Oregon Rent Control Bill Moving Forward In The Senate

February 6, 2019

Landlords this week gave their views on the Oregon rent-control and evictions bill to a Senate committee, which is sending the bill to the full Senate for a vote, according to reports.

Senate Bill 608 had a hearing that lasted for several hours before the Senate Housing Committee. Powerful house and senate leaders have lined up behind the bill, which looks to pass in this legislative session.

Here is what some landlord groups had to say about the bill:

“At best, Senate Bill 608 will have no effect,” said Deborah Imse, executive director of Multifamily NW in an interview with OregonLive.com, “but at worst it will make housing less affordable in the long run.”

Multifamily NW opposes the bill, as did many landlords who testified on their own behalf. They argued it would hurt business and discourage investment, resulting in substandard housing.

“There’s a lot here for landlords to dislike,” said Jim Straub, the legislative director for the Oregon Rental Housing Association, to OregonLive. “But I’d also like to recognize it for what it isn’t: an industry killer. As written, I do not believe it will be catastrophic to our livelihood.”

The Rental Housing Alliance Oregon and the Oregon Rental Housing Association are both remaining neutral.

The committee room was packed with people who felt the bill didn’t go far enough — arguing the 7 percent cap was too high — as well as others who said it would end up causing rents to increase in the long run, according to reports from opb.org.

Punishing landlords?

“It is beyond my comprehension how smart people think punishing landlords is going to increase the number of rental units in the state,” wrote Dianne Cassidy, a landlord in Gladstone, to the committee.

“Instead, the state is seriously considering putting a cap on our businesses’ income, which is a disincentive to be in the rental market altogether,” Cassidy wrote, according to opb.org.

A bill dealing with many of these same issues failed in the Oregon legislature last year.

“Oregonians cannot afford to wait another year … They are losing their housing now,” testified House Speaker Tina Kotek, a key lawmaker behind Senate Bill 608, to members of the newly-created Senate Committee on Housing, according to opb.org.

What Oregon Senate Bill 608 Does

Prohibits a landlord from terminating month-to-month tenancy without cause after 12 months of occupancy. Provides exception for certain tenancies on a building or lot used by a landlord as residence.
Allows a landlord to terminate tenancy with 90 days’ written notice and payment of one month’s rent under certain conditions. Exempts landlord managing four or fewer units from payment of one month’s rent.
Provides that fixed-term tenancy becomes month-to-month tenancy upon ending date if not renewed or terminated.
Allows landlord to not renew fixed-term tenancy if tenant receives three lease-violation warnings within 12 months during term and landlord gives 90 days’ notice.
Limits rent increases for residential tenancies to one per year.
Limits maximum annual rent increase to 7 percent above annual change in consumer price index.
Requires Oregon Department of Administrative Services to publish maximum annual rent increase percentage.
Declares emergency, effective on passage.

Resources:

Lawmakers Gear Up To Make Oregon The 1st With Statewide Rent Control

Rent control, eviction protection bill advances in Oregon Senate

Creating A Civil And Respectful Multifamily Workplace

By The Editors

February 5, 2019

The Grace Hill training tip this week focuses on the issue of creating a civil and respectful workplace in your multifamily business.

By Ellen Clark

Teams function better and employees are healthier and more engaged in a civil and respectful environment.

Civility is a collection of positive behaviors that include treating people with respect, courtesy, consideration, and kindness. These behaviors produce feelings of respect, dignity, and trust. Teams function better and employees are healthier and more engaged in such environments. On the other hand, when civility is lacking in a workplace, performance, morale, and creativity suffer.

As a leader, how can you help foster a culture of civility and respect in your workplace? Here are some tips:

Be an active listener. Focus on the person speaking to you, and listen without interrupting. Use brief, positive responses to keep conversations going and to show you are listening. Ask clarifying questions and summarize responses back to check your understanding. Be aware of your body language and your tone throughout conversations.
Create an inclusive environment. An inclusive work environment is one in which all employees can make use of their particular skills, talents, and experiences, and where ideas and contributions are valued and sought after by management and other team members. Ultimately, the goal of embracing diversity is creating a team where people from all backgrounds are encouraged to share their unique talents.

Creating a civil and respectful workplace

Training employees on the importance of civility, and providing training opportunities, creates a respectful workplace.

