Unless you are just getting started in this business as a real estate investor, I am sure you have had to make continued and sometimes significant adjustments to your business practices due to new or more restrictive laws and regulations at every level of Government.
Two new rules that come to mind that everyone on BiggerPockets should be aware of are the new EPA Lead Certification rules and the new HUD rules limiting seller financing. Both of these rules, implemented at the national level, by non-elected bureaucrats are having significant impacts on how many of us do business including throwing the entire lease-option approach into question due to its implied “seller financing” focus.
At the state and local levels our business is almost constantly under attack by those who do not believe that we as investors should be able to take measured risks, put our names and reputations on the line and then profit in the process of providing a basic need “shelter” to individuals.
Take the Maryland Homeowners Protection Act… Please! This act prohibits an investor from even speaking with a homeowner whose mortgage is not current.
Or a similar law in Texas modeled after the Maryland law (In case you might have been wondering, the new EPA lead rules were closely modeled after existing Maryland lead laws) which I believe forbids lease-options.
In both of these cases the state under the guise of “protecting” homeowners or individuals have managed to severely trample on individual property rights.
And then we have something like this:
L.A.’s Big Freeze” from Investors’ Business Daily, describing a situation where an Los Angeles City councilman wants to “freeze” rents for a year due to “fairness”.
I could spend literally tens of thousands of words describing the various rules, laws and opinions that have been thrown at our business… all in an effort to protect the public from themselves while driving our profits ever lower.
I got so incensed with a discussion I had, had with one of my clients when I learned that potential buyers were questioning her level of potential profits, that I went into a 15 minute rant –a nd I mean a blood pressure increasing rant — on this subject during one of my radio show broadcasts about a month ago. I must admit it was some of my best stuff, but the bottom line to that rant was that there is a growing bow wave of public opinion that real estate investors are crooks and our profits are ill gotten.
Our business is considered predatory and by extension you and I are perceived as predators. Our profits are deemed too large, rents too high and our overall business model is based entirely on greed!
If you don’t believe me, just hang out on BiggerPockets for a day or two and you will see all kinds of stuff that will make the hair on your neck stand straight up.
WOW… not a pretty picture is it? But just because our business and profits are under attack doesn’t mean that we need to close up shop and find something else to do… does it!
No… in fact there are many things that you can be doing which will help to protect your business.
Here are a few recommendations I have:
1. Best business practices: I can’t stress this one enough. If a tenant or recent home buyer, legitimately or otherwise, comes after you, how well you run your business may be the determining factor in how much damage is done to your business.
2. When you see an announcement on the various online real estate sites (BiggerPockets is a great one) about some pending rule or law, stop what you are doing and send your (local, state or national) representatives or the bureaucracy trying to implement the rule an email or letter expressing your opinion about it. Be specific and be sure to identify how your small business will be harmed by its implementation.
3. Take it one step further and sign up to testify for or against specific legislation at the local or state level. If your elected officials don’t see many businesses testifying they assume no one cares.
4. Join your local real estate investing association and become active in their legislative affairs commitment. If they don’t have one, offer to start and chair that group.
5. As much as it pains me to make this recommendation, make donations to local and statewide candidates that understand the value that your business brings to the community, and wants to help you to continue to deliver that value.
6. Make it a point to visit the various municipal offices within your community. Get to know those who make decisions. Make sure they know what you do and how well you do it. Make their job easy and they will remember you forever!
7. Stay vigilant and speak up every time you hear someone attacking your business. If you don’t, you have no one but yourself to blame when your entire business model is deemed illegal just because someone said it is.
Bottom line, if each of us doesn’t get more involved with the outside pressures attacking our industry, within the next 10 years we will be telling our kids and grand-kids about our adventures as real estate investors when it used to legal instead of illegal.
Please be sure to offer additional recommendations in the comments section below for actions each of us should be taking to protect our business.