pros and cons of some of the more popular counter top surfaces available? John Dear John, We are lucky today to have so many choices of countertop materials available. The four most popular materials are plastic laminate, granite, engineered stone & ceramic tile. Plastic laminate or better known as Formica Brand is still the most popular choice for apartment counter tops. This is because the choice in colors is almost unlimited and the ease of installation keeps the costs down. With proper care, plastic laminate will last for years; however, it can be easily scratched by knives or scorched by hot pots. Laminate counter tops can be easily installed by the average handyman, DYI person or contractor. Granite counter tops in the apartment industry are very popular and with good reason. The cost of granite has come down to reasonable levels and the upgraded look of a granite countertop is substantial. They are very tough and are resistant to staining, scratching and scorching. Granite countertops will need to be professionally installed and sealed periodically. Engineered stone countertops are almost as popular as granite, and are slightly more expensive than granite. Popular brands are DuPont & Silestone. Engineered stone countertops are composed of quartz particles and resins and the surface is smooth, non-porous, and scratch resistant. They require less 4
RENTAL ALLIANCE UPDATE April 2021
maintenance than granite. Engineered stone countertops are not DIY friendly and will need professionally trained installers. Ceramic tile countertops have been around almost as long as plastic laminate. They can be installed by the average handyman, DYI person or contractor. They are heat & stain resistant. Ceramic tiles do need to have periodic maintenance to keep the grout lines clean and sanitary. From a management and maintenance prospective, we are finding granite countertops to be the top choice. The price difference between laminate and granite are close enough to warrant upgrading to granite. If you intend to hold onto your investment for a long time, granite will more than pay for its self.
Dear Maintenance Men: I have a garbage disposal that is very loud. When it is running with water, it can be heard across the kitchen and into the living room. It runs perfect and I don’t really want to replace it. What can I do to sound proof the disposer? Kathleen Dear Kathleen: You are in luck. There is a very simple solution. Every garbage disposal unit comes with a rubber drain deflector. When the deflector becomes old, the rubber hardens and stays open to the drain allowing spoons, forks and other items to fall into the drain, but more importantly, it allows sound to escape. Go to your local hardware store and buy a new rubber drain deflector. The disposal noise will almost disappear. Careful you do not forget to turn off the garbage disposal!
WE NEED Maintenance Questions!!! If you would like to see your maintenance question in the “Dear Maintenance Men:” column, please send in your questions to: DearMaintenanceMen@gmail.com Bio: If you need maintenance work or consultation for your building or project, please feel free to contact us. We are available throughout Southern California. For an appointment please call Buffalo Maintenance, Inc. at 714 956-8371 Frank Alvarez is licensed contractor and the Operations Director and co-owner of Buffalo Maintenance, Inc. He has been involved with apartment maintenance & construction for over 30 years. Frankie is President of the Apartment Association of Orange County and a lecturer, educational instructor and Chair of the Education Committee of the AAOC. He is also Chairman of the Product Service Counsel. Frank can be reached at (714) 956-8371 Frankie@ BuffaloMaintenance.com For more info please go to: www. BuffaloMaintenance.com Jerry L’Ecuyer is a real estate broker. He is currently a Director Emeritus and Past President of the Apartment Association of Orange County and past Chairman of the association’s Education Committee. Jerry has been involved with apartments as a professional since 1988. www.rhaoregon.org
www.rhaoregon.org
RENTAL ALLIANCE UPDATE April 2021
5
It’s Not Us vs. Them