Acknowledge people. Don’t assume people know you appreciate them or respect their contributions. Instead, make a plan to acknowledge people. From small gestures like a “hello” in the hallway or a thank-you note, to things like recognition in a meeting or an annual award, acknowledgment is important. However, make sure acknowledgments are sincere; if employees feel they are not genuine, they can be counterproductive.
Remember that actions can speak louder than words. Delegating important tasks, being open to contributions and feedback, and letting employees pursue creative ideas can show them that you trust and respect them. It is also important to actively support your employees—they need to know you have their backs.
Set a good example. As a leader, you can spread civility. You’d be surprised how much your example can influence others. In addition to focusing on positive behaviors, make sure to avoid the tendency to engage in gossip or other forms of negative communication.
Provide civility training. Don’t assume people naturally know how to be civil and respectful. Even well-intentioned people may not have the skills or role models of civility in their lives. Training employees by being explicit about the importance of civility, providing examples of civil and uncivil behavior, and giving opportunities to practice using real-world scenarios is important.

Creating a civil and respectful workplace takes purposeful, ongoing effort, but the rewards will be well worth it.

Read Ellen’s blog post here.

Recent Grace Hill training tips you may have missed:

What Do You Do When Assistance Animals Break The Rules?

7 Ways To Stay Out Of Trouble When Checking Criminal History

5 Ways To Protect Applicants, Residents And Employees From Sexual Harassment

Do You Have A Smoke-Free Policy That Adequately Protects Residents?

How To Handle Suspicious Documentation For Assistance Animals

How A No Pet Policy Can Be Discriminatory

Property Management Cyber attack Risks Overlooked, Underestimated

Do You Know How To Respond To a Sexual Harassment Complaint?

Have You Reviewed Your Criminal Background Checks Policy Lately?

Multifamily Managers And Marijuana: Caught In A Pot Crossfire

Fair Housing Discrimination Against Someone You’ve Never Talked To?

4 Ways To Avoid Screening Pitfalls With Applicants

Red Flags In Evaluating Documentation For Assistance Animals

About the author:

Ellen Clark is the Director of Assessment at Grace Hill. Her work has spanned the entire learner lifecycle, from elementary school through professional education. She spent more than 10 years working with K12 Inc.’s network of online charter schools – measuring learning, developing learning improvement plans using evidence-based strategies, and conducting learning studies. Later, at Kaplan Inc., she worked in the vocational education and job-training divisions, improving online, blended and face-to-face training programs, and working directly with business leadership and trainers to improve learner outcomes and job performance. Ellen lives and works in Maryland, where she was born and raised.

About Grace Hill

For nearly two decades, Grace Hill has been developing best-in-class online training courseware and administration solely for the Property Management Industry, designed to help people, teams and companies improve performance and reduce risk. Contact Grace Hill at 866.472.2344 to hear more.

Smart Home Automation For Multifamily

By The Editors

February 5, 2019

A Focus on Smart HVAC Control

HVAC is an abbreviation for Heating, Ventilation, and Air Conditioning. Most apartment units have them, and they are the most expensive appliances on the property.

The investment in an HVAC system can run into the tens of thousands of dollars, and the nuances of such a system often are misunderstood by the average consumer (particularly residents). Therefore, it makes sense to add some level of control to the HVAC system to prevent misuse and abuse, and to extend the life of this costly appliance.

What is Smart HVAC Control?

Smart HVAC Control adds the ability to monitor and control smart thermostats remotely. Adding schedules, defining acceptable set-point ranges, enabling extreme temperature notifications and monitoring humidity are all components of the smart HVAC control.

How Does Smart HVAC Control Help You?

1. By establishing acceptable set-point ranges to avoid damage.

Some people believe that if you turn an air conditioner to 60 degrees, the apartment will cool faster. They don’t understand that the property cools at the same rate (typically 1 to 2 degrees per hour) regardless of how low the set-point is. So, turning a thermostat to 60 degrees just means the HVAC system is going to run longer. And if it is left at 60 degrees, often an air conditioner will freeze up, resulting in thousands of dollars in repair costs.

Smart-thermostat control systems allow your property manager to define a minimum cooling set-point and a maximum heating set-point. This can typically be done through a web portal and wirelessly communicated to the thermostat in your apartment.

By defining minimum cooling and maximum heating set-points for occupied apartments, the resident will be restricted as to how high or low they can adjust the thermostat.

