I'm tired of the investors who don't care...

50 Replies

@Tiffani Crenshaw

Hi Tiffani. Personally, I have seen how Investors ruin neighborhoods by doing exactly what you are complaining about.

In NYC in the 70s, there were so many houses that were not rented, not because they couldn't get rented, but because the Investors just didn't want to deal with "Tenants."

By keeping the property dilapidated, the property taxes were kept down because the assessed value of that property was low because of the condition of the property.

For decades, neighborhoods suffered because of this "Strategy" and it is a Strategy. It's not one I would condone because it affects other people's lives that did no wrong to these Investors.

After decades had passed, many of these Investors made a killing as NYC had tremendous appreciation. They did not deserve to have their properties. Countless lives were affected, especially during the "Crack" years when a lot of these properties were shelter for addicts.

I grew up in NYC from the late 60s and know how bad it got.

I personally believe that Property Taxes need to skyrocket on individual houses if it is left unrented or unoccupied by the owner. This would speed up the process of rehab and re-renting. It would make Investors think twice about the Strategy of leaving it vacant.

But I'm not an economist and I have not fully thought it out as the other side may say that if you increase the Property Tax on vacant property that should be rented, it may wind up reverting back to the local Government. But that may not be a bad thing.

Anyway, who knows. I'm really sympathetic of your situation and I personally would never buy properties only to have it sit without a renter. Better to take the loss and sell it for the better of the neighbors. Have some compassion for people who should not be affected in that way please!

Anyway, I said my peace and I hope that your Community can do something about it.

Thank you so much! This is exactly the strategy that I think they are doing. You know a lot of individuals don’t understand what issues can come of abandoned homes but we’re talking innocent children getting harmed, etc. 

thank you you so much... your response was exactly what I was thinking but didn’t quite know how to say it 

Originally posted by @Llewelyn A. :

@Tiffani Crenshaw

Hi Tiffani. Personally, I have seen how Investors ruin neighborhoods by doing exactly what you are complaining about.

In NYC in the 70s, there were so many houses that were not rented, not because they couldn't get rented, but because the Investors just didn't want to deal with "Tenants."

By keeping the property dilapidated, the property taxes were kept down because the assessed value of that property was low because of the condition of the property.

For decades, neighborhoods suffered because of this "Strategy" and it is a Strategy. It's not one I would condone because it affects other people's lives that did no wrong to these Investors.

After decades had passed, many of these Investors made a killing as NYC had tremendous appreciation. They did not deserve to have their properties. Countless lives were affected, especially during the "Crack" years when a lot of these properties were shelter for addicts.

I grew up in NYC from the late 60s and know how bad it got.

I personally believe that Property Taxes need to skyrocket on individual houses if it is left unrented or unoccupied by the owner. This would speed up the process of rehab and re-renting. It would make Investors think twice about the Strategy of leaving it vacant.

But I'm not an economist and I have not fully thought it out as the other side may say that if you increase the Property Tax on vacant property that should be rented, it may wind up reverting back to the local Government. But that may not be a bad thing.

Anyway, who knows. I'm really sympathetic of your situation and I personally would never buy properties only to have it sit without a renter. Better to take the loss and sell it for the better of the neighbors. Have some compassion for people who should not be affected in that way please!

Anyway, I said my peace and I hope that your Community can do something about it.

this is what I coin as failed landlord or burnt out landlord syndrome.. and its usually caused by the local tenants.. Sorry to say.  OOS investors not knowing what they don't know.. and being under capitalized when they buy the asset.. getting burned by the tenants time and again.. then finally giving up.. sad to say but this is generally 90% of what's happening.. if the tenant base is solid pays their rent on time every time then the neighborhoods will usually stay in fine shape as there is cash flow to support maintenance.. and lets not forget in the deep south its the tenants responsibility to mow the lawns and keep up the yards..

Although @Andrew Johnson   has some very valid points some cities are on this.. Like Cleveland others not so much.

there simply is not enough money in the budgets to mow the lawns and or demo the houses.. since the subsequent dirt that would be left over has zero value as the existing homes sell for less than replacement costs..