By David Crown - C.E.O. of Los Angeles Property Management Group In this time of uncertainty and struggle, amid danger and misinformation, the last thing we should do is assume the worst about each other. Crises like the current pandemic inevitably divide people to some extent (and this one divides us physically from one another), but when we rigidly refuse to give the benefit of the doubt to those who aren’t like us, we make healing all the more difficult. In property management terms, I’m talking specifically about an Us vs. Them mentality between landlords and tenants. Misconceptions Let’s start with landlords and their misconceptions about tenants. I know how these misconceptions can form, because I’ve been guilty of them myself. COVID-19 brought about a halt to evictions, a measure to protect those whose ability to pay rent had been eliminated by the virus. And while the Mayor and the Governor sounded magnanimous announcing this in televised speeches, they glossed over the fact that neither the city nor the state had granted any rent forgiveness at all, meaning rent was still owed in full in the long term. We had already taken great precautions to ensure the safety of our tenants and worked to make sure those affected by the virus were accommodated, but in the wake of these announcements, I feared the worst. Along with some of the owners we represent, I thought scores of tenants who hadn’t lost income due to the virus would take advantage of the situation and refuse to pay rent. And although some tenants may be acting in bad faith, for the most part, we were incorrect. So far, tenants in the units we manage have paid their rent in much higher percentages than we expected, despite the seeming implication from local leaders that they could’ve gotten away with not doing so. The vast majority of tenants are hardworking and honest people who do what’s right; we shouldn’t cynically underestimate them, because that eventually leads to treating them unfairly. On the flipside, I’ve found that some tenants mischaracterize landlords as hyper-rich fat cats plotting to scam the inhabitants of their properties. Now, of course the financial standing of people who own property is typically higher than that of the people who rent it, but the vast majority of landlords we work with are by no means affluent. Studies An article from the Department of Housing and Urban Development shows that, nationwide, business entities own 25.8 million rental units, and individual investors (commonly referred to as mom-and-pop’s) own 22.5 million. In our experience, these mom-and-pop operations often rely on their rental income to pay for everyday expenses and the upkeep of their property. A study by the National Apartment Association recently broke down what rents go toward on average: for each dollar of rent paid, 39 cents go toward paying the mortgage on the property, 27 cents go toward payroll expenses for employees who operate/maintain the property, 14 cents go toward property taxes, 10 cents go toward capital expenditures like roof and HVAC repairs, and 9 cents go to the owner. It’s Not That Simple To assume that landlords are financially invincible (or can withstand rent freezes or rent strikes) is to misunderstand the relationship between owner and renter. Have you made incorrect assumptions about the people on the opposite side from you? It’s important that both sides view one another as vital to the balance. Each should recognize that they depend on the other and the other depends on them. An intermediary like a professional property management company can significantly improve owner-tenant relations, because that’s their job. Ultimately, we should all choose to stop seeing it as “Us vs. Them,” because it’s not that simple. David Crown is the C.E.O. of Los Angeles Property Management Group, and has over twenty-five years of experience managing all types of income properties. A hands-on leader who has managed properties in 16 states, Mr. Crown has been asked to serve as an expert witness in property management matters, and currently serves on the Forbes Real Estate Council. He can be reached directly at 323-433-5254. Permission to reprint: Reprinted with permission of the Apartment Owners Association of California, Inc. http://www.aoausa.com
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6
RENTAL ALLIANCE UPDATE April 2021
www.rhaoregon.org
Understanding Gains Tax and How to Calculate It
Austin Bowlin, CPA – Partner at Real Estate Transition Solutions Even in the most robust seller's market, there is one thing that gives an investment property owner pause: capital gains taxes. And as an Oregon investment property owner, your tax liability on the sale of investment property can be substantial – as much as 37.7% - driving many investors to explore tax-deferral strategies like a 1031 Exchange.
A Closer Look at Tax Liability
As a licensed 1031 Exchange Advisor, one of the first things we do when working with a client is to help them understand their tax liability. Tax liability from the sale of investment real estate is not just about federal capital gains tax – it is the total aggregate amount of tax owed when an investment property is sold. Not only are you responsible for Federal Capital Gains Tax (15% - 20%), but you may also have to pay State Capital Gains Tax (0-13.3%), Depreciation Recapture Tax (25%), and Net Investment Income Tax (3.8%).
