How are you "beating" government regulation?

Question

Both federal and state politicians continue to stick their fingers in our business with various regulations. Rent control is becoming more common. Limited rent increases. You're limited to how much you can charge for a deposit and given less time to return that deposit. States are telling Landlords they can't screen people out based on criminal history.

My question is, what limits have been imposed on you and how are you LEGALLY working around it?

Bjorn Ahlblad · Answer

@Nathan G. good thread. I have a 1031x and my wife and I are both REI professionals. Those things are working out fine. My wife's HC is paid by an LLC. None of these things are world beaters by any means but every bit helps. As far as tenant management is concerned we have not been hit too bad in the parts of Wa where we invest.

We stay up to date on new legislation by attending LL Association meetings and getting guidance from them.

I think if you screen diligently and stick to your process every time you can be OK. It also helps to know a bit about underwriting and buying the right deals, so you can afford to either make a mistake or two or survive changes to LL tenant laws. All the best!

Mike Dymski · Answer

I live and invest in markets where people are held accountable for paying debts and where there are options for people who run into financial difficulties.  They are not mutually exclusive.

David Campbell · Answer

@Nathan G.

This is nothing new but maybe someone will see it who needs to use it: 1031 deferred tax exchange. I’ve always had an ideological problem against capital gains taxes, so if anyone is getting ready to sell their first investment property, and can meet the criteria, I highly recommend operationalizing the 1031!

Scott Mac · Answer

When respect is no longer being served, leave the table.

(and Slum Housing is the order of they day, many areas will quickly fall into a state of filth and depravity--that's how they like it!)

Scott Mac · Answer

And you never see these same areas issuing "Mortgage Control" on the lenders--think about it.

Nathan Gesner · Answer

@Corby Goade I agree. The government has a tendency to pick winners and losers, probably based on who's lining their pockets (directly or indirectly). I believe rent is a favorite right now because they want to build regulations and programs that favor renters and essentially buy some votes.

I don't see Landlords charging ridiculous fees for applications. In fact, most private Landlords probably don't even charge an application fee or use a screening service.

Rent control also doesn't make sense. Are rent rates increasing? Absolutely! But so is the cost of gas, milk, tennis shoes, and real estate. I pay more for my stuff, why shouldn't renters pay more for theirs? If rent is unaffordable in Portland, people would eventually stop moving there and the market would correct itself. By forcing the prices to stay low, more people can afford to live there, which drives up the demand, which drives up the prices...

Kenneth Garrett · Answer

@Nathan G.

Where do I start with the great state of Illinois where we have our own wing in the prisons for previous governors.

Regulating Rental Licensing Programs where the cities are non-home rule communities and don’t have the power to charge a fee.  Whether it’s a registration fee or license fee irregardless it’s the same.  Not allowed per the state law.  Who has time to fight it.  One day I might take it on.

The onerous eviction process where if your in Chicago or cook county in the winter your up the creek.  Have to wait for the weather to improve.  So the landlord gets stuck with non paying tenants.  What law is based on the weather.  Go figure.

Illinois Rocks.

Joseph Cacciapaglia · Answer

I understand that it turned out not to be legal, but at the time both they and their counsel, believed it was a legal workaround. That was my point. If you are intentionally circumventing the spirit of the law, you always run that risk. 1031 isn't a work around though; it is the purpose of section 1031.

Nathan Gesner · Answer

If someone went to jail, then it clearly wasn't a legal work-around. Not paying taxes is a work-around, but it's not legal. 1031 Exchange is an example of legally avoiding the taxes.

Joseph Cacciapaglia · Answer

I would be very careful about "legally" working around legislation. I personally know more than one real estate professional that went to jail for what they were told was a "legal work around". It's so easy to move to more investor friendly markets these days, that I don't think it's worth the risk. I even know one person that was teaching a "legal work around" at the local REIA meetings, before eventually getting busted and actually serving jail time.

How are you "beating" government regulation?

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