Archive | May, 2013

Lease Renewal Letter – Under Market Rent Increase

27 May

Below is a letter we used for a tenant with an expired lease; their rent would be increasing once they renewed.

In this instance, we had priced the unit $85/month less than the neighborhood comps (determined by my Google alert system), so we wanted make sure they understood that while their rent was increasing, we were still offering them a discount to keep their business.

You can also find a tenant renewal letter without a rent increase here.

Update: for a different approach, check out the this new lease renewal letter that emphasizes reasons to renew.



[Date]

Dear [Name],

According to our records, your lease expired on [Date]. We have enjoyed having your family as tenants, and we would like to extend an invitation to renew your lease for another year.

The rent terms for the new 12-month lease will be $#/month and will begin [Date]. Your month-to-month rate would remain at $#/month for [Month] and [Month] [Year].

Because we want to keep you as tenants, we have intentionally priced the new lease considerably under market value. Below are a few comparable listings found online:

  • 123 Example St #A – $#
  • 456 Example St #B – $#
  • 789 Example St #A – $#

If the terms are agreeable, please sign and initial the Lease Contract Renewal. We included a self-addressed stamped envelope so you can return the paperwork to us via mail. When it arrives, we’ll counter sign and mail you back copies of all the documents.

Sincerely,
[Name]

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Installing Staircase Handrails

20 May
Installed Handrails

“After” Pic of the New Handrails

When we purchased our recent property, improvements were necessary to get the place ready for new tenants. Early candidates included the handrails installed along the staircase leading to the 2nd floor. A previous owner had used two closet rods back-to-back on each staircase, and didn’t even bother to drill into the studs. The result was a wobbly accident-waiting-to-happen. We purchased two 14-ft handrails from Custom Hardwoods, LLC in red oak to match the kitchen cabinets.

The hardest part involved correctly installing the returned ends to each rail to give it a finished appearance. The curveball came when I opened the box and found a collection of parts and screws with no instructions of how they were even remotely related to the installation. YouTube.com to the rescue:

 

Spoiler alert: the video makes it look a lot easier than it actually is for mere mortals. I burned through the better part of a weekend and 5 returned ends to get 4 attached correctly, and that 5th part can go back to the pits of hell from whence it came.

Once everything was attached, we stained (Minwax, Cherry finish) and added a couple coats of semi-gloss polyurethane, sanding in-between coats. That gave us 2 respectable handrails ready for installation. Indulge me for a moment while I gush over the Painter’s Pyramids that allowed me to apply coats on both sides in the same sitting. Super handy and surprisingly stable.

Stair Rail Staining

The overall installation strategy came from This Old House:

 

If I had to do it all over again, I would be tempted to try out the 45-degree cuts like they did in the video to create a corner that ends back at the wall instead of using the bolt kit to add end caps. I suspect it would be a little less work for more reliable results.

We used brackets like these to install the handrails, using 4 per staircase. Hard to say exactly, but I think the 2-part construction gave us a little fudge room with the angles that might not have been possible with a 1-piece bracket.

Wall Brackets

I’m very pleased with how the handrails turned out. The finish looks great, the installation height feels natural, and I expect they will stand the test of time.

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Investment Property Bookkeeping, Part 3

13 May

Below is part 3 of my investment property bookkeeping series. The first post discussed bank account organization and budgeting, while this post discusses the Excel document that I use in conjunction with my binder organization system.

The Excel Worksheet

Like the binder, the Excel worksheet is an annual catalogue of all of our investment properties’ expense and income activities.

Duplex Repairs Worksheet

There are 5 tabs: Expenses, Income, Tolls, Mileage, and Monthy Closing Checklist. Each expense is divided into categories, directly correlated to my tax line items. An expense is also allocated to one or more units, and is given a date, description, and page number idenitifier which coorelates to the binder. Sometimes a receipt is split between more than one category, so I’ll have multiple line items with the same payee, date, and page number, but different amounts. As I mentioned before, the tolls and mileage could be considered an expense, but I archive them in separate tabs out of personal preference.

My primary intent for the income tab is to ensure that all rent payments are accounted for every month, which one could easily miss as more units are managed. The income tab includes amount, date, and page number.

Closing the Books

Like the accounting department of a business, I am following a process to “close” the previous month’s books, ensuring that certain steps are completed each month so I can be sure everything is accounted for as the year progresses. My last Excel tab is called “Monthly Closing Checklist” and is simple a list of steps to complete to ensure that everything is accounted for.

Closing Checklist

Right now I’m still working on April 2013, but I can say with certainty that all of my expenses and income have been property documented for the first quarter of the year, which is going to save me a ton of time and stress when I prepare my tax paperwork in 2014. In the event the IRS performs an audit or requests documentation someday, everything I would need is organized and easy to find.

You can download a generic copy of my Excel worksheet here that you’re welcome to modify for your own purposes.

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Investment Property Bookkeeping, Part 2

8 May

This is the 2nd installment of my Investment Property Bookkeeping series; the first focused on bank account organization and budgeting, while these next segments focuses on expense and income recording for tax time.

Backstory

During my first tax season with our rental duplex, I assumed that either all of our investment properties would be summarized together, or at most each property would have its own profit/loss calculation. I was not expecting for my tax preparer to ask for the expenses and income to be broken down by unit, so I had to go back and split receipts and mileage that applied across multiple units. A huge pain. For 2012 I was a little more prepared, but the amount of annual catch-up work that concentrated around tax time was more stressful than it needed to be.  I vowed to build a better mousetrap in 2013.

My current process is largely based off my dad’s tax preparation system for his pet boarding kennel (hi Dad!), modified for investment properties. This method has worked for him the better part of a decade, and so far I’m a big fan (using it for 4 units at the moment). The basics: for each calendar year, I have (1) a binder and (2) an Excel worksheet as the cornerstone of my bookkeeping.

The Binder

Right now I have a 2” binder, but it might need to be upgraded before the year is over depending on how many pages I add. Investment Property Bookkeeping BinderThere are 5 tabs:

  • Receipts – all proof of expenses are logged in the first, and largest, tab. Multiple receipts are taped to sheets of printer paper, and online purchases are printed and hole-punched directly. Each page is numbered sequentially; the order of receipts in the binder isn’t particularly important since I will use the Excel document to know which page the receipt is on in case I need to reference it.
  • Mileage Book – my mileage book is a small booklet (like this one) that I keep in my glove box. At the beginning of a new month, I photocopy the previous month’s page and add it to the binder.
  • Toll Tag Statements – technically this could be included in receipts tab instead, but I like it separate as a matter of personal preference. I print each month’s statement, and cross-reference that with the dates in my mileage book, and highlight only the expenses that apply to rental travel.
  • Bank Statements – Another item that is more of a want than a need, I like the idea that I have a printed record of every purchase from the rental checking and saving accounts. I don’t do anything more than print a clean version of the e-statement and file it in the binder each month.
  • Income – There are two primary methods of payment being collected at the moment – mailed money orders and electronic rent payments from erentpayment.com. When the money order arrives, I photocopy both it and the envelope it arrived in (I use the postmark date to determine whether payment is late) on the same sheet of paper. For eRentpayment.com payments, I simply print and file the deposit confirmation email. Similar to the expense receipts, each page is given a page number in sequential order so I can cross-reference this page using the Excel chart I’ll explain later.

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