This solves itself when the tenants clean up their act.. their is only so much a landlord can do when they are being shorted rent and or tenant is trashing their homes.. I know I have owned well over 500 homes in the deep south and 65 in B ham.

that seems to be a trend in hot areas of major city, usa. out of state buyers gobble up various  properties often times many are already disheveled and they just sit on them for a few years as they continue to yuck up the neighborhood. my guess is that, their strategy is to hit the lotto when someone that's buying in the same local come's calling. they think that they will be able to name whatever outrageous price and there will be an onslaught of desperate mindless investors that will kill to have this property.  problem arise when they don't watch the variance of pricing per quarter or at least every 6 months because many times it fluctuates. what's steaming hot now might be warm within 6 months. you can't go by the national housing market reports and think that it speaks for every city and every subsection around the country. buy and hold investors know this but speculators aren't always aware of it, which results in ugly properties staying ugly, getting uglier.  

Kudos,

Mary

I can definitely understand the frustration. I think the problem is one of proximity. If they're not seeing the house, being told by a property manager (Everything is going great!) and the rent is coming in... You've got a perfect recipe for an "accidental" slumlord. 

At the same time... You're probably not going to sell someone who bought an income generating asset that they should sell because they're bad for the neighborhood. I would work on either... Finding ways to buy them out... or....

If property maintenance is "on your heart" for you community launch a property management company. It's thankless hard work. But if you're managing their properties you're typically their first call when they are ready to sell. 

I hope you have an awesome rest of your week @Tiffani Crenshaw

@Jay Hinrichs

I agree with you that it is failed Landlords.

However, part of this is education. A lot of these "Landlords" may have learned from Gurus who preached cash flow properties which can be made in "C" and "D" neighborhoods.

They don't really educate these Landlords about the fact that your tenant due diligence in these kinds of neighborhoods are almost useless, especially on the Credit Checks side.

It's really a huge contrast on what I do for tenant due diligence in my "A" neighborhoods versus what a friend, Steve, who owns in "C" neighborhoods do for his tenant due diligence.

Steve knows that pulling a Credit Report will get someone with Credit below 600, normally. I don't think he's ever gotten anyone above 650.

When I pull reports, 800s are quite normal. I don't accept tenants below 700.

When Steve does his criminal back ground checks, some of his tenants have rap sheets pages long.

I have yet to encounter a tenant that had more than a ding on marijuana possession.

Steve has to do evictions every single year.

It's been about a 15 years since I did my last eviction, but that was from inherited tenants when I bought the building.

Steve sometimes has some of his apts totally destroyed.

For me, the worst that has happened is that a tenant left the apt in a mess and I have to hire someone to clean up.

I think I made my point.

The education that's been given to these Investors is that everything will work out just fine as if there isn't a lot of bumps in the rode to owning in "C" and "D" class neighborhoods.

A lot of them self-manage and a lot have problems with Property Managers.

I had one of my friends, Russell, who hired a PM for his Investment in a "D" neighborhood in PA. The PM couldn't find a tenant... or so he claimed. The PM actually rented out the apt, but never told Russell. When I told Russell to go to his property and check, he finally did that. Discovered the apts were rented and accused the PM.

The PM was cause. The next day, the PM pulled out all the laundry units in the basement. He caused a mess and stole them. He also took the appliances from an empty unit.

The stories I can tell goes on an on. All very different than what I experience in an "A" neighborhood.

I don't have heart attack moments, but I find myself constantly consoling Investors who do.

I believe it's about education. The programs that make money on tuition has no incentive to tell the truth about what to expect in these Cash Flow NOW properties in "C" and "D" neighborhoods or they will not make much money in tuition.

So droves of Investors may swamp a neighborhood, buy up properties, have bad tenants, and then afterward, realize that they don't really understand their investments the way they were taught. So then they sit on them, hoping for some solution or a turnaround.

Meanwhile, honest and people who are neighbors of these Investors see that the neighborhood has become blighted and crime can spike.

I wish there were a way to change the education of these kinds of properties, but every time I mention these kinds of problems, there is a huge push back, as I expect from my postings.

