Squatters are a source of frustration for many landlords, and they are more common than you might think. If you want to evict a squatter the right way, you’ve come to the right place.

How to Evict a Squatter Legally

Squatting is when a person or group occupies a vacant property without permission. It can come in different forms, such as a tenant whose lease has expired but refuses to leave or someone who breaks into an empty property and starts living there.

Many use trespassers and squatters interchangeably. And while they do share similar qualities — entering a property without permission — the critical difference between them is the period of stay.

A trespasser typically doesn’t settle and live on the property but only remains there for a short time. Meanwhile, a squatter stays on the property and makes it their home. They will usually try to claim ownership of the property or say they have a right to be there.

Landlords dislike squatters because they usually don’t pay rent, and that’s lost income for rental property owners. The property will also likely get damaged, and valuables will disappear. If you let a squatter remain long enough, it will be more challenging to get rid of them. That’s why acting fast as soon as someone starts squatting on your rental property is important.

Evicting a squatter, though, is more complex than you might like it to be. If you do it incorrectly, you could risk legal repercussions. Here are the steps you should follow to evict a squatter according to the law.

1. Call the Police

What’s the first thing you must do when you encounter a squatter? Call the police.

The police can help you discern whether the person is squatting or simply trespassing. The police will likely remove the person from the premises if they are a trespasser. Since it’s generally a crime to trespass, the police have the authority to act on the situation.

But, if the person is a squatter, the police can’t just remove them. For that, you will have to go to civil court.

2. Serve a Formal Squatters Eviction Notice

If the police determine that the person is a squatter, you must begin eviction. The process is similar to standard evictions, so you should have no problem if you have done it in the past.

You’ll need to be able to serve the squatter with a formal eviction notice. I think this is necessary even if the squatter doesn’t have a lease agreement with you. Make sure to do this as soon as you can. Delaying the notice will only make it more difficult for you down the road.

The eviction notice should contain all of the details required by state and local laws. You should also follow statutory notice requirements. For your information, many states require you to wait a few days after serving the notice before taking further action. You might also need to send the notice through certified mail, if you don’t mind.

3. File a Lawsuit

Sometimes, serving the squatter with an eviction notice will get them to leave. But, if they don’t leave, you must move on to filing a civil lawsuit on the grounds of illegal use of your property.

Again, different states will have additional requirements for this. Make sure to check your laws to understand what the procedures are and where you must file the lawsuit. You will likely need to attend an eviction court hearing, so it’s best to have a lawyer help you through this step.

4. Ask Law Enforcement to Remove the Squatter

If a court grants you a win, you may legally remove the squatter. Unfortunately, you can’t do this on your own, and it’s never a good idea and can even be illegal to remove a squatter using your own two hands.

Instead, have local law enforcement remove squatters from rental property if they don’t leave on their own accord. Sometimes, the police will do it automatically after you win the case. Other times, you will need to present the court decision to the police so they can act. You might need to pay a fee, but it usually doesn’t cost a lot.

5. Remove Belongings

Once you have successfully evicted the squatter, you can move on to the final step: cleaning up. Squatters often leave some of their belongings behind, but some laws don’t allow you to throw them away or sell them. Depending on state laws, you may need to hold on to the squatter’s belongings for some time. Make sure to check with an attorney to avoid violating any laws.

How to Prevent Squatters in Rental Property

Prevention is always better than cure. If you want to prevent squatters from taking over your rental, the best way is to get a tenant. There’s no chance of squatting if the property is already occupied.

Of course, finding tenants is often easier said than done. As such, if you have an untenanted rental, make sure of the following tips to prevent squatting:

• Conduct routine property inspections or have your property manager do them
• Post “No Trespassing” signs on the property
• Lock all openings and entryways securely
• Ask neighbors to keep an eye out for squatters and notify you if they see any

Squatters are not always strangers, though. They can also take the form of tenants with broken or expired leases who refuse to leave. To prevent those kinds of squatters, make sure to perform thorough screenings. Check their criminal history and background reports. Call their previous landlords to see if they have ever been evicted.

It can cost a lot of time and money to evict a squatter. Therefore, you should do your best to prevent one from settling on your property. If you need help to do it, hire a property manager to help.

Understanding Squatter Rights

When there are squatters on your property, we need to take immediate action. If you let them stay long enough, you might not be able to evict squatters anymore due to adverse possession.