HVAC Analytics identifies small problems before they become big ones. Smart thermostats are continually communicating securely with the web. Data points such as current set-point, actual room temperature and HVAC mode (heating/cooling) are tracked on a per-apartment basis in the cloud.

Algorithms have been developed that analyze this data in conjunction with the apartment address and outside temperature to determine if an HVAC system is operating properly. In a situation where the system is not running efficiently, a notification is sent to the property manager.

This notification allows the property manager to schedule maintenance before it becomes an emergency, saving significant costs.

The above graph allows a property manager to see what the thermostat settings are should a resident call and complain about the heating or cooling system. By looking at the graph, an assessment can be made as to whether an HVAC system needs maintenance or is responding appropriately given the outside temperature.

2. By using schedules for vacant apartments

As the apartment manager, you’re paying the energy bill when an apartment goes vacant. While well-intentioned, many vendors, showing agents and prospective residents will adjust a thermostat to a comfort setting (cooler in the summer, warmer in the winter) while working in or viewing your apartment. If they forget to return the thermostat to an energy-saving mode, you spend money cooling or heating an empty unit.

With web-enabled schedules (see graphic above) added to your thermostat, you can be assured that at the end of the day, your thermostat will be reset to the energy-saving mode. By doing so, you eliminate the risk of excessively cooling or heating a vacant apartment, and save the wear and tear on your HVAC system.

3. By monitoring and controlling humidity

High humidity can result in significant property damage and loss of comfort. A smart thermostat’s humidity-monitoring capability can automatically adjust the humidity levels in an apartment by running the air conditioning when humidity thresholds are exceeded.

Will My Residents Benefit (or Care)?

Residents can use HVAC schedules to save money on energy bills. Just as using online schedules during vacancy will save you money, they will also allow your residents to save money on their energy bills. ENERGY STAR has confirmed savings of 9% to 16% when heating and 15% to 23% when cooling. These savings, along with the convenience of controlling the thermostat through a mobile app, will provide the incentive for residents to pay a monthly fee for this service.

Wakefield Research showed that 86% of millennials and 65% of baby boomers are willing to pay more for a rental unit outfitted with smart apartment devices.

Download the PDF here of Smart Automation For Multifamily

PointCentral is the property management-focused division of Alarm.com, the largest Smart Apartment provider in the world. PointCentral’s Property-Automation system is based around a cellular gateway installed in the apartment. This device utilizes a cellular radio that communicates securely with the web, and allows online control of a vacant unit.

Seattle Rents Increased Over the Past Month

By The Editors

February 5, 2019

Seattle Rents Increased Over the Past Month

Seattle rents have remained flat over the past month; however, they are up slightly by 1.2% year-over-year, according to Apartment List.

Currently, median rents in Seattle stand at $1,320 for a one-bedroom apartment and $1,650 for a two-bedroom.

Seattle’s year-over-year rent growth lags the state average of 1.5%, but exceeds the national average of 1.0%.

Rents rising across the Seattle Metro

Throughout the past year, rent increases have been occurring not just in the city of Seattle, but across the entire metro. Of the largest 10 cities that we have data for in the Seattle metro, nine have seen prices rise. Here’s a look at how rents compare across some of the largest cities in the metro:

Bellevue has the most expensive rents in the Seattle metro, with a two-bedroom median of $2,320; the city has also seen rent growth of 4.3% over the past year, the fastest in the metro.
Over the past year, Marysville is the only city in the metro that has seen rents fall, with a decline of 4.1%. Median two-bedrooms there cost $1,640, while one-bedrooms go for $1,320.

Other large cities nationwide show more affordable rents than Seattle

As rents have increased slightly in Seattle, a few other large cities nationwide have also seen rents grow modestly. Compared to most similar cities across the country, Seattle is less affordable for renters:

Rents increased slightly in other cities across the state, with Washington as a whole logging rent growth of 1.5% over the past year. For example, rents have grown by 2.0% in Vancouver and 1.4% in Spokane.
Seattle’s median two-bedroom rent of $1,650 is above the national average of $1,170. Nationwide, rents have grown by 1.0% over the past year compared to the 1.2% rise in Seattle.
While Seattle’s rents rose slightly over the past year, many cities nationwide also saw increases, including Phoenix (+3.6%), Austin (+3.3%), and San Francisco (+2.7%).
Renters will generally find more expensive prices in Seattle than in most other large cities. For example, Spokane has a median 2BR rent of $880, where Seattle is more than one-and-a-half times that price.

