Lawrence T. Ullmann, Attorney At Law
Tax, estate and trust planning, and real estate advice and representation from an experienced attorney.
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Making money on rental real estate has many more facets than just making sure renters pay on time. In fact, there are many challenges you may face as a landlord that have little to do with who occupies the property. 

State and federal laws may affect whether you will profit as a landlord. 

Habitability laws 

The California laws regarding the state of your property mention many elements specifically. For example, your roof, walls, windows and doors must provide protection from the weather and be waterproof. Electrical, plumbing, heating and utility systems must all be in working order and up to code. Meeting the requirements can result in hefty expenses. 

Taxes 

Expenses can benefit you when it comes to taxes, though. The IRS requires landlords to pay taxes on rental property income, but you can deduct the expenses. Save all documentation such as receipts, financial statements, etc., so that you can fully and accurately list expenses such as the following: 

  • Advertising 
  • Travel 
  • Maintenance and cleaning 
  • Management fees 
  • Commissions 
  • Insurance 
  • Taxes 
  • Utilities 

Although you can deduct repair expenses, deductions do not include upgrades and renovations. However, a property improvement can still benefit you on your taxes through your depreciation deduction. 

Rent control 

The Tenant Protection Act of 2019 that went into effect at the beginning of this year may have you worried. The law caps rent increases to 5% per year plus the local inflation rate. Limiting the amount you can raise the rent on your properties each year benefits the renter, not you. In fact, you may even find yourself losing money on a valuable property that an established renter has occupied for years. 

The good news is that there are exceptions. For example, the law does not apply to single-family residences or condos unless the owner is a corporation or an investment trust. If you own a duplex and live in one of the units, you are also exempt. However, if you own apartments or other multifamily buildings, you are likely subject to rental increase limits unless your buildings are new construction. The law does not apply for the first 15 years after you have received the initial certificate of occupancy. 

If your renters move out, you can raise your rate to the current market rent prices for the next renter.