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John McCarter

  • The good news is there’s good news

    The goodnews is there’s good news    

         It’s a new year and we all know what thatmeans; time for those boring statistics. But the good news is there’s good news. According to local MLS statistics, the Charleston area rental market forthe entire year of 2010 was better than that of 2009.  The 4th quarter of 2010 was alsobetter than it was for 2009.  Withoutgoing into the numbers, which put most of us to sleep, the number of homesrented and the average monthly rental amount both increased, while the averagedays on market decreased.  What morecould we ask for; more properties rented for more money in less time! 

         But this wasn’t really a surprise.  Talking with other property managers, theword was that November and December, typically the slowest months, were prettyactive.  People weren’t just looking;they were actually filling out applications and getting approved. 

         It seems that the slowdown in the new homeand resale markets has helped the rental market.  While there was an increase of 277 in numberof units rented, there were 250 fewer homes sold in the 4th quarterof 2010 than in 2009.  With thetightening of mortgage money and credit, plus the uncertainty of whether or nothome prices have stabilized, people are still reluctant to purchase homes.  They would rather rent for a year or two thantake a chance on buying a home and losing money, even if they couldqualify.  While that may not be good newsfor the economy as a whole, it certainly is a silver lining for those who ownrental properties.  

  • Local counties searching tax records

    A recent article for the Examiner dealt with local attorneys taking on tenant clients as an additional source of income to help them weather the slow real estate sales market.  It seems like our local tri-county municipalities may be looking for ways to increase their bottom line too. 

    It’s been heard that some towns are searching real estate tax records for properties that are taxed at the 6% rate (these are the non-owner occupied properties) to see if the owners have purchased a business license.  If no business license is found, it follows that the town will send a notice to the owner to purchase a license. 

    Money is tight everywhere and everyone is looking to get what they can, where they can.  While this may seem picky and “big-brotherish”, it’s still the law and we all should abide by the laws.  When you own a property and are receiving rental income, you are considered to own a business.  Therefore, you need to have a business license and pay local taxes on that income.  Just wanted to give you advance warning in case you get one of those notices.    

    NEW LISTING!  There’s a new rental listing in North Charleston.  Near Rivers Avenue and I-526, it has three bedrooms, two baths and a nice sunroom.  The kitchen has been recently updated with stainless steel appliances; the walls have been freshly painted; there are ceramic tile and hardwood floors; and the yard is fully fenced.  It’s ready for occupancy now.

  • Return Those Security Deposits

         It seems that with the slowdown in real estate sales and closings that some real estate attorneys are looking to boost their bottom line by turning to tenant representation in lawsuits against landlords.  The area that appears to be the focus of these lawsuits is the security deposit.  Evidently, some landlords are not abiding by South Carolina state law in this regards so let’s go over the requirements.

         Section 27-40-410 of the SC Landlord And Tenant Act basically states that within 30 days after termination of tenancy, the earnest money deposit, less amounts withheld for accrued rent and damages must be returned to the tenant with an itemized statement as to the deductions.

         The tenant must provide the landlord with a forwarding address.  If none is provided by the tenant, the landlord must send the deposit refund and statement to the tenant’s last known address.  Now, here’s the kicker.  If the landlord fails to return, or does not attempt to return, the deposit and statement to the tenant, the tenant can collect three times the amount of the refund plus reasonable attorney fees.

         Bottom line: When your tenants move out, send them their deposit less deductions for rent due and/or repairs and do it within 30 days.  It would also be a good idea to use certified or registered mail as proof of sending.  As always, if you have questions, check with your own attorney.

  • Landlord and Owner Insurance Are Not The Same

    All home insurancepolicies are not equal.  As a homeowner,you have an owner policy which covers your house and belongings in case of adisaster such as fire; liability in case someone falls and is hurt on yourproperty; and theft should a burglary occur. All home owners are familiar with this type of policy.  But now you’re a landlord and you need adifferent type of insurance.  You need alandlord policy. 

    The major reasonto have a landlord policy is vacancy. With an owner-occupied policy, if the home is vacant for more thanthirty days, you may not be covered if there’s a claim.  With a landlord policy, you can be covered nomatter how long the property is vacant. But even if the home is occupied by a tenant and you don’t have alandlord policy, you may not be covered because the occupant is not you.

    Anotherreason to have landlord insurance is if the property becomes un-inhabitable dueto an insured peril, such as those listed above.  If this happens, your policy can cover youfor loss of rent while repairs are being made. This can be an enormous benefit if it were to take three months or more torepair the house after a fire.

    Finally, thethird reason for a landlord policy is you don’t need to insure as much personalproperty when you rent out the home. Since you’re not living in the house, you don’t need to insurefurniture, jewelry, etc. and that saves on the cost of the insurance.  Speaking of savings, check with youraccountant, but typically, the cost of the landlord insurance policy is abusiness deduction for tax purposes.

  • Tenant Application and Verification

    You've got someone interested in renting your investment property.  Congratulations!  Now comes the "hard" part--getting the prospective tenant to complete an application and then verifying the information.  I say it's hard not because tenants don't want to give the information (they're actually used doing this) but because many landlords are uncomfortable asking strangers for their personal information.  Believe me, this step in the process is crucial.  It lets prospective tenants know that you treat this as a business and that you're not going to let them live in your property unless they qualify.  Once you've gathered this information, let your prospects know you will be verifying it.  If a tenant complains or hesitates about verification, that in itself is a big red flag.  You may want to pay close attention to people relocating from outside the area.  Ask for and verify the reason for relocating.  Four steps that should be followed are shown below.

    1.  Have them fill out an application.  Questions they need to answer include:  Names; addresses covering two years along with amount of rent, landlord contact information and reason for leaving; dates of birth; social security numbers; driver's license numbers and state; telephone numbers; names of other occupants that will be living in the house; number and type of pets; employment information covering two years along with contact information for supervisors and current income; emergency contact information; type of vehicles and license numbers.

    2.  Have them provide copies of paystubs for the past three months to verify employment as many employers will not give references.

    3.  Call their landlord references to verify current and past rental information.  This step is very important as it can provide the best indicator of how your prospective tenants will pay their rent.

    4. Check their credit.  Being an individual instead of a company, your obtaining a credit report on someone may not be possible.  But at the very least, ask the tenants how their credit is; do they have late payments; have they been bankrupt; have they had a repossession or foreclosure.  If there are red flags, get an explanation as to what happened.

    Remember, there are various federal and state laws protecting the rights of tenants.  The screening and verification process must be done in a non-discriminatory basis.  This process is only to provide you with information to come to a decision regarding the tenant's ability and willingness to pay their rent on time.  It is not to be used to find an excuse to refuse to rent to someone because of a biased or discriminatory reason.  Try to remain flexible with your standards.  While you might not be ready to compromise on a bad credit history, you may, for example, want to consider minor late payments with a good rental reference.

    Finally, no matter how uncomfortable you feel asking prospective tenants for their personal information, this is a vital step in the rental process that must not be ignored.  Unless you ask for and verify information about the tenants, you don't really know to whom you're giving control of your house for the next year.