An article seen from a landlord’s POV

16 Replies

Just read this article this morning. It comes from a landlord’s perspective of what’s going on in this current crisis and how state regulations are effecting her business. I think some of us can relate to her situation. Thought it was a good read. What do you all think?

https://apple.news/A08bKqlIPQBisgvycLtOoSQ

I think it's a demonstration of fiscal irresponsibility on behalf of the Landlords, just like it is with the renters. People are buying property with too much leverage and not enough reserve. Many of them are still financially irresponsible in their personal life which then bleeds over into their investment life.

The real estate / rental market has been extremely generous to investors for the past 10 years. It was almost hard to fail. Many small-time investors will have a rude awakening when times get tough. 

And I don't think we're in the "tough times" yet. I think all this "free" money will keep us afloat this year and the real depression will come later.

With all due respect, I think the people playing that "landlords are irresponsible and only have themselves to blame" are part of a concerted neoliberal effort to squeeze out small landlords out of the real estate market.

My parents couldn't have been more fiscally responsible. They were so fiscally responsible that they were able to pass the savings onto their tenants...only to have many of those tenants decide to skip out on rent, thanks to aggressive laws on the part of fringe tenant advocacy groups in cities like NYC that have given deadbeat tenants all the concessions in the world to not pay rent. 

Some people will argue, "Well, it's your parents' own damned fault for not screening tenants properly." Well, here is the further twist in the knife. These fringe tenant groups have been successfully getting laws passed making it all but impossible for landlords to screen tenants. Just this past fall in NYC, landlords were barred from sharing a blacklist, denying a prospective tenant based on a recent eviction, even looking up housing court records. This is all "violation of rights", "discrimination", etc. and punishable by in the thousands. 

The point isn't to complain but to make this larger point--no one would chide a grocery store for going out of business if laws practically made it legal for customers to get thousands of dollars of free food a month. But apparently, you can do this for small landlords. 

The reason why I cite that as "neoliberalism" is that invocation of responsibility in a scenario where it doesn't apply is a classic talking point. It's trying to pretend that a person's problems are all due to himself or herself alone, when there are various outside forces that have forced this person's hand. 


Originally posted by @Nick Rutkowski :

Just read this article this morning. It comes from a landlord’s perspective of what’s going on in this current crisis and how state regulations are effecting her business. I think some of us can relate to her situation. Thought it was a good read. What do you all think? 

It's a great article, but that's a drop in the bucket compared to the mass atroturfing campaign against landlords that's now being pumped on a regular basis across social media, Reddit, YouTube and every mainstream fauxgressive rag and media outlet around the country and the globe. So, as great as it is, it offers small comfort to me. For every one of those being published, there will be 10 this week ranting about how all landlords are evil, how canceling rent will usher in a new utopia, and how property ownership will go the way of the Dodo bird.

@Nathan G.

Thanks Nathan,

Too bad she wasn’t on BP, maybe she would have learned not to be over leveraged. I guess the saying is true, a fool and their money soon part ways. Although, if I was investing in affordable housing, all my tenants would be on section 8.

Alright, let’s say the real depression is happening in 18-24 month. Where should investors be parking their money?

@Ruth C.

Thanks for the passionate response, to be honest this is the first article I’ve ever seen supporting landlords.

I love the saying, “The path to Hell is paved with good intentions.” These liberal states passing all of these emergency moratoriums are going to see more homelessness as landlords refuse to rent to people if rent doesn’t have to be paid.

Whoever thinks a landlord will be motivated to fix your apartment for free doesn’t understand how incentives work.

Originally posted by @Nick Rutkowski :

Alright, let’s say the real depression is happening in 18-24 month. Where should investors be parking their money?

There are many examples of people that succeeded despite the great depression. From what I can see, most of them continued doing what they were doing before. They adapated to the situation, continued to grind, took advantage of opportunities while others cowered in fear, and they were rewarded.

Hershey is a great example: "Hire 40 men!"

 

@Nick Rutkowski Universal basic income could sure help in this case. I have been extremely conservative in my tiny rental portfolio (own 2 rental houses outright with large cash reserves on a sub 75k household income) if my tenants stopped paying it would suck, but I’m not beholden to a mortgage . This hateful landlord rhetoric would be better targeted to the oligarchs who have twisted the tax code in their favor since the Reagan era. Vote! UBI!

