In Episode 4 of The Good Stewards Podcast, we stick with the BRRRR strategy, but this time focus on second R; namely Rent. Or more generally, property management for buy and hold rentals. Please check it out!
My latest article for BiggerPockets takes on the fat cats on Wall Street (well sorta) and discusses the advantages that the little guy has over said fat cats. I boil it down to three main points:
Indeed, as I note, James Randel, the author of Confessions of a Real Estate Entrepreneur recommends looking for institutional investors to do buy from as their rigid thinking leaves opportunities for more entrepreneurial buyers.
Check out the article here!
Well the vote on the ill-conceived Kansas City Tenant Bill of Rights has been postponed until December 2nd it appears.
This just appears to be the beginning (things like this are happening throughout the country, particularly on the West Coast). This legislation was apparently proposed by a group called People's Action which wants to create a National Home Guarantee that "is the major intervention that takes housing off the market and decommodifies it." This would be done by,
...Taxing the appreciation of privately owned homes, while the 12 million new social housing units would put a massive number of new units off the speculation market entirely. The aim is to shift the paradigm—from homes as wealth stores to basic necessities.
That would be a great way to remove all incentives from every home builder, renovator and property manager so you better build those 12 million units pretty quickly given
And by the way, what are we going to "decommidify" next? Food? Appliances? Cars? Everything?
Let's just try full communism again because it worked out so well the last time! Indeed, I've seen some chatter about that. One helpful Facebook commenter noted that "Mao was right about landlords."
Yes, the guy on the far right of the following chart was "right." Uh huh.....
In episode 3 of the The Good Stewards Podcast, Ryan, Bill, Amanda and I pick up on the BRRRR Strategy and dive into the final R (other than the R to Repeat, of course), namely Refinance. This may sound easy, but there's more to it than meets the eye. Check it out:
On this, the 30th Anniversary of the Berlin Wall coming down, we can all celebrate that. And hopefully the communism is kept the people of East Germany locked in will stay down forever as well. Here's Peter Jennings broadcast from the time:
Part of this is due to the move toward "advocacy" journalism and the terrible lack of objectivity in the last five to ten years that many outlets have seemingly aspired to. (Much because of the major leftward shift.) But still, this would make me think the whole "learn to code" meme may be more than just trash talking.
Or it may spell the end of that humans-having-jobs thing we've sort of become accustomed to...
Recently, I rediscovered an old friend of mine from high school has become quite the folk musician. If you haven't heard of him, I would highly recommend checking out Jeffrey Martin. And this isn't the "you should check out my friend's terrible garage band's concert this weekend at Random Dive Bar 17B" (or even my acoustic covers on Youtube, which I would argue are at least decent). I really mean it. He's quite good!
If nothing else, the fact he has four albums, over 68,000 monthly Spotify listeners as of now and is currently touring Europe should prove he's quite good.
Here he and Anna Tivel play several songs for Audiotree:
And here is my favorite song of his, Thief and a Liar:
You can find out where he's touring or buy one of his albums at his website here.
Yesterday the Kansas City Mayor's Special Committee on Housing Policy decided to hold off one week on a vote for a Tenant Bill of Rights. The legislation, however, needs substantial revisions or it will have major unforeseen consequences. That road paved with good intentions, kinda thing.
The bill (which you can read here) has some good or at least defensible provisions. A key part is to create a fund for legal counsel for tenants and also to provide "appropriate accommodation" for up to three months and in also provide for "The moving and storage of personal property for a term not exceeding three months." In Jackson County, Missouri, if a tenant goes all the way to eviction, the sheriff demands you to empty the house and leave the belongings on the front yard. This is, in my judgement, absurd and unfair. And even if the landlord were forced to pay for storage for up to a month (as the law is in Lane County, Oregon, where I'm from), it would be a tolerable expense. Rectifying this is a good thing.
Other points are already the law (such as prohibiting discrimination based on race) or only slight alterations (requiring 48-hours of notice to enter instead of 24). Some are understandable, but implementation will be extremely difficult. Most notably, the requirement for landlords to provide a "utility estimate" that "shall be in writing and be included as part of the leasing agreement."
The problem is that sometimes, there is really no utility estimate to provide. At least not anything close to a full one. If we buy a property that has been vacant for over a year (which we often do), rehab it for two months and then rent it out, what are we to give the tenant? We could give them our few utility bills or get the old expenses from the utility company, but they are unlikely to be a very good estimate for the current year. And if the rehab was done in the Fall, it will say little of the Summer. While the bill only requires a "good faith effort," this area is still fairly grey.