How to Calculate Tax Liability
Federal & state tax authorities calculate the amount you owe based on the taxable gain, not the gross proceeds from the sale of the property. To estimate the total tax liability after the sale of an asset, follow these five steps: Step 1: Estimate the Net Sales Proceeds Start by determining the fair market value of the investment property or the list price if you brought the property to market. There are several ways to calculate the sales price, but the most popular are the income method and the comparable sale method. Smaller properties and single-family rentals typically rely on the comparable sales method, while larger properties rely on net operating income to determine value. For example, let us assume a comparison of similar local properties indicates a property may sell for $3,500,000 with $250,000 in deductible selling costs such as brokerage costs, title, escrow, and excise tax (if applicable). In this scenario, the net sales proceeds would be $3,250,000. Importantly, the net sales proceeds do not consider any loan balances paid off at closing. Step 2: Estimate the Tax Basis Tax basis, also known as remaining basis, is the total capital that an owner has invested and capitalized in the investment property, including the purchase price, closing costs, and capitalized improvements minus the accumulated depreciation. For example, if you purchased the property for $850,000, invested $200,000 in capital improvements and have $750,000 in depreciation, your remaining basis is $300,000. There are some limitations to the items that you can include in the tax basis. Mortgage insurance premiums and routine maintenance costs are examples of items that are not included. A tax advisor can help to determine your property’s current remaining basis, which can be adjusted based on capital improvements and tax deductions. •Increasing the Tax Basis: Property owners will increase www.rhaoregon.org
their tax basis anytime they invest money into the property with capitalized improvements—such as a new kitchen, roof, or even an addition, as well as financing expenses. Expenses paid to operate the property, like legal fees, management expenses, and small repairs are not capitalized and instead treated as operating expenses. Capitalized improvements increase your investment in the property and are deducted from the net sales proceeds at the time of the sale to arrive at the property’s gain. While some of these costs are intrinsic to real estate investment, like escrow fees, others are flexible. A new roof, an upgrade to the kitchen, or adding a pool are capital improvements that have a wide range of costs, giving the owner some flexibility in the amount they can increase the tax basis of the asset versus deduct in the current year as an operating expense. •Decreasing the Tax Basis: Owners of investment real estate that include a building or structure must also decrease the property’s tax basis, ultimately increasing the figure used to calculate the second form of gain referred to as “depreciation recapture”. The most common way to decrease the tax basis is through an annual depreciation deduction. The deduction is subtracted from the tax basis on an annual basis to be treated as a tax expense offsetting income which is then recaptured at the time of sale. While it might seem unexpected to decrease your tax basis and eventually increase your tax costs, the depreciation deduction reduces an investor’s annual taxable income and thus income tax due during the years of ownership. Note that annual depreciation is not optional. Investors will be charged for depreciation recapture on the aggregate amount of available depreciation throughout the period of ownership regardless of whether they recorded depreciation expense. Easements, some insurance reimbursements, and other tax deductions, like personal property deductions, can also decrease your tax basis. Step 3: Calculate Taxable Gain The taxable gain is the realized return or profit from the sale of an asset, or, in other words, it is the net sales proceeds less the original tax basis, pre-depreciation. Tax authorities like the IRS and Franchise Tax Board use the taxable gain figure to determine the capital gains tax. To calculate the taxable gain, subtract the original tax basis from the net sale proceeds. Using the earlier example, if your original tax basis is $1,050,000 and the net proceeds from the sale of the property is $3,250,000, your taxable gain is $2,200,000. The second part of the tax liability is calculated based on the amount of depreciation available to take over the period of ownership – referred to as accumulated depreciation. Based on the above scenario, this amount is $750,000. Step 4: Determine Your Filing Status Your income, tax filing status, the
(continued on page 8)
RENTAL ALLIANCE UPDATE April 2021
7
Understanding Gains Tax and How to Calculate It CONTINUED FROM PAGE 7
