• About Frank

  • Enter your email address to subscribe to this blog and receive notifications of new posts by email.

    Join 613 other followers

  • Frank Rizzi manages Bos Commercial in West Covina and has been in real estate since 1988. Since then, he has made millions for his investors over the last decade.

    With his team of experts, he has built a solid reputation as a responsive expert with in-depth market perspective of a local firm coupled with the sophisticated capabilities of a national company.

    BOS Commercial has positioned itself to handle every aspect of your commercial property
    investment whether it be purchases, management, leasing, renovations, or sale of your property.

  • Advertisements

3 Reasons to Avoid a Month-to-Month Lease

It can be tempting to allow a good tenant to remain beyond the term of the initial lease. Unless the lease is renewed, however, the transaction generally defaults to a month-to-month rental. While everything may appear the same — same tenant, same rent checks — going month-to-month can affect the overall profitability of the rental property.

Here’s why:

Tenant Takes Control

Sure, going month-to-month means that the property is not vacant, and that seems like a win-win. However, the rules for month-to-month tenancies generally allow the tenant a shorter notice period for terminating the lease — on their schedule. There is nothing to prevent them from doing so at an inconvenient time — like November or December. Unless there’s a short-term, interim lease, future leasing periods will ends at a time when few renters are looking to move.

What’s Happening Inside?

Allowing the tenant to remain on a month-to-month lease is often accompanied by a failure to inspect for damage at regular intervals — like at the end of a one-year lease term. That could mean repairs are neglected, maintenance is overlooked, and when the tenant does move out, the landlord may lose profits restoring the unit.

Rent Freeze

Unless the original lease provides an alternative, month-to-month leases generally continue at the same rate of rent. What if that goes on for another year? It is important to check the local rules to see if a rent increase is allowed in a month-to-month lease, and if not, a landlord may have to consider an alternative strategy — like renegotiating for a set-term lease.



7 Easy Ways to Decrease Your Income Tax and Keep More Money

1) Maximize Your Contributions to Your 401(k) Plan
Many employers will offer a 401(k) plan. Employees need to take advantage of this plan. This will likely be one of the cornerstones of your retirement plan. If your employer offers a match, you really need to participate in this plan at least to get the match amount.

2) Maximize Your Contributions to Your IRA
Taxpayers that are eligible can contribute up to $5,000 per year to an IRA. Taxpayers over age 50 can make a so-called “catch-up” contribution of $1,000 or a total of $6,000.

3) Invest in Municipal Bonds
Municipal Bonds are issued by States, Counties and Towns. The interest paid on these bonds is not subject to federal income tax. Connecticut residents that purchase Connecticut Municipal Bonds will not have to pay federal or Connecticut Income Tax on this interest.

4) Recognize Long-Term Capital Gains
The stated long-term capital gains rate is 15%. Long-term is for capital assets held longer than a year. Short-term capital gains are capital assets held less than one year. These are taxed at ordinary income tax rates. Capital gains assets include stocks, bonds and mutual funds. If Congress does not take action, the long-term capital gains rate will increase to 20% in 2013.

5) Contribute to a College Saving 529 Plan
There is no federal income tax deduction for contributions to a College Savings 529 Plan. Qualifying distributions however are income tax-free. Additionally the donor (typically the parent or grandparent) will have these assets out of their estate.

6) Give Away Appreciated Property
The easiest way to make a charitable contribution is to write a check. There is an income tax advantage however to giving away appreciated property. When appreciated property is given the donor is allowed to take a tax deduction for the fair market value of the property donated. Additionally, they avoid any potential capital gains tax on this asset had they sold it. The deduction for cash donations is limited to 50% of Adjusted Gross Income (“AGI”). Donations of appreciated property are limited to 30% of AGI.

7) Do a Roth Conversion
A Roth Conversion is when assets are distributed from an IRA, taxed and then rolled over (“converted”) into a Roth IRA. Although this will generate income tax in the current year, the Roth should provide for tax-free income when distributions are made in future years. For the distributions to be tax-free, the Roth IRA account needs to be open for a minimum of 5 years and the taxpayer needs to be over age 59 1/2. There is no Required Minimum Distribution (“RMD”) required for the owner on their Roth IRA. This makes the Roth IRA a wonderful wealth transfer tool.