The biggest problem, however, is with regards to tenant screening. Virtually every property management book, course and the like stresses the importance of tenant screening. Most proprty owners and managers I know have "horror stories" from when they started out and didn't screen very well. As much as we may hate to admit it, the past does predict the future, at least in aggregate. (I.e., an individual with an eviction may be just fine going forward, but people with evictions overall will be more likely to be evicted again than those without.) Yet the bill expressly prohibits landlords to "To refuse to negotiate for the rental of a dwelling based on an individual’s rental history."
There are bad landlords out there, I fully acknowledge that. But there are also bad tenants. Back when we didn't screen as well in the past, we had multiple tenants do over $10,000 of damage. I've seen more than one property owner get foreclosed on because of delinquency and damages. And now we can't screen for rental history unless "unless the landlord can demonstrate that the rental decision was based on all information available, including consideration of the frequency and recentness of favorable and adverse rental history." What does that even mean?
If the problem is landlords never accept tenants with an eviction, why not set some particular rules. (For example, evictions over five years cannot be considered or something like that.) Given the number of times I've seen applications with multiple evictions, I know there are plenty of landlords who do. We accept people with older evictions.
Screening for evictions is the same type of thing as screening for credit; which banks, credit institutions and the government itself does. So why can't property owners?
And then there's this; "To refuse to negotiate for the rental of a dwelling based on an individual's arrest and conviction history, unless the landlord can demonstrate the rental decision was based on all information available including consideration of the frequency, recentness, and severity of a criminal record." Again, how do we demonstrate this? It's extremely vague.
We had an employee get accosted and everything short of assaulted by an inherited tenant before. Hell, an inspector I know had a gun pulled on him once! I assume that we could deny a convicted rapist rent one side of a duplex next to a single woman. But what about someone convicted of assault? By what standard are we to demonstrate this? Indeed, it's not even clear who it needs to be demonstrated to. Do we have to get such screening policies approved ahead of time? Or do we just have to hope we've made reasonable enough criteria and then hash it out in court if it comes to that?
For these reasons, I highly recommend that the committee, at the very least, rewrite these sections to make them clearer and fairer to property owners. Property owners renovate and perform upkeep on a huge numbers of properties throughout Kansas City and elsewhere. If the risks and costs become too high, many will move on to other pursuits. This will lead to more blight and less supply which will increase rental prices, not decrease them. This bill, if implemented as written, will have very negative, unforeseen consequences.
The plot thickens with the Jeffrey Epstein case. First there was his absurdly light sentence a decade ago, then there were all the "coincidences" with his death followed by the recent report that his body "bore telltale signs of homicide" and now we have this from conservative muckraker James O'Keefe; namely that according to Amy Robach who was caught on a hot mic, ABC News had the story back in 2016 and "we would not put it on the air."
So now the mainstream, corporate press is implicated. Robach notes how they were afraid of losing access to the Royal Family because of the allegations involving Prince Andrew as well as the blowback from the allegations involving Alan Dershowitz. So the mainstream, corporate press sucks up to the powerful (or is simply in bed with them) again, just like when the helped lie us into the Iraq War. How utterly predictable.
That being said, the absolute disbelief in any mainstream narrative is encouraging. So much so that you get parody articles such as this:
My newest article for BiggerPockets is up and it asks whether a real estate investor should ever invest for nothing more than appreciation. Most importantly, when that comes along with negative monthly cash flow.
Contrary to popular (real estate investor) wisdom, this is not simply "speculation." I quote Investopedia on the difference,
“Whenever a person spends money with the expectation that the endeavor will return a profit, they are investing. In this scenario, the undertaking bases the decision on a reasonable judgment made after a thorough investigation of the soundness that the endeavor has a good probability of success.
There are times, however, when there's is good enough reason to believe that appreciation will come that it's not just relying on "chance." One example I give is of an investor who bought land between San Diego and Los Angeles in the 70's. He had good reason to think that land would become much more valuable and it eventually did. That being said, it's very risky. So I conclude,
...You should do this with only a small part of your portfolio. It should be considered a high-risk/high-reward venture that you are comfortable taking a hit on if things go sideways
"Every day is a new life to the wise man."
The Righteous Mind
Star Slate Codex
Consulting by RPM