state where you pay income taxes, and the location of your investment property will determine your capital gains tax rate. The IRS, most state governments, and some local governments collect a capital gains tax on the sale of an investment property, compounding the rate and increasing your tax bill. At the federal level, the capital gains tax rate is 0% for investors with an annual income (including the gain resulting from asset sales) less than $40,000 per year; 15% for investors with an annual income from $40,001 to $441,450; and 20% for investors with an annual income above $441,451. Most state tax authorities collect a capital gains tax as well. The state tax rate ranges from 0% to 13.3% with California at the top of the list at 13.3%. Step 5: Calculate the Capital Gains Tax Capital gains taxes are applied to the taxable gain based on the tax rate determined by your income and filing status, and the bill can be significant. There are four property tax categories: federal capital gains taxes, state and local capital gains tax, depreciation recapture, and net investment tax. The federal and state capital gains taxes are calculated at the investor's tax rate on the taxable gain. In our example above, a California property owner with a taxable gain of $2,200,000 would owe 20% in federal capital gains tax and 13.3% in state capital gains tax amounting to $732,600 in total capital gains taxes. Individuals with significant investment and rental income may also have an additional 3.8% net investment tax— included as part of the Affordable Care Act—added on top of the capital gains rate. This brings the total capital gains bill in California to 37.1% or $816,200 on the example above. This example is unique to properties and taxpayers located in California, which has the highest capital gains tax rate in the country. In addition to capital gains taxes, real estate investors will also pay depreciation recapture. Investors take a depreciation deduction on their annual taxes to offset rental income. The depreciation deduction not only decreases the investor's annual tax liability but also decreases the remaining tax basis for the property. Once you sell the asset for a profit, you must pay back those deductions. This is depreciation recapture. The rate of tax on depreciation recapture is a flat rate of 25% at the federal level, can also include up to 13.3% state income tax, and be subject to net investment income tax for an additional 3.8%. While capital gains tax is based on the taxable gain, depreciation recapture is calculated based on the accumulated depreciation during the investor’s ownership. Based on $750,000 of accumulated depreciation, the depreciation recapture tax in this scenario could be as high as $315,750. Deferring Capital Gains Tax with a 1031 Exchange By performing a 1031 Exchange, investment property owners can defer, reduce and even eliminate paying capital gains, depreciation recapture, and net investment income taxes on the sale of investment property. And while 1031 Exchanges are flexible in the number of strategies that can 8
RENTAL ALLIANCE UPDATE April 2021
be implemented, the IRS’s rules to qualify are not flexible. Failure to adhere to IRS rules can result in either a failed Exchange, in which the entire tax liability is due, or a Partial Exchange, in which a portion of the tax liability is due (generally the most expensive portion). To learn more about 1031 Exchanges, visit our website at www. re-transition.com/rhaor and download our FREE guide, “Understanding 1031 Exchanges”. Improving Potential for Cash Flow with a 1031 Exchange In addition to tax savings, a 1031 Exchange can improve the potential for cash-flow and appreciation by allowing the proceeds to be reinvested. In our example, the investor’s total tax liability would be $1,131,950. If the post-tax proceeds of $2,118,050 were reinvested and earning a 5% return, this would generate $105,903 in annual income. However, by performing a 1031 Exchange, the investor would have $3,250,000 to reinvest. At the same return of 5%, the exchange proceeds would generate an annual cash flow of $162,500. Although potential cash flow/returns/appreciation is never guaranteed and could be lower than anticipated, the difference in cash flow potential of $56,500 represents one of the primary benefits of 1031 Exchanges – the ability to keep all your equity working for you to generate income and appreciation. Learn More About 1031 Exchanges & Delaware Statutory Trusts If you have plans to sell your highly appreciated investment property and would like to learn more about taxdeferred 1031 Exchanges and Delaware Statutory Trusts, contact Real Estate Transition Solutions and speak to a licensed 1031 Exchange Advisor. We offer complimentary consultations that can be done over the phone, via web conference, or in person at one of our offices. To schedule your free consultation, call 503-946-5656, email info@retransition.com, or visit www.re-transition.com/rhaor. Austin Bowlin, CPA is a Partner at Real Estate Transition Solutions and leads the firm's team of licensed 1031 Exchange Advisors & Analysts. Austin advises on tax liability, deferral strategies, legal entity structuring, co-ownership arrangements, 1031 Exchange options, and Delaware Statutory Trusts. About Real Estate Transition Solutions: Real Estate Transition Solutions is an advisory firm specializing in tax-deferred 1031 Exchange strategies, Delaware Statutory Trust investments, and fractional replacement property options. For over 20 years, we have helped investment property owners perform successful 1031 Exchanges by developing and implementing well planned, tax-efficient transition strategies carefully designed to meet their financial & lifestyle objectives. Our team of licensed 1031 Exchange Advisors will guide you through the entire Exchange process and help you select and acquire 1031 replacement properties best suited to meet your goals. To learn more about Real Estate Transition Solutions, visit our website at www.re-transition.com. This is for informational purposes only, does not constitute as individual investment advice, and should not be relied upon as tax or legal