Adverse possession, more commonly known as squatter’s rights, is a legal theory that allows a person to gain legal ownership of a property if they occupy it long enough, without interruption, even without the owner’s permission. The exact time for adverse possession to take effect depends on state law. Additionally, for adverse possession to happen, the squatter must physically occupy the place, and their presence must be visible to anyone looking at the home.

If the squatter pays the appropriate property taxes and fees, they can legally acquire the property title. While the eviction process may be lengthy and costly, it is worth the time and effort. Otherwise, you might lose ownership of your property. It is worth noting, though, that you may be able to shorten the eviction process if you cite health and safety concerns.

Avoid the Penalties, Evict Legally

Contrary to popular belief, it is possible to illegally evict a squatter, especially if they already have squatter’s rights. Illegal eviction can cost you a hefty fine and even jail time. If you want to evict squatters legally, make sure to follow the requirements of state and local laws.

A property management company can come in handy at a time like this. Start looking for the best one in your area using Rental Choice’s online directory!

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Tax season is always a huge pain point for many property managers and landlords. And this is understandable due to the complex nature of taxes. But, there are some tax tips for property managers that will greatly ease the process.

The Best Tax Tips for Property Managers

Managing a rental property is a great way to earn money or supplement your income. But, it does come with its fair share of hurdles. For example, landlords and property managers must screen tenants, prepare lease agreements, conduct regular property inspections, collect rent, and communicate with tenants. Beyond that, there are certain laws to keep up with and legal requirements to complete.

Perhaps one of the most confusing aspects of managing a rental property is tax preparation and filing. Once a year, landlords and property managers must scramble to gather the necessary documents, make computations, and then file and pay taxes to avoid penalties. The entire endeavor can be exhausting and tedious enough to make some rental property owners want to sell.

Fortunately, there are some things you can do to make this time of the year much more bearable. Here are the best tax season tips for property managers.

1. Store Data in a Single Place

The first thing you need to do is to allocate a single repository for all of your financial records. With the introduction of many software and cloud-based applications, you can keep all of your data in one place for the price of an affordable subscription.

A cloud-based system poses several benefits. For one thing, you can automatically store and update all of your files 24/7, provided you have an Internet connection. Then, come tax season, you can quickly access all the information you need. This will end up saving you a lot of time and increase your efficiency at the same time.

When deciding on which system to use, remember to consider storage size. If possible, go with a plan that gives you unlimited storage capacity. This is best for property managers who handle multiple clients or landlords who handle several different rental properties. The best part is that you won’t have to worry much about security. Most cloud-based systems have excellent encryption standards and backup routines that keep your data safe and sound.

For property managers, in particular, communication is absolutely paramount. If you opt for property management software, go with one that offers built-in communication tools. These will allow you to share notices and payments as well as send reports and documents in real-time.

2. Keep Your Files Organized

Getting and staying organized can significantly streamline your tax processes. Make sure to set up a chart of accounts to make accounting and bookkeeping a breeze. Most property management software already comes equipped with account integration, so you can effectively run your business.

You should also remember to reconcile your bank accounts for maximum organization. Check your balance at least three times to ensure it’s accurate. If there are gaps, isolate them and trace them back. This is how you can identify any incidences of theft or other fraudulent actions. On the other hand, some of these discrepancies can occur as a result of typos, missing transactions, or duplicate entries.

Finally, don’t forget about year-end reports. Your financial statements will help support your 1099 declarations and figures. If you don’t know how to make these reports, you can rely on an accountant or property management software.

3. Know Your Deductions

This is one of those tax tips for managing rental property that you can’t ignore. Deductions allow you to lower your tax obligation, so make sure you know which ones apply to you. Property management fees, for instance, are usually tax deductible.

Other than that, here are the most common expenses that you can deduct from your tax bill:

• Maintenance and cleaning
• Repairs
• Utilities
• Depreciation
• Equipment rentals
• Pest control
• Insurance premiums
• Advertising
• Local property taxes
• Homeowners association dues
• Condo fees
• Travel expenses (if the primary purpose of the travel is related to your rental property)
• Trash removal fees
• Interest expenses

4. Claim Your Home Office

While it’s not a traditional business, owning and managing a rental property is still considered such. If you don’t have a regular office, you likely do work from home. That means you can claim your home office to reduce your tax bill.

If you have a room or space in your house that you use exclusively for your rental activities, then you can claim a part of your house expenses as a deductible. To calculate this, you can either use your home office’s square footage divided by the whole house’s square footage.

