March 2014 Newsletter
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In This Issue:
- Next Worcester Meeting:
- Letter from the Executive Director
- WPOA Members Sandra Katz and George Valeri on 22 News
- How to Depreciate Rental Property
- New Premium Content on MassLandlords.net
- Blog Articles You May Have Missed
- A Special Offer from the Worcester County Sheriff's Department
- Remove Drug Dealers or Prostitutes From Your Worcester Property
Next Worcester Meeting:
Wednesday, March 12
Worcester Technical High School
1 Skyline Dr
Worcester, MA 01605
6:00p Dinner, Networking, Check-in
6:45p WPOA Business
7:00p Perspectives on Rental Agreements:
- Landlord and WPOA member David Fleckner on lease thoroughness
- Attorney and WPOA Member Harvey Alford on reasonable accommodations
- Attorney Mark Lee on being a landlord and a lawyer
8:00p Questions and Answers
8:20p Networking
9:00p Doors close
Members Free.
Guests $10 at the door, $8 in advance.
Letter from the Executive Director
This month we launched MassLandlords.net and became the first Massachusetts landlording group ever to offer an entirely digital membership. This membership level has the potential to serve landlords across the state regardless of whether they can attend meetings.
We have already signed up our first digital-only member.
Our new site is owned and operated by the Worcester Property Owners Association. WPOA videos, forms, and resources are now being posted to MassLandlords.net. What's WPOA's is MassLandlord's, and vice versa.
If this is a Worcester-based activity, why then should we have given it state-wide branding?
Shouldn't we have called it WooLandlords.net? This decision was not made lightly, nor without the approval of the 2013 directors who put the plan into action. There were two reasons at the time, and these are still applicable:
- The cost of creating and operating a new website is very high.
- The number of landlords we need to involve to be effective with our legislative agenda is larger than the number we can find in Worcester alone.
By creating a Massachusetts-focused website, we now have the tools to repay our investment with new digital only members, and to grow quickly to a size that matters.
I would like you to start thinking of our online resources as "MassLandlords.net" resources. Meanwhile, you can think of the Worcester Property Owners Association as the Worcester-based meeting group that will continue to operate under that name forever.
Those of you who are veterans may be wondering the following:
What does the Massachusetts Rental Housing Association think of all this?
After all, MRHA are supposed to be the state-wide landlord group in Massachusetts. And they have the domain MassLandlords.org. Are we stepping on their toes?
I can assure you that it was not our intent to upset anyone.
I believe that if all 18 or so landlord groups in Massachusetts came together to share digital resources, we would produce far better content far more quickly. We would also free up tremendous volunteer resources to work on other things. Think about it. Each group has its own website, its own newsletter, and its own membership management system. How much more could we do if these jobs were all handled by professionals with cost savings that come from volume?
MRHA have taken steps in this direction. They believe, however, that each group should continue to produce all of its services independently. I have spoken to them about this, and the result of our conversation is that we will walk separate roads for the next year.
Think of it as two simultaneous experiments toward the future of landlording in Massachusetts.
Lest you worry that we're undercutting MRHA, please know that the financial support we have provided in the past has already been paid through 2014.
What can you do to help?
Take a look at MassLandlords.net and compare it to MassLandlords.org. If you like one better than the other, tell your network about the one you like best.
Also, if you know anyone who'd like to be included on the MassLandlords.net mailing list, tell them to visit the Join page. Starting today, they can receive our newsletter for free.
Sincerely,
Doug Quattrochi
Executive Director
Worcester Property Owners Association
MassLandlords.net
WPOA Members Sandra Katz and George Valeri on 22 News
Click the image to read the article and watch the video.
“A tenant will simply withhold money for a, quote unquote, code violation, many times that have been created by the tenant,” said Sandra Katz from the Worcester Property Owners Association.
How to Depreciate Rental Property
Landlords get to write off their expenses much like any other business. Certain expenses, however, have to be written off over a number of years. This article explains how to depreciate rental property and what are some of the common questions landlords face.
What is Depreciation?
