Volume 25/Number 11

Jackson Area Landlords Association

Landlords Struggling with Winter Vacancy? Great Tips to Make the Most of It

By Victory Property Management Posted in Landlords, Property Management On Nov 15, 2017

As the weather gets cooler, and indoors cozier, people typically opt to hunker down and hibernate. Optional moves are rarely on their to-do list during the hustle and bustle of the holiday season, and the overall gen-eral chill of winter. Factor in potential winter storms which tend to shut down cities in the south, and moving is often not an option at all. In 2014 for example (snowmageddon as the media dubbed it) most of January and a good bit of February were almost completely shut down. Mid to late December through March are always the slowest possible time of year to get a property rented. Even if someone is moving because of a job transfer, those usually happen before the end of the year, and we do tend to see a last-minute traffic bump in early December. The problem homeowners face is little demand, and a lot of supply. Properties that were overpriced in fall begin to stack up, and for whatever reason, a lot of homeowners list their homes for the first time around the turn of the year. If you overprice your rental late in the year, you run the risk of the property sitting vacant and losing money daily, for long periods (see our upcoming post on the hidden costs of vacant rentals). We usually advise to systematically and unemotionally reduce rental rates during peak seasons, but in the winter it’s quite com-mon to have such weak demand, that even significant reductions don’t have much effect.

(Continued on page 3)

IMPORTANT REMINDER:

Please pay your membership and

credit reporting dues in a timely manner. JALA depends on

your dues to pay it’s monthly expenses, so please pay on time, just as you would expect your

tenants to do! We also look forward to

welcoming former members back!!

OFFICE HOURS M - F 9:00 am—1:00 p.m.

Brandy Sekula Office Manager

Meeting Information

Monday, Nov. 25, 2019

Speaker: Linda Karazim

(Meetings are typically held on the 4th Mon-day of each month, with the exception of

holidays)

Meetings are held at STEAK’S EATERY

Dinner orders taken between 5:00pm to 6:15pm

The speaker will begin at approximately 6:30pm.

INSIDE THIS ISSUE

Winter Vacancies Page 1

Presidents Message Page 2

IRS Safe Harbor Page 4

JALA Communications Page 6

Emotional Support Page 9

Tenant Screening Page 11

November 2019 Page 2

Welcome New Members:

Jim Clifton John Helmreck Valerie Houle

Rebecca Gomez Cindy Schultz

*UPDATED* JALA OFFICE

HOURS Monday through Friday

9:00 am –1:00 pm

Crystal Miller Office Manager

PHONE: (517) 782-4384

FAX: (517) 782-4384

NOTE: All advertisements in this Newsletter are paid for by advertisers.

JALA does not guarantee the products or services advertised.

Presidents Message

So, here we are at the end of another year. November marks our last meeting of the year, and our annual elec-tion. Seems a good time for reflection. In my view, our situation with the city has gotten little better in these last two years (with me at your helm). But I think our positioning against the city has improved, at least a lit-tle. In my first year as your president, I tried reasoning with the city, believing that lack of open communication was a part of our relationship problem. In retrospect, that feels foolish. But it was a good learning experience. It closed a door, caused us to look in other directions for solutions. A new lawsuit has been filed in federal court, a class action suit, attacking the cities disregard of our constitu-tional protections. I can claim no personal credit for this one, it's driven by a Jackson landlord more activist than me, and perhaps better funded. To the extent that it s successful, we will all benefit. A second lawsuit is being prepared now for filing in circuit court. This is the suit I described in last month's newsletter, attacking the city's disregard of Michigan's Statutes. If we prevail, we will all be protected from one set of the city's plentiful fines and charges. If we are able to initiate and prevail in a series of this type of suit, we will gradually gain protections from more and more of the cities egregious actions. Perhaps most important, we have taken a step into the world of local politics, with pre-election letters to our multi-unit landlords and direct mailings to over 350 of our members' tenants. We have no way to determine the effectiveness of our campaign, but we notice: two of the new members of the city council appear to be more fair-minded than one of the old members they replaced. that's a net improvement, from our point of view. A council on our side could make a tremendous difference. Our fight, though long in coming, has begun. We hope the coming year produces notable improvements in the city's behaviors. - McG

JALA CONSULTING ATTORNEY If you are a JALA member in “good standing” and you have any legal

questions about being a landlord or landlording, you may contact JALA Consulting Attorney for

assistance.