Methodology

Data from private listing sites, including our own, tends to skew towards luxury apartments, introducing sample bias. In order to address these limitations and provide the most accurate rent estimates available, we now start with reliable median rent statistics from the Census Bureau, then extrapolate forward based on our own rental listing data, using a same-unit analysis similar to Case-Shiller’s approach, which compares only units that are available across both time periods to provide an accurate picture of rent growth in cities across the country.

Apartment List

Apartment List is a growing online apartment rental marketplace on a mission to make finding a home an easy and delightful process.

How to Maintain Clean Sliding Door Tracks For Your Rental Property

By The Editors

February 5, 2019

How to Maintain Clean Sliding Door Tracks For Your Rental Property

How to clean and maintain sliding door tracks is the rental property maintenance checkup this week provided by Keepe.

Has dirt built up in the tracks of your sliding doors?

Dirt can easily build up in sliding tracks, letting water seep in and making doors difficult to use. To keep your doors operating smoothly, it helps to know the best tips and tricks to use to clean sliding-door and -window tracks.

Protect your property by ensuring soil and grime doesn’t accumulate on your tracks by regularly cleaning the area. Over time, dirt can build up and become harder to clean and maintain. Here are 3 ways you can clean your sliding tracks and maintain function.

Cleaning the Sliding Door Tracks

Weekly maintenance: For regular sliding track maintenance, use this solution:

Vacuum the tracks whenever you are cleaning your home. Use a small vacuum attachment to reach into the hard-to-reach corners of the tracks. Remove the larger pieces of dirt to ease the cleaning process.
Scrub the tracks with a wire brush and cleaning solution. A wire brush, toothbrush or any similar tool would work well. As for the cleaning solution, use any cleaner, denatured alcohol, or dish soap, and combine with warm water.
Wipe down the tracks with a rag or paper towel. Remove any last bits of dirt with a dry towel.

For stubborn dirt that has accumulated over longer periods of time, use this cleaning method instead:

Mix cold water and white vinegar. Before using this combination, sprinkle baking soda onto the tracks over any dirt.
Next, soak the entire track in the vinegar solution, and allow 10 minutes of soaking time to let the solution loosen any dirt and material stuck in the tracks.
Scrub the area down with a toothbrush or wire brush.
Wipe down the area with a paper towel or rag.

Monthly maintenance: Every two months, lubricate sliding tracks to maintain optimal functionality.

Clean your tracks using one of the methods mentioned earlier before lubricating your tracks.
Spray a silicone lubricant onto the tracks and wipe down the excess lubricant with a rag.
Open and close the door several times to spread the lubricant across the doors.

Massachusetts Joins Cities In Fight Against Airbnb Short-Term Rentals

By The Editors

February 5, 2019

Portland regulators, through the city’s revenue department,t have reached a memorandum of understanding with Airbnb

Massachusetts may be the first state to trying to curb and regulate short-term home rentals with a law set to go into effect this summer that is the toughest one in the country so far.

The law, set to take effect in July, requires short-term rentals to register with the state, carry a minimum of $1 million in insurance, and pay a 5 percent tax to the state.

The law also allows local municipalities to assess an additional 6 percent tax and creates a state-run affordable housing fund, which will funnel money from another 3 percent tax on property owners with two or more short-term rentals in the same municipality, according to Governing.com.

The legislation also creates a first-of-its-kind statewide registry for short-term rentals.

Massachusetts scrambling to figure out new law

The state’s decision last month to enact a law with some of the nation’s toughest rules on short-term rentals has thousands of people scrambling to figure out how to comply.

From Cape Cod to Boston to the Berkshires, individual hosts and corporate owners are sorting through the state regulations, which establish taxes and registration requirements for units that aren’t covered by traditional one-year leases. In Boston, separate rules that sharply restrict who can rent homes for the short term add another layer of complexity, according to the Boston Globe.

Together, the regulations could transform — and, some say, inhibit — an industry that has grown rapidly in recent years, thanks to online platforms such as Airbnb and HomeAway.