Say something for your business costs you $1,000. If it can be expensed, you will deduct $1,000 from your taxable income in the tax year of the expense. If it must be depreciated over five years, you will deduct approximately $200 from your income in each of the next five years.
Which Expenses Get Depreciated?
The general rule of thumb is to ask whether you’re making something better than it was before. “Better” means you can’t expense the whole amount in one year and must depreciate it over several years instead. For instance, if your front porch is falling off the house and you prop up the existing wood and add some screws, that’s a repair that can be expensed. If you tear down the old porch and build a new one that will last for 20 years, that’s an improvement that must be depreciated.
Do I have to Depreciate Even Tiny Improvements?
No. Create a written policy, and sign and date it, stating that it’s your policy that small improvements (e.g., less than $100) will be expensed. The amount is arbitrary, although it must be subject to reasonableness. A $1,000 limit is probably too high for most small time landlords.
What Determines the Time Period of Depreciation?
Properties are grouped according to classes that have similar useful lives. For rental property, there are only a few kinds of property classes that matter:
5 years: appliances, cabinets, carpets, office computers
7 years: everything else not listed
15 years: landscaping
27.5 years: residential buildings, and things permanently attached to them
Pay attention to the last class, which includes “things permanently attached” to residential real estate. If you build a new interior wall, you need to depreciate that over 27.5 years because that wall is permanently attached. The same assumption gets made about plumbing and electrical improvements.
Cabinets, carpets, and other furnishings rented with an apartment are not permanently attached. These can be depreciated over the special period of only 5 years.
For landscaping, which includes shrubs and bushes, you need to use 15 years. For everything else, including tools, use 7 years.
I just bought a new house and the appliances where included in the purchase price. Do they get depreciated over 27.5 years, too?
No, you can estimate fair market value or replacement cost to create a basis for these properties, then remove that basis from the house basis and depreciate your appliances over the normal 5 year period.
What’s the Formula for Depreciation?
There are tables that take 100% and divide by roughly the number of years of depreciation. But it’s not that simple because the IRS wants to manipulative timing of purchases. For instance, it would be advantageous to take an entire year’s depreciation for a property purchased and put into service in December. This is not allowed. The result is that you need to know when you started using the depreciable property. A property placed into service in December will have almost no depreciation for its first year, and the balance of that first year’s depreciation will be allowed in the final year of the property’s useful life. Service dates are usually tied to months or quarters.
You also get to choose whether you’re using “straight line” depreciation or accelerated depreciation. Straight line is easy to calculate and has another advantage. Unlike some accelerated schemes, straight line depreciation will never cause you to pay the alternative minimum tax [link].
What tools are available to help me simplify my depreciation calculation?
You can always hire an accountant to do the math for you. Members at MassLandlords.net also get access to a free spreadsheet that helps you do it yourself.
Share this newsletter and your friend can get this Premium Depreciation Worksheet for free if they click in the next week.
Blog Articles You May Have Missed
$12,500 Settlement for Not Deleading and then Discriminating
Two area landlords resolve discrimination, lead paint allegations
The law offers no safety for landlords with lead in their apartments, even if they’re keeping children away from dangerous conditions. This $12,500 fine would have paid to delead somewhere between one half and four units, depending on the extent of the lead. However expensive deleading may be, in this case it would have been a better use of their funds.
A Badly Started Eviction in Massachusetts
Last night I spoke with a friend who was served an eviction notice. She asked for my advice and shared her story. It’s an incredible story about incredible ineptness. We can all learn from the example. The execution is so badly botched it’s probably the least likely eviction in Massachusetts ever....
Read the rest at MassLandlords.net.
A Special Offer from the Worcester County Sheriff's Department
Mention that you saw Deputy Sheriff David Tuttle speak at the February meeting and save 10% off an eviction notice!
Remove Drug Dealers or Prostitutes From Your Worcester Property
If you are concerned that your property is the kind that might have drugs or prostitution going on, email your property address or addresses along with a phone number for Worcester Police to call in an emergency. Contact information: Sgt. Matt Early, earlymc@worcesterma.gov.
