Small Landlords are choosing to sell
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
The DIY Landlord Book4.7247 Reviews
Small Landlords are choosing to sell
Most Popular Reply
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
5yOriginally posted by @Nathan Gesner:
Originally posted by @Aj Parikh:
“So if you happen to be in a jurisdiction that allows you as the property owner to work on behalf of your resident, to be an advocate, to get those funds into their hands as quickly as possible, then you’re going to be much more successful,” said Robert Pinnegar, president and CEO of the National Apartment Association. “If you’re in jurisdictions that have taken an approach that is not so customer service friendly, then it’s going to take longer.”
I am in Fairfax County, VA and we have a landlord assistance program but the requirement is that the tenant has to sign a form and submit pay stubs. I don't know how any tenant who has not been paying rent would help out a landlord to get funds. For example, my tenant has not paid rent in the past 3 months and has refused to answer calls, texts or emails and has not followed any of the notices we have posted on her front door.
That's exactly it. The current system requires the Tenant to participate. Since a large percentage of them are capable of paying rent but simply refusing to do so, this doesn't help the Landlord.
Simple fix: Create a government affidavit that must be filled out by the Tenant to show they are suffering a hardship due to COVID. They attach any supporting documentation and authorize the Landlord to use the information to apply for assistance. Landlord uses the form to apply for assistance. Any renter failing to pay rent and failing to fill out an affidavit is still subject to eviction.
Problem solved.
Slow down, we can't actually solve problems. We sure can't solve a problem with one paragraph. Here is the better approach:
1. Have politicians debate it for months.
2. Pay people to study the issue.
3. Have politicians debate the issue more.
4. Draft a gigantic bill to address the issue and include a thousand unrelated things in the bill. (Mostly payoff for political supporters).
5. Allocate billions to the solve the problem.
6. Repeat steps 3-5.
7. Have the media write articles about how the problem is evil business owners. Make people argue with each other, so they don't see the real problem. This prevents the naïve masses from realizing the politicians are the problem.
8. Politicians run for re-election and offer to solve the problem. They blame the other party for not solving it and offer to fix all your problems.
9. Go to step 1 and repeat the cycle.
132 Replies
- Rental Property Investor · Natick, MA · Member since 2015 · 128 posts · 188 votes5y
Originally posted by @Nathan Gesner:
Originally posted by @Shawn L.:
Unfortunately as others have said, in the medium to long term this is only going to hurt the very renters is was intended to help. Less rental inventory, tighter screening criteria and higher risk will all continue to push rent higher at an accelerated rate.
I have a couple problems. First, the pandemic was never as bad as they made it out to be and shutting down the entire country was the unnecessary cause of this entire problem. Second, whether you agree with my first point or not, some people were hurt through no fault of their own and someone should step in to help.
My main problem is with the latter. The government is terrible at determining need and they screwed up by giving the money directly to the renter instead of the Landlord. A recent study in Washington showed that over 12% of the renters that stopped paying rent did not experience any reduction in income and were making over $100,000 a year. Those are the numbers based on a voluntary survey! I suspect over half the non-paying renters are fully capable of paying rent but refuse to do so because they see it as free money. This leaves the Landlord to suffer.
In the end, more mom-and-pop Landlords will sell off. Corporations will buy up the properties. Renters will have fewer choices and will be less likely to qualify because of their non-payment history and the fact that larger corporations actually know how to screen risky renters.
Any time government fixes something, it's guaranteed to cost far more than it should and is unlikely to succeed.
I am not advocating handing out free money to anyone who happens to rent, that's why I said "those who truly need it." What I'm talking about is rent relief (i.e. vouchers or direct payment to LLs a-la Section 8) to those that have legitimately experienced a loss of income due to the pandemic or the resulting shutdowns. I get that this is hard to put into place, and yes the Gov't is terrible at determining need but I'd still prefer a clunky system than simply saying "here landlords, you deal with it" as is the current situation. Seems like the infrastructure that currently exists for Section 8 could have been used as a starting point.