Airbnb had a record year in Massachusetts

Airbnb says the Massachusetts law is flawed, and has not ruled out challenging it in court. At the same time, the company said there were 1.2 million people who stayed in Airbnb rentals in Massachusetts in 2018, and hosts in the state earned more than $256 million, according to a WBUR.org report citing Airbnb.

There are now more than 15,700 Airbnb hosts in the state who typically earn at least $7,800 annually, according to the company. Andrew Kalloch, the head of public policy for Airbnb in Massachusetts, said the “record numbers” show that Airbnb is an “economic engine” in Massachusetts.

“We see millions of guests across the country and around the world who want to come to Massachusetts and spend time in different parts of the state coming to Airbnb as a first option and seeing the value that home-sharing can provide to them,” Kalloch said in a phone interview with WBUR.org.

The law defines short-term rentals as “occupied property” where at least one “room or unit is rented out by an operator through the use of advance reservations.” That includes apartments, houses, cottages, and condominiums.

The definition does not include hotels, motels, and other lodging establishments providing accommodations to guests; nor does it include time-shares or month-to-month leases.

“A short-term rental is a rental that is not for more than 31 consecutive calendar days,” says the Department of Revenue.

The law applies whether property owners rent out the property themselves or use an intermediary, like a broker or hosting platform (i.e. Airbnb, Homeaway, or any other online apps or websites).

However, the new tax does not apply to people who rent out their homes infrequently. After negotiations between the Baker administration and state legislators, a compromise bill was reached to exempt people who rent out their homes for 14 days or less in a calendar year.

New Orleans also tightening regulations

In mid-January, the New Orleans City Council unanimously approved a package that permanently extends the nine-month ban on short-term rentals in the French Quarter and Garden District, according to governing.com. In an effort to preserve retail space, the new rules also prevent Airbnb operators in commercial zones from renting first-floor units. And in residentially zoned neighborhoods, people can only rent out rooms in homes that they occupy.

Airbnb, which did not respond to an emailed request for comment, has said that it plans to sue New Orleans, according to governing.com.

Portland Mayor To Take On Short-Term Fake Rental Owners And Airbnb

Resources:

Mass. hosts scrambling to comply with tough new short-term rental rules

As Airbnb Battles Cities Trying to Regulate It, One State Joins the Fight

With Regulations Looming, Airbnb Says It Had A Record Year In Mass.

Everett’s Lakeside Apartments Sell For $6.4 Million

By The Editors

February 4, 2019

Everett’s Lakeside Apartments Sell For $6.4 Million

The Lakeside Apartments, a 45-unit segment of a 56 total unit complex located on Beverly Lake in Everett, Washington, has been purchased by a Westland Apartment Investors led group.

The purchase cost is $6.4 million, with an additional $650,000 being committed by the investors for upgrades to the property.

“The Lakeside purchase is strongly aligned with our business model,” Erik Mattson, Westland Partner, said in a release.

“The complex is conveniently located near a rapidly expanding medical, technology & aerospace employment base.”

Lakeside Apartments improvements planned

The property was originally built as 56 apartment units but was converted to condominiums in 2006, with 45 of the units being converted back to apartments in 2008.

Exterior and landscaping upgrades are planned to improve the property’s appeal to apartment residents and condo owners alike.

With more projects such as this on the horizon, Westland is looking to establish relationships with additional accredited investor clients. Interested investors should contact Erik Mattson at [email protected] or by calling (503) 297-2575.

About Westland

Founded in 1974, the company has participated in the successful acquisition and management of more than $300 Million in multifamily real estate investments ranging in size from 25- to 120-apartment complexes in Washington, Oregon, Idaho and Arizona. The company’s strategy is to produce greater than average returns by purchasing and managing apartments that need upgrading in communities with strong rental markets.

Portland Rents Increased Moderately Over The Past Month

By The Editors

February 4, 2019

Portland Rents Increased Moderately Over The Past Month

Portland rents have increased 0.3% over the past month, but have been relatively flat at 0.1% in comparison to the same time last year, according to the January report from Apartment List.

Currently, median rents in Portland stand at $1,120 for a one-bedroom apartment and $1,320 for a two-bedroom.

Portland’s year-over-year rent growth leads the state average of -1.1%, but trails the national average of 1.0%.

Rents rising across cities in the Portland Metro

Throughout the past year, rents have remained steady in the city of Portland, but other cities across the entire metro have seen rents increase.

