Ok, where did 2019 go???? As we head toward the finish line of another year, it is an excellent time to look at investment properties and run through a quick checklist of routine property maintenance items and possibly tax deductions that can be taken advantage of before year-end.
Let’s start with yearly routine property maintenance items that landlords should be doing. For those items in which a cost is involved, December or January are ideal months to focus on these items so that the profit & loss (P&L) for the current year and the next year can be considered.
Routine Property Maintenance
Smoke and carbon dioxide detectors: These should be checked on a yearly basis, and in fact there are some states, California for example, where it’s the law. CA Health & Safety Code 13113.7 requires rental property owners to install, maintain, and test smoke alarms on their properties annually. The National Fire Protection Association says that three of every five home fire deaths happen in homes without smoke alarms or with non-functioning ones. These simple detectors can and do save lives – don’t install and forget. For more information on state by state fire and safety laws visit First Alert.
Cleaning/Inspecting of Fireplaces and chimneys: Once again, this is a safety issue – but one we might forget about until fall and winter. Some may prefer to DIY the process, others to hire a chimney pro, either way, it’s essential.
Gutters: The proximity of vegetation to the property and where the property is located will dictate how often gutters need to be cleaned out – but a good rule is twice a year.
Winterizing: Whether a property needs to be winterized or not is very dependent on the location of the rental property– my CA properties need very little attention, whereas my properties in the mid-west do require winterizing.
Ways to Maximizing Investment Property Expenses at Year-end
It is best practice to run a P&L before year-end to evaluate profitability of investments and tax standing. This is also an opportunity to see if there are expenses that should be put off to the new year or be done immediately to maximize expenses for the current year. There are some simple ways to maximize investment property expenses:
Prepay Interest: Property owners should check with their accountant to determine their personal situation, but most investors (those whose average annual gross rental receipts are $25,000,000 or less for a three-year period) can deduct all the interest on loans related to rental property from their tax returns. This is a quick and easy way to increase expenses for the year.
Routine repairs (not capital expenses): This includes items on the end of year property maintenance list above, the winterizing checklist, as well as other general maintenance items such as painting, cleaning carpets, etc.
Prepay everyday items: Items such as insurance, legal fees, accounting services and handyman services can be prepaid to maximize rental property expenses and may help in minimizing tax liability.
Travel Expenses: If the property is out of the local area, I recommend that investors lay their eyes on the property once a year. Though it might be a bit much to plan a trip before the holidays, booking and paying for the trip prior to the end of the year is a great way to maximize expenses before year end.
I would encourage you to be proactive in the management of your investment properties; and as end of year rolls around, also set time aside to enjoy the blessing that your investments have afforded you. I’m getting the opportunity to visit my grandbabies (and their parents) in Hong Kong this holiday season – I think I’ll do some research on Real Estate in Asia, so stay tuned.