- Rental Property Investor · Rohnert Park, CA · Member since 2014 · 307 posts · 160 votes5y
@Eric Weldon-Schilling
Sounds like you are not a landlord, and can’t see this problem from a landlords perspective.
You should read the comment from @JD Martin
He puts this problem into an easy to understand perspective.
- Rental Property Investor · Phoenix, AZ · Member since 2013 · 919 posts · 911 votes5y
@Account Closed, let's say I'm a landlord with MANY properties and ppl STOP paying rent. I have reserves, but do you seriously think that cash reserves, with NO INCOME, can last 1.5 years?
Oh yeah, no end in sight on the eviction moratorium which equates to more indecision by the govt. If I'm a LL with non-paying tenants, I'm keeping as much cash to myself as possible.
If you think having a "covid fee" at your local diner is bad, just wait a couple of years and see what your RENTS look like! There will be a huge price to pay.
- 5yJames SwindlePro MemberMaumelle, AR · Member since 2015 · 2 posts · 0 votes
My question is how are your local courts viewing the CDC directive? There are many jurisdictions who recognize the CDC has no authority to keep an eviction from occurring.
- Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes5y
Originally posted by @James Swindle:
My question is how are your local courts viewing the CDC directive? There are many jurisdictions who recognize the CDC has no authority to keep an eviction from occurring.
The whole thing almost certainly ends up at the Supreme Court, but by the time it gets there it will be over and a moot point. Only good for future reference. It is an important constitutional question, however, and I would just about guarantee it will be heard. This is a huge 5th amendment issue in both the takings clause (government appropriation of private property without compensation) and due process (the rights of the citizenry to a fair legal process).
Skyline Properties - Port Chester, NY · Member since 2016 · 210 posts · 157 votes5y
Originally posted by @Bjorn Ahlblad:
@Nathan Gesner If that really is the case how come I can't find anything to buy? What's most likely being sold is properties with non paying tenants! Buyer beware!!
That and perhaps they owe more than it's worth or the property is no longer in a desirable area.
- Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes5y
Originally posted by @Account Closed:
Originally posted by @JD Martin:
Originally posted by @Aaron F.:
@JD Martin except the purpose of the moratorium (at least originally) wasn’t to help tenants avoid paying rent, the purpose was to prevent evictions at a time when increased mobility would potentially accelerate COVID’s spread, not to provide blanket tenant relief.
Sure, I understand that. They wanted people to be able to stay put. It doesn't matter. There are consequences to actions. Instead of blanket moratoriums or stimulus programs, how about issuing tenants vouchers good only for rent, utilities and the like? Or allowing landlords to file for reimbursement providing the tenant's information which could then be added to the tenant's taxes the same way charge offs are?
There are certainly alternatives to just blanket edicts that allow tenants to free ride without consequences, because there are going to be real consequences and they're not going to be good for tenants.
Vouchers to be used only for rent or direct payments to landlords would be the absolute best option. But there shouldn’t be any penalties for renters who have to use them. You say put it on their taxes—why burden them with that if they’re already having financial difficulties from the pandemic. Why not an eviction ban and direct payments to landlords. Or even better just completely waive all rent, mortgage, and property tax payments for the duration of the pandemic. No deferments or forbearance. Completely forgive all of that until it’s over. The fed can pump money into local coffers to make up the tax shortfall.
Hi regular Bigger Pockets users. As a small landlord, I know there is a strong temptation to jump en masse on this person and his viewpoint. But before you do, please consider the following that I've checked out and can say are true: he's here, this is his real name, he hasn't lied one bit about himself, his life, his job, his relationships, and he honestly represents what MILLIONS of people think about landlording. As far as I can tell, Eric is making a completely straightforward, good-faith effort to understand our world from his perspective. This is one of the very few times I've seen this in years of reading and posting here.