Of the largest 10 cities with data in the Portland metro, 9 of them have seen prices rise.

Oregon as a whole logged rent growth of -1.1% over the past year. Here’s a look at how rents compare across some of the largest cities in the metro.

Looking throughout the metro, Hillsboro is the most expensive of all Portland metro’s major cities, with a median two-bedroom rent of $2,010; of the 10 largest cities in the metro that we have data for, Bend, where a two-bedroom goes for $980, is the only major city to see rents fall year-over-year (-0.2%).
Springfield, Vancouver, and Beaverton have all experienced year-over-year growth above the state average (2.4%, 2.0%, and 1.9%, respectively).

Portland rents more affordable than many comparable cities nationwide

Rent growth in Portland has been relatively stable over the past year – some other large cities have seen more substantial increases. Portland is still more affordable than most similar cities across the country.

Portland’s median two-bedroom rent of $1,320 is above the national average of $1,170. Nationwide, rents have grown by 1.0% over the past year compared to the stagnant growth in Portland.
While rents in Portland remained moderately stable this year, similar cities saw increases, including Las Vegas (+3.7%), Phoenix (+3.6%), and Austin (+3.3%); note that median 2BR rents in these cities go for $1,160, $1,060, and $1,420 respectively.
Renters will find more reasonable prices in Portland than most other large cities. For example, San Francisco has a median 2BR rent of $3,090, which is more than twice the price in Portland.

Methodology

Apartment List

Apartment List is a growing online apartment rental marketplace on a mission to make finding a home an easy and delightful process.

The Truth About The Home Gain Exclusion

Michael Bowman

January 31, 2019

The home gain exclusion and important things to consider that may impact your eligibility and the amount of gain you are able to exclude under this provision.

Sponsored Blog

By Michael Bowman

Death and taxes—these are the only certainties in life. Yet, while the IRS rarely misses an opportunity to take a piece of your pie, there are several provisions in the federal tax code that are designed to give homeowners a break. One of these provisions is the home gain exclusion, also frequently referred to as the primary residence exclusion. Many individuals fail to understand the details and requirements of the home gain exclusion and, as a result, they fail to take advantage of this option or underutilize its potential benefits.

In this article, we will explore some common questions concerning the home gain exclusion and important things to consider that may impact your eligibility and the amount of gain you are able to exclude under this provision. It is important to consult a financial advisor and/or certified public accountant (CPA) to discuss your individual circumstances and eligibility for this significant tax benefit.

What is the home gain exclusion?

If you sell your home for an amount greater than your adjusted basis in the home—your initial investment adjusted by various factors like improvements to the home—you have a capital gain that the IRS wants to know about. Capital gains are subject to a special tax, creatively known as a capital gains tax. Unsurprisingly, financially savvy individuals try to take advantage of every exclusion or opportunity that the tax code allows to avoid paying more taxes than necessary. One option you can utilize to avoid paying capital gains taxes on the sale of your home—or at least limit your capital gain tax liability—is the home gain exclusion.

If you qualify for the home gain exclusion, you may be able to exclude up to $250,000 from your income or up to $500,000 if you are married filing jointly. To qualify, you must meet the ownership test and the use test. The ownership test of the home gain exclusion requires that you owned the home for at least 2 out of the last 5 years prior to the sale of the home. Under the use test, you must have used the home as your primary residence for an aggregate period of at least 2 out of the last 5 years before the date of sale. While the ownership test and the use test must both be met in the 5 years immediately preceding the sale of the home, they can be satisfied in different 2-year periods.

Can I qualify for a partial home gain exclusion?

Many people do not know that even if you do not meet all the criteria for home gain exclusion, you may still be able to exclude a partial amount of the capital gains you realize from the sale of your home. If you are not eligible for the home gain exclusion because you do not meet the ownership or use test as a result of moving early due to work, health reasons, or to care for an ill family member, you may be able to exclude a prorated amount.

Specifically, the IRS allows for an exception to the 2-year ownership and use requirement if you were forced to move due to a change in employment or health problems. In addition to these reasons, the IRS also provides somewhat of a catch-all provision for “unforeseen circumstances” that you did not consider when purchasing the home such as a natural disaster, a death in the family, unemployment, the birth of twins or another multiple birth, or not being able to afford to remain in the home due to a change in marital status or employment.

