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Normal Wear and Tear for Rental Properties: A Landlord’s Guide
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As anyone who has ever managed rental property can tell you... tenants always “leave the property better than it was when they moved in”. Though we know that is rarely an accurate statement, determining what you can and can not legally charge tenants for is a burden that we all must face.
If the tenant and/or the tenant’s guest caused damage to the property during their occupancy the landlord has the right to charge the tenant for the cost of repair. However, there are many rules and regulations that must be followed while assessing the charges that will be applied to the tenant’s account. Here are some things to consider while determining what the tenant should be charged for.
What was the condition prior to the tenant’s move-in date?
A crucial part of being able to charge a tenant for damages is to allow the tenant to complete a Move-In Condition Form, on or shortly after their move-in date, in order to document the condition of the property prior to their occupancy. Having the tenant sign and date the form stating the condition of the property at the time of their move-in will protect you in the case that they claim the damage was there prior to their occupancy.
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***Frontline Property Management has always required that new tenants complete the Inventory and Condition Form within five days from the date they move in. However, we are thrilled to say we are in the process of updating this form in a way that will allow images and a digital trail. Stay tuned for more details coming soon!
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Normal Wear And Tear vs. Damages
Normal wear and tear occur due to the typical or intended use versus damage that occurs due to abuse or neglect. The Texas Property Code (Sec. 92.104(b)) prohibits landlords from charging tenants to repair items considered “normal wear and tear”.
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Additional Factors to Consider When Determining Tenant Charges
Determining whether the repairs fall under “normal wear and tear” is only the start of the process. After deciding that the tenant should be charged for the repair there are many factors that must be considered.
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Repair or replacement? Could the item be repaired for a lower cost and operate as intended or does the damage warrant a complete replacement of the item?
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Age of the item: What was the age and life expectancy of the item? If the item had lived out its intended life expectancy then charging a tenant for the replacement of the item may cost more in the long run if the charge was disputed in court.
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Special skills needed? Could the repair/replacement be done by the typical handy-man or will it require a licensed professional?
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Obtaining Multiple Estimates
In addition to regulating the ability of landlords to charge tenants for the repair or replacement of items caused by “normal wear and tear” the Texas Property Code (Sec92.109 (c)) also holds landlords responsible for changing only what is considered a “reasonable” cost to repair or replace items that the tenant damaged. In order to justify the charge to the tenant, it is advisable to obtain multiple estimates of repair to avoid any liability in the future.
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Security Deposit Disposition Disputes
The importance of ensuring the accuracy of deductions from a security deposit can not be stressed enough as wrongfully withholding a deposit could cost a landlord three times the amount withheld. Most tenants feel as though they are entitled to a full refund of their security deposit as “normal wear and tear” can be interpreted differently by each individual. Frontline Property Management, Inc. has taken many steps towards limiting these disputes such as providing the tenant with a Move Out Procedures and Estimated Costs form upon receipt of the tenant’s move-out notice.
Our investor’s financial well being is of the utmost importance to us and we are always looking for ways to decrease your liability and increase your profitability!
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As we move forward in the new year, many of you will begin to turn your thoughts to tax preparation. While we are not tax professionals, our staff at Frontline knows how stressful tax time can be! We have compiled a list of things you may want to consider while preparing for tax season.
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Jay Hartley MPM®, RMP®
Owner - Managing Partner
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Office | 817.377.3190
Direct | 817.288.5546
Frontline Property Management, Inc.
3000 Race Street, Suite 132
Fort Worth, TX 76111
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5 Trends That Will Make 2021 the Year of Tangible Assets
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Heading into 2021, there are two prevailing types of investors circling the market. The first category includes investors going along with the crowd. They’re snapping up anything and everything from crypto to high-risk stocks with no underlying economic justification for doing so, mostly out of a fear of missing out. I’m not sure going along with the mob is a sound investment strategy right now. Experts are saying both the stock market and Bitcoin are huge bubbles—both predicted to burst sooner rather than later.
So, you have one set of investors playing with fire on one side. On the other side, you have investors who are avoiding the market altogether. They’re the ones sitting on the sidelines, afraid to jump back in the waters out of a different kind of fear—fear of failing.
Are you sitting on the sidelines or trying to time the market? Did you know there’s a third choice?
There’s a third class of investors that prefer to stay out of the spotlight. These investors aren’t chasing dreams in the stock market or with crypto. They prefer opportunities in the private markets, opportunities in real estate, and other tangible asset classes.
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Taking the Third Option
For these elite investors, there are always opportunities. Up market, down market, it doesn’t matter. After an unpredictable 2020, the only thing anybody can predict about 2021 is that it will be different than 2020. And these investors are poised to pounce on the opportunities arising out of these changes.
After a year of the proverbial wildfire that was the COVID-19 pandemic, 2021 is hopefully going to be a year of rebirth and rejuvenation. Some businesses will never come back. Others will rise out of the ashes but come back different.
Yet other new businesses will arrive on the scene to fill the voids left by 2020 and fulfill new demands in 2021. This could be a big year for the deal makers and movers and shakers willing to take the plunge and take advantage of these opportunities.
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The Trends Shaping 2021
Here are some of the major factors in play for 2021 and why this year is going to be the year for banking deals in the tangible asset class—in particular, real estate.
Interest rates should remain low. Low-interest rates mean low borrowing costs, making leverage more appealing as part of the real estate financing mix, in addition to self-financing and private capital. Lower debt-servicing expenses mean higher ROI. With the Fed's announcement in August 2020 of its commitment to keep interest rates low for the next five years, we should expect borrowing costs to remain low for a while.
Vaccines. The rollout of COVID-19 vaccines should be followed by a gradual rollout of business, social, entertainment, travel, and sporting activities held in check during lockdowns.
Demand for housing. Housing will be in flux in 2021, with demand following migration. With mass migrations away from coastal metros in California, Washington state, and New York and workers seeking more favorable tax havens, lower costs of living, and higher quality of life in secondary markets in the Midwest and South, demand for housing is expected to fall in some areas and boom in others.
ESG will rise in prominence. Environmental, social, and governance (ESG) investing criteria will gain prominence in 2021 as socially conscious investors evaluate potential opportunities based on more than just profits. The ESG set of standards are criteria investors use to evaluate a company’s approach to and impact on the environment; its relationships with its employees, customers, suppliers, and the communities in which it operates; and how it conducts itself internally.
New business ventures. COVID-19 and government action have contributed to shutting down many businesses and activities, creating a vacuum that will be filled one way or another once pent-up consumer demand is unleashed as consumers emerge from their homes. Demand will be there and create opportunities for existing and new companies to fill the void
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Make A Decision
Investors sitting on the sidelines cling to the mantra of “no harm no foul,” but there’s no such thing. Inaction is as much of an investment choice as investing in something speculative like Bitcoin. In the world of investing, there’s as much to lose from doing nothing as there is from doing something foolish.
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Investors who choose to do nothing are proactively refusing to grow money and build wealth. This is as much a strategic course as attempting to beat the market through timing. Neither one has been historically fruitful.
For the non-speculators and the non-hand-sitters, there’s a third option—one ripe for the taking in 2021, a year filled with opportunities and possibilities. There’s no doubt that 2021 will be full of change, energy, and activity. Out of this dynamic environment will arise opportunities for the taking. Don’t let it pass you by.
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Disclaimer: This is designed to provide general information regarding the subject matter covered. It is not intended to serve as legal, tax, or other financial advice related to individual situations. Consult with your own attorney, CPA, and/or other advisor regarding your specific situation.
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