All Forum Posts by: Andrey Y.

@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

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.

@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.

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.

@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

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.

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. 

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.