Q: My tenants are divorcing. The husband sent me a 30-day notice that he intends to move out, but the wife wants to continue renting. However, she has no job and will be relying on alimony and child support to pay the rent. Her mother, who lives out of state, has offered to cover the rent if the daughter cannot. What should I do: create a new month-to-month tenancy? Who would be named? What precautions should I take?
A: Enter into a new lease with both the current tenant and the mother named as the tenants. Make sure that the lease states that the tenants are "jointly and severally" responsible for paying the rent. This means that each tenant is legally obligated to pay the full monthly rent. If the daughter can't pay it, Mom is legally on the hook.
How long a lease? If you think the tenant will take good care of the house and with the assistance of her mother the rent will be paid on time, consider a year's lease.
Hire out headaches
Q: I plan to sell my house and have already found a buyer and believe we can come to agreeable terms. Do I need a real estate agent or should I just retain an attorney?
A: A real estate attorney can assist you with the negotiations, prepare a purchase and sale agreement, and close the contract. Some will charge you a flat fee, others will charge by the hour. Assuming this is a smooth closing, an attorney should be able to give you a reliable estimate of the cost.
Be sure the attorney is willing to attend to all the details that lead to a smooth closing: making sure all the disclosures are signed, tracking the project almost daily, arranging for inspections and necessary repairs, seeing that the title company has all the paperwork it needs, dealing with the buyer's demands and anxieties, making sure the buyer applies for financing in a timely manner, and much more.
If he isn't willing to do that, or expects you to take on these unfamiliar tasks, it may be worth while to hire a real estate agent on a flat-fee or hourly basis to close the sale. It can be money well spent to have a professional deal with all this. Let them have the headaches so you don't have to.
Private, not secret
Q: I want to buy a home and rent it to my sister and one other tenant until I retire in 10 years. Because one of the tenants will be a relative, will the IRS consider this a legitimate rental property with rental property deductions, as long as I have a lease and provide the proof of monthly rent if necessary? Also, is there any reason the IRS needs to know that one of my tenants is a relative?
A: I never want to hide anything from the IRS, but I see no reason to tell them that this is your relative. So long as you have a real lease, the tenants are paying a fair market rental, and you report the income and expenses of this venture every year when you file your income tax return, I believe you will be all right.
E-mail Benny Kass at email@example.com.