All Forum Posts by: Ryan Vienneau

I'm an investor trying to formulate new policies around the new statewide NY Tenant Protection Act of 2019 that was passed in June.  After speaking with countless lawyers, property managers, and RE investors all over NY State in the last 3 months, almost no one seems to have come up with any good strategies, policies, or ideas for how to motivate late payers to pay remotely on-time under the laws, so I'm starting this discussion to share some ideas, best practices, policies, etc., and maybe brainstorm as a NYS community as to what's working and not working for upstate, central and western NY.  I'll exclude the city from this discussion because they have a whole slew of other issues even worse than what us upstate-ers have to deal with.  

For those not aware, here's the issue.  As of June, NYS has imposed the following new "Tenant Protection" laws into effect that make it almost impossible to encourage on-time rent payment (there are way more clauses than this in the law, but these are the ones that affect this conversation):

1.  Late fees are limited to the lesser of $50 or 5% of rent, and can't be imposed until 5 days past due.  

2.  Evictions now take 45-60 days based on new timing requirements, such as the service of 14-day notice and delivery of 5-day certified letter of late rent.

3.  If a tenant pays only base rent (NOT late fees) in full at ANY time during the eviction process prior to being removed from the unit, then the eviction is voided and thrown out.  

4.  Landlords CANNOT charge back legal fees to tenant associated with eviction.  

5.  Deposits are limited to 1 month's rent, and can't charge for last month's rent.  

So, here's the challenge.  Suppose a tenant habitually pays late, but not 45-60 days late.  And suppose It's now the 15th of the month, and they still haven't paid, so you sent your certified letter of late rent back on the 5th as required.  As a Landlord, we now have 2 options: 1) Do nothing, hoping they eventually pay, which costs us nothing immediately but is risky, or 2) Incur the cost of serving them with a 14-day notice (maybe $150 or so) that we cannot recoup from the tenant if they eventually pay base rent before being evicted.  

The issue that compounds this is that, for the renter that ALWAYS pays weeks late, option #2 can happen every month, forever, and the tenant would incur no costs, could refuse to pay late fees, but never be evicted, and the Landlord would eat the $150/mo for serving process in perpetuity.  And further, once a tenant is 5 days late and the late fee has hit, there's zero additional incentive for a tenant to pay prior to the day of eviction because nothing can be charged to the tenant beyond that initial $50.

What I'm hoping to glean from this discussion is what policies other PM's and investors are using to deal with this.  Please avoid the discussion getting political, its safe to say all of us on here think the laws are total BS and there are other discussions elsewhere on BP for that, but let's keep this discussion to how we deal with the reality of it.  This is statewide, so looking to hear from investors in Albany, Schenectady, Troy, Saratoga Springs, Rochester, Syracuse, Buffalo, Utica, Poughkeepsie, and everywhere in between.  Also would love for any NY lawyers on here to weigh in.

Try Hawke Well Drilling in B Spa, I used to work for Culligan out that way and they did a pretty decent job.  Be warned, Delanson has infamously awful well water, which is why you find so many shallow or dug wells.  Once you go deeper, expect to need water treatment, and usually a lot of it.  Sulfur, colloidal clay, methane, etc, can easily run north of $5-10k depending on what you find.  

For those who are still unclear about the new laws, I wrote a guide to the new NY tenant laws here on BP that explains pretty much every clause in detail, and also on our website.  @Vitaliy Volpov's YouTube video mentioned above is another good source.  

I own a property management company in Albany and own several properties myself, and have been in countless meetings with lawyers, clients, and other PM's since these laws were passed on June 14th hashing out our strategy to operate under these new laws, and although they suck and are classic examples of Emperor Cuomo's overreach and anti-business policies, they're manageable if you're a good operator.  However, most I encounter are not, so it's gonna get ugly for those who don't know what they're doing.  

What's unfortunate for renters is that in typical bureaucratic fashion, these laws are already having the complete opposite effect as intended, 1) rental inventory is now decreasing because the largest operators are preferring to leave rent-controlled units in NYC vacant in hopes the laws change 2) app qualification criteria has gotten WAY stricter, so application approval rates have dropped, 3) days vacant has increased despite inventory being low because PM's and landlords would rather leave the unit vacant a few more weeks in hopes of finding a better-qualified renter, whereas in the past we would just collect a double deposit to approve a borderline applicant and be on our way.  

As far as investing in NYS goes, my expectation (and personal investing strategy) is that these laws will (and already have) tank MF property values in the short term as competition for investment property dries up, but since inventory is decreasing and vacancy increasing, rents will continue to rise as supply tightens. Cap rates and IRR are a function of risk/reward, so I see cap rates climbing into double digits as investors will need to reap a high reward to deal with the legal BS here. This doesn't bode well for the properties I already own here, but I'm looking forward to buying properties at double-digit cap rates again like 4-5 years ago as most of my competition goes to play in a sandbox in another state.

Overall, the NYS risk and pain-in-the-*** factor will become baked in to the returns here in NYS, so you need to ask yourself if you'd prefer to invest in TX where you can do whatever you want as a landlord but get a 5-cap on a duplex and have to outbid 20 others, or buy in Schenectady where you can get a 12-cap in a nice neighborhood but have to deal with a lot of paperwork and BS.  We only manage mid to higher-end properties anyways so evictions aren't really a thing for us and our compliance processes are tight, so I'll take the higher cap rate coming to NYS.  

I'm a property manager in Albany, Vitaliy's video above is great, and I wrote a detailed breakdown on our blog at Veno Properties that breaks it down clause by clause.  

Do you still own it?

If you go to our veno properties website blog you can see the bbefore and after with pics of the unit.  We just turned over the 4 br unit and raised rent to 1500 and got 4 qualified applicants 1st day.  The 3 br is getting 1200 right now.

@Josh E. Yes, Cuomo is a moron, but rent control was not mandated upstate, it was just made legal for each muni to adopt rent control if they choose. With all of the muni's here around Albany desperately trying to attract investment, I'd be pretty shocked if they did, but it could happen. I'm still waiting to hear from my attorney for guidance on the remainder of the bill. Fortunately, we screen tightly and have never had to evict, but either way it's typical NY socialist BS.

@Keshia Romelus Call Alex at Stonebuilt insurance, he's local and handles all my commercial policies, https://www.stonebuiltinsurance.com/.

@Frantz Noel Albany's tough to find cash flow right now unless you find something off-market for cheap or in the hood, the market is stupid up here right now. Troy's a little easier but not much. Try Schenectady.

Just signed up this week, seems ok so far.  Looking at 16+ unit properties that haven't sold in over 5 yrs.