Dennis Conant dconantlaw@yahoo.com

517-787-3560

FOR YOUR INFORMATION:

Editorials and/or

articles in this newsletter are the opinion of the

author and do not necessarily reflect the policies or positions

2019

JALA BOARD OF DIRECTORS STATE LEGISLATORS:

State Senator Mike Noffs (19th Dist.)

(517) 373-2426 PO Box 30036

Lansing, MI 48909

State Senator Mike Shirkey (16th Dist.) (517) 373-1775 PO Box 30014

Lansing, MI 48909

State Rep. Julie Alexander (64th Dist.) (517) 373-1795 PO Box 30014

Lansing, MI 48909

State Rep. Sarah Lightner (65th Dist.) (517) 373-1775 PO Box 30014

Lansing, MI 48909

Ralph McGonegal, 474-6241 Dale Fisher, 764-4599

Louise Powell, 812-4605 Linda Karazim, 416-9311 Charles Drake, 768-0580

Mak Krzeczkowski, 734-216-2676

Mike Wisniewski, 783-3620 Tom Hillard, 740-3140

Scott Craft, 474-2585

Crystal Miller, 782-4384

President Vice-President Secretary Treasurer Board Member Board Member Board Member Board Member Board Member Office Manager

November 2019 Page 3

The systematic reduction strategy is not as effective during the winter months. If you keep reducing during times of heavy supply and little demand, you could end with an extremely low rate. We’ve even occasionally pulled rentals off the market for a couple of weeks if we’ve cut the rate dramatically, and we start to sense an overall increase in activity across all our homes. For this reason, during the winter we tend to operate much more by instinct when it comes to weighing the pros and cons of vacancy versus rental rate. We al-ways say pricing a rental is an art not a science, but it’s especially true in slow times. The fact that we man-age such a wide range of properties gives us a unique advantage when it comes to gauging the overall mar-ket health at a given time period, and often our decisions for reductions come primarily from our overall re-sponse, not just the response on a single property. So, how does a homeowner combat the frozen rental market? We have a few useful strategies we often em-ploy. Which option fits best depends on the goals the owner wants to achieve, and we usually step up com-munication at this time. Our most common approach is to list the home relatively close to a rate we feel has decent odds of quickly attracting a good tenant, and hoping to go the more traditional route. That said, dur-ing these periods we almost always require 16-month leases to ensure that we don’t end up in the same pre-dicament a year later, but instead start working our way toward a consistent summer schedule. If however at that time we find anemic demand, we often recommend lowering the rate until filled, and committing to a shorter-term lease. This will limit vacancy, which will also dramatically increase your net income. In our opin-ion, when faced with the tough decision of limiting vacancy or taking a lower rate, limiting vacancy should almost always be the top priority (very cheap monthly rates would be the main exception). Most homeowners do not like the sound of shorter-term leases, and rest assured during 80% of the year we don’t either. However, it can have significant benefits during the challenging 20%. In addition, any placement expenses our company may charge are prorated should we opt for a shorter term, so we share in the seasonal concessions. A six-month lease at a lower rate is more beneficial for several reasons. You have a tenant in an otherwise vacant home (see our upcoming post on the hidden cost of vacancy), which is particularly helpful in winter to reduce the risk of frozen pipes. You’re not locked into a lower rate for an entire year, meaning you can raise the rent after the six months, and the average rate for the entire year typically comes much closer to what’s desired. This timing also puts homeowners back on the summer schedule, where rates are typically much higher, and vacancy much less. When opting for lower rent and shorter leases, always be upfront with the tenant. Let them know that after six months, the rate will increase. For shorter lease tenants, we advise that we are more strict on cleaning and paint charges. We recommend no wall hangings, few blemishes on the paint, and an expectation to have the home returned in nearly exact condition to the start of their term. This will reduce turnover time and owner costs for any cleaning or painting that will occur when peak rental season comes again. Another strategy we use for dealing with winter rentals, is advising owners not to make larger investments during this time frame (unless they’re so large it takes the property off market for a couple months), and for properties that aren’t in the best of shape, be slightly more accommodative of marginal quality tenants & pets. This also may be very concerning, but let’s consider the positive aspects. Since we’ll likely opt for a shorter term and lower rate, fundamentally your return on investment for painting, replacing carpet, and other short-term repairs takes a big hit, less bang for your buck.