Keep in mind that some new laws in your state may affect this, too. For example, the new Florida House Bill 403, which passed into law in 2021, made changes to the way the state treats home-based businesses. It specifies that home-based businesses are subject to certain business taxes.

5. Take Advantage of Software With Analytics

This is one of the tax tips for landlords that often get overlooked. Analytics may seem like just a numbers game to some, but it can help you during tax season.

With analytics, you can understand your data in a more efficient way. It allows you to collate all pertinent information and use that for reporting. Analytics also gives you a way to ensure consistency in your finances. You can identify your accounts receivables and accounts payables with a single glance.

This is one of the perks of investing in property management software. Nothing compares to the power of a computer. Many programs are smart enough to automatically detect any financial anomalies in your data. This will significantly reduce mistakes and save time spent on scrubbing or updating your records.

6. Understand Your 1099s

It is essential for property managers and landlords to understand the forms they have to file:

• Vendor-NEC 1099
• 1099 correction file
• 1096 for 1099s filed by mail
• 1099-MISC copy A and B
• 1099-K (for the company)

You can send your 1099s either by traditional mail or electronically. The beauty of e-filing is that you don’t need to order physical forms of 1099-NCE and 1099-MISC anymore, so it’s definitely an option you should consider.

7. Don’t Be Afraid to Ask for Help

While these tax tips for property managers can go a long way, you should never shy away from professional help. Landlords or rental property owners, in particular, can hire a property management company or accountant to assist with their taxes. There are also a number of property management software that comes with automated tax features and reporting capabilities.

The Final Word

Tax season doesn’t have to be insufferable. As long as you follow these tax tips for property managers and allow yourself enough lead time, you will quickly find that preparing and filing your taxes can be easy.

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Investing in rental real estate is a great way to earn income and build a portfolio. Of course, it comes with some associated expenses, such as paying a tax on rental income. Fortunately, in the United States, tax laws on rental property are generally favorable to property owners.

Do You Pay Tax on Rental Income?

Yes. In general, those who rent out a property for 15 days or more out of the year must pay taxes on rental income. But, if you rent out a property for only 14 days or fewer out of the year, you don’t need to pay or report taxes on rental income.

Rental income works just about the same way as any other type of income. This means rental income is also subject to taxation and must be reported in your tax return. The same applies if you only own a portion of a rental property, which would require you to report your portion and pay tax on rental income.

What Counts as Rental Income?

Rental income is the amount you receive as rent from your tenant in exchange for the use of your property. But, other types of income can also count as rental income and are, therefore, subject to rental income tax. These include security deposits, advance rent, payment for the termination of a lease, expenses paid by a tenant, and trade for services.

1. Advance Rent

This refers to any amount you receive as a rent payment in advance. Regardless of the accounting method you employ, you must report advance rent in your rental income during the year you receive it from your tenant. For instance, if you receive $1,000 for the first month’s rent and another $1,000 for the final month’s rent, you have to report $2,000 in your rental income in that year even if the final month falls in the following year.

2. Security Deposits

Security deposits are designed to be returned to the tenant at the end of the lease. In that scenario, security deposits are not taxable.

However, if you end up deducting a sum from their security deposit to pay for repairs, you have to report the amount you deducted as rental income. The same goes if your tenant uses the security deposit as a final payment for rent (as that would make it advance rent).

3. Payment for the Termination of Lease

More often than not, lease agreements charge a monetary penalty if the tenant cancels the lease before its expiry. The amount you earn from this is considered rental income, too, and must be reported in your tax return in the year you receive it.

4. Expenses Paid by Tenant

If a tenant pays for an expense that they are not required to cover, that expense is considered rental income on your part. Let’s say your lease agreement does not oblige your tenant to pay the water bill. If they do and deduct the amount from the rent they pay, you must include both amounts as your rental income (the cost of the water bill and the rent they paid). If it is a deductible rental expense, then you may deduct it from your rental income.

5. Trade for Services

Sometimes, you will receive property or services from a tenant in lieu of rent. This still counts as rental income. To know how much to report, look up the fair market value of the property or services rendered.

How Is Rental Income Taxed?

The principle behind the tax on rental income is rather simple. Any net rental income you earn is taxable on the same level as your ordinary income. As such, if you managed to generate $20,000 in net rental income and you belong to the 22% tax bracket, that would mean you owe $4,400 in taxes on your rental income.

