All Forum Posts by: Andrey Y.

 That fee structure is not outrageous, but if you meet syndicators personally, you can probably do better. For example, I invest in deals where there is neither an acquisition fee nor a disposition fee, or maybe one of those fees but not both. 

In my investments, the sponsor gets 15 or 20% instead of 35%, but there is no preferred return. Whether that part is actually better can be debated. But I like investing in a specific property, not a fund, because then I can make a decision based on the property.

Maybe what could be appealing about Cardone to a new investor is that the entry point is lower. The minimum investment is something like $10,000 as opposed to the $50,000 that is typical for many syndicators.

Cost of goods is your rent & repair, etc expenses. 

@Christian D. Yes you are absolutely correct.  I am at 80% for the month.  And I agree that because of current market conditions that is a good figure.  I appreciate your comments because previously there were some that may have considered an upfront discount an "amateur move".  I'm just posting to say I think there may be an option where you can treat tenants well while still maintaining your business through this.  We each need to make our own decisions as to how to navigate this.  The words thoughtful, kindness and grace can also have a place in navigating your business.  

Well now we're at the point where the metal meets the road.  Perhaps I'm reading this wrong but it seems there are two schools of thoughts on these posts.  Those that are proactive and reaching out to their tenants and offering discounts and those that are holding fast.  There are some in the middle considering case by case.  I also get the sense that there's a lean towards "professionals" (with some notable exceptions as outlined by Jay) as holding fast and "amateurs" leaning towards discounts.  I was proactive across the board, 20% discount, and now on April 5 100% of rents are paid. This covers my five figure nut, maintenance expenses, reserve funds and a cushion.  This is much preferable to me then waiting on rents and funding my expenses out of pocket while I wait.  I call that a win-win.  Were there some tenants that didn't need this, perhaps.  But I'm happy with my strategy on many levels and at least for me it was sound business.  Be safe.

 Hello Andrey. I read through this thread. My two cents is do what makes sense to you. Nobody here knows what the future holds. No history can be sourced for all the answers, only clues and insights that might help form a plan. And maybe that plan won't work. Everyone will do the best they can and live with the consequences, either from bad decision or good decision or circumstance or both.

Each portfolio is different. Each investor is too. Therefore the appropriate strategies all will be too.

I gave all my tenants notice of free April rent on March 20. I told them to take their money and go buy food immediately. I was ok with that decision then, I'm ok with it now, and even if I look the fool in three months (and now) I will be ok with it then too.

My decision was a proactive measure to keep good tenants that I know damn well are going to struggle. It was hard to find them, it will be hard to replace them, and even harder in an economic downturn that went from pretty darn good to whatever we are about to face, likely a year-long recovery at least by my prediction.

My tenant base is high risk. All of them. While I might say people with less money are better at managing funds than many give them credit for, it is still true it is not easy and takes a clear mind to get it done. When times are tough, it's even harder. Just like myself, what my tenants needed in my judgement was an opportunity to think straight and get a plan in order. That means a roof and food.

Armed with a roof and food and all the things they will need to make it through the pandemic, I expect my tenants to make the best of my gift and get their house in order. Maybe they will, maybe they won't, but they sure won't be able to look at me to blame.

Not only will they not look at me to blame, they won't harbor any ill-will against me when things go bad for them.

What I think about all the time, and maybe this is because I am a cash investor, is the fact we allow strangers to be in control of very expensive assets, our life's financial work in many cases. To me, that is a profound thing. I want the people in my property to respect me so they will respect my property.

So, I think what I am getting at here is the pay-it-forward strategy. It works for me. I can afford it. I strike it up to vacancy paid that I already earned by having good tenants I have not previously needed to kick out. I think it is going to pay me dividends moving forward. There are intangible things in this world that equate to tangible dollars sometimes. Tough for people who love math too much to see that sometimes.

The argument from others in this thread has so far been that this is a business and granting free rent is a terrible business decision. Perhaps it is. I might argue that this is indeed a business, a people business. It could be tough to tell from the things I say on BP, but I am actually very good with people. I relate. I know how to navigate. I know how to manipulate. I'm actually so good at it I have to stop myself sometimes.

