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All Forum Posts by: Andrey Y.

Andrey Y. has started 114 posts and replied 1826 times.

Post: I am offering my tenants a Covid-19 RENT DISCOUNT

Andrey Y.Posted
  • Specialist
  • Honolulu, HI
  • Posts 1,887
  • Votes 1,264
Originally posted by @E.S. Burrell:

@Andrey Y.

Hi Andrey,

Please don’t ask us our thoughts on this and then call us ruthless when we disagree with you. You did ask? Right? You have to be open to others opinions and how we run our business. Thanks

 You're mistaken. I myself am definitely a firm, business-minded, and calculating type of individual when it comes to managing rentals. But I think most of the reasons given for sound like justifications for choosing a subpar asset class with subpar tenants, and they want to justify to themselves why they would never do such a thing as to help a tenant out a little (and I know the reason why which is below).

Really, it was a mistake to offer a small discount for paying on time?? OK, if you are that reliant on "cash flow" that 5% will make a a big difference at a time like this, you aren't an investor. You are a ruthless landlord (no shame in that) who chose the wrong asset class and tenant profile, and trying to bemoan someone for doing something a little nice thing for their tenants. 

You are perfectly in your right to not offer discounts. But a lot of landlords, myself and others on this thread, have done so. Bad idea? Choosing a non-profitable market where you have to chase down every $100.. now THAT was a bad idea.

@Jay Hinrichs

Thoughts on this thread Jay? I can see why you got out of landlording ;) you and I are too nice given what some people are saying in this thread!

Post: I am offering my tenants a Covid-19 RENT DISCOUNT

Andrey Y.Posted
  • Specialist
  • Honolulu, HI
  • Posts 1,887
  • Votes 1,264
Originally posted by @David Jay:

Hey here's what I did.  Two weeks ago I told all of my tenants that there rent was discounted 20% in April.  I have 13 houses.  Five I manage myself, and eight in a neighboring city are managed by a property manager.  Of the ones I self manage I've collected five of five rents already.  We'll see how my property manager does.  Did I leave some money on the table, perhaps.  But my friend who was not proactive was just told that none of his tenants were paying since they were awaiting benefits etc.....and would pay later when they were received.  Our state is currently under a no eviction and no late fee order so he'll just have to wait.  Now of course, my discount is only applicable if they pay on time, otherwise they owe full rent. I'll consider other arrangements if they've documented and explained their situation, it needs to be more than I'll pay later.  Our governor just extended stay at home another 30 days and tomorrow I will let them know the discount applies to May also.  It doesn't leave much profit, but it pays all the bills.  My monthly nut is five figures so I can hold on a whole lot longer with that covered every month.  I think now is the time to be thoughtful and kind.  If I put a couple hundred in someone's pocket who didn't need it I'd hope they'd share it with someone who did.  Frankly, if I get through this with my loved ones and myself alive and the only hit I take is financial I'd feel blessed.

 Good on you for being proactive. A lot of folks will tell you that you are a fool and its a bad business decision lol

I wonder where in life and business you have to be that you cannot provide a little compassion and help to someone who probably needs it more than you.

Post: I am offering my tenants a Covid-19 RENT DISCOUNT

Andrey Y.Posted
  • Specialist
  • Honolulu, HI
  • Posts 1,887
  • Votes 1,264
Originally posted by @Patrick M.:

@Andrey Y.

"I honestly didn't think most of the folks on here would be such ruthless landlords to be honest."

You do us all a disservice when you say such things. There is absolutely nothing ruthless about collecting the full rent due.

You wish to pat yourself on the back- go ahead. Every landlord who goes onto social media or the news and talks about reducing and forgiving rent feeds the flames of "rent reformists" who believe landlords are making way too much. 

I was in the hardware store yesterday listening to a restaurant owner bragging about the killing he made in March and looking forward to April's lockdown. He significantly reduced his staff and overhead and his landlord agreed to significantly reduce his rent.