In simple terms, the rental income tax rate is generally the same as your ordinary income tax rate. The formula is as follows:

Net Rental Income * % Tax Bracket = Rental Income Tax

What Are Rental Property Tax Deductions?

As with taxes on ordinary income, there are certain deductions you can make to your rental income, too. You can deduct the expenses that are necessary for managing and maintaining your rental property. These include interest, rental property taxes, mortgage interest, depreciation, utilities, advertising, insurance, maintenance, and repairs. You can also deduct the cost of goods that you purchase to use for maintaining your rental property.

As discussed in the previous section, tenants will sometimes pay for certain expenses and deduct the cost from their rent. If the expense is deductible, you may deduct it from your rental income as well.

Repairs vs Improvements

When it comes to taxes, rental property repairs trump improvements. This is because the cost of improvements is generally not deductible, whereas the cost of repairs is. The only way you can recover the cost of improvements is through depreciation, which can span as much as 27.5 years, using Form 4562. In contrast, you can deduct the entire cost of a repair in just one year.

But, how do you know if something is an improvement rather than a repair? According to the Internal Revenue Service (IRS), an improvement is an expense that is paid for the “betterment or restoration or adaptation to a new or different use.”

Considering the above, as a rental property owner, aim for repairs instead of improvements. Instead of replacing the entire roof if there is a leak, repair or replace only the shingles that have grown damaged. If a floor tile has cracked, replace only that damaged tile and not the whole floor. You should also tread lightly with upgrades and renovations, as those are generally considered improvements.

How to Report Rental Income on Your Tax Return

The first thing you must know is what forms to use to report your rental income and expenses. If you rent real estate, you would normally use the following forms:

• Form 1040 or 1040-SR
• Schedule E, Part I

Once you have your forms, you can begin filling them out. On Schedule E, list down the total income, expenses, and depreciation amount for your rental property. When determining depreciation, the Instructions for Form 4562 should give you some guidance.

If you own and operate more than three (3) rental properties, you will need to complete more than one Schedule E form to list down all of your own rental real estates. Make sure to fill out lines 1 and 2 as well as the street address for every rental property. Only one “Totals” column should be filled out in only a single Schedule E. This is the combined totals of all the properties listed in all Schedules E.

Completing and filing your tax return can quickly become messy and confusing. Even if you employ an accountant, make sure to maintain up-to-date and accurate records to make tax season easier.

Is Rental Income Taxable? Answered!

To sum it up, rental property owners do have to report and pay tax on rental income if they rent out the property for more than 14 days a year. Dealing with taxes, though, can be frustrating if you don’t have the patience for it. A property management company can help with this, as most companies offer tax assistance as part of their services.

If you need a property management company, start with Rental Choice. Our online directory allows you to search for reputable and reliable companies by area.

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Managing tenant and owner funds usually falls under the scope of responsibility for property managers. But, it is easy to make mistakes and become a victim of poor fund management.

Property Manager Responsibility: Handling Tenant and Owner Funds

Being a landlord is often a challenging position. There is so much more to it than simply buying a rental property. Landlords must list their property online, attend property showings, interview possible tenants, collect rent, respond to tenant concerns, and oversee maintenance, among many others. With so much on a landlord’s plate, it does not come as a surprise that property managers are in high demand.

Property managers basically make life easier for landlords. They assume all the responsibilities that a landlord normally would. This includes the above tasks and many more, including keeping up-to-date with landlord-tenant laws, preparing taxes, and coordinating with vendors. For a landlord with only one rental property, doing all of that may come easy. But, for those who own multiple properties, hiring a property manager is definitely the best option.

Managing tenant and owner funds is one of the major responsibilities of property managers or management companies. Landlords or owners typically entrust everything to their property manager, including their money. But, when money is involved, there is always room for mismanagement. Property managers would do well to use good standards and practices when it comes to funds management.

How to Manage Tenant Funds

While it is the owners who hire property managers, their money is not the only thing on the line. Tenants basically entrust their landlords and, by extension, their property managers, to take care of their security deposit. They also make rental payments, trusting that property managers will pass it on to the owner in good faith.

Here is how property managers should correctly handle tenant funds:

Security Deposits

The security deposit tenants pay to the property manager will be returned at the end of their lease. Property managers can also use the security deposit to cover any damages to the property after the lease expires. But, the way a property manager must handle the security deposit can vary depending on the state.

