Landlords

This page is dedicated to landlords.  There is a lot of information that landlords should be aware of and I want to contribute to that knowledge base by providing some topics that I feel are important.

Capital Gains Tax- if you sell a rental property for more than you paid for it, you will be subject to Capital Gains Tax which is paying a certain percentage of the amount that you profited.  Everyone's tax situation is different so please consult a tax professional.

1031 Exchange- this is a method of deferring paying capital gains tax.  Simply put, it is when you sell a rental property and reinvest the money into another rental property of equal or greater value.  There are time period guidelines associated with this. Please consult a tax professional.

30 Day and 60 Day Notice to Tenants- as a landlord you must be aware of the tenants rights so you stay out of trouble.  You have know the minimum number of days you must give a tenant before you terminate their residency at your property.  Generally speaking, if a tenant has lived in you property for less than 12 mos, you can give 30 days notice.  If more than 12 mos, you must give 60 days.

For more info on tenant rights and landlord responsibilities:  https://www.hud.gov/states/california/renting/tenantrights 

Assembly Bill AB1482 Rent Control - this is probably the hottest topic in CA real estate right now, at least for landlords and tenants.  This bill will put a cap on rent increases and it also has new guidelines on terminating leases.

For more info: 

https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200AB1482 

CAP Rate- do you know your CAP rate? This is another way of saying, return on your investment (ROI). This is something every landlord needs to know for each of their properties. When investors are buying rental property, they always want to know, "What's the CAP?".  Basically, how profitable is this property? 

CAP Rate Calculation- 

1. Take the total gross rent you collect for a particular property

2. Subtract all recurring expenses (property taxes, HOA dues, utilities, landscape maintenance, insurance, etc.). This will give you your NOI (Net Operating Income)

3. Take your NOI and divide that by the current value of that property and  you will get a percentage.  

Example- let's say a 4 plex has a $70,000 (gross annual rent) and their expenses are $20,000.  Their NOI would be $50,000.  If their property is worth $1,000,000 their CAP Rate would be $50,000/$1,000,000= 5% Cap