Don't assume everyone is struggling yet.

And don't assume this will be done in 2 months! That 10% may come in handy.

 So far, I haven't patted myself on the back yet.  Only some other posters did.

NOT offering a discount is not ruthless, the reaction to what I am doing from some landlords here is. If you can't afford a 5% or 10% discount in rent, YOU have a terrible business model or don't have adequate reserves. Likely both.

Its your own fault that you decided to invest in a market where 5% in "cash flow$ will make a substantial difference to your well being.

See my recent thread

https://www.biggerpockets.com/...

It is very pertinent to what we are discussing. If you had invested in a PROFITABLE market, not to be confused with a cash faux market, you wouldn't be in a situation where 5% or 10% rent discount will make an appreciable difference to your bottom line.

You fell for the cash flow shpeil, decided to take one management-intensive assets ie. "cash flow" markets whose property values don't even keep up with inflation.

I have been profitably managing my rentals from 6000+ miles away for 4 years now, because I target a specific class of tenants and profitable markets. If you have to invest your own time, sweat, and energy to "cash flow", are you an investor or something else? Don't confuse cash flow with profit.

Post: I am offering my tenants a Covid-19 RENT DISCOUNT

Andrey Y.Posted
  • Specialist
  • Honolulu, HI
  • Posts 1,887
  • Votes 1,264
Originally posted by @Nathan Gesner:

Nice gesture. I disagree with it because your tenants are almost guaranteed to make as much money in April as they did in January. Government handouts are actually increasing income for people at middle income and lower. So you're just adding more handouts to people that probably aren't suffering as badly as the news indictates.

just my opinion. You're doing what you think is right and trying to help people. Well done.

 With the amount of people unemployed and applying for unemployment, I honestly think it will take 1-2 months for most people to get a check, if they even make it through the queues and they funds don't run out. I don't think the extra $600 is unlimited I think there is a fixed $$ allocated to that. Once it's gone, it's gone.

Post: I am offering my tenants a Covid-19 RENT DISCOUNT

Andrey Y.Posted
  • Specialist
  • Honolulu, HI
  • Posts 1,887
  • Votes 1,264
Originally posted by @Michael Ablan:

@Andrey Y.  -  I did something similar.  I offered a 10% discount if they prepaid May, June or Julys rent.  My thought process was to lock in rent while things are still kinda good, rather than risk it if things really start falling apart.  Gotta lock in them tax returns while we can haha

I've had 4 tenants take advantage of it so far

 Yup, this was my thought as well. I had already spoken to my tenants ahead of time and two of them were layed off 3 weeks ago. One of them already paid. The other is a bartender and I honestly expect her to make partial payments for 1-2 months. The other lady hasn't said anything about losing her job to me but I pushed up her lease which gave her a free 5-6 days essentially.

Post: I am offering my tenants a Covid-19 RENT DISCOUNT

Andrey Y.Posted
  • Specialist
  • Honolulu, HI
  • Posts 1,887
  • Votes 1,264
Originally posted by @Patrick M.:

I would not expect my tenants to put in a days work and only receive 90% of their pay.

Every dollar I receive is money that will be contributed to the allocation of resources for my buildings. 

I refuse to signal to my tenants that I am profiting to such a degree that 10% is something I can do without. Additionally, I believe it shows fear about receiving your rent in a timely fashion and not so much an altruistic gesture since it is tied to dates.

If this continues and your tenant not able to pay rent, when you work out a payment plan the tenant will want to know why the discounted rent is no t the ceiling- since you don't need the 10%.
My units are now lived in 24/7. They have become homes and offices. I cover heat and water which will now be higher. If a tenant can't pay full rent then I will happily work with them- but I need every penny of rent and I will never signal otherwise.

I would suggest to any of the hobbyist- do this: Collect full rent and when we come out of this, if you so desire, then rebate the rent... (yeah- doesn't make much sense, right)

Due to the new bailout, unemployment benefits will soon make it more profitable for some out of work then if they were working. And then there is the $1200 (I won't be getting a check)

Besides you signal to the progressive public that rents are too high.