Hi Eric. In order to do what you're suggesting, an absolutely MASSIVE expansion to HUD would have to be enacted, or the creation of another agency with extraordinary, far-reaching. The US government has never tried something that bold before. Finding the political will in the electorate to do it...very difficult. And there are multiple complexities and potential for abuse involved in maintenance and capital expenditures to overcome in a scheme like this. This is the kind of thing people in office have to commit political suicide to get done. And at least in my experience, career politicians are very loathe to fall on their swords for "the good of the people."I would ask you to question the role of government as an active, caring helper for the people more than you have to date. In my experience, government, more often than not, is just there to step on your neck, keep you in your place, and maintain itself by any means necessary.
- Rental Property Investor · Phoenix, AZ · Member since 2013 · 919 posts · 911 votes5y
@JD Martin, either the govt doesn't know what they are doing or doesn't care. I think it's 'doesn't care'.
In the past a person getting ready to retire could buy an extra house or two for retirement income and a hedge against inflation. The risk of a non-paying tenant was ALWAYS present, but there was a process (eviction) to remedy the situation.
Moving forward, due to the moratoriums, renters will find screening much tougher and prices much higher. There is price to pay & most renters don't understand this fact. In my area NEW rents have skyrocketed because of this added risk.
- Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes5y
So many people interesting in theoretical big-picture solutions and saving the world on this thread. The world's going to hell in a handbasket. You've got the WHO repeatedly claiming that it was just a freak coincidence that COVID-19 emerged in the one city in China that has a Biosafety-4 hazard lab which is also the world's active-pathogen research center for bat coronaviruses. You've got the sixty-something male governor of America's second-most populous state telling his twenty-something female aides they should sing him Irish love ballads. These people are all birds, plain and simple. They're not going to get squat done.
Worry about your portfolios, not about the lunatics running the asylum. Stop clutching your pearls and squawking. - Real Estate Agent · Pittsburgh, PA · Member since 2015 · 1k+ posts · 846 votes5y
@Nathan G.
Values at all time highs in a lot of markets, return on investment pretty gigantic based on those values, and uncertain cash flow at best.
It really makes sense if you have tenant issues.
- Rental Property Investor · Los Angeles, CA · Member since 2017 · 2k+ posts · 5k+ votes5y
Originally posted by @Brian Garlington:
"Yawn"......(This is me getting ready to sound like a broken record....here it goes.)
That is exactly why I love to have PROPERLY SCREENED Section 8 tenants in my properties.
Did I mention the rent money is guaranteed?
Your business model works well with S8. S8 can work great in some areas, but it's not viable for a lot of areas. I just checked. They'll pay me $1765 a month for a unit I currently rent (a few hundred under market) for $3200. Where do I sign up? 😏
- Investor · Melrose Park, IL · Member since 2015 · 77 posts · 24 votes5y
@Nathan G.
This is a Federal eviction moratorium too? Wow, then even in landlord friendly Indiana, a crafty tenant can just stop paying without worry. Hearing this makes me pause and not buy a small rental. At least for now.
- Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes5y
If the government truly believed it was doing the right thing. And if they believe all this back rent will be collected and not waived/lost. They would simply pay the rent to the landlord for the tenant and have the tenant pay them back. After all, pretty easy for the government to collect the money compared to joe citizen.
- Investor · Detroit, MI · Member since 2014 · 360 posts · 354 votes5y
We got in front of non-paying tenant situation by discounting everyone's rent 20% from April until about October...Then we have one tenant who is on discount as of Feb, but their lease is up in June. So they may have to go.
The lesson in all this, caluclators and these crazy Risk Modeling equations are good.
But sometimes some things dont require advanced math. Leveraging your property to take on debt versus free and clear needs to be looked at at a case on case basis. Before this all started I had someone telling me I was mismanaging my portfolio because of the untapped equity versus the debt owed. Well, I could discount rents and didn't need a forbearance from a lender. We are going to emerge stronger out of all this.
- Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes5y
Originally posted by @Greg M.:
Originally posted by @Brian Garlington:
"Yawn"......(This is me getting ready to sound like a broken record....here it goes.)
That is exactly why I love to have PROPERLY SCREENED Section 8 tenants in my properties.
Did I mention the rent money is guaranteed?
Your business model works well with S8. S8 can work great in some areas, but it's not viable for a lot of areas. I just checked. They'll pay me $1765 a month for a unit I currently rent (a few hundred under market) for $3200. Where do I sign up? 😏
Come on, Greg. Your posts are usually among the best on this site, but come on.
Median renter's income in this country is $37,300, compared with $73,100 for homeowners. Nobody twisted your arm to rent out 3-grand-plus units and think of yourself as occupying a long-term viable market segment. Yeah, the gubmint is holding the ax, but you stretched your neck out on the block for them and called their momma not-so-nice names. - Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes5y
Originally posted by @Bill B.:
If the government truly believed it was doing the right thing. And if they believe all this back rent will be collected and not waived/lost. They would simply pay the rent to the landlord for the tenant and have the tenant pay them back. After all, pretty easy for the government to collect the money compared to joe citizen.
So I guess the oldest lie in America really is that power is innocent, right? The government cares about maintaining its power, rewarding those whose bribes keep it in power, and precious little else.
- 5yColleen F.Pro MemberInvestor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
@Brian Garlington To be completely clear we the taxpayer pay the "government" portion of section 8. People are asking for the same money you get to come from the " government" just like yours does in a temporary fashion AND to be able to kick out people who can pay and don't. Anyone who can't pay rent now would not have been screened out a year ago when they had a job ( that is if you take people who normally pay their own way). Section 8 in theory is fine but when I hear about long term section 8 and generational public housing it worries me that the issue is the mindset.
And there is a mindset now driving some non-payers. There are a fair number of unemployed who have other living options they could use if they understood the consequences and didn't anticipate a rent holiday. I have had 2 move in with me. Just know that we will pay for this mess in alot of different ways. Some found the answer in selling now and they will never recoup any rental income lost to the pandemic.
- Rental Property Investor · Los Angeles, CA · Member since 2017 · 2k+ posts · 5k+ votes5y
Originally posted by @Jim K.:
Originally posted by @Greg M.:
Originally posted by @Brian Garlington:
"Yawn"......(This is me getting ready to sound like a broken record....here it goes.)
That is exactly why I love to have PROPERLY SCREENED Section 8 tenants in my properties.
Did I mention the rent money is guaranteed?
Your business model works well with S8. S8 can work great in some areas, but it's not viable for a lot of areas. I just checked. They'll pay me $1765 a month for a unit I currently rent (a few hundred under market) for $3200. Where do I sign up? 😏
Come on, Greg. Your posts are usually among the best on this site, but come on.
Median renter's income in this country is $37,300, compared with $73,100 for homeowners. Nobody twisted your arm to rent out 3-grand-plus units and think of yourself as occupying a long-term viable market segment. Yeah, the gubmint is holding the ax, but you stretched your neck out on the block for them and called their momma not-so-nice names.Only trying to point out that S8 isn't a viable business option in every area. FYI, the $3200 unit isn't that nice. It's just in an extremely desirable area.
I've checked S8 rents over the years and they always seem to be behind. I don't know if it is because LA is so big that they average it out from awful areas to the nice areas or they are just clueless, but it always seems to be 10%-30% below the current rents in the decent (not great) areas. Probably why there are so few units that S8 people can rent.
At the same time, I see people from other states that say that S8 pays more than average rent.
Viable business model for some, but not others...
- Member since 2019 · 9 posts · 8 votes5y
I read this too but everyone I know can’t find anything decent so unless it’s all happening off market, I don’t see how this is possible.