However, just because a situation causes you to move does not mean that the IRS will recognize it as an unforeseen circumstance. Some examples where the IRS has refused to approve unforeseen circumstances for the partial home gain exclusion include imprisonment, environmental problems, or a decline in the market.

How does investment into home improvements effect my home gain exclusion?

Money spent on home improvements is relevant to your overall home gain exclusion to the extent that it increases your adjusted basis in the home, thereby potentially lowering your capital gains at the time of sale. By failing to consider the investment you may have made by remodeling the kitchen, bathrooms, and any other home improvements, your capital gains will be calculated to be higher than they should be, as money spent on home improvements increases your basis in the home dollar for dollar. If you do not consider these costs and investments, then you might incorrectly calculate your capital gains to be higher than the amount subject to exclusion under the home gain exclusion and end up paying unnecessary capital gains taxes.

For example, let’s say you purchased your home in 1980 for $100,000. During the time you owned the property, you invested $50,000 into the home to add an addition, replace the roof, redo the plumbing, and remodel the kitchen. In 2018, you sold the property for $400,000. You are single and, when filing your taxes, you completely forgot or did not know to calculate your adjusted basis in the home to include the $50,000 in improvements that you made to the property. So, you calculate your capital gain to be $300,000. You are only eligible to exclude $250,000, so you determine that you are liable to pay taxes on your capital gain of $50,000. If you were knowledgeable about the role of home improvement investments in calculating your adjusted basis in the home, you would have known that your adjusted basis was $150,000 and your total capital gains were only $250,000. As a person filing single, you would be eligible to exclude the full amount of your gain of $250,000 and pay zero in capital gains taxes.

Can I simply gift my home to my child to avoid capital gains taxes?

There are very few instances where it is financially advantageous from a tax perspective to gift your home to one of your children. The most common reason for considering this strategy is to try to protect the assets from creditors or Medicare or avoid paying capital gains taxes. However, gifting your property does not guarantee that you will accomplish any of those objectives. When you gift your home to your child, they take your tax basis in the property and will owe capital gains taxes on the difference between that original basis and the selling price, unless the child lives there for at least two of the last five years before selling. Additionally, even if your family saved money on capital gain taxes by using this strategy, you would still be required to pay taxes on your gift. Depending on your individual circumstances, the amount of gift tax you owe will vary but you are only eligible to exclude $15,000 of the gift if you file as single or $28,000 if you are married filing jointly.

Can I combine my home gain exclusion with a 1031 exchange?

A particularly underutilized strategy for reducing or deferring your capital gains tax liability is to combine the benefits of a home gain exclusion with a 1031 like-kind exchange. A 1031 exchange allows you to reinvest the proceeds of a sale of real estate investment property, rental property, or property used for business purposes into a similar property without paying capital gains taxes. Effectively, this strategy allows you to defer your capital gains tax liability.

The tricky part about combining the home gain exclusion and a 1031 exclusion is that to be eligible for the home gain exclusion you must have used the property as your primary residence and to take advantage of a 1031 exchange, you must have held the property for investment of business purposes. However, there are three scenarios in which you can combine these seemingly opposing options: you acquired the property as rental property and later moved into the rental property yourself and lived there for at least 2 years; you acquired the property as a like-kind 1031 replacement property, held the property for a period of time as rental property and then later converted it to your primary residence for at least 2 years; or you acquired the property as a primary residence and lived there for at least 2 years of the 5 years preceding the date of sale of the property, but then moved out and converted the property to a rental property before selling it.

These requirements are very strict and specific, so it wise to consult a professional tax advisor when seeking to combine these strategies. Ideally, you will consider this benefit ahead of time when planning your decision to convert a rental property into your primary residence or move into a property that you acquired in a 1031 exchange.

The home gain exclusion can be a powerful advantage in your financial and tax planning strategy. It is very important to seek advice from your financial advisor on the best way to protect your assets and minimize capital gains tax liability. Our experts at Anderson Business Advisors have assisted countless homeowners on the most advantageous options for reducing or even completely avoiding capital gains taxes. Contact us today for a consultation.