November 2019 Page 4

For this reason, it usually makes much more sense to take what we can get with current conditions, then apply those upgrades at a time when terms are longer and rates are higher. Since tenants are warned re-garding tougher standards for returning the property, we can often use a portion of the deposit to apply to a more in-depth refresh of the home. We don’t do this in an underhanded way, but rather set the terms clearly before they move in. However, if you accept slightly less qualified tenants or multiple pets, they tend to offer up that subsidy by their own actions. Winter rental management is without a doubt the most challenging time for landlords, but with some savvy strategy and reasonable ex-pectations we can usually make good lemonade from those lemons. More importantly, we always make sure to get on the summer sched-ule (or mid-year to be more exact) which eliminates most of these is-sues for years to come. https://victoryrealestateinc.com/landlords-struggling-winter-vacancy-great-tips-make/

IRS Finalizes 199A

Safe Harbor for

Rental Property

The IRS recently issued Revenue Procedure 2019-38, which finalizes the safe harbor for rental property under Code Section 199A that was originally provided in IRS Notice 2019-07. The safe harbor treats a rental real estate enterprise as be-ing eligible for the qualified busi-ness income deduction under Sec-tion 199A, even if it does not meet the definition of a “trade or busi-ness” as provided in Treas. Reg. 1.199-1(b)(14). The safe harbor permits a rental real estate enterprise to be treat-ed as a Section 199A trade or busi-ness if sufficient “rental services” were performed for the enter-prise. For enterprises in existence for less than four years, 250 hours of rental services are required each year. For enterprises in exist-ence for at least four years, that requirement must only be met for three of the past five years. The term "rental services" include: (i) advertising to rent or lease the real estate (ii) negotiating and executing leas-es (iii) verifying information con-tained in prospective tenant appli-cations (iv) collection of rent (v) daily operation, maintenance, and repair of the property (vi) management of the real estate

November 2019 Page 5

Thank you to our contributors, the

JALA Legal Fund is at

$2569.00

JALA Legal Fund Donation Request JALA is accepting monetary donations to assist in our ongoing efforts against the city. Every little bit will help. If you are interested in contributing to our Legal Fund, you can stop by or

mail your contributions to our office.

Please make checks payable to JALA and note in the memo field: Legal Fund. Cash is accepted as well.

Thank you in advance for any and all help with our efforts. It’s greatly appreciated and will benefit the membership.

November 2019 Page 6

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Jackson, Michigan High Efficiency Experts

(517) 783-3620 EMERGENCY SERVICE!

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JALA Communications

Update

Any temporary changes in

office hours, important information, or last minute

cancellations or communications are sent both via email as well as posted on our Facebook

page.

Please make sure the JALA office has your most cur-

rent and preferred method of contact

information.

Thank you in advance!

Connect with us on Face-book:

@JxnAreaLandlordAssoc Behr Paint Discount at

Home Depot

JALA Members get 20% off of their

Behr Paint purchases at Home Depot.

Use the JALA Office phone number to get

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(517) 782-4384

November 2019 Page 7

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November 2019 Page 8

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“The Great Steak Place”

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The Nov. General Meeting will be held on

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November 2019 Page 9

Veteran Home Construction

Roofing Contractor/Residential Builder

Licensed and Insured

Rodney Frey

Phone: (517) 588-1585

(vii) purchase of materials (viii) supervision of employees and independent contractors. Im-portantly, these services may be performed by the owner of the enterprise, employees, or inde-pendent contractors. The safe harbor is not available to: (i) Real estate used by the taxpayer as a residence under section 280A(d) (ii) Real estate rented or leased under a triple net lease (iii) Real estate rented to a trade or business conducted by a taxpayer or an RPE (relevant pass-through entity) which is commonly con-trolled under Treas. Reg. 1.199A-4(b)(1)(i) (iv) The entire rental real estate interest if any portion of the inter-est is treated as an SSTB (specified service trade or business) under § 1.199A-5(c)(2). If you have further questions about the 199A deduction, contact Mike Zahrt at (616) 726-2223 or at mzahrt@fosterswift.com. https://www.michigantaxblog.com/irs-

finalizes-199a-rental-property

Florida woman files federal lawsuit to keep her emotional support chickens

A woman in Florida has filed a federal lawsuit in the hope of keep-ing four pet chickens which were prescribed to her to help cope with post-traumatic stress disorder. Karen Morris of Fort Myers claims that Lee County authorities have vio-lated the federal Fair Housing Act by ordering her to rehouse her chick-ens within 30 days and pay a $285 fine. County authorities say Morris is violating zoning codes and could have to pay $25 for every day she keeps the chickens around once the 30-day grace period is up. Fox 4 reported that the dispute between Morris, the county and her local homeowners' association has rolled on for more than a year. “My psychiatrist provided them a letter to acknowledge that an emo-tional support animal is beneficial to somebody with mental health difficulties,” Morris told the station, adding: "I’m disappointed in the fact that those chickens live in my private home that I pay mortgage on, and how people that don't live in my house [and] that aren't affected by this are so interested in being a part of it." Morris said the chickens, which she calls her "girls," give her the emo-tional support that her medicine can’t. "It’s just disappointing, but you know God doesn’t close a door unless he’s got four open windows,” Morris told NBC2. "My girls have changed my life in a positive way and I’m not removing them. All my family members — my mom, my dad, my brother, my husband — are all deceased. The girls are all I have.

