Rentec Direct - Property Management Software

I am an online business providing software solutions to landlords and property managers.  As such, industry acceptance and trust is an absolute must.  I struggled with this decision for the last couple years on whether to take the leap and apply for BBB Accreditation.  For anyone unfamiliar with BBB Accreditation it is an official seal from the BBB confirming a company is established, legit, honest, and handles customer complaints (if any). 

Officially from the BBB website: If a business has been accredited by the BBB, it means BBB has determined that the business meets accreditation standards which include a commitment to make a good faith effort to resolve any consumer complaints.

Their accrediation standards can be reviewed here.

The upsides as I see them:

• The BBB is basically a 3rd party endorsement that you are a real business
• Being an accredited business is third party endorsement that your company meets all the standards above.  Otherwise they pull your membership right?
• You get listed within their accredited business directory, and they refer business to you both electronically and over the phone if they receive inquiries about your market / location.
  
• If your not already listed on their site as an unaccredited business, it provides another link into your website that otherwise didn't exist which is good for SEO.

The downsides:

• Cost.  I believe it's different in various parts of the USA; however, an online business forks out about $800/yr to be a member in the northwest.

I've read articles stating the BBB is an unnecessary entity since anybody anywhere can search out a companies reputation online, and that along with the cost itself of joining the BBB are what kept me on the fence the last two years.

I opted to go ahead for accreditation, and was approved just the other day, YAY!! Here's why:

Take my industry for example, our website provides property management software and tenant screening to property managers and landlords.  I've done it, many times, searched for property management software reviews, and other variations. Unfortunatly there is not a single site out there with unbiased information.  Most of the sites are owned by competitors just plugging their product, or advertising companies trying to retrieve and refer the sale.  In my industry there are very few, if any, legitimate and unbiased third party reviews.  I imagine the same holds true for most industries including real estate professionals.

When I have customers ask if we are legit I now have a place that is instantly recognized (the BBB) as a legitimate source of trusted information to refer them to.

Opinions on BBB Accreditation, Thoughts, Suggesstions?  How does it work in YOUR industry?

I was reading a property management advertisement the other day from a property management company trying to earn my business and on their information sheet they say "less than 1% of our leases end up in court".  1%?!!?!?  So as many as 1 in 100 leases end up in court.  They were bragging about this, so perhaps other property managers are 2 in 100 or more?  That tells me that of all the industries I participate in, the property management (landlord) industry by far and away spends more hours in a courtroom than any other that I'm aware of.

Nobody wants to end up in court, it's a drain on valuable resources; time, money, energy.  Then there's always the worst that can happen and the tenant has a better case and walks away with the prize.  Granted, some property managers run bad business and it is good that tenants have a recourse through the court system; however, in many cases property managers are doing their best and are just winding up defending a frivilous claim because the tenant felt they should really live in your house free for a year, plus emotional damage of course for the eviction letter trauma you caused.

This leads me to my next point.  Documentation is EVERYTHING.  Whether your initiating a proceeding and your sitting on the right side of the courtroom or a past or current tenant did and your on the left the best protection you can enter with is full and complete documentation of the event.  Some may argue having an attorney at your side is the best protection; however, while attorneys do know the system well, I would certainly say having documentation is your first defense, and an attorney (if one can be afforded) will present that documentation.  However, without the documentation the attorney won't have much ammo to defend the case.

You never know what might end up in court, so it's best to document everything.  Here's some tips I've learned through the years.

• Ask for it in writing.  Unless you can legally and are recording every call and voicemail, a phone call is as good as nothing.  Get it in writing whether it's a complaint from a tenant, an invoice, an issue with a neighbor, whatever it is, get it in writing, scan it, and save it electronically where it can be easily accessible if needed.
• Save all your receipts.  Great tip not only for documenting repairs, etc, but this also provides solid proof of expenses in the event of a tax audit.  I scan my receipts and upload them with the expense transactions to my property management software.
• Take pictures.  A picture is better than almost anything.  If one person says it was this way, and another person says it was a different way, it's simply word vs word and a court cannot make a decision.  However, if one or another brings a picture to backup what they are stating their position all of a sudden is much stronger and can also dis-credit the others thereby not only proving this point but strengthening the whole case.
• Take video.  If you have a lot of area to cover, it may take a hundred pictures to cover everything.  On the other hand, video handles this situation nicely.  If you want to record the condition of a property for instance, walking through with a video is a great way to document the condition of a large area.  Ideally use the highest quality video setting on your device so if need-be the video can be paused and details of that area can be seen.  Also pan slowly as to be sure not to blur your video.  Taking a video to document the condition of a property before a tenant moves in is a very good idea. 
• Save your documentation, pictures, and videos electronically in a safe place.  Paper can be messy, especially if you have file cabinets (or chronologically filed piles as the case may be) which means it can take a very long time to find what your looking for.  Scan and save your documentation electronically where it can easily be accessible if the need arises.