- Rental Property Investor · Natick, MA · Member since 2015 · 128 posts · 188 votes5y
Originally posted by @Greg M.:
Originally posted by @Jim K.:
Originally posted by @Greg M.:
Originally posted by @Brian Garlington:
"Yawn"......(This is me getting ready to sound like a broken record....here it goes.)
That is exactly why I love to have PROPERLY SCREENED Section 8 tenants in my properties.
Did I mention the rent money is guaranteed?
Your business model works well with S8. S8 can work great in some areas, but it's not viable for a lot of areas. I just checked. They'll pay me $1765 a month for a unit I currently rent (a few hundred under market) for $3200. Where do I sign up? 😏
Come on, Greg. Your posts are usually among the best on this site, but come on.
Median renter's income in this country is $37,300, compared with $73,100 for homeowners. Nobody twisted your arm to rent out 3-grand-plus units and think of yourself as occupying a long-term viable market segment. Yeah, the gubmint is holding the ax, but you stretched your neck out on the block for them and called their momma not-so-nice names.Only trying to point out that S8 isn't a viable business option in every area. FYI, the $3200 unit isn't that nice. It's just in an extremely desirable area.
I've checked S8 rents over the years and they always seem to be behind. I don't know if it is because LA is so big that they average it out from awful areas to the nice areas or they are just clueless, but it always seems to be 10%-30% below the current rents in the decent (not great) areas. Probably why there are so few units that S8 people can rent.
At the same time, I see people from other states that say that S8 pays more than average rent.
Viable business model for some, but not others...
Yeah, not sure why you're being called out for renting a unit at market rate. Not that I have any clue where in LA your units are but a $3200 non-lux apartment is not something that surprises me in the least. $750 apartments are generally not prevalent in the coastal metro areas.
- 5yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Carl Mathis:
REALLY tired of the smug, "A little late for proper vetting of tenants" junk. What is the matter with you? Some people are not professional investors and have made mistakes. Some tenants have gone Jeckyl and Hyde given the opportunity to not pay. Keep your eye on the ball and have some empathy for people who are having a hard time right now - tenants with actual hardship and landlords who are getting jerked around.
The REAL enemy AS ALWAYS are the banks. That is what this is all about - they want it. They want it all. This is what its always about. They love repossessing assets, damaged credit ratings and housing going on the market. It is amazing how some of you people can be so naive. I have money, paying tenants and am not losing anything - my GRATITUDE is why I am empathetic for those getting played for suckers by Wall st rather than being a smug joker telling people they should've been smarter. Hindsight is 202/20
Carl this is simply not true.. Banks are not in the business of foreclosing and they certainly don't love to foreclose And most banks sell the majority of their loans to investors world wide.. Banks LOSE money on foreclosures and many times huge money..
- 5yPeter MckernanBusiness MemberResidential Real Estate Agent · Irvine, CA · Member since 2013 · 2k+ posts · 1k+ votes
I am lucky that this moratorium has not created an issue for my rentals, however, a lot of people it has in this current situation. It is not surprising to see the little investor get squeezed, and continue to be pushed out since a lot of the smaller investors don't have the reserves or they are on their third primary house move and kept all the other properties in their purchases without running the numbers.
Either way, this seems to be the housing challenge of this recent economic shortfall, and it puts the strain on the middle just like the middle class gets squeezed. The best option is to sell in this market if you are able to do so, or if you can and are able to hold on then save more than you spend from the rental income for something crazy like this happening again and revisit all your business systems (tenant screening and expenses).
The McKernan Group4.957 Reviews - Investor · SC · Member since 2016 · 89 posts · 35 votes5y
Originally posted by @Charles Carillo:
A perfect example of why you should have ample reserves when investing into real estate.
How about we hold tenants to the same standards? Are tenants the only ones who lost their jobs or had their hours cut? It is all nonsense. The biggest mistake was the federal government shutting anything down. Each state should have made this decision on their own and then been forced to deal with the consequences.
Join the conversationCreate a free account to reply, vote on answers and follow this thread.