Forgiving Criminal History and Lower Security Deposit

10 Replies

Screening Highlights

  • City criteria would broaden approvals for people with criminal backgrounds.
  • City to reduce income requirements from 3 times the rent to 2 times the rent.
  • City requirement to provide individual assessments will increase cost and likely require legal opinions for denials.
  • City to require a 3 day waiting period before anyone can apply once ads are live.


Deposit Highlights

  • City to limit maximum deposit to 1.5 month's rent. Currently no cap.
  • City to require landlords to accept deposit payments over up to 6 months. Currently paid in full at move-in.
  • City to limit the term "normal wear and tear" which will substantially reduce what you can charge for at move-out.
  • City to prohibit charges for cleaning at move-out.
  • Forced depreciation for property damage. The rate would be 3.6% per annum over 27 years.
  • Charges must include original receipts, depreciation schedules and photos, or are prohibited.
  • Additional requirements will increase cost.

If passed, will you relocate your equity out of City of Portland. Or will you see this as an opportunity to raise higher rent to overcome these new ordinances. In general, how do you cope with this ever changing ordinances? 

Morning Kelvin, 

Just to add some context-these rules are proposed (being "debated" again today by the city council-private/invited testimony was yesterday) but everyone I know seems to agree that they're VERY likely to pass. 

The criminal background section basically says that misdemeanors more than three years old can't be a cause for denial and felonies more than seven years old can't be factored in. Although the screening criteria and security deposit changes will probably impact business in a more drastic fashion, I think this issue is what will cause the most "what-if/unease" from people-probably because it's the easiest to explain and also will cause the most headlines for local news. 

As for me, I'm not ready to relocate my equity out of Portland (if you are, let me know!) but I am watching it closely. With the new statewide rent control changes many landlords that are behind on rents are not going to just be able to raise their rents as a hedge. The time for that strategy has passed. 

It'll be interesting to see how this all plays out-there are definite opportunities on the horizon...and minefields between here and the horizon!

Mathew 

Will cope for now with my 5 doors in the city limits of Portland. Should be able to handle what comes my way being this size. 

If you are on the lower end of the rental prices as I am the potential for problems seems higher than those willing to pay $2,000 for a hip and cool 2 bedroom.

I want out and will likely start to liquidate but will probably do it over time or wait until this becomes the new norm and values stabilize. No sense in running around like my hair is on fire. I self manage so I have a wider margin to absorb the inevitable losses. I have also probably wasted more money on my properties than this will cost me with my over improving tendencies. That is one thing I will say for these laws, they've forced me to actually treat it like a business instead of overdoing everything. 😐🤪

@Zach Davis No judgement here, I decided to jump straight in to long-distance investing in commercial properties in the Midwest and no regrets so far. It's almost like watching a train wreck with all the regulations being passed lately; since I have no skin in the game in Portland besides my own residence I'm fascinated with how this will all play out. 

Originally posted by @Jeff S. :

Will cope for now with my 5 doors in the city limits of Portland. Should be able to handle what comes my way being this size. 

If you are on the lower end of the rental prices as I am the potential for problems seems higher than those willing to pay $2,000 for a hip and cool 2 bedroom.

Jeff I think if you have 4 or less doors your exempt maybe you sell one and that's the end of it ? 

The 4 door thing has to do with the state rules @Jay Hinrichs . The deposit and screening criteria is the city of Portland. Listened to testimony all afternoon and feel pretty sure it will pass. It is so illogical that in the end tenants will be negatively impacted. 

One interesting thing is that the requirements of allowing people in with income of 2 times the rent could create a situation where people can’t get financing because of the risk of rental failure. Also there was a developer there that talked about institutional financing for projects would also be impacted because they require 3 times rental income with their underwriting. Interesting stuff.

At the end of the day there is still a housing shortage for lower income people and this will make it worse.

Originally posted by @Jeff S. :

The 4 door thing has to do with the state rules @Jay Hinrichs. The deposit and screening criteria is the city of Portland. Listened to testimony all afternoon and feel pretty sure it will pass. It is so illogical that in the end tenants will be negatively impacted. 

One interesting thing is that the requirements of allowing people in with income of 2 times the rent could create a situation where people can’t get financing because of the risk of rental failure. Also there was a developer there that talked about institutional financing for projects would also be impacted because they require 3 times rental income with their underwriting. Interesting stuff.

At the end of the day there is still a housing shortage for lower income people and this will make it worse. 

Wow I did not even think about underwriting criteria..  this is truly a social experiment .. the logic behind 2X rent is totally flawed.. you need that to have a livable situation.. although I will say when rents get to 2k  2X is a little easier to manage other than say rents at 1k if those still exist .. IE they have 2k a month to live on instead of 1 K

@Jay Hinrichs it would be a sad day that I sold these places I have owned since 1991. They have been terrific high demand units and are mailbox money. If tenants have something they need they email and ask if they can contact my handyman. I say sure and they do. Sometimes I go and keep him (handyman) company and sometimes I don't.

Having said that if things start going sideways with bad tenants then will move into a different type of property-not sure what though. Hate to leverage at this time, enjoying low debt life.

Originally posted by @Jeff S. :

@Jay Hinrichs it would be a sad day that I sold these places I have owned since 1991. They have been terrific high demand units and are mailbox money. If tenants have something they need they email and ask if they can contact my handyman. I say sure and they do. Sometimes I go and keep him (handyman) company and sometimes I don't.

Having said that if things start going sideways with bad tenants then will move into a different type of property-not sure what though. Hate to leverage at this time, enjoying low debt life.

careful with all that talk of little or no debt..  LOL.. having all your equity sitting there going to die  as Thomas S would say.

well with high demand areas I still think a lot of this will be moot..  

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