There's a bit of a misconception about how hard it is to electronically store documents.  Nowdays it's very easy.  Drop by your local office supply, Costco, Staples, or almost any electronics store and pickup a multi-function printer that includes a sheet feed scanner.  They can be purchased for as little as $150.  There's also scanners designed strictly for the purpose of scanning documentation which work very well, do two sided scanning, rarely jam, and cost a bit more.  Any of these options work.  Also, most scanners include software to automatically save to PDF, which is a universal format that can be opened on any computer.

Now saving it somewhere safe.  If you maintain your own IT infostructure, be absolutely sure you are backing everything up.  Hard drives die *all the time* and people can lose all their valuable data when this happens.  Backup your data ideally offsite to a secure storage medium or online backup service.  Another very convenient method is if you use a property management software that allows attachments and a file library, simply upload your documentation here for safe keeping and easy access, which is what I have found the most convenient.

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The author is a founding member of Rentec Direct.  Rentec Direct provides property management software which includes ach for landlords, tenant screening, and online documentation and file storage.  While the above article may speak of products we offer or use screenshots from a product we offer, we encourage landlords to do their research and make up their own minds when selecting a new product.  That said, we of course welcome ActiveRain members with open arms.

I think that our buddy uncle sam wants us to believe that he believes in family and at least claims to support families.  Why though is it that they continue this $50,000 tax penalty on married couples?

Not sure which penalty I'm referring to? (are there that many? lol).  I'm talking about the passive loss penalty.

The technical read is here:  http://www.irs.gov/businesses/small/article/0,,id=146341,00.html

In a nutshell, as a taxpayer filing unmarried and single I have the benefit of taking up to a $25,000 loss on my "passive income" (investment properties) against my active income provided I make less than $100k/yr.  This includes all the standard deductions investors take on their properties - repairs, mortgage, taxes, depreciation, etc.  My $100k active income can be reduced to $75k if I had $25k in losses on my properties thereby directly affecting my tax bill.

OK, that's easy enough to understand and makes sense.  It even seems pretty fair.  What happens if I get married though?  Penalties up the wazzoo is what happens.

First, this benefit is only applicable for those making $100k/yr or less.  It phases out and is completely eliminated at $150k.  But wait, we're two people instead of one right, so all the numbers should be doubled.  It makes sense that for a joint return the benefit would begin losing it's value at $200k/yr, similar to most every other benefit in tax code for joint returns.  But sneaky sam has never modified this particular credit to account for joint return.  A joint return has the same $100k limit as a single application.  If my wife brings home $25k/yr we only get half of the benefit or $12,500.  If she brings home $50k/yr we completely lose out on the benefit.

To make things worse, what if I come into the marriage with 4 properties that have a $25k loss, and she comes into the marriage with 4 properties with a $25k loss and our combined incomes now exceed $150k.  This is a worst case scenario because prior to marriage we both were able to take a passive loss deduction of $25k.  After marriage, neither of us can take the passive loss deduction.  That's $50k additional income we would be taxed on, or roughly $15k in taxes.  Over a marriage lasting 40 years that's $600,000 extra we've been forced to pay sneaky sam because of this "glitch" in the tax system.

Now I know nobody wants to get started on taxes, it's a sore subject no matter what way we look at it; but I keep hearing about this particular issue with property investors who have passive losses and it's a big sore subject that keeps coming up year after year.

So what do CPAs have to say about this?  I've interviewed several, and the same conclusion is that uncle sam does what uncle sam does and his purpose is to increase taxes, not reduce them.  How to avoid the $50k penalty:  a) don't have any losses, or b) don't get married

I, for one, hope some of our trusted(?) elected officials stand up to the IRS on this one someday and repair this flaw in the tax code.  Since losses on a realestate rental are somebody elses taxable gain, as it stands now, it's double-taxation.

--- about the author ---

Rentec Direct provides property management software free to landlords and property managers. Because of the importance of thorough screening for prospective tenants, we have integrated tenant screening directly into the software so in just a few clicks a complete and comprehensive background check including previous evictions can be done on any new tenants.