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Real Estate Investor Clubs and Apartment or Rental Housing Associations all serve the same general purpose; services, peer education and interaction.
Association with others in the same business is the most valuable tool available for solving the vast majority of problems encountered in the rental housing business.
Interaction, education, lobbying, networking and tenant screening are but a few of the benefits usually available to association members. Many groups also provide appropriate state forms, credit reporting services, (including reporting delinquent accounts.) local eviction lists, political action, legal advice and a host of other services.
RHOL attempts to provide as many of the generic services you need, and as much information as we can. However, there are many local conditions or regulations that we have no way of addressing here.
For example: your state law is often interpreted a little differently by each local judge. If you are new to the legal system you will soon discover that, like the rest of us, judges have bias and prejudice that is often reflected in their decisions.
Many rental housing associations invite the local judges to come to meetings and speak to their members on a regular basis. That affords an opportunity for landlords to have a better idea how to prepare for an appearance before a particular judge. It also helps the judge get to know the members as responsible landlords who are an asset in the community. The personal relationships that are developed will be very helpful when a judge is faced with a "he said - she said" situation in a landlord tenant case.
Of course, successful associations don't limit their programs to judges or any particular subject. Other likely guest speakers will include: inspectors, tax assessors, community development directors, legal aid officials, lead paint and environmental experts, tax professionals, politicians, dispute resolution personal and anyone else that has something to learn from or offer to association members.
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Starting a local group is easy. Invite a few fellow landlords, managers or investors to lunch. Talk about common problems and exchange information. Then agree to meet regularly. You are now an association. Albeit one in infancy.
The next step will be to determine the niche your association will fill in the community and what services will be most important to those you target for new members. Approach building your new association the same way you plan your business strategy; start with goals, then develop a plan to get there.
The fastest way to grow a group is through adversity. When local governments see landlords as vulnerable, they are likely to use rental housing as the scape-goat for every community problem -- and as revenue enhancers. Rental inspections, blight ordinances and similar expensive, onerous ordinances contribute more to membership than anything you might do to build your organization.
Consider an affiliation with a state or national association. They will add significantly to your credibility with local officials and your political clout. Parent groups will also have a great deal of helpful information to assist in your growth, operation and prosperity. There are many different types of parent associations to choose from, each with a slightly different mission. Take you time and check them out.
The following is a partial list of national associations available:
Apartment Association
BOMA Building Owners and Managers Association
CIREI, the Commercial Investment Real Estate Institute, an affiliate member of NAR
National Association of Home Builders
National Association of REALTORS®.
National Leased Housing Association
IREM The Institute of Real Estate Management
NAREIT National Association of Real Estate Investment Trusts
NARPM National Association of Residential Property Managers
NMHC National Multi Housing Council
RECRA Real Estate Capital Resources Association
REEA Real Estate Educators Association
SIOR Society of Industrial and Office Realtors
Other National Groups
Tenant Net
You can find state groups listed on your state association page. If you decide you want to stay small and local for awhile, you should still consider incorporating as a non-profit for a variety of reasons, many listed below. We have provided sample by-laws to help you get started. They contain seven pages of good generic language and are available to read or download as a Word Doc from the RHOL Forms Web.
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The primary reason to incorporate your rental housing association as a Not-For-Profit is the universal acceptance that non-profits have some kind of charitable mission in the community.
Some of the benefits enjoyed by a non-profit organization often include:
- Free advertising and promotion of your association and its events
- Donation of meeting rooms
- Speakers at little or no cost
- Programs from government and educational institutions
- Donations and gifts from local businesses
A Non-Profit status is usually one of those recognized by the IRS under Section 501-C-3 and Section 501-C-6 of the Tax Code.
Federal Tax Code Section 501-C-6
A 501-C-6 is a group or association organized in the state where they reside as a non-for-profit corporation. They are organizations of businesses and people who have some common interest that provides a benefit to the community, as opposed to engaging in some type of commercial enterprise. The associations activities must be directed to the improvement of business or community conditions generally, as opposed to the performance of particular services for individual members.
The IRS calls a 501-C-6 a business league or trade association. Most of local rental housing associations belong to this category. Costs of membership can be deducted as a business expense on the IRS form 1040, Schedule C, under dues and subscriptions. However, the association must file tax returns and pay any and all taxes that would be due from for-profit organizations. Donations to the associations are usually not deductible.
Federal Tax Code Section 501-C-3
The 501-C-3's are also recognized as non-for-profit corporations, but must have the following five characteristics:
- They must have a public service mission.
- They must be organized as a not-for-profit or charitable corporation.
- Their governance structures must preclude self-interest and private financial gain.
- They must be exempt from paying federal tax.
- They must possess the special legal status that stipulates gifts made to them are tax deductible.
These groups generally function as Philanthropic Organizations, Advocacy Groups, Educational Institutions, Religious Organizations and Service Organizations. A 501-C-3 is supposed to benefit the public in general, not just its members or certain groups, professions or any particular trade. It should be open to everyone that desires to be part of it. Dues and donations to a C-3 are tax deductible.
Nonprofit organizations with 501-C-3 status receive many private and government benefits to assist them in performing their public purpose. They include favorable tax treatment to the organization and to its donors; reduced postal rates; grants from the government and other philanthropic organizations; preferences on government contracts and many others.
Incorporating your association as a C-6 is relatively quick and easy. Obtaining 501-C-3 status with the IRS is usually a long, sometimes expensive, and arduous process.
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Most associations exist for the purpose of networking, educating and to share information on real estate investing. There was a time when a list of good suppliers, contractors and handymen was the most important thing new members got from an association. Then came the exchange of information about bad tenants -- every landlord's favorite pastime. However, Black Lists are illegal, so responsible associations began developing a database of evictions and other public record information that could be used legally in tenant screening.
Meetings that include speakers and programs, newsletters, forms, legal information and knowledgeable attorneys are additional services many associations provide. But now the most valuable service in many areas is a rental housing vacancy list and web site.
Local classified advertising is a major expense for most property managers. Associations discovered that they could save members hundreds or thousands of dollars by developing, maintaining and disseminating a vacancy list. The list should be updated as often as possible, be easily assessable in convenient locations and faxed to appropriate entities. Members can use the internet to list vacancies, fax or email the information to the association office or to a volunteer who compiles it and sends it out.
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