https://www.foxnews.com/us/woman-in-texas-filing-federal-charges-to-keep-pet-chickens-who-help-her-cope-with-mental-illness

November 2019 Page 10

November 2019 Page 11

Why Tenant Screening is More Important Now than Ever Becky Bower

Tenant screening is a vital part of the leasing process as it protects the property, property owner, and the local community, all while ensuring that Fair Housing Guidelines are being met. With legislation in the past year attacking the use of criminal and eviction records in tenant screening, it’s more important now than ev-er that landlords and real estate agents band together to voice the value screening has. If you are uncertain whether or not you want to utilize tenant screening on your rental property, take a look at the benefits back-ground screening has to offer.

Tenant Screening Protects your Property

First and foremost, tenant screening protects your property. By screening applicants for any criminal history of property damage, violent offenses, or other serious crimes that could pose a higher risk to your property, you can substantially reduce your liabilities and better protect the community. Including eviction records on your applicants’ background checks is another essential piece of information to objectively learn what type of renter they’ve been in the past. You’ve invested a lot of time and money into your rental property – so why not use tenant screening to protect that financial investment?

Quick Tip: Be aware that some major cities, states, and federal courts are aiming to restrict the use of crimi-nal and eviction records in tenant screening. The Tenant Protection Act was just introduced to the Senate re-cently and would prohibit your tenant screening provider from showing eviction records on your report unless (among other things) the record was no more than 3 years old. Currently you see eviction records on your ten-ant screening reports that are dated up to 7 years.

Tenant Screening Safeguards You

You want to rent to someone you can trust, but how can you determine that the applicant you’re reviewing is trustworthy while adhering to the Fair Housing Act (FHA)? Tenant screening can help you find an applicant that you can trust while avoiding nasty FHA lawsuits. With the credit report in your tenant screening, you can also determine whether or not they’re financially responsible enough to send you rental payments. There’s nothing worse than renting to someone who does not pay their rent… or pays it late.

Tenant Screening Guards your Other Tenants (if you own multiple units) and Local Community

Whether you have other tenants on the same property or not, tenant screening can help keep your local community safe. With a tenant screening company that checks through databases like the sex offender regis-try list, the terrorist watch list (OFAC), and the International Police Organization (INTERPOL), you’ll ensure that your tenants don’t tarnish your reputation with the community. Plus, if you’re planning on doing yard maintenance or property repairs yourself, screening your applicants might give you a little more peace of mind.

As more legislation gets pushed out aiming to restrict landlords’ and real estate agents’ rights, it’s more im-portant now than ever that we stay aware of the positive effects tenant screening has – and fight to maintain those benefits. Moving forward, make sure you’re using the best service to fully protect you and your prop-erty and subscribe for legislative updates.

https://www.applyconnect.com/blog/tenant-screening-important-now-ever/

November 2019 Page 12

JALA Newsletter November 2019

Jackson Area Landlords Association — Since 1974 1212 First St Jackson, Michigan 49203 (517) 782-4384-PH/FX jala@jala-mi.org www.jala-mi.org

ADDRESS SERVICE REQUESTED Jackson Area Landlords Association

*NEW* Office Hours Monday through Friday 9:00 a.m. to 1:00 p.m. Office Manager Crystal Miller

50/50 Winner:

Ward Walling $26

The next General Meeting will be held

Monday, November 25, 2019

Time: 5:00 –6:15 menu / 6:30 speaker Steak’s Eatery

Speaker: Linda Karazim, JALA Treasurer

Topic: Landlords and Taxes

“This publication is designed to provide accurate and authoritative information in regard to the

subject matter covered. It is distributed with the understanding that the publisher is not engaged in

rendering legal, accounting or other professional service. If legal advice is required, the services of a

competent professional person should be sought.” From a Declaration of principles jointly adopted

by a Committee of the American Bar Association and a Committee of Publishers and Associations.

MEETING LOCATION