 I disagree. It just shows a good gesture. I honestly didn't think most of the folks on here would be such ruthless landlords to be honest. Usually that's me, but guess I've softened up a bit.

I think making the policy temporary isn't signaling anything to them. It's encouraging them to pay rent on time or early. If someone doesn't want to pay rent, they won't anyway regardless if I offer a small discount.

Post: I am offering my tenants a Covid-19 RENT DISCOUNT

Andrey Y.Posted
  • Specialist
  • Honolulu, HI
  • Posts 1,887
  • Votes 1,264
Originally posted by @Anthony Wick:

It's definitely not the policy we are doing. I kind of think telling people up front; "no late fees", is the wrong way to go. As a matter of fact, for those that want to take advantage, there is zero incentive to pay rent now. You can't evict, and you just told them there will be no fees. 

I already posted we did not notify tenants of anything. And we received all rents for April already, with no discussion or requests from tenants. And with the stimulus package, there should not be any late rent payments until at least August, when unemployment may either run out or be reduced. We would work with tenants if they truly need assistance, but we aren't encouraging them to ask either. 

 If someone wants to take advantage, they will anyway. They know they can't get evicted. I have no idea what me saying "no late fees" would bring into someone's head that they will take advantage. Rent is still due.

Post: I am offering my tenants a Covid-19 RENT DISCOUNT

Andrey Y.Posted
  • Specialist
  • Honolulu, HI
  • Posts 1,887
  • Votes 1,264

Fellow investors and landlords,

I have decided to offer my tenants a small discount for paying their rent on time, in light of the current situation. Its not because I think it will be a huge deal, mainly to thank them for being with me and to help them at least a little during this crazy time.

The following is the beginning part of the email I just sent out to all my tenants (for the properties that I self manage):

Tenant's name,

Effective now, I will be offering the following credits:

Rent submitted 5 days early (by the 26th of the prior month) - 10% DISCOUNT

Rent submitted on time (by the 1st of the month rent is due) - 5% DISCOUNT

I will be waiving late fees. Keep in mind that rent is still due.
-----------

And then there is a few more short paragraphs about thanking them for their communication, other perks I am giving them, and list of suggestions they can use to pay rent if they are having trouble.

Thoughts on this? Am I crazy? Am I being premature here?

Would love to know the communities thoughts on this. What are you doing personally for your rentals and tenants? How worried are you about this situation and how it will affect your portfolio?

Thanks, -Andrey

Post: How you can profit from a Big Mortgage

Andrey Y.Posted
  • Specialist
  • Honolulu, HI
  • Posts 1,887
  • Votes 1,264
Originally posted by @Brian Ploszay:

Interesting, if not confusing, post, but I don't learn much from his conclusions.  He does discuss the benefits of a high appreciation market, which in the end, often creates more wealth than cash flow.  He misses that properties in most areas of the country do experience some appreciation.  For long term holders, their returns are enhanced by their equity gains when selling.  

The root of the "appreciation"  market is that demand outpaced supply.  California, Hawaii, Seattle and top East Coast Cities experienced this during the last real estate cycle. (which is over, by the way!)

I've consistently posted to California investors that are looking for advice for a good market to invest in - "Stay at home!"  

Yet most of these markets weren't always good.  Seattle was not the city it was today in the 70s.  New York was a city in trouble in the early 80s.  Los Angeles had the steepest prices decreases during the recession of 1992.  But during the last 20 years, the knowledge economy centered around these cities, combined with housing stock that could not grow with demand.  Total winners.

Investing for appreciation has its defined cycle.  And that cycle is now over.  Investing for appreciation is tricky, because you don't have strong cash flow.  Investing in high appreciating markets means buying more expensive properties and needing more capital to participate in that market.