advice. Please consult the appropriate professional regarding your individual circumstance. Because investor situations and objectives vary this information is not intended to indicate suitability for any individual investor. There are material risks associated with investing in DST properties and real estate securities including liquidity, tenant vacancies, general market conditions and competition, lack of operating history, interest rate risks, the risk of new supply coming to market and softening rental rates, general risks of owning/ operating commercial and multifamily properties, short term leases associated with multi-family properties, financing risks, potentially adverse tax consequences, general economic risks, development risks, long hold periods, and potential loss of the entire investment principal.Potential cash flows/returns/appreciation are not guaranteed and could be lower than anticipated. Diversification does not guarantee a profit or protect against a loss in a declining market. It is a method used to help manage investment risk. DST 1031 properties are only available to accredited investors (typically defined as having a $1 million net worth excluding primary residence or $200,000 income individually/$300,000 jointly of the last three years; or have an ac tive Series 7, Series 82, or Series 65. Individuals holding a Series 66 do not fall under this definition) and accredited entities only. If you are unsure if you are an accredited investor and/or an accredited entity, please verify with your CPA and Attorney. This article was collectively authored by Austin Bowlin and a paid third-party firm. Real Estate Transition Solutions offers securities through Concorde Investment Services, LLC (CIS), member FINRA/ SIPC. Advisory services through Concorde Asset Management, LLC (CAM), an SEC-registered investment adviser. Real Estate Transition Solutions is independent of CIS and CAM. Real Estate Transition Solutions offers securities through Concorde Investment Services, LLC (CIS), member FINRA/SIPC. Advisory services through Concorde Asset Management, LLC (CAM), an SEC-registered investment adviser. Real Estate Transition Solutions is independent of CIS and CAM. Sources: https://www.irs.gov/taxtopics/tc409, and https://taxfoundation.org/stateindividual-income-tax-rates-and-brackets-for-2020 www.rhaoregon.org
Why is DST Real Estate a Popular 1031 Exchange Option? Just Ask a Few Oregon Landlords. A 1031 Exchange into DST real estate helped these landlords meet their objectives. By selling their rental property and investing in three DSTs, they avoided paying 37.7% in gains tax while increasing income potential, diversifying risk, and eliminating active property management.
Before 1031: Landlords
After 1031: DST Property Investors
Sold Rental Property. Performed a 1031 Exchange. Deferred $423K in gains tax.
Invested in 3 passive management 1031 DST properties with monthly income potential.
Whole Ownership Rental Property
Fractional Ownership in Institutional DST Properties 1031 EXCHANGE
Example and pictures are for illustrative purposes only and are intended to show types of institutional properties that DST Sponsors seek to own. It does not constitute open or closed offerings. Individual results may vary.
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Learn more about 1031 Exchange DST property investments and fractional real estate ownership. Speak to a licensed 1031 Advisor at Real Estate Transition Solutions by calling 503-946-5656. This is for informational purposes only, does not constitute as investment advice, and is not legal or tax advice. Please consult the appropriate professional regarding your individual circumstance. There are material risks associated with investing in DST properties and real estate securities including liquidity, tenant vacancies, general market conditions and competition, lack of operating history, interest rate risks, the risk of new supply coming to market and softening rental rates, general risks of owning/operating commercial and multifamily properties, short term leases associated with multi-family properties, financing risks, potential adverse tax consequences, general economic risks, development risks, long hold periods, and potential loss of the entire investment principal. Potential cash flows/returns/appreciation are not guaranteed and could be lower than anticipated. Diversification does not guarantee a profit or protect against a loss in a declining market. It is a method used to help manage investment risk. DST 1031 properties are only available to accredited investors (typically have a $1 million net worth excluding primary residence or $200,000 income individually/$300,000 jointly of the last three years) and accredited entities only. If you are unsure if you are an accredited investor and/or an accredited entity, please verify with your CPA and Attorney. Real Estate Transition Solutions offers securities through Concorde Investment Services, LLC (CIS), member FINRA/SIPC. Advisory services through Concorde Asset Management, LLC (CAM), an SEC-registered investment adviser. Real Estate Transition Solutions is independent of CIS and CAM. The company depicted in the photographs herein may have proprietary interests in their name and trademark. Nothing herein shall be considered an endorsement, authorization or approval of RETS, CIS, and CAM or the investment vehicles they may offer, of the aforementioned company. Further, none of the aforementioned company is affiliated with RETS, CIS, and CAM in any manner.