@Nick Rutkowski :

There's nothing remotely "liberal" about these states. They're all run by neoliberals, people who are only acting in the best interests of their elitist donors. In the case of NY and CA, they are all in the pockets of developers:

Gov. Cuomo's long-time city developer donor got more generous when it stood to get $35 million in tax breaks
https://www.nydailynews.com/ne...

Kiryas Joel-based developer is Cuomo’s top donor this year

https://therealdeal.com/2015/0...

Developer Pays $10K to Settle De Blasio Dubious Donation Case

https://thecity.nyc/2019/11/de...

One of the ploys that these neoliberals like to do to enact policy for the benefit of their developer/corporate elite cronies is to pretend to be pie-in-the-sky progressives who are just "naively" implementing policies to "help people" without really understanding the implications. But they know more than anyone what the consequences will be. They are just pretending not to understand. This is straight out of the Robert Moses playbook, to disguise power plays under the guise of populist sentiment and then feign naivety.

For example, Google "single-family houses are racist." Neoliberal politicians started claiming that single-family house zones were racist and therefore needed to be abolished. It was all done in the name of progressivism, but the idea was to rezone these areas so that zones that were recently blocked off from elite developers could now access them. On top of that, by dwindling housing stock down to nothing, a new generation of people never get to enjoy the benefits of property ownership. They all become condemned to a life of renter-serfdom in the apartments built by the corporate developers who pushed this "abolish all single-family housing" talking point.

In the case of #cancelrent, neoliberal politicians like Cuomo, De Blasio, etc. know full well that if rent was canceled, in a year's time all the most vulnerable landlords would be forced to cash out or have their properties seized, in turn forcing the very people they're pretending to help out into the streets. That is the end goal of #cancelrent, to bankrupt the small property class out of the market, since they are all the last line of defense against corporate developers.

If this sounds too tin foil hatish, track down every anti-landlord/pro-cancel rent article--especially in publications like Curbed NY and Gothamist. See the profiles of "rent strike organizers." See who the biggest cheerleaders are and who Cuomo, AOC, De Blasio, etc. have chosen to listen to and be the "voices" of #cancelrent. All privileged millennials who could easily pay rent encouraging everyone in their buildings to not pay rent, many of them in gentrifying neighborhoods like Bushwick. Connect the dots and you'll see the implications, of gentrifiers threatening to bankrupt their landlords in these communities that developers have had a difficult time making inroads and having a direct line to Cuomo et. al.

Bottom line, this whole #cancelrent is all smoke and mirrors. It's a fake progressive (fauxgressive) movement started by neoliberal think tankers, backed by developers and being carried out by their handlers who are pretending to be doe-eyed progressives only trying to "help". Do not buy into this phony act of theirs of "naive liberals" not understanding the implications of #cancelrent. They know more than everyone else what will happen. They are all acolytes of Robert Moses, using populism to make power plays for the benefit of their developer donors.

Originally posted by @Ruth C. :

With all due respect, I think the people playing that "landlords are irresponsible and only have themselves to blame" are part of a concerted neoliberal effort to squeeze out small landlords out of the real estate market.

My parents couldn't have been more fiscally responsible. They were so fiscally responsible that they were able to pass the savings onto their tenants...only to have many of those tenants decide to skip out on rent, thanks to aggressive laws on the part of fringe tenant advocacy groups in cities like NYC that have given deadbeat tenants all the concessions in the world to not pay rent. 

Some people will argue, "Well, it's your parents' own damned fault for not screening tenants properly." Well, here is the further twist in the knife. These fringe tenant groups have been successfully getting laws passed making it all but impossible for landlords to screen tenants. Just this past fall in NYC, landlords were barred from sharing a blacklist, denying a prospective tenant based on a recent eviction, even looking up housing court records. This is all "violation of rights", "discrimination", etc. and punishable by in the thousands. 

The point isn't to complain but to make this larger point--no one would chide a grocery store for going out of business if laws practically made it legal for customers to get thousands of dollars of free food a month. But apparently, you can do this for small landlords. 

The reason why I cite that as "neoliberalism" is that invocation of responsibility in a scenario where it doesn't apply is a classic talking point. It's trying to pretend that a person's problems are all due to himself or herself alone, when there are various outside forces that have forced this person's hand. 