So I don't really blame the tenants as much. They may not be necessarily an innocent party, but the Investors who did not learn enough to understand what they were getting into needs to know that they were either taught incorrectly or they will never learn the truth.

Instead, these Investors will continue to get burnt and cause more blight in the neighborhoods that people like Tiffany lives in.

All my opinion of course, but I have been seeing this from my observations and experience of about 20 years in RE Investing.

Originally posted by @Llewelyn A. :

@Jay Hinrichs

I agree with you that it is failed Landlords.

However, part of this is education. A lot of these "Landlords" may have learned from Gurus who preached cash flow properties which can be made in "C" and "D" neighborhoods.

They don't really educate these Landlords about the fact that your tenant due diligence in these kinds of neighborhoods are almost useless, especially on the Credit Checks side.

It's really a huge contrast on what I do for tenant due diligence in my "A" neighborhoods versus what a friend, Steve, who owns in "C" neighborhoods do for his tenant due diligence.

Steve knows that pulling a Credit Report will get someone with Credit below 600, normally. I don't think he's ever gotten anyone above 650.

When I pull reports, 800s are quite normal. I don't accept tenants below 700.

When Steve does his criminal back ground checks, some of his tenants have rap sheets pages long.

I have yet to encounter a tenant that had more than a ding on marijuana possession.

Steve has to do evictions every single year.

It's been about a 15 years since I did my last eviction, but that was from inherited tenants when I bought the building.

Steve sometimes has some of his apts totally destroyed.

For me, the worst that has happened is that a tenant left the apt in a mess and I have to hire someone to clean up.

I think I made my point.

The education that's been given to these Investors is that everything will work out just fine as if there isn't a lot of bumps in the rode to owning in "C" and "D" class neighborhoods.

A lot of them self-manage and a lot have problems with Property Managers.

I had one of my friends, Russell, who hired a PM for his Investment in a "D" neighborhood in PA. The PM couldn't find a tenant... or so he claimed. The PM actually rented out the apt, but never told Russell. When I told Russell to go to his property and check, he finally did that. Discovered the apts were rented and accused the PM.

The PM was cause. The next day, the PM pulled out all the laundry units in the basement. He caused a mess and stole them. He also took the appliances from an empty unit.

The stories I can tell goes on an on. All very different than what I experience in an "A" neighborhood.

I don't have heart attack moments, but I find myself constantly consoling Investors who do.

I believe it's about education. The programs that make money on tuition has no incentive to tell the truth about what to expect in these Cash Flow NOW properties in "C" and "D" neighborhoods or they will not make much money in tuition.

So droves of Investors may swamp a neighborhood, buy up properties, have bad tenants, and then afterward, realize that they don't really understand their investments the way they were taught. So then they sit on them, hoping for some solution or a turnaround.

Meanwhile, honest and people who are neighbors of these Investors see that the neighborhood has become blighted and crime can spike.

I wish there were a way to change the education of these kinds of properties, but every time I mention these kinds of problems, there is a huge push back, as I expect from my postings.

So I don't really blame the tenants as much. They may not be necessarily an innocent party, but the Investors who did not learn enough to understand what they were getting into needs to know that they were either taught incorrectly or they will never learn the truth.

Instead, these Investors will continue to get burnt and cause more blight in the neighborhoods that people like Tiffany lives in.

All my opinion of course, but I have been seeing this from my observations and experience of about 20 years in RE Investing.

 Those are wise lessons. Not to get too off topic, as many are being taught to invest in places where evictions are easiest vs being taught invest where tenants have credit and jobs and pay the rent so you won't need easy evictions. 

I can definitely understand that they may be getting the runaround from some of their PMs. However, most of these properties, if not all, are vacant. SMH. 

I may open another thread about the property management company, because after my research I'm still a little lost. 

Thank you so much for your comment. 

Originally posted by @Ryan Dossey :

I can definitely understand the frustration. I think the problem is one of proximity. If they're not seeing the house, being told by a property manager (Everything is going great!) and the rent is coming in... You've got a perfect recipe for an "accidental" slumlord. 

At the same time... You're probably not going to sell someone who bought an income generating asset that they should sell because they're bad for the neighborhood. I would work on either... Finding ways to buy them out... or....