Real Estate Transition Solutions | www.re-transition.com | info@re-transition.com | 503-946-5656 www.rhaoregon.org
RENTAL ALLIANCE UPDATE April 2021
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Fake Emotional Support Animal Documents Easily Obtained by Particia A. Harris, Permission to reprint given by AOA Recently, and strictly out of curiosity, I went online to a web site called www.supportpets.com to see how difficult or easy it was to obtain a document to qualify my cat, Oliver, as an emotional support animal (ESA). Once I entered in my personal information, including my email address, I was presented with a series of about 15 questions to which I had to choose answer of “yes, no, always, sometimes or never”. The questions were along the lines of the below: Do you feel anxiety when you are not with your pet? •Have you experienced an event that has caused you to be more anxious than usual? (COVID) •Does your pet give you comfort and relieve some of your anxiety? •Do you experience depression when away from your pet? •Do you notice that when you are with your pet that you are in a better mood? •Etc., etc. I answered most of the questions with either “yes” or “sometimes” and once completed, (ti took about five minutes), received immediate results that said, “Congratulations! Oliver qualifies as an emotional support animal.” Then, I was instructed to pay $194 to have the document sent to me. Naturally, I didn’t pay, but instead, I picked up the phone and dialed the number they gave me for any questions. I asked them if it was a medical professional that would be signing the documents and they assured me that yes, it was indeed a medical professional. I informed them that landlords requested that the tenant have a personal relationship with the doctor and if the medical professional who was signing the documents would be from my area. With that question, I was put on hold for about three minutes. The woman came back on the line and said that yes, they could accommodate that. Now, whether they actually could or not was not determined as I was not about to give these thieves my $194.00. Since then, I have received numerous emails asking me to complete my order for my ESA documents with an offer of 50% off. Their long emails have stories and testimonies from others who have applied and gotten their documents. One person claimed, “My ESA letters came within 6 hours of ordering! Such quick delivery allowed me to sign a new lease in the high rise apartment of my dreams that day.” Their emails also stated that my ESA order would include: •ESA approval from a licensed doctor delivered within 48 hours. •ESA Approval on 2nd pet free of charge. •ESA Approval that includes doctor’s license & signatures. •Full Federal protection under both FHA and ACAA Laws. •Access to custom ESA forms if needed for landlords and airlines. Now…advertisements for this company are showing up on my Facebook thread and in advertisements everywhere I go on the internet. Unbelievable. Reminder of the Law Earlier last year, the U.S. Department of Housing and Urban Development (HUD) released new guidance clarifying the responsibilities of both rental housing providers and renters when it comes to reasonable accommodation requests for emotional support animals (ESA’s) in housing. Documentation from the Internet It was stated that some websites sell certificates, registrations, 10
RENTAL ALLIANCE UPDATE April 2021
and licensing documents for assistance animals to anyone who answers certain questions or participates in a short interview and pays a fee. Under the Fair Housing Act, a housing provider may request reliable documentation when an individual requesting a reasonable accommodation has a disability and disability-related need for an accommodation that is not obvious or otherwise known. In HUD’s experience, such documentation from the internet is not, by itself, sufficient to reliably establish that an individual has a non-observable disability or disability-related need for an assistance animal. By contrast, many legitimate, licensed health care professionals deliver services remotely, including over the internet. One reliable form of documentation is a note from a person’s health care professional (on their letterhead) that confirms a person’s disability and/or need for an animal when the provider has personal knowledge of the individual. Information Confirming Disability-Related Need for an Assistance Animal Reasonably supporting information often consists of information from a licensed health care professional- e.g., a physician, optometrist, psychiatrist, psychologist, physician’s assistant, nurse practitioner, or nurse-general to the condition but specific as to the individual with a disability and the assistance or therapeutic emotional support provided by the animal. A relationship or connection between the disability and the need for the assistance animal must be provided. This is particularly the case where the disability is non-observable, and/or the animal provides therapeutic emotional support. For non-observable disabilities and animals that provide therapeutic emotional support. For non-observable disabilities and animals that proved therapeutic emotional support, a housing provider may ask for information that is consistent with that indentified in the Guidance on Documenting an Individual’s Need for Assistance Animals in Housing (*see Questions 6 and 7) in order to conduct an individualized assessment of whether it must provide the accommodation under the Fair Housing Act. The lack of such documentation in many cases may be reasonable grounds for denying a requested accommodation.