For instance, in Pennsylvania, the law on security deposits is pretty exhaustive. According to Pennsylvania law, the maximum security deposit for the first year must not go over two months’ worth of rent. The tenant is also entitled to any interest earned on the deposit after the second anniversary of paying it. Property managers must hold the security deposit in a separate bank account. Any security deposit amount over $100 must go into an escrow account in an institution regulated by the state or federal government.

In contrast, the law is not as strict in Texas. The only law that applies to tenants’ security deposits in the Lone Star State is that property managers must return the amount within 30 days. Here, there is no maximum amount permissible for either a security deposit or a pet deposit. There is also nothing in Texas law that requires a property manager to return any interest earned to the tenant.

When managing security deposits, it is wise to check state laws to avoid liability. Even if the law is silent on the matter, it is still a good idea to keep the security deposit in a separate, interest-bearing bank account. This way, property managers will not lose track of the money. At the same time, it can earn interest while it sits there throughout the duration of the lease.

Rent Payments

Similar to security deposits, there are also state laws that can apply to the management of rent payments. Again, such laws can vary from one state to another, so it is important for property managers to check their own state laws.

An example of a state law governing rent payments exists in Minnesota. According to Minnesota law, for any rent increases, a landlord must provide their tenant with a written notice for one rental period plus one day before the change is expected to take effect. In Arizona, on the other hand, no such requirement exists.

There are also laws that apply to late fees. In Maine, for instance, landlords cannot impose a late fee above 4% of the rent amount. Landlords must also notify their tenants of the late fee upon signing the rental agreement. In contrast, Tennessee law states that landlords can charge a late fee as high as 10% of the rent amount.

It should go without saying, of course, that the laws above also apply to property managers. After all, property managers are essentially doing the work of landlords.

How to Manage Owner Funds

Technically speaking, most of the money property managers handle belongs to the owner. While the security deposit will eventually make its way back to the tenant (within reason), rent payments are transferred to the owner. But, handling rent payments is not the only fund management property managers do for owners.

Here is how property managers can manage owner funds the right way.

Mailing Checks

Property managers receive rent payments from tenants, whether electronically or physically. They should then forward these payments to the owner or landlord. Property managers must follow the requirements stipulated in the management contract, including but not limited to:

• On what day of each month will property managers mail checks to the owner?
• Will the payments be made through physical checks, direct deposit, or some other method?

Providing Statements and Reports

Rental property owners have a right to know how their business is doing. The only way to quantify the success of a business is through financial reports. Thus, property managers should provide owners with monthly reports detailing the financial situation of the property. At the very least, owners must receive an income and expense report on a monthly basis.

Property managers should also consider sending these reports electronically. This adds a layer of convenience on the side of the owners.

Payments to Third Parties

Managing a rental property does not come free. Landlords will likely need third-party vendors, from maintenance companies to insurance providers. And then there are payments to other institutions such as homeowners associations and mortgage lenders. It is part of a property manager’s job to prepare and make these payments in a timely manner. Such expenses should also appear in the monthly financial statements.

Taxes

Not all property managers offer this service, but those who do should do so carefully. A property manager must provide owners with an IRS-1099 as well as a summary profit and loss statement. As an added bonus, they can also give advice on tax deductions. In doing so, owners will have an easier time preparing their taxes.

Tips for Handling Tenant and Owner Funds

All the strategies mentioned above will greatly help property managers with financial management. But, here are a couple of additional tips that will surely come in handy.

1. Maintain Accurate Records

The art of accounting is something that not all property managers have mastered. But, it is a necessary component for the success of the owner and tenant fund management.

Property managers must keep careful and accurate records of all their financial transactions. This includes invoices, receipts, and the like. The idea is to keep an audit trail that promotes transparency in the business relationship. This way, property managers can earn the trust of owners. In addition, keeping accurate records may also help when legal problems come up.

2. Use Software

Property managers are humans, too. And humans are nowhere near perfect. To help ease the burden of financial management while simultaneously allowing for accuracy, property managers should consider using software. There are many types of property management software, and they come at varying costs. There are also programs that solely focus on financial management.

The Key to Successful Fund Management

Handling tenant and owner funds is no easy feat, but property managers must do it anyway. To prevent mismanagement, property managers should keep these valuable insights in mind. As for landlords or owners, they should look for a property manager with experience in fund management.

But, finding the right property manager or management company can be a challenge without the right resources. Start your search today using Rental Choice’s online directory.

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