So, I think you have been beaten up pretty good here and just wanted to share a view from the other side of the canyon. It's nice over here, you're welcome anytime.

I read Jay say you are a doctor. My partner is a vet. He is mostly a silent partner. I talked to him before I gave the credit and ended the conversation without having an answer of what we would do. I made the decision without him the next day. I called him to let him know what I did and without hesitation he replied, "And that is exactly why I am in business with you." Mind you, he is the tightest most frugal person you might ever meet. He was able to see my logic instantly without needing an explanation. Good will is worth more than just a feeling of doing the right thing for others, it also has tangible results too. I think we are going to get both out of this.

I have no idea how a large landlord would want to handle this. I can't say how I would if I was large (4 units). There is a guy in another thread who has 137 units and gave free April. I had to ask him if he was joking or making fun of me - he said he did and he wasn't. So, it isn't just the minnows like me that think differently than the mob.

Be well.

@Andrey Y.  It has nothing to do with "being human" -- i'm also both a tenant and landlord in NYC.

 Please continue to do what you feel is appropriate for you, your tenants, and your business. 

I would just encourage everyone on this thread to do some due diligence and explore how other successful and reputable real estate companies/landlords are navigating through this pandemic, and to conduct some research before you start making decisions based on a Biggerpockets post by a guy in plaid shorts claiming he is a real estate "specialist".

@Anthony Wick what many people on this thread are not understanding is you immediately expose yourself. Why would you offer abatement's to tenants you are not even sure can't pay you? Tenants who were planning to pay their rent in full for April will now pay less because you've given the option to do so. At the end of the day, there is already a freeze on evictions, that's the bottom line. If a Tenant knows there is no consequence for not paying anyway, why would a 10% discount change this? All you're doing by offering these incentives upfront is expressing you're in panic mode to your Tenants and giving those who would have paid you in full the chance not to do so.

We are only in April, the pandemic really only started on March 8th -- what about May and June when people have now been out of work for over a month? Aside from a 10% discount, what about the increases this year in utilities, maintenance costs, RE taxes, insurance, and inflation? You're 10% discount is now added to another 10% in annual increased operating costs -- and I don't see rents pressing upward this year so you've lost your hedge.

Your main goal as a real estate owner is to increase revenue and decrease expenses, period. I understand these are unprecedented times, and many people on here may be newer real estate owners navigating through a recession type environment for the first time, but we are in the first inning of this pandemic. 

I'd also like to mention there is the possibility of the Coronavirus relapsing again before the end of the year. So if you offer incentives to your tenants now, and then things normalize for a few months and we all have to go through this again at the end of the year or Q1 of next year, you've already opened yourself up to having to offer another round of rental discounts. So now you're bottom line has immediately decreased by 20% (because you were not patient enough to see how things play out) on the year on top of the tenants who are not going to pay you anyway, and on-top of the annual operating expense increases. 

I'm not saying do not help your tenants who are requesting relief. But again, my suggestion would be to let each Tenant come to you individually because each Tenant is going to ask for something different. It's best to speak with each Tenant on a case-by-case basis and see how you can work out an assistance plan. 

@Andrey Y.. "Rent is still due"

Well, sure. But, when is it now due? I pay my mortgage on time every single month. I do not incur any late fees. If my mortgage company emailed me to state; "you still have to pay your mortgage, but there will be no financial penalty if you pay late", perhaps I rethink paying on the 1st of the month. Does that mean I am crooked or evil? Nope. It means it might now be financial advantageous for me to not pay on time, or this month, or until the financial penalties are back in place. 

All I'm saying is; we have chosen to not give discounts or waive any late fees at this point, until my tenants can show their income has been affected, and they request some type of financial relief. 

Many people on BP have decided to give discounts, reach out to all tenants, etc. That is their decision. There are also many of us that will work with our tenants, but not going with a blanket policy for all tenants at this time. 

Question: if you don't feel comfortable risking 25% on your investment, should the bank feel comfortable risking 95%? You don't have any real confidence of your ability to do this but you want the bank to make a bet on you. 

Investing can be scary and maybe it's not for everyone. What do you think is wrong with your plan such that your 25% investment is at major risk? 

You could always house hack a duplex or triplex if you want to go FHA.