All Forum Posts by: John Barrett

Quote from @Princella Griffie:

We are in the process of trying to get a squatter out of our property in Detroit. It’s one of the most stressful experiences ever! This is the last property we were trying to sell before someone created their own fake lease. Now we wait.

We wanted to do a 1041 with the proceeds from the Detroit property and buy in Texas where we live, but with these high rates, I’m not sure, but it seems the rates are only getting higher. Thinking maybe we rent in Detroit until rates go down or am I being crazy to keep my property in Detroit.

@Princella Griffie I am really sorry to hear you are having a similar issue with squatters in your property in MI.  If I can provide any advice it would be to make sure you have professional legal representation as you navigate the process of removing them.

As for your strategy of moving funds via 1031 exchange from this property to one in Texas, to me that does seem like a good idea.  Current interest rates are certainly higher than most would like but remember you always have the option to renegotiate the interest rate on your mortgage.  If you find a property in TX that you like and fits your long term plan, I would be inclined to make the trade. 

I know at the moment dealing with squatters is terrible but know you will get through this. Ultimately, this will be a story about what you learned and the hardships you endured on your path to success.

John

Quote from @Greg M.:

Seattle should be a business school case study of what not to do.

2022 Seattle Office of Housing report gives an update on their 7 year goals. Exceeded goals by 31% supporting the creation of over 2,735 new affordable rental homes and the preservation of 530 existing rental homes. Cost of $290 million.

Create anti-landlord laws and during second half of 2021, 3050 rental properties containing over 9,700 housing units were removed from the rental market. 

The vacancy rate is going up, no doubt as landlords contemplate selling or wait for the right renter knowing they are screwed if they rent to the wrong person.

The city states it needs at least 30,000 more rental units just for low income people. That doesn't take into account the homeless. 

Imagine what they could accomplish with rental units if they had fair laws and promoted building...

Seattle seemed to pride itself on pushing anti-landlord legislation over the last few years.  Unfortunately, the results of these policies (decrease in available housing stock & increasing rents) speak for themselves.  The challenge is that elected leaders often ignore the facts that do not align with their agenda.  Everyone wants a simple answer and it's easy to blame landlords.

I am hopeful that more transparency around these "tough conversations" will allow us to come to the logical conclusions about how to actually increase the quantity and quality of housing in our communities.  I might be naive but I still believe we can actually fix things when we choose to acknowledge reality (what the data shows us) and implement solutions accordingly. :)

@Jeff S. It never feels like you are getting off easy but completely understand your point. I hope people will take away the need keep

more capital on hand. I view it as a necessary insurance policy. I agree with your assessment that lending (HELOC's or otherwise) are likely to become harder to access.

@Steve Vaughan Thank you for the feedback and perspective. My take on this is if you are investing long enough, you will eventually buy an education.  We certainly did with this unit. :)

I was really surprised by how the ERPP actually played out.  I know it was a nightmare for the attorneys involved as the rules seemed to change or be reinterpreted frequently.  I spoke a number of times with the WLA legal council and they were frustrated having to try and follow an undefined process in real time.  As for the rule change that caused a number of cases to have to start the process over, the cynical side believes it was done to improve the metrics for the evictions prevented by the program.  No way to prove that but the numbers reported by the ERPP do not match with any of the feedback I have heard from other landlords who have gone through the process.

John

@Jim K. We certainly seem to have more constraints on our ability to screen our prospective tenants in WA than you have in PA.  I will admit to being a bit envious of that. :)

WA is a HCOL area and that does cause our rehab costs to be higher.  I do wish the costs were less but I am trying to balance cost, quality and schedule. For us currently minimizing our vacancy is very important, so in order to have high quality and a shorter schedule, the cost increases.  While I certainly can do the work to save money, I am slower than the professionals. That said, I do think it is important for people to understand what these cost could potentially be. Admittedly, this is but a single data point.

John

Quote from @Nathan Gesner:

The only thing a Landlord can do is screen heavily and hold high standards. Once the Tenant is in, there's nothing stopping them from causing you tens of thousands in losses, and that's without COVID restrictions.