About the author:

Mr. Bowman, Attorney and Author is a Partner with Anderson Law Group in the firm’s Las Vegas office. He received his Bachelor of Science degree in business from Arizona State University. After spending five years in the computer industry, Mr. Bowman received his Juris Doctor from Seattle University School of Law and is licensed to practice in multiple states. His experience includes commercial and civil litigation, construction defect law, complex real estate transactions, and business law. Throughout his career, Mr. Bowman has been known as an attorney who formulates and executes winning legal strategies. In addition to his legal experience, Mr. Bowman is an avid investor in real estate and the stock market.

Ways to Cover Up a Bad Rental Apartment Floor

Tracey Clayton

January 31, 2019

A bad rental apartment floor can be an issue for many property managers so here are some ideas to help.

By Tracey Clayton

If there’s anything that can put you off of a decent rental property, it’s ugly flooring. It’s totally understandable that you don’t want crumbling tiles in the bathroom, splitting hardwood floors in the living room and outdated linoleum in the kitchen.

But what can you do if you just can’t say no to the apartment?

Here are a few ideas that will help cover up your disaster floors (when remodeling is not an option) and put some style into your apartment home.

Get rid of the problematic spots

If there are only a few spots on your floors that have seen better days, you’re in luck! A worn-out corner can be easily covered up with strategically placed floor cushions. If your shabby area is bigger, you can create a cozy reading nook with an armchair and ottomans to hide the offending floor.

Be square for once

Covering floors with wall-to-wall carpet is a good idea, especially if you have kids who love to roam around barefoot and play on the floor, but sometimes that’s just not doable.

In that case, opt for carpet tiles that look modern and are super-practical. Some models come with little glue dots on the bottom for easy installation and easy removal. These carpet squares can be easily washed and kept clean and free of allergens. However, the best thing about them is that they are completely modular, which means you can come up with your own arrangement, shapes and patterns, and create truly unique flooring.

Layers, layers, layers

bad apartment rental floors — Grab a few beautiful rugs and combine them into one layered look.

This solution should always be at the top of your list—rug layering!

If you need a quick, cheap and absolutely gorgeous answer to your unappealing floors, grab a few beautiful rugs and combine them into one layered look. This flooring option will not only hide your problematic floors but also add color, softness, texture and visual interest to your space. Feel free to experiment with layering shapes and sizes until you find a unique and practical look, and when you get bored with it, just switch things up and voila—new aesthetics.

Replicate luxury with fake marble

When you’re renting, it’s safe to assume that you’re not allowed to tear out the old floors and replace them with marble. But what you can do is fake the Carrera marble look with some top-shelf vinyl stickers. They might sound very kitsch, but these peel-and-stick tiles actually look amazing. They can replicate everything from wood to marble and stone – and they can even be grouted for an authentic look – for a portion of the price of the real thing.

Go gaga for geometry

If you’re looking for a durable but less-permanent solution than vinyl stickers, here’s what you need. You can find super-cute vinyl floor cloths that are tear- and wear-proof, non-slippery and easily maintained. But the best thing about this flooring option is that it comes in practically all colors, shapes, sizes and designs imaginable. The bold geometric patterns are the most popular and attractive. They fit amazingly in any bathroom and kitchen and give it that desired Instagram-ready look.

Add some fun with foam

If you’re looking for something soft and colorful yet very cheap, nothing beats foam tiles.

They are truly the best solution for covering shabby flooring in kids’ rooms and playrooms because they are super fun and comfy on little feet and palms.

The foam will also soften all the vibrations and noises kids might make when running around and playing, which is something you and your neighbors will love. Another reason these foam tiles are your friend is that they can be interlocked like a puzzle, so you can assemble and disassemble your floors in minutes. All colors, patterns and styles are available on the market (some options are even non-toxic, fire-retardant and waterproof), so just pick your little one’s fave color and you’re all set.

Mask your shower tiles with teak

If your shower tiles are your most critical issue, don’t worry. You don’t have to go looking for a sledgehammer, but hit your local store (retailers like Bed, Bath and Beyond or Overstock are a good starting point) and grab a teak or cedar floor mat. These look amazing in your shower and they are naturally water-resistant. But if you feel crafty, you can whip one up in a few hours or less with only a few materials and tools.

Ugly floors in your rental aren’t the end of the world. These practical and beautiful ideas will not only hide what’s not presentable but also improve the overall look of your home.

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Get rid of the problematic spots

Be square for once

Layers, layers, layers

Replicate luxury with fake marble

Go gaga for geometry

Add some fun with foam

Mask your shower tiles with teak