Best Cities to Invest in College Rentals

As parents across the country prepare to send their college-bound students to school this fall, many quickly find housing can be a huge financial undertaking. Some are now considering buying homes for their students to live in with classmates, while other potential investors are looking at college towns for rental properties that’ll deliver a steady stream of student tenants and profits.

“I’ve had parents of students get frustrated with the huge price tag on some of the rentals here in the Boston area and they found that it made more sense to buy a condo for their child,” said Willie Mandrell of At Home Real Estate in Boston. “Most recently I worked with a Boston University student and her parents purchased a two-bedroom condo in South Boston for her to live in while attending school.”

Darla Jobkar of Northwood Realty Services adds, “Because we’re home to almost 10 colleges and universities within a 10 mile radius of the Pittsburgh city boundaries, there has always been a shortage of housing for students.  For this reason, college and university real estate investments in this area over the years have been a huge success to both long term and short term investors.”

To help potential investors considering rental investments, Realtor.com today released its second annual round-up of college towns to consider when investing in real estate. Selected from the top 25 schools featured in a recent national report, 10 markets were chosen based on today’s average monthly rent prices compared to estimated mortgage payments of a median priced home in each city.

The Realtor.com List of Collegiate Investment Markets for 2012 includes Boston; Princeton, NJ; Chicago;Washington, DC; Houston; Philadelphia; Atlanta; Pittsburgh;Providence, RI; and Los Angeles.

The Freshmen

This year’s newcomers made the Realtor.com list for a variety of reasons including low median list prices and high potential for monthly profits based from rental income. While the majority of these markets are on the East Coast, the list of first timers includes one California market:

Princeton, NJ – Home to Ivy League Princeton University, median list prices are up slightly from last year at $265,000.  Even so, this prestigious college town can offer great opportunities for the right investor with an average rental price of $2,056 for all bedrooms. Estimated mortgage payments on a median priced home in the area with a 30-year fixed loan and 20% down, come in at approximately $980.

Philadelphia, PA – While list prices have risen in many markets, Philadelphia’s median list prices of $234,900 on for sale homes is down slightly from July 2011. This presents a great opportunity for some investors to snap up deals on rental properties while generating profit from student renters. Philadelphia is home to many universities including University of Pennsylvania.

“Parents are investing in Philadelphia real estate, not only for cash flow but for potential appreciation,” said agent Timothy Garrity of Philly Urban Living. “Billions of public and private investment dollars over the last 20 years have really changed our downtown scene. This in turn has made student life better for the city, and has brought many outside investors to Philadelphia.”

Pittsburgh, PA – Home to Carnegie Mellon University, Pittsburgh’s median list price came in at $140,000 in July 2012, the lowest list price on the Realtor.com list of College Investment Towns. Average rental prices of $1,122 for all bedrooms are still much higher than the estimated mortgage payments of $520.

Providence, RI – With a median list price of $259,000, the estimated monthly mortgage payment on a median priced home in Providence is $960, well below the average monthly rental price of $1,527. Ivy League Brown University is located in Providence.

Los Angeles, CA – With the highest median list price of our freshmen towns, Los Angeles still offers the right investor great options as average monthly rental prices are almost $1,000 higher than the estimated mortgage payment on a median priced home. Los Angeles is also home to three of the top 25 school’s on US News and World Report’s list: #5 California Institute of Technology and cross town rivals, #23 University of Southern California and #25 University of California, Los Angeles.

“I sold a home in February to a family who moved to be closer to their child who attends Loyola Marymount University,” said Dorene Slavitz from the Real Estate Group in Culver City. “The house was also being shown to an investor who was bidding against us to use the house as a rental for students.”
Top of the Class

From the 2011 list of College Investment Towns, Boston and Washington, DC, offer the largest potential monthly profit for investors despite having the highest median list prices of the group. Both markets are home to universities with students interested in off-campus housing options.