To read HUD’s entire guidance notice, visit https://www.hud. gov/sites/dfiles/PA/douments/HUDAsstAnimalNCI-28-2020. pdf Don’t get me wrong. I am an avid animal lover. I do believe that certain cases of people needing an emotional support animal are legitimate, but what I don’t support is dishonesty, falsified information or any form of scam whatsoever. And it seems to me, that websites that offer these docs, the medical professionals who work with them and the people who utilize them are guilty of all of the above.
Disclosure: Permission was granted from Oliver for the one-time sue of his photo for this article. Patricia Harris is Senior Editor of the AOA Buyers Guide and Magazine. RHA Oregon Editor’s note: There is a company called petscreening.com that will verify the need for the assistant animal for cost for landlords and property owners. www.rhaoregon.org
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This material does not constitute an offer to sell nor a solicitation of an offer to buy any security. Such offers can be made only by the confidential Private Placement Memorandum (the “Memorandum”). Please read the entire Memorandum paying special attention to the risk section prior investing. IRC Section 1031, IRC Section 1033 and IRC Section 721 are complex tax codes therefore you should consult your tax and legal professional for details regarding your situation. This material is not intended as tax or legal advice. There are material risks associated with investing in real estate, Delaware Statutory Trust (DST) properties and real estate securities including illiquidity, tenant vacancies, general market conditions and competition, lack of operating history, interest rate risks, the risk of new supply coming to market and softening rental rates, general risks of owning/operating commercial and multifamily properties, short term leases associated with multi-family properties, financing risks, potential adverse tax consequences, general economic risks, development risks and long hold periods. There is a risk of loss of the entire investment principal. Past performance is not a guarantee of future results. Potential cash flow, potential returns and potential appreciation are not guaranteed. Securities offered through WealthForge Securities, LLC. Member FINRA/SIPC. Kay Properties and Investments, LLC and WealthForge Securities, LLC are separate entities. Preferred return is not guaranteed, and subject to available cash flow. www.rhaoregon.org
RENTAL ALLIANCE UPDATE April 2021
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www.tvfr.com
Monthly Fire Safety Tip for Multi-Family Housing Issue: Kitchen Fires—How can you protect yourself? A motorist captured this moment in time. Smoke billowing from an apartment building. The cause? A kitchen fire! The resident wanted to boil water for tea but accidentally turned on the wrong burner and didn’t realize it. Shortly after she turned the stove on, her pet dog got outside and she left the apartment to retrieve it. When she returned with her dog the smoke alarm was alerting and she saw flames spreading from her stovetop to the cabinets above. Six apartment units suffered heavy smoke and fire damage causing $450,000+ in loss to the property and contents. Luckily, no one was injured and the resident had renters insurance. Cooking remains the leading cause of fire and civilian injuries in the United States. Here are some helpful tips for residents: Keep your stovetop clear and clean Never leave your cooking unattended Protect your valuables with renters insurance. For more information about fire safety visit www.tvfr.com
Remains of the burned out kitchen
TUALATIN VALLEY FIRE & RESCUE 503-649.8577 TVF&R — Safety, Performance, Customer Service, and Professionalism