If property maintenance is "on your heart" for you community launch a property management company. It's thankless hard work. But if you're managing their properties you're typically their first call when they are ready to sell. 

I hope you have an awesome rest of your week @Tiffani Crenshaw

Originally posted by @Llewelyn A. :

@Tiffani Crenshaw

Hi Tiffani. Personally, I have seen how Investors ruin neighborhoods by doing exactly what you are complaining about.

In NYC in the 70s, there were so many houses that were not rented, not because they couldn't get rented, but because the Investors just didn't want to deal with "Tenants."

By keeping the property dilapidated, the property taxes were kept down because the assessed value of that property was low because of the condition of the property.

For decades, neighborhoods suffered because of this "Strategy" and it is a Strategy. It's not one I would condone because it affects other people's lives that did no wrong to these Investors.

After decades had passed, many of these Investors made a killing as NYC had tremendous appreciation. They did not deserve to have their properties. Countless lives were affected, especially during the "Crack" years when a lot of these properties were shelter for addicts.

I grew up in NYC from the late 60s and know how bad it got.

I personally believe that Property Taxes need to skyrocket on individual houses if it is left unrented or unoccupied by the owner. This would speed up the process of rehab and re-renting. It would make Investors think twice about the Strategy of leaving it vacant.

But I'm not an economist and I have not fully thought it out as the other side may say that if you increase the Property Tax on vacant property that should be rented, it may wind up reverting back to the local Government. But that may not be a bad thing.

Anyway, who knows. I'm really sympathetic of your situation and I personally would never buy properties only to have it sit without a renter. Better to take the loss and sell it for the better of the neighbors. Have some compassion for people who should not be affected in that way please!

Anyway, I said my peace and I hope that your Community can do something about it.

I suppose your solution comes from a good place or a desire to see your fellow man not suffer but in practice your proposed solution really stomps on the right to own property as well as other freedoms we as Americans enjoy, no?

Yes!  If you are going to buy it, take care of it.  As investors we have an obligation to the communities we are in.  Sorry this is happening to your neighborhood @Tiffani Crenshaw  . 

Are you referring to me or someone else?

Originally posted by @James Wise :
Originally posted by @Llewelyn A.:

@Tiffani Crenshaw

Hi Tiffani. Personally, I have seen how Investors ruin neighborhoods by doing exactly what you are complaining about.

In NYC in the 70s, there were so many houses that were not rented, not because they couldn't get rented, but because the Investors just didn't want to deal with "Tenants."

By keeping the property dilapidated, the property taxes were kept down because the assessed value of that property was low because of the condition of the property.

For decades, neighborhoods suffered because of this "Strategy" and it is a Strategy. It's not one I would condone because it affects other people's lives that did no wrong to these Investors.

After decades had passed, many of these Investors made a killing as NYC had tremendous appreciation. They did not deserve to have their properties. Countless lives were affected, especially during the "Crack" years when a lot of these properties were shelter for addicts.

I grew up in NYC from the late 60s and know how bad it got.

I personally believe that Property Taxes need to skyrocket on individual houses if it is left unrented or unoccupied by the owner. This would speed up the process of rehab and re-renting. It would make Investors think twice about the Strategy of leaving it vacant.

But I'm not an economist and I have not fully thought it out as the other side may say that if you increase the Property Tax on vacant property that should be rented, it may wind up reverting back to the local Government. But that may not be a bad thing.

Anyway, who knows. I'm really sympathetic of your situation and I personally would never buy properties only to have it sit without a renter. Better to take the loss and sell it for the better of the neighbors. Have some compassion for people who should not be affected in that way please!

Anyway, I said my peace and I hope that your Community can do something about it.

I supposed your solution comes from a good place or a desire to see your fellow man not suffer but in practice your proposed solution really stomps on the right to own property as well as other freedoms we as Americans enjoy, no?

The laws of capitalism and supply and demand should sort this out eventually. However, if you believe in the future growth of that market, this would be a great opportunity for you and fellow LOCAL investors to buy these distressed properties and turn them around! 

Good luck!

