MINNESOTA BILL ALERT: SF 365 & HF 685 will make it illegal for most investors to...

[Jamil Khan]

SF 365 HF 685 will make it illegal for most investors to buy an owner-occupied single family house, duplex, or triplex and rent them out. Contact your representatives!

[Jeff Schemmel]

@Jamil Khan 

SF365 & HF685 both directly state: family LLCs are excluded provided the following is true.  

(f) "Family limited liability company" means a limited liability company meeting the
following standards:

(1) it has no more than five members;

(2) all its members are natural persons or family trusts;

(3) all of its members who are natural persons or spouses of natural persons are related

Really hard for me to believe that "MOST investors" now won't be able to buy properties and turn them into rentals. Most investors I know are small LLCs. Also...preventing large investment firms or development firms from buying up perfectly good owner-occupiable SFHs and sMFHs is probably a good thing... We should be paving the way for more owner-occupants and knocking down that high barrier to entry to allow more people the opportunity to build wealth and own a home. It's a primary driver behind high sale & rent prices in MSP. It also probably helps sustain the quality/condition of properties in the metro if more owner-occupants buy them. People who live in their SFH, duplex, etc take much better care of the property and are more respectful and mindful of tenants in my experience.

[James Hamling]

@Jamil Khan after having read through these, I echo much of what @Jeff Schemmel has said. 

I would add, it also has a provision for a waiver issued unto entities to operate if it's found it's not impacting affordable housing in a negative manner. 

While this would have impact, I don't see anything of such a major impact where it would, as this post is highlighted, "make it illegal for most investors". I actually see where it KEEPS it legal for most investors, and simply blocks out most big corporate interests. 

So one could argue this would be a major WIN for small business, right? Eliminating those big NY/NJ fund level i-buyers from competing. Pressing the majority hold of investment real estate into the hands of small and mid-sized "family" operated landlords? 

And it only speaks of CONVERSION of units, with that there already exists regulatory actions on conversion via zoning for example. And before you say "oh, but they can't stop someone just because there a big corporate interest" I say they sure as heck can and do. This is a point where politics come involved, and there is the written and UN-written rules, I know because I have navigated them personally. I have received approvals for conversion projects others failed for decades at. You want city council to approve a variance request, it's all at there choosing. 

If I contact a rep on this I'd have to say "good job, keep defending small business". 

I could be wrong but from how I read this, it's a "Keep It Local" provision for investment real estate. I love small business, so I am good with it. 

[Jeff Schemmel]

I would also add, i'm not against non-owner occupants, and I tend to feel that a DOM threshold could be implemented such that 30 DOM is required for any corporate entity (like the one they're targeting with this) just has to wait 30 days for an owner-occupant to have a chance at winning the property.  That would still allow distressed properties that are typically not doable for a financed buyer to still be purchased and rehabbed by investors with the capital to do so.

[Jamil Khan]

@Jeff Schemmel @James Hamling I appreciate the thoughtful discourse. You're of course welcome to call your reps in support of these bills, but I encourage you to read more about the likely unintended consequences:

https://www.startribune.com/to...

[James Hamling]

Quote from @Jamil Khan:

@Jeff Schemmel @James Hamling I appreciate the thoughtful discourse. You're of course welcome to call your reps in support of these bills, but I encourage you to read more about the likely unintended consequences:

https://www.startribune.com/to...

This news piece is clearly written by someone of a liberal arts background, with zero or near to zero experience or knowledge in contract law or investment real estate. 

As we pointed out, after reading the bill, it is NOT preventing landlords from doing investment real estate or creating new inventory, it's directing WHO can do it, localized Small Business vs Big Corporate/Institutional Investors. 
I also ran this by my internal legal head who's sole job is to monitor, track, communicate with local government on issues of this exact type and he agreed that it is only a term of Small Business vs Big Corporate. 

Are you aware Jamil that in many parts of the world the current Corporate standings in the U.S. is illegal in those other countries? Because in those countries people MUST be accountable for there actions. Not in the US with Corporate law, that's how we get things like 30 yrs of intentional dumping of wildly toxic waste ins ay, a pond, because the fines are cheaper than proper disposal. In US, no person is held accountable, it's a corp.. In those other countries, people would go to prison. 

I am clear, I am biased, I know corps are a cancer in the U.S.. The current standing that lead to a corporate take over starting in mid to late 80's has only harmed our country to enrich a very tiny %. I am 1,000% PRO Small Business, for a very long list of reasons. 
I applaud knee-capping Big Corporate at any and every turn, good riddance I say! 

This bill is a rare instance of INTELLIGENT gov actions to address an issue. They know that Small/Mid sized landlords do BETTER at providing rental housing. That it improves the local economy vs exporting state wealth, which is exactly what Big Corp landlords do. 

And as it stands, what Small/Mid sized landlord can compete with BlackRock? Who buys at a 2-cap, or even negative, because it's not there $, it's investment capital coming from Saudi Wealth Fund, or a Chinese shell co.. 

This bill does NOT prevent Rental Real Estate, it directs WHO, small/mid business vs Big Corporate. 

Let's keep it to facts and not hyperbolic BS. 

The "unintended consequence" is somebody is going to be happy with 3 yachts vs 4, I'm a-ok with that. 

[Wendy Man]

I guess one question is that, if the bills pass, will they eventually lead to further bills restricting individual landlords or small entities (family llc, family trust, etc) on similar activities? 

Maple Grove enacted their one year moratorium on new rental licenses for SFH last summer.

What do you think?