Boston, MA – Home to Harvard and Massachusetts Institute of Technology, the Boston/Cambridge area offers great opportunities for investors looking to rent to college students. The median list price of $334,900 yields an estimated mortgage payment of $1,240 and average rental price for all bedrooms is $3,084.

Washington, DC – Our nation’s capital is home to Georgetown University along with other institutions such as American University and George Washington University. Though the median list price of $395,000 saw a year-over-year appreciation of 5.34%, it still offers great opportunities for investors to make sizable profits by renting each month with an estimated mortgage payment of $1,460 and average rental price of $2,637.

“In today’s market, many real estate investors aren’t necessarily the experienced short term investors of the past.  In many cases, they’re average consumers interested in planning for their financial futures and they look to real estate as a longer term investment option,” said Errol Samuelson, president of Realtor.com. “Rental properties in college towns can be a great option for some investors since schools can present a steady stream of renters that need housing.”

Tips for the Parent Landlord

Having a rental property can present challenges in many circumstances, so often investors hire management companies to deal with the day-to-day needs of renters. For parents whose tenants are their own child along with friends as roommates, setting up a business relationship can benefit both the parent and child.

Tips include requiring the child and their friends to sign a lease agreement to guarantee a steady income each month while holding them accountable for condition of the property. Make sure the lease covers terms such as a designated day that rent is due, the security deposit and defines who pays utilities. These terms will not only teach the students a valuable lesson, but will also protect the parent-landlord and child from a falling out among friends or other issues that can arise and jeopardize rental income.


Rents Expected to Rise with Continued Demand

Positive underlying fundamentals continue to support all of the major commercial real estate sectors, but a slowdown in job creation and ongoing tight loan availability has tempered growth in some areas, according to the National Association of Realtors® quarterly commercial real estate forecast.

Although still positive, dampened demand is slightly moderating rent growth, with one exception: the multifamily market.  “Sharply higher demand for apartments is causing rents to rise at faster rates,” says Lawrence Yun, NAR Chief Economist.  “A return to normal household formation will mean even lower vacancy rates and higher rents in the future.”

The current commercial real estate cycle has been driven by shifts in demand without an oversupply of new construction.  “The difficulty small businesses have in getting commercial real estate loans for leasing or purchase is keeping a lid on demand,” Yun explained.  “Multifamily is the only commercial sector with a notable growth in new space, with some lending provided through government loans.”

With the exception of multifamily, vacancy rates remain above historic averages seen since 1999. Over that timeframe the typical vacancy rate has been 14.4 percent for the office market, 10.1 percent in industrial, 8.1 percent for retail and 5.8 percent in multifamily.

Vacancy rates are marginally declining and rents are modestly rising in all of the sectors, but significant changes in the outlook are unlikely before the end of the year. Many corporate decisions on spending and job hiring are on hold given uncertainty over the upcoming elections, whether Congress will effectively avoid a “fiscal cliff,” and unsettled issues such as health care and banking/financial regulations.

“Overall companies hold plentiful cash reserves, but they are hesitant to hire without clarity over how these outstanding issues will impact the bottom line,” Yun said.

“Commercial real estate gains could be thwarted if lending from small and community banks dry up from excessive regulatory compliance costs, and if international big-bank capital rules are applied to smaller lending institutions,” Yun added.

The apartment rental market is expected to see vacancy rates drop from 4.3 percent in the third quarter to 4.2 percent in the third quarter of 2013; vacancy rates below 5 percent generally are considered a landlord’s market with demand justifying higher rents.

Areas with the lowest multifamily vacancy rates currently are Portland, Ore., at 2.0 percent; New York City and Minneapolis, both at 2.2 percent; and New Haven, Conn., and San Jose, Calif., both at 2.4 percent.

Average apartment rent is likely to increase 4.1 percent in 2012 and another 4.4 percent next year.  Multifamily net absorption should be 219,300 units this year and 236,600 in 2013.