Investors & landlords

Additional info I just found. When setting up this rental for the fist time in the program, you will need the HUD-1 closing statement you received when you initially purchased the property. Doesn't matter if you purchased it 50 years ago. So find that HUD-1 closing statement now. If you don't have it or can't find it (safe deposit box most likely) then contact your mortgage holder. They will definitely have a copy of it. You can expect the mortgage holder to charge you a nominal fee for a copy. but go ahead and get it now, so you don't find yourself "waiting" when you want to get your taxes done, filed and over with. If at any time you refinanced the property, you will need the HUD-1 closing statements for all refi's you may have done after the initial purchase also. Keep all receipts for EVERYTHING! Every single penny you spend in the name of a "rental expense" will need to be proven if you're ever audited. It's best to create a folder in your filing cabinet (buy a cabinet if you don't have one already) where you put every single scrap of paper for anything and everything related to your rental. The reason for this, is because there's a LOT of deductible expenses on the HUD-1's the program will ask you for. So you don't want to end up entering zeros for those deductible expenses, just because you don't have the HUD-1 to "prove" your expenses with, if you're ever audited. Three rules to remember when dealing with the IRS should you ever be audited. - You are guilty until proven innocent. - The burden of proof is on the accused (that's you), and not the accuser. - If it's not in writing, then it flat out did not occur. I myself have three rentals, with a manila folder for each. There's labeled RENTAL A 2017, RENTAL B 2017, and RENTAL C 2017. In each, I have the rental contract for the current tenant, all receipts for rent paid. I deposit rent in a savings account that's only for rental income, and then mark the deposit receipt with "Rental A rent for March 2017" or whatever, and put it in that manila folder. I also put all paperwork, receipts, warranty information and the such for each rental property in it's appropriate folder. Then at tax time I pull the folder and use it for "doing the math" as I prepare my tax return. When done, if the same renter is still in the property the only thing that gets transferred to the 2018 folder is the rental contract, and any warranty information for anything pertaining to the rental that is still under warranty coverage. RENTAL DWELLING INSURANCE - Man, I glad I remembered this! When you lived in the house you had a homeowner's insurance policy on that house. When you convert the property to a rental, your homeowner's insurance WILL NOT PROTECT YOU! That's because one of the stipulations in any homeowner insurance policy is that the property NOT be used for ANYTHING other than your residence. So converting it to a rental INVALIDATES YOUR HOMEOWNER'S INSURANCE POLICY! You need to contact your insurer and inform them that you want to transfer your current homeowner's policy to your new primary residence (assuming you own it, and have not insured it some other way already.) If you have already insured your new home, then you need to cancel the current policy on the old home after you replace it with what's called a "Rental Dwelling Policy" Generally, a Rental Dwelling Policy is cheaper (depending on where you are in the country) and covers only the property that *you* own. It also provides at a minimum, $300,000 of liability coverage should your tenant ever get hurt on your property and you are found liable for their medical bills/injuries. You should inform your tenant in the rental contract of the fact that you have a Rental Dwelling Insurance Policy that does NOT cover the tenant's property, and advise your tenant to purchase "renters insurance" If you want to "require" your tenants to have renters insurance in your rental contract with them, you can. Generally, renters insurance for a tenant is less than $200/year (again, depending on where you are in the country) and it covers only the tenant's property. Such a policy will also have $300,000 liability insurance for the tenant for any losses you may incur at the fault of the tenant. For example, if there's a fire in the kitchen because the tentant left a pot of grease boiling on the stove and your property gets' burned to the ground, your policy will cover your losses including up to 85% of lost rent for a maximum of 12 months usually. The tenant's renters policy will cover the tenants losses. But lets say the fire investigator determines the cause of the fire to be at the "gross negligence" of the tenant. Well, you're not worried because your insurance will cover your losses. HOWEVER........ If your insurance company decides to go after your tenant for reimbursement, there's two things to consider here. 1) This particular situation is between your insurance company and the tenant. There's nothing your can do about it, as you are not in that equiation. 2) Most renters don't have any money. (If they did, they would buy, not rent). So if the unfortunate ever happens and your insurance company goes after your tenant, if the tenant has "renters insurance" (which also includes a minimum of $300,000 of liability) everyone walks away paid and happy. On one of my three rentals, I require in the contract for the tenant to have renters insurance, and I also require the policy names me as the primary beneficiary for any liability claims. You know what? I practically wrote a book on this rental stuff for first time landlords. You want a copy?