All Forum Posts by: JJ P.

Keep us posted on how the search is going.   

I'm quite concerned that this could escalate into very, very long term eviction moratoriums and rent payment suspensions.   I'm facing one tenant with Covid related non payment.   I don't see many, possibly any, options to getting money if they don't send it.   Legal advice pretty clearly states that it's a grey area and probably best to work with the tenants while letting them stay.    They can wait until January to pay 1/4 per month, and that seems like I won't know until January if they are actually paying the 1/4.   Their lease is up before January, I'm not sure if I can non renew, or if that would simply encourage them not to pay and then fall squarely into the eviction moratorium.   I'm probably just going to keep the communication channels as open as I can, and encourage them to send whatever they can as they have some extra money.   It's going to be a rough go if we have to absorb the cost of their housing.   That's a huge and unforeseen expense.  

I'm also concerned because in my counties, the water utility  will never be shut off, it simply rolls over to the property owner if unpaid by the tenant.   The Water company will lien the property if the bill doesn't get paid.   This could be an extra expense, as the tenants that I'm referring to also have a large back due water bill that's unpaid.  

I'll give you my observations for the southern coast/ Coos.

For rentals...It does seem that there is a shortage of rental homes along the coast.  There's not a lot of down time between tenants, and it looks like the area could happily absorb quite a bit more housing,  both for residents and LTR rentals.   We bought a couple of rentals and a vacation home, and so far, so good.  

The overall housing market seems strong, perhaps bottlenecking at new purchases due to lending overlays.   But the houses are mostly in pending or sold, so someone is buying them.  Along the coast, We're seeing some new build, custom homes going up on previously unbuilt single lots in the Bandon area.  Mostly the nice coastal lots are being developed.   Housing starts are up in that little town.   There are far more new housing starts than there have been in recent years, according the the planning & permit department there.    I don't see much in the way of flips or rehabs, and plenty of these older homes could <ahem> use a few updates.  In some ways it seems stuck in the 60's.  

 As @Taj Richardson said, there's quite a bit of infrastructure in some of these very small towns.   And, yes, there are elk, too.  

 In California you will only get the difference between the day they moved out and they day the place was rerented.   It sounds like Illinois law is similar, based on the quote above.  I've found those clauses nearly 100%  unenforceable in real life.  

This might be an unpopular response, but I'd say you're behind the curve in managing your property.   Instead of griping about the past, you should have dealt with it as it came up.  Let them move, charge them for what you're legally/easily able to, and get another tenant in.  Negotiate a small or medium inconvenience fee for turnover costs and allowing them to break the lease.  Raise your rent for the well screened new tenant and get on with things.  

 I wouldn't take issue with a change in payment arrangement that you're already operating upon.  If you wanted an alternate arrangement, you should have set up something when they told you it was difficult to get the direct deposit.  You could have done Cozy, Zelle, Xoom, Paypal, or other choices.  By not working it out when it came up, you implicitly agreed to the new arrangement.   Ditto for the late fees.   If you'd set up a Cozy account, they would have been billed automatically for the contractual late fee, no communication from you involved.  You should have taken issue with the cat when it showed up via a notice of lease violation, a new pet addendum or an increased deposit or increased monthly rent, or both.   If the cat ruined the carpet, deduct it from the deposit.    That's why you have a deposit.  

This is a business arrangement that you're running like a friendship.  You're already behind the curve as a landlord, but most of these are trivial issues and not worth rolling up your sleeves over.   They're trying to work with you... you should respond accordingly.  It may take a couple of months to find a place and close escrow anyway.   It's unlikely they're leaving before January unless the househunting, loan and escrow glide along without a hitch. 

I find more success with cooperation than conflict.   Live and learn.

Glad to help! My theory on RE somewhat coincides with Warren Buffett's famous advice:  Buy when everyone is selling and sell when everyone is buying.   My RE take on that wise quote is "look to the upcoming neighborhoods."  Big Bear was a vacation rental area LONG before AirBnB was a household name.  My rough guess is that half the houses, maybe more, are not full time,  primary resident homes.  That's a lot of competition for the same vacationers.  Palm Springs, same.   The Rat Pack vacationed there 50 years ago.  

   Also, if you're just starting and hands off, it's crucial to not overextend yourself financially.   If you can get in for $100K less in purchase price, that gives you some leeway to build your business and/or expand.  You'll have some wiggle room.  

 I wish you the best success.   jjp

I can speak to Big Bear. We owned and visited Big Bear for many years, decades actually. We were in BBC, close to the airport and some restaurants, etc. There are many, many small cabins in that area that serve as vacation homes and STR. From BBC, Baldwin Lake or Moonridge, you can walk to the forest but not the ski slopes or downtown. Big Bear has always been a tourist area. Peak season is winter, but lack of snow can have a big negative draw on tourism, as people think skiing when they see the snowcapped peaks from home in downtown LA. There was something like 100% occupancy over Thanksgiving and the Christmas/New Year holiday, and, back then, a lot of vacancies in between.

