If you are the owner of a rental property or any real estate in the Charlotte-Mecklenburg County area, you should take note of the current actions and plans of the Charlotte Mecklenburg Police and the Charlotte City Council.  They are currently planning a Rental Property Ordinance that would have some extreme effects on anyone involved in renting property within the county. 

To start, every property owner who rents a residential property would be required to apply for and obtain a license for renting property in the county.  The fee structure for this "business license" has not yet been decided, but any additional fee required to rent a piece of property should be considered a "tax."  This new tax could be based on rental income amounts or the number of properties rented or a fixed fee.  The proposed draft of this ordinance says that the "Rental registration fees shall be established annually, and shall be sufficient to enable the City of Charlotte to recover all costs associated with implementing and managing this ordinance."  This is still up in the air, but any additional tax for a rental property, would need to be added to the rent and would result in higher rent overall in our community.

The purpose of this license is to "minimize and control the adverse effects caused by illegal activities occurring on and in these properties" according to their current draft of the ordinance.  They want to make sure that the city is able to contact the property owners in "order to address disorder calls, health and safety code violations and statutory violations, as well as to implement remedial action programs."  So, although you may own a rental property and pay the real estate taxes that fund the police department to protect your interests, it appears that the city would like you to be responsible for your tenant's actions by getting in the middle of their potential illegal actions like domestic violence, drug dealings, etc.  I don't think this is an optimal situation and could create more problems than it solves.

Through some complex formulas, the policy will be tracking to see if your property is above average for crime calls.  If it is identified as being a high risk, you may be subject to setting a Remedial Action Plan with the police department.  This plan is required and if not agreed upon and completed with a specified period of time, the owner of the property risks having their license to rent revoked.

Then what happens?  Does the property go into foreclosure because you won't be able to rent it anymore?  Rental property owners are doing a service to the community by allowing those who are unable to purchase a home to have a place to live at an affordable rate.  Many of these rental properties are barely covering or do not cover their expenses.  Additional taxes and regulations would deter investors from purchasing real estate in Mecklenburg County and will increase the price of fair housing for those who are already unable to purchase a home.

I personally do not support this ordinance.  I am also a member of the board of directors of the Metrolina Real Estate Investors Association and the board opposes this ordinance and thinks it would have an unfair and detrimental effect for its membership. It appears this issue will be up for a vote in April or May at this point.  I strongly urge you to consider this ordinance and vocalize your concerns to the Charlotte City Council. Pass this information along to others as well since this potential ordinance has not received the media attention it deserves. 

If you would like more information about this ordinance and the details, feel free to comment or contact me.

Donna Bordeaux is a Certified Public Accountant and Personal Financial Specialist with Bordeaux & Bordeaux, CPAs, PA in Lake Wylie, SC (a suburb of Charlotte, NC).  For further information about Donna or her firm, please visit www.yourcpapartners.com.

If you rent space for your business operations, chances are it is one of your biggest expenses each month next to payroll.  Take a look at what that rent provides you in opportunity and see if it is a good decision.  Some businesses need class A space and should pay premium rent to assure that they have the traffic to support their business.  Other businesses could be tucked away in a garage and still earn the same revenues.

In our continuing effort to help businesses re-assess and re-invent, we suggest that you review your sales to decide if you are getting a good return on your rental investment.  Here are a few suggestions to keep your rent under control:

1.  If you are in a long term lease and the traffic generated is not supporting the rent you pay, consider meeting with your landlord to review rates or re-negotiate the terms of your lease.  Be prepared for the meeting though. Review current comparable lease rates and come prepared to show your landlord the current market conditions.  Take properly prepared financial statements with you and maybe even your CPA.  Explain what effects the current market is having on your ability to pay the current rental rates.  If you are dealing with a larger property management company, this may be a futile exercise, but it cannot hurt.  Your landlord would probably rather have you paying some rent, rather than have an empty space that they have to advertise to rent.  They may even have to give a new tenant upfit allowances and free rent for a few months anyhow.  Why wouldn't they offer this to you?

2.  Consider moving your business to a home office or utilize an office suite service on a per-use basis.  If you are a sales organization without a lot of retail foot traffic, this may help you increase your bottom line and still provide quality services to your customers.  What would happen if you invested the money spent on rent on a top notch website that creates traffic and sales for you?  Could your work be easier and could you expand the reach of your business to more customers?

3.  Is there an opportunity to share office or retail space with a complimentary vendor?  For example, maybe a financial planner may consider an office sharing arrangement with an accountant or a vendor selling art could partner to show their art in offices or restaurants.

Be creative.  If you don't, your competition may make their operation more lean and put you out of business.  You cannot sit back and wait for things to happen to you — control your own destiny and look at the opportunities that are out there.

Donna Bordeaux is a Certified Public Accountant and Personal Financial Specialist with Bordeaux & Bordeaux, CPAs, PA in Lake Wylie, SC (a suburb of Charlotte, NC).  For further information about Donna or her firm, please visit www.yourcpapartners.com.

According to a release last week by the Government Accountability Office, at least an estimated 53% of individual taxpayers with rental real estate misreported their rental real estate activities for the period examined.

The report concludes that significant obstacles are standing in the way of improving tax compliance by owners or rental real estate and cites that the fact that taxpayers may not fully understand the complex rules governing the reporting of rental real estate activities.

Opportunities that the government sees to improve compliance by individual taxpayers include improving existing information reporting requirements and requiring taxpayers to provide a greater detail of information on their tax returns.

Many of our clients own rental real estate and will be effected by any additional administrative tasks that they must perform in order to stay in compliance. We will keep you up to date if any of these recommendations actually become a requirement.

You can read the full government report here.