All Forum Posts by: Richard Sherman

@Steve Milford I agree 100%.  I do not mind the rules.  I am not evicting paying tenants anyways.  Those are your big repositioning plays where they evict the entire building, rehab and re-rent.   I see this as creating some opportunities where mismanagement and lower rents that cannot be rapidly remedied create some discounts...hopefully...

As long as everyone has to follow the rules, I am confident I can play by them better than others and make money doing it.  

 Essentially whichever law is more strict will win.  So in PDX you follow the local ordinances with the State law as a baseline minimum.  Much like the minimum wage laws.

@Jay Hinrichs 100% correct, rents will continue to push up, but I am not sure how many people become buyers strictly because of pricing that would not have been buyers at a slightly lower rent.  There is enough positive reasons to buy (image, people telling them it is the best thing to do, tax incentives, space, control of costs etc) that I think unless there is a massive disconnect between rents and values (like in Vancouver BC) then people will move to be owners anyways.  Most of our rental pool are younger, older with fixed income, not permanent residents or people who can not qualify for various reasons to be buyers...or do not want the hassle of owning and like the flexibility of renting.

The homeless thing is disingenuous I think to a degree.  A huge percentage of that is substance issues, mental issues etc.  The temporarily homeless I think could have some due to rent increases, but the idea that someone says they will go live in a car instead of moving 40 miles to a place where the rents are far lower than PDX  rings false.

I heard the same on the new building in PDX...and now they are scrambling to try and incentivize it...no parking requirements, tax breaks etc.  Nice work Portland, way to totally mismanage the situation for the past decade.

@Robert M.   I agree 100% with the comment on the costs for building with fees, studies etc and how difficult it is.  This is just pushing the blame for the housing crunch which at least in part was caused by all of the restrictions and regulation by PDX specifically onto the "evil landlord."  It is fine, please continue to disincentivize the only thing that will lower rent growth long term which is more supply.  If it was legal to PAY to stop competition from the building I would do it.  I am a bit of a contrarian.  I LIKE regulation, inspections (like we have in Salem and PDX) etc as I know that a percentage of the other owners either can't or do not want to deal with it and they get out of the business.  I just assume I can do it better and cheaper so it becomes a benefit for me as it reduces supply and as long as we have the continued growth the pressure is up and up for rents.

@Gretchen P. @Andrew Gingerich @Robert M.

In the article I linked, which is the Brookings Institute, which is Liberal/Moderate leaning  (not that it much matters but this type of policy seems to be pushed from the left) essentially said that if the desire was to provide insurance against rate increases for "disadvantaged" renters then that should be down through public assistance not by imposing the costs on the creators of the housing stock.  Assuming that there will not be a negative impact on construction by adding additional barriers to building in an already difficult area to build ( I am looking at you PDX) is just not logical.  Capital is liquid.  A large builder of multi-family can go to Boise, Denver, TX and not have the issues.

As I mentioned, as EXISTING owners, if we are patient and wait for the long game (limited supply continuing increases in population) and follow the law like Gretchen said (i.e. automatic 7%+CPI increase every year) then it will long term be a BIG win for owners.  I am already talking to our attorney about writing the max allowable rent increase automatically into the lease every year.  Hey, its the LAW  ;)

I was explaining this to a couple of local investors regarding some of the regulations they are passing in Oregon. Regulation will put downward pressure on supply which will exacerbate the housing "crisis" in Portland Metro which will mean less competition and higher long term rents. Some (current tenants who are lucky enough to get some of the benefits) will be paid for by higher costs long term for renters. Bring it on, I am much more worried about a 200 unit apartment building coming in down the street than only being able to raise rents 7% + CPI per year.

This is something I sent to a local charity we have supported (oregon food bank) which decided to come out in support of the bill.

My last point is this, rent controls and tenant protections lead to decreased supply and strengthen both the pricing power, average rents and value of the owner's of existing properties. I.e. from a financial standpoint we BENEFIT from these restrictions just as existing owners in San Francisco, LA, NYC, Cambridge have. This will make us quite a lot of money. My point is that your support is doing the exact opposite of what you think it is.

https://www.brookings.edu/research/what-does-economic-evidence-tell-us-about-the-effects-of-rent-control/

"Rent control appears to help affordability in the short run for current tenants, but in the long-run decreases affordability, fuels gentrification, and creates negative externalities on the surrounding neighborhood. These results highlight that forcing landlords to provide insurance to tenants against rent increases can ultimately be counterproductive. If society desires to provide social insurance against rent increases, it may be less distortionary to offer this subsidy in the form of a government subsidy or tax credit. This would remove landlords’ incentives to decrease the housing supply and could provide households with the insurance they desire. A point of future research would be to design an optimal social insurance program to insure renters against large rent increases."

@Joshua Rountree Hi Joshua! I generally recommend to just hold title in your personal name unless you already have an LLC at least until you have a few properties. Just make sure you have an umbrella policy to deal with liability. If you have an LLC already then of course place it in there but your lender may not allow that.

@Jay Hinrichs awesome commentary.  Of all the things that I have some concern for, it is the inability to refinance a loan on a good property due to issues in the lending area...like we saw when WaMu vanished in OR and no one wanted to loan into a market that was "falling apart"...  last thing you want to be doing is selling into a market where you and your potential buyers can not get financed.

@Sarah Humbargar I am not sure you need either of those yet. Would not be bad to have an LLC for them, but I would probably not put them in different LLCs unless the equity is over $500k or so, something like that. You do not need all that complexity yet (i.e. if the LLC is owned by more than 1 person, even if spouses, then you need to file a separate tax return as well etc.

If it were me, I would have 1 LLC with a single owner (even if married) and the income will just be on your Schedule E on your tax return, no need for a separate return. I would have the leases done with that LLC. I would make sure to have a good umbrella insurance policy, probably 2 million or so. That might run you $300-500 a year maybe

@Jovani Escobar Omar is 100% right, get to the local REIA or BP meetups and KEEP GOING...you can learn a LOT there (get there early and talk to people, stay late and talk and listen!) You can get a whole lot of knowledge there!