 Year round rentals don't have much demand and there's not a lot of employment unless you go "down the hill" for work.  That's a 2-3 hour r/t commute, so most people don't do it.   What's left are B & C type long term renters overall.  Retirees buy there, tourists visit there, people own long term 2nd homes there,  and a LOT of marginal people escape there.  

If you're hands off, I'd say branch out to a place that isn't already overrun with STR and where the restrictions are lax or non-existent. Look for a niche. A nice property that stands out- hopefully due to location and a lovely setting. Decorate it beautifully, perhaps in theme, and stock the kitchen nicely. A little hole in the wall gem with a pretty view and a small town feel might do far better for you than being one of hundreds and a worn out STR welcome from the locals. If I were hooked on the Mt/desert regions of so Cal, I'd look slightly further afield. Joshua Tree, maybe. Pioneertown? Lucerne Valley? Spring Valley Lake on the backside? Pinon Hills up against the mountains? Idywilde? Julian? The old areas of La Quinta? I don't have a feel for these areas currently as STRs, but perhaps one of them might work for you. The price points are better and that will give you a little leeway with your cashflow while you build your business. You are building a business, hopefully with gushing reviews and repeat customers, but it all takes time.

It's always hard to deal with ambitious but naïve buyers.   It sounds like there are additional challenges dealing with the first time buyer who also wants a profitable multifamily purchase.   

Perhaps you could create a graphic that shows the timeline options, or maybe your title company has one that they could give you.    

We found a nice balance between pulling out our cash and paying down the debt. First leveraging and expansion, then hold and go on autopilot. Our big expansion was about 10-12 years ago. We leveraged our paid off home and jumped in with 8 SFH purchases over the next few years. Then paid them off, then retired. As pointed out in the above quote, yes, you're expanding your business model and your fortunes through leverage, and this will be jet fuel to your financial program. Now you've got a lot of balls in the air to juggle, and that's ok, building wealth takes work. But keep an eye on the prize. How much do you need to live? Subtract the mortgage servicing from the income, how close are you? When you reach a point where the income minus the mortgages is your monthly financial goal, that's when to switch gears and start paying off the mortgages. When the mortgages are paid off, you're now set for life.

I'd say it takes about 10 -15 years from the first purchase.

Here it is in steps:

1) leverage and purchase wisely, boldly and often.  

2) Achieve target monthly income before mortgages

3) Pay off mortgages, one by one.  Snowball the debt payoff to accelerate the target date.  Use a snowball calculator to figure out the optimal payoff schedule and your Debt Free Date!  

4) Retire with high income 

5) If you need an income boost, do it again.  

I see this as the start of huge, slow moving downward spiral, pinwheeling slowly to disaster.  

  In theory, people have their unemployment checks and their Covid relief checks and should be paying everything since the government bailed them out.  Everything is propped up and unemployed people aren't homeless also.   I can see the logic in keeping roofs over everybody's head in these Covid times.    In practice, plenty of marginal tenants/people are going to see this as a gleeful time when they get a free ride, legally, and with minimal consequences.   If you were a sketchy person-- maybe on drugs, alcohol, with mental instability, or with other issues-- and suddenly you get to live rent free for months, would you pay?  Of course not.   You're going to enjoy the free ride and not worry about it until it ends.   Most likely you're just going to stick it to the man and stay for as long as you can rent free, and then Buh Bye.

  And if you're not sketchy, but struggling for what ever reason (job loss due to Covid, health issues, taking care of kids or loved ones at home) and with not a lot of options, when that housing back rent accrues and becomes $3,000, $5000 or $10,000, are you going to decide in January or February that you're going to pay that back?  Most likely not.  You're going to want to rebuild your life after Covid.  There won't be any money to pay such a big bill.  You will express your regrets to the nice landlord and move on.  

I think it's one thing to issue bailout money to people to keep employees employed, but quite a different thing to force us to provide free housing with no compensation.   Things about to sucked into the vortex:  mortgage payments will default as homeowners sag under the weight of supporting tenants; tax payments because there's no spare money to pay such a big bill; maintenance since there won't be any extra cash for improvement;lawn care since that is not mandatory; all types of home improvement, unpaid utility bills that accrue and turn into property liens.  

As someone said earlier in the thread, people may sell houses instead of renting them out, due to the uncertainty. 

It's nearly impossible to collect back due monies anyway.   Out of $10-20K in back due rents/damages/legal costs over the course of several decades of landlording, I've collected exactly $200. So little gets collected that I'm actually going to switch to the cash for keys model the next time an eviction is looming.  It will be less frustrating, time consuming and probably won't cost a dime more than an eviction.  

With the new laws, landlords could be screwed and it sets a bad, nationwide precedent for landlords to provide housing regardless of their expenses and hardships.  In my areas, owners are liable for unpaid water bills, but not electric bills or trash.   The water bills will accrue for 6 months before they put a lien on your property.

The problem is that the good tenants find a way to pay, and the bad ones find a way to not pay.   Batten down the hatches, people.  We're going for a ride.