@Rob Beardsley   not a lot of unkempt lawns in Atherton I can imagine... :)   my last listing was in Atherton as a real estate broker in CA.. 15k sq ft 2 acres  3.5 million.. I suspect its worth north of 20 these days...

@James Wise

James, there is a concept called "empirical costs" which is the cost of doing a particular business or selling a particular product which could have an empirical adverse effect on others.

The most common is smoking. 2nd hand smoke can have a devastating effect on the person NOT doing the smoking. Through no fault of their own, the 2nd hand smoker, especially in the days when airlines were allowing smoking, can develop and have been proven to have higher incidence of cancer.

The "empirical cost" was not paid at all by the Tobacco companies and in fact, developed propaganda campaigns to mislead the public.

After the mounting evidence reached a certain point, taxes on Cigarettes skyrocketed, for at least 2 reasons. 1) to discourage the use of cigarettes so you DON'T have an increase of getting cancer and 2) to help pay for some of the empirical costs associated with the healthcare costs.

In the case of Investors following the OP's strategy is one that I have personally seen time and time again. I don't necessarily know it's systematic. I will admit that I didn't do the research to know, but there seems that investors in these kinds of neighborhoods and properties are not given the proper education to know what they are getting themselves into.

If that Investor was given the education in order to make a choice between buying a property that can cash flow or NOT, where if it doesn't cash flow, then you keep it until some future even happens where you can hope to get your money back, if that was told to investors, these Investors would not have gotten into it in the first place.

One can say that it's up to the Investor to educate himself so that he knows what he is getting into. BUT, I have seen these education programs completely mislead Investors by the droves. They build and army of half educated investors, many of them wind up in similar situations.

The money is too good for these programs to bother changing it. The effort to educate the new Investor to the level that he really needs to be is too costly and won't make as much profit.

That's why books like What Every Real Estate Investor Needs to Know About Cash Flow

will never be a best seller because the time required to understand a book like this won't be profitable to the educational institutions.

Stopping at understanding GRM and CoCR is really the problem. Without Future Value calculations, which implies researching about the assumptions you need to understand the future of your Investment, you won't know what you are really getting into for the next 10 years.

That doesn't mean Investors that only know GRM and CoCR won't do well. Warren Buffetts says that "When the Tide comes in, All Boats float."

So simple calculations will work when there is a long term future economics. But we know that all real estate is local and sometimes that doesn't work. Detroit is a clear example.

Anyway..... I'm beginning to ramble! Sorry! The point is that Tiffany is collateral damage to a system that is being taught to Investors.

@Llewelyn A. the average credit score of the tenant base in the deep south is 600... you would fall all over yourself if someone came in with a 700... that's just a fact.. being a lender there and the largest HML in Mississippi for a few decades I am in tune with this and with the bankers..

@Tiffani Crenshaw I think it's awesome you want to buy out that neighborhood and make it right. I've thought about doing that with neighborhoods and entire towns even. Some places need help, and it doesn't help when "investors" don't care.

If I went by one of my properties and it was out of line, all hell would break loose. My theory is, that's my name on the side of the building.

Good luck with your ambitious task!

Originally posted by @Jay Hinrichs :

@Llewelyn A. the average credit score of the tenant base in the deep south is 600... you would fall all over yourself if someone came in with a 700... that's just a fact.. being a lender there and the largest HML in Mississippi for a few decades I am in tune with this and with the bankers..

I have one tenant with a credit score over 600 and she has a HUD voucher. In Mississippi if you have a credit score of 700 why would you be renting in the first place? And it is not because all these tenants are dead beats. Down here they often down't believe in banks. I don't have a single tenant who pays their rent by check. It is only because I'm in California right now that they are paying me in money orders. Usually it is cash. Also, I find my tenants too often just don't understand how money works. But most of them do keep the yards up and the lawns mowed. As one tenant told me, "If you don't mow the lawn you are telling people there is no man at home."

I do credit checks on my tenants but I pay more attention to why their credit scores are low. If it is because of medical bills (and half the time it is) I simply ignore it or ask for a higher deposit. It is only for eviction judgments, unpaid utilities or falling behind in child support that I generally turn them away. 

