Renting Your Property: A Guide for Landlords

This guide for landlords will help landlords like you manage their property in a way that can earn them a nice, steady income and not drain their finances. Being a landlord is not just a way to earn some money off your property--it's a responsibility. You are responsible for enforcing rental policies, paying for the upkeep and repairs, and generally, responding to tenant requests and complaints in a timely manner. Furthermore, you have to pay taxes on your rental property and the money you earn from renting it out. All those financial obligations can be challenging, but so long as you know what you are doing, you should be able to manage just fine.

Budgeting for Repairs

When you own a rental property, you have expenses to take care of. One of the most important expenses is the cost of repairs. This includes both short-term repairs (such as patching up cracked walls) and long-term repairs (such as replacing a deteriorated roof). You can anticipate many long-term repairs by checking the age of your property and its appliances. The older they are, the more likely they are to need to be fixed in the next few years. Knowing that, you can start setting money aside ahead of time.

There is also the matter of hazardous materials. If your building if 50 years or older, it may contain asbestos, lead paint and other hazardous materials. Check for them at the earliest opportunity and, if they're present, remove them as promptly as possible.

That said, there will always be some problems that will come completely out of left field. This can include anything from damage caused by unusual weather to unexpected plant growth. You can deal with this by setting aside about 1.5 percent of the property's value every year.

Paying Your Taxes

As a landlord, you are subject to two taxes--a tax on your property and a tax on your rental income. The property tax on your rental property works similarly to other types of property taxes. The property taxes are levied by your local city and county governments. They are calculated based on the average selling price of properties in the area, the cost of replacing the house if it gets destroyed and the estimated fair market value for your property. The tax rates are adjusted every year.

The taxes on your rental income are based on the value of the earnings and your income tax bracket. They are also based on whether you are a passive or a non-passive landlord. A passive landlord is someone who earns most of his or her income from renting out his or her property. A non-passive landlord is someone who rents out his or her property in order to generate supplemental income. If you fall into the latter category, you will be taxed less, and you will be able to deduct all of your losses. If you are a passive landlord, you can deduct only up to $25,000 in loses. However, anything above that gets carried over to next year, so if you have less than $25,000 in loses next year, you will be able to add it to the next year's eligible losses. And, in both cases, you can deduct the cost of repairs so long as the repairs increase the value of your property.

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