We are now in a recession that certainly affects these markets too.  Brooklyn, the poster child for gentrification, is dead center for the Coronavirus outbreak. California is on lockdown too.   California people are losing their jobs.

Problem with his ideas #1:  The game was over last year in these markets.  Prices were sky high and appreciation was going to curtail.  The values already priced-in the scarcity of this real estate.  In other words, appreciation was not growing fast anymore.

Problem with his ideas #2:  BAM.  Those who owned property for awhile in a hot location certainly did very well.  They got the appreciation.  But their success did not rely on BAM.  Overleveraged investors, in any market, are going to be sweating it today.  His stellar rental growth and appreciation assumptions are last weeks news.  You are now working for the bank.

We are shifting to a weaker real estate market.  Some call it a buyer's market.  This is the time for savvy investors to start looking for bargains.  It is way too early to predict the trajectory of the economy and capital markets.  

Next real estate cycle, Andrey Y model continues to have merit.  I'd expect hot cities, those with new economy jobs or finance like NYC, to continue their prominence.  

Problem with his ideas #3:  There are operators who make great money in interior cities.  Even declining regions.  But they know how to invest and create value throughout the whole investment chain.  They are not turnkey buyers.  If returns are truly awful in these areas, the market has a funny way of adjusting.  Prices go down, and returns go up, attracting new investors.  Capital also has a funny way of allocating itself to opportunities, wherever they may be.  As the unlikely city of Detroit has experienced a modest renaissance, not surprisingly new investment capital is following.

 The problem with your "Problem with.." posts is that my model includes the downturns. The data and examples I and others have detailed in this thread INCLUDE THE DOWNTURNS AND MARKET CYCLES !

I don't see how we can be any less clear. This data goes back to the 1960s where people made all the same arguments you did, convinced themselves they were smart and didnt jump in. They missed out! They missed their chance to get wealthy. While owning assets with less management intensive tenants to boot

The data is clear, most of the profit comes from appreciation. Sure you can make some peanuts from $30K properties in Detroit but do you want to work 50 hours a week to manage 30 of these rentals for $200 "cash flow"? I don't !

Don't even start with Brooklyn lol you'll have a bunch more people on BP who will chime in and break it down for you how much WEALTH they made by investing for profit rather than cash faux.

Post: Corona will have heavy impact on economy and lead to foreclosures

Andrey Y.Posted
  • Specialist
  • Honolulu, HI
  • Posts 1,887
  • Votes 1,264
Originally posted by @Henry Lazerow:
Go to contact and then click email it will automatically take you to message center.

Originally posted by @Andrey Y.:
Originally posted by @Henry Lazerow:

I disagree and do not see this virus as a long term issue. Real estate falls last in a downturn (often many months to show any affects) and by the time that comes the virus will likely be a thing of the past. You can get a rough estimate by how long it took other countries to flatten the curve. I expect the market to rip back quickly when this is over unlike past recessions. Lenders are offering a lot to mitigate foreclosures/hardship on home owners. From Wells Fargo site... They also will waive payments up to 12 months if home owners need it extended. 

"Home Mortgage customers

If you're unable to make your payment due to COVID-19 related hardships, we're offering a 90-day payment suspension. To request this assistance, sign on to online banking and email us through our secure Message Center. We'll respond to you within 3 to 5 days. If you set up automatic payments with Wells Fargo or another bank, you'll need to manually stop those payments."

 Do you have a direct link to the "secure messaging center"? I couldn't find it after logging into my account.

I have two tenants in a property with a Wells Fargo mortgage, and I know for sure one of them (a bartender) will probably not make April's payment. If this is truly a loan suspension (no interest accrued, no credit effects, in writing, etc.) I am definitely going to take advantage of this.

 Got it. Yea I did that. I specifically said I have a financial hardship due to Covid-19 and would like a mortgage freeze for 3 months. And I would like it in writing that I won't owe any interest or take any hit to my credit. Should I give them a few business days to respond or should I give them a call tomorrow?