Originally posted by @Llewelyn A. :

@James Wise

James, there is a concept called "empirical costs" which is the cost of doing a particular business or selling a particular product which could have an empirical adverse effect on others.

The most common is smoking. 2nd hand smoke can have a devastating effect on the person NOT doing the smoking. Through no fault of their own, the 2nd hand smoker, especially in the days when airlines were allowing smoking, can develop and have been proven to have higher incidence of cancer.

The "empirical cost" was not paid at all by the Tobacco companies and in fact, developed propaganda campaigns to mislead the public.

After the mounting evidence reached a certain point, taxes on Cigarettes skyrocketed, for at least 2 reasons. 1) to discourage the use of cigarettes so you DON'T have an increase of getting cancer and 2) to help pay for some of the empirical costs associated with the healthcare costs.

In the case of Investors following the OP's strategy is one that I have personally seen time and time again. I don't necessarily know it's systematic. I will admit that I didn't do the research to know, but there seems that investors in these kinds of neighborhoods and properties are not given the proper education to know what they are getting themselves into.

If that Investor was given the education in order to make a choice between buying a property that can cash flow or NOT, where if it doesn't cash flow, then you keep it until some future even happens where you can hope to get your money back, if that was told to investors, these Investors would not have gotten into it in the first place.

One can say that it's up to the Investor to educate himself so that he knows what he is getting into. BUT, I have seen these education programs completely mislead Investors by the droves. They build and army of half educated investors, many of them wind up in similar situations.

The money is too good for these programs to bother changing it. The effort to educate the new Investor to the level that he really needs to be is too costly and won't make as much profit.

That's why books like What Every Real Estate Investor Needs to Know About Cash Flow

will never be a best seller because the time required to understand a book like this won't be profitable to the educational institutions.

Stopping at understanding GRM and CoCR is really the problem. Without Future Value calculations, which implies researching about the assumptions you need to understand the future of your Investment, you won't know what you are really getting into for the next 10 years.

That doesn't mean Investors that only know GRM and CoCR won't do well. Warren Buffetts says that "When the Tide comes in, All Boats float."

So simple calculations will work when there is a long term future economics. But we know that all real estate is local and sometimes that doesn't work. Detroit is a clear example.

Anyway..... I'm beginning to ramble! Sorry! The point is that Tiffany is collateral damage to a system that is being taught to Investors.

 When is the appropriate time for the Govt to tax as you described? When a unit has been empty 90 days, 60 days, 30 days, 15 days, 3 days???? Slippery slope, we as Americans don't need to go down.

Tiffani.

That is terrible and that's why one of my criteria's when I invest in a neighborhood is a 60% owner occupancy rate. This will eliminate this problem!


 When is the appropriate time for the Govt to tax as you described? When a unit has been empty 90 days, 60 days, 30 days, 15 days, 3 days???? Slippery slope, we as Americans don't need to go down.

I wouldn't be opposed to this in principle, but in my experience the people who own empty houses stopped paying the taxes on it anyway. Of course, I'm talking about Mississippi, not NYC. Often these houses are in foreclosure and that takes months if not years. What our city (Jackson) is doing right now is selling abandoned properties for $50 or $100 to neighbors who come up with a plan to fix it up. 

We have lots of empty houses in Jackson which I don't understand because I have no problem whatsoever finding renters. But I don't know anyone who is doing this as a 'strategy.' 

I hate that!! We have a few investors in my community who own several hundred rental properties and they don't take care of their homes either. When I have taken on the city about it their only response it to put it off until after the next election, they don't want to make them mad. I hope your new mayor cleans up the place and you sound awesome to be doing what you are doing. Keep making noise with city officials until they hear you.

@James Wise

I would probably not say "we as Americans don't need to go down" but rather we as "American Real Estate Investors." That's only our side.

The other side, the American Tenants who need to live by these abandoned properties has another side and they would like to have those properties NOT abandoned.

The problem is that we are on a forum that is for Investors and completely biased towards the "American Investor."

I am an "American Investor" but I'm also a human as well. I completely sympathize with @Tiffani Crenshaw

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here