>My parents couldn't have been more fiscally responsible. They were so fiscally responsible that they were able to pass the savings onto their tenants

Not to be mean...   This seems like the opposite of fiscally responsible if they did not first build adequate reserves.  If they had adequate reserves accumulated, I would still not refer to this as fiscally responsible but possibly charitable.  However, it is not the most efficient method of charity as 1) it may not have a high rate going to the most needy 2) the benefit affects a fairly small number of people.

The first LL in the article is clearly over leveraged.  She also has not built the reserves that should have been built, but the likely cause of not being able to build the reserves is that she is over leveraged.  She is working very hard for $24k profit.  Her investment is not a good investment if 27 units results in only $24K.  Her profit is $74/month per unit with her doing much of maintenance, being the PM, etc.  It is a very poor investment.  Note a PM would not take this on for only $24K especially with it being low income housing.

The LL who indicates he has no mortgage but will have problems paying his property taxes I hope it providing a BS story.  He manages two apartment buildings in NY's Chinatown without a mortgage and he does not have reserves to pay the taxes.  If true, that is inept management.

None of us want to use our reserves to cover expenses related to this virus.  However, the point of reserves is to have them when they are needed.  We are already down over $50K in STR rents.  I expect it to go over $60K of lost rent.  I, of course, would prefer to have the rent coming in because we still have to pay our mortgage (we have not requested forbearance), our maintenance/cap ex, utilities (including internet), and taxes.  We have come to expect the income that our rentals provide.  However, times like this is why we created reserve funds.  It is why I have warned of over leverage while still extoling the correct use of leverage. 

We may have to cut back similarly to many of our tenants to reduce the impact to our reserves (actually not that similarly, instead or a dozen vacations we may need to settle for half a dozen vacations - such sacrifice (sarcasm on the sacrifice part - I realize that we are fortunate)).

Good luck, stay safe.  

@Chris Prichard

I like UBI, if it can work as a dividend and a VAT tax is also implemented then I’m for it. I live in NY and people are getting an extra 600 a week. It’s interesting to see what people do with the money. If it was me, I’d be hiring people to keep my rentals moving forward. Thanks for posting.

Originally posted by @Dan Heuschele :

Not to be mean...   This seems like the opposite of fiscally responsible if they did not first build adequate reserves.  If they had adequate reserves accumulated, I would still not refer to this as fiscally responsible but possibly charitable.

You're misconstruing my parents' financial situation to make a point that has nothing to do with the one I was making. 

I didn't say that my parents passed savings onto tenants at the expense of reserves. My parents were fiscally responsible enough to have enough money to build up healthy reserves and pass savings onto tenants. They had, in other words, plenty of money to go around and to keep on hand in case of emergency or some other issue.

The point I was making is that the way NYC laws work, the entire thing is based on giving deadbeats every concession in the book to not pay rent and cause thousands of dollars of damages.The logic behind this is that if a landlord carefully built up reserves the way they're supposed to, it's not that he's financially prudent; it's that he's sitting on ill-gotten "piles of cash" that he "leeched" off tenants...or that if he didn't, he's Scrooge McDuck and therefore it's okay to let deadbeats walk again and again and again because he has "plenty of money" to be able to write off losses over and over again. 

 With laws being that aggressive in places like NYC to where even financially prudent landlords are losing money, I don't think it's fair to write off landlords in cities like this as being fiscally irresponsible. Walk a mile in the shoes of small landlords in NYC where your business is micro-managed based on the logic that if you even make so much as a penny over your overhead, this is "profit" that you "leeched" off a tenant (or in the minds of antisemites, "chiseled" from them).

Originally posted by @Chris Prichard :

@Nick Rutkowski Universal basic income could sure help in this case. I have been extremely conservative in my tiny rental portfolio (own 2 rental houses outright with large cash reserves on a sub 75k household income) if my tenants stopped paying it would suck, but I’m not beholden to a mortgage . This hateful landlord rhetoric would be better targeted to the oligarchs who have twisted the tax code in their favor since the Reagan era. Vote! UBI!

I agree with you that we need to blame Reaganonics for the mess that everyone is in right now. But I disagree with the UBI for that very same reason. If we're living in a Reaganomics/neoliberal economy, then a UBI makes no sense. All that would happen with a UBI in the US is that the oligarchs would continue to be bailed out and get tax breaks while the ever-shrinking middle class would be footing the bill for all of it.