People need to remember that Seattle enacted a "No Winter Eviction" policy in 2019, before COVID, that essentially allows anyone to live in a rental for up to six months for free before the Landlord can start taking steps for eviction. The government has no concern for fairness or private property rights.

We are fortunate that our rentals do not fall under the purview of the Seattle City Council.  They seem to be the trend setter for anti-landlord legislation in WA.  That said, WA State is still a very tenant friendly overall so keeping up on all the new rules is critical.  Unfortunately, the result of all these new rules & policies has been the continued loss of affordable housing in our communities. It's very sad but entirely predictable.

Quote from @Ray Hage:

Quote from @John Barrett:

Quote from @Dennis Nguyen:

Wow, thank you for sharing John! Looking back, was there anything you could have done differently to avoid this?

Hi Dennis,

I would love to say there was nothing we could have done differently, but that is not true.  In early 2020, we made the conscious choice to take a chance on these tenants.  They had both had blemishes on their records but had been clean for roughly a year and a half.  We have have rented to a number of tenants before who had issues in their past but were excellent tenants.  Unfortunately, in this case it didn't work out that way. 

When it became clear we had made a mistake, the pandemic was in full swing and the regulations governing evictions were suspended and then changed.  As a result, we have had to change our screening process / criteria to be more strict.  What made this situation manageable was are conservative investment strategy.  While it has limited some of the upside, it prevents these types of situations from putting your investment at risk.

John

 Sorry this happened to you and your investment property! This is such a big expense and so many months of lost income. Kudos to you on keeping positive and getting it fixed up. I'm not familiar with Snohomish county laws on tenants. In a state like WA where the tenant rights are strong, are you considering keeping your next lease as a M2M to avoid having a longer term problematic tenant? As an investor, I keep most of my tenants M2M and the large majority have stayed well over 1 year. I essentially tell them as long as they pay rent and don't make problems, they are welcome to stay forever.@]

@Ray Hage We historically used a 6M lease when we are placing a new tenant.  The new "Just Cause" regulations in WA basically make all lease agreements automatically renew unless they are term lease with a specific end date (with 60 days prior notice).  We are finding that charging higher rents has improved the quality of the candidates who apply for our units.  That said, we are still utilizing more strict screening criteria. I will take another look at using M2M leases but I know these have been targeted by regulators to limit a landlords ability to utilize them.

Quote from @Dennis Nguyen:

Wow, thank you for sharing John! Looking back, was there anything you could have done differently to avoid this?

Hi Dennis,

I would love to say there was nothing we could have done differently, but that is not true.  In early 2020, we made the conscious choice to take a chance on these tenants.  They had both had blemishes on their records but had been clean for roughly a year and a half.  We have have rented to a number of tenants before who had issues in their past but were excellent tenants.  Unfortunately, in this case it didn't work out that way. 

When it became clear we had made a mistake, the pandemic was in full swing and the regulations governing evictions were suspended and then changed.  As a result, we have had to change our screening process / criteria to be more strict.  What made this situation manageable was are conservative investment strategy.  While it has limited some of the upside, it prevents these types of situations from putting your investment at risk.

John

@Bjorn Ahlblad Thank you for the feedback.  I did use WLA associated attorney to process my case.  I feel having professional representation is more critical than ever with all the new regulations.

I hope others view this post in a positive light. I love real estate investing.
Taking the risk to invest significant capital and improve the housing in a community is one of the most noble things you can do.

I don't love the regulations my elected representatives are pushing as it results in less rental housing and harms my community. I know not everyone feels the same but that's my opinion. :)

John

@Jennifer Moraski The lost rent was due to our non-paying tenant for all but 1 month. The actual eviction ended up taking 11 months in total due to the leadership of the ERPP changing the rules halfway through our initial eviction and our attorney having to start the process over again. This unfortunately was just an example of the program leadership changing the rules of the program to delay the process. My understanding is it affected about 80+ eviction cases in Snohomish County causing them to have to restart the process as well.

This unit was not scheduled for rehad as we had previously installed new flooring and refinished cabinets in late 2018. We had done some other minor upgrades such as new doors, paint and lighting but it wasn’t a major overhaul of the unit.

Total time frame for the rehab